Court Opinion

ID: 813570
Source: CourtListenerOpinion
Date Created: 2012-12-13 20:19:22+00
Date Added: 2024-06-11T15:12:55.330670
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
             __________________________

         WESTERN MANAGEMENT, INC.,
           ROBERT E. KOVACEVICH,
         AND YVONNE R. KOVACEVICH,
              Plaintiffs-Appellants,
                           v.
                 UNITED STATES,
                 Defendant-Appellee.
             __________________________

                     2012-5005
             __________________________

    Appeal from the United States Court of Federal
Claims in No. 08-CV-116, Judge Nancy B. Firestone.
              ___________________________

             Decided: December 12, 2012
             ___________________________

   ROBERT E. KOVACEVICH, of Spokane, Washington, ar-
gued for plaintiffs-appellants.

    MELISSA BRIGGS, Tax Division, United States De-
partment of Justice, of Washington, DC, argued for de-
fendant-appellee. On the brief were KATHRYN KENALLY,
Assistant Attorney General, RICHARD FARBER and REGINA
WESTERN MANAGEMENT    v. US                               2

S. MORIARTY, Attorneys. Of counsel was GILBERT S.
ROTHENBERG, Attorney.
             __________________________

    Before NEWMAN, DYK, and PROST, Circuit Judges.
    Opinion for the court filed by Circuit Judge DYK.
   Dissenting opinion filed by Circuit Judge NEWMAN.
DYK, Circuit Judge.
    Robert E. Kovacevich and Yvonne R. Kovacevich ap-
peal from a decision of the Court of Federal Claims grant-
ing summary judgment to the government on their tax
refund claims. See W. Mgmt., Inc. v. United States, 101
Fed. Cl. 105 (2011). The Kovaceviches also appeal from
the Court of Federal Claims’ grant of summary judgment
to the government on its counterclaims against them, and
the entry of judgment in the amount of $87,879.39. See
id. We affirm the court’s grant of summary judgment to
the government on the Kovaceviches’ claims, and (with
one exception) affirm its judgment in favor of the govern-
ment on the government’s counterclaims. We remand for
the Court of Federal Claims solely to determine whether
the judgment in favor of the government on its counter-
claims should be reduced by certain credits claimed by the
Kovaceviches under 26 U.S.C. § 6521.
                       BACKGROUND
    This litigation arises from the Kovaceviches’ efforts to
obtain a refund of the amount represented by four checks
they wrote to the Internal Revenue Service (“IRS”) be-
tween 1991 and 2004. See W. Mgmt., 101 Fed. Cl. at 112.
The government asserted counterclaims against the
Kovaceviches concerning their liability for tax liabilities
incurred by Western Management, Inc. (“Western”) in
3                                 WESTERN MANAGEMENT      v. US

1994 and the first fiscal quarter of 1995. See id.1
     During the periods in question, Robert Kovacevich
was the president, secretary-treasurer, and sole share-
holder of Western, a professional services corporation.
See W. Mgmt., 101 Fed. Cl. at 110-11; W. Mgmt., Inc. v.
Comm’r, 85 T.C.M. (CCH) 1442, 1442 (2003), T.C. Memo
2003-162, aff’d in part, 176 F. App’x 778 (9th Cir. 2006).
The corporation treated Robert as an independent con-
tractor, and did not pay the employer’s share of employ-
ment taxes or withhold the employee’s share of federal
income and employment taxes. See W. Mgmt., 85 T.C.M.
(CCH) 1442; see also Kovacevich v. Comm’r, 98 T.C.M.
(CCH) 1, 1 (2009), T.C. Memo 2009-160 (discussing the
1992 tax year). The Kovaceviches appear to have paid
self-employment taxes, consistent with Robert’s professed
status as an independent contractor.
    In April 1999, the IRS sent Western a notice of de-
termination, recharacterizing Robert as an employee and
assessing a deficiency in the corporation’s taxes for the
periods at issue. W. Mgmt., 85 T.C.M. (CCH) at 1442-43.
The Tax Court sustained the IRS’s determination. See id.
at 1445. The Ninth Circuit affirmed as to Western’s
liability for unpaid employment taxes. See W. Mgmt., 176

