[ Ginsburg ]
[ Kennedy ]
[ Rehnquist ]
The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
BALLARD et ux. v. COMMISSIONER OF INTERNAL REVENUE
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
The Tax Courts Chief Judge appoints auxiliary officers, called special trial judges, to hear certain cases, 26 U.S.C. § 7443A(a), (b), but ultimate decision, when tax deficiencies exceed $50,000, is reserved for the court itself, §7443A(b)(5), (c). Tax Court Rule 183(b) governs the two-tiered proceedings in which a special trial judge hears the case, but the court renders the final decision. Rule 183(b) directs that, after trial and submission of briefs, the special trial judge shall submit a report, including findings of fact and opinion, to the Chief Judge, [who] will assign the case to a Judge of the Court. In acting on the report, the assigned Tax Court judge must give [d]ue regard to the circumstance that the [s]pecial [t]rial [j]udge had the opportunity to evaluate the credibility of the witnesses, must presum[e] to be correct factfindings contained in the report, and may adopt the [s]pecial [t]rial [j]udges report or may modify it or may reject it in whole or in part. Rule 183(c). Until 1983, such special trial judge reports were made public and included in the record on appeal. Pursuant to a rule revision that year, those reports are now withheld from the public and excluded from the appellate record, and Tax Court judges do not disclose whether the final decision modi[fies] or reject[s] the special trial judges initial report. Instead, the final decision invariably begins with a stock statement that the Tax Court judge agrees with and adopts the opinion of the [s]pecial [t]rial [j]udge. Whether and how the final decision deviates from the special trial judges original report is never revealed.
Petitioners Claude Ballard, Burton Kanter, and another taxpayer received notices of deficiency from respondent Commissioner of Internal Revenue (Commissioner) charging them with failure to report certain payments on their individual tax returns and with tax fraud. They filed petitions for redetermination in the Tax Court, where the Chief Judge assigned the consolidated case to Special Trial Judge Couvillion. After trial, Judge Couvillion submitted a Rule 183(b) report to the Chief Judge, who issued an order assigning the case to Tax Court Judge Dawson for review [of that report], and if approved, for adoption. Ultimately, Judge Dawson issued the Tax Courts decision, finding that the taxpayers had acted with intent to deceive the Commissioner, and holding them liable for underpaid taxes and substantial fraud penalties. That decision, consisting wholly of a document labeled Opinion of the Special Trial Judge, declared: The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below.
Based on conversations between Kanters attorney and two Tax Court judges, the taxpayers came to believe that the decision was not in fact a reproduction of Judge Couvillions Rule 183(b) report. According to a declaration submitted by Kanters attorney, Judge Couvillion had concluded that the taxpayers did not owe taxes with respect to some of the payments at issue and that the fraud penalty was not applicable. The taxpayers therefore filed motions seeking access to Judge Couvillions initial report as submitted to the Chief Judge or, in the alternative, permission to place that report under seal in the appellate record. Denying the requested relief, the Tax Court stated: Judge Dawson and Special Trial Judge Couvillion agre[e] that Judge Dawson adopted the findings of fact and opinion of Judge Couvillion, presumed [those] findings of fact were correct, and gave due regard to Judge Couvillions credibility findings. The order added that any preliminary drafts of the special trial judges report were not subject to production because they relate to [the courts] internal deliberative processes. On appeal, both the Eleventh Circuit in Ballards case and the Seventh Circuit in Kanters case rejected the taxpayers objection to the absence of the special trial judges Rule 183(b) report from the appellate record. Proceeding to the merits, both Courts of Appeals affirmed the Tax Courts final decision in principal part.
Held: The Tax Court may not exclude from the record on appeal Rule 183(b) reports submitted by special trial judges. No statute authorizes, and Rule 183s current text does not warrant, the concealment at issue. Pp. 1023.
(a) Rule 183(c)s promulgation history confirms the clear understanding, from the start, that deference is due the trial judges factfindings under the [d]ue regard and presumed to be correct formulations. Under Rule 183s precursor, the Tax Courts review of the special trial judges report was a transparent process. The report was served on the parties, who were authorized to file objections to it, and the regular Tax Court judge reviewed the report independently, on the basis of the record and the parties objections. Parties were therefore equipped to argue to an appellate court that the Tax Court failed to give the special trial judges findings the required measure of respect. On adoption of the 1983 amendments, however, the Tax Court stopped acknowledging instances in which it rejected or modified special trial judge findings. Instead, it appears that the Tax Court inaugurated a novel practice whereby the special trial judges report is treated essentially as an in-house draft to be worked over collaboratively by the regular Tax Court judge and the special trial judge. The regular Tax Court judge then issues a decision purporting to agre[e] with and adop[t] the opinion of the Special Trial Judge.
