No. 96-1968 IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1996 MORTIMER L. GRANT, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT BRIEF FOR THE RESPONDENT IN OPPOSITION WALTER DELLINGER Acting Solicitor General LORETTA C. ARGRETT Assistant Attorney General CHARLES E. BROOKHART PATRICIA M. BOWMAN Attorneys Department of Justice Washington, D.C. 20530-0001 (202)514-2217 ---------------------------------------- Page Break ---------------------------------------- QUESTION PRESENTED Whether petitioner's appeal was properly dismissed because he failed to pay sanctions imposed in a prior appeal. (I) ---------------------------------------- Page Break ---------------------------------------- TABLE OF CONTENTS Opinions below . . . . 1 Jurisdiction . . . . 2 Statement . . . . 2 Argument . . . . 4 Conclusion . . . . 8 TABLE OF AUTHORITIES Cases: Chambers v. NASCO, Inc., 501 U.S. 32 (1991) . . . . 4, 5, 7 Christensen v. Ward, 916 F.2d 1485 (10th Cir.), cert. denied, 498 U. S. 999(1990) . . . . 5, 6 Degen v. United States, 116 S. Ct. 1777(1996) . . . . 5 Demos v. Storrie, 507 U.S. 290 (1993) . . . . 7 Falcon v. General Telephone Co. of Southeast, 611 F. Supp.707(N.D. Tex. 1985), aff'd on other grounds, 815 F.2d 317 (5th Cir. 1987) . . . . 5 Hacopian v. United States Department of Labor, 709 F.2d 1295 (9th Cir. 1983) . . . . 6 Hilgeford v. Peoples Bank, l10 F.2d 700 (N.D. Ind. 1986) . . . . 5 Hymes v. United States, 993 F.2d 701 (9th Cir. 1993) . . . . 5, 6 Link v. Wabash R. R., 370 U. S. 626(1962) . . . . 5, 6, 7 Martin v. District of Columbia Court of Appeals, 506 U. S. 1(1992) . . . . 7 McDonald, In re, 489 U.S. 180(1989) . . . . 7 Schiff v. Simon & Schuster, Inc.,766 F.2d 61 (2d Cir. 1985) . . . . 5, 6 Sindram, In re, 498 U. S. 177(1991) . . . . 7 Stelly v. Commissioner, 804 F.2d 868 (5th Cir. 1986), cert. denied, 480 U.S. 907(1987) . . . . 4, 5, 6 United States v. Grant, No. 91-56344, 1993 WL 31365 (9th Cir. Feb. 10,1993) (988 F.2d 123) . . . . 4, 7 (III) ---------------------------------------- Page Break ---------------------------------------- IV Cases-Continued: United States v. Hudson, ll U.S. (7 Cranch) 32 (1812) . . . . Vey v. Clinton, 117s. ct. 1792(1997) . . . . Weidenfeld v. Pacific Improvement Co., 101 F.2d 699 (2d Cir. 1939) . . . . Zerman v. Jacobs, 814 F.2d 107(2d Cir. 1987) . . . . Statutes and rules: Internal Revenue Code (26 U.S.C.): 6651(a)(l) . . . . 6654 . . . . 6673 . . . . 6673(a)(1) . . . . Fed. R. App. P.38 . . . . Fed. R. Civ. P.41(d) . . . . ---------------------------------------- Page Break ---------------------------------------- In the Supreme Court of the United States OCTOBER TERM, 1996 No. 96-1968 MORTIMER L. GRANT, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT BRIEF FOR THE RESPONDENT IN OPPOSITION OPINIONS BELOW The order of the court of appeals (Pet. App. Al) and the opinion of the Tax Court are unreported; ___________________(footnotes) 1 The petition incorrectly lists the United States as the re- spondent in this case. The case was originally filed in Tax Court and the correct caption (which is shown on the opinion of the court of appeals, see Pet. App. Al) is "Mortimer L. Grant v. Commissioner of Internal Revenue." See Rule 60(b) of the Tax Court Rules of Practice and Procedure. The opinion of the Tax Court was not reproduced in the appendix to the petition. It has since been provided separately by petitioner, however, and is cited in this brief as " Tax Ct. op." (1) ---------------------------------------- Page Break ---------------------------------------- 2 JURISDICTION The judgment of the court of appeals was entered on March 14, 1997. The petition for a writ of certiorari was filed on June 10, 1997. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATEMENT 1. Petitioner failed to file income tax returns for the tax years 1976 through 1978. On January 24, 1996, the Commissioner of Internal Revenue issued a notice of deficiency to petitioner determining a deficiency in federal income taxes for the taxable years 1975, 1977 and 1978 in the total amount of $151,726, and determining that petitioner was liable for additions to tax for failure to file tax returns (26 U.S.C. 6651(a)(1)) and for failure to pay estimated taxes (26 U.S.C. 6654). Petitioner sought review of the Commissioner's determinations in the Tax Court, Petitioner asserted that the Internal Revenue Service was "without regulatory authority," that he did not sign a waiver authorizing the IRS to send him a notice of deficiency and that the deficiency determined by the Commis- sioner was arbitrary and capricious. The Commis- sioner moved to dismiss the case-and also sought to have a penalty imposed against petitioner under 26 U.S.C. 6673-on the grounds that the claims of petitioner were frivolous and were asserted for purposes of delay (Tax Ct. Op. at 1).2 ___________________(footnotes) 2 26 