Court Opinion

ID: 9404239
Source: CourtListenerOpinion
Date Created: 2023-06-22 17:00:29.709426+00
Date Added: 2024-06-11T17:20:12.780930
License: Public Domain

NOT PRECEDENTIAL

             UNITED STATES COURT OF APPEALS
                  FOR THE THIRD CIRCUIT

                   _______________________

                         No. 22-3056
                   _______________________

V.I. DERIVATIVES, LLC, BY VIFX, LLC, ITS TAX MATTERS PARTNER,
       BY RICHARD G. VENTO, ITS TAX MATTERS PARTNER,
                                           Appellant

                                v.

  DIRECTOR, VIRGIN ISLANDS BUREAU OF INTERNAL REVENUE

                UNITED STATES OF AMERICA,
                          (Intervenor in District Court)

                   _______________________

                         No. 22-3057
                   _______________________

 VIFX, LLC, BY RICHARD G. VENTO, ITS TAX MATTERS PARTNER,
                                      Appellant

                                v.

  DIRECTOR VIRGIN ISLANDS BUREAU OF INTERNAL REVENUE

                 UNITED STATES OF AMERICA
                           (Intervenor in District Court)
                   ______________________

                 On Appeal from the District Court
                      of the Virgin Islands
                (District Court Nos. 3-06-cv-00004 and 3-06-cv-00005 )
                 Chief District Judge: The Honorable Juan R. Sanchez
                            __________________________

                                 Argued May 22, 2023

               Before: RESTREPO, McKEE, and SMITH, Circuit Judges

                                 (Filed: June 22, 2023)

Joseph A. DiRuzzo, III
DiRuzzo & Company
401 East Las Olas Boulevard
Suite 1400
Fort Lauderdale, FL 33301

Joseph M. Erwin [ARGUED]
Suite 700
100 Crescent Court
Dallas, TX 75201
       Counsel for Appellants

Pamela R. Tepper
Office of Attorney General of Virgin Islands
Department of Justice
34-38 Kronprindsens Gade
GERS Complex, 2nd Floor
St. Thomas, VI 00802

James N. Mastracchio [ARGUED]
Winston & Strawn
1901 L Street NW
Washington, DC 20036
      Counsel for Appellee

Geoffrey J. Klimas
Jennifer M. Rubin [ARGUED]
Anthony T. Sheehan
United States Department of Justice
Tax Division
                                           2
950 Pennsylvania Avenue NW
P.O. Box 502
Washington, DC 20044
      Counsel for Intervenor

                             __________________________

                                      OPINION*
                             __________________________

SMITH, Circuit Judge.

       This appeal presents the latest development in a long-running dispute between

Appellants, V.I. Derivatives, LLC and VIFX, LLC, and various taxing entities. V.I.

Derivatives, LLC, and VIFX, LLC (collectively, the LLCs), were created as part of a plan

by Richard Vento and his family to avoid capital gains taxes on the $180 million realized

from the 2001 sale of a technology company that he co-founded. In 2005, the LLCs

received Notices of Final Partnership Administrative Adjustments (FPAAs) issued by the

Virgin Islands Bureau of Internal Revenue (VIBIR) and the United States Internal

Revenue Service (IRS), respectively. The FPAAs advised that the VIBIR and the IRS

had determined that the LLCs were a “sham” and that “all transactions engaged in by [the

LLCs would be] treated as engaged in by its purported members and/or other persons

receiving flow through gains or losses from it.” JA154, A177. The LLCs petitioned for

readjustment of the partnership items under 26 U.S.C. § 6226, and this litigation ensued.

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
                                             3
                                             I.

       This matter first came before us in 2013 on appeal from the District Court’s

threshold determination of the Ventos’ residency.1 There, we held that Richard Vento and

his wife Lana Vento were residents of the Virgin Islands in 2001 but affirmed the District

Court’s finding that the Ventos’ daughters were not bona fide residents. Vento v. Dir. of

V.I. Bureau of Internal Revenue (“Vento I”), 715 F.3d 455, 477, 479 (3d Cir. 2013). The

LLCs, which were “treated as partnerships for tax purposes,” id. at 459 n.2, and “pass-

through entities,” did “not have residencies separate from their owners,” id. at 479 n. 22.

