United States Court of Appeals 

for the Federal Circuit ______________________

BASR PARTNERSHIP, WILLIAM F. PETTINATI, 

SR., TAX MATTERS PARTNER,

Plaintiffs-Appellees

v.

UNITED STATES,

Defendant-Appellant

______________________

2017-1925

______________________

Appeal from the United States Court of Federal Claims 

in No. 1:10-cv-00244-SGB, Judge Susan G. Braden.

______________________

Decided: February 8, 2019

______________________

THOMAS A. CULLINAN, Eversheds Sutherland (US) 

LLP, Atlanta, GA, argued for plaintiffs-appellees. Represented by REBECCA M. STORK.

MICHAEL J. HAUNGS, Tax Division, United States Department of Justice, Washington, DC, argued for defendant-appellant. Also represented by JACOB EARL 

CHRISTENSEN, DAVID A. HUBBERT, GILBERT STEVEN 

ROTHENBERG.
2 BASR PARTNERSHIP v. UNITED STATES

CARLTON M. SMITH, New York, NY, for amici curiae 

Harvard Federal Tax Clinic, Philip C. Cook Low-Income 

Tax Clinic of Georgia State University.

______________________

Before PROST, Chief Judge, WALLACH and CHEN,

Circuit Judges.

Opinion for the court filed by Chief Judge PROST. 

Dissenting opinion filed by Circuit Judge WALLACH. 

PROST, Chief Judge.

This appeal concerns an order from the U.S. Court of 

Federal Claims awarding $314,710.69 to BASR Partnership (“BASR”) under 26 U.S.C. § 7430 (“I.R.C. § 7430”) for 

its reasonable litigation costs incurred in connection with 

a tax determination from a Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) proceeding. The United 

States (“Government”) appeals the order. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3). We affirm.

I

The Pettinati family owned a commercial printing company, Page Printing, from 1982 until they sold it in 1999. 

Before completing the sale, the Pettinatis hired the nowdefunct law firm of Jenkens & Gilchrist to advise them on 

an investment strategy that potentially had tax benefits

arising from the sale of their business. See BASR P’ship v. 

United States, 795 F.3d 1338, 1340 (Fed. Cir. 2015); J.A. 

133, 987. As part of the “tax planning strategy by attorney 

Erwin Mayer of Jenkens & Gilcrest [sic], P.C.,” J.A. 1071, 

the Pettinatis formed BASR, a general partnership, J.A. 

1071, 2392–402. BASR assumed certain U.S. Treasury 

Note obligations, which increased its cost basis. J.A. 54. 

Further, each of the BASR partners—William Pettinati, 

Sr., his wife, Virginia Pettinati, and the gift trusts belonging to their two sons, William Pettinati, Jr. and Andrew 

Pettinati—contributed all their shares in Page Printing to 
BASR PARTNERSHIP v. UNITED STATES 3

BASR in June 1999. J.A. 55, 82. Two months later, BASR 

sold 100% of its stock in Page Printing to Nationwide 

Graphics, Inc. for $6,898,245. J.A. 55. When offset against 

its overstated cost basis, however, BASR realized a gain of 

only $263,934. Id. On their 1999 individual returns, the 

Pettinati partners reported their shares of this understated gain passed through to them from BASR. J.A. 1231, 

1266, 1280. In other words, “by creating the BASR Partnership, the Pettinatis greatly reduced the tax liability 

arising from the sale of their printing business.” BASR 

P’ship, 795 F.3d at 1340.

The Internal Revenue Service (“IRS”) did not confront 

the Pettinatis regarding the overstated basis until a decade

later. In January 2010, the IRS issued to BASR’s tax matters partner, William Pettinati, Sr., a final partnership administrative adjustment (“FPAA”), which disallowed the

tax benefits generated from BASR’s 1999 tax filing. J.A. 

61–72. In April 2010, Mr. Pettinati filed a petition and 

summary judgment motion in the U.S. Court of Federal 

Claims (“trial court”) challenging the FPAA as untimely 

under I.R.C. § 6501(a), which provides a three-year statute 

of limitations. J.A. 45–60. At that time, BASR had “zero 

assets,” J.A. 1956, and had filed its last partnership return 

in 1999, J.A. 317. 

While BASR’s filings were pending before the trial 

court, the BASR partners offered the Government $1.00 to 

settle all of the adjustments that the Government made in 

the FPAA. J.A. 1953–54.1 The Government declined the 

offer. Government’s Br. 56–57. 

 

1 Although BASR argues that it submitted the qualified offer in conjunction with its partners, Appellee’s 

Br. 11, I.R.C. § 7430(g)(1)(A) specifies that a qualified offer 

“is made by the taxpayer.” Because partnerships do not 

pay income taxes, see I.R.C. § 701, we do not regard BASR 
4 BASR PARTNERSHIP v. UNITED STATES

In September 2013, the trial court granted summary 

judgment for BASR, holding that the FPAA was untimely 

issued. BASR P’ship v. United States, 113 Fed. Cl. 181, 194 

(2013). This court affirmed. BASR P’ship, 795 F.3d at 

1350. 

In March 2016, BASR, by and through Mr. Pettinati,

Sr., moved the trial court for litigation costs under I.R.C. 

§ 7430(c)(4)(E). J.A. 1934–41. The trial court granted 

BASR’s motion in part and awarded BASR $314,710.69 in 

litigation costs. BASR P’ship v. United States, 130 Fed. Cl. 

286, 313–14 (2017).2

II

This appeal concerns the interplay between two statutory schemes—I.R.C. § 7430, which is a fee-shifting statute, and TEFRA, 26 U.S.C. § 6221 et seq.

I.R.C. § 7430(a) provides that a “prevailing party” may 

be awarded reasonable litigation costs incurred in connection with a court proceeding brought against the United 

States in connection with “the determination, collection, or 

refund of any tax, interest, or penalty under this title.” 

 

as an offeror, see Oral Arg. at 32:16–32:20, http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2017-1925.mp3

(Q: “Is the partnership a taxpayer?” A: “No.”).

2 In its briefing before this court, BASR moved to 

strike portions of the Government’s opening brief that 

BASR claims are disputed. Appellee’s Br. 12. The Government responds that “there is no requirement that the factual statements in an appellate brief must be based on 

specific findings of fact determined after a trial.” Government’s Reply Br. 31–32. When reviewing the briefs, we remain cognizant that a party may present the facts in the 

light most favorable to that party. BASR had the opportunity in its response brief to dispute the Government’s factual account. The motion is denied. 
BASR PARTNERSHIP v. UNITED STATES 5

Generally, a party must “substantially prevail” with respect to the amount in controversy or the issues presented, 

as provided by I.R.C. § 7430(c)(4)(A).3 But special rules apply when a taxpayer makes the Government a monetary 

offer to settle the tax dispute and the Government rejects

the offer. In such cases, if the taxpayer’s liability under the 

court’s judgment turns out to be less than or equal to the 

offer that the taxpayer made to the Government to settle 

the tax dispute, the taxpayer will be treated as a “prevailing party” if it is also “[a] party to [the] court proceeding.”4

 

3 We do not consider BASR’s alternative argument 

that it is a prevailing party under I.R.C. § 7430(c)(4)(A), because BASR pursued a different route to an award before 

the trial court, specifically, I.R.C. § 7430(c)(4)(E). J.A. 