    1    Western was named Robert E. Kovacevich, P.S.
until 1997, and its current name is credeX Inc. Since all
parties have referred to the corporation as “Western
Management” in this litigation, we do the same.
     Western was also a party before the Court of Federal
Claims. The court dismissed the claims and counterclaims
involving the corporation, holding that because Tax Court
litigation over its corporate liability for the fiscal quarters
at issue was pending before the Ninth Circuit at the time
that this suit was filed, the Court of Federal Claims
lacked jurisdiction over those claims under 28 U.S.C.
§ 1500. See W. Mgmt., 101 Fed. Cl. at 113-14. Neither
side has appealed that dismissal.
WESTERN MANAGEMENT    v. US                               4

F. App’x 778. However, noting Western’s claim that the
Kovaceviches had “paid self-employment taxes equivalent
to the amounts [of employment taxes] owed” by the corpo-
ration, the Ninth Circuit suggested that the Kovaceviches
could seek a refund under 26 U.S.C. § 6511(d)(7). Id. at
781. The Ninth Circuit remanded for the Tax Court to
reexamine Western’s liability for failing to withhold
income taxes. Id. at 782. On remand, the Tax Court
found that because Robert had paid his income taxes, the
IRS could not penalize Western for failing to withhold,
but refused to abate Western’s liability for the employer’s
share of employment taxes. The Ninth Circuit affirmed.
See W. Mgmt. v. Comm’r, 314 F. App’x 65 (9th Cir. 2009);
Kovacevich, 98 T.C.M. (CCH) at 2 (summarizing this
litigation).
    In 2004, while the Tax Court litigation was on appeal
before the Ninth Circuit for the first time, the IRS sought
to collect some of Western’s liabilities from Robert, as the
individual responsible for the corporation’s tax payments
under § 6672 of the Internal Revenue Code. See Kovace-
vich, 98 T.C.M. (CCH) at 1-2. In particular, the IRS
assessed against Robert a so-called trust-fund-recovery
penalty, stemming from Western’s failure to withhold
Robert’s income taxes and employee’s share of employ-
ment taxes. See id.2 When the Tax Court, on remand
from the Ninth Circuit, abated Western’s liability for
failure to withhold Robert’s taxes, the IRS abated Robert’s

   2     The Tax Court has described the trust-fund-
recovery penalty assessed against Robert as a penalty for
“unpaid employer taxes,” id. at 2 (emphasis added), rather
than for unwithheld employee taxes, but this appears to
be an error, in light of the court’s accompanying descrip-
tion of the § 6672 trust-fund-recovery penalty as a penalty
assessed when “a corporate employer doesn’t pay over the
withheld [income and employment taxes],” see id. at 1-2
(emphasis added).
5                                WESTERN MANAGEMENT      v. US

corresponding trust-fund-recovery penalty. This trust-
fund-recovery penalty is distinct from the government’s
efforts in this litigation, discussed below, to impose liabil-
ity on the Kovaceviches on an alter ego theory.
    Around this time, the Kovaceviches wrote three of the
four checks to the IRS that are at issue here. Specifically,
the Kovaceviches wrote a check for $7,682.00 in Septem-
ber 2003; a check for $7,514.40 in April 2004; and a check
for approximately $8,276 in November 2004. See 101 Fed.
Cl. at 112 & n.15; Kovacevich, 98 T.C.M. (CCH) at 3.
While the Kovaceviches have advanced different explana-
tions at different times as to their intent with respect to
these checks, the record is clear regarding what the IRS
did with the checks: all three were credited to Western’s
tax account, offsetting part of the corporation’s liabilities
for the five quarters at issue in this litigation (1994 and
the first quarter of 1995). See infra.
    The Kovaceviches initiated this litigation in February
2008, seeking a refund of the amount represented by the
three checks. See 101 Fed. Cl. at 112. The Kovaceviches
asserted that the checks were payments for Robert’s
trust-fund-recovery penalty, and that when that penalty
was abated, the amounts should have been refunded. Id.
The Kovaceviches also sought a refund for the value of a
fourth check drawn for approximately $22,000 on the
account of Robert E. Kovacevich, P.S. in March 1991, on
the theory that the IRS had wrongfully assessed Western
for taxes that had already been paid by the Kovaceviches
individually. See id. at 112 & n.16; Kovacevich, 98 T.C.M.
(CCH) at 3.
    The government counterclaimed against the Kovace-
viches, seeking to hold both members of the couple indi-
vidually liable for Western’s remaining employment tax
liabilities for 1994 and the first quarter of 1995. 101 Fed.
WESTERN MANAGEMENT    v. US                               6