U.S.C. 6672(a)(l) authorizes the Tax Court to "require the taxpayer to pay the United States a penalty not in excess of $25,000" when the taxpayer has commenced proceedings "primarily for delay" or has asserted a position that is "frivo- lous or groundless" (ibid.). ---------------------------------------- Page Break ---------------------------------------- 3 The Tax Court agreed with the Commissioner that petitioner was advancing "tax protestor" arguments of the type routinely rejected by the courts and for which penalties have been imposed under 26 U.S.C. 6673. Instead of entering an award of sanctions at that time, however, the Tax Court gave petitioner six weeks either to object to the award of a penalty under 26 U.S.C. 6673 or to file an amended petition that alleged specific, non-frivolous grounds for contesting the deficiency asserted by the Commissioner. In response to that order, however, petitioner merely filed a motion for summary judgment that reasserted the contention that the deficiency determination was arbitrary and capricious. Petitioner presented no facts in support of his allegations and made no attempt to cure the defects in the petition (Tax Ct. Op. at 2). The Tax Court dismissed the petition because it "presented] no assignments of error nor allegations of fact in support of any justifiable claim" and "raise[d] only tax protestor rhetoric and legalistic gibberish" (Tax Ct. Op. at 3). The court also imposed a penalty against petitioner under 26 U.S.C. 6673 in the amount of $5,000. The court stated that it was "convinced that petitioner instituted and maintained] this proceeding primarily, if not exclusively, for * * * delay" (Tax Ct. Op. at 3). 2. Petitioner and his wife, Alice M. Grant, had pre- viously appealed an order of the United States District Court for the Central District of California that enforced two IRS summonses. In that appeal, petitioner and Mrs. Grant argued that they were not subject to federal income tax because they were citizens of California. In an unpublished opinion, the Ninth Circuit affirmed the order enforcing the sum- ---------------------------------------- Page Break ---------------------------------------- 4 menses and awarded the United States $1,500 as a sanction for the frivolous appeal. United States v. Grant, No. 91-56344 (Feb. 10, 1~93)=- 3. The monetary sanction imposed by the Ninth Circuit in that prior case had not been paid by peti- tioner by the time that he commenced the appeal in the present case. The Commissioner moved to dis- miss the present appeal because of the petitioner's failure to pay the sanctions previously imposed by the court of appeals. Petitioner filed a response to that motion but did not pay the outstanding award of sanc- tions (Pet. 4). The court of appeals dismissed the appeal "because of [petitioner's] failure to pay sanctions imposed against him by this court in United States v. Grant, No. 91-56344" (Pet. App. Al). ARGUMENT The decision of the court of. appeals is correct and does not conflict with any decision of this Court or any other court of appeals. Further review is there- fore not warranted. 1. Under Rule 38 of the Federal Rules of Appellate Procedure, a court is authorized to award "just dam- ages and single or double costs to the appellee" when it determines that a-n appeal is frivolous. Such sanc- tions serve "as a deterrent to the bringing of future frivolous appeals" and also compensate the govern- ment "for at least the direct costs of defending the appeal." Stelly v. Comissioner, 804 F.2d 868, 871 (5th Cir. 1986), cert. denied, 480 U.S. 907 (1987). See also Chambers v. NASCO, Inc., 501 U.S. 32,46 (1991) (sanctions vindicate judicial authority and compen- sate the prevailing party for expenses caused by the abuse). ---------------------------------------- Page Break ---------------------------------------- 5 This Court has emphasized that "[c]ourts invested with the judicial power of the United States have cer- tain inherent authority to protect their proceedings and judgments in the course of discharging their traditional responsibilities." Degen v. United States, 116 S. Ct. 1777, 1780 (1996), citing Chambers v, NASCO, Inc., 501 U.S. 32, 43-46 (1991); Link v. Wabash R. R., 370 U.S. 626, 630-631 (1962); United States v. Hudson, 11 U.S. (7 Cranch) 32,34 (1812). To protect the integrity of the judicial process and to compensate litigants for prior abuses of that process, courts have consistently concluded that a party should not be permitted to litigate in a court if sanctions or costs incurred in an earlier proceeding, or in prior actions involving the same parties and the same or similar subject matter, remain unpaid. Hymes v. United States, 993 F.2d 701 (9th Cir. 1993); Christensen v. Ward, 916 F.2d 1485, 1486 (lOth Cir.), cert. denied, 498 U.S. 999 (1990); Stelly v. Com- missioner, 804 F.2d at 871-872; Zerman