1940–41 (BASR’s memorandum in support of its motion for 

litigation costs under I.R.C. § 7430(c)(4)(E)); Oral Arg. at 

36:33–37:10. The trial court, therefore, did not address the 

issue. We view the argument as forfeited. 

4 I.R.C. § 7430(c)(4)(E) (“qualified offer rule”) recites:

A party to a court proceeding . . . shall be treated 

as the prevailing party if the liability of the taxpayer pursuant to the judgment in the proceeding 

(determined without regard to interest) is equal to 

or less than the liability of the taxpayer which 

would have been so determined if the United States 

had accepted a qualified offer of the party under 

subsection (g).

(ii) Exceptions.—This subparagraph shall not 

apply to.—

(I) any judgment issued pursuant to a settlement; or

(II) any proceeding in which the amount of 

tax liability is not in issue . . . . 

I.R.C. § 7430(c)(4)(E).
6 BASR PARTNERSHIP v. UNITED STATES

There are two exceptions, however, to this so-called qualified offer rule. The qualified offer rule does not apply 

(1) when the court’s judgment issues pursuant to a settlement or (2) when the amount of tax liability is not “in issue”

during the court proceeding. See I.R.C. § 7430(c)(4)(E)(ii).

TEFRA, enacted in 1982, enables the IRS to correct errors on a partnership’s tax return in a single, unified proceeding.5 United States v. Woods, 571 U.S. 31, 38–39 

(2013). Under TEFRA, the IRS first initiates proceedings 

at the partnership level to adjust partnership items. Id. at 

39. Once the tax treatment of the partnership items at the 

partnership level becomes final, administratively or judicially, the IRS next initiates a partner-level proceeding to 

make any resulting computational adjustments in the tax 

liability of the individual partners. See id. The IRS directly assesses most computational adjustments against 

the partners, “bypassing deficiency proceedings and permitting the partners to challenge the assessments only in 

post-payment refund actions.” Id.6

 

5 Although partnerships do not pay federal income 

tax, I.R.C. § 701, they must still report their tax items 

(“partnership items”) on an annual information return, 

I.R.C. § 6031(a). 

6 The Bipartisan Budget Act of 2015, Pub. L. No. 

114-74, § 1101, 129 Stat. 584, 625, repealed TEFRA and 

reformed the partnership auditing process such that the 

tax attributable to any audit adjustments made by the IRS 

to the partnership items will be assessed and collected from 

the partnership at the partnership level, rather than from 

the partners in the partner-level proceedings. This change 

does not apply to this case because the Act is effective only 

for partnership taxable years beginning after December 

2017. See Bipartisan Budget Act of 2015 § 1101, 129 Stat. 

at 638.
BASR PARTNERSHIP v. UNITED STATES 7

III

With this legal framework in mind, we turn to the Government’s arguments. The Government advances five independent challenges to the trial court’s order. The first is 

that (1) BASR does not qualify for litigation costs under 

I.R.C. § 7430(a) because it is not a “party” and therefore 

cannot be a “prevailing party.” Government’s Br. 17–18. 

Next, it argues that, even if BASR were considered to be a 

“party,” it still could not receive litigation costs under 

I.R.C. § 7430(a) because (2) it did not pay or incur any such

costs, and (3) the amount of tax liability was not “in issue”

during the TEFRA partnership-level court proceeding. 

Government’s Br. 24, 45. Lastly, the Government argues

that even if BASR were statutorily eligible to receive an 

award for litigation costs under I.R.C. § 7430(a), the trial 

court erred by (4) failing to apply the real-party-in-interest 

doctrine and by (5) abusing its discretion in granting the 

award. Government’s Br. 51, 56. 

A. Prevailing Party

To qualify as a “prevailing party” under I.R.C. 

§ 7430(a), the taxpayer must necessarily be a “party” to a 

§ 7430(a) court proceeding—here, the TEFRA partnershiplevel judicial proceeding. See I.R.C. § 7430(c)(4)(E); 26 

U.S.C. § 6226 (2009) (“I.R.C. § 6226”). The Government argues that BASR could not have been a party to the proceeding because it is the partnership entity, and as a legal 

matter, only the individual partners can be parties to a 

TEFRA proceeding. Government’s Br. 40. The trial court 

disagreed and determined that BASR was indeed a party 

to the TEFRA proceeding. Although the trial court relied 

largely on an inapplicable treasury regulation to reach its 

conclusion,7 the trial court’s error was harmless because, 

 

7 Treasury Regulation § 301.7430-5(g) applies only 

to costs incurred and services performed in cases in which 
8 BASR PARTNERSHIP v. UNITED STATES

in our view, other reasons support a finding that BASR was 

a party.

Whether I.R.C. § 6226 prohibits a partnership from being a party to a TEFRA partnership-level court proceeding 

is a legal question requiring statutory interpretation. We 

review the trial court’s statutory interpretation de novo. 

Salman Ranch Ltd. v. United States, 573 F.3d 1362, 1370 

(Fed. Cir. 2009). We focus our inquiry on the statutory language. Electrolux Holdings, Inc. v. United States, 491 F.3d 

1327, 1330 (Fed. Cir. 2007) (explaining that “[s]tatutory interpretation begins with the language of the statute” and 

“the plain meaning of the statute [is derived] from its text 

and structure”).

I.R.C § 6226 concerns judicial review of FPAAs under 

the TEFRA scheme. It provides, in relevant part, that “(1) 

each person who was a partner in [the] partnership at any 

time during [the partnership taxable] year shall be treated 

as a party to [the] action,” and “(2) the court having jurisdiction of [the] action shall allow each such person to participate in the action.” I.R.C. § 6226(c). Despite the 

Government’s argument to the contrary, I.R.C. § 6226(c)

does not provide that “partners, rather than the partnership itself, are the parties in a TEFRA partnership proceeding.” Government’s Br. 44–45. While it is true that 

I.R.C. § 6226(c) provides that a partner “shall be treated as 

a party” to the TEFRA judicial proceeding, that provision 

alone does not disqualify the partnership entity from also 

being a party to the proceeding.

The Government, however, avers that allowing a partnership to be a party would conflict with U.S. Tax Court 

precedent and the Rules of the Court of Federal Claims 

 

the petition was filed on or after March 1, 2016. 81 Fed. 

Reg. 10,479, 10,489 (Mar. 1, 2016); Treas. Reg. § 301.7430-

6. The petition in this case was filed in 2010.
BASR PARTNERSHIP v. UNITED STATES 9

(“RCFC”).8 Government’s Br. 40, 44. As the trial court 

acknowledged, the Tax Court has, at least on one occasion,

interpreted I.R.C. § 6226(c) as standing for the proposition 

that “the partners, rather than the partnership entity, are 

the parties in a TEFRA proceeding.” BASR P’ship, 130 

Fed. Cl. at 302 (quoting Foothill Ranch Co. P’ship v. 

