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UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF VIRGINIA

The NATIONAL ORGANIZATION FOR

MARRIAGE, INC.,

Plaintiff,

v.

The UNITED STATES OF AMERICA,INTERNAL REVENUE SERVICE,

Defendant.

Civ. No. 13-cv-1225-JCC/IDD

MEMORANDUM IN SUPPORT OF MOTION FOR ATTORNEYS FEES

Plaintiff the National Organization for Marriage, Inc. (NOM), through counsel, hereby

moves this Court for an award of attorneys fees for the work of its attorneys before this Court.

In support of this Motion, NOM states as follow:

1. NOM brought this action pursuant to 26 U.S.C. 7431 to identify the source of and

recover damages for the unauthorized disclosure and inspection of its tax return information in

violation of 26 U.S.C. 6103. (See Verified Compl. (Dkt. 1) at 19-22.)

2. Specifically, NOM alleged that the Internal Revenue Service (IRS) had unlawfully

inspected and publicly disclosed its unredacted 2008 IRS Form 990, Schedule B, which contains

the names, home addresses, and contribution amounts of NOMs donors of $5,000 or more.

3. In its Verified Complaint, NOM initially sought $1,000 in statutory damages for each act

of unlawful inspection or disclosure or actual damages stemming from related legal costs and

lost donations in an amount not less than $60,500, plus punitive damages for any intentional or

grossly negligent acts of disclosure or inspection. See 26 U.S.C. 7431(c). NOM later dropped

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its $50,000 claim for lost donations in order to protect the identity of its donor. During discovery,

NOM recalculated its remaining actual damages to be $58,586.37.

4. On December 2, 2013, the Defendant United States of America, Internal Revenue Service

(hereafter, the Government) filed its Answer (Dkt. 33). The Government admitted that it

negligently disclosed NOMs unredacted 2008 IRS Form 990, Schedule B to a third party in

violation of 26 U.S.C. 6103. (Id. 78.)

5. In a letter dated December 17, 2013, the Government offered to settle NOMs claims for

$1,000 plus the cost of the action to date. On December 31, 2013, NOM declined the

Governments offer.

6. Following the close of discovery, the Government moved for summary judgment on all

counts (Dkt. 67), which NOM opposed (Dkt. 73).

7. On June 3, 2014, this Court granted the Governments Motion for Summary Judgment as

to NOMs unlawful inspection claim, and its request for punitive damages. (Dkt. 80.) The

Government motion was denied in all other respects, including the Governments argument that

NOM was not entitled to actual damages.Natl Org. for Marriage, Inc. v. United States, IRS, No.

1:13cv1225 (JCC/IDD), 2014 U.S. Dist. LEXIS 77263, 27-37 (E.D. Va. June 3, 2014) (NOM).

8. On June 18, 2014, the parties filed the Joint Motion for Entry of Consent Judgment (Dkt.

86), pursuant to which the parties agreed that NOM would obtain a judgment against the

Government in the amount of $50,000, inclusive of NOMs claims for actual damages under 26

U.S.C. 7431(c)(1)(B)(i) and its claims for costs of the action under 26 U.S.C. 7431(c)(2) (see

Dkt. 86-1).

9. On June 24, 2014, this Court approved the Consent Judgment and retained jurisdiction

for purposes of resolving the instant motion for attorneys fees. (Dkt. 87.)

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10. Section 7431(c)(3) provides that a plaintiff may recover reasonable attorneys fees

against the United States if the plaintiff is the prevailing party (as determined under section

7430(c)(4)).

11. Under Section 7430(c)(4) a prevailing party is a party that has

a. substantially prevailed with respect to the amount in controversy, 26 U.S.C. 7430(c)(4)(A)(i)(I); or

b. substantially prevailed with respect to the most significant issue or set of issuespresented, 26 U.S.C. 7430(c)(4)(A)(i)(II); and

c. if the plaintiff is a corporation, had fewer than 500 employees and a net worthwhich did not exceed $7,000,000 at the time the civil action was filed. 28

U.S.C. 2412(d)(2)(B).

12. A party shall not be treated as the prevailing party . . . if the United States establishes

that the position of the United States in the proceeding was substantially justified. 26 U.S.C.

7430(c)(4)(B)(i).

13. The Governments position in this matter was not substantially justified. Because NOM

satisfies the requirements listed in paragraph 11, NOM is a prevailing party and therefore

entitled to reasonable attorneys fees.

14. Accordingly, and as fully explained below, NOM requests attorneys fees in the amount

of $680,000.05 for the work of its attorneys on the underlying litigation. NOM also requests

$11,025 for the work of its attorneys preparing this Motion. This amount of subject to change for

the continuing work in support of this Motion.

ARGUMENT

I. NOM Is a Prevailing Party.

A prevailing party for purposes of 26 U.S.C. 7431 is one that (1) has substantially

prevailed with respect to the amount in controversy; or (2) has substantially prevailed with

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respect to the most significant issue or set of issues presented. 26 U.S.C. 7430(c)(4)(A)(i)(I)-

(II); see also Christian Coal. Intl v. United States, 133 F. Supp. 2d 437, 438 (E.D. Va. 2001).

The party must also meet the requirements of 28 U.S.C. 2412(d)(2)(B), which, in part, limits

attorneys fees awards to incorporated entities that have fewer than 500 employees and a net

worth of $7 million or less at the time the civil action was filed. NOM satisfies all three of these

requirements.

A. NOM Substantially Prevailed with Respect to the Most Significant Issue orSet of Issues Presented.

The term substantially prevailed . . . can be reasonably interpreted to refer to the final

outcome of the casewhether by court judgment or settlement. Cassuto v. Commr, 936 F.2d

736, 741 (2d Cir. 1991). This requirement is phrased in terms of issues not claims.Heasley v.

Commr, 967 F.2d 116, 122 (5th Cir. 1992) (quoting Huckaby v. U.S. Dept of Treasury, 804

F.2d 297, 300 (5th Cir. 1986)). Thus, a victory on the primary issue suffices. Heasley, 967

F.2d at 122; see also Wilkerson v. United States, 67 F.3d 112, 120 (5th Cir. 1995) (A victory on

the primary issue will suffice, and neither the amount of damages received nor number of claims

won is determinative.).

The starting point for identifying the issues presented for litigation is the face of the

Complaint. Christian Coal. Intl, 133 F. Supp. 2d at 439. An issue is the most significant if,

despite involving a lesser dollar amount than other issues, the issue objectively represents the

most significant issue for the taxpayer or the IRS. Don Johnson Motors, Inc. v United States,

No. B-06-047, 2008 U.S. Dist. LEXIS 36594, *13 (S.D. Tex. Mar. 14, 2008). Although [i]n

cases raising several issues, courts may consider each phase or issue of the litigation discretely to

determine whether the Plaintiff is entitled to recover expenses incurred in pursuing that issue or

litigating that phase, Christian Coal. Intl, 133 F. Supp. 2d at 438-439 (citing Ragan v.

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Commn, 135 F.3d 329 (5th Cir. 1998)), even time expended on unsuccessful claims may be

recovered if those claims involve a common core of facts or [are] based on related theories,

Hensley v. Eckerhart, 461 U.S. 424, 435 (1983).

As NOMs Verified Complaint makes plainly clear, the primary and most significant

issue in this case was whether the IRS unlawfully disclosed NOMs 2008 IRS Form 990,

Schedule B. (See Dkt. 1 2.) For nearly two years, NOM undertook significant and costly efforts

to determine which agents or employees within the IRS were responsible for that disclosure. (See

id. 45-71.) The Government, however, stood between NOM and the truth by refusing to

provide NOM with any relevant details concerning the Treasury Inspector General for Tax

Administrations (TIGTA)investigation of the disclosure. (See Dkt. 33 55 (The United

States admits that TIGTA responded to Plaintiffs FOIA requests and has not produced records

regarding the underlying conclusions or specifics of its investigation.).) Not until NOM filed

this action did the Government admit that it disclosed one copy of Plaintiffs 2008 Form 990

unredacted Schedule B to a single third party in violation of law. (Dkt. 33 78.) And only in

response to discovery requests did the Government reveal any details concerning the results of

TIGTAs investigation. By virtue of the Governments admission in its Answer (and confirmed

in the motion for consent judgment (Dkt. 86)), NOM substantially prevailed on the issue of

whether the IRS unlawfully disclosed NOMs IRS Form 990, Schedule B.

NOM also substantially prevailed on the issue of whether the IRSs unlawful disclosure

was the cause of its actual damages. See NOM, 2014 U.S. Dist. LEXIS 77263 at 26-34.

