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No. 14-2363

In the United States Court of Appeals

for the Fourth Circuit
THE NATIONAL ORGANIZATION FOR MARRIAGE, INC.,
Appellant,
v.
UNITED STATES OF AMERICA, INTERNAL REVENUE SERVICE,
Appellee,

Appeal from the United States District Court

for the Eastern District of Virginia, Alexandria Division

REPLY BRIEF OF APPELLANT

William E. Davis, of counsel

Kaylan L. Phillips
Noel H. Johnson
Joseph A. Vanderhulst
PUBLIC INTEREST LEGAL FOUNDATION*
209 West Main Street
Plainfield, IN 46168
(317) 203-5599 (telephone)
(888) 815-5641 (fax)
wdavis@foley.com
kphillips@publicinterestlegal.org
njohnson@ publicinterestlegal.org
jvanderhulst@ publicinterestlegal.org

John C. Eastman
CENTER FOR CONSTITUTIONAL
JURISPRUDENCE
c/o Chapman Univ. School of Law
One University Drive
Orange, CA 92866
(877) 855-3330 x2 (telephone)
(714) 844-4817 (fax)
jeastman@chapman.edu

Counsel for Appellant

(additional counsel listed inside cover)

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Additional Counsel:
Jason Torchinsky
Shawn Toomey Sheehy
HOLTZMAN VOGEL JOSEFIAK, PLLC
45 North Hill Drive, Suite 100
Warrenton, VA 20186
(540) 341-8808 (telephone)
(540) 341-8809 (fax)
jtorchinsky@hvjlaw.com
ssheehy@hvjlaw.com

*Formerly known as ACTRIGHT LEGAL FOUNDATION

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Table of Contents
Table of Authorities .................................................................................................. ii
Argument....................................................................................................................1
Response to Governments Statement of Facts ......................................................2
I.

NOM Substantially Prevailed with Respect to the Most Significant Issue or

Set of Issues Presented.....................................................................................4

II. NOM Substantially Prevailed with Respect to the Amount in Controversy ...6
A. The District Court Erred by Including a Voluntarily Withdrawn Claim for
Damages in the Amount in Controversy. ...................................................7
B. The District Court Abused Its Discretion in Its Speculative Calculation of
the Punitive Damages at Issue........................................................................8
III. The District Court Abused Its Discretion in Determining that the
Governments Position Was Substantially Justified........................................9
A. The District Court Abused its Discretion in Omitting Consideration of the
Governments Position on Actual Damages. .................................................9
B. The Governments Position on Actual Damages Was Not Substantially
Justified...........................................................................................................9
Conclusion ...............................................................................................................11
Certificate of Compliance ........................................................................................13
Certificate of Service ...............................................................................................14

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Table of Authorities
Cases
Cassuto v. Commr, 936 F.2d 736 (2d Cir. 1991) .....................................................6
Estate of Baird v. Commr, 416 F.3d 442 (5th Cir. 2005) .......................................10
Jones v. United States, 9 F.Supp.2d 1154 (D. Neb. 1998). .................................6 n.5
Marre v. United States, 117 F.3d 297 (5th Cir. 1997) ...............................................2
Smith v. United States, No. 3:09cv228 (JBA), 2011 U.S. Dist. LEXIS 22316
(D. Conn. Mar. 7, 2011)........................................................................................10
United States v. Paisley, 957 F.2d 1161 (4th Cir. 1992) ................................. 1-2, 10
Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288 (1st Cir. 2000) ..................9
Statutes
26 U.S.C. 6103 ........................................................................................................5
26 U.S.C. 7431 ..................................................................................................6 n.4
26 U.S.C. 7430(c)(4)(A)(i)(I) and (II) ....................................................................5
26 U.S.C. 7430(c)(4)(B)(i)....................................................................................10
Other Authorities
Local Rule of the Fourth Circuit 28(f). ......................................................................2

