Ninth Circuit Rules That DOJ Tax Division Head Does Not Have to Attend Routine Settlement Conference


The Ninth Circuit in U.S. v. U.S. District Court for the Northern Mariana Islands (“Northern Mariana Islands”), No. 11-72940, 2012 WL 3984406, recently granted relief to the government and directed a district court to vacate orders that directed the government to send a representative with full authority to settle a civil tax refund lawsuit to an initial settlement conference. Although the appellate court held that the district court has the authority to order parties, including the federal government, to participate in mandatory settlement conferences, the Ninth Circuit found that the district court abused its discretion in ordering attendance by a representative with full settlement authority under the circumstances of the case. The Ninth Circuit cited two factors important to its determination: (1) the lowest-ranking official with settlement authority over the case was the Assistant Attorney General of the Tax Division (“Assistant Attorney General”) and it would be impractical to require the Assistant Attorney General to appear at all settlement conferences in all cases involving amounts within his or her settlement authority; and (2) the initial settlement conference was a matter of routine practice under the district court’s local rules, and the personal participation of the person able to make a final decision was not vital. While the practice of not sending a representative with ultimate settlement authority is fairly standard for the Department of Justice, the Ninth Circuit’s decision adds guidance with respect to an important issue for taxpayers, as settling a case can be more difficult when not dealing directly with the ultimate decision-maker.

The Department of Justice has promulgated specific regulations that identify the persons with authority to settle claims made against the United States. In the case of tax refund claims, authority to settle claims in excess of $2 million resides with the Assistant Attorney General of the Tax Division. 28 C.F.R. § 0.160. See also 26 U.S.C. § 6405 (also requiring review by the Joint Committee on Taxation where a refund amount exceeds $2 million). Settlements of less than $2 million may be accepted by other representatives of the Tax Division, pursuant to specific delegation procedures issued by the Assistant Attorney General. 76 Fed. Reg. 15212.

In Northern Mariana Islands, the underlying case was a tax refund case in which the taxpayer sought to recover more than $5 million in taxes, penalties and interest. Pursuant to a local rule that provided that the court may mandate attendance at a scheduled settlement conference by each party through a representative with full authority to settle the litigation, the district court issued an order scheduling a settlement conference before a settlement judge. The government moved for relief on three separate occasions arguing that because of the size of the claim, the lowest-ranking official authorized to settle the case was the Assistant Attorney General. The government proposed a compromise to send the trial attorneys responsible for the case, with the Section Chief of the Tax Division’s Office of Review1 available by telephone, rather than to send the Assistant Attorney General. The district court denied the government’s request and proposed compromise on each occasion. Finally, the government filed an emergency petition for a writ of mandamus to the Ninth Circuit and an emergency motion to stay the settlement conference.

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