Cl. at 112. In particular, the government sought to hold
Robert liable as the “alter ego” of the corporation, and
Yvonne jointly liable under Washington’s community
property law. Id.
    The Court of Federal Claims awarded summary
judgment to the government on both the Kovaceviches’
claims and the government’s counterclaims. With regard
to the three checks from 2003 and 2004, the court read an
earlier Tax Court ruling as finding that the IRS’s decision
to credit these checks to Western was proper, and held
that the Kovaceviches were precluded from relitigating
this issue. Id. at 114-16 (citing Kovacevich, 98 T.C.M.
(CCH) 1). With regard to the March 1991 check, the court
found that the statute of limitations for claiming a refund
had expired. Id. at 116 (citing 26 U.S.C. § 6511(b) (2006)).
Finally, with regard to the government’s counterclaim,
the court found that Robert was liable as Western’s alter
ego, and Yvonne was liable as an owner of community
property. Id. at 117-20. The court further held that “res
judicata bars [the Kovaceviches] from relitigating the
issue of [Western’s] liability for employment taxes, penal-
ties, and interest stemming from Mr. Kovacevich’s em-
ployment.” Id. at 119. The court entered judgment
against the Kovaceviches in the amount of $87,879.39.
Id. at 121-22.
    The Kovaceviches timely appealed, and we have ju-
risdiction pursuant to 28 U.S.C. § 1295(a)(3). “We review
grants of summary judgment de novo.” Manor Care, Inc.
v. United States, 630 F.3d 1377, 1381 (Fed. Cir. 2011).
                       DISCUSSION
                   I. The Plaintiffs’ Claims
                 A. The 2003 and 2004 checks
   On appeal, the Kovaceviches first contest the Court of
7                                WESTERN MANAGEMENT      v. US

Federal Claims’ denial of a refund or credit for the three
checks written in 2003 and 2004. The court found that
this claim was precluded by the Tax Court’s decision in
Kovacevich v. Commissioner, 98 T.C.M. (CCH) 1 (2009),
T.C. Memo 2009-160, which, the Court of Federal Claims
believed, “established the appropriateness of allocating
[the checks] toward [Western’s] account.” W. Mgmt., Inc.
v. United States, 101 Fed. Cl. 105, 114-15 (2011); see also
W. Mgmt., Inc. v. United States, No. 08-116T, slip op. at 3
n.1 (Fed. Cl. Jan. 17, 2012) (Order Denying Reconsidera-
tion) (“[T]he Tax Court has established that the IRS
treated the Kovaceviches’ payment correctly when it
applied those payments towards [Western’s] existing tax
liability.”).
    We conclude that the Court of Federal Claims read
too much into the Tax Court’s decision when it held that
the Tax Court’s decision is preclusive on the question of
whether this crediting was proper. In particular, the Tax
Court explicitly refrained from deciding whether the IRS’s
crediting of the last check, for approximately $8,276,
accorded with the taxpayers’ wishes. 98 T.C.M. (CCH) at
7.
     Nonetheless, we affirm the court’s award of summary
judgment to the government on different grounds. Since
the Kovaceviches are now liable for Western’s tax liabil-
ity, they have received the full benefit of these payments.
The Kovaceviches are not entitled to any further credit or
refund for these payments.
                       B. The 1991 check
    The Kovaceviches also appeal the Court of Federal
Claims’ determination that the statute of limitations bars
their claim for a refund for the amount of the check they
wrote in 1991. Seemingly conceding that the ordinary
statute of limitations, set forth in § 6511(b) of the Internal
WESTERN MANAGEMENT     v. US                               8

