United States Court of Appeals, Ninth Circuit

“ The court found that defense counsel had acted reasonably in response to a case in which they were confronted by claims for $2 million plus punitive damages and a request for permanent injunctive relief against their clients; counsel had secured for their clients a dismissal of all the plaintiffs' claims in their entirety. Only after this review did the district court substantially adopt the recommendation of the special master as the amount of fees to be awarded. The district court's action cannot fairly be characterized as rubber-stamping. ”

“ A computation under Rule 155 must be made solely from the evidence in the record and the opinion of the tax court; it cannot be used to reopen the evidence or raise a new issue. Tax Court Rule 155 (c) . See also Paccar, Inc. v. Commissioner, 849 F.2d 393, 399-400 (9th Cir.1988) . Here, the tax court found that Erhard's computation was an accounting opinion that raised a new issue of fact. Erhard disagrees, contending that, because the record already included est, a.e.c. tax returns, the remaining useful lives could be calculated "by simple mathematical computations from those returns." ”

“ Appellants argue that the discovery was unduly burdensome, but there is no record (and no claim) that they ever sought relief from any of the discovery requests.
A district court must consider five factors in determining whether the circumstances warrant dismissal:
(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its docket; (3) the risk of prejudice to the defendants; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions. ”

“ Even if we decided not to give the special master's finding the full weight it deserves, Wyle does not make an evidentiary hearing an absolute prerequsiite to a dismissal sanction, even when issues are in dispute. See Wyle, 709 F.2d at 592 (“When necessary, the district court may hold an evidentiary hearing on a motion for sanctions.”) (emphasis added) . Thus, we do not find that the special master or Judge Ideman abused their discretion in denying a hearing on either the credibility or document-existence issues. ”

“ As Erhard's counsel explained, the main purpose of such an organization was "to try to get money paid offshore in a deductible fashion, and then the money would find its way onshore in a non-income fashion." Reporter's Transcript, volume 22 at 102.
In implementing this tax planning, Margolis devised orchestrated money movements *1473 that were structured by contractual arrangements. In a typical circular money movement, funds would pass from one system entity to a taxpayer, and then from the taxpayer to a second system entity for some ostensible business purpose of the taxpayer. ”

“ However, we do agree with the New Church's apparent concern that we could not enjoin the use of the scriptures without giving the New Church a meaningful opportunity to file opposing papers and present evidence in a full adversary hearing. Whether this court may grant certain relief, however, is quite a different question from whether we have jurisdiction in the first place to review a TRO that is tantamount to a denial of a preliminary injunction. ”

“ A client earned interest on positive balances in the system accounting and was charged interest on negative balances. Transactions between system entities were not recorded because the funds stayed in the system. Though Erhard purportedly had no ownership interest in est, a.e.c., Margolis maintained only one combined system accounting for Erhard and est, a.e.c.
The tax court found that Margolis' representation of clients generally consisted of three phases. During the initial phase, the client's goals were defined and documents were drafted to realize the goals. ”

“ The Church cannot now avoid the consequences of that choice by burdening the district court with a second application for preliminary relief, and this court with a second interlocutory appeal. Where the Church easily could have alleged in its initial application that the scriptures had an economic value, we should hold that it is estopped from appealing the denial of its subsequent application for preliminary relief under California trade secrets law. ”

“ Ellen Erhard appeals the Tax Court's dismissal of her petition as untimely filed.
We affirm.
I. Ellen and Werner Erhard filed joint tax returns for the 1984, 1985, 1986, 1987, and 1988 tax years. When they divorced, Ellen executed a power of attorney appointing Werner as her attorney-in-fact and authorizing him to act on her behalf regarding the 1984, 1985, and 1986 tax years. Werner, in turn, executed a second power of attorney authorizing New York attorney Michael Saltzman to act on behalf of him and Ellen for the 1984, 1985, 1986, and 1987 tax years (hereinafter "Saltzman power") . ”

“ The Tax Court found that Ellen had received actual notice of the IRS' notice of deficiency at the time she refused delivery of the notice; her December 1993 petition, filed over a year after the IRS mailed the notice of deficiency, was thus untimely. This appeal followed.
II. [1] The IRS must give notice to a taxpayer before it may assess or collect any tax deficiency. 26 U.S.C. § 6213 (a) . The IRS validly discharges this obligation if: (1) it mails the notice to the taxpayer's "last known address," 26 U.S.C. § 6212 (b) (1) ”

“ WEA immediately transferred $4,950,677 back to various system entities, allegedly in payment for assets. However, out of the aggregate loan *1474 proceeds of $7,200,000, Erhard retained $2,249,323 for operating expenses.
FN2. A back-to-back loan occurs when a bank loan is collateralized with a cash deposit from a third party. When the loan principal is repaid, then the compensating deposit is released. In the Margolis' system accounting, a system entity's deposit securing a back-to-back loan was treated as a charge against the client receiving the loan from the bank. ”

