Court Opinion

ID: 2813117
Source: CourtListenerOpinion
Date Created: 2015-06-30 19:02:39.210053+00
Date Added: 2024-06-11T12:03:51.350201
License: Public Domain

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

ADAM STEELE and,

BRITTANY MONTROIS,
Plaintiffs,

v. Civil Case No. 14-1523

UNITED STATES OF AMERICA,

Defendants.

WALLACE G. DICKSON,
Plaintiff,
v. Civil Case No. 14-2221

UNITED STATES OF AMERICA,

Defendants.

VvvVVVVVVVVVVVVVVVVVVVVVV

MEMORANDUM OPINION
Plaintiff Wallace Dickson and plaintiffs Adam Steele and Brittany Montrois seek an order
consolidating the above-captioned cases because they share common questions of law and fact.
Plaintiff Dickson further moves for appointment of the law ﬁrms Hausfeld LLP and Boies Schiller
& F lexner LLP (“BSF Group”) to serve as interim co-lead counsel in the proposed consolidated
action. Plaintiffs Steele and Montrois seek the appointment of the law ﬁrm Motley Rice as interim
lead counsel in the proposed consolidated action, to work with Allen Buckley and others (“Motley

Rice Group”).

I. BACKGROUND

In 2010, the IRS promulgated new regulations requiring tax-retum preparers to meet
requirements for competency testing and engage in continuing education. See 31 C.F.R. §§ 10.4(c),
10.5(b), 10.6(d)(6), (e)(3). Additionally, the IRS also required all tax preparers to pay to obtain a
Preparer Tax Identiﬁcation Number (“PTIN”), and pay to renew it each ear. See 26 C.F.R. §
300.l2(a), (b).

Allen Buckley subsequently agreed to represent Jesse Brannen, a tax-return preparer who
wanted to challenge the new PTIN fees in court. In May 201 1, Buckley ﬁled a complaint, Brannen
v. United States, No. 4:11-cv—00135, 2011 WL 8245026 (N.D. Ga. Aug. 26, 2011), arguing that
the IRS lacks statutory authority to require paid tax preparers to ﬁle for, pay for, and receive a
PTIN. Id. at *1. Although the Brannen case was subsequently dismissed, see Brannen, 2011 WL
8245026; aff’d, 682 F.3d 1316 (11th Cir. 2012), Mr. Buckley further developed these themes in
an article he wrote, IS Treasury ’s New Regulatory Scheme for Return Preparers Lawful ?,
published in Tax Notes magazine in October 2012. Buckley Decl. 11 8, Ex. A (reprinted at
http://www.taxanalysts.com/www/features.nsf/Articles/F40714F3406FC5E585257D86000CDD
68?OpenDocument).

Mr. Buckley also alleges that he was substantially involved in another case challenging the
legality of the IRS’s efforts to regulate tax—return preparers, Loving v. IRS, 917 F. Supp. 2d 67
(D.D.C. 2013). Buckley Decl. ll 7. He alleges that he reviewed all major briefs, provided research,
and frequently consulted with Daniel Alban, lead counsel in the Loving case. Ia'. This case was
successful: In February 2014, the DC. Circuit afﬁrmed the lower court’s holding that the IRS

lacked the authority to regulate tax-return preparers. Loving v. IRS, 742 F.3d 1013, 1014-15 (D.C.

Cir. 2014). The DC. Circuit opinion relied on many of the same arguments Buckley set forth two
years earlier in his Tax Notes article.

In the meantime, Mr. Buckley had agreed to represent Adam Steele, who was introduced
to him by Mr. Alban. Knowing Mr. Buckley sought local counsel in Washington, DC, Mr. Alban
introduced Mr. Buckley to Stuart Bassin. Buckley Decl. H 13. Mr. Bassin also claims to have been
involved with the Loving case, occasionally sharing insights and making substantive suggestions
about the case on appeal. Decl. of Stuart Bassin, Dickson ECF No. 17-2.1 Mr. Bassin, after working
extensively with Allen Buckley, ﬁled the Steele complaint in this Court on September 8, 2014.
Steele Compl. The Steele plaintiffs seek review of the IRS’s decision under the Administrative
Procedure Act (APA).

