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Steele v. United States

United States District Court, District of Columbia

June 30, 2015

ADAM STEELE and, BRITTANY MONTROIS, Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendants. WALLACE G. DICKSON, Plaintiff,
v.
UNITED STATES OF AMERICA, Defendants.

MEMORANDUM OPINION

Plaintiff Wallace Dickson and plaintiffs Adam Steele and Brittany Montrois seek an order consolidating the above-captioned cases because they share common questions of law and fact. Plaintiff Dickson further moves for appointment of the law firms Hausfeld LLP and Boies Schiller & Flexner LLP ("BSF Group") to serve as interim co-lead counsel in the proposed consolidated action. Plaintiffs Steele and Montrois seek the appointment of the law firm Motley Rice as interim lead counsel in the proposed consolidated action, to work with Allen Buckley and others ("Motley Rice Group").

I. BACKGROUND

In 2010, the IRS promulgated new regulations requiring tax-return preparers to meet requirements for competency testing and engage in continuing education. See 31 C.F.R. §§ 10.4(c), 10.5(b), 10.6(d)(6), (e)(3). Additionally, the IRS also required all tax preparers to pay to obtain a Preparer Tax Identification Number ("PUN"), and pay to renew it each ear. See 26 C.F.R. § 300.12(a), (b).

Allen Buckley subsequently agreed to represent Jesse Brannen, a tax-return preparer who wanted to challenge the new PTIN fees in court. In May 2011, Buckley filed a complaint, Brannen v. United States, No. 4:11-cv-00135, 2011 WL 8245026 (N.D.Ga. Aug. 26, 2011), arguing that the IRS lacks statutory authority to require paid tax preparers to file for, pay for, and receive a PTIN. Id. at *1. Although the Brannen case was subsequently dismissed, see Brannen, 2011 WL 8245026; aff'd, 682 F.3d 1316 (11th Cir. 2012), Mr. Buckley further developed these themes in an article he wrote, Is Treasury's New Regulatory Scheme for Return Preparers Lawful?, published in Tax Notes magazine in October 2012. Buckley Deck ¶ 8, Ex. A (reprinted at http://www.taxanalysts.com/www/features.nsf/Articles/F40714F3406FC5E585257D86000CDD 68?OpenDocument).

Mr. Buckley also alleges that he was substantially involved in another case challenging the legality of the IRS's efforts to regulate tax-return preparers, Loving v. LRS, 917 F.Supp.2d 67 (D.D.C. 2013). Buckley Deck ¶ 7. He alleges that he reviewed all major briefs, provided research, and frequently consulted with Daniel Alban, lead counsel in the Loving case. Id. This case was successful: In February 2014, the D.C. Circuit affirmed the lower court's holding that the IRS lacked the authority to regulate tax-return preparers. Loving v. IRS, 742 F.3d 1013, 1014-15 (D.C. Cir. 2014). The D.C. Circuit opinion relied on many of the same arguments Buckley set forth two years earlier in his Tax Notes article.

In the meantime, Mr. Buckley had agreed to represent Adam Steele, who was introduced to him by Mr. Alban. Knowing Mr. Buckley sought local counsel in Washington, D.C, Mr. Alban introduced Mr. Buckley to Stuart Bassin. Buckley Deck ¶ 13. Mr. Bassin also claims to have been involved with the Loving case, occasionally sharing insights and making substantive suggestions about the case on appeal. Deck of Stuart Bassin, Dickson ECF No. 17-2.[1] Mr. Bassin, after working extensively with Allen Buckley, filed the Steele complaint in this Court on September 8, 2014. Steele Compl. The Steele plaintiffs seek review of the IRS's decision under the Administrative Procedure Act (APA).

Several attorneys became interested in the litigation at this point, including James Pizzirusso of Hausfeld, Jeffrey Kaliel of Tycko & Zavareei, and Scott Gant of BSF. In the meantime, the relationship between Mr. Buckley and Mr. Bassin deteriorated, and they terminated their working relationship. Buckley Deck ¶ 16; Bassin Deck ¶¶ 13-14. After meeting with Mr. Buckley and discussing potential arrangements as co-counsel, Mr. Pizzirusso and Mr. Kaliel declined to work with him. Buckley Deck ¶ 19, Pizzirusso Deck ¶ 18. Mr. Buckley alleges that Mr. Gant of BSF declined to return his calls. Buckley Deck ¶ 21. Mr. Buckley reached an agreement with Motley Rice LLC that it would serve as counsel in the Steele case.

Later that month, Hausfeld, BSF, and Tycko & Zavareei LLP, filed the Dickson complaint on December 31, 2014. The Dickson complaint asserts claims for illegal exactions, contending that the IRS lacks legal authority to impose PTINs fees-at all, or alternatively, in the amounts charged.

One week later, the plaintiff in Dickson moved to consolidate the Dickson and Steele actions, and sought appointment of Hausfeld and BSF as interim co-lead counsel for the proposed class, supported by Mr. Bassin. The Steele plaintiffs also move for consolidation, but seek the appointment of Motley Rice as interim class counsel, working with Mr. Buckley and others. The government has not opposed their motions.

II. CONSOLIDATION

Federal Rule 42(a) permits consolidation of actions that involve "a common question of law or fact." Fed.R.Civ.P. 42(a). Local Rule 40.5 states that two or more civil cases "are deemed related when the earliest is still pending on the merits in the District Court and they (i) relate to common property, or (ii) involve common issues of fact, or (iii) grow out of the same event or transaction or (iv) involve the validity or infringement of the same patent." LCvR 40.5(a)(3).

"In deciding whether to consolidate, courts must 'weigh the risks of prejudice and confusion wrought by consolidation against the risk of inconsistent rulings on common factual and legal questions, the burden on the parties and the court, the length of time, and the relative expense of proceeding with separate lawsuits if they are not consolidated." Royer v. Fed. Bureau of Prisons, 292 F.R.D. 60, 61 (D.D.C. 2013) (quoting Nat'l Ass 'n of Mart. Brokers v. Bd. of Governors of the Fed. Reserve Sys., 110 F.Supp.2d 283, 286 (D.D.C. 2011)). Consolidation is appropriate when cases involve the same general facts, are at similar stages of litigation, and when consolidation poses no risk of confusion or prejudice. Id.

These cases involve common questions of both law and fact, and the Court agrees with the parties that consolidation would promote convenience and judicial economy, simplify management of the cases, and facilitate global resolution of the class claims and conserve judicial resources.

Dickson and Steele share similar operative facts. While the cases present some differences, they are both predicated on allegations that the government assessed PTIN fees on tax preparers without legal authority to do so. The cases share basic relevant facts, involve the same defendant, and challenge ...


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