20‐2813 Kirik v. Commissioner
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 7th day of June, two thousand twenty‐one.
PRESENT: AMALYA L. KEARSE GERARD E. LYNCH, RICHARD J. SULLIVAN, Circuit Judges, _____________________________________ YAROSLAV KIRIK & GALINA KIRIK,
Petitioners‐Appellants,
v. No. 20‐2813
COMMISSIONER OF INTERNAL REVENUE,
Respondent‐Appellee. _____________________________________ For Petitioners‐Appellants: DAVID ROTHENBERG, Rothenberg Law, Rochester, NY.
For Respondent‐Appellee: JOHN SCHUMANN (Arthur T. Catterall on the brief), for David A. Hubbert, Deputy Assistant Attorney General, Department of Justice, Washington, DC.
Appeal from the United States Tax Court (Mark V. Holmes, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the order of the Tax Court is AFFIRMED.
In June 2013, Yaroslav and Galina Kirik received a notice of deficiency from
the Internal Revenue Service (“IRS”) indicating that they owed over $1.7 million
in additional taxes, as well as almost $1.3 million in penalties, for calendar years
2007–2009. Three months later, the Kiriks commenced a timely action in the
United States Tax Court to dispute the deficiencies, asserting, among other things,
that the IRS had overstated their income for the three years in question.
At the time the Kiriks filed their action in Tax Court, the Kiriks were also the
targets of a criminal investigation. In March 2014, the IRS moved for a
continuance of the trial in the Kiriks’ Tax Court action until after the criminal
matter concluded. The Tax Court granted that continuance and consolidated the
2 Kiriksʹ case with a related Tax Court action brought by Eagle Expeditors, Inc., a
company created by petitioner Yaroslav Kirik; the consolidated case bore the
caption “Eagle Expeditors, Inc., et al. v. Commissioner of Internal Revenue” and
the docket numbers of the company’s case and the Kiriks’ case. For the next five
years the IRS periodically filed status reports with the Tax Court, which filed a
series of orders maintaining the continuance and directing further status reports.
In July 2018, the Kiriks fired their attorney and elected to represent
themselves. The Tax Court thereafter ordered the Kiriks to provide a phone
number and email address at which they could be reached. When the Kiriks
failed to provide that information, the Tax Court ordered the Kiriks to show cause
why their case should not be dismissed for failure to prosecute. The Kiriks did
not respond to that show‐cause order, and the Tax Court dismissed their case for
lack of prosecution on October 17, 2019.
Almost nine months later, on July 2, 2020, the Kiriks filed a motion in Tax
Court to vacate the October 2019 order dismissing their case. The Tax Court
denied that motion, explaining that:
A motion to vacate is due 30 days after entry of decision. Rule 162. Our unappealed decisions become final after 90 days. IRC § 7481(a)(1). After that, we don’t have
3 jurisdiction any more. Arkansas Oil and Gas, Inc. v. Commissioner, 114 F.3d 795 (8th Cir. 1997); Stewart v. Commissioner, 127 T.C. 109, 112‐13 (2006). In Stewart we listed the exceptions to this rule ‐‐ fraud on the Court, mutual mistake, clerical error, and lack of jurisdiction to enter decision in the first place. Id. at 112 n. 3. None of those applies here.
App’x at 157. This appeal followed.
“We review a Tax Court’s denial of a motion to vacate a final decision for
abuse of discretion.” Cinema ’84 v. Comm’r, 412 F.3d 366, 370–71 (2d Cir. 2005)
(citing Senate Realty Corp. v. Comm’r, 511 F.2d 929, 931 (2d Cir. 1975)). “However,
whether the Tax Court had jurisdiction to consider a motion is a question of law,
which we review de novo.” Id. at 371 (citing Merrill Lynch & Co. v. Comm’r, 386
F.3d 464, 469 (2d Cir. 2004)).
Section 7481(a) of the Internal Revenue Code (“IRC”) provides that “the
decision of the Tax Court shall become final . . . [u]pon the expiration of the time
allowed for filing a notice of appeal, if no such notice has been duly filed within
such time[.]” IRC § 7481(a). The time allowed for filing a notice of appeal is “90
days after the decision of the Tax Court is entered.” IRC § 7483. There is no
dispute that the Kiriks did not file a notice of appeal within 90 days. Thus, the
4 Tax Court’s decision became final months before the Kiriks filed their motion to
vacate.
Although § 7481(a) is quite explicit as to when a decision of the Tax Court
becomes final, circuit courts have split on whether, and under what circumstances,
the Tax Court may vacate or revise one of its finalized decisions. The Sixth Circuit
has concluded emphatically that “once a decision of the Tax Court becomes final,
the Tax Court no longer has jurisdiction to consider a motion to vacate its
decision.” Harbold v. Comm’r, 51 F.3d 618, 621 (6th Cir. 1995). Other circuits, and
the Tax Court itself, have acknowledged a few narrow exceptions to this rule,
including situations in which there has been a fraud on the court, where the Tax
Court did not have jurisdiction in the first place, Davenport Recycling Assocs. v.