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Argument
As a result of this litigation, Appellant National Organization for Marriage,
Inc., (NOM) identified who illegally disclosed its confidential tax return
information and successfully obtained a judgment in the amount of $50,000 against
the Government for the damage the Government caused by that disclosure. The
Government vehemently disavowed any liability for that damage throughout the
entire course of this litigation. Yet, to escape liability again, this time for any
attorneys fees, the Government attempts to diminish the significance of NOMs
victory by inundating the Court with its interpretation of the purpose of the case. In
its prolix statement of factswhich spans nineteen pagesthe Government spends
merely a few paragraphs discussing its liability for damages. See Brief of the
United States at 4-23 (hereinafter Governments Response). However, the record
tells a different story than the Government. The record demonstrates that the
district court abused its discretion in finding that NOM was not a prevailing party
and in finding the Governments position substantially justified.
As a threshold matter, the parties agree that this Court reviews decisions
awarding or denying attorneys fees for an abuse of discretion. (Opening Brief at 9,
Governments Response at 26.) But, importantly, the abuse of discretion standard
is considerably short of a simple, accept-on-faith, rubber-stamping of district court
decisions on this issue. United States v. Paisley, 957 F.2d 1161, 1166 (4th Cir.
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1992). The Government does not contest that de novo review is appropriate for any
conclusions of law underlying the award or denial of fees. (Opening Brief at 9,
citing Marre v. United States, 117 F.3d 297, 301 (5th Cir. 1997)).
Response to Governments Statement of Facts
Pursuant to the Federal Rule of Appellate Procedure 28(b), an Appellee is
not required to present a Statement of the Case unless it is dissatisfied with the
appellants statement. The Government chose to file an extensive Statement of
Facts that goes well beyond what is called for by the local rule, which requires
only a narrative statement of all of the facts necessary for the Court to reach the
conclusion which the brief desires with references to the specific pages in the
appendix that support each of the facts stated. Local Rule of the Fourth Circuit
28(f). Comprising nearly 40 percent of its entire brief, the Governments
Statement of Facts includes many statements of opinion. Many of these
editorialized comments are highly prejudicial and are not supported by record
evidence. For example, the Government states as fact that NOM itself ultimately
recognized that the disclosure of its donor information was accidentally made in
response to a routine public inspection request. (Governments Response at 14
(citing to a portion of NOMs gross negligence argument where NOMs analysis
necessarily begins with the assumptionnot concessionthat the disclosure was
inadvertent).)
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The Government also uses its Statement of Facts to cite to articles

regarding statements by NOMs counsel at the filing of the lawsuit. (Governments
Response at 7-8.) None of these articles were considered by the district court and
they are not relevant to whether NOM is entitled to attorneys fees. 1 Despite the
Governments attempts to vilify NOM in its Statement of Facts, none of NOMs
claims were frivolous or made in bad faith. If they were, the Government would
have sought sanctions or filed a motion to dismiss. Instead, all of NOMs claims
proceeded to summary judgment. And although NOM was unable to overcome the
high evidentiary hurdles presented by the Governments interpretation of 26 U.S.C.
6103 and third-party witness assertions of Fifth Amendment rights regarding its
claims for willfulness or gross negligence, NOM did substantially prevail on its
hotly contested claim for actual damages and on the amount in controversy, as well
as on its effort to identify the individual responsible for the disclosure of its
confidential tax return information. 2 And its victory, in light of the Governments

Regarding the Washington Times article, (Governments Response at 7-8),

the Government conveniently omits counsels statements regarding NOMs claims
for damages, including specifics about the actual damages NOM sustained as a
result of a complaint premised on the disclosure that was filed in California.
2
As is evident from the record below, many of the facts surrounding even
the disclosure are premised on circumstantial evidence because the Government
destroyed any records of the alleged request from Matthew Meisel, (see, e.g., Joint
Appendix (JA) at 216-217, 228-29, 321), the IRS clerk deemed responsible for
the disclosure could not recall processing the specific request, id. at 216-217, and
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position during the litigation, is sufficient for an award of attorneys fees.

I.

NOM Substantially Prevailed with Respect to the Most Significant Issue

or Set of Issues Presented.
As NOM explained in its Opening Brief, the most significant issues in this

