Pacific Fisheries Inc. v. United States of America, Konstantin Vladimirovich Voloshenko v. United States

The Internal Revenue Code allows taxpayers to recover costs and attorneys’ fees if they prevail in either civil or administrative proceedings, so long as the position of the United States was not substantially justified. 26 U.S.C. § 7430 . Appellants Pacific Fisheries and Konstantin Vladimi-rovich Voloshenko (collectively the “taxpayers”) seek attorneys’ fees associated with pursuing two federal court petitions to quash third-party summonses. The taxpayers and the United States agree that the summonses were not enforceable. They disagree about whether the government should pay the taxpayers’ legal fees as a consequence. The government’s issuance of the summonses essentially forced the taxpayers into court, but once there, the government’s only action during the litigation was to promptly withdraw the summonses. The question is whether the government’s prelitigation conduct should be factored into a determination of whether its position in the judicial proceeding “was substantially justified” as defined in the statute. 26 U.S.C. § 7430 (c)(4)(B)(i). Looking to the language and structure of the statute, we conclude that the litigation fees of these particular taxpayers do not fall…