(explaining that NOMs claimed actual damages were likely both actually and proximately

caused by the unlawful disclosure); (Dkt. 86 3 (explaining that settlement agreement resolves

issue of actual damages caused by unlawful disclosure of 2008 Schedule B).). NOMs victory

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on the primary issue and a significant, related issue, establishes that NOM substantially

prevailed for purposes of attorneys fees. See, e.g.,Heasley, 967 F.2d at 122.1

B. NOM Substantially Prevailed with Respect to the Amount in Controversy.

The amount in controversy is any amount placed at issue by the pleadings increased by

any amount subsequently placed at issue by any party. Don Johnson Motors, Inc., 2008 U.S.

Dist. LEXIS 36594 at 7. Notably, [t]he law does not clearly define what threshold a plaintiff

must meet to substantially prevail on the amount in controversy. Estate of Johnson v. United

States, No. 11-10148-RWZ, 2013 U.S. Dist. LEXIS 150120, 3 (D. Mass. Oct. 18, 2013).

However, neither the amount of damages received nor number of claims won is determinative

as to whether a party substantially prevailed. Wilkerson, 67 F.3d at 120.

Some courts have opted to gauge whether [the] Plaintiff substantially prevailed on the

amount in controversy by calculating the percentage of the amount in controversy the Plaintiff

successfully received. Don Johnson Motors, Inc., 2008 U.S. Dist. LEXIS 36594 at 10 n.6. In

practice, courts have often found that the plaintiff did not substantially prevail on the amount in

controversy only where the award is disproportionally low, Mallas v. United States, 876 F.

Supp. 86, 89 (M.D.N.C. 1994). See, e.g., Goettee v. Commr, 192 Fed. Appx. 212, 222 (4th Cir.

2006) (plaintiff did not substantially prevail with regard to amount in controversy where not

quite 5 percent was recovered);Ralston Dev. Corp. v. United States, 937 F.2d 510, 515 (10th

Cir. 1991) (same with regard to a 19 percent recovery);Don Johnson Motors, Inc., 2008 U.S.

1 Although NOM did not prevail on its claim that the Government unlawfully inspected its taxreturns, it does not change the result. See Huckaby, 804 F.2d at 299-300 (party substantiallyprevailed on most significant issue even though he collected only $ 1,000 out of a possible$8,000 statutory award, and failed to collect punitive damages (which could have added another$20,000 to the award) because the party prevailed on the primary issue: whether thegovernment was liable for tax return disclosures that were given without written consent.)(emphasis in original).

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Dist. LEXIS 36594 at 10 (same with regard to a three-percent recovery); Smith v. United

States, 735 F. Supp. 1396, 1400 (C.D. Ill. 1990) (same with regard to $1,000 recovery where $6

million in compensatory and punitive damages were sought). Yet even in such cases, an

insubstantial award is not dispositive.Don Johnson Motors, Inc., 2008 U.S. Dist. LEXIS 36594

at 10 (citing Farrar v. Hobby, 113 S. Ct. 566, 578 (1992) (OConnor, J., concurring)).

NOMs recovery in this case was not disproportionally low, but was substantial in light

of the total amount in controversy. Though NOMs pleading initially sought $60,500 in actual

damages, that amount was reduced to $58,586.37 for reasons unrelated to the merits of NOMs

claims.

2

NOM ultimately recovered $50,000 from the Government (Dkt. 86-1), which constitutes

a recovery of approximately 85 percent of the total amount of actual damages in controversy.

Such a recovery is substantial.3Reynoso v. United States, No. 10-00098, 2011 U.S. Dist. LEXIS

87929, 8 (N.D. Cal. Aug. 9, 2011) (Plaintiff thus recovered eighty-one percent of the amount in

controversy in this action and has substantially prevailed under section 7430.).

That NOM also sought punitive damages should not alter this conclusion. Importantly,

the amount of punitive damages sought was never reduced to a dollar amount, meaning that to

include such damages in any percentage calculation would require speculation. Even if punitive

damages were to be included at an amount equal to compensatory damages, see Exxon

Shipping Co. v. Baker, 554 U.S. 471, 515 (2008), NOMs recovery would be nearly 43 percent

of the total amount in controversy, also a substantial amount of the total. See Keeter v. United

2 NOM voluntarily dismissed its claim for $50,000 in lost donations in order to protect theidentity of its donors.

3 NOMs recovery with respect to actual damages would likely have been 100 percent had theissue proceeded to trial. Indeed, this Court denied the Government summary judgment on theissue of causation, concluding that NOMs actual damages were likely both actually andproximately caused by the unlawful disclosure.NOM, 2014 U.S. Dist. LEXIS 77263 at 26-34.

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States, No. S-96-1755, 1998 U.S. Dist. LEXIS 12457, 5 (E.D. Cal. Aug. 3, 1998) (fifty-five

percent recover deemed substantial). In comparison, such a recovery dwarfs those that courts

have rejected as being disproportionally low,Mallas, 876 F. Supp. at 89. See supra at 6-7 (3,

5, and 19 percent recoveries not substantial).

C. NOM Had Fewer than 500 employees and a Net Worth of Less than $7Million When this Case Was Filed.

NOM also satisfies the requirements of 28 U.S.C. 2412(d)(2)(B). As confirmed by

NOM President Brian Brown, NOM employed fewer than 500 employees and had a net worth of

less than $7 million at the time the underlying civil action was filed. (Exhibit 1, Declaration of

Brian Brown 2-3.)

II. The Governments Position Was Not Substantially Justified.

Attorneys fees are mandated to a prevailing party unless the Governments position

was substantially justified. The burden is on the Government to prove that its position was

substantially justified. 26 U.S.C. 7430(c)(4)(B)(i) (A party shall not be treated as the

prevailing party . . . if the United States establishes that the position of the United States in the

proceeding was substantially justified) (emphasis added); see also Pac. Fisheries, Inc. v. United

States, 484 F.3d 1103, 1107 (9th Cir. 2007) (The language of the statute places the burden

squarely on the United States, not on the taxpayer, to demonstrate that the governments position

was substantially justified.).4 The Government cannot satisfy its burden here.

As used in Section 7430, the phrase substantially justified has essentially the same

meaning as a provision of the Equal Access to Justice Act [(EAJA)] that allows an award of

4 There are some pre-1996 cases that indicate the burden is on the taxpayer, but Congressamended section 7430 in 1996 to provide specifically that the burden is on the United States.Dodson v. U.S. Treasury Dept, IRS, 2013 U.S. Dist. LEXIS 184657, 26 (M.D. Fla. Dec. 9,2013) (citingBarford v. Commr, 194 F.3d 782, 786 n.4 (7th Cir. 1999)).

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fees and costs unless a court determines that the position of the government was substantially

justified. Bowles v. United States, 947 F.2d 91, 94 (4th Cir. 1991) (quoting 28 U.S.C.

2412(d)(1)(A)). The Supreme Court explains that the Governments position is substantially

justified if it has a reasonable basis both in law and fact. Pierce v. Underwood, 487 U.S. 552,

565 (1988). The Governments position must be more than merely undeserving of sanctions for

frivolousness, United States v. 515 Granby, LLC, 736 F.3d 309, 315 (4th Cir. 2013) (quoting

Pierce, 487 U.S. at 566); it must be justified in substance or in the mainthat is, justified to a

degree that could satisfy a reasonable person. Pierce, 487 U.S. at 565. In determining whether

the Governments position is substantially justified, the court shall take into account whether

the United States has lost in courts of appeal for other circuits on substantially similar issues. 26

U.S.C. 7430(c)(4)(B)(iii).

Although the relevant position of the Government is the one taken in the proceeding 26

U.S.C. 7430(c)(4)(B)(i), the Court may consider the facts . . . available at the time the IRS

took its position, including pre-litigation actionsthat 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) (quotingEstate of Baird v. Commr, 416 F.3d

442, 447 (5th Cir. 2005)). Ultimately, [w]hether the governments position is not substantially

justified is necessarily a case-by-case, facts and circumstances determination. Kenagy v. United

States, 942 F.2d 459, 464 (8th Cir. 1991).

Prior to this litigation, the Government had refused even to acknowledge that it had

illegally disclosed NOMs tax return information, or to identify the source of the disclosure. In

its Answer, the Government finally admitted that it negligently disclosed NOMs IRS Form 990,

Schedule B to a third party in violation of 26 U.S.C. 6103, (Dkt. 33 78), and NOM learned

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during the course of the litigation by whom the Government claims the disclosure occurred, and

to whom. Despite that admission, the Government took the position that it was not responsible

for any of the actual damages sustained by NOM as a result of the disclosure, including legal

expenses incurred during NOMs investigation into the source of the disclosure. (Id. 123-25.)

That position, in light of the facts . . . available at the time the IRS took it, was substantially

unjustified.Estate of Baird, 416 F.3d at 447.