Revenue Code, has expired, the Kovaceviches instead
seek a credit under § 6521 of the Code. Section 6521
provides that where the correction of a particular mis-
characterization of income requires “an assessment of one
[form of] tax and the refund or credit of [another],” but the
statute of limitations bars a refund action, “the amount of
the assessment . . . shall be reduced by the amount of the
credit or refund . . . which would be required . . . if such
credit or refund . . . were not prevented by” the statute of
limitations. 26 U.S.C. § 6521(a). The Kovaceviches
represented in this litigation that the March 1991 check
was intended to pay Robert’s employment taxes for 1989
and part of 1990. Since none of the government’s recovery
on the counterclaim stems from the recharacterization of
any income earned in the years 1989 or 1990, § 6521 does
not permit the Kovaceviches to seek a credit for the 1991
payment. See Bronson v. Comm’r, 64 T.C.M. (CCH) 1254
(1992), T.C. Memo 1992-648. As the Court of Federal
Claims correctly concluded, the statute of limitations has
expired on this claim.
             II. The Government’s Counterclaims3

    3    The Kovaceviches contend that the Court of Fed-
eral Claims lacked jurisdiction over the government’s
counterclaims against them. The trial court’s jurisdiction
over the counterclaims derives from its jurisdiction over
the individuals’ claims. See 28 U.S.C. §§ 1503, 2508; W.
Mgmt., Inc. v. United States, No. 08-116T, slip op. at 3-4
(Fed. Cl. March 20, 2009) (Order Granting in Part and
Denying in Part Motion to Strike Defendant’s Counter-
claim). The court correctly held that 28 U.S.C. § 1500 did
not deprive it of jurisdiction over the individuals’ claims,
notwithstanding the fact that the Tax Court litigation in
Kovacevich, 98 T.C.M. (CCH) 1, was ongoing at the time
that the present litigation commenced. See W. Mgmt.,
Inc. v. United States, No. 08-116T, slip op. at 4-5 (Fed. Cl.
Jan. 17, 2012) (Order Denying Reconsideration).
9                               WESTERN MANAGEMENT     v. US

             A. The alter ego determination
    The Kovaceviches appeal the trial court’s determina-
tion that Robert is Western’s alter ego, claiming that this
finding is contrary to the Tax Court’s findings in Western
Management, Inc. v. Commissioner, 85 T.C.M. (CCH)
1442 (2003), T.C. Memo 2003-162, and therefore barred
by both claim and issue preclusion. The Court of Federal
Claims correctly rejected this argument. See W. Mgmt.,
101 Fed. Cl. at 118 n.20. The Tax Court made no deter-
mination on the alter ego question. See W. Mgmt., 85
T.C.M. (CCH) 1442; W. Mgmt., No. 12686-99 (T.C. Aug.
20, 2003) (Order on Motion for Reconsideration). Thus,
the Tax Court litigation has no preclusive effect on the
alter ego determination. However, as the Court of Fed-
eral Claims correctly noted, the plaintiffs’ own admissions
in filings submitted to the Tax Court establish that “Mr.
Kovacevich regarded himself as [Western’s] ‘alter ego,’

    Section 1500 deprives the court of jurisdiction over a
claim if it is “based on substantially the same operative
facts” as a claim pending in another court. United States
v. Tohono O’odham Nation, 131 S. Ct. 1723, 1731 (2011).
In this case, the “operative facts” are not the same. At the
time that this case was filed in the Court of Federal
Claims, two Tax Court litigations were pending. One Tax
Court suit concerned Western’s tax liability for 1994 and
1995. See W. Mgmt. v. Comm’r, 314 F. App’x 65 (9th Cir.
2009). The Kovaceviches were not parties to that litiga-
tion, so it has no bearing on whether § 1500 bars suit by
the Kovaceviches individually. The other pending Tax
Court suit concerned the Kovaceviches’ 1992 tax liability,
and not the 1994 or 1995 tax liabilities involved here. See
Kovacevich, 98 T.C.M. (CCH) at 7. Contrary to the dis-
sent’s assertion, the 1992 tax year is not at issue in this
case. Furthermore, we have held that this second Tax
Court litigation was not preclusive on the issue of the
proper crediting of the checks in this case. Therefore,
§ 1500 has no application to the claims and counterclaims
involving the Kovaceviches in this case.
WESTERN MANAGEMENT    v. US                              10