“ It is well established that a party who created a document under a work-for-hire basis cannot entertain an action for false designation of origin. See Cleary v. News Corp., 30 F.3d 1255, 1259-60 (9th Cir. 1994) . In his order dismissing Mayo's counterclaims, Judge Tashima found that “ [t] he prior work-for-hire doctrine ruling effectively foreclosed any rights on Mayo's part to make any claims of authorship or ownership regarding the NOT materials.” This finding forecloses Mayo's false designation of origin counterclaim. ”

“ Meanwhile, appellees served damage interrogatories called for by the discovery plan. In 1992, when the defendants had received no responses and none appeared forthcoming, defendants filed motions to dismiss, which the master converted into motions to compel, ordering appellants to respond to both sets of interrogatories. Appellants were warned repeatedly by both the court and the master that failure to comply would result in dismissal. ”

“ Religious Technology Center (RTC) , a California corporation, appeals from judgment and imposition of attorneys fees entered against it in two cases it brought against David Mayo (Mayo) and other related defendants. Mayo cross-appeals judgment entered against him on his counterclaims. We affirm the judgment and award of attorneys fees against RTC. We affirm the dismissal of Mayo's emotional distress and false designation of origin counterclaims, but reverse and remand the judgment against Mayo on his remaining counterclaims. ”

“ WEA also needed funds for the acquisition. As for the funds, Margolis indicated that, " [t] he truth is that there is no source other than the accumulated values of the past decade." Id. at 12. The asset acquisition was accomplished in four phases. In the first phase, which occurred in June and July 1981, Erhard borrowed $2,200,000 from Terla, B.V., a system entity and $5,000,000 from Barclays Bank of San Francisco. Barclays Bank was not a system entity, but the loan was a back-to-back loan secured by Parallax Corp., a system entity. ”

“ Thus, she argues, her decision to refuse delivery was understandable in light of the IRS' misleading conduct. Patmon & Young, however, draws no distinction between a "purposeful" refusal of delivery and an "understandable" or "excusable" refusal of delivery. ”

“ Given this evidence, the fact that Erhard made some subsequent payments to ICF does not lead to the conclusion that the tax court committed clear error in its finding of sham. Indeed, these payments to ICF can be explained in any number of ways [FN10] that are wholly in keeping with the tax court's conclusion that the transactions lacked economic substance. FN10. For example, the payments could very well have been rendered as a part of the final accounting between Erhard and the system. ”

“ The record below makes it clear that an evidentiary hearing would have been pointless; in light of the district judge's ruling that Wollersheim barred all interlocutory relief, it would have been a waste of party and judicial resources to have conducted an evidentiary hearing.The New Church argues that Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423, 433 n. 7, 94 S.Ct. 1113, 1121 n. 7, 39 L.Ed.2d 435 (1974) forecloses our treating this as an appeal from an order denying a preliminary injunction. We disagree. Granny Goose is simply inapposite. ”

“ Phase four took place in December 1981, ostensibly because Erhard needed more money to complete the asset acquisition. This phase was financed with a $1 million demand loan again from ICF through St. John. The source of the funds was Antigua Banking, Ltd., and ABC Trust Company, both system entities. Over a four-month period, Antigua and ABC funneled the funds to the Harry E. Wright, Jr. Charitable Trust, a Margolis client. On August 27, 1981, the Trust transferred $750,000 to Island Bank. On December 17, 1981, the Trust transferred $250,000 to Island Bank. ”

“ The master made a succinct statement as to the fees requested, noting that “many attorneys worked many, many hours on this case”; that the hours were reasonable “given the plethora of constitutional issues, discovery stand-offs, appeals, and, most importantly, plaintiffs' practice of endlessly litigating issues”; and that the hourly rates were reasonable for federal civil practice within the Central District of California. The master recommended an award of $2.9 million. ”

“ There the circumstances included “a full adversary hearing,” which presumably means an evidentiary hearing; here the circumstances included a non-evidentiary adversary hearing at which all parties were represented. ”

“ See 1B Moore's Federal Practice ¶ .405 [8] , at 238-42 (2d Ed.1988) . “The policies underlying preclusion of inconsistent positions are ‘general consideration [s] of the orderly administration of justice and regard for the dignity of judicial proceedings.’ ” Arizona v. ”

“ An evidentiary hearing was therefore unnecessary. See Sablan v. Department of Finance of N. Mariana Islands, 856 F.2d 1317, 1322 (9th Cir. 1988) (noting that an evidentiary hearing is not necessary where the “record and supporting affidavits are sufficiently detailed to provide an adequate basis for calculating an award.”) ; D'Emanuele v. Montgomery Ward & Co., Inc., 904 F.2d 1379, 1389 (9th Cir. 1990) (same) . FN6. ”

“ Easy Living, Inc., 743 F.2d 1378, 1385 n. 3 (9th Cir. 1984) , this is not such a case. Although the order which Judge Ideman ultimately signed was submitted by the victorious defense attorneys, the Findings of Fact incorporated therein as to the reasonableness of the hours spent and the $2.9 million fee award were made by the Special Master-and not Mayo's attorneys. Thus, Sealy's rule of reversal does not apply.We find RTC's other claims of rubber-stamping equally meritless. ”