Nearly 2 years prior to the filing of this action, the Governmentspecifically, TIGTA

conducted an extensive investigation into the circumstances of the unlawful disclosure of NOMs

2008 Schedule B. (See Dkt. 68 at 8, 21; Dkt. 73 at 2.) That investigation informed the

Government of the following facts:

IRS clerk Wendy Peters disclosed an unredacted copy of NOMs Amended 2008Schedule B to Matthew Meisel around February of 2011. The unlawful disclosure wasmade in response to a request by Meisel using IRS Form 4506-A. See NOM, 2014 U.S.Dist. LEXIS 77263 at 3-5.

When Meisel made the request, he noted on the form that he was a member of the mediaand that he intended to use NOMs tax returns for an Internet blog.Id.; Dkt. 68-4 at 1;

In March 2012, Meisel sent a copy of NOMs unredacted Amended 2008 Schedule B tothe Human Rights Campaign (HRC), who posted it on its website and shared it with theHuffington Post, who also posted it on its website.NOM, 2014 U.S. Dist. LEXIS 77263at 4-5; Dkt. 68 at pp. 7-8, 19-20.

Consequently, when this action was filed, the Government knew that the IRS was the originating

source of the document posted on the Internet by HRC and the Huffington Post.

Further, in June of 2012, NOM informed TIGTA, by letter, that Fred Karger had filed a

complaint (and a supplemental complaint) with Californias Fair Political Practices Commission

(FPPC), which included a copy of NOMs Amended 2008 Schedule B. (Dkt. 76-1 at 48-49.)

NOM explained to TIGTA that the FPPC had refused NOMs request to destroy the 2008

Schedule B. (Id. at 49.) As this Court recognized, Kargers complaints were based, at least in

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part, on information garnered from NOMs Schedule B. Indeed, his original complaint contained

screen shots of NOMs Schedule B, as published by the HRC. NOM, 2014 U.S. Dist. LEXIS

77263 at 6.

In other words, at the time the Government took the position that it was not responsible

for any of NOMs actual damages, it knew that the person who received NOMs unredacted tax

return from the IRS claimed to be a member of the media who intended to publish NOMs tax

information on his Internet blog. The Government also knew that the IRS was the original source

of the document posted by HRC and Huffington Post and the document attached to the complaint

filed by Fred Karger with the FPPC. Moreover, the Government knew that NOMs claimed

actual damages included legal expenses incurred by NOM in order to investigate the disclosure

caused by the IRS and to prevent HRC, Huffington Post, Fred Karger and the FPPC from

possessing and further publicizing NOMs confidential donor information. See id. (NOM hired

legal counsel to protect the confidential donor information disclosed by Karger, and ultimately

NOM was absolved of any wrongdoing.). Despite having this knowledge, the Government

offered NOM only $1,000 in statutory damages, and wholly denied that NOMs claimed actual

damages were sustained . . . as a result of [the] unauthorizeddisclosure, 26 U.S.C.

7431(c)(1)(B)(i), made by IRS clerk Wendy Peters.

The Government maintained its position regarding actual damages throughout discovery

and ultimately moved for summary judgment on the issue, arguing that NOM could not prove

that its damages were caused by the disclosure. (Dkt. 68 at 24.) This Court soundly rejected all

the Governments arguments concerning actual damages, explaining, The Governments

position that it is not responsible, as a matter of law, for the costs associated with the subsequent

misuse of NOMs confidential taxpayer information is untenable on the facts presented.NOM,

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2014 U.S. Dist. LEXIS 77263 at 35 (emphasis added). In fact, this Court had little trouble

concluding that the unlawful disclosure of NOMs Schedule B was the actual cause of its

claimed damages.Id. at 29 (emphasis added). While the issue of proximate cause was a closer

call, this Court found that the Governments position was legally unsustainable, explaining that

it was certainly foreseeable that releasing NOMs Schedule B to a member of the media could

result in its publication, and that NOM would take legal action to prevent further harm. Id. at 33

(emphasis added). In other words, according to this Courts analysis, the Governments position

with respect to actual damages did not have a reasonable basis both in law and fact. Pierce,

487 U.S. at 565. It was therefore not substantially justified. See Mallas, 876 F. Supp. at 89

(where court rejected all the arguments presented by the Government and it was clear that the

Government disclosed return information in violation of the statute, the Governments position

was not substantially justified.).

The lack of substantial justification for the Governments position is reinforced by

existing precedent in which the Government lost on substantially similar issues. See Jones v.

United States, 9 F. Supp. 2d 1119 (D. Neb. 1998). While the Court is only mandated by statute to

consider losses on substantially similar issues in courts of appeals for other circuits, 26 U.S.C.

7430(c)(4)(B)(iii), Jones v. United States nevertheless demonstrates that the Government

should have known its position was substantially unjustified prior to filing its motion for

summary judgment. Cf. Snider v. United States, 468 F.3d 500, 511 (8th Cir. 2006) (affirming

district court holding that governments position was not substantially justified where, after close

of discovery, the government should have realized[its] position was not substantially

justified).

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As this Court explained, Jones illustrates the general position . . . that misuse of

taxpayer information by third parties is one of the kind of consequences of an unauthorized

disclosure which might reasonably be foreseen.NOM, 2014 U.S. Dist. LEXIS 77263 at 34

(quoting Jones, 9 F. Supp. at 1144). Jones further illustrates that the Governments position in

this casethat is was not responsible for damages sustained as a result of misuse of NOMs

2008 Schedule B by third partieswas not substantially justified.

Only after this Courts decision on the Governments motion for summary judgment did

the Government accept NOMs offer to settle the issue of actual damages for $50,000. [T]he

governments concession of [the] case is one factor to be considered when the trial court decides

whether the governments overall position was substantially justified. Hanson v. Commr, 975

F.2d 1150, 1156 (5th Cir. 1992); see also Envtl. Def. Fund, Inc. v. Watt, 722 F.2d 1081, 1085-86

(2d Cir. 1983) (stating that under the EAJA, the governments ultimate acquiescence in

a settlement is part of the substantial justification inquiry and that [t]he government may lack

substantial justification for its position even though it does not insist upon an unreasonable

stance through to the resolution of a case). Although [t]he unfavorable terms of a settlement

agreement, without inquiry into the reasons for settlement, cannot conclusively establish the

weakness of the Governments position, Pierce, 487 U.S. at 568 (emphasis added), the reasons

for settlement here are plainly obvious: this Court conclusively rejected the Governments

position with respect to causation and actual damages. The Governments willingness to settle on

unfavorable terms after its argument was rejected thus provides further evidence that its position

was not substantially justified.

III. The Requested Attorneys Fees Are Reasonable.

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The standards set forth in [Hensley v. Eckerhart, 461 U.S. 424 (1983)] are generally

applicable in all cases in which Congress has authorized an award of fees to a prevailing

party. Id. at 433 n.7; see also, e.g., Mallas, 876 F. Supp. at 89-90 (applying Hensley to fee

petition under Section 7431); Finney v. Roddy, 617 F. Supp. 997, 1002 (E.D. Va. 1985)

(applying Hensley to fee petition under Section 7430). Under those standards, NOM bears the

burden of proving a reasonable attorneys fee.Hensley, 461 U.S. at 437.

The Supreme Court has adopted the lodestar as the measure of the reasonable fee to

which a prevailing party is entitled. City of Burlington v. Dague, 505 U.S. 557, 560 (1992) (The

lodestar figure has . . . become the guiding light of our fee-shifting jurisprudence.). The lodestar

figure is the number of hours reasonably expended on the litigation multiplied by a reasonable

hourly rate.Hensley, 461 U.S. at 433. [W]hen the applicant for a fee has carried the burden of

showing that the claimed rate and number of hours are reasonable, the resulting product is

presumed to be the reasonable fee . . . .Blum v. Stenson, 465 U.S. 866, 897 (1984) (emphasis

added); see also City of Burlington, 505 U.S. at 562 (We have established a strong

presumption that the lodestar represents the reasonable fee.).

The Fourth Circuit has implemented theHensley standards using a three-step analysis,

which is meant to ensure the fees awarded are reasonable. Robinson v. Equifax Info. Servs.,

LLC, 560 F.3d 235, 243 (4th Cir. 2009). First, the Court must determine a lodestar figure by

multiplying the number of reasonable hours expended times a reasonable rate. Id. (citing

Grissom v. Mills Corp., 549 F.3d 313, 320 (4th Cir. 2008)). Second, the Court should subtract

fees for hours spent on unsuccessful, unrelated claims. Id. at 244 (citing Grissom, 549 F.3d at

321). Lastly, the Court should award some percentage of the remaining amount, depending on

the degree of success enjoyed by the prevailing party.Id. (citing Grissom, 549 F.3d at 321); see

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also Tech Sys. v. Pyles, 2013 U.S. Dist. LEXIS 110636, 6-7 (E.D. Va. Aug. 6, 2013) (explaining

three-step analysis).

