Case: 20-1052 Document: 58 Page: 1 Filed: 07/22/2021
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
UNION TELECOM, LLC,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2020-1052
______________________
Appeal from the United States Court of Federal Claims
in No. 1:16-cv-01409-TCW, Judge Thomas C. Wheeler.
______________________
Decided: July 22, 2021
______________________
ANDREW PAUL KAWEL, Kawel PLLC, Miami, FL, ar-
gued for plaintiff-appellant.
JULIE CIAMPORCERO AVETTA, Tax Division, United
States Department of Justice, Washington, DC, argued for
defendant-appellee. Also represented by DAVID A.
HUBBERT, JOAN I. OPPENHEIMER.
______________________
Before MOORE, Chief Judge, REYNA and HUGHES, Circuit
Judges.
Case: 20-1052 Document: 58 Page: 2 Filed: 07/22/2021
2 UNION TELECOM, LLC v. US
HUGHES, Circuit Judge.
Union Telecom, LLC, sued the IRS for a refund of taxes
on prepaid phonecards. After the testimony portion of a
bench trial, a new judge was assigned to the case at the
trial court, but the judge denied the plaintiff’s request to
recall witnesses under Rule 63. The trial court then denied
the plaintiff’s claim for a refund. Union Telecom appeals
the denial of its request to recall witnesses. We hold that
the trial court erred in its decision but that the error was
harmless. Accordingly, we affirm.
I
The IRS assesses taxes on toll telephone services.
26 U.S.C. § 4251(a)(1), (b)(1)(B). Section 4252(b)(1) defines
such services as “telephonic quality communication[s] for
which (A) there is a toll charge which varies in amount with
the distance and elapsed transmission time of each individ-
ual communication and (B) the charge is paid within the
United States.” For prepaid phonecards, the tax is paid by
the first non-carrier to purchase cards from a carrier.
26 U.S.C. § 4251(d)(1)(B) (assessing the tax “when the card
is transferred by any telecommunications carrier to any
person who is not a carrier”); 26 C.F.R. § 49.4251-4(a).
Until 2006, the IRS interpreted the “distance” and
“time” variables of § 4252(b)(1) in the disjunctive. Union
Telecom, LLC v. United States, 144 Fed. Cl. 477, 480 (2019)
(Decision). Therefore, the IRS interpreted the statute to
cover sales of prepaid phonecards that billed by the amount
of elapsed time, even if charges did not vary by distance.
Id. However, in 2006, the IRS altered its interpretation,
recognizing that, to be subject to the tax, providers must
vary charges by both time and distance. Id. This change
entitled those that had paid such tax to a refund. Id.
Union Telecom purchased prepaid phonecards from a
group of corporate entities arranged in a structure de-
signed to avoid the tax. IDT Corporation (IDT) is a
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UNION TELECOM, LLC v. US 3
telecommunications carrier that distributes prepaid
phonecards. Id. at 481. IDT formed a subsidiary carrier in
Puerto Rico (IDT PR) and transferred the cards to that sub-
sidiary. Id. at 481–82. This transaction was not taxable be-
cause it was between carriers. IDT PR then sold the cards
to Union Telecard Alliance (UTA), a non-carrier partially
owned subsidiary of IDT. Id. at 482. This transaction was
not taxable because it was outside of the United States. Id.
UTA then sold these cards to Union Telecom, a non-carrier.
Id. This transaction was not taxable because it was be-
tween non-carriers. Union Telecom then sold these cards to
consumers. Id. The IRS was aware of this arrangement and
raised no issues. Id. at 483.
After the IRS altered its interpretation regarding the
tax on prepaid telephone cards, Union Telecom sued the
IRS for a refund in the United States Court of Federal
Claims. Judge Susan Braden presided over a three-day
trial. J.A. 205–346. All testimony regarding the relevant
transactions indicated that none of the entities in the chain
remitted the tax to the IRS or were required to do so. Deci-
sion, 144 Fed. Cl. at 483–85. For example, Joseph Farber,
IDT’s CFO of U.S. retail operations, testified that “there
was no excise tax paid.” J.A. 324.
Nevertheless, the CEO of Union Telecom, Peter Shah,
testified that Union Telecom was entitled to a refund. Shah
lacked personal knowledge regarding whether IDT paid
the tax. J.A. 244 (“I don’t talk to anybody in IDT. I have no
idea.”). Indeed, UTA had informed Shah in a letter that
“IDT did not pay any federal excise taxes on the . . . prepaid
calling cards.” J.A. 485. Shah contended, however, that
IDT included the tax in the price it charged UTA, which
was then passed on to Union Telecom, regardless of
whether the government ever received those payments.