Several attorneys became interested in the litigation at this point, including James
Pizzirusso of Hausfeld, Jeffrey Kaliel of Tycko & Zavareei, and Scott Gant of BSF. In the
meantime, the relationship between Mr. Buckley and Mr. Bassin deteriorated, and they terminated
their working relationship. Buckley Decl. 11 16; Bassin Decl. W 13-14. After meeting with Mr.
Buckley and discussing potential arrangements as co-counsel, Mr. Pizzirusso and Mr. Kaliel
declined to work with him. Buckley Decl. 11 19, Pizzirusso Decl. 11 18. Mr. Buckley alleges that

Mr. Gant of BSF declined to return his calls. Buckley Decl. $1 21. Mr. Buckley reached an

agreement with Motley Rice LLC that it would serve as counsel in the Steele case.
Later that month, Hausfeld, BSF, and Tycko & Zavareei LLP, ﬁled the Dickson complaint

on December 31, 2014. The Dickson complaint asserts claims for illegal exactions, contending that

the IRS lacks legal authority to impose PTINs fees—at all, or alternatively, in the amounts charged.

1 Mr. Bassin is now collaborating with the Dickson plaintiff.

3

One week later, the plaintiff in Dickson moved to consolidate the Dickson and Steele
actions, and sought appointment of Hausfeld and BSF as interim co-lead counsel for the proposed
class, supported by Mr. Bassin. The Steele plaintiffs also move for consolidation, but seek the
appointment of Motley Rice as interim class counsel, working with Mr. Buckley and others. The
government has not opposed their motions.

II. CONSOLIDATION

Federal Rule 42(a) permits consolidation of actions that involve “a common question of
law or fact.” Fed. R. Civ. P. 42(a). Local Rule 40.5 states that two or more civil cases “are deemed
related when the earliest is still pending on the merits in the District Court and they (1) relate to
common property, or (ii) involve common issues of fact, or (iii) grow out of the same event or
transaction or (iv) involve the validity or infringement of the same patent.” LCvR 40.5(a)(3).

“In deciding whether to consolidate, courts must “weigh the risks of prejudice and
confusion wrought by consolidation against the risk of inconsistent rulings on common factual and
legal questions, the burden on the parties and the court, the length of time, and the relative expense
of proceeding with separate lawsuits if they are not consolidated.” Royer v. Fed. Bureau of Prisons,
292 F.R.D. 60, 61 (D.D.C. 2013) (quoting Nat ’lAss ’rz ofMort. Brokers v. Bd. ofGovernors 0fthe
Fed. Reserve Sys, 770 F. Supp. 2d 283, 286 (D.D.C. 2011)). Consolidation is appropriate when
cases involve the same general facts, are at similar stages of litigation, and when consolidation
poses no risk of confusion or prejudice. Id.

These cases involve common questions of both law and fact, and the Court agrees with the
parties that consolidation would promote convenience and judicial economy, simplify
management of the cases, and facilitate global resolution of the class claims and conserve judicial

I‘CSOUI‘CCS.

Dickson and Steele share similar operative facts. While the cases present some differences,
they are both predicated on allegations that the government assessed PTIN fees on tax preparers
without legal authority to do so. The cases share basic relevant facts, involve the same defendant,
and challenge the IRS’s assessment of PTIN fees—0r the level at which they were set.

Additionally, both cases are in their infancy. N0 discovery has been conducted in either,
and consolidating the cases now will support judicial efﬁciency.

Finally, consolidation would avoid duplication, waste, and inconsistent results. Already,
the Court and parties have been faced with unnecessarily duplicative motion practice and
difﬁculties with coordination. These cases potentially involve hundreds of thousands of putative
class members, and duplicative discovery disputes could become burdensome.

For these reasons, the Court will consolidate the Dickson and Steele cases into a single
action.