A. The First Prong of the Lodestar Calculation Is Determined by Establishing the

Number of Hours Reasonably Expended on the Litigation.

To determine the first prong of the lodestar calculationthe number of hours reasonably

expended on the litigationapplicants should submit evidence supporting the hours worked

. . . .Hensley, 461 U.S. at 433. An applicant, however, is not required to record in great detail

how each minute of his time was expended.Id. at 437 n.12. Rather, he need only identify the

general subject matter of his time expenditure. Id. NOM has satisfied these obligations by

submitting with this motion the Billing Statements of NOMs counsel which show the actual

hours expended in this case. In total, NOMs attorneys and support staff expended 2,924.45

hours in this litigation.5

Hensley also requires fee applicants to exercise billing judgment. 461 U.S. at 437. In

this regard, hours that are not properly billed to ones client also are not properly billed to ones

adversary pursuant to statutory authority. Id. at 434. Thus, counsel for the prevailing party

should make a good-faith effort to exclude from a fee request hours that are excessive,

redundant, or otherwise unnecessary, and the reviewing court should similarly exclude from the

fee calculation hours that were not reasonably expended.Id.

NOM has complied with these requirements in two ways. First, NOM caused Barnaby

Zall, an experienced tax-exempt organization and litigation attorney, to review the raw billing

5 Attached to this memorandum are declarations from an attorney at each of the firms thatprovided legal services to NOM in this litigation. Each affidavit attests to the hours expended inthe litigation by the attorneys and staff at each firm. See Exhibit 3, ActRight Legal Foundation(Declaration of Kaylan L. Phillips 8); Exhibit 4, Foley & Lardner, LLP (Declaration of WilliamE. Davis 8); Exhibit 5, Holtzman Vogel Josefiak, PLLC (Declaration of Jason Torchinsky 7);Exhibit 6, Center for Constitutional Jurisprudence (Declaration of John C. Eastman 11).

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statements of NOMs counsel and eliminate or discount billing entries he determined were

excessive, duplicative, untimely or presumptively unreasonable. (See Exhibit 2, Affidavit of

Barnaby Zall 53, 94, 105, 106.) Mr. Zalls initial review included the billings statements of all

thirty-one timekeepers (attorneys and support staff) involved in this litigation. (Id. 84.) Using

the hourly rates proposed by NOM, the starting lodestar for all timekeepers is $1,150,953.75.

(Exhibit D to Phillips Decl.) Upon his initial review, Mr. Zall eliminated $319,154.10 from the

original total billed to NOM. (Zall Affidavit 110-11.) In Mr. Zalls opinion, the resulting

figure of $831,799.65 was reasonable in light of the circumstances of this case. (Id. 111.)

After reviewing Mr. Zalls analysis, NOMs counsel conferred and reduced the number

of timekeepers in the fee analysis from thirty one to only seven (attorneys William Davis, Cleta

Mitchell, John Eastman, Jason Torchinsky, Shawn Sheehy, Kaylan Phillips, and Noel Johnson).

(Id. 4.) Completely eliminating the billing entries of twenty-four timekeepers (including

attorneys and support staff) resulted in an additional reduction of 584.1 hours, totaling

$182,771.25 in fees, for a remaining starting value of $968,182.50. (Exhibit D to Phillips Decl.)

Using the new starting lodestar value, Mr. Zall then conducted a second review of the

billing statements of the remaining seven timekeepers, (Zall Affidavit at 111), again eliminating

or discounting billing entries he determined were excessive duplicative, untimely or

presumptively unreasonable. (Id. 35, 53, 94, 105, 106.) This exercise resulted in a reduction of

approximately 545 hours, totaling $223,999.70, originally billed by the remaining seven

timekeepers, or a discount of approximately 23 percent of the discounted lodestar figure.6

(Exhibit D to Phillips Decl.) In Mr. Zalls opinion, the seven timekeepers reasonably expended

6 This figure also includes reductions for billing entries that showed some indication of timeunrelated to the successful claims. Zall Affidavit 109.

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approximately 1795 hours in this litigation, totaling $744,182.80 in attorneys fees using NOMs

proposed hourly rates. (See Zall Affidavit at 58; Exhibit D to Phillips Decl.)

Second, on top of Mr. Zalls reductions, NOMs seven remaining counsel further

exercised billing judgment in a good-faith review of their own respective billing records to

exclude even potentially excessive, redundant, or otherwise unnecessary hours.7 This exercise

resulted in an additional total reduction of approximately 159.9 hourstotaling approximately

$64,182.758from the total time expended on the litigation before this Court, a total reduction

of 5.5 percent from the original raw total. (See also, Exhibit D to Phillips Decl.)

After making the aforementioned reductions, NOMs counsel reasonably expended

approximately 1635.1 hours in this litigation.

B. The Second Prong of the Lodestar Calculation Is Established by Determiningthe Reasonable Hourly Rate to Which Attorneys Are Entitled for Their Services.

The second prong of the lodestar calculation requires that the court determine the

attorneys reasonable hourly rate. In order to determine the reasonable hourly rate the fee

applicant should utilize the prevailing market rates in the relevant community . . . .Blum, 465

U.S. at 895. An attorneys actual billing rate provides a starting point for establishing a

prevailing market rate. Emplrs Council on Flexible Comp. v. Feltman, No. 1:08cv371 (JCC),

2010 U.S. Dist. LEXIS 2744, 33 (E.D. Va. Jan. 13, 2010) (Cacheris, J.) (citingRum Creek Coal

Sales v. Caperton, 31 F.3d 169 (4th Cir. 1994)). The fee applicant may carry its burden to

7 Notwithstanding the related nature of NOMs claims, see infra at III.C, in an effort of good

faith, NOMs billing judgments also included reductions for time exclusively related to itsunsuccessful legal theories concerning willfulness and gross negligence. See Andrade, 852 F.Supp. 2d at 642 (finding successful and unsuccessful claims related, but subtracting hours wherethose devoted solely to unsuccessful claims can be identified and separated); see also Certainv. Potter, 330 F. Supp. 2d 576, 585 (M.D.N.C. 2004) (subtracting hours spent on unsuccessfulclaims that did not aid the litigation as a whole).

8 Davis Decl. 18-19; Torchinsky Decl. 17-18; Eastman Decl. 20-21; Phillips Decl. 17-18.

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establish the prevailing marketing rate in a number of waysthrough affidavits reciting the

precise fees that counsel with similar qualifications have received in comparable cases;

information concerning recent fee awards by courts in comparable cases; and specific evidence

of counsels actual billing practice or other evidence of the actual rates which counsel can

command in the market.9 Spell v. McDaniel, 824 F.2d 1380, 1402 (4th Cir. 1987); In re

9 The hourly rate cap provided by 26 U.S.C. 7430(c)(1)(B)(iii) does not apply to requests forattorneys fees under 26 U.S.C. 7431. Prior to 1998, 26 U.S.C. 7431 did not expresslyprovide for recovery of attorneys fees and courts were split on whether Congress intended topermit recovery of attorneys under the standards provided in 26 U.S.C. 7430, which allowedrecovery of fees in cases concerning the determination, collection, or refund of any tax, interest,

or penalty. See Internal Revenue Service, Disclosure & Privacy Law Reference Guide (2012),1-31 n.32, available at http://www.irs.gov/pub/irs-pdf/p4639.pdf (hereafter, IRS DisclosureGuide). In 1998, Congress amended 26 U.S.C. 7431 to explicitly provide for the recoveryattorneys fees. IRS Disclosure Guide at 1-31 n. 32. In doing so, it incorporated the prevailingparty standard as used in Section 7430(c)(4). See 26 U.S.C. 7431(c)(3) (if the defendant isthe United States, reasonable attorneys fees may be awarded only if the plaintiff is the prevailingparty (as determined under section 7430(c)(4))). Congress, however, did not incorporate any ofSection 7430s many other limitations and prerequisites for attorneys fees. See Quijano &Mock,I.R.C. 7430 Attorneys Fees: Navigating Sections 7430 And a Call For The Final Act,15 Fordham J. Corp. & Fin. L. 731, 732 (2010) (describing Section 7430 as having numerousprocedural requirements, which determine eligibility for attorneys fees).

Courts presume that Congress is knowledgeable about existing law pertinent to thelegislation it enacts. Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 185 (1988). And whereCongress knows how to say something but chooses not to, its silence is controlling. UnitedStates v. Webb, 655 F.3d 1238, 1257 (11th Cir. 2011); see also Ctr. For Special Needs TrustAdmin., Inc. v. Olson, 676 F.3d 688, 701-02 (8th Cir. 2012) (Where Congress includesparticular language in one section of a statute but omits it in another section of the same Act, it isgenerally presumed that Congress acts intentionally and purposely in the disparate inclusion orexclusion.). Because 26 U.S.C. 7431 is silent on the applicable hourly rate, Hensleysprevailing market rate standard applies. See Hensley, 461at 433 n.7 (The standards set forth inthis opinion are generally applicable in all cases in which Congress has authorized an award offees to a prevailing party.); see also Eastern Associated Coal Corp. v. Dir., OWCP , 724 F.3d

561, 570 (4th Cir. 2013) (Principles construing what constitutes a reasonable fee applyuniformly to federal fee-shifting statutes.).