Comm’r, 110 T.C. 94, 99 (1998)). Our view, however, is that

the Tax Court’s interpretation improperly converts an inclusive statutory provision into an exclusive one. Moreover, we note that the Tax Court has also said that “the 

partners and the tax matters partner, rather than the partnership entity itself, are the essential parties in a partnership audit and litigation procedure,” leaving open the 

possibility that a partnership could be a non-essential 

party. See Chef’s Choice Produce, Ltd. v. Comm’r, 95 T.C. 

388, 395 (1990) (emphasis added).

Regardless, we are not bound by Court of Federal 

Claims Rules or Tax Court decisions. In fact, this court 

previously explained that “[t]he tax matters partner . . . represents the partnership in partnership-level judicial proceedings, but the individual limited 

partners . . . are also deemed to be parties to the proceeding.” Conway v. United States, 326 F.3d 1268, 1271 (Fed. 

Cir. 2003) (internal citation omitted). Other courts, moreover, have also acknowledged that the partnership participates in partnership-level TEFRA proceedings through its 

tax matters partner. See, e.g., White & Case v. United 

States, 22 Cl. Ct. 734, 736–37 (1991) (referring to the partnership, rather than the partner, as the plaintiff in a court 

proceeding concerning a petition for readjustment of partnership items pursuant to I.R.C. § 6226(a)). Because 

 

8 RCFC Appendix F, Rule 6(a) (“[T]he partner who 

filed the complaint, the tax matters partner, and each person who satisfies the requirements of Code Sections 6226(c) 

and (d) . . . shall be treated as parties to the action.”).
10 BASR PARTNERSHIP v. UNITED STATES

nothing in I.R.C. § 6226 or I.R.C. § 7430 prohibits a partnership from being a party to a partnership-level TEFRA 

judicial proceeding, we reject the Government’s argument 

that BASR, due to its partnership status, cannot legally be 

a party to the proceeding. 

To the contrary, as BASR argues, the statutes at issue 

suggest that a partnership can receive litigation costs in a 

TEFRA judicial proceeding. Specifically, under I.R.C. 

§ 7430(c)(4)(A)(ii), a “prevailing party” must “meet[] the requirements of section 2412(d)(2)(B) of such title 28.” That 

section states, in relevant part:

“party” means (i) an individual whose net worth did 

not exceed $2,000,000 at the time the civil action 

was filed, or (ii) any owner of an unincorporated 

business, or any partnership, corporation, association, unit of local government, or organization, the 

net worth of which did not exceed $7,000,000 at the 

time the civil action was filed, and which had not 

more than 500 employees at the time the civil action was filed.

28 U.S.C. § 2412(d)(2)(B) (2012) (emphasis added). The 

fact that the Internal Revenue Code’s cost-shifting statute 

incorporates a provision that sets specific requirements for 

partnerships suggests that Congress intended for partnerships to be eligible for costs under § 7430.

Indeed, the Government does not dispute that a court 

can award costs in a partnership-level proceeding. The 

Government’s position is simply that the qualified offer 

rule can never result in a costs award in partnership-level 

cases. But I.R.C. § 7430 does not draw this distinction. Rather, the statute applies in any proceeding “in connection 

with the determination, collection, or refund of any tax.” 

I.R.C. § 7430(a). Thus, we conclude that BASR can legally 

be a “party.”
BASR PARTNERSHIP v. UNITED STATES 11

B. “In Issue”

The Government next argues that the trial court erred 

in determining that tax liability was “in issue” in the 

TEFRA partnership-level court proceeding. Specifically, 

the Government asserts that the qualified offer rule does 

not apply to TEFRA partnership-level proceedings at all 

because each partner’s tax liability amount is not “in issue”

in such proceedings. See I.R.C. § 7430(c)(4)(E)(ii)(II) (excluding from the qualified offer rule cases in which the 

amount of tax liability is not “in issue” during the court 

proceeding); Government’s Br. 28. 

The trial court found that the amount of tax liability 

was “in issue” because “[t]he partnership-level FPAA review proceeding conclusively determines the tax treatment 

of all partnership items, determining each individual partner’s tax liability.” BASR P’ship, 130 Fed. Cl. at 303–04. 

Although the Government does not appear to dispute that 

the tax treatment of partnership items affects each partner’s individual tax liability, it contends that “[u]nder the 

plain terms of the qualified-offer rule, . . . that real, but indirect, link between the judgment and the tax liability is 

insufficient to support a fee award.” Government’s Br. 31. 

According to the Government, the amount of tax liability 

must be determined in the proceeding for it to be “in issue” 

in that proceeding. See Government’s Reply Br. 7–10. 

BASR disagrees and argues that the amount of tax liability 

need be only indirectly “in issue” to avoid the qualified offer 

rule’s exclusionary provision. See Appellee’s Br. 36.

To resolve the parties’ dispute, we turn to the language 

of the statute to ascertain whether the amount of tax liability must be determined in order for it to be “in issue” for 

purposes of the qualified offer rule. As previously discussed, we review the trial court’s statutory interpretations 

de novo. Salman Ranch, 573 F.3d at 1370. We agree with 

the trial court that the statute does not require such a determination. 
12 BASR PARTNERSHIP v. UNITED STATES

I.R.C. § 7430 does not define the phrase “in issue,” and 

we are unaware of any special technical meaning under the 

tax laws. Thus, it is appropriate to construe the phrase 

according to its plain meaning. FDIC v. Meyer, 510 U.S. 

471, 476 (1994). Black’s Law Dictionary defines the term 

“issue” as “a . . . dispute between two or more parties.” 

Black’s Law Dictionary 907 (9th ed. 2009). It follows, 

therefore, that the plain meaning of “in issue” is simply “in 

dispute.” Additionally, at least some courts have used the 

terms “in issue” and “at issue” interchangeably in certain 

contexts. See, e.g., Safeco Ins. Co. of Am. v. Vecsey, 259 

F.R.D. 23, 30 n.5 (D. Conn. 2009) (“The Connecticut Supreme Court has used the terms ‘in issue’ and ‘at issue’ interchangeably when discussing the implied-waiver-ofprivilege doctrine . . . .”). The term “at issue” is defined in 

Black’s Law Dictionary as “taking opposite sides; under 

dispute; in question.” Black’s Law Dictionary 144 (9th ed. 

2009). In light of these consistent definitions, we view the

plain and ordinary meaning of “in issue” as broader than 

the Government asserts and conclude that the phrase requires neither a calculation nor determination of tax liability amount. The Government has not pointed to anything 

in the statutory scheme that would warrant a narrower interpretation. 

“TEFRA created a method for uniformly adjusting 

items of partnership income, loss, deduction, or credit that 

affect each partner.” Locke v. Comm’r, 1996 Tax Ct. Memo 

LEXIS 558, at *5–6. “A partner’s tax liability attributable 

to partnership items is determined at the partnership 

level, separate from the proceedings for determining deficiencies attributable to nonpartnership items.” Id. (emphasis added). As the Tax Court has said, the proposition that 

in a partnership-level proceeding the court “make[s] determinations with respect to the items of income, gain, loss, or 

credit of the partnership, rather than the individual partners, . . . is to exalt form over substance.” See 1983 W. Reserve Oil & Gas Co. v. Comm’r, 95 T.C. 51, 57 (1990).
BASR PARTNERSHIP v. UNITED STATES 13

C. Paid or Incurred Litigation Costs

Prevailing parties may be awarded reasonable litigation costs “incurred” in connection with a court proceeding 

brought against the United States with respect to “the determination, collection, or refund of any tax, interest or 

penalty” under Title 26. I.R.C. § 7430(a). The Government 

argues that “BASR is . . . ineligible for an award under 

I.R.C. § 7430 because it did not ‘pay or incur’ any litigation 

costs.” Government’s Br. 45. 