       After we remanded, the LLCs moved to dismiss their own petitions for lack of

subject matter jurisdiction. The District Court denied the LLCs’ motion, explaining that

Vento I had resulted in a final judgment and that res judicata thus barred the LLCs’

argument. The LLCs appealed the District Court’s order as to the IRS—but not as to the

VIBIR—and we affirmed. See V.I. Derivatives LLC v. United States (“Vento II”), 671

Fed. App’x 839 (3d Cir. 2016).

       After a period of inactivity, the VIBIR moved for summary judgment in 2021 on

the merits of the LLCs’ tax liability. Citing Vento II, the LLCs argued that Vento I

constituted a final judgment that precluded the District Court from acting on the VIBIR’s

summary judgment motion. In addition, the LLCs asserted that various equitable

1
 “[B]ona fide Virgin Islands residents who fully report their income and satisfy their
obligations to the VIBIR do not pay taxes to the IRS.” Vento v. Dir. of V.I. Bureau of
Internal Revenue, 715 F.3d 455, 465 (3d Cir. 2013).
                                             4
doctrines also warranted denial of the summary judgment motion. The District Court

granted summary judgment in the VIBIR’s favor. The LLCs appealed for the third time.2

                                             II.

       We are not persuaded by any of the LLCs’ arguments. The LLCs contend that the

District Court erred because the cases were “final and long closed.” Pet’rs’ Br. 45. But a

review of the docket shows that no final judgment had been entered in the VIBIR cases

until summary judgment was granted in September of 2022. In Vento I, we reversed the

District Court’s finding that Richard and Lana Vento were not bona fide residents of the

Virgin Islands and, consequently, neither were the LLCs. Vento I. 715 F.3d at 479 &

n.22. After our remand in Vento I, there were no final judgments as to Richard, Lana,

and the LLCs because the question of tax liability owed to the VIBIR still had to be

resolved. Additionally, Vento II did not establish that Vento I constituted a final

judgment in these matters. Vento II addressed finality only as to the IRS cases because

the LLCs did not appeal the denial of their motion to dismiss in the VIBIR cases. Any

suggestion in Vento II that the VIBIR cases were final was, at most, dicta.

       Finally, the LLCs assert that the equitable doctrines of laches, repose, and judicial

estoppel preclude the VIBIR’s summary judgment motion. We do not agree. The LLCs

forfeited any judicial estoppel argument by failing to raise it in the District Court and we

2
 The District Court appropriately exercised jurisdiction under 48 U.S.C. § 1612(a) and
26 U.S.C. § 6226(a)-(b), (f) (2006). See United States v. Woods, 571 U.S. 31, 39 (2013).
We have jurisdiction under 28 U.S.C. § 1291. Because the District Court had jurisdiction
under 26 U.S.C. § 6226(f), we need not reach the LLCs’ arguments about 26 U.S.C. §
6233 (2012). We review de novo a district court’s grant of summary judgment. Popa v.
Harriet Carter Gifts, Inc., 52 F.4th 121, 125 (3d Cir. 2022).
                                             5
see no “exceptional circumstances” that would warrant hearing the argument. Barna v.

Bd. of Sch. Dirs. of Panther Valley Sch. Dist., 877 F.3d 136, 147 (3d Cir. 2017). The

doctrine of repose does not apply inasmuch as the VIBIR cases were not final. See Cox

v. Horn, 757 F.3d 113, 125 (3d Cir. 2014). Because laches is a defense to an

“inexcusable delay in instituting suit” and requires a showing of prejudice, that doctrine

does not aid the LLCs either. Cent. Pa. Teamsters Pension Fund v. McCormick Dray

Line, Inc., 85 F.3d 1098, 1108 (3d Cir. 1996).

       We therefore will affirm the District Court’s grant of summary judgment.

                                             6