111. INTERIM CLASS COUNSEL
A. Legal Standard

Under Federal Rule of Civil Procedure 23(g)(3), the Court may “designate interim counsel
to act on behalf of a putative class before determining whether to certify the action as a class
action.” Fed. R. Civ. P. 23(g)(1). Rule 23(g), which outlines the factors a court must consider when
appointing class counsel, applies equally to the appointment of interim class counsel before
certiﬁcation. In re Shop-Vac Mktg. & Sales Practices Litig, No. 4:12-MD-2380, 2013 WL
183855, at *1 (MD. Pa. Jan. 17, 2013); Brigiotta’s Farmland Produce & Garden Ctr., Inc. v.
United Potato Growers of Idaho, Inc, No. 4:10—cv—307, 2010 WL 3928544, at *1 (D. Idaho Oct.

4, 2010); Four In One Co. v. SKFoods, L. P., No. 08-cv-O3017, 2009 WL 747160, at *1 (ED. Cal.

Mar. 20, 2009); In re Air Cargo Shipping Servs. Antitrust Litig, 240 F.R.D. 56, 57 (E.D.N.Y.
2006).

Rule 23(g) requires the court to consider: (1) the work counsel has done in identifying or
investigating potential claims in the action; (2) counsel’s experience in handling class actions,
other complex litigation, and the types of claims asserted in the action; (3) counsel’s knowledge
of the applicable law; and (4) the resources that counsel will commit to representing the class. Fed.
R. Civ. P. 23(g)(l)(A). The court may also consider “any other matter pertinent to counsel’s ability
to fairly and adequately represent the interests of the class.” Fed. R. Civ. P. 23(g)(l)(B). Where
more than one applicant seeks appointment as class counsel, the court must appoint the applicant
“best able to represent the interests of the class.” Fed. R. Civ. P. 23(g)(2).

B. Analysis

At the outset, the Court must determine exactly whose efforts and expertise are to be
evaluated. BSF Group argues that “the court must choose lead counsel based on the work,
experience, knowledge, and resources of the class counsel applicants themselves, not their paid
consultants and experts.” BSF’s Reply, Dickson ECF No. 17 at 5, 8 (citing In re Honey
Transshipping Litig, No. l3-cv-2905 (ND. 111. Aug. 9, 2013) (rejecting co—lead applicants’
reliance on his co—counsel’s experience)). Therefore, it asserts, because the Motley Rice ﬁrm seeks
to be chosen as solo lead counsel in this lawsuit, the role of Mr. Buckley and other retained ﬁrms
is irrelevant to its adequacy as lead counsel.

However, Rule 23(g)(l)(B) explicitly permits the Court to consider, in addition to the four
required factors, “any other matter pertinent to counsel’s ability to fairly and adequately represent
the interests of the class.” The proposed involvement of the other counsel in the Motley Rice Group

is “pertinent” to whether Motley Rice is the proposed class counsel “best able to represent the

interests of the class.” Fed. R. Civ. P. 23(g)(2). There is no need to require those who seek to work
together to seek a multiple lead counsel arrangement: The Court is assured that Motley Rice, Mr.
Buckley, Mr. Beck, and Mr. Rizek, have a strong working relationship and can function as a team
with Motley Rice at the helm. The proposed lawyers in the Motley Rice Group have each entered
appearances in this case as counsel. Indeed, Mr. Buckley has previously entered into a co-counsel
agreement with Motley Rice, indicating that the relationship is not merely one where Motley Rice
hires “paid consultants” to make up for any perceived deﬁciencies, but a close working
relationship. As such, the Court will consider all factors pertinent to Motley Rice’s ability to
represent the purported class, including its relationships with Mr. Buckley and others.