case were whether the Government released a nonprofits confidential return

information and, therefore, whether the Government is responsible for the resulting
damage. (Opening Brief at 12-14.) The Government argues that NOMs statement
on the most significant issue or set of issues is a post-settlement effort to
recharacterize its complaint. (Governments Response at 42.) To do so, the
Government must ignore the twenty-seven paragraphs of the Complaint discussing
the exhaustive efforts NOM undertook in an attempt to discover the circumstances
surrounding the disclosure, (Opening Brief at 13), circumstances that came to light
only as a result of discovery in this lawsuit. 3
The Government attempts to downplay NOMs success on the hotly
Mr. Meisel asserted his Fifth Amendment rights and declined to respond to
questions regarding the request, id. at 319.
3
In questioning the reason behind NOMs lawsuit, the Government readily
admits that it conceded its liability in its Answer, (Governments Response at
43)a concession that NOM was unable to receive previously despite its myriad
efforts to find the truth before it filed its suit. Despite this success, the Government
still contends that NOM did not substantially prevail, simply because it continued
to press for damageson which NOM did ultimately prevail. The Government
appears to be conditioning prevailing party status on the speed with which an issue
is resolved. Just because NOM succeeded on the issue of liability early on (which
it then used to succeed on the issue of damages), it should not be disqualified for
attorneys fees at the end of the litigation.
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contested issue of actual damages by claiming that NOMs receipt of a damages

award that was too small to make it the prevailing party in terms of the amount in
controversy hardly makes it a prevailing party as to the most important issue
presented. (Governments Response at 45). While the merits of NOMs argument
as to the amount in controversy are spelled out below, the relevant point here is
that the question of whether a party prevailed on the most significant issue is a
separate test from whether it prevailed as to the amount in controversy, and only
one test must be met for prevailing party status. 26 U.S.C. 7430(c)(4)(A)(i)(I)
and (II) (or).
According to the Government, [t]he only issue NOM prevailed on was
whether the IRS violated I.R.C. 6103 in inadvertently disclosing an unredacted
copy of a schedule to its 2008 return. (Governments Response at 24-25.) This
statement is misleading in its oversimplification. Not only did NOM prevail on the
issue of whether the Government violated section 6103 with regards to its
confidential return information, it prevailed on the issue of whether the
Government is liable for the actual damages caused by the unauthorized disclosure.
After the courts summary judgment decision, as the Government acknowledged,
the parties settled the only remaining issuethe amount of actual damages
incurred by NOM. (Governments Response at 25.) The fact that the issue of
actual damages was settled does not affect the analysis, as the court looks to the
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final outcome of the casewhether by court judgment or settlement. Cassuto v.

Commr, 936 F.2d 736, 741 (2d Cir. 1991).
Whether the Government released NOMs confidential return information
and, therefore, is responsible for the resulting damage are significant and important
issues upon which NOM prevailed.
II.

NOM Substantially Prevailed with Respect to the Amount in

Controversy.
In addition to prevailing on the most significant issues, NOM substantially

prevailed on the amount in controversy with its recovery of $50,000. The

Government argues that both NOMs voluntarily withdrawn claim and a
speculative amount for punitive damages should be included in the amount in
controversy, thus diminishing the percentage of NOMs recovery. 4 As described
more fully in NOMs Opening Brief and reiterated below, such additions to the
amount in controversy lead to inequitable results. 5 Each argument will be

According to the Government, the amount in controversy includes statutory

damages that NOM placed in issue later in the litigation. (Governments
Response at 38.) But, pursuant to the statute at issue, NOM could only recover
statutory damages or actual and punitive damages. 26 U.S.C. 7431. The fact that
the Government advocates that the amount in controversy include more damages
than the statute even allows further demonstrates that the Governments position is
unworkable.
5
The Government also contests NOMs inclusion of a case where the plaintiff
was deemed to have prevailed on the amount in controversy despite receiving only
15 percent of what was requested. (Governments Response at 41 n.8) (citing
Jones v. United States, 9 F.Supp.2d 1154 (D. Neb. 1998). To be sure, the
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addressed in turn.
A.

The District Court Erred by Including a Voluntarily Withdrawn

Claim for Damages in the Amount in Controversy.

The Government responds to NOMs assertion that the district court erred by
considering a withdrawn claim in the amount in controversy by saying the
assertion is unsupported by any authority and meritless. (Governments
Response at 38.) As to the first point, NOM pointed out in its Opening Brief that
the legal question of whether a voluntarily withdrawn claim is included in the
calculation of amount in controversy when determining prevailing party status is,
to NOMs knowledge, a question of first impression. (Opening Brief at 17); (see
also Joint Appendix (JA) at 373 (stating that the Fourth Circuit has not provided
guidance as to how to calculate the amount in controversy).) As to the second
point, the Government misunderstands NOMs argument as to why the voluntarily
withdrawn claim should not be included. Primarily, the general definition of
amount in controversy results in an inequitable calculation in this circumstance.
Contrary to the Governments implications, NOM is not saying that a party who
concedes his entire lawsuitshould be deemed the prevailing party because his
Government mischaracterizes NOMs argument as stating that Jones created a
standard for plaintiffs that achieve 15 percent recoveries. (Compare Opening
Brief at 23 with Governments Response at 41.) However, given that the
Government is supporting a methodology where the percentage of recovery is
determinative, it is relevant to know that the Jones court found a plaintiff with a
low percent of recovery to have prevailed as to the amount in controversy.
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abandoned lawsuit was meritorious. (Governments Brief at 39.) Nor is NOM