with all control over the corporation being held by himself
and Mrs. Kovacevich.” W. Mgmt., 101 Fed. Cl. at 117-18.
         B. The 1994 and 1995 self-employment
                    tax payments
     The Kovaceviches also seek credit against the gov-
ernment’s recovery for self-employment taxes they alleg-
edly paid along with their 1994 and 1995 income tax
returns. Once again, they rely on § 6521 of the Internal
Revenue Code, arguing that since the judgment in this
case stems from Western’s failure to pay employment
taxes for the same quarters for which they mistakenly
paid self-employment taxes, § 6521 permits them to offset
their mistaken payments against the judgment. At oral
argument we ordered supplemental briefing on this issue.
In its supplemental briefing, the government claimed that
the Kovaceviches received at least partial credit for their
self-employment tax payments. However, the record in
this litigation is not adequate to determine whether some
or all of the claimed credit was allowed. We must thus
assume for purposes of this appeal only that the Kovace-
viches were not given the credit that they now claim.
    The government argues alternatively that the Kova-
ceviches cannot claim the benefit of § 6521. Section 6521
only allows the original, mistakenly paid taxes to be offset
against the newly-assessed taxes if the statute of limita-
tions prevented the person who paid the original taxes
from initiating an ordinary refund proceeding at the time
that the new taxes were assessed.        See Treas. Reg.
§ 301.6521-1(c) (1967); Rev. Rul. 78-127, 1978-1 C.B. 436.
The government argues that the employment taxes were
assessed against Western in April 2004, and that the
Kovaceviches could have sought a refund for the self-
employment taxes they allegedly paid at any time be-
tween June 2003 (when the Tax Court issued its initial
11                              WESTERN MANAGEMENT     v. US

ruling affirming the IRS’s reclassification of Robert, see
W. Mgmt., 85 T.C.M. (CCH) 1442) and December 2008 (at
the end of the second calendar year after that ruling
became final, see 26 U.S.C. § 7481(a)(2) (2006); W. Mgmt.
v. Comm’r, 176 F. App’x 778 (9th Cir. 2006)). See 26
U.S.C. § 6511(d)(7) (2006); see also W. Mgmt, 176 F. App’x
at 781 (suggesting the Kovaceviches seek relief under
§ 6511).
    The government appears to be correct that § 6521
does not entitle the Kovaceviches to claim a credit against
Western’s tax liability because at the time that that
liability was determined, the Kovaceviches could have
sued for a self-employment tax refund. The Kovaceviches
are not entitled to a credit against Western’s corporate
liability, but they are (potentially) entitled to a credit
against their individual liability resulting from the alter
ego determination. That liability was first determined in
2011, when the Court of Federal Claims entered judgment
in this litigation, and will only be finally determined when
this decision on appeal becomes final. By that time, the
statute of limitations for a refund claim under
§ 6511(d)(7) will have expired. Under these circum-
stances, we think that § 6521 allows the Kovaceviches to
claim a credit for self-employment tax paid against their
liability for Western’s unpaid taxes to the extent that
such a credit has not already been allowed. We leave to
the Court of Federal Claims on remand to determine, in
the first instance, the amount of such a credit.
                       CONCLUSION
    To summarize, we affirm the Court of Federal Claims’
determination that no further credit is due for the checks
written in 2003 and 2004; that the statute of limitations
has expired with regard to the check written in 1991; and
that Robert is liable for Western’s unpaid taxes as the
WESTERN MANAGEMENT    v. US                           12

