United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT June 14, 2005
_______________________ Charles R. Fulbruge III
Clerk
No. 04-60839
_______________________
MICHAEL E. GRAHAM; ROSALIND LOUISE GRAHAM,
Petitioners-Appellants,
versus
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
Appeal from the Tax Court
No. 7298-95
Before JOLLY, HIGGINBOTHAM, and JONES, Circuit Judges.
PER CURIAM:*
Michael and Rosalind Graham (“Michael,” “Rosalind,”
collectively “Grahams”) appeal the Tax Court judgment against them
for violating, inter alia, 26 U.S.C. (I.R.C.) §§ 6661(a)1 and
§ 6653(b).2 In each of the relevant tax years, the Grahams failed
to file a tax return. After investigation by the criminal
investigation division of the Internal Revenue Service (“IRS”), in
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
1
26 U.S.C. (I.R.C.) § 6661(a), now repealed (see Pub.L. 101-239, Title
VII, § 7721(c)(2), Dec. 19, 1989, 103 Stat. 2399), added to the tax liability for
unexcused, nonpayment of taxes.
2
26 U.S.C. 6653(b) in pertinent part reads:
(b) Fraud. If any part of any underpayment (as defined in subsection
(c)) of tax required to be shown on a return is due to fraud, there
shall be added to the tax an amount equal to 50 percent of the
underpayment.
1989 the Grahams filed a tax return for tax year 1984 reporting
total gross income of $18,000. This return failed to report
$41,000 of income from the sale of stock, which the Grahams
contested. Additionally, the Grahams filed a return reporting
gross income of $122,000 for tax year 1985, and a return reporting
gross income of $182,000 for tax year 1986. The 1985 and 1986
returns omitted significant items of income.
The United States Attorney, Southern District of Texas,
indicted Michael Graham for one count of criminal tax evasion for
tax year 1986. On December 23, 1986, Michael pled guilty. The
plea agreement included provisions stating that the agreement
“binds only the United States Attorney’s Office for the Southern
District of Texas and the defendant,” as well as a promise from
Michael “to cooperate with the Internal Revenue Service to resolve
his tax matters.” R. Doc. 1, Ex. B, ¶¶ 12 & 17. The plea
agreement did permit Michael to contest the amount of tax liability
and penalties as to the 1986 tax year.
In February 1995, the Commissioner issued a notice of
deficiency as to tax years 1984 and 1986, additions to tax for
substantial understatements (under I.R.C. § 6661(a)) for 1984,
1985, and 1986, and additions to tax for fraud (under I.R.C. §
6653(b)) for 1984, 1985, and 1986 against Michael Graham. After
the Commissioner issued the notices and engaged in some preliminary
discussions with the Grahams, a series of delays ensued. The
Grahams, collectively and individually, changed counsel multiple
2
times, Rosalind declared bankruptcy, Rosalind had medical problems,
and both Grahams avoided phone calls and meetings with the
Commissioner.
On June 3, 1998, the IRS and the Grahams entered into a
Stipulation of Settled Issues which were submitted to the Tax
Court. In the Stipulations, the Grahams largely conceded the
amounts posited by the Commissioner. However, shortly after the
Stipulations were filed, Rosalind Graham asserted an innocent
spouse defense for each of the tax years at issue and obtained
another continuance to prepare this defense.
After further delays and continuances, on October 21,
2002, the Grahams and the IRS entered into a Supplemental
Stipulation of Settled Issues. The figures relating to the tax
deficiencies were altered, and the parties stipulated that Rosalind
Graham was entitled to innocent spouse relief for tax year 1984,
but not for 1985. Supp. Stipulation of Settled Issues at 2 ¶11.
For tax year 1986, the parties agreed Rosalind was entitled to
innocent spouse relief with respect to $35,000 only (not with
respect to an additional $220,000). Id. The stipulations
concluded by stating, “[a]ll issues in this case have been resolved
in the Stipulation of Settled Issues previously filed and this
Supplemental Stipulation of Settled Issues.” Id. at 4 ¶16.
Once the parties filed the Supplemental Stipulation of
Settled Issues, the Tax Court denied the Grahams’ renewed motion
3
for a continuance. A computational dispute between the parties
persisted, and the case was set for trial on June 7, 2004 (the
sixth scheduled trial date). Two weeks before trial, the Grahams
filed motions to withdraw the Stipulation of Settled Issues and for
leave to amend their petition.3 The Grahams contended that parts
of the Stipulations were unfair because they did not permit
Rosalind to claim innocent spouse status and allowed the IRS to
take a different position than the U.S. Attorney on the amount of
deficiency (and thus to deprive Michael of the full benefit of his
plea bargain). After a telephone conference, the Tax Court denied
these motions. The Commissioner then moved for entry of decision
based on the Stipulations, and presented evidence on the
computational dispute. After hearing from all parties, on June 17,
2004, the Tax Court granted the Commissioner’s motion for entry of
decision.
On July 19, 2004, the Grahams filed a joint motion to
vacate the decision of the Tax Court, which the Tax Court summarily
denied. The Grahams filed a timely appeal in this court.
DISCUSSION
This court reviews the Tax Court’s denial of a motion to
withdraw stipulations for abuse of discretion. Henry v. Comm’r,
362 F.2d 640, 643 (5th Cir. 1966). Similarly, we review the denial
3
As will be relevant to the discussion infra, on December 10, 2003,
the IRS informed Rosalind by mail that the agency had determined she was eligible
for innocent spouse status for tax year 1985.