Moreover, there is nothing in the statutory language or history of 26 U.S.C. 7431,including the 1998 amendment, that indicates that Congress contemplated a statutory cap similarto that in Section 7430. The statute expressly references Section 7430s prevailing partystandard, 26 U.S.C. 7431(c)(3), indicating that Congress could have imposed the statutory capif it wanted to, but it did not. See Zall Affidavit 61-62. The few recent cases on 26 U.S.C. 7431 claims confirm this by not applying any statutory cap.Id. 63-65.

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Outsidewall Tire Litig., 748 F. Supp. 2d 557, 567 (E.D. Va. 2010) (Typically, a party seeking

attorneys fees would present an affidavit from a local counsel not connected to the present

litigation who would offer testimony concerning prevailing local rates for the relevant type of

work.). However, [i]n circumstances where it is reasonable to retain attorneys from other

communities, however, the rates in those communities may also be considered.Rum Creek Coal

Sales, 31 F.3d at 175. This evidence should be submitted [i]n addition to the [billing]

attorneys own affidavits.Emplrs Council on Flexible Comp., 2010 U.S. Dist. LEXIS 2744 at

33 (quoting Plyler v. Evatt, 902 F.2d 273, 277 (4th Cir. 1990)).

NOM has complied with the above standards. First, NOMs counsel has provided

affidavits that establish that each attorneys requested rate is comparable to, and in most

instances lower than, the rate normally charged to fee-paying clients and collected by the

attorney.10 See Emplrs Council on Flexible Comp., 2010 U.S. Dist. LEXIS 2744 at 36 (citing

Rum Creek, 31 F.3d at 176) (In the Fourth Circuit, the rates actually charged by a petitioning

attorney are evidence of reasonableness when it is shown that they have collected those rates in

the past from the client.) With respect to the NOMs most experienced counsel, the requested

rates are below the rates typically charged. (See Exhibit 7, Decl. of Craig C. Reilly 34.)

Second, NOM has submitted the affidavit of an experienced civil litigator and attorneys

fees expert, Craig C. Reilly, who has studied and is familiar with hourly rates charged by

attorneys in Northern Virginia. (Reilly Decl. 7.) Mr. Reilly is the creator of the 2011 Range of

Hourly Rates in Northern Virginia, a matrix of hourly rates for complex civil litigation in

Northern Virginia, which was submitted and adopted by the Eastern District of Virginia in

Vienna Metro LLC v. Pulte Home Corp., No. 1:10cv502 (E.D. Va. Aug. 24, 2011) (the Vienna

10 Davis Decl. 14; Torchinsky Decl. 13; Eastman Decl. 16.

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Metro Matrix). (Reilly Decl. 27.) The Vienna Metro Matrix has subsequently been used to

establish reasonable hourly rates in two other cases in this court, Tech Systems, Inc. v. Pyles, No.

1:12cv374 (GBL/JFA), 2013 U.S. Dist. LEXIS 110636, *19-20 & n.4 (E.D. Va. Aug. 6, 2013);

Taylor v. Republic Services, Inc., No. 1:12cv523 (GBL/IDD), 2014 U.S. Dist. LEXIS 11086,

*14-15 (E.D. Va. Jan. 29, 2014). (See Ex. B to Reilly Decl. 3); see also Spell, 824 F.2d at 1402

(reasonableness of rates may be established by information concerning recent fee awards by

courts in comparable case). Using his extensive experience and the Vienna Metro Matrix as the

accepted benchmark, Mr. Reilly concluded that the hourly rates proposed for the NOM

attorneys are reasonable and within the prevailing market rates in Northern Virginia for this sort

of litigation.11 (Reilly Decl. 35.)

Using the requested hourly rates and accounting for aforementioned reductions to the

hours expended, the resulting lodestar calculation is $680,000.05.12

11 Mr. Reilly also opined that NOMs proposed rates are reasonable under the unadjusted andadjustedLaffey matrices. (See Reilly Decl. 30-31.)

12 The Fourth Circuit instructs that district courts may consider the following so-called Johnsonfactors to adjust the lodestar calculation:

(1) the time and labor expended; (2) the novelty and difficulty of the questionsraised; (3) the skill required to properly perform the legal services rendered; (4)the attorneys opportunity costs in pressing the instant litigation; (5) thecustomary fee for like work; (6) the attorneys expectations at the out-set of thelitigation; (7) the time limitations imposed by the client or circumstances; (8) theamount in controversy and the results obtained; (9) the experience, reputation andability of the attorney; (10) the undesirability of the case within the legalcommunity in which the suit arose; (11) the nature and length of the professional

relationship between attorney and client; and (12) attorneys fees awards insimilar cases.

Robinson v. Equifax Info. Servs., LLC, 560 F.3d 235, 243-244 (4th Cir. 2009) (citing Johnson v.Ga. Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974)). However, many of these factorsusually are subsumed within the initial calculation of hours reasonably expended at a reasonablehourly rate.Hensley, 461 U.S. at 434 n.9. [T]o the extent that any of [the Johnson factors] hasalready been incorporated into the lodestar analysis, [the court] do[es] not consider [those

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C. Because NOMs Claims Share a Common Core of Facts, No AdditionalReductions Are Warranted.

After the lodestar figure is calculated, the court then should subtract fees for hours spent

on unsuccessful claims unrelated to successful ones. Grissom, 549 F.3d at 321; see also

Robinson, 560 F.3d at 244 (same). For purposes of attorneys fees, claims are related if they

involve a common core of facts or [are] based on related legal theories.13Hensley, 461 U.S. at

43. As stated by the Fourth Circuit, claims are related if their respective facts are inextricably

intertwined, even if the claims are based on different legal theories. Abshire v. Walls, 830

F.2d 1277, 1283 (4th Cir. 1987); see also Andrade v. Aerotek, Inc., 852 F. Supp. 2d 637, 642 (D.

Md. 2012) (Where the plaintiffs hours benefitted or addressed both [successful and

unsuccessful] claims, the court will grant those hours reasonably expended.). Where claims

are related, the Supreme Court recognizes that

[m]uch of counsels time will be devoted generally to the litigation as a whole,making it difficult to divide the hours expended on a claim-by-claim basis. Such alawsuit cannot be viewed as a series of discrete claims. Instead the district courtshould focus on the significance of the overall relief obtained by the plaintiff inrelation to the hours reasonably expended on the litigation.

factors] a second time. McAfee v. Boczar, 738 F.3d 81, 89 (4th Cir. Va. 2013) (citing E.Associated Coal Corp. v. Dir., OWCP, 724 F.3d 561, 570 (4th Cir. 2013)). Moreover, thestrong presumption that the lodestar number represents a reasonable attorneys feecan onlybe overcome in those rare circumstances where the lodestar does not adequately take intoaccount a factor that may properly be considered in determining a reasonable fee.McAfee, 738F.3d at 88-89 (quoting Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010)). The voluntaryadjustments to the lodestar made by NOMs counsel are more than reasonable, and thus noadditional adjustments are necessary pursuant to theJohnson factors.

13 Whether or not claims are related, [a] partially prevailing plaintiff should be compensated forthe legal expenses he would have borne if his suit had been confined to the ground on which heprevailed . . . .) Since the legal expenses of drafting certain portions required of any filings e.g.,factual and procedural information, would have been borne if this suit had been confined solelyto the successful claims, such expenses are considered with the winning claim denominator inthe calculus.

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Id. See also Goos v. National Assn of Realtors, 997 F.2d 1565, 1570 (D.C. Cir. 1993)

(Hensley mandates that distinct legal challenges based on essentially the same factual

allegations be treated as related claims.).

Under these standards, NOMs claims concerning the unauthorized disclosure and

inspection of its tax returnsand the resultant damagesare related because they share a

common core of facts,Hensley, 461 U.S. at 435namely, the circumstances pertaining to the

IRSs processing of a request for NOMs 2008 Schedule B and the subsequent disclosure and

dissemination of that document. (See Zall Affidavit 77(opining that common core of facts in

this case related to the violation of IRC 7431(a)the IRSs disclosure of NOMs unredacted

Schedule B).) NOM prevailed on its claim that the IRS negligently disclosed its 2008 Schedule

B in violation of law and on its claim that the IRS was liable for actual damages sustained as a

result of that disclosure. Though NOM did not prevail on its legal theories that the disclosure

was willful or the result of gross negligence, the facts supporting those theories were

inextricably intertwined with the facts supporting NOMs successful claims. In other words,

NOMs claims are related because NOM could not have presented[its] case [for negligence

and actual damages] without developing and presenting the facts surrounding the entire sequence

of events that transpired.Abshire, 830 F.2d at 1283.