Both parties agree that in order to “incur” costs, one 

must be obligated to pay them. See Pickholtz v. Rainbow 

Techs., Inc., 284 F.3d 1365, 1375 (Fed. Cir. 2002); Government’s Br. 46; Appellee’s Br. 40. The trial court determined 

that “BASR ‘incurred’ litigation costs for purposes of I.R.C. 

§ 7430, because it ha[d] an obligation to pay the attorney 

and paralegal fees and other costs charged by Sutherland 

Asbill [& Brennan LLP].” BASR P’ship, 130 Fed. Cl. at 

306. The Government argues that the trial court erred because BASR had no such “legal obligation” to pay Sutherland, Asbill & Brennan LLP anything. See Government’s 

Br. 51. 

The Government avers that the obligation to pay Sutherland belonged to only the Pettinatis because the 

“[e]ngagement letters were addressed to, and countersigned by, (1) William Pettinati, Sr., and Virginia Pettinati; 

and (2) William Pettinati, Jr., and his wife.” Government’s 

Br. 46. Additionally, “Sutherland’s invoices were all addressed to Virginia and William Pettinati, Sr., not to 

BASR.” Government’s Br. 47. “And the Pettinatis paid 

those invoices out of their own funds: Virginia and William 

Pettinati, Sr., paid two-thirds of the fees . . . [and] William 

Pettinati, Jr., paid the remaining one third.” Id.

The trial court acknowledged these arguments and 

found them unpersuasive because “under the terms of the 

Partnership Agreement, BASR is obligated to repay its 

Partners for litigation costs incurred on its behalf.” BASR 
14 BASR PARTNERSHIP v. UNITED STATES

P’ship, 130 Fed. Cl. at 306. The court cited Section 2.5 of 

the Partnership Agreement, which provides that the Managing Partner—i.e., William Pettinati, Sr.—is entitled to 

“reimbursement for reasonable out-of-pocket expenses incurred by him on behalf of the Partnership or in pursuance 

of his duties as Managing Partner.” Id.; J.A. 2394 (Partnership Agreement). The trial court also cited Section 

9.2(a) of the Partnership Agreement: 

Each Partner shall, to the extent permitted by law, 

be indemnified and held harmless by the Partnership from and against any and all losses, claims, 

damages, liabilities, joint and several, expenses

(including reasonable legal fees and expenses), . . . and all other amounts arising from any 

and all claims, costs, demands, actions, suits or 

proceedings, civil, criminal, administrative or investigative, in which the Partner may be involved.

J.A. 2399 (emphasis added). The trial court noted that although Section 9.2(c) limits indemnification “to the extent 

of any Partnership assets,” see BASR P’ship, 130 Fed. Cl.

at 307, BASR’s inability to reimburse the partners for litigation costs advanced on its behalf does not absolve BASR

of its obligation to reimburse its partners, see id.

The trial court also relied on Texas partnership law. 

The court found that “Texas law governs the obligations 

that BASR owes to its partners” because “Section 9.11 of 

the Partnership Agreement states that ‘th[is] Agreement 

shall be governed by and construed in accordance with the 

laws of the State of Texas, including the [Texas Uniform 

Partnership] Act.’” Id. at 306 (quoting J.A. 2400 (Partnership Agreement)). Under Texas law, “[t]o the extent that 

the partnership agreement does not otherwise provide, 

[Chapter 152] and the other partnership provisions [of the 

Texas Business Organizations Code (TBOC)] govern the relationship . . . between the partners and the partnership.” 

Tex. Bus. Org. Code Ann. § 152.002(a). 
BASR PARTNERSHIP v. UNITED STATES 15

Thus, the trial court found that “even if the Partnership Agreement did not expressly provide that the partners 

were entitled to reimbursement, the TBOC obligates BASR 

to repay its partners for litigation costs incurred on its behalf.” BASR P’ship, 130 Fed. Cl. at 307 (citing 

TBOC §§ 152.703(a), 11.052, and 11.055, which together 

provide that a person winding up a partnership’s business 

may continue to prosecute or defend a civil court action or

proceeding by or against the partnership in the name of 

and for and on behalf of the partnership). 

The Government acknowledges BASR’s Partnership 

Agreement and the TBOC, Government’s Br. 50, but argues that (1) the partners did not advance the litigation 

costs on BASR’s behalf but rather incurred those costs to 

pay for their own legal representation as separate parties 

to the litigation, and (2) any obligation that BASR may 

have had to reimburse the Pettinatis is purely theoretical 

because BASR has not reimbursed its partners and its 

partners have not requested such reimbursement, id. at

49–50.

“A partnership agreement is a contract, and is interpreted according to the principles of contract law.” Holmes 

v. Keets, 153 F.2d 132, 134 (D.C. Cir. 1946); Park Cities 

Corp. v. Byrd, 534 S.W.2d 668, 672 (Tex. 1976) (“[W]e shall 

construe and interpret [the partnership] agreement pursuant to the applicable law of contracts.”). Because contract 

interpretation is a question of law, we review the trial 

court’s legal conclusions de novo. Barron Bancshares, Inc. 

v. United States, 366 F.3d 1360, 1368 (Fed. Cir. 2004). If 

the provisions of a contract are clear and unambiguous, as 

they are here, we construe them according to their plain 

meaning. Id. at 1375–76. 

We disagree with the Government. As to the Government’s first argument, TEFRA partnership-level court proceedings under I.R.C. § 6226 are only “nominally brought 

in the name of a partner.” H.R. Rep. No. 105-148, at 638 
16 BASR PARTNERSHIP v. UNITED STATES

(1997). To be sure, this court has previously interpreted 

I.R.C. § 6226 as “permit[ting] the ‘tax matters partner’ . . . to file a petition on behalf of the partnership to contest adjustments to partnership income made by the 

Internal Revenue Service.” Transpac Drilling Venture, 

1983-63 by Crestwood Hosps., Inc. v. United States, 16 F.3d 

383, 385 (Fed. Cir. 1994). Consistent with that interpretation, Mr. Pettinati, Sr., as BASR’s Tax Matters Partner, 

brought the partnership action on BASR’s behalf to challenge the adjustments the IRS made to BASR’s partnership 

return. 

As to the Government’s second argument, we simply 

fail to see its relevance. The fact that BASR has not yet 

reimbursed its partners and that its partners have not yet 

asked for the reimbursement is immaterial to the question 

whether BASR is contractually obligated to reimburse or 

indemnify its partners under the Partnership Agreement.

We agree with the trial court that the Partnership 

Agreement obligates BASR to indemnify and reimburse 

the Pettinatis for reasonable legal fees and expenses arising from the TEFRA partnership-level court proceeding. 