corporation’s alter ego. We have also considered the
Kovaceviches’ other arguments, and find them to be
without merit. We thus affirm the trial court’s rejection
of the Kovaceviches’ claims and award of summary judg-
ment to the government on its counterclaims, with one
exception. We remand to the Court of Federal Claims
solely in order to determine whether the Kovaceviches
have previously received credits for the full amount of
self-employment taxes they paid for 1994 and the first
quarter of 1995, and, if they have not, to correct the
amount of the judgment entered against them to reflect
such credits.
                            COSTS
   Costs to neither side.
       NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
              __________________________

          WESTERN MANAGEMENT, INC.,
            ROBERT E. KOVACEVICH,
          AND YVONNE R. KOVACEVICH,
               Plaintiffs-Appellants,
                           v.
                  UNITED STATES,
                  Defendant-Appellee.
              __________________________

                      2012-5005
              __________________________

    Appeal from the United States Court of Federal
Claims in No. 08-CV-116, Judge Nancy B. Firestone.
               __________________________

NEWMAN, Circuit Judge, dissenting.
    The Court of Federal Claims did not have subject
matter jurisdiction over this case under 28 U.S.C. §1500,
and as reinforced by the Court in United States v. Tohono
O’Odham Nation, 131 S. Ct. 1723 (2011). The judgment
against the plaintiffs should be vacated, and the claims
and counterclaims dismissed. From my colleagues’ con-
trary ruling, I respectfully dissent.
                      DISCUSSION
   On February 28, 2008, Robert and Yvonne Kovacevich
WESTERN MANAGEMENT     v. US                                2

filed this suit in the Court of Federal Claims to obtain
credits or refunds of asserted tax overpayments repre-
sented by four payments to the IRS made by personal
check, dated between 1991 and 2004.1 The IRS credited
the first check, for $8,276.50, to Western Management,
Inc.’s 1995 tax liability. Kovacevich v. Comm’r, 98 T.C.M.
(CCH) 1, 9-10 (T.C. 2009). The second and third checks,
for $7,682.00 and $7,514.40, were credited to Western
Management’s liability for tax year 1994. Id. at 8-9. The
fourth check, for $21,985.48, was credited to Western
Management’s pre-1992 tax liability. Id. at 7.
     At the time of filing this suit, the plaintiffs had pend-
ing two separate but related cases in the Tax Court. The
first case, Kovacevich v. Commissioner, 98 T.C.M. (CCH) 1
(T.C. 2009), involved whether the IRS properly credited
the four checks to Western Management’s pre-1992, 1994,
and 1995 employer tax liabilities, or whether the IRS
should have credited these payments to the Kovaceviches’
personal income tax liability for tax year 1992. Mr. and
Mrs. Kovacevich argued that as “voluntary payments”
they were entitled to have the checks credited according
to their wishes, for their 1992 tax year. The IRS re-
sponded that the checks were properly applied to West-
ern’s tax liabilities according to the Kovaceviches’
notations on the checks. The Tax Court held that the IRS
properly credited the checks to Western Management’s
tax liability rather than the Kovaceviches. 98 T.C.M.
(CCH) at 7-10. Mr. and Mrs. Kovacevich did not appeal.
   The second case, Western Management, Inc. v. Com-
missioner, 94 T.C.M. (CCH) 127 (T.C. 2007), aff’d 314 F.

    1    The majority states that the present litigation
arises from the plaintiffs’ efforts to “obtain a refund,” maj.
op. at 2, but that is not entirely accurate. The Complaint
requests “a credit or refund” for each of the payments.
Complaint ¶¶16, 24, 30; id., Request for Relief ¶¶1-4.
3                                WESTERN MANAGEMENT     v. US