Nowhere in the Tax Courts current Rules is this joint enterprise described or authorized. Notably, the Rules provide for only one special trial judge opinion: Rule 183(b) instructs that the special trial judges report, submitted to the Chief Judge before a regular Tax Court judge is assigned to the case, shall consist of findings of fact and opinion. It is the Rule 183(b) report, not some subsequently composed collaborative report, that Rule 183(c), tellingly captioned Action on the Report, instructs the Tax Court judge to review and adopt, modify, or reject. It is difficult to comprehend how a Tax Court judge would give [d]ue regard to, and presum[e] to be correct, an opinion he himself collaborated in producing.
The Tax Court, like all other decisionmaking tribunals, is obliged to follow its own Rules. See, e.g., Service v. Dulles, 354 U.S. 363, 388. Although the Tax Court is not without leeway in interpreting its Rules, it is unreasonable to read into Rule 183 an unprovided-for collaborative process, and to interpret the formulations due regard and presumed to be correct, to convey something other than what those same words meant prior to the 1983 rule changes. Pp. 1017.
(b) The Tax Courts practice of not disclosing the special trial judges original report, and of obscuring the Tax Court judges mode of reviewing that report, impedes fully informed appellate review of the Tax Courts decision. In directing the regular judge to give due regard to the special trial judges credibility determinations and to presum[e] correct the special trial judges factfindings, Rule 183(c) recognizes a well-founded, commonly accepted understanding: The officer who hears witnesses and sifts through evidence in the first instance will have a comprehensive view of the case that cannot be conveyed full strength by a paper record. Fraud cases, in particular, may involve critical credibility assessments, rendering the appraisals of the judge who presided at trial vital to the ultimate determination. In the present cases, for example, the Tax Courts decision repeatedly draws outcome-influencing conclusions regarding the credibility of Ballard, Kanter, and other witnesses. Absent access to the special trial judges Rule 183(b) report in this and similar cases, the appellate court will be at a loss to determine (1) whether the credibility and other findings made in that report were accorded [d]ue regard and were presumed correct by the Tax Court judge, or (2) whether they were displaced without adherence to those standards.
The Tax Courts practice is extraordinary, for it is routine in federal judicial and administrative decisionmaking both to disclose a hearing officers initial report, see, e.g., 28 U.S.C. § 636(b)(1)(C), and to make that report part of the record available to an appellate forum, see, e.g., 5 U.S.C. § 557(c). The Commissioner asserts a statutory analogy, however, 26 U.S.C. § 7460(b), which instructs that when the full Tax Court reviews the decision of a single Tax Court judge, the initial one-judge decision shall not be part of the record. This Court rejects the Commissioners endeavor to equate proceedings that differ markedly. Full Tax Court review is designed for resolution of legal issues. Review of that order is de novo. In contrast, findings of fact are key to special trial judge reports. Those findings, under the Tax Courts Rules, are not subject to de novo review. Instead, they are measured against due regard and presumed correct standards. Furthermore, all regular Tax Court members are equal in rank, each has an equal voice in the Tax Courts business, and the regular judge who issued the original decision is free to file a dissenting opinion recapitulating that judges initial opinion. The special trial judge, who serves at the pleasure of the Tax Court, lacks the regular judges independence and the prerogative to publish dissenting views.
Given this Courts holding that the Tax Courts practice is not described and authorized by that courts Rules, this Court need not reach, and expresses no opinion on, the taxpayers further arguments based on due process and other statutory provisions. Should the Tax Court some day amend its Rules to adopt the idiosyncratic procedure here rejected, the changed character of the Tax Court judges review of special trial judge reports would be subject to appellate review for consistency with the relevant federal statutes and due process. Pp. 1723.
No. 03184, 321 F.3d 1037; No. 031034, 337 F.3d 883, reversed and remanded.
Ginsburg, J., delivered the opinion of the Court, in which Stevens, OConnor, Scalia, Kennedy, Souter, and Breyer, JJ., joined. Kennedy, J., filed a concurring opinion, in which Scalia, J., joined. Rehnquist, C. J., filed a dissenting opinion, in which Thomas, J., joined.
*. Together with No. 031034, Estate of Kanter, Deceased, et al. v. Commissioner of Internal Revenue, on certiorari to the United States Court of Appeals for the Seventh Circuit.