8th Circuit rules in favor of the Government of the U.S. Virgin Islands in Coffey v. Commissioner

Dec 06, 2011   

Today, the 8th Circuit Court of Appeals reversed and remanded, in a published and precedential opinion, a decision of the Tax Court in Coffey v. Commissioner, (8th Cir., case # 11-1362).  The 8th Circuit examined, similar to the Third Circuit in Appleton v. Commissioner, 430 Fed. Appx. 135 (3d Cir. 2011)(unpublished) (Appleton II), a decision of the Tax Court which incorporated by reference the holding and analysis of Appleton v. Commissioner, 135 T.C. 461 (2010) (Appleton I). 

In Appleton I, the Tax Court held that the Government of the U.S. Virgin Islands lacked the ability to intervene under Rule 24 of the Federal Rules of Civil Procedure, made applicable to the Tax Court via Tax Court Rule 1.  The Government of the U.S. Virgin Islands sought to intervene either as of right (Rule 24(a)(2)) or permissively (Rule 24(b)(2)).  The Tax Court ruled in Appleton I that the Government of the U.S. Virgin Islands could not show that it had “neither demonstrated that its participation as a party is necessary to advocate for an unaddressed issue nor shown that its intervention will not delay resolution of this matter” and further stated that the participation of the Government of the U.S. Virgin Islands in the Tax Court litigation “could result in trial complications as well as delay the resolution of the issue in which movant asserts an interest.”

However, Judge Benton, in writing for the 8th Circuit, noted that neither of these concerns comported with the legal standard for Rule 24 intervention.  The 8th Circuit agreed with the 3rd Circuit that the appropriate standard is whether there is “undue delay” or “prejudice that adjudication of the original parties rights.”  Based on this erroneous view of the law, the Tax Court abused its discretion by denying the Government of the U.S. Virgin Islands intervention.

The ramifications of this ruling is that the pending cases before the 11th Circuit (Cooper v. Commissioner (11-10617); McGrogan v. Commissioner (11-10618); Huff v. Commissioner (11-10608)) and the 4th Circuit (McHenry v. Commissioner (11-1239)) are more likely to have an outcome in favor of the Government of the U.S. Virgin Islands.  The 4th Circuit has set oral argument in McHenry v. Commissioner for January 25, 2012, in Richmond, Virginia. Additionally, the outcomes in the pending motions to intervene in the Tax Court (Teffeau v. Commissioner (27904-10)) are more likely to be ruled in favor of the Government of the U.S. Virgin Islands.

A full copy of the 8th Circuits opinion can be found here.

The attorneys at Fuerst Ittleman have extensive experience litigating against the U.S. Government in tax cases in at both the trial and appellate court levels.  Likewise, Fuerst Ittlemans attorneys have extensive experience litigating USVI residency cases and cases against the USVI Government, and Joseph DiRuzzo of Fuerst Ittleman is licensed to practice in the USVI.  You can contact us by emailing us at contact@fidjlaw.com, or by calling us at 305.350.5690.