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of a motion to amend a petition for abuse of discretion. Estate of
Smith v. Comm’r of Internal Revenue, 198 F.3d 515, 517 (5th Cir.
1999). The Tax Court’s decision following a contested motion for
entry of decision is reviewed for clear error. Cook v. Comm’r of
I.R.S., 349 F.3d 850, 853 (5th Cir. 2003). The clear error
standard precludes reversal of a trial court’s findings unless this
court is “left with the definite and firm conviction that a mistake
has been committed.” Rodriguez v. Bexar County, Tex., 385 F.3d
853, 860 (5th Cir. 2004) (quoting Anderson v. City of Bessemer, 470
U.S. 564, 573, 105 S. Ct. 1504, 1511 (1985)). Michael
Graham raises several challenges to the sufficiency of the evidence
underlying the Tax Court’s determinations. These arguments are of
no moment because Michael failed to contest any of the evidence in
the Tax Court and instead chose to enter into stipulations with the
IRS concerning the facts at issue. Stipulations are treated as a
contract between the two parties. “One who attacks a settlement
must bear the burden of showing that the contract he has made is
tainted with invalidity, either by fraud practiced upon him or by
a mutual mistake under which both parties acted.” Mid-South v.
Har-Win, Inc., 733 F.2d 386, 391-92 (5th Cir. 1984). Thus, the
appropriate starting point for this court’s analysis is whether any
reason exists to reverse the Tax Court on its refusal to vacate the
Stipulations. The sufficiency of the evidence arguments would be
relevant only to the Tax Court if, and only if, this court first
5
found an abuse of discretion in that court’s decision not to vacate
the Stipulations.
However, Michael has not demonstrated any abuse of
discretion by the Tax Court on this issue. Under Tax Court rules,
Stipulations will be enforced as binding and the court “will not
permit a party to a stipulation to qualify, change, or contradict
a stipulation in whole or in part, except that it may do so where
justice requires.” T.C.R. 91(e). The Grahams delayed resolution
of the issues for nearly a decade and had multiple opportunities to
note their disagreement, confusion, or mistake about the Stipu-
lations. Instead, the Grahams sought to vacate the Stipulations a
mere two weeks before the trial. Michael’s claim that the IRS
should be judicially estopped from proposing a different income
allocation than the U.S. Attorney relied upon belies the fact that
Michael himself allowed the Commissioner to do so through the
Stipulations entered after his plea bargain and conviction.
Furthermore, the Grahams have not attempted to argue that the
Stipulations are a product of fraud or mutual mistake. In light of
the procedural history of the case, the absence in the record of
any evidence of fraud or mutual mistake, and the deferential
standard of review, we conclude that the Tax Court did not abuse
its discretion in denying the Grahams’ motion to withdraw the
Stipulations.
Michael further contends the Commissioner should be
judicially estopped from using a different income allocation for
6
tax year 1985 than the U.S. Attorney relied upon in its plea
agreement with Michael. Judicial estoppel prevents parties in
subsequent judicial proceedings from taking litigation positions
contrary to those asserted by the same party in a previous lawsuit.
See United States ex rel. Am. Bank v. C.I.T. Constr. Inc., 944 F.2d
253, 258-59 (5th Cir. 1991). Judicial estoppel must be pled and
argued in the trial court absent “an especially egregious case
wherein a party has successfully asserted a directly contrary
position.” Id.
Michael did not plead judicial estoppel in the Tax Court,
and this case does not represent an “egregious” attempt by the
Commissioner to argue contradictory legal theories. Moreover, this
argument is borderline frivolous because the plea agreement
explicitly bound only the particular U.S. Attorney’s office, not
any other governmental agency. Michael stipulated to this figure
with the Commissioner; short of a bona fide reason for vacating the
Stipulations, which he lacks, Michael cannot assert judicial
estoppel against the Commissioner for the first time here.
Finally, Rosalind claims she should have been granted
innocent spouse status for tax year 1985. Both parties agree the
Tax Court should be reversed on this issue. Apparently the IRS was
making an administrative determination on this issue while the Tax
Court was considering the instant suit. Before the Tax Court
entered its decision (in June 2004), the IRS determined (in
December 2003) Rosalind deserved innocent spouse status for Tax
7
Year 1985, but the Tax Court did not learn of this decision before
it issued its opinion holding to the contrary. The IRS thus
concedes in its brief that the Tax Court should be reversed on this
issue. The IRS does not concede anything additional, however, and
asserts that Rosalind should be afforded innocent spouse status
only as to 1985 and, based on this status, should be cleared solely
of $35,000 of the unreported income for tax year 1986; Rosalind
would thus remain bound to the remaining $220,000 of unreported
income for tax year 1986 absent any additional claim of error.
Rosalind does not contest this point any further; her brief
requests only that she be granted innocent spouse status for tax
year 1985. By failing to raise additional arguments on this point,
Rosalind waives all other claims of error. See, e.g., Fed. R. App.
P. 28(a)(9)(A) & (B); Foster v. Townsley, 243 F.3d 210, 212 n.1
(5th Cir. 2001) (issues inadequately briefed are deemed waived).
Thus, we reverse and render only on this point; the judgment of the
Tax Court is otherwise affirmed.
AFFIRMED IN PART; REVERSED AND RENDERED IN PART.
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