Section 9.2 obligates BASR to indemnify each partner for 

reasonable legal fees and expenses arising from any and all 

suits or proceedings in which the partner is involved. J.A. 

2399. Section 2.5 obligates BASR to reimburse Mr. Pettinati, Sr., for his reasonable out-of-pocket expenses incurred 

on behalf of the partnership or in pursuance of his duties 

as Managing Partner. J.A. 2394. Under the Partnership 

Agreement, it is the Managing Partner’s duty to serve as 

the Tax Matters Partner. J.A. 2397. As such, Mr. Pettinati, Sr., had a duty to act on the partnership’s behalf, irrespective of his personal tax posture. See United States v.

Martinez (In re Martinez), 564 F.3d 719, 728–29 (5th Cir. 

2009); see also Comput. Programs Lambda, Ltd. v. Comm’r, 

89 T.C. 198, 205–06 (1987).
BASR PARTNERSHIP v. UNITED STATES 17

Mr. Pettinati, Sr., filed a petition for readjustment of 

BASR’s partnership items under I.R.C. § 6226(a) and hired 

legal representation in connection with the consequent

partnership-level proceeding. We agree with the trial court

that Mr. Pettinati, Sr., acted on BASR’s behalf in his capacity as BASR’s Tax Matters Partner consistent with the 

Partnership Agreement. See BASR P’ship, 130 Fed. Cl. at 

290. BASR, therefore, is responsible for the litigation costs

associated with the partnership-level TEFRA proceeding. 

D. Real-Party-in-Interest

The Government avers that the trial court erred in 

awarding costs to BASR because the Pettinatis, not BASR, 

are the real-parties-in-interest in the TEFRA partnershiplevel proceeding. Government’s Br. 54. The trial court, 

however, determined that BASR is the real-party-in-interest with respect to litigation costs because the Partnership 

Agreement and Texas law obligate it to pay those costs. See

BASR P’ship, 130 Fed. Cl. at 308. 

“The phrase, ‘real party in interest,’ is a term of art utilized . . . to refer to an actor with a substantive right whose 

interests may be represented in litigation by another.” 

United States ex rel. Eisenstein v. City of New York, 556 

U.S. 928, 934–35 (2009). The relevance of the real-partyin-interest doctrine to this case stems from 28 U.S.C. 

§ 2412(d)(2)(B), which is partially incorporated into I.R.C. 

§ 7430(c)(4)(E) and prohibits, inter alia, an individual 

whose net worth exceeds $2 million and a partnership 

whose net worth exceeds $7 million from obtaining an 

award under I.R.C. § 7430. 

It is undisputed that Virginia and William Pettinati, 

Sr., are ineligible to directly recover litigation costs under 

I.R.C. § 7430 because their personal net worth exceeds 
18 BASR PARTNERSHIP v. UNITED STATES

$2 million. Oral Arg. at 24:10–24:16.9 Also undisputed is 

the fact that BASR’s net worth does not exceed $7 million. 

Government’s Br. 50; J.A. 1956 (affidavit of William Pettinati, Sr., certifying that BASR had “zero assets” at the time 

the complaint was filed). Thus, in order for Mr. and Mrs. 

Pettinati, Sr., to recover their out-of-pocket litigation costs, 

they must do so indirectly through reimbursement from 

BASR.

Relying on Unification Church v. Immigration & Naturalization Service, 762 F.2d 1077, 1082 (D.C. Cir. 1985)

(holding that “the court shall consider only the qualification[s] . . . of those parties that will be themselves liable for 

fees if court-awarded fees are denied”), the Government argues that “the Pettinatis would be the only beneficiaries of 

any award in this case.” Government’s Br. 54. According 

to the Government, the Pettinatis would be liable for the 

litigation costs if an award is denied. See id.; see also J.A. 

2067–72 (law firm engagement letters); J.A. 2399 (section 

of the Partnership Agreement providing that “indemnification . . . shall be to the extent of any Partnership Assets”). And the Pettinatis ultimately would recover their 

litigation costs—either as a consequence of the Partnership 

Agreement or due to the inherent, pass-through nature of 

partnerships—if an award is granted. See Government’s 

Br. 54. As a consequence, argues the Government, the Pettinatis are the real-parties-in-interest. Id. The dissent 

agrees. Dissenting Op. at 2, 6. We do not. 

In Unification Church, the D.C. Circuit applied the 

real-party-in-interest doctrine “to carry out the congressional intent” with regard to § 2412(d). 762 F.2d at 1082. 

The court found that the real-party-in-interest was the 

 

9 The Government disputed before the trial court 

whether William Pettinati, Jr.’s gift trust satisfies the networth requirements, but the trial court made no findings 

on that issue. See BASR P’ship, 130 Fed. Cl. at 308.
BASR PARTNERSHIP v. UNITED STATES 19

Church, not the employees who applied for attorney’s fees,

because the Church had agreed to pay for the employees’ 

attorney’s fees. See id.; see also Love v. Reilly, 924 F.2d 

1492, 1494 (9th Cir. 1991). 

Notably, at least one of our sister circuits has rejected

the D.C. Circuit’s application of the real-party-in-interest 

doctrine to determine eligibility for fees and costs under 

§ 2412(d). See, e.g., Nail v. Martinez, 391 F.3d 678, 683 

(5th Cir. 2004) (stating that the D.C. Circuit’s “resort to the 

legislative history for the inclusion of a non-statutory requirement for EAJA eligibility was unnecessary” because 

“Congress has precisely defined the term ‘party’” and 

“[t]here is no ambiguity in the statutory language that 

would warrant looking beyond the plain language of the 

statute”).

Other circuits, however, have simply reasoned, without 

endorsing the application of the real-party-in-interest doctrine when performing a § 2412(d) analysis, that the doctrine does not bar recovery in a particular case. See, e.g.,

Love, 924 F.2d at 1494 (the Ninth Circuit concluding that

the real-party-in-interest doctrine did not bar the association from collecting attorney’s fees because the association’s members were not the real-parties-in-interest, as 

there was no agreement making them liable for the attorney’s fees); Estate of Palumbo v. United States, 675 F.3d 

234, 241–44 (3d Cir. 2012) (the Third Circuit concluding

that the real-party-in-interest doctrine did not support a 

determination that the Charitable Trust was the realparty-in-interest because the trust “had no . . . arrangement that made it liable or responsible for the [legal] fees”). 

That is the course that we take here.

Even assuming the real-party-in-interest doctrine can 

bar recovery of fees in some cases, we agree with the trial 

court’s determination that “the ‘real-party-in-interest’ doctrine is not a bar to recovery” in this case. BASR P’ship, 

130 Fed. Cl. at 308. As explained above, BASR is liable 
20 BASR PARTNERSHIP v. UNITED STATES

under the Partnership Agreement and the TBOC for the 

litigation costs arising from the TEFRA partnership-level 

court proceeding. So, if we were to deny an award here, 

BASR would be liable for the costs that the partners advanced on its behalf—even though BASR, presumably, 

would be unable to reimburse its partners. If we were to 

grant an award, however, the Government would be liable 

for those costs. In light of the foregoing, and the fact that 

the plain language of I.R.C. § 7430 and 28 U.S.C. § 2412 

does not explicitly prohibit an insolvent party from obtaining an award, we conclude that BASR would be the beneficiary of the award. Accordingly, the real-party-in-interest 

doctrine, as applied in Unification Church, does not prevent BASR from obtaining an award under I.R.C. § 7430. 