Mallas v. United States, 876 F. Supp. 86, 89 (M.D.N.C. 1994), supports this conclusion.

In Mallas, the plaintiff, along with nine others, raised four causes of action, against eleven

defendants, and sought $25 million in damages for various constitutional violations, Privacy

Act violations, common law libel, and wrongful disclosure under 26 U.S.C. 7431. Id. at 88-

89. After various motions, all Defendants except the United States of America and all Plaintiffs

except Mallas and [another individual] were dismissed.Id. Plaintiff ultimately prevailed only on

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his claims under Section 7431. Though he sought $3.4 million in punitive damages, no actual or

punitive damages were awarded.Id. Rather, plaintiff received only $73,000 in damages, which

represent[ed] the statutory amount of $1,000.00 for each unauthorized act of disclosure.Id. at

89. Plaintiff then sought attorneys fees.

After finding the plaintiff was a prevailing party under Section 7430, the court applied

theHensely analysis to determine what amount of fees should be awarded. Although the plaintiff

pursued different claims based on different legal theories, the court follow[ed] the Court of

Appeals for the Fourth Circuits opinion inAbshire and declined to untangle the successful

claims from the unsuccessful claims.Id. at 90 (citingAbshire, 830 F.2d at 1282-83 (finding that

plaintiffs unsuccessful claims for false arrest, false imprisonment and malicious prosecution

were related to plaintiffs successful strip search claim for purposes of attorneys fees because

all claims arose from a common core of facts and were inextricably intertwined with the

entire sequence of events)); see also Tech Sys., 2013 U.S. Dist. LEXIS 110636 at 21 (finding

reduction in fees for unsuccessful breach of contract claim and misappropriation of trade secrets

claim unwarranted because those claims and the successful claims both arose from larger set of

facts, namely, [defendants] sabotage of [plaintiffs] server and the unauthorized emails that

[defendant] sent once she was terminated from her position); Emplrs Council on Flexible

Comp., 2010 U.S. Dist. LEXIS 2744 at 38-39 (declining to reduce fee award where Plaintiff

pursued to conclusion only two of its original six claims because they concerned the same set

of operative factsnamely, the actions that Defendants took to obtain Plaintiff's trademarks,

business, and profits for themselves). Under the authority of Hensley and its progeny, NOM

should therefore recover those fees expended not just in pursuit of its successful claims, but in

pursuant of its unsuccessful but related claims as well. See Andrade, 852 F. Supp. 2d at 642

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(quoting Hensely, 461 U.S. at 440 (Hensley instructed courts to subtract plaintiffs billable

hours attributable to unsuccessful claims when they are distinct in all respects from [the]

successful claims.)) (emphasis in original).

D. NOM Has Eliminated All Expenses from Its Request.

The consent judgment disposed of NOMs actual damages and its claims for costs of the

action under 26 U.S.C. 7431(c)(2). (Dkt. 87.) The costs settled by the consent judgment were

those taxable administrative costs provided by 28 U.S.C. 1920, such as filing fees and printed

transcripts. The consent judgment did not address attorneys fees or out-of-pocket expenses

incurred by NOM that were necessary to the prosecution of the action.

A number of courts, including the Fourth Circuit, have held that where attorneys fees

are authorized expressly by statute, recoverable litigation expenses are not limited to taxable

costs. Laffey v. Nw. Airlines, Inc., 572 F. Supp. 354, 382 (D.D.C. 1983), overrruled on other

grounds by 746 F.2d 4 (D.D.C. 1984) (citingDowdell v. City of Apopka, 698 F.2d 1181, 1188-89

(11th Cir. 1983); Copper Liquor, Inc. v. Adolph Coors Co., 684 F.2d 1087, 1100 (5th Cir.

1982); Wheeler v. Durham Bd. of Educ., 585 F.2d 618, 623-24 (4th Cir. 1978) [(federal courts

have routinely provided for recovery of out-of-pocket expenses in conjunction with fee

awards)]). Indeed, other fee-shifting statutes, including the Equal Access to Justice Act and the

Civil Rights Attorneys Fees Award Act of 1976 treat out-of-pocket expenses separately from

costs, as a component of attorneys fees. See 28 U.S.C. 2412(b) (a court may award

reasonable fees and expenses of attorneys, in addition to the costs which may be awarded);

Harris v. Marhoefer, 24 F.3d 16, 19 (9th Cir. 1994) (Under 42 U.S.C. 1988, a plaintiff may

recover as part of the award of attorneys fees those out-of-pocket expenses that would normally

be charged to a fee paying client) (citations and quotations omitted); see also New York v.

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Microsoft Corp., 297 F. Supp. 2d 15, 47-48 (D.D.C. 2003) (travel, phone calls, attending trial,

and attending a Microsoft Tech Seminar are not costs; such expenses are considered part of

attorneys fees and may be awarded as such if such expenses are routinely billed by the attorney

to his or her client) (construing Clayton Act).

However, in a further effort to be reasonable, NOM has eliminated from its request all of

the expenses incurred in the prosecution of this action.14 This decision resulted in an additional

reduction of $36,760.61. (Id.)

E. NOMs Request Is Reasonable In Light of Its Substantial Success.

In cases like this, where successful and unsuccessful claims share a common core of

facts[,] a court should simply compute the appropriate fee as a function of degree of

success. Goos v. Natl Assn of Realtors, 997 F.2d 1565, 1569 (D.C. Cir. 1993)

(citingHensley, 461 U.S. at 434-35). The degree of success obtained by the plaintiff is the most

critical factor in determining the reasonableness of a fee award. Bland v. Fairfax County, No.

1:10cv1030 (JCC/JFA), 2011 U.S. Dist. LEXIS 128522, 10 (E.D. Va. Nov. 7, 2011) (Cacheris,

J.) (citations and quotations omitted). [O]nce the court has subtracted the fees incurred for

unsuccessful, unrelated claims, it then awards some percentage of the remaining amount,

depending on the degree of success enjoyed by the plaintiff.Bland, 2011 U.S. Dist. LEXIS

12852 at 10 (quoting Robinson, 560 F.3d at 244 (internal quotations and citations omitted)).

There is no precise formula for making this reduction to the lodestar amount; however, the

court may either reduce the overall award or identify specific hours that should be

eliminated.Bland, 2011 U.S. Dist. LEXIS 128522 at 10 (quoting Hensley, 461 U.S. at 436-37).

14 Decl. of Torchinsky 19; Decl. of Phillips 19; Decl. of Eastman 22; Decl. of Davis 20.

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The court necessarily has discretion in making this equitable judgment. Hensley, 461 U.S. at

424.

In an exercise of billing judgment and to account for its degree of success, NOM has

already voluntarily eliminated 1,289.435 hours, totaling $470,959.95 in attorneys fees. NOM

achieve[d] a level of success that makes the hours reasonably expended a satisfactory basis for

making a fee award, Hensley, 461 U.S. at 434, in the amount of $680,000.05. (See Zall

Affidavit 117.) This amount is reasonable in light of the considerations mandated byHensely

and no further reductions are necessary.

IV. NOM Is Entitled to Reasonable Attorneys Fees and Expenses for Preparing thisMotion.

This Court has discretion to award attorneys fees and costs incurred in the preparation

of a petition requesting attorneys fees. Emplrs Council on Flexible Comp., 2010 U.S. Dist.

LEXIS 2744, at *18-19 (Cacheris, J.) (citingDaly v. Hill, 790 F.2d 1071, 1080 (4th Cir. 1986)).

However, [a] request for attorneys fees should not result in a second major litigation.Hensley,

461 U.S. at 437. Therefore, [t]he single finding that the Governments position lacks substantial

justification, like the determination that a claimant is a prevailing party, operates as a one-

time threshold for fee eligibility. Commr v. Jean, 496 U.S. 154, 160 (1990) (holding that the

fee applicant is eligible for fees on fees in EAJA cases upon a finding of eligibility for fees in

underlying litigation). In other words, [s]o long as the governments position justifies recovery

of fees, any reasonable fees to recover such fees are recoverable.Huffman v. Commr, 978 F.2d

1139, 1149 (9th Cir. 1992); see also Powell v. Commr, 891 F.2d 1167, 1172 (5th Cir. 1990)

(Where the governments underlying position is not substantially justified, plaintiff is entitled

under the EAJA [and 7430] to recover all attorneys fees and expenses reasonably incurred in

connection with the vindication of his rights, including those related to any litigation over fees,

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and any appeal.);Russell v. Heckler, 814 F.2d 148, 155 (3d Cir. 1987) (Where the sole basis for

the governments opposition to the fee petition is the alleged substantial justification of the

governments position in the underlying proceedings . . . the petitioner will almost always, if not

always, be entitled to fees for litigation over an EAJA fee petition if she is entitled to fees for the

underlying litigation[.]).