J.A. 245, 250. The invoices for the cards Union Telecom
purchased did not include a line item for the tax, but Shah
testified that in the phone card industry, carriers do not
itemize taxes. J.A. 245.
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4 UNION TELECOM, LLC v. US
Before Judge Braden issued her ruling, the case was
transferred to Judge Thomas Wheeler. Decision, 144 Fed.
Cl. at 483. Union Telecom then requested that Judge
Wheeler recall witnesses Farber and Shah under Rule 63
of the Court of Federal Claims. The trial court denied the
motion. J.A. 1–2. The trial court then issued a final judg-
ment that Union Telecom was not entitled to a refund. De-
cision, 144 Fed. Cl. at 489. The trial court’s opinion gave
two alternative grounds for its decision. First, no entity in
the chain paid or was required to pay the tax, so no refund
was warranted. See id. at 484 (“Plaintiff certainly pur-
chased the cards from UTA, but the Government’s swath of
uncontroverted evidence shows that IDT never included
[the tax] in those cards’ price during the relevant period.”)
(citation omitted). Second, even if the tax had been paid,
Union Telecom was not the first non-carrier transferee and
therefore lacked standing. Id. at 486.
Union Telecom appeals, arguing that the trial court
erred by not recalling the witnesses. Although we agree
that the trial court’s analysis of Rule 63 was erroneous, we
hold that the error was harmless.
II
Rule 63 applies when a new judge takes over a hearing
or trial at the Court of Federal Claims. In relevant part,
the rule reads: “In a hearing or trial, the successor judge
must, at a party’s request, recall any witness whose testi-
mony is material and disputed and who is available to tes-
tify again without undue burden.” The phrasing of the rule
is mandatory (“must”), and there are only three listed ex-
ceptions: (1) the testimony is immaterial, (2) the testimony
is undisputed, or (3) there would be an undue burden on
the witness. If a party makes a request under Rule 63, the
trial court must find one of these exceptions in order to re-
fuse to recall witnesses.
Here, the trial court did not mention any of the three
exceptions in its opinion. Instead, the trial court stated:
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UNION TELECOM, LLC v. US 5
The Court is familiar with the record and has ex-
tensively reviewed the audio recordings of live tes-
timony given during the three-day trial and the
accompanying transcripts. The limited amount of
testimony coupled with the Court’s access to these
audio recordings well-positions the Court to render
a decision on any purported credibility determina-
tions.
J.A. 1–2.
Rule 63 does not grant an exception for when the court
is familiar with the record. Because the trial court must
find one of the three exceptions in order to refuse to recall
witnesses, we hold that the trial court erred in its reason-
ing.
But the trial court’s error was harmless. None of the
testimony that the plaintiff requested be reheard could
have altered the outcome of the case. One of the reasons for
the trial court’s judgment was that the chain of entities in
this case was designed to avoid the tax on prepaid phone-
cards, and with no entity responsible to pay the tax, Union
Telecom was not entitled to a refund. None of the witnesses
that Union Telecom seeks to recall have personal
knowledge to the contrary.
Shah, as the CEO of Union Telecom, has no personal
knowledge regarding the tax liability of the entities earlier
in the corporate structure. Union Telecom argues that his
testimony could still alter the outcome because Shah has
personal knowledge that phone card companies do not sep-
arately list taxes on invoices. But, even if fully credited,
this generalized knowledge of the industry could not alter
the outcome. General practices regarding owed taxes are
irrelevant because there is undisputed testimony that IDT
designed a corporate structure to avoid owing the tax and
that no party paid the tax. We therefore agree with the trial
court that “[g]iven the lack of . . . first-hand knowledge,
Shah’s assessment is not probative. In short, Union
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6 UNION TELECOM, LLC v. US
Telecom ignores the reality of the situation here—IDT
structured its business to avoid paying the [tax].” Decision,
144 Fed. Cl. at 484.
Farber’s testimony also could not have altered the hold-
ing. He testified that IDT did not pay the tax and that it
structured its business as to not owe the tax. Thus, his tes-
timony supported the government on the key issue. How-
ever, even if his testimony were fully discredited, it was
only one piece of evidence in a “swath of uncontroverted
evidence show[ing] that IDT never included [the tax] in
[the] cards’ price during the relevant period.” Id.
III
We have considered Appellant’s other arguments and
find them unpersuasive. We hold that the trial court erred
by refusing to recall witnesses under Rule 63 without find-
ing any of the exceptions to the rule. But because none of
the witnesses that the plaintiff requested be recalled could
have altered the outcome, that error was harmless. There-
fore, we affirm.
AFFIRMED
No costs.