v. Jacobs, 814 F.2d 107, 109 (2d Cir. 1987); Schiff v. Simon & Schuster, Inc., 766 F.2d 61, 62 (2d Cir. 1985). See also Fed. R. Civ. P. 41(d). In some eases, courts have used their inherent power to stay or dismiss a suit because of a party's failure to pay costs assessed in a prior action. See, e.g., Falcon v. General Telephone Co. of Southwest, 611 F. Supp. 707,723-725 (N.D. Tex. 1985), aff'd on other grounds, 815 F.2d 317 (5th Cir. 1987); Hymes v. United States, 993 F.2d at 702; Schiff v. Simon & Schuster, Inc., 766 F.2d at 62-63; Weidenfeld v. Pacific Improvement Co., 101 F.2d 699, 700 (2d Cir. 1939); Hilgeford v. Peoples Bank, 110 F.R.D. 700 (N.D. Ind. 1986). In other cases, courts have directed their clerks not to accept any new filings by a party until sanctions imposed in prior proceedings are paid. ---------------------------------------- Page Break ---------------------------------------- 6 See, e.g., Christensen v. Ward, 916 F.2d at 1485; Stelly v. Commissioner, 804 F.2d at 871; Hymes v. United States, 993 F.2d at 702; Zerman v. Jacobs, 814 F.2d at 109; Hacopian v. United States Department of Labor, 709 F.2d 1295,1296 (9th Cir. 1983). The fact that courts have responded somewhat differently to similarly abusive conduct (compare Hymes v. United States, 993 F.2d at 702 (dismissing for the nonpayment of costs of a prior action) with Christensen v. Ward, 916 F.2d at 1485 (directing the clerk not to accept any new filings)) indicates nothing more than the substantial breadth of "the permissible range of the court's discretion." See Link v. Wabash R. R., 370 U.S. at 633. " It does not, as petitioner erro- neously contends (Pet. 8-10), reflect a conflict among the circuits on the scope of that discretion. 2. It is obvious why courts have decided not to hear appeals while previously imposed sanctions remain unpaid. In Stelly v. Commissioner, 804 F.2d at 871- 872, the Fifth Circuit explained that it was "deter- mined to stop the growing number of patently frivo- lous appeals filed by abusers of the tax system whose sole purposes are to delay and harass the collection of public revenues." The Ninth Circuit similarly stated in Hymes v. United States, 993 F.2d at 701-702, that "[w]e make clear today that we will not entertain appeals from a litigant who refuses to comply with a previous order of this court." As the Second Circuit noted in Schiff v. Simon & Schuster, Inc., 766 F.2d at 62, to "make the sanction effective and thereby pro- tect the processes of a court from abuse, a litigant against whom Rule 38 sanctions have been imposed ---------------------------------------- Page Break ---------------------------------------- 7 must comply with those sanctions before being per- mitted to pursue new matters in that court."3 By bringing this appeal while the sanctions im- posed against him in United States v. Grant, supra, remained unpaid, petitioner defied the court's effort to stem his persistent abuse of the judicial process. By exercising its inherent power to dismiss the appeal in these circumstances, the court acted well within the scope of its permissible discretion. See Link v. Wabash R.R., 370 U.S.-at 633 (dismissal was not an abuse of discretion); Chambers v. NASCO, Inc., 501 U.S. at 50 (sanctions reviewed for abuse of discretion). Because of petitioner's intransigent refusal to pay the sanction entered upon his prior frivolous appeal, dismissal of the appeal was an appro- priate remedy in this case. 3. Petitioner errs in contending (Pet. 9-13) that he was not provided adequate notice and a hearing before the appeal was dismissed. The Commissioner's mo- tion to dismiss obviously provided notice to petitioner of the possibility that the appeal would be dismissed. Petitioner was given an opportunity to oppose that motion and did so, filing a brief in which he argued ___________________(footnotes) 3 This Court has similarly instructed the Clerk of the Court not to accept further petitions from a litigious, indigent peti- tioner in noncriminal matters unless the petitioner first com- plies with the Court's Rules and pays required docketing fees. Vey v. Clinton, 117 S. Ct. 1792 (1997). To protect the orderly administration of justice and to prevent abuse of the Court's process, the Court has imposed prospective bars against filings in appropriate cases. See, e.g., Demos v. Storrie, 507 U.S. 290 (1993); Martin v. District of Columbia Court of Appeals, 506 U.S. 1 (1992); In re Sindramj 498 U.S. 177 (1991); In re McDonald, 489 U.S. 180 (1989). ---------------------------------------- Page Break ---------------------------------------- 8 "that he was entitled to appeal as a matter of right" (Pet. 4). CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. WALTER DELLINGER Acting Solicitor General LORETTA C. ARGRETT Assistant Attorney General CHARLES E. BROOKHART PATRICIA M. BOWMAN Attorneys JULY 1997