Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-02671/USCOURTS-cand-3_04-cv-02671-5/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1346 Recovery of IRS Tax

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

STEPHEN E. ROULAC, and O.D.

PARKINSON,

Plaintiffs,

 v.

 UNITED STATES OF AMERICA,

Defendant.

 /

No. C 04-02671 JSW

PROPOSED FINAL JURY

INSTRUCTIONS

Case 3:04-cv-02671-JSW Document 55 Filed 03/07/06 Page 1 of 18
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DUTY OF JURY TO FIND FACTS AND FOLLOW LAW

Members of the jury, now that you have heard all the evidence, it is my duty to instruct

you on the law which applies to this case. I am also providing each of you with copies of these

instructions for you to consult in the jury room if you find it necessary.

It is your duty to find the facts from all the evidence in the case. To those facts you will

apply the law as I give it to you. You must follow the law as I give it to you whether you agree

with it or not. You must not be influenced by any personal likes or dislikes, opinions,

prejudices, or sympathy. That means you must decide the case solely on the evidence before

you. You will recall that you took an oath promising to do so at the beginning of the case.

In following my instructions, you must follow all of them and not single out some and

ignore others; they are all equally important. You must not read into these instructions or into

anything the court may have said or done any suggestion as to what verdict you should return –

that is a matter entirely up to you.

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WHAT IS EVIDENCE

The evidence from which you are to decide what the facts are consists of:

1. the sworn testimony of witnesses;

2. the exhibits which have been received into evidence; and

3. any facts to which the lawyers have agreed or stipulated.

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WHAT IS NOT EVIDENCE

In reaching your verdict, you may consider only the testimony and exhibits received into

evidence. Certain things are not evidence, and you may not consider them in deciding what the

facts are. I will list them for you:

1. Arguments and statements by lawyers are not evidence. The lawyers are not

witnesses. What they have said in their opening statements, will say in their

closing arguments, and at other times is intended to help you to interpret the

evidence, but it is not evidence. If the facts as you remember them differ from

the way the lawyers have stated them, your memory of them controls.

2. Questions and objections by lawyers are not evidence. Attorneys have a duty to

their clients to object when they believe a question is improper under the rules of

evidence. You should not be influenced by the objection or by the court’s ruling

on it.

3. Testimony that has been excluded or stricken, or that you have been instructed to

disregard, is not evidence and must not be considered. 

4. Anything you may have seen or heard when the court was not in session is not

evidence. You are to decide the case solely on the evidence received at the trial.

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DIRECT AND CIRCUMSTANTIAL EVIDENCE

Evidence may be direct or circumstantial. Direct evidence is direct proof of a fact, such

as testimony by a witness about what that witness personally saw or heard or did. 

Circumstantial evidence is proof of one or more facts from which you could find another fact. 

You should consider both kinds of evidence. The law makes no distinction between the weight

to be given to either direct or circumstantial evidence. It is for you to decide how much weight

to give any evidence.

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STIPULATIONS OF FACT

The parties have agreed to certain facts that have been stated to you. You should

therefore treat these facts as having been proved.

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CREDIBILITY OF WITNESSES

In deciding the facts in this case, you may have to decide which testimony to believe and

which testimony not to believe. You may believe everything a witness says, or part of it, or

none of it.

In considering the testimony of any witness, you may take into account:

1. the opportunity and ability of the witness to see or hear or know the things

testified to;

2. the witness’ memory;

3. the witness’ manner while testifying;

4. the witness’ interest in the outcome of the case and any bias or prejudice;

5. whether other evidence contradicted the witness’ testimony;

6. the reasonableness of the witness’ testimony in light of all the evidence; and

7. any other factors that bear on believability.

The weight of the evidence as to a fact does not necessarily depend on the number of

witnesses who testify.

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TAX REFUND ACTIONS - ELEMENTS AND BURDEN OF PROOF

On Plaintiffs’ claim that the $1,600,000 Plaintiff Roulac received as a settlement from

Deloitte is exempted from gross income, and that they are therefore entitled to a refund, the

plaintiffs have the burden of proving each of the following elements by a preponderance of the

evidence:

1. the plaintiffs are entitled to the exemption;

2. if plaintiffs are entitled to the exemption, in what amount.

If you find that each of the elements on which the plaintiffs have the burden of proof has

been proved, your verdict should be for the plaintiffs. If, on the other hand, the plaintiffs have

failed to prove any of these elements, your verdict should be for the defendant.

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INCOME EXCLUSION UNDER 26 U.S.C. § 104(a)(2) - TWO PART TEST

In order to establish by a preponderance of the evidence that the settlement amount of

$1,600,000 Plaintiff Roulac received was exempt from taxation, the plaintiffs must establish

each of two things:

First, plaintiffs must establish that the underlying claim giving rise to the settlement is

based on tort or tort type rights; and 

Second, the plaintiffs must establish the amount of the settlement that was received on

account of personal injuries or sickness. The exclusion applies to both physical and nonphysical

injuries, including claimed emotional distress. 