saying that it should be declared the prevailing party as to the $50,000 claim that it
withdrew. Rather, NOM believes that it serves judicial economy to treat a claim
that was voluntarily withdrawn prior to the close of a very-short discovery window
and well in advance of summary judgment briefing as not included in the
calculation of amount in controversy for the purposes of determining whether a
party prevailed.
B.

The District Court Abused Its Discretion in Its Speculative

Calculation of the Punitive Damages at Issue.

Regarding NOMs unspecified punitive damages, the Government appears

to understand the problems with including punitive damages in the amount in
controversy calculations for every case, (Governments Response at 40), but it
argues that some estimate of those damagesis necessary to accurately assess the
amount in controversy in this case, (Governments Response at 34.) Like the
district court, the Government provides no authority for this statement but simply
relies on its framing of the reason NOM brought this case. As NOM explained in
its Opening Brief, speculating as to the punitive damage award penalizes plaintiffs
with non-frivolous claims and does not lead to an equitable result. (Opening Brief
at 19-20.)

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III.

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The District Court Abused Its Discretion in Determining that the

Governments Position Was Substantially Justified.
A.

The District Court Abused its Discretion in Omitting

Consideration of the Governments Position on Actual Damages.

The Government asserts that the District Court did consider the
Governments position on actual damages. (Governments Response at 48.) Yet
the record citation for that claim is not to the courts discussion of substantial
justification, but to the courts discussion of the amount in controversy. (Id.
(citing JA at 373-377).) That portion of the courts opinion concerns only the
calculation of actual damages. It says nothing about the Governments position
concerning its liability for those damages. Indeed, on that issue, the district court
was completelyand erroneouslysilent. See Waste Mgmt. Holdings, Inc. v.
Mowbray, 208 F.3d 288, 295 (1st Cir. 2000) (An abuse occurs when a court, in
making a discretionary ruling, relies upon an improper factor, omits consideration
of a factor entitled to substantial weight, or mulls the correct mix of factors but
makes a clear error of judgment in assaying them.).
B.

The Governments Position on Actual Damages Was Not

Substantially Justified.

In an effort to justify its position on actual damages, the Government recasts

its argument as one about the amount of actual damages. The Government claims it
justifiably held out until NOM lowered its $108,586.37 demand to $50,000 and
then settled the claim. (Governments Response at 48.) To be sure, the Government
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held out, not because it believed it was responsible for a lesser amount of
damages but because it believed it was not liable for any damages. From the outset,
as the Government concedes, it denie[d] that the disclosure caused any actual
damages. (Id. (citing JA at 61) (emphasis added).) Truthfully, the Government
held out until the district court determined that its position was unjustified and
unsubstantiated by the record. The courts rejection of the Governments
arguments forced the Government to settle the issue on unfavorable terms.
NOM does not dispute that the relevant position of the Government is the
one taken in the proceeding. 26 U.S.C. 7430(c)(4)(B)(i). However, the Court
may consider the facts available at the time the IRS took its position,
including pre-litigation actions that may have informed [the Governments]
conduct during the litigation. Smith v. United States, No. 3:09cv228 (JBA), 2011
U.S. Dist. LEXIS 22316, 10 n.1 (D. Conn. Mar. 7, 2011) (quoting Estate of Baird
v. Commr, 416 F.3d 442, 447 (5th Cir. 2005)). The Government does not refute
that at the time the Government took the position that it was not responsible for
any of NOMs actual damages, it knew all of the facts on which the district court
based the Governments liability. (See Opening Brief at 29-31.) Moreover, other
objective indicia, including the ease with which the court reached its decision,
indicate that the Governments position was plainly unreasonable. See United
States v. Paisley, 957 F.2d 1161, 1166 (4th Cir. 1992).
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Accordingly, this Court should reverse the district court and remand the case
with instructions to find the Governments position on actual damages was not
substantially justified, and to award attorneys fees to NOM in an amount
commensurate with NOMs substantial success.
Conclusion
For the reasons outline in its Opening Brief and in the foregoing, NOM is a
prevailing party, and is entitled to reasonable attorneys fees. The judgment to
the contrary by the district court should be reversed, and the district court directed
to consider NOMs reasonable attorneys fees request.

