United States of America and Dennis P. McCarthy Special Agent, Internal Revenue Service v. James F. Ford

The Internal Revenue Service (IRS) petitioned in district court on August 16, 1978, for the enforcement of an IRS summons served upon James F. Ford (Ford). On March 28,1980, the IRS moved for a voluntary dismissal of the action. After dismissing the petition with prejudice, the district court filed a judgment awarding attorney’s fees and costs to Ford. The IRS appeals this award.

I.

In 1976, the IRS initiated an income tax audit of Midwest Growers Cooperative, Inc. Finding indications of fraud, the Audit Division referred the case to the Criminal Investigation Division. Thereafter, Revenue Agent Martin D. Lipman, investigating the civil liability of Midwest Growers, teamed with Special Agent Dennis P. McCarthy, investigating the criminal liability. As part of their joint investigation, they issued administrative summonses requiring various persons to give testimony concerning dealings with Midwest Growers. On March 3, 1978, such a summons was served upon James F. Ford, who had business dealings with Midwest Growers. Ford refused to testify, and on August 16, 1978, the IRS filed a petition in district court to enforce the summons. On November 27, 1978, Ford filed a response to…