Herbert W. Timms, Dba Petrol Express Petrol Express Cooperative and Petrol Stops Northwest v. United States

742 F.2d 489 84-2 USTC P 9774 Herbert W. TIMMS, dba Petrol Express; Petrol Express Cooperative; and Petrol Stops Northwest, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee. No. 83-2029. United States Court of Appeals, Ninth Circuit. Argued and Submitted Dec. 15, 1983. Decided Sept. 5, 1984. Fred Luyties, Molloy, Jones, Donahue, Trachita, Childers & Mallamo, Tucson, Ariz., for plaintiffs-appellants. Kristina E. Harrigan, Dept. of Justice, Washington, D.C., for defendant-appellee. Appeal from the United States District Court for the District of Arizona. Before HUG, PREGERSON, and NORRIS, Circuit Judges. HUG, Circuit Judge: 1 After prevailing in a tax refund suit, appellants sought recovery of attorneys' fees under the Equal Access to Justice Act. The district court denied the fee request on the basis that the Government's position in defending the suit was substantially justified. We conclude the Government's position was not substantially justified and therefore reverse and remand for determination of the fee award. 2 Appellants include an individual, Timms, and several related entities that market gasoline through self-service stations. Starting in 1970,…

After prevailing in a tax refund suit, appellants sought recovery of attorneys’ fees under the Equal Access to Justice Act. The district court denied the fee request on the basis that the Government’s position in defending the suit was substantially justified. We conclude the Government’s position was not substantially justified and therefore reverse and remand for determination of the fee award.

Appellants include an individual, Timms, and several related entities that market gasoline through self-service stations. Starting in 1970, appellants took the position that for federal tax purposes the operators of their stations were not employees, but independent contractors. Accordingly, appellants did not withhold or remit to the Government federal employment taxes for those individuals for the period 1970-1976. Following an audit, the Internal Revenue *491 Service disagreed with that classification and assessed a tax. Appellants paid an initial installment on the assessment and then filed a district court action for a refund.

In January 1978, appellants offered to settle their refund claim. In an agreement reached under I.R.C. § 7122, appellants agreed to withhold and remit…

concurring:

I agree with the majority opinion in all respects except that I continue to believe that this circuit’s application of the abuse of discretion standard to attorneys’ fees rulings under section 204(d)(1)(A) of the Equal Access to Justice Act, 28 U.S.C. § 2412 (d)(1)(A), is inappropriate. See United States v. First National Bank of Circle, 732 F.2d 1444, 1449 (9th Cir.1984) (Norris, J., concurring).