These two requirements are independent of one another and must both be met in order

for a settlement amount to be excludable.

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SEQUENCE OF ANALYSIS WHEN DAMAGES ARE PAID THROUGH A

SETTLEMENT AGREEMENT

The $1,600,00 at issue here was received by Plaintiff Roulac pursuant to a settlement he

reached with Deloitte. When damages are paid through a settlement agreement, you may look

to the underlying agreement to determine whether it expressly states that the damages

compensate for personal injuries or sickness. If the agreement lacks express language

specifying the purpose of the compensation, you may examine the intent of the payor.

If the settlement agreement allocates the proceeds, the allocation may be followed to the

extent that the agreement was entered into by the parties in an adversarial context at arms length

and in good faith. However, you need not blindly accept the terms contained in a settlement

agreement, especially if the circumstances indicate that the allocation was uncontested, nonadversarial, and tax motivated. The payor’s intent is a factor that you may consider in

determining the validity of any allocation agreement.

When payments are received pursuant to a settlement agreement from which it cannot be

clearly discerned why the payments were made, you may examine the underlying complaint and

details surrounding the litigation as an indicator of the payor’s intent.

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TAX REFUND ACTIONS - PENALTIES

The Internal Revenue Code provides that a taxpayer can be assessed and required to pay

a monetary penalty if any portion of an understatement of a tax is attributable to negligence or

disregard of rules or regulations. The term of “negligence” includes any failure to make a

reasonable attempt to comply with Code, and the term “disregard” includes any careless,

reckless, or intentional disregard of the Code. Negligence can be indicated if the taxpayer fails

to make a reasonable attempt to ascertain the correctness of not reporting certain income on his

tax returns.

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TAX REFUND ACTIONS - ELEMENTS AND BURDEN OF PROOF - PENALTIES

The Government bears the burden of proof with respect to the liability of any individual

for penalties. If a taxpayer files a petition alleging some error in the determination of the

penalty, the taxpayer’s challenge will succeed unless the Government produces evidence that the

penalty is appropriate.

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TORT TYPE RIGHTS

Plaintiff Roulac’s complaint in the Deloitte lawsuit stated twelve claims. The sixth

claim was not based upon tort or tort-type rights. The first, second, third, fourth, fifth, seventh,

eighth, ninth, eleventh, and twelfth claims were based upon tort or tort type rights.

No. Claim Type

1. Breach of fiduciary duty/constructive fraud re termination Tort

2. Breach of fiduciary duty/constructive fraud re merger Tort

3. Fraudulent nondisclosure re Deloitte agreement Tort

4. Constructive fraud re Deloitte agreement Tort

5. Negligent misrepresentation re Deloitte agreement Tort

6. Breach of written contracts Non-tort

7. Conspiracy to induce breach of contract and breach of fiduciary Tort

duty

8. Intentional misrepresentation re performance award Tort

9. Negligent misrepresentation re performance award Tort

10. Intentional interference with contractual relations Tort

11. Negligent interference with contractual relations Tort

12. Breach of implied covenant of good faith and fair dealing Tort

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DUTY TO DELIBERATE

When you begin your deliberations, you should elect one member of the jury as your

presiding juror. That person will preside over the deliberations and speak for you here in court.

You will then discuss the case with your fellow jurors to reach agreement if you can do

so. Your verdict must be unanimous. 

Each of you must decide the case for yourself, but you should do so only after you have

considered all of the evidence, discussed it fully with the other jurors, and listened to the views

of your fellow jurors.

Do not be afraid to change your opinion if the discussion persuades you that should. Do

not come to a decision simply because other jurors think it is right.

It is important that you attempt to reach a unanimous verdict but, of course, only if each

of you can do so after having made your own conscientious decision. Do not change an honest

belief about the weight and effect of the evidence simply to reach a verdict.

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USE OF NOTES

Some of you have taken notes during the trial. Whether or not you took notes, you

should rely on your own memory of what was said. Notes are only to assist your memory. You

should not be overly influenced by the notes.

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COMMUNICATION WITH COURT

If it becomes necessary during your deliberations to communicate with me, you may

send a note through my Courtroom Deputy, signed by your presiding juror or by one or

members of the jury. No member of the jury should ever attempt to communicate with me

except by a signed writing; and I will communicate with any member of the jury on anything

concerning the case only in writing, or here in open court. If you send out a question, I will

consult with the parties before answering it, which may take some time. You may continue your

deliberations while waiting for the answer to any question. Remember that you are not to tell

anyone - including me - how the jury stands, numerically or otherwise, until after you have

reached a unanimous verdict or have been discharged. Do not disclose any vote count in any

note to the court.

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RETURN OF VERDICT

A verdict form has been prepared for you. After you have reached a unanimous verdict,

your presiding juror will fill in the form that has been given to you, sign and date it, and advise

the court that you are ready to return to the courtroom.

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Dated: March 7, 2006 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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