Sheryl Stratton reports this morning that Government Seeks Appellate Court Rehearing in Ballard and Lisle Cases, also available on the Tax Analysts web site as Doc 2005-25609, 2005 TNT 244-1:

Charging that the appeals courts’ decisions in the Ballard and Lisle cases conflict with the Supreme Court’s decision in the Ballard/Kanter case, the Justice Department is seeking rehearings in the Eleventh and Fifth circuits.

The circuits’ orders — reinstating Tax Court Special Trial Judge Irvin Couvillion’s original report in the fraud trial of Burt Kanter, Claude Ballard, and Robert Lisle, forbidding a new Tax Court judge from recommitting the cases to Judge Couvillion, and directing review of his original report under a "manifestly unreasonable" standard — are inconsistent with the Supreme Court’s opinion in Ballard v. Commissioner, 125 S.Ct. 1270 (2005), according to the government’s petitions for rehearing. (For the petition in Ballard, see Doc 2005-25589 [PDF]; for the petition in Lisle, see Doc 2005-25590 [PDF].)

In November 2005 the Eleventh Circuit in Ballard was joined by the Fifth Circuit in Lisle in per curiam opinions that ordered the Tax Court to strike the collaborative opinion published by the Tax Court in Investment Research Associates Ltd. et al. v. Commissioner, T.C. Memo. 1999-407, regarding the cases pending in the Tax Court. The two courts directed the Tax Court to reinstate the original special trial judge’s report (which found no fraud), to refer the cases to a new judge who had no involvement in the collaborative report, and for the new judge to "give ‘due regard’ to the credibility determinations of Judge Couvillion, presuming that his fact findings are correct unless manifestly unreasonable." (For the Eleventh Circuit’s opinion, see Doc 2005-22258 [PDF], 2005 TNT 212-16 . For the Fifth Circuit’s opinion, see Doc 2005- 23858 [PDF], 2005 TNT 226-5 .)

The appeals courts’ opinions appear to forbid a new Tax Court judge assigned to the cases from recommitting them to Judge Couvillion under Tax Court Rule 183, even if the reviewing judge were to determine recommittal was warranted, the government points out in its December 15 petitions. "Foreclosing this avenue," the motions state, "would preclude the Tax Court from fully following its own rules." It is difficult to conceive of a process less likely to result in accurate fact-finding than to deny the Tax Court all access to the only judge who was physically present when the evidence was taken, the motions say. Barring the Tax Court from giving Judge Couvillion any opportunity to reconsider his report is not only inconsistent with the Supreme Court’s interpretation of Rule 183, but "stands Rule 183 on its head," the motions add.

Furthermore, the circuit courts’ orders heighten Rule 183 standards of deference to a manifestly unreasonable standard of review, instead of the Supreme Court’s enunciated "respectful attention" standard, the government argues. The petitions assert that a regular Tax Court judge’s decisional authority would be abdicated if the judge had to apply the heightened standard of review to a recommendation by a special trial judge that the regular judge did not believe.

The government asks the circuit courts to modify their opinions to make clear that the new judge who reviews the special trial judge’s original report may exercise any option permitted by Rule 183, including recommittal of the case to the special trial judge, and to incorporate the Supreme Court’s respectful attention standard for reviewing special trial judge recommendations.