United States Court of Appeals
For the First Circuit
Nos. 08-1355; 08-2368
KATHLEEN HAAG,
Plaintiff - Appellant,
v.
UNITED STATES;
INTERNAL REVENUE SERVICE,
Defendants - Appellees.
No. 08-1472
ROBERT HAAG; KATHLEEN HAAG,
Plaintiffs - Appellants,
v.
UNITED STATES;
INTERNAL REVENUE SERVICE,
Defendants - Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Boudin and Howard, Circuit Judges, and
Tashima,* Senior Circuit Judge.
Timothy J. Burke for appellants.
John Schumann, Tax Division, U.S. Department of Justice,
with whom John A. DiCicco and Bridget M. Rowan were on briefs,
for appellees.
December 14, 2009
*
Of the Ninth Circuit, sitting by designation.
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Tashima, Senior Circuit Judge. In 2002, the United
States brought an action in district court against taxpayers Robert
and Kathleen Haag to reduce to judgment federal income tax
liabilities. In her answer, Kathleen Haag asserted an innocent
spouse defense under 26 U.S.C. § 6015, which the district court
subsequently rejected by granting partial summary judgment to the
United States.
Meanwhile, in November 2003, during the pendency of the
government action, the Internal Revenue Service (“IRS”) filed a
notice of federal tax liens against the Haags. The Haags responded
by filing suit against the United States, alleging that they had
been deprived of their statutory right to a Collection Due Process
(“CDP”) hearing with respect to the tax liens, because the IRS
failed properly to notify them of their right to such a hearing
under 26 U.S.C. § 6320.
The district court consolidated the two actions in
December 2004.
With respect to the government’s collection action, the
district court eventually entered judgment against the Haags in
January 2006 in the amount of approximately $1.85 million, a
judgment the Haags did not appeal.
With respect to the Haags’ action, the government
initially conceded that the Internal IRS had failed to send proper
notice of the tax liens, and thus agreed to provide the Haags with
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a substitute CDP hearing. That hearing was held in August 2005,
and Kathleen Haag again asserted an innocent spouse defense.
Shortly after the hearing, however, the government
discovered evidence that it had in fact sent the proper notice, and
thereafter moved for summary judgment on the Haags’ complaint. The
district court agreed and granted judgment to the United States on
August 1, 2006, from which the Haags timely appealed.1
This court affirmed, concluding that the government had
provided the proper notice. Consequently, the Haags “were not
entitled to the hearing at all.” Haag v. United States, 485 F.3d
1, 4 (1st Cir. 2007) (“Haag I”).
Haag I did not, however, end the saga. The controversy
spawned two more actions that are the subject of the present
appeals. On these appeals, we have little trouble concluding that
these actions are foreclosed by the res judicata effects of Haag I.
First, following the district court’s August 1, 2006,
judgment (but prior to our decision in Haag I), the Haags filed a
second action against the United States in district court, again
alleging improper notice — this time because their attorney
supposedly failed to receive notice of the tax liens (“Haag II”).
The district court administratively closed the case in late 2006 on
1
Notwithstanding the district court’s judgment, the IRS
subsequently issued a decision letter on August 31, 2006,
sustaining enforcement of the tax liens and rejecting all claims
raised by the Haags at the CDP hearing, including Kathleen Haag’s
innocent spouse defense.
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account of Robert Haag’s bankruptcy, then denied several motions to
reopen, on the ground that Haag I barred the action under res
judicata. The Haags timely appealed from the last such denial, and
we have construed it as a final order terminating the case subject
to our appellate jurisdiction.
Second, in October 2007, Kathleen Haag filed a third
action against the United States in district court (“Haag III”),
alleging that in her August 2005 CDP hearing — the one to which she
was not entitled — the IRS improperly failed to consider her
innocent spouse defense. The district court also dismissed that
action on res judicata grounds in January 2008. Kathleen Haag
timely appealed. She then filed a motion for relief from judgment
in September 2008, which the district court denied, and from which
Kathleen Haag again appealed.
After carefully reviewing the record, we conclude that
neither of these appeals has merit.
I. Discussion
We review dismissals based on res judicata de novo. See
Gray v. Evercore Restructuring, L.L.C. (In re High Voltage Eng’g
Corp.), 544 F.3d 315, 318 (1st Cir. 2008). The other orders of the
district court are based on similar conclusions of law grounded in
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res judicata. We therefore review those orders under a de novo
standard as well. See id.
Under the doctrine of res judicata, a final judgment on
the merits of an action precludes the parties from relitigating
claims that were or could have been raised in the prior action.
See Gonzalez v. Banco Cent. Corp., 27 F.3d 751, 755 (1st Cir.
1994). “Accordingly, the elements of res judicata are (1) a final
judgment on the merits in an earlier suit, (2) sufficient
identicality between the causes of action asserted in the earlier
and later suits, and (3) sufficient identicality between the
parties in the two suits.” Id.
With respect to the claims raised in Haag II, each of
these elements is met.
There is little dispute as to the first and third
elements. In Haag I, the district court entered a final judgment
on the merits against the Haags that, inter alia, rejected their
claim of improper notice, a judgment this court subsequently
affirmed. Both Kathleen and Robert Haag were parties to the
earlier suit, as was the United States. Thus, identicality of
parties and the final judgment requirement are easily met.
On the second element, identicality of causes of action,
this court employs a transactional analysis whereby identity exists
“if both sets of claims — those asserted in the earlier action and
those asserted in the subsequent action — derive from a common
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nucleus of operative facts.” Id. Put another way, “as long as the
new complaint grows out of the same transaction or series of
connected transactions as the old complaint, the causes of action
are considered to be identical.” Kale v. Combined Ins. Co., 924
F.2d 1161, 1166 (1st Cir. 1991) (internal quotation marks and
citations omitted).
The claims in Haag I and II satisfy this standard and are
essentially identical: Both allege that the IRS failed to provide
proper notice of the November 2003 tax liens under 26 U.S.C. §
6320. The only conceivable difference is that in Haag I, the Haags
claimed they personally did not receive effective notice, while in
Haag II they claim their attorney did not receive such notice.
This is a distinction without a difference. The Haag II claim,
whether tied to the taxpayers or their attorney, “grows out of the
same transaction” as the old complaint and arises from a “common
nucleus of operative facts:” the notice provisions triggered by the
November 2003 tax liens, and whether the IRS complied with those
provisions.
Moreover, the Haags could have and should have brought
their “notice to counsel” argument as part of Haag I. Nothing
prevented them from doing so. Whether their attorney received
notice in November of 2003 was instantly discernible to them and
their lawyer, and they needed nothing further from the courts or
any other party to press this claim in Haag I. Essentially, the
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Haags want to litigate the notice issue piecemeal, but such a
strategy is barred by res judicata.
A similar conclusion attends the claims in Haag III. In
Haag III, Kathleen Haag asserts that she was improperly prevented
from raising an innocent spouse defense at the CDP hearing held in
August 2005. However, both Kathleen Haag’s innocent spouse defense
and the contours of her right, if any, to a hearing were fully
adjudicated in Haag I and resulted in a final judgment on the
merits against her. Further, Kathleen Haag is attacking a supposed
defect in a hearing to which she was not entitled in the first
place and, as in Haag I, we fail to understand “why the allegedly
unsatisfactory hearing left [her] worse off than no hearing at
all.” 485 F.3d at 4.
Because the complaint in Haag III concerns the “same
nucleus of operative facts” as in Haag I, it is barred by res
judicata, as is the complaint in Haag II.
II. Conclusion
The orders of the district court are therefore AFFIRMED.
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