App’x 65 (9th Cir. 2009), involved a “recalculation” of
Western’s liability under 26 U.S.C. §3402(d) for tax years
1994 and 1995 based on payments made by Mr. and Mrs.
Kovacevich in their personal capacity. This case was a
remand after appeal of a prior Tax Court proceeding,
Western Manangement, Inc. v. Commissioner, 176 Fed.
App’x 778, 782 (9th Cir. 2006), in which the Ninth Circuit
held that Western Management was liable for unpaid
employer taxes as the employer of Robert Kovacevich. On
February 12, 2008, while the recalculation remand was
still pending, an IRS case manager sent Robert Kovace-
vich a letter “relieving” Western of trust-fund-recovery
penalties for certain quarters in tax years 1994 and 1995.
JA 250 (Letter from IRS to Robert Kovacevich).
    Two weeks after the February 12, 2008 letter, while
the 1992 income tax and Ninth Circuit remand cases were
pending in the Tax Court, the plaintiffs brought the
present suit seeking credits or refunds for the checks. On
motion for summary judgment, the government argued
that all claims by and against Western Management were
barred under Section 1500 and Tohono O’Odham. The
Court of Federal Claims agreed, and dismissed all claims
by and against Western. W. Mgmt., Inc. v. United States,
101 Fed. Cl. 105, 114 (2011). The Kovaceviches’ personal
claims, and the government’s counterclaims, were not
dismissed, for the Court of Federal Claims found that the
Kovaceviches did not “have another case pending in
another court ‘for or in respect to’ the claims they filed as
individuals.” Id.
    The government then moved for summary judgment
on the Kovaceviches’ personal claims, arguing they were
barred by res judicata based on the Tax Court litigation re
the 1992 tax year. 101 Fed. Cl. at 115. The court granted
the motion, stating
WESTERN MANAGEMENT      v. US                                4

      the Kovaceviches were parties to the Tax Court
      CDP litigation regarding tax year 1992 that estab-
      lished the appropriateness of allocating certain of
      the plaintiffs’ tax payments toward WMI’s ac-
      count. In that case, the Kovaceviches argued that
      the IRS had inappropriately credited WMI’s ac-
      count with certain checks the Kovaceviches had
      submitted to the IRS. The Tax Court held that
      the IRS had treated the checks at issue properly.
      Kovacevich, T.C.M. (RIA) 2009–160 (Def.’s Ex.
      21). In particular, the court held the following:
      Check number 3747, for $21,985.48, written on
      the account of Robert E. Kovacevich, P.S., was ap-
      plied to the firm’s tax account for years preceding
      1992. Check 10161, for $7682.00, written Sep-
      tember 29, 2003, was properly allocated to WMI’s
      account equally between the four quarters of
      1994. Check 10376, for $7514.40, dated April 28,
      2004, drawn from the personal account of Robert
      and Yvonne Kovacevich, was credited to WMI’s
      account for the first quarter of 1994. Finally,
      check 7641, for $8276.50, was properly credited to
      WMI’s account for the first quarter of 1995.
          Mr. and Mrs. Kovacevich are barred by the
      doctrine of res judicata from relitigating the issue
      of the appropriateness of the IRS crediting WMI’s
      account with the above-described payments. As
      the Supreme Court has explained, once parties
      have an opportunity to fully litigate an issue and
      obtain a final judgment on the merits, they may
      not relitigate that issue . . . .
Id.
    Mr. and Mrs. Kovacevich moved for reconsideration
based on the undisputed fact that, contrary to the court’s
discussion of Section 1500 in its opinion, the 1992 case
5                               WESTERN MANAGEMENT     v. US