Comm’r, 220 F.3d 1255, 1259 (11th Cir. 2000), and where the Tax Court discovers a
clerical error after the decision became final, Stewart v. Comm’r, 127 T.C. 109, 112
n.3 (2006). Although the Second Circuit has never definitively decided whether
the finality rule is jurisdictional or merely a claim processing rule that is subject to
judicially‐created exceptions, neither has it expressly adopted any of the
exceptions identified above. See Cinema ’84, 412 F.3d at 371. But even assuming
that the Tax Court’s finality rule is not strictly jurisdictional and the above‐
5 referenced exceptions could be properly considered by the Tax Court, none would
make the slightest difference in this case, since there is no possible argument that
the Kiriks’ delay was caused by fraud, mutual mistake, clerical errors, or the Tax
Court’s lack of jurisdiction to enter a decision in the first place. Indeed, the Kiriks
do not argue otherwise.
Instead, the Kiriks essentially argue that we should create a new exception
to the finality rule based on the concept of excusable neglect. But we need not
decide whether we can, or even should, acknowledge such an exception because
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20‐2813 Kirik v. Commissioner
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 7th day of June, two thousand twenty‐one.
PRESENT: AMALYA L. KEARSE GERARD E. LYNCH, RICHARD J. SULLIVAN, Circuit Judges, _____________________________________ YAROSLAV KIRIK & GALINA KIRIK,
Petitioners‐Appellants,
v. No. 20‐2813
COMMISSIONER OF INTERNAL REVENUE,
Respondent‐Appellee. _____________________________________ For Petitioners‐Appellants: DAVID ROTHENBERG, Rothenberg Law, Rochester, NY.
For Respondent‐Appellee: JOHN SCHUMANN (Arthur T. Catterall on the brief), for David A. Hubbert, Deputy Assistant Attorney General, Department of Justice, Washington, DC.
Appeal from the United States Tax Court (Mark V. Holmes, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the order of the Tax Court is AFFIRMED.
In June 2013, Yaroslav and Galina Kirik received a notice of deficiency from
the Internal Revenue Service (“IRS”) indicating that they owed over $1.7 million
in additional taxes, as well as almost $1.3 million in penalties, for calendar years
2007–2009. Three months later, the Kiriks commenced a timely action in the
United States Tax Court to dispute the deficiencies, asserting, among other things,
that the IRS had overstated their income for the three years in question.
At the time the Kiriks filed their action in Tax Court, the Kiriks were also the
targets of a criminal investigation. In March 2014, the IRS moved for a
continuance of the trial in the Kiriks’ Tax Court action until after the criminal
matter concluded. The Tax Court granted that continuance and consolidated the
2 Kiriksʹ case with a related Tax Court action brought by Eagle Expeditors, Inc., a
company created by petitioner Yaroslav Kirik; the consolidated case bore the
caption “Eagle Expeditors, Inc., et al. v. Commissioner of Internal Revenue” and
the docket numbers of the company’s case and the Kiriks’ case. For the next five
years the IRS periodically filed status reports with the Tax Court, which filed a
series of orders maintaining the continuance and directing further status reports.
In July 2018, the Kiriks fired their attorney and elected to represent
themselves. The Tax Court thereafter ordered the Kiriks to provide a phone
number and email address at which they could be reached. When the Kiriks
failed to provide that information, the Tax Court ordered the Kiriks to show cause
why their case should not be dismissed for failure to prosecute. The Kiriks did
not respond to that show‐cause order, and the Tax Court dismissed their case for
lack of prosecution on October 17, 2019.
Almost nine months later, on July 2, 2020, the Kiriks filed a motion in Tax
Court to vacate the October 2019 order dismissing their case. The Tax Court
denied that motion, explaining that:
A motion to vacate is due 30 days after entry of decision. Rule 162. Our unappealed decisions become final after 90 days. IRC § 7481(a)(1). After that, we don’t have
3 jurisdiction any more. Arkansas Oil and Gas, Inc. v. Commissioner, 114 F.3d 795 (8th Cir. 1997); Stewart v. Commissioner, 127 T.C. 109, 112‐13 (2006). In Stewart we listed the exceptions to this rule ‐‐ fraud on the Court, mutual mistake, clerical error, and lack of jurisdiction to enter decision in the first place. Id. at 112 n. 3. None of those applies here.
App’x at 157. This appeal followed.