E. Abuse of Discretion

Finally, the Government argues that the trial court

abused its discretion by awarding litigation costs under the 

qualified offer rule because the partners’ $1.00 offer to the 

Government “was not made in a good-faith attempt to produce a settlement,” and was submitted solely to shift fees 

to the Government in the event BASR and the BASR partners prevailed. Government’s Br. 56–57. BASR responds 

that the $1.00 offer was a good-faith attempt to settle a 

case that BASR believed the Government could not win. 

Appellee’s Br. 53. We disagree with the Government.

This court has not previously addressed the standard 

of review to apply to a district court’s decision to grant an

I.R.C. § 7430 award, but several of our sister circuits have 

reviewed such rulings for an abuse of discretion. See, e.g., 

Moulton v. United States, 429 F.3d 352, 355 (1st Cir. 2005)

(finding that a district court’s award or denial of attorneys’ 

fees under I.R.C. § 7430 should be reviewed for abuse of 

discretion); Kaffenberger v. United States, 314 F.3d 944, 

960 (8th Cir. 2003) (same); United States v. Yochum (In re 

Yochum), 89 F.3d 661, 670 (9th Cir. 1996) (same); Michael 

A. Cramer, MAI, SRPA, Inc. v. United States, 47 F.3d 379, 
BASR PARTNERSHIP v. UNITED STATES 21

382 (10th Cir. 1995) (same); Rasbury v. IRS (In re Rasbury), 24 F.3d 159, 166 (11th Cir. 1994) (same). We follow 

suit here and review the trial court’s decision to award 

BASR litigation costs under I.R.C. § 7430 for an abuse of 

discretion. 

To constitute an abuse of discretion, the trial court’s 

decision must be clearly unreasonable, arbitrary or fanciful, or based on clearly erroneous findings of fact or erroneous conclusions of law. Hohenberg Bros. Co. v. United 

States, 301 F.3d 1299, 1303 (Fed. Cir. 2002). In exercising 

its discretion to grant BASR’s request for reasonable litigation costs, the trial court rejected the Government’s argument that the $1.00 settlement offer was not made in good

faith. The trial court recognized that I.R.C. § 7430 “does 

not require any minimum amount or define the parameters 

of a ‘reasonable’ offer, nor does it require that an offer be 

for a certain percentage of the taxpayer’s purported liability.” BASR P’ship, 130 Fed. Cl. at 305. The trial court also 

noted that the Government did not identify any amount 

that BASR could have offered that would have been reasonable. Id. 

No evidence or argument currently before us persuades 

us that the trial court’s determination was clearly unreasonable, arbitrary, fanciful, based on clearly erroneous 

findings of fact, or based on erroneous conclusions of law.

We therefore conclude that the trial court did not abuse its 

discretion.

IV

We have considered the Government’s remaining arguments and find them unavailing.10 Accordingly, the order

 

10 We acknowledge the discussion during oral argument on the issue of whether BASR cannot avail itself of 

the qualified offer rule because it is a partnership and not 

a taxpayer, as required by I.R.C. § 7430(g). Oral Arg. at 
22 BASR PARTNERSHIP v. UNITED STATES

of the U.S. Court of Federal Claims is affirmed.

AFFIRMED

COSTS

The parties shall bear their own costs.

 

32:08–34:42. However, because that issue was not raised 

or briefed on appeal here or before the trial court, we do not 

consider it.
United States Court of Appeals 

for the Federal Circuit ______________________

BASR PARTNERSHIP, WILLIAM F. PETTINATI, 

SR., TAX MATTERS PARTNER,

Plaintiffs-Appellees

v.

UNITED STATES,

Defendant-Appellant

______________________

2017-1925

______________________

Appeal from the United States Court of Federal Claims 

in No. 1:10-cv-00244-SGB, Judge Susan G. Braden.

______________________

WALLACH, Circuit Judge, dissenting.

The majority properly recognizes that the real party in 

interest doctrine has been applied to bar recovery of litigation costs and attorney fees in tax proceedings under Internal Revenue Code (“I.R.C.”) § 7430 (2012) and 28 U.S.C. 

§ 2412 (2012), but errs in “agree[ing] with the [U.S. Court 

of Federal Claims’] determination that ‘the . . . doctrine is 

not a bar to recovery’ in this case.” Maj. Op. 20 (quoting 

BASR P’ship v. United States, 130 Fed. Cl. 286, 308 (2017)). 

In arriving at its conclusion, the majority relies on precedent that is not only inapposite to its reasoning, but that 

explicitly contradicts it. If, as here, there exists an express 

agreement making other parties or non-parties liable for a 

party’s litigation costs and attorney fees and providing that 
2 BASR PARTNERSHIP v. UNITED STATES

they will receive any court award of costs and fees, then

those parties and non-parties are the real parties in interest who must demonstrate eligibility for such an award. 

The Court of Federal Claims, therefore, erred in determining Appellee BASR Partnership (“BASR”) is the real party 

in interest, see BASR, 130 Fed. Cl. at 308, and awarding 

BASR litigation costs and attorney fees, see id. at 313–14. 

The proper course is to vacate the Court of Federal Claims’ 

real party in interest determination and remand the case 

for findings regarding whether the actual real parties in 

interest, i.e., William F. Pettinati, Sr., Virginia Pettinati, 

and William F. Pettinati, Jr. (collectively, “the Pettinatis”),

who are partners in BASR and liable for the litigation costs 

and attorney fees arising from this case, satisfy the statutory eligibility requirements for the award of litigation 

costs and attorney fees under § 7430 and § 2412. Accordingly, I respectfully dissent. 

DISCUSSION

The Pettinatis, not BASR, are the real parties in interest with regard to litigation costs and attorney fees in this 

case because they are liable for the financial obligations

that resulted from the U.S. Internal Revenue Service’s untimely issuance of a notice of final partnership administrative adjustment to Appellee Mr. Pettinati, Sr., the tax 

matters partner of BASR, and because they will receive the 

costs and fees awarded by the Court of Federal Claims. 

The Pettinatis, rather than BASR, must, therefore, fulfill

the criteria under § 7430 and § 2412 for the award of litigation costs and attorney fees. In order to recover these 

costs and fees “[i]n any administrative or court preceding 

which is brought by or against the United States in connection with the determination, collection, or refund of any 

tax, interest, or penalty under” the Internal Revenue Code, 

a party must be a “prevailing party.” I.R.C. § 7430(a). To 

be a prevailing party, a party must, inter alia, “meet[] the 

requirements of [28 U.S.C. §] 2412(d)(2)(B).” Id. 