relied upon for res judicata was pending at the time they
filed suit in the Court of Federal Claims. In denying
reconsideration, the Court of Federal Claims admitted it
“erred” in failing to recognize that the 1992 personal
income tax case was pending at the time the Kovaceviches
filed, but the court adhered to its ruling because the Tax
Court case pertained to “a different tax year.”
    Section 1500 states that “[t]he United States Court of
Federal Claims shall not have jurisdiction of any claims . .
. in respect to which the plaintiff or his assignee has
pending in any other court any suit or process against the
United States . . . .” 28 U.S.C. §1500. Under the Court’s
decision in Tohono O’Odham, a suit is precluded under
Section 1500 if based on “substantially the same operative
facts, regardless of the relief sought in each suit.” 131 S.
Ct. at 1731. The Court explained that “[c]oncentrating on
operative facts is [ ] consistent with the doctrine of claim
preclusion, or res judicata, . . . [Given the history of
Section 1500] it is no surprise that the statute would
operate in similar fashion.” Id. at 1730.
    Guided by the Supreme Court’s discussion in Tohono
O’Odham, it is not sufficient to state, as the Court of
Federal Claims did here, that the Kovaceviches’ “refund”
claims can be barred by res judicata while eluding preclu-
sion under Section 1500. Tohono O’Odham precludes
claims based on the same “operative facts.” Whether the
Tax Court was presented with or considered the specific
relief requested here in either the Kovaceviches’ 1992
personal income tax case or Western’s 1994-95 recalcula-
tion case, is not critical. The transactional facts are the
same in the three cases regardless of the relief requested.
Larson v. United States, 89 Fed. Cl. 363, 398 (Fed. Cl.
2009) (“The [ ] plaintiffs have attempted to repackage
their theory of refund recovery a number of times, but the
underlying ‘transactional’ facts . . . have remained the
WESTERN MANAGEMENT    v. US                               6

same. . . . ‘Altering the theory of recovery does not create
a new claim under the transactional approach.’” (cita-
tions omitted)), aff’d, 376 F. App’x 26 (Fed. Cir. 2010).
     In the 1992 personal income tax case, the IRS Appeals
officer applied the $8,276 check to Western Management’s
deficiency for the first quarter of 1995, and the Tax Court
affirmed that crediting despite the Kovaceviches’ objec-
tion. 98 T.C.M. (CCH) at 9-10. The Tax Court found that
all of the checks were “properly credited to years other
than 1992.” Id. at 10. Although the Tax Court did not
recite the particular liability of Western against which the
$8,276 check was credited, the disposition of that pay-
ment was the foundation of the suit.2 The Tax Court also
held, for reasons stated by that court, that “[a]ny mistake
the Appeals officer made in finding that the check was
credited according to the Kovaceviches wishes is harmless
error.” 98 T.C.M. (CCH) at 10.
    The question of whether the $8,276 was properly cred-
ited was decided by the Tax Court. The Kovaceviches’
attempt to relitigate those issues is barred by Section
1500.

   2     The panel majority states at footnote 3 that the
Tax Court litigation did not involve Robert’s 1994 or 1995
trust-fund-recovery penalty or the corporation’s tax
liability for 1994 or 1995. That is incorrect. The 1994
and 1995 tax years were at issue in the Tax Court case
appealed to the Ninth Circuit and remanded to the Tax
Court, and thus squarely invoke Section 1500. The Court
of Federal Claims correctly applied Section 1500 to bar
the claims by and against Western Management in view
of those proceedings. In the case before us, the parties are
Mr. and Mrs. Kovacevich and Western Management, all
seeking refund (or credit) of payments for tax years 1992,
1994, and 1995. The same operative facts are the founda-
tion of the suits, first in the Tax Court, now in the Court
of Federal Claims. Section 1500 is directly applicable.
7                               WESTERN MANAGEMENT     v. US

    In the Court of Federal Claims, “[w]hen a plaintiff’s
claim is rejected for lack of jurisdiction, the defendant’s
counterclaim must be dismissed along with plaintiff’s
complaint, without regard to the merits of the counter-
claim.” Talbot v. United States, 40 Fed. Cl. 801, 806 (Fed.
Cl. 1998). The Court of Federal Claims must have juris-
diction of a plaintiff’s claim against the United States, or
the entire suit—including the counterclaim—is a “void
act.” Triton Group, Ltd. v. United States, 10 Cl. Ct. 128,
134 (1986) aff’d, 818 F.2d 876 (Fed. Cir. 1987); Mulhol-
land v. United States, 361 F.2d 237, 245 (Ct. Cl. 1966).
    This claim against the United States and the govern-
ment’s counterclaim require dismissal under Section
1500. From my colleagues’ contrary ruling, I respectfully
dissent.