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Dated: April 29, 2015

Respectfully submitted,
John C. Eastman
Center for Constitutional
Jurisprudence
c/o Chapman Univ. School of Law
One University Drive
Orange, CA 92866
(877) 855-3330 x2 (telephone)
(714) 844-4817 (fax)
jeastman@chapman.edu

/s Kaylan L. Phillips
William E. Davis, of counsel
Kaylan L. Phillips
Noel H. Johnson
Joseph A. Vanderhulst
PUBLIC INTEREST LEGAL
FOUNDATION*
209 West Main Street
Plainfield, IN 46168
(317) 203-5599 (telephone)
(888) 815-5641 (fax)
wdavis@foley.com
kphillips@publicinterestlegal.org
njohnson@ publicinterestlegal.org
jvanderhulst@publicinterestlegal.org

Jason Torchinsky
Shawn Toomey Sheehy
Holtzman Vogel Josefiak, PLLC
45 North Hill Drive, Suite 100
Warrenton, VA 20186
(540) 341-8808 (telephone)
(540) 341-8809 (fax)
jtorchinsky@hvjlaw.com
ssheehy@hvjlaw.com

*Formerly known as ACTRIGHT LEGAL

FOUNDATION

Counsel for Appellant

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UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

National Organization for Marriage, Inc. v. United States
Caption: __________________________________________________

No. 14-2363
_______

CERTIFICATE OF COMPLIANCE WITH RULE 28.1(e) or 32(a)

Type-Volume Limitation, Typeface Requirements, and Type Style Requirements
1. Type-Volume Limitation: Appellants Opening Brief, Appellees Response Brief, and
Appellants Response/Reply Brief may not exceed 14,000 words or 1,300 lines. Appellees
Opening/Response Brief may not exceed 16,500 words or 1,500 lines. Any Reply or Amicus
Brief may not exceed 7,000 words or 650 lines. Counsel may rely on the word or line count
of the word processing program used to prepare the document. The word-processing program
must be set to include footnotes in the count. Line count is used only with monospaced type.
This brief complies with the
32(a)(7)(B) because:

type-volume limitation of Fed. R. App. P. 28.1(e)(2) or

[]

2,604
this brief contains
[state number of] words, excluding the parts of
the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii), or

[ ]

this brief uses a monospaced typeface and contains

[state number
of] lines of text, excluding the parts of the brief exempted by Fed. R. App. P.
32(a)(7)(B)(iii).

2. Typeface and Type Style Requirements: A proportionally spaced typeface (such as Times
New Roman) must include serifs and must be 14-point or larger. A monospaced typeface
(such as Courier New) must be 12-point or larger (at least 10 characters per inch).
This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type
style requirements of Fed. R. App. P. 32(a)(6) because:
[]

this brief has been prepared in a proportionally spaced typeface using

Microsoft Word 2010
[identify word processing program] in
[identify font size and type style]; or
14-point, Times New Roman

[ ]

this brief has been prepared in a monospaced typeface using

[identify word processing program] in
[identify font size and type style].

(s) Kaylan L. Phillips

Attorney for Appellant
Dated: 4/29/2015

13
04/13/2012
SCC

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CERTIFICATE OF SERVICE
I hereby certify that I electronically filed the foregoing Reply Brief of
Appellant with the Clerk of the Court for the United States Court of Appeals for
the Fourth Circuit by using the appellate CM/ECF system on April 29, 2015. I
further certify that all participants in the case are registered CM/ECF users and that
service will be accomplished by the appellate CM/ECF system.

Dated: April 29, 2015

/s/ Kaylan L. Phillips

Kaylan L. Phillips
PUBLIC INTEREST LEGAL FOUNDATION
209 West Main Street
Plainfield, IN 46168
(317) 203-5599 (telephone)
(888) 815-5641 (fax)
kphillips@publicinterestlegal.org
Counsel for Appellant

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