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District of Columbia Office of Tax & Revenue v. Exxonmobil Oil Corp.

Court of Appeals of Columbia District

June 30, 2016

DISTRICT OF COLUMBIA OFFICE OF TAX & REVENUE, Petitioner,
v.
EXXONMOBIL OIL CORPORATION, et al., Respondents.

          Argued February 9, 2016

         On Petition for Review of an Order of the District of Columbia Office of Administrative Hearings OTR-49-11.

          Richard S. Love, Senior Assistant Attorney General, with whom Karl A. Racine, Attorney General for the District of Columbia, Todd A. Kim, Solicitor General, and Loren L. AliKhan, Deputy Solicitor General, were on the brief, for petitioner.

          M. Miller Baker, with whom Stephen P. Kranz, Diann L. Smith, and Katie Bukrinsky were on the brief, for respondents.

          BEFORE: Thompson and McLeese, Associate Judges; and King, Senior Judge.

         JUDGMENT

         This case came to be heard on the administrative record, a certified copy of the agency hearing transcript and the briefs filed, and was argued by counsel. On consideration whereof, and as set forth in the opinion filed this date, it is now hereby

         ORDERED and ADJUDGED that the orders issued by the Office of Administrative Hearings, granting the oil companies summary judgment, are vacated, and the case is remanded for further proceedings consistent with this opinion.

          OPINION

          WARREN R. KING SENIOR JUDGE.

         Petitioner District of Columbia Office of Tax and Revenue ("OTR") petitions for review of three orders issued by the Office of Administrative Hearings ("OAH") that grant summary judgment to respondents Exxon Mobil Oil Corp., Shell Oil Co., and Hess Corp. (collectively, the "oil companies") and reverse OTR's Notices of Proposed Assessment of Tax Deficiency against them. OTR contends that OAH's grant of summary judgment to the oil companies is premised on the erroneous application of offensive[1] non-mutual collateral estoppel against OTR. In United States v. Mendoza, 464 U.S. 154 (1984), the Supreme Court held that offensive non-mutual collateral estoppel does not, as a matter of law, apply against the federal government. Citing Mendoza, OTR contends that offensive non-mutual collateral estoppel should not, as a matter of law, ever apply to the District government or its entities, such as OTR. Alternatively, OTR argues that OAH abused its discretion in applying offensive non-mutual collateral estoppel in the circumstances of these cases. For the reasons that follow, we conclude that OAH did abuse its discretion in applying offensive non-mutual collateral estoppel against OTR and thereby erred in granting the oil companies summary judgment. We therefore vacate OAH's orders and remand for further proceedings.

         I.

         Between 2011 and 2012, OTR issued a Notice of Proposed Assessment of Tax Deficiency for alleged underpayment of corporate franchise taxes for tax years 2007–2009 to each of the oil companies. Each oil company filed a petition in OAH protesting the proposed assessment it received. Their protests were based in part on their shared view that the methodology used by OTR to calculate their alleged tax deficiencies (the "Chainbridge methodology") was contrary to applicable law. OTR and the oil companies agreed to a stay of the proceedings by OAH pending resolution of similar challenges by other companies to tax deficiency assessments issued by OTR that also utilized the Chainbridge methodology.[2] Thereafter, OAH lifted the stay at the oil companies' request to allow them to file motions for summary judgment.

         In their motions for summary judgment, the oil companies argued, inter alia, that OTR was collaterally estopped from defending the legality of the Chainbridge methodology by OAH's ruling in the Microsoft case. See supra note 2; see also Microsoft Corp., supra note 2, No. 2010-OTR-12 at *18-*27. Thereafter, OAH specifically directed OTR to "file . . . brief[s] addressing the issue of collateral estoppel" in each of the proceedings and scheduled oral argument to deal solely with that issue. OTR complied with OAH's order, submitting motions addressing collateral estoppel in which it argued (1) that offensive non-mutual collateral estoppel does not apply to the District government or its entities or, in the alternative, (2) that it would be unfair and an abuse of discretion to apply offensive non-mutual collateral estoppel in these cases, citing the fairness factors identified by this court in Modiri v. 1342 Rest. Grp., Inc., 904 A.2d 391, 400 (D.C. 2006).

         Following oral argument on the oil companies' motions, OAH issued nearly identical orders in all three cases granting the oil companies summary judgment and reversing the three Notices of Proposed Assessment of Tax Deficiency issued by OTR. The orders were premised on OAH's conclusion that its ruling in the Microsoft case collaterally estopped OTR from defending the legality of its methodology for calculating the oil companies' alleged tax ...


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