Each group is comprised of accomplished attorneys and has demonstrated signiﬁcant
experience in handling class actions, including class actions. See Fed. R. Civ. P. 23(g)(l)(A)(ii).
While both groups put forth arguments about speciﬁc types of lawsuits their opponents have not
handled—for example, class actions against the government or illegal exaction claims,
speciﬁcally—the Court is thoroughly impressed by the qualiﬁcations of both groups. The
purported plaintiff class would beneﬁt from the wealth of experience that either group offers.
Furthermore, both groups of attorneys appear to have a strong command of the applicable law. See
Fed. R. Civ. P. 23(g)(1)(A)(iii).

The Court is also satisﬁed that both groups of attorneys have signiﬁcant resources that they
are willing to commit to representing the putative class. See Fed. R. Civ. P. 23(g)(l)(A)(iv). The
costs the Motley Rice Group may incur to travel to Washington DC. throughout the course of
litigation would be minimal, and the Court ﬁnds that does not affect its ability to effectively or

efﬁciently represent the purported class.

While three of the four factors set forth in Rule 23(g)(1)(A) would support either group of
attorneys, the Court ﬁnds that due to Mr. Buckley’s extensive work laying the groundwork that
made these cases possible, his group is the most qualiﬁed to further the interests of all putative
class members. Mr. Buckley has conducted thorough and extensive pre-ﬁling investigation and
testing of the potential claims and initiated legal action months in advance of other applicants.
Consideration of “the work counsel has done in identifying or investigating potential claims in the
action” leads the Court to determine that the Motley Rice Group is better suited to represent the
putative class. See Fed. R. Civ. P. 23(g)(1)(A)(i). While other counsel also claim to have conducted
some investigative work, no claimed efforts appear to pre-date Mr. Buckley’s work.

The Motley Rice Group has documented its work and investigative efforts to the Court in
sufﬁcient detail to satisfy that Court that it has conducted a comprehensive investigation, and made
a signiﬁcant investment in time and resources such that its commitment to this litigation is
unquestioned. The Motley Rice Group was instrumental in ferretting out similar lawsuits as early
as May 2011 before publishing an article on key issues at stake in this case in 2012. And while the
BSF Group asserts that its “signiﬁcant independent and original work” is reﬂected in its complaint,
which differs in some respects from the Steele complaint, the Motley Rice Group had already
initiated its claims in September, 2014. The Motley Rice Group has satisﬁed the Court that it has

conducted more signiﬁcant work in investigating and identifying potential claims in this action.2

2 Indeed, even if this factor alone were insufﬁcient to support the selection of the Motley Rice
Group, the Court ﬁnds that since both groups are more than qualiﬁed to handle this action, it would
be imminently reasonable to select the Motley Rice Group on the basis that their complaint was
ﬁled ﬁrst. See, e.g., Rickey v. Ells, No. 12-CV-02635-WJM-MEH, 2013 WL 179234, at *2 (D.
Colo. Jan. 17, 2013) (citing Biondi v. Scrushy, 820 A.2d 1148, 1159 (Del. Ch. 2003) (because all
ﬁrms were more than qualiﬁed to handle the action, the court appointed counsel who ﬁrst ﬁled the
case); Moradi v. Adelson, llcv490—GMN—RJJ, 2011 WL 5025155, *3 (D. Nev. Oct. 20, 2011).

8

While both groups of attorneys have satisﬁed the Court that they have sufﬁcient
experience, adequate knowledge of the applicable law, and sufﬁcient resources to adequately
represent the putative class, the Motley Rice Group has demonstrated that it has conducted more
signiﬁcant work in identifying and investigating potential claims. Consideration of the factors set
forth in Rule 23(g) thus leads the Court to conclude that it is the group that is best able to represent
the interests of the putative class. For this reason, the Court will grant Motley Rice’s motion to

serve as interim class counsel.

IV. CONCLUSION

For the aforementioned reasons, the plaintiffs” motion for consolidation will be
GRANTED. Motley Rice’s motion for appointment as interim class counsel is GRANTED, while
BSF’s motion for appointment is DENIED.

A separate order consistent with this Opinion shall issue on this date.

Signed by Royce C. Lamberth, United States District Judge, on June 30, 2015.