Opinion ID: 754611
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: 2 According to Frank Lewis's deposition, at about 11:00 o'clock on the morning of Thursday, April 15, 1993, he deposited at the United States Post Office at 371 Nevada Street, Auburn, California, an Application for Automatic Extension For Time To File U.S. Individual Income Tax Return for Tax Year 1992. The form was signed by himself and his wife Janis and enclosed in a stamped envelope properly addressed to the Internal Revenue Service (the Service). Accompanying it were two checks, both dated April 15, 1993, in the total amount of $5,000, made out to the Service. On the same date he filed the Lewises' request for an extension of time to file their state return accompanied by a check also dated April 15, 1993. The latter check was cashed by the state on April 16, 1993. 3 The Lewises' Application For Automatic Extension was in mail delivered to the Ogden Service Center in bags which were stamped on the date of receipt from the Post Office. In April 1993, 9,634,446 pieces of mail were received at the Ogden Service Center. The Lewises' application was stamped as received by the Service on April 26, 1993 and was subsequently denied as untimely filed. The Lewises did file a federal income tax return for 1992, but, as it was late, they were assessed a penalty, which, together with interest, eventually came to $1,794.92. 4 On May 1, 1995 S. Ross Kochenderfer, an Auburn attorney admitted to practice in the Tax Court, was retained by the Lewises. On the same day he telephoned the IRS appeals office and discussed the position of the Lewises, asking in particular for a copy of the postmarked envelope in which the Lewises' Application for Automatic Extension had been filed. The Service did not produce the envelope. After further communication and correspondence, the Service levied upon the Lewises' bank account and collected the amount the Service believed was owed. Thereafter the Lewises invoked the Freedom of Information Act to obtain documents from the Service relating to their filing and in particular a copy of the postmarked envelope. They received their entire penalty file consisting of 63 pages of documents including some envelopes, but none of the documents included the envelope in which the Application for Automatic Extension had been mailed. PROCEEDINGS 5 On June 8, 1995 the Lewises filed a claim for refund of the $1,794.92. On September 20, 1995 the Service disallowed the claim. On December 20, 1995 the Lewises filed suit in the district court seeking refund of the $1,794.92, together with interest, costs, and attorney's fees, and requesting jury trial. 6 On February 12, 1996, the Lewises moved for summary judgment setting out in substance the above facts. On March 19, 1996 the United States filed a cross-motion for summary judgment. An exchange of memoranda and supplemental declarations on both sides followed. 7 On September 24, 1996 the district court filed an opinion denying the government's motion for summary judgment. The district court stated: The Lewises have produced sufficient evidence to convince a fact-finder that their return was timely filed. In a footnote to this opinion, the district court denied the Lewises' motion for summary judgment, stating, Because there is some evidence that the letter was not timely mailed--principally the date of receipt--summary judgment for plaintiffs must be denied. 8 On October 9, 1996, less than three weeks later, the United States stipulated to judgment in favor of the Lewises in the amount of $1,794.92. 9 The Lewises' lawyer, Ross Kochenderfer, put in over 100 hours of work on the litigation. He has charged a below-market rate of $150 per hour for his work. The Lewises are thus liable for over $15,000 in legal fees. The Lewises moved for the award of attorney's fees under 26 U.S.C. § 7430, which provides for an award of attorney's fees to the prevailing party unless the government establishes that the position of the United States in the proceeding was substantially justified. 26 U.S.C. § 7430(c)(4)(B)(i). Under the statute the maximum amount the Lewises would receive was approximately $10,000. 10 The United States opposed the motion. After an exchange of memoranda and declarations the district court on February 18, 1997 denied the Lewises' request. The district court added: The court can well understand the plaintiffs' sense of unfairness in this case.... To find that the position of the United States was substantially justified given the state of the law, however, is not to say that the United States exercised wise discretion in dealing with citizens who have made good faith efforts to comply with the tax laws. 11 The Lewises appeal.