§ 7430(c)(4)(A)(ii). Section 2412(d)(2)(B) allows recovery by 
BASR PARTNERSHIP v. UNITED STATES 3

“an individual whose net worth did not exceed $2,000,000 

at the time the civil action was filed” or “any owner of an 

unincorporated business, or any partnership, corporation, 

association, unit of local government, or organization, the 

net worth of which did not exceed $7,000,000 . . . and which 

had not more than 500 employees at the time the civil action was filed.” 

In addition, we have invoked the real party in interest 

doctrine1 with regard to § 2412, and stated that, “[i]f the 

party seeking legal fees is obligated to pay them to a third 

party which is not the professional providing the legal service, an award under [§ 2412] has been deemed inappropriate.” Phillips v. Gen. Servs. Admin., 924 F.2d 1577, 1583 

n.5 (Fed. Cir. 1991). Pursuant to the real party in interest 

doctrine, we must examine the parties or non-parties to 

whom any award of costs and fees actually accrues to determine whether they are statutorily eligible for such an 

award. See Wall Indus., Inc. v. United States, No. 89-1236, 

1989 WL 81684, at *1 (Fed. Cir. July 26, 1989) (per curiam) 

(affirming the Court of Federal Claims’ conclusion that a 

party “was not the prevailing party” because it “did not incur th[e legal] fees or have any responsibility to do so and 

derived no benefit from the judgment,” and determining 

that the “real prevailing party in interest [that] paid the 

fees” and “received the proceeds from the judgment” 

“must . . . satisfy [the] various eligibility requirements of 

 

1 “The phrase, ‘real party in interest,’ is a term of art 

utilized in federal law to refer to an actor with a substantive right whose interests may be represented in litigation 

by another.” United States ex rel. Eisenstein v. City of N.Y., 

556 U.S. 928, 934–35 (2009); see Unification Church v. Immigration & Naturalization Serv., 762 F.2d 1077, 1081 

(D.C. Cir. 1985) (“The [real party in interest] doctrine is often relevant to which entities may properly press a claim 

or an appeal.”).
4 BASR PARTNERSHIP v. UNITED STATES

[§ 2412] to recover”). This approach is consistent with several of our sister circuits, including the Third, Eighth, 

Ninth, and D.C. Circuits. See Estate of Palumbo v. United 

States, 675 F.3d 234, 242 (3d Cir. 2012) (determining that 

“a legal arrangement that ma[kes a party] responsible for 

[legal] fees” makes it the real party in interest in attorney 

fees proceedings under § 7430 and § 2412); Nat’l Ass’n of 

Mfrs. v. Dep’t of Labor, 159 F.3d 597, 603 (D.C. Cir. 1998) 

(“[T]he ‘real party in interest’ doctrine applies [under

§ 2412] when an ineligible party pays the fees for an eligible party” or when “an ineligible non-party (such as an association member) . . . pays the fees of a party (such as an 

association),” and “bar[s] fee awards from which only ineligible parties [and non-parties] would benefit” (emphases 

and footnote omitted)); Love v. Reilly, 924 F.2d 1492, 1494 

(9th Cir. 1991) (providing that individual members of an 

association “would be the real party in interest in the 

[§ 2412] fee litigation . . . if they were liable for the [association’s] attorney[] fees”); SEC v. Comserv Corp., 908 F.2d 

1407, 1416 (8th Cir. 1990) (determining that “a . . . party 

meeting the financial qualifications” of § 2412 was nevertheless ineligible to receive an award of attorney fees because its attorney fees were “fully paid by a noneligible 

organization” and it was, therefore, not the real party in 

interest).

Application of the real party in interest doctrine to the 

limitations of § 2412 is appropriate in light of Congress’s

intent in enacting this statute. Pertinently, Congress 

found that “certain individuals, partnerships, corporations, 

and labor and other organizations may be deterred from 

seeking review of, or defending against, unreasonable governmental action because of the expense involved in securing the vindication of their rights in civil actions and in 

administrative proceedings.” Equal Access to Justice Act, 

Pub. L. No. 96–481, § 202(a), 94 Stat. 2321, 2325 (1980). 

Accordingly, when § 2412 was enacted, its stated purpose 

was “to diminish the deterrent effect of seeking review of,
BASR PARTNERSHIP v. UNITED STATES 5

or defending against, governmental action by providing in 

specified situations an award of attorney fees, expert witness fees, and other costs against the United States.” Id.

§ 202(c)(1) (emphasis added). As the D.C. Circuit has recognized, “a congressional intention to limit the scope of 

[§ 2412] to individuals or to small entities that find particularly burdensome the ever-rising costs of litigation” is evident, but “not to subsidize . . . the purchase of legal 

services by large entities easily able to afford legal services.” Unification Church, 762 F.2d at 1082; see Wall Indus., 1989 WL 81684, at *1 (“[T]he possibility of an 

ineligible party using a nominally eligible party as a front 

to obtain fees otherwise unavailable is contrary to [§ 2412] 

and its legislative history and purpose and cannot be countenanced.”); see also Foley Constr. Co. v. U.S. Army Corps 

of Eng’rs, 716 F.2d 1202, 1203 (8th Cir. 1983) (“The purpose 

of [§ 2412] is to diminish the deterrent effect of the expense 

involved in seeking review of, or defending against, unreasonable government action.” (citation omitted)).

There is no dispute that the Pettinatis are legally obligated to pay the litigation costs and attorney fees arising 

from this case. See J.A. 2067–69 (providing the Fees and 

Costs Agreement between, inter alia, Mr. Pettinati, Jr. and 

counsel for BASR and Mr. Pettinati, Sr.), 2070–72 (providing the same with regard to Mr. Pettinati, Sr. and Ms. Pettinati), 2073–282 (providing the invoices for legal services 

provided by counsel for BASR and Mr. Pettinati, Sr. billed 

to Mr. Pettinati, Sr. and Ms. Pettinati). Indeed, the record 

demonstrates that the Pettinatis actually paid the litigation costs and attorney fees. J.A. 2283–91 (providing the 

Billing and Payment Report from counsel for BASR and 

Mr. Pettinati, Sr. indicating amounts charged and payments made by Mr. Pettinati, Sr. and Mr. Pettinati, Jr.), 

2327–57 (providing the credit card statements indicating 

payments made by Mr. Pettinati, Sr. and Mr. Pettinati, Jr. 

to counsel for BASR and Mr. Pettinati, Sr.). In addition, 

BASR’s partnership agreement obligates BASR to 
6 BASR PARTNERSHIP v. UNITED STATES

indemnify the Pettinatis, as partners in BASR, for these 

financial obligations and outlays. See J.A. 2392 (identifying, in the Partnership Agreement, the Pettinatis as partners), 2399 (stating, in the Partnership Agreement, that 

“[e]ach Partner shall, to the extent permitted by law, be indemnified and held harmless by [BASR] from and against 

any and all . . . expenses (including reasonable legal fees 

and expenses) . . . arising from any and all . . . suits or proceedings . . . in which the Partner may be involved” (emphases added)). Thus, pursuant to the Partnership 

Agreement and the Pettinatis’ agreements to pay the fees 

and costs of counsel for BASR and Mr. Pettinati, Sr., the 

Pettinatis, not BASR, stand to benefit from the Court of 

Federal Claims’ award of litigation costs and attorney fees, 

and are, therefore, the real parties in interest. See Phillips, 

924 F.2d at 1583 n.5 (stating that, “[i]f the party seeking 

legal fees is obligated to pay them to a third party which is 

not the professional providing the legal service, an award 

under [§ 2412] has been deemed inappropriate”); Unification Church, 762 F.2d at 1082 (“[T]he beneficiary of any 

award of fees . . . can fairly be characterized as the real 

party in interest.”). 