NOMs counsel, ActRight Legal Foundation, expended 79.8 total hours preparing this

Motion and its supporting documents. (Phillips Decl. 21.) In an exercise of billing judgment,

NOM has excluded 48.3 of those hours from its request. Accordingly, NOM respectfully

requests reasonable attorneys fees in the amount of $11,025 for the 31.5 hours reasonably

expended preparing this Motion. (Id.) This amount is subject to change for work performed on

the memorandum in reply to the Governments opposition.

Conclusion

Because NOM is a prevailing party in this litigation, NOM respectfully requests

reasonable attorneys fees in the amount of $680,000.05 for the work of its counsel on the

underlying litigation. NOM further requests $11,025 in attorneys fees for the work of its counsel

on this Motion. In total, NOM requests $691,025.05 in attorneys fees.

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Respectfully submitted this 25th day of July, 2014.

_/s/_______________________Jason Torchinsky (Va. 47481)

Shawn Toomey Sheehy (Va. 82630)Holtzman Vogel Josefiak, PLLC45 North Hill Drive, Suite 100Warrenton, VA 20186(540) 341-8808 (telephone)(540) 341-8809 (fax)[email protected]@hvjlaw.comCounsel for Plaintiff

John C. Eastman (Cal. 193726)*

Anthony T. Caso (Cal. 88561)*Center for Constitutional Jurisprudencec/o Chapman University School of LawOne University DriveOrange, CA 92866(877) 855-3330 x2 (telephone)(714) 844-4817 (fax)[email protected]@chapman.eduCounsel for Plaintiff

Cleta Mitchell, of counsel(D.C. 433386)*William E. Davis, of counsel(D.C. 280057)*Mathew D. Gutierrez, of counsel(Fla. 0094014)*Kaylan L. Phillips (Ind. 30405-84)*Noel H. Johnson (Wisc. 1068004)*ACTRIGHT LEGAL FOUNDATION209 West Main StreetPlainfield, IN 46168(317) 203-5599 (telephone)(888) 815-5641 (fax)[email protected]@[email protected]@[email protected] for Plaintiff * Admitted Pro Hac Vice

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Certificate of Service

I hereby certify that on July 25, 2014, I filed the foregoing Plaintiff National

Organization for Marriage, Inc.s Motion for Attorneys Fees via ECF which notified the

following counsel of record:

UNITED STATES OF AMERICA, INTERNAL REVENUE SERVICEPhilip M. Schreiber (D.C. 502714)*Benjamin L. Tompkins (D.C. 474906)*Christopher D. Belen (Va. 78281)Trial Attorneys, Tax DivisionU.S. Department of JusticePost Office Box 14198Ben Franklin Station

Washington, DC 20044(202) 514-6069 (Mr. Schreiber)(202) 514-5885 (Mr. Tompkins)(202) 307-2089 (Mr. Belen)Fax: [email protected]@[email protected]

Dana J. BoenteActing United States AttorneyDavid MoskowitzAssistant U.S. Attorney2100 Jamieson AvenueAlexandria, Virginia 22314Telephone: (703) 299-3845Fax: (703) [email protected]

*Admitted Pro Hac Vice

/s/_______________________Shawn Toomey Sheehy (Va. 82630)Holtzman Vogel Josefiak, PLLC45 North Hill Drive, Suite 100Warrenton, VA 20186(540) 341-8808 (telephone)[email protected] for Plaintiff

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Exhibit 1

Declaration of Brian Brown

Case 1:13-cv-01225-JCC-IDD Document 91-1 Filed 07/25/14 Page 1 of 2 PageID# 1683

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NITED STATES DISTRJCT CORT

FOR THE EASTERN IRCT OF VRGINIA

The ATIOAL ORGAIZATO FORMARRJAGE, C.,

v.

The UTD STATES OF AMERICA,

ITERA REEE SERICE

Plaintf

Defendat

v. o. 13-c225JC/DD

DEARAIO OF BRIA BROWN I SUPPORT O

LAINTFFS MOTION OR ATTORYS' FEES

Brin w decrs pursut 28 USC 746:

I. m h cur Prid f lii Nal Orgzto r Mi, c ("OM)

I sd s rdt OM h ths ci s fild o Ocbr 3 203

2 O Ocbr 3 2013 OM mplyd fr h iv hudrd mpys

O Octb 3 2013 OM d rth lss th sv mll dlrs

dclr dr ply f jy t r tru d crrc

Excd l 24

Br

Prsid Ntol Orio or Mrr Ic

1


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Exhibit 2

Affidavit of Barnaby W. Zall


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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

National Organization for Marriage, Inc. ||

v. | No. 1:13CV1225 (JCC/IDD)|

United States |___________________________________ |

AFFIDAVIT OF BARNABY W. ZALL

July 24, 2014


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TABLE OF CONTENTS

A Note on Terminology ....................................................................................................... 3

Executive Summary ............................................................................................................ 3

My Qualifications ................................................................................................................ 6

General Background ......................................................................................................... 11

Applicable Law ................................................................................................................. 12The Statute .............................................................................................................. 12

The Legislative History .......................................................................................... 13IRS Interpretations ................................................................................................... 14This Courts Recognition ........................................................................................ 15

Standards and Assumptions ............................................................................................... 15Using Supreme Court Standards for Similar Fee-Shifting Statutes ....................... 15Standards .................................................................................................................. 16Ethical Standards ..................................................................................................... 17The IRSs Recent Bunker Mentality Drives Up Legal Costs ............................. 20Timing Issues .......................................................................................................... 25

Descriptions ............................................................................................................ 28Lodestar Calculations .......................................................................................... 30Reasonable Hourly Rates ........................................................................................ 30Substantially Prevailing and Adjustment for Unsuccessful Claims ................... 35Special Factors Adjustment .................................................................................... 39

Methodology ..................................................................................................................... 41

The Findings ..................................................................................................................... 49

Analysis ............................................................................................................................. 52

Conclusion ......................................................................................................................... 53

Attachment OneMarch 13, 2013, E-Mail from Lois Lerner ......................................... 55


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Attachment TwoSummary of Findings ......................................................................... 58

Attachment ThreeDatabase Printout ............................................................................. 60

A NOTE ON TERMINOLOGY

1. Throughout the literature on attorneys fees, the phrase attorneys fees isrendered in several forms, including attorneysfees, 26 U.S.C. 7431(c)(3),

attorneys fees, Civil Rights Attorneys Fees Awards Act of 1976, 42 U.S.C.

1988, and attorneys fees.Barber v. Kimbrells Inc., 577 F.2d 216, 226 (4th

Cir. 1978). Except in quotations and the like, I will use the formulation

attorneys fees, because this case involves the application of 26 U.S.C. 7431

and that provision renders the phrase in that form.

EXECUTIVE SUMMARY

2. Background Summary: I am an experienced tax-exempt organization andlitigation lawyer. I was asked to provide an opinion, based on my review of

time records provided to me from the attorneys representing the prevailing

taxpayer in this case, as to the reasonableness of the attorneysrequested

amount of legal fees. My agreement provides that my opinion will be

independent of my conclusions and may be adverse to the attorneys interests.

3. Methodology Summary: I reviewed approximately 3,500 timeslips from 31timekeepers, reporting a total of approximately 3,000 hours of legal services,

which would have yielded a fee award of more than $1.1 million without


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adjustments. To review these timeslips, I first used the applicable Fourth Circuit

and Supreme Court precedents to determine the appropriate standards for fee

awards in Internal Revenue Code 7431 cases. Because the Code section does

not give guidance on a reasonable fee (and has no statutory limit on fees or

hourly rates) and because the IRS has not promulgated regulations governing

fee awards in IRC 7431 cases, I used the standards for fee-shifting statutes

(primarily for Section 1988 civil rights attorneys fees awards) that served as the

basis for the 1998 amendment to provide attorneys fee awards under IRC

7431. Under the applicable cases, includingHensley v. Eckerhart, 461 U.S. 424

(1983), I first applied a general ethical billing standard under Virginia ethics

rules, then applied six specific standards (timing, specificity/clarity, unrelated to

successful claims, excessive time, likely or should have been already awarded

as costs, and duplicative efforts). Based on that review, I categorized each

timeslip for certainty as to whether I thought it was reasonable. This review,

though based on standards, was essentially an application of my professional

judgement; for example, I completely discounted time spent on media relations,

travel, and activities prior to a starting date, and applied a varying degree of

discounts to timeslips which appeared to have an issue under one of the

standards. I created a database permitting classifications and sorting by various


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factors, and applied simple mathematical and logical algorithms to capture and

analyze my results.

