Opinion ID: 3064685
Heading Depth: 2
Heading Rank: 3

Heading: Application to Morrison

Text: On the record before us, we find it difficult to discern the exact nature of the agreement between Caspian and Morrison regarding the repayment of attorneys’ fees, or even determine whether such an agreement exists. At various times, Morrison asserted (1) that “under the arrangement pursuant to which CASPIAN paid [Morrison’s] litigation costs, [Morrison] is obligated to pay over any recovery to CASPIAN”; (2) that “[a]s part of the consideration to be paid to [Morrison] by CASPIAN for the purchase of his stock, CASPIAN agreed to advance on behalf of [Morrison] the costs and fees incurred by [Morrison] in connection with this case,” and “[Morrison] in exchange agreed to pursue the recovery of his litigation costs, and to pay over to CASPIAN any recovery of such costs”; (3) that the payment of fees by Caspian “were treated as loans to [Morrison]”; (4) that “CASPIAN’s payment of [Morrison’s] attorneys was part of an [arm’s-length] business transaction in which the cost to CASPIAN of the payment was treated by the parties to the arrangement as part of the consideration paid to [Morrison]”; and (5) that Morrison “indirectly paid for the services of an attorney when CASPIAN assumed his share of the cost of the then pending tax disputes with Appellee as part of the consideration in the buy-out transaction.” The government and the Tax Court suggest that these statements are contradictory. We are not so sure. Although the statements are not models of clarity, they are all consistent with the idea that Caspian agreed to advance Morrison’s attorneys’ fees as consideration for the purchase of Morrison’s Caspian stock, but that, as part of that agreement, Morrison agreed to repay any fees he recovered. Such an arrangement closely parallels the contractual arrangement in Wilson, where the petitioner paid insurance premiums in exchange for the insurance company’s agreement to pay any potential attorneys’ fees, but also agreed to seek recovery of those fees on MORRISON v. CIR 5765 behalf of the insurance company. See Wilson, 126 F.3d at 1407-08. For the reasons outlined above, Morrison, like the petitioner in Wilson, would be entitled to attorneys’ fees if he took on a contingent obligation to repay the fees to Caspian. As the government points out, however, there is little direct evidence of the fee arrangement between Caspian and Morrison. Morrison submitted an affidavit from his attorney, William E. Taggert, in which Taggert asserted that the parties’ joint engagement and disclosure agreement established the fee arrangement among the parties. Our independent review of the written agreement, however, reveals that it is silent on precisely how the payment and reimbursement of fees was to be handled. In addition, Morrison did not produce any documentary evidence of the stock-buyout agreement between himself and Caspian. It is therefore possible, though perhaps unlikely, that Morrison was under no obligation to repay any fee recovery to Caspian.8 [7] Because the Tax Court took the view that a litigant can never “incur” fees if the fees are first paid by a third party, it did not sort out the precise nature of the relationship between Caspian and Morrison, and so did not determine whether Caspian agreed to pay some or all of Morrison’s fees as consideration for an earlier transaction, or whether Morrison assumed a contingent or noncontingent repayment obligation. We therefore remand to the Tax Court to apply the definition we have adopted of “incurred,” after determining the precise nature of the fee agreement, if any, between Caspian and Morrison. 8 Even if Morrison was not obligated to repay any fee recovery to Caspian, he might still qualify for a fee award if he paid full consideration in exchange for Caspian’s agreement to pay his fees. In such a case, the consideration paid by Morrison could amount to a prepayment of his attorneys’ fees. He would therefore have “paid” attorneys’ fees under § 7430. Of course, Morrison would be entitled to, at most, only the amount of consideration he pre-paid. 5766 MORRISON v. CIR