“We review a Tax Court’s denial of a motion to vacate a final decision for
abuse of discretion.” Cinema ’84 v. Comm’r, 412 F.3d 366, 370–71 (2d Cir. 2005)
(citing Senate Realty Corp. v. Comm’r, 511 F.2d 929, 931 (2d Cir. 1975)). “However,
whether the Tax Court had jurisdiction to consider a motion is a question of law,
which we review de novo.” Id. at 371 (citing Merrill Lynch & Co. v. Comm’r, 386
F.3d 464, 469 (2d Cir. 2004)).
Section 7481(a) of the Internal Revenue Code (“IRC”) provides that “the
decision of the Tax Court shall become final . . . [u]pon the expiration of the time
allowed for filing a notice of appeal, if no such notice has been duly filed within
such time[.]” IRC § 7481(a). The time allowed for filing a notice of appeal is “90
days after the decision of the Tax Court is entered.” IRC § 7483. There is no
dispute that the Kiriks did not file a notice of appeal within 90 days. Thus, the
4 Tax Court’s decision became final months before the Kiriks filed their motion to
vacate.
Although § 7481(a) is quite explicit as to when a decision of the Tax Court
becomes final, circuit courts have split on whether, and under what circumstances,
the Tax Court may vacate or revise one of its finalized decisions. The Sixth Circuit
has concluded emphatically that “once a decision of the Tax Court becomes final,
the Tax Court no longer has jurisdiction to consider a motion to vacate its
decision.” Harbold v. Comm’r, 51 F.3d 618, 621 (6th Cir. 1995). Other circuits, and
the Tax Court itself, have acknowledged a few narrow exceptions to this rule,
including situations in which there has been a fraud on the court, where the Tax
Court did not have jurisdiction in the first place, Davenport Recycling Assocs. v.
Comm’r, 220 F.3d 1255, 1259 (11th Cir. 2000), and where the Tax Court discovers a
clerical error after the decision became final, Stewart v. Comm’r, 127 T.C. 109, 112
n.3 (2006). Although the Second Circuit has never definitively decided whether
the finality rule is jurisdictional or merely a claim processing rule that is subject to
judicially‐created exceptions, neither has it expressly adopted any of the
exceptions identified above. See Cinema ’84, 412 F.3d at 371. But even assuming
that the Tax Court’s finality rule is not strictly jurisdictional and the above‐
5 referenced exceptions could be properly considered by the Tax Court, none would
make the slightest difference in this case, since there is no possible argument that
the Kiriks’ delay was caused by fraud, mutual mistake, clerical errors, or the Tax
Court’s lack of jurisdiction to enter a decision in the first place. Indeed, the Kiriks
do not argue otherwise.
Instead, the Kiriks essentially argue that we should create a new exception
to the finality rule based on the concept of excusable neglect. But we need not
decide whether we can, or even should, acknowledge such an exception because
even the most charitable and expansive definition of excusable neglect could not
salvage the Kiriks’ claims here.
Although excusable neglect provides a permissible basis for noncompliance
with court rules in a variety of contexts, all applications of the doctrine require
courts to consider “the reason for the delay, including whether it was within the
reasonable control of the movant.” Silivanch v. Celebrity Cruises, Inc., 333 F.3d 355,
366 (2d Cir. 2003) (internal quotation marks omitted). “We have noted that the
equities will rarely if ever favor a party who fails to follow the clear dictates of a
court rule,” id. (internal quotation marks and alteration omitted), going so far as
to observe that where the rule governing a filing deadline “is entirely clear . . . a
6 party claiming excusable neglect will, in the ordinary course, lose,” Canfield v. Van
Atta Buick/GMC Truck, Inc., 127 F.3d 248, 251 (2d Cir. 1997).
Here, the Kiriks’ delay in filing their motion was entirely within their
control. There is no dispute that the Kiriks fired their attorney, thus taking on the
risks associated with navigating the Tax Court alone, notwithstanding their self‐
professed lack of sophistication and less‐than‐complete fluency in English.
Inexplicably, they then failed to respond to multiple orders from the Tax Court,
including the order dismissing their case for lack of prosecution. Several months
later, the IRS sought to levy on the Kiriks’ assets, yet even then the Kiriks did not
file a motion to vacate the order dismissing their case. It was not until July 2020 –
almost nine months after the Tax Court issued its dismissal order – that the Kiriks
finally got around to making their motion. Nothing in our case law suggests that
the Kiriks’ neglect, which was considerable, was even remotely excusable.
Consequently, we see no reason to second guess the Tax Court’s denial of the
Kiriks’ motion to vacate the October 2019 order dismissing their case.
We have considered the Kiriks’ remaining arguments and find them to be
meritless. The order of the Tax Court is AFFIRMED.
FOR THE COURT:
7 Catherine O’Hagan Wolfe, Clerk of Court