The situation here mirrors that in Unification Church

upon which the majority relies in resolving the real party 

in interest issue. See Maj. Op. 20 (basing its resolution of 

this issue on “the real-party-in-interest doctrine[] as applied in Unification Church”). There, three individuals and 

a church sought attorney fees from the Government. Unification Church, 762 F.2d at 1079. However, per an arrangement with their shared counsel, the church was 

solely liable for attorney fees. Id. at 1082. Thus, “[w]hatever the outcome of [the D.C. Circuit’s] consideration of 

fees,” the individuals would “not pay the fees.” Id. If fees 

were not awarded, the church would pay, and if they were, 

the Government would pay. Id. The church was, therefore, 

determined to be “the beneficiary of any award of fees, not 

the individual appellants, and . . . the [c]hurch [was] 
BASR PARTNERSHIP v. UNITED STATES 7

characterized as the real party in interest.” Id. “[I]f the 

[c]hurch would not itself qualify [for a fee award], then to 

allow the presence of the individual plaintiffs to result in a 

fee award would allow the [c]hurch to receive free legal services courtesy of a statute that intended to exclude the 

[c]hurch from its scope.” Id. at 1083. Similarly, had the 

Court of Federal Claims not awarded costs and fees here, 

the Pettinatis would have paid. See J.A. 2067–72. The 

Court of Federal Claims, however, awarded costs and fees, 

so Appellant the United States (“Government”) must pay. 

See BASR P’ship, 130 Fed. Cl. at 313. Under Unification 

Church, the Pettinatis are the real parties in interest, not 

BASR. See 762 F.2d at 1082–83. 

As a result of its errant conclusion that BASR is the 

real party in interest, the Court of Federal Claims limited 

its consideration of net worth under § 7430(c)(4)(A)(ii) and 

§ 2412(d)(2)(B) to BASR, rather than the Pettinatis. See 

BASR P’ship, 130 Fed. Cl. at 308 (“[T]he court need not 

consider the net worth of BASR’s individual partners . . . .”). If the Pettinatis each individually have a net 

worth exceeding $2 million, then they are not eligible for 

an award of litigation costs and attorney fees, see I.R.C. 

§ 7430(c)(4)(A)(ii); 28 U.S.C. § 2412(d)(2)(B), and they may 

be improperly receiving free legal services courtesy of a 

statute intended to exclude them from its scope, see Nat’l 

Ass’n of Mfrs., 159 F.3d at 603 (“[I]f an association were no 

more than a ‘front’ or a ‘sham’ through which ineligible entities pursued litigation and recovered fees, it would be appropriate to pierce the associational veil and look to the 

real parties in interest.”). 

The majority disregards this possibility and fails to correctly apply the real party in interest doctrine by stating 

that the Ninth Circuit, in Love, has “reasoned, without endorsing the application of the real-party-in-interest doctrine when performing a § 2412(d) analysis, that the 

doctrine does not bar recovery in a particular case.” Maj. 

Op. 19. Love, however, is not only unsupportive of the 
8 BASR PARTNERSHIP v. UNITED STATES

majority’s assessment, but expressly contradicts it. In 

Love, an association sought attorney fees against the Government and was eligible for such an award under § 2412. 

924 F.2d at 1493. The Government there argued that the 

real parties in interest were the association’s members

since they would benefit from any award of fees, and sought 

to “requir[e] the association to prove that each of its members [was] individually eligible for fees.” Id. at 1494. The 

Ninth Circuit disagreed and stated, in relevant part, that 

“[t]he members . . . would be the real part[ies] in interest . . . only if they were liable for the [association]’s attorney[] fees,” and that “[n]othing in the record points to such 

an agreement.” Id. (emphases added); see Estate of Palumbo, 675 F.3d at 242 (determining that the presence of 

“a legal arrangement that ma[kes a party] responsible 

for . . . fees” is key to an individual or entity being the real 

party in interest).2 Here, the Pettinatis are liable for 

 

2 Although, the majority also cites Estate of Palumbo

to support its proposition that our sibling circuits have not 

endorsed the real party in interest doctrine in holding “that 

the [real party in interest] doctrine does not bar recovery 

in a particular case,” Maj. Op. 19, I disagree. In Estate of 

Palumbo, the Third Circuit comprehensively assessed 

whether the real party in interest doctrine obligated it to 

look to the qualifications of a non-party in determining 

whether, under § 2412, the award of attorney fees was 

proper, and determined that the doctrine did not by distinguishing cases in which the doctrine was interpreted to impose such an obligation. See 675 F.3d at 242 (concluding 

that “judicial interpretations of the real-party-in-interest 

doctrine pertaining to [§ 2412] do not militate in favor of” 

looking to a non-party’s qualifications). Contrary to the 

majority’s assertion, Estate of Palumbo is an example of

one of our sibling circuits applying the real party in interest doctrine in the context of a § 2412 analysis, and 
BASR PARTNERSHIP v. UNITED STATES 9

BASR’s litigation costs and attorney fees due to their 

agreements to pay the fees and costs of counsel for BASR 

and Mr. Pettinati, Sr. See J.A. 2067–72. Thus, based on 

its statements in Love, the Ninth Circuit would determine

persons like the Pettinatis to be the real parties in interest 

who must satisfy the requirements of § 7430 and § 2412 to 

be eligible for the award of costs and fees.3 

CONCLUSION

In failing to apply the real party in interest doctrine to 

this case, the majority relies on precedent that actually 

contradicts its conclusion that the doctrine “does not prevent BASR from obtaining an award under . . . § 7430.” 

Maj. Op. 20. Rather, the record and precedent make clear 

that the Pettinatis, not BASR, are the real parties in interest. Accordingly, the Court of Federal Claims’ determination that BASR is the real party in interest should be 

vacated and the case remanded for findings with regard to 

the Pettinatis’ fulfillment of the statutory requirements 

 

determining that the doctrine did not require appraisal of

the qualifications of a non-party for the award of attorney 

fees. 

3 The majority also relies on “the fact that the plain 

language of . . . § 7430 and . . . § 2412 does not explicitly 

prohibit an insolvent party from obtaining an award” to 

reach its conclusion. Maj. Op. 20. This, however, is irrelevant to deciding the real party in interest issue, which 

solely involves discerning to whom any costs and fees 

award accrues, regardless of solvency. See, e.g., Nat’l Ass’n 

of Mfrs., 159 F.3d at 603 (providing that the real party in 

interest doctrine applies when ineligible parties or nonparties pay the fees for an eligible party, and “bar[s] fee 

awards from which only ineligible parties [and non-parties] 

would benefit”).
10 BASR PARTNERSHIP v. UNITED STATES

under § 7430 and § 2412 for the award of litigation costs 

and attorney fees. For these reasons, I respectfully dissent.