Court Opinion

ID: 9496434
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:26:26.413889+00
Date Added: 2024-06-11T17:57:34.511997
License: Public Domain

MOORE, Circuit Judge,
concurring in part and dissenting in part.
Although I agree with much of the majority’s thoughtful opinion, I write separately to express my disagreement regarding the contingency-fee issue.
As the majority holds, we are bound by our circuit’s recent decision in Estate of Clarks v. United States, 202 F.3d 854 (6th Cir.2000), which held that the lawyer’s contingency fee operated as a lien on the client’s recovery that under Michigan law transferred part of the ownership of the client’s claim to the attorney, such that the client never realized income on the contingency-fee part of the judgment. We are dealing here, however, not with Michigan law but with California law regarding the characterization of the lawyer’s contingency-fee interest in taxpayer Banks’s employment-related claim. California’s law has been authoritatively and persuasively construed by a panel of the Ninth Circuit in Benci-Woodward v. Commissioner, 219 F.3d 941 (9th Cir.2000), which held that, “[ujnder California law, an attorney lien does not confer any ownership interest upon attorneys or grant attorneys any right and power over the suits, judgments, or decrees of their clients.” Id. at 943 (relying on Isrin v. Superior Court, 63 Cal.2d 153, 45 Cal.Rptr. 320, 403 P.2d 728, 732, 733 (1965)). California law, as explained by the California Supreme Court and the Ninth Circuit, clearly treats the attorney’s contingency-fee contract as simply a security interest and not as an ownership interest. Thus I would affirm the Tax Court’s ruling here that the proceeds the taxpayer paid to his attorney as a contingency fee should be included in the taxpayer’s income. See also Srivastava v. Commissioner, 220 F.3d 353, 367-69 (5th Cir.2000) (Dennis, J., dissenting).
Regarding the issue of the deductibility of the taxpayer’s payments to his ex-wife and the duty of consistency, I do not disagree with the majority’s assessment that the Tax Court did not appear to apply our half-century-old case, Crosley Corp. v. United States, 229 F.2d 376 (6th Cir.1956), and that the Tax Court did not appear to make any relevant factual findings. Therefore I do not disagree with remanding this issue to the Tax Court for further proceedings. I note that this case seems to me to be one where the duty of consis*390tency applies, because the taxpayer has unique knowledge regarding the nature and timing of his payments for his ex-wife, such that he should not be able to take one position on one tax return and a diametrically opposite position on another return on which the statute of limitations has run against the government. I suggest that in revisiting this issue, the Tax Court is free to determine whether there was a representation by the taxpayer as well as to evaluate the other requirements that comprise our version of the duty of consistency. I agree with the majority that on remand the Tax Court also may address the underlying question whether the payment even constituted § 71 alimony at all.
Finally, I concur fully in the majority’s determinations that the taxpayer’s characterization of the settlement proceeds as payment for personal injuries is worth no weight and that the Tax Court properly determined that no portion of the settlement amount was attributable to personal injuries.