4. My preliminary conclusions were that the total amount that would have beengenerated by the raw timeslips was too large, and should have been reduced to

$831,799. I would have found that figure to be reasonable under the

circumstances. After reviewing my standards, assumptions, analysis and

preliminary conclusions, the legal counsels for the taxpayer voluntarily reduced

their requests to only seven timekeepers, and a total request for $744,183 in

fees, even less than I would have found reasonable in my preliminary

conclusions.

5. Conclusions Summary: While a large amount, I believe that the Court couldfind this requested amount of $744,183 reasonable under applicable standards,

as it is less than could have been awarded on a comparable basis in a similar

2005 case, and amply justified by the IRSs recent bunker mentality of non-

cooperation and resisting providing required information to practitioners and

litigants. In short, I believe that the IRS itself drove the legal fees up to this

amount, and any significant reduction in fees awarded would serve as an

incentive for the IRS to continue this unfortunate trend. Thus, based on my

review and analysis, I believe the reduced amount, though large, is reasonable

under the circumstances.


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MY QUALIFICATIONS

6. I am a public policy attorney in private practice in a small law firm. Mypractice centers on representation of, and legal issues involving, tax-exempt

organizations, generally focusing on public policy advocacy and political

organizations. I have more than thirty years experience counselingand

representing clients and contesting matters before courts and the Internal

Revenue Service (IRS) and other government agencies.

7. Other than this affidavit, I have no prior or current relationship to this caseor the Plaintiff National Organization for Marriage, Inc. (NOM). I have

attended discussions of the underlying disclosure of donor information and the

progress of this case at the First Tuesday Lunch Group, a monthly informal

discussion group (which I moderate) of several dozen attorneys across the

political and ideological spectrum who practice in similar areas of law (see 13

below). My Agreement to prepare this report provides that I have, and will

make, no attorney-client relationship with NOM.

8. Currently, I am principally a tax attorney, representing organizationsgenerally exempt from most federal taxation under Internal Revenue Code

(IRC) sections 501 and 527. In more than thirty years of private practice, I

have provided legal counsel to and represented hundreds of tax-exempt

organizations ranging from tiny start-ups to the largest private foundations,


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from religious, educational and charitable organizations exempt under IRC

501(c)(3), to social welfare organizations exempt under IRC 501(c)(4), to

trade and professional associations exempt under IRC 501(c)(6), and political

organizations exempt under IRC 527.

9. Many of my clients have been involved in highly-controversial positionswhich have resulted in my providing assistance to them before federal and state

courts, regulators, and legislative bodies. As a result, donor disclosure issues are

important to them. I routinely train and counsel clients on the Form 990 Annual

Information Return, and, in particular, the Schedule B list of donors. I am

familiar with the rules regarding public disclosure and the penalties for

improper disclosure of a Schedule B. For example, I recently provided an

extensive legal analysis of the IRSs internal procedures regarding the

development and use of Schedule B to attorneys representing an organization

suing the State of California for requiring organizations to provide an

unredacted Schedule B to the California Attorney General as part of their

registration for fundraising solicitations in California.1

10. I have been active in the American Bar Associations Section of Taxationsince 1983. I served as Chairman of the Committee on Attorneys in Small Law

Firms and was Editor of the Tax Sections Small Firm Tax Lawyernewsletter

1See, e.g., Center for Competitive Politics v. Harris, No. 2:14-cv-00636-MCE-DAD, (E.D. Cal. May 14, 2014)2014 WL 2002244.


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for eight years. I have been an active member of the Tax Sections Committee

on Exempt Organizations since 1983, and a member of the Subcommittee on

Political Organizations for nearly that long. I am also a long-time member of

the Tax Sections Committee on Court Procedures and Practice.

11. For many years, I have been a periodic correspondent for CCHsExemptOrganization ReportsTax-Exempt Advisor.2 I am a regular contributor to the

on-line publicationExempt Organization Tax Journal.3I am also active on e-

mail and similar discussion lists, including Prof. Rick HasensElection Law list

from the University of California, Irvine, and the ABA Tax Sections Tax-

Exempt Organization mailing lists.

12. At the September 2013 Tax Section meeting in San Francisco, I presented a40-page paper on defining permissible election-related activities of 501(c)(4)

social welfare advocacy organizations.4I have also presented on several other

topics at various American and state Bar Associations, and at the American and

state Institutes of Certified Public Accountants. I also presented written

comments to both the Office of Management & Budget5and the Department of

2

See, e.g., Barnaby Zall, Dont Go There: Who Benefits From IRS Attacks on Tax-Exempt Credit CounselingAgencies? 361 Tax-Exempt Advisorat 4 (August 2004).3See, e.g., Barnaby Zall, The EO Mailbag,EO Tax Journal, 2014-107, May 29, 2014,http://eotaxjournal.com/eotj/?p=3219(paywall) (letter analyzing new decision refusing to dismiss First Amendmentchallenge to IRS processing of applications for organizations intending to work in the disputed areas of the WestBank of Israel:Z Street v. Koskinen, Civ. 12-cv-0401 (KBJ), Slip op. 34,https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv0401-49).4http://meetings.abanet.org/meeting/tax/FALL13/media/jt-eo-cpg-helping-zall-paper.pdf.5http://www.campaignfreedom.org/wp-content/uploads/2013/12/Comments-on-PRA-and-RFA-Barnaby-Zall.pdf(Paperwork Reduction and Regulatory Flexibility Acts comments).

http://eotaxjournal.com/eotj/?p=3219http://eotaxjournal.com/eotj/?p=3219https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv0401-49https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv0401-49https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv0401-49https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv0401-49http://localhost/var/www/apps/conversion/tmp/scratch_10/meetings.abanet.org/meeting/tax/FALL13/media/jt-eo-cpg-helping-zall-paper.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_10/meetings.abanet.org/meeting/tax/FALL13/media/jt-eo-cpg-helping-zall-paper.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_10/meetings.abanet.org/meeting/tax/FALL13/media/jt-eo-cpg-helping-zall-paper.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/Comments-on-PRA-and-RFA-Barnaby-Zall.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/Comments-on-PRA-and-RFA-Barnaby-Zall.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/Comments-on-PRA-and-RFA-Barnaby-Zall.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/Comments-on-PRA-and-RFA-Barnaby-Zall.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_10/meetings.abanet.org/meeting/tax/FALL13/media/jt-eo-cpg-helping-zall-paper.pdfhttps://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv0401-49https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv0401-49http://eotaxjournal.com/eotj/?p=3219

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Treasury on the IRSs November 29, 2013 proposal of a new regulation

restricting election-related activities of 501(c)(4) organizations.6

13. I am the founder and convenor of the First Tuesday Lunch Group (FTLG),a bi-partisan informal monthly discussion meeting of campaign finance and

exempt organization attorneys, mostly from the Washington, D.C. area, but

including participants from across the country. The FTLG meetings provide a

high-level forum for discussions of litigation, government activities and

developments in public policy advocacy, with participation usually evenly-

divided between what one might call liberal or Democratic participants and

conservative/libertarian or Republican participants. Two of the attorneys whose

time is considered in this analysis are participants in the FTLG.

14. Unlike most tax-exempt organization attorneys, I have also been an activelitigator. I am admitted to the bars of the District of Columbia and Maryland, as

well as admitted to practice before the United States Supreme Court, the United

States Courts of Appeal for the D.C., Fourth, Fifth, Ninth, Tenth, Eleventh and

Federal Circuits, the United States District Courts for D.C. and Maryland, and

the United States Tax Court. I have also appeared before numerous other state

6http://www.campaignfreedom.org/wp-content/uploads/2013/12/2014-02-23_Barnaby-Zall_IRS-Comment-On-Litigation-Risk-Of-Proposed-501c4-Rulemaking.pdf(Substantive comments to the Department of Treasury andIRS).

http://www.campaignfreedom.org/wp-content/uploads/2013/12/2014-02-23_Barnaby-Zall_IRS-Comment-On-Litigation-Risk-Of-Proposed-501c4-Rulemaking.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/2014-02-23_Barnaby-Zall_IRS-Comment-On-Litigation-Risk-Of-Proposed-501c4-Rulemaking.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/2014-02-23_Barnaby-Zall_IRS-Comment-On-Litigation-Risk-Of-Proposed-501c4-Rulemaking.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/2014-02-23_Barnaby-Zall_IRS-Comment-On-Litigation-Risk-Of-Proposed-501c4-Rulemaking.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/2014-02-23_Barnaby-Zall_IRS-Comment-On-Litigation-Risk-Of-