Opinion ID: 2975680
Heading Depth: 4
Heading Rank: 1

Heading: Living Care Utica

Text: In Living Care Utica III/IV, Living Care Utica is the same party as in Living Care Utica I/II, and therefore privity is not in issue or contested. Nevertheless, Living Care Utica does protest that the issues in Living Care Alternatives of Utica that were necessary and essential to a judgment on the merits and that were actually litigated and decided after full and fair opportunity are not identical to those raised by it in the instant consolidated appeals. In Commissioner v. Sunnen, the United States Supreme Court cautioned that [w]here two cases involve income taxes in different taxable years, collateral estoppel must be used with its limitations carefully in mind so as to avoid injustice. It must be confined to situations where the matter raised in the second suit is identical in all respects with that decided in the first proceeding and where the controlling facts and applicable legal rules remain unchanged. 333 U.S. 591, 599-600 (1948); see also Kennedy v. Comm’r, 876 F.2d 1251, 1257 (6th Cir. 1989). Living Care Utica submits that its issues are not “identical in all respects” to those presented in Living Care Alternatives of Utica because the cases involve different tax -12- years, different facts, and different hearing officers conducting different analyses. However, Sunnen refers to an identity in the matter raised, without change in controlling facts, rather than identity of each and every fact. Nor must the presiding decision maker be the same in order to invoke collateral estoppel. Under Appellant’s theory, neither collateral estoppel nor res judicata would virtually ever apply in tax proceedings. And as to Appellant Living Care Utica’s belief that appeals officers’ analyses are “different” unless each nuance considered in its later tax challenges replicates those from Living Care Alternatives of Utica, no authority is put forth for such proposition. If such identity were required, it would be particularly problematic in establishing collateral estoppel in collection due process proceedings such as these, because of the deferential review Congress contemplated would be given to tax appeals versus other agency decisions. Living Care Alternatives of Utica, 411 F.3d at 625 (“Judicial review of collection due process hearings” historically “involved very little judicial oversight,” consequently resulting in “a surprisingly scant record.”). The Supreme Court has established a three-part test to determine if applying collateral estoppel is also appropriate: (1) “whether the issues presented by [the subject] litigation are in substance the same as those resolved [in the prior case]”; (2) “whether controlling facts or legal principles have changed significantly since the [prior] judgment”; and (3) “whether other special circumstances warrant an exception to the normal rules of preclusion.” Montana, 440 U.S. at 155. As noted, the district court presiding over Living Care Utica III/IV identified nine claims presented by Living Care Utica in those consolidated administrative appeals. The -13- district court summarized the claims presented by Living Care Utica on appeal as: (1) because there are senior lienholders, the IRS would not realize any tax revenue from the levy or liens; (2) the liens have harmed Living Care Utica by preventing refinancing; (3) Medicaid and Medicare funds are exempt from levy; (4) Living Care Utica’s inability to pay the taxes is the result of extensive government regulation in the field; (5) the IRS wrongly rejected an offer in compromise; (6) the IRS should have accepted Living Care Utica’s plan to maintain the business and sell it as an ongoing concern; (7) the IRS abused its discretion in making a determination to sustain the levy and liens; (8) Living Care Utica’s plan to sell the business as an ongoing concern will net more tax revenue; and (9) Living Care Utica contests the underlying tax liability. (Utica J.A. 205-06). As the district court correctly identified, all of the claims presented to it by Living Care Utica, with the exception of the second claim, at least nominally were resolved in Living Care Alternatives of Utica, thus satisfying Montana’s first requirement. Even though the tax years in these appeals differ from those at issue in Living Care Utica I/II, the tax circumstances which faced Living Care Utica, and the points and defenses raised by Rosser on behalf of it in anticipation of the hearing and pursuant to the statutory provision to raise “any other relevant issue relating to the unpaid tax,” 26 U.S.C. § 6330(c)(2)(A), are all matters that are “in substance” the same as those raised in Living Care Utica I/II. As to the first, third, and fourth claims, courts in the prior Living Care I/II litigation determined that Living Care Utica’s claims failed as a matter of law. See Living Care Alternatives of Utica, 411 F.3d at 626, 628 (holding that even if the inability to pay was the result of government regulation, it would not excuse the tax liability and that there is no -14- requirement that the United States consider whether it will receive any revenue from the levy); Living Care Alternatives of Utica, Inc. v. United States, No. 03-0359, 2003 WL 23311523,  (S.D. Ohio Dec. 12, 2003) (holding that Medicaid and Medicare funds are subject to levy and that even if the inability to pay was the result of government regulation, it would not excuse the tax liability). Therefore, as to the second part of Montana’s threepart test, no controlling facts are relevant and collateral estoppel is appropriate for these claims.2 As to the fifth, sixth, and eighth claims, this Court previously held that the Appeals Officer had not abused his discretion by refusing the alternatives presented by Living Care Utica because it had previously defaulted under an installment payment plan and it had an escalating amount of unpaid tax liability. See Living Care Alternatives of Utica, 411 F.3d at 631. The facts that justified the Officer’s prior decision remain unchanged. Therefore, part two of Montana’s three-part test is satisfied and so collateral estoppel is also appropriate for these claims. Living Care Utica’s ninth claim in the district court challenged its underlying tax liability. However, Living Care Utica no longer presents this as a direct challenge or issue on appeal to this Court. 2 As to the third consideration, “whether other special circumstances warrant an exception to the normal rules of preclusion,” Montana, 440 U.S. at 155, Living Care Utica points to no special circumstance aside from its general contention that poor congressional public policy in the regulation of nursing homes when balanced with the imposition of tax obligations upon such homes constitutes special circumstances to overlook this Court’s prior judgment. This legislative conundrum is not so much presented by Appellant as a special circumstance to except the application of collateral estoppel as it is a basis for asking this Court to legislate specialized tax laws for the nursing home industry, which of course we will not do. -15- As to Living Care Utica’s seventh claim – that the IRS abused its discretion in making a determination to sustain the levy and liens – the judgment in Living Care Alternatives of Utica arguably relied on different facts than those presented in this case. That is, in previously deciding that the IRS did not abuse its discretion in making the determination to sustain the levy and liens, this Court reviewed the reasoning of that appeals officer’s decision. See id. at 630. On the one hand, this case presents different decisions rendered by appeals officers not involved in the prior judgment. Whether the appeals officers in Living Care Utica III/IV abused their discretion depends upon the reasoning of these particular officers. In other words, even though the appeals officers arrived at the same ultimate conclusion as the appeals officer in the prior litigation, it is possible that the appeals officers abused their discretion in the reasoning justifying that conclusion. Therefore, in this sense it is inappropriate to apply collateral estoppel. On the other hand, and as previously discussed, the same decision maker or identity in reasoning (as opposed to identity in the controlling facts or legal principles) is not a required condition to invoke collateral estoppel. Essentially this seventh claim is an allencompassing one, sweeping within it the various other challenges to the administrative decision raised by Appellant Living Care Utica. Blanket rejection of collateral estoppel amounts to an end run around applying the doctrine to particularized arguments. As a practical matter, in this appeal Living Care Utica has already been collaterally estopped from relitigating arguments upon which it now relies to argue why the appeals officers abused their discretion in determining to sustain the levy and liens. The one exception is that of claim two concerning the refinancing. The district court correctly observed that this -16- claim was not presented in Living Care Utica I/II, and so collateral estoppel does not apply. Merits consideration of this claim is set forth below in this decision. In summary, all but the second claim raised by Living Care Utica are issues that were litigated in Living Care Utica I/II and decided by this Court in Living Care Alternatives of Utica. They are in substance the same as issues raised presently by Living Care Utica in Living Care Utica III/IV. The controlling facts and/or applicable legal rules remain unchanged, with no special circumstances having been shown to except imposing upon Living Care Utica the determinations for these issues from the prior judgment. Therefore, Living Care Utica’s claims on appeal, with the exception of its challenge concerning the refinancing, are barred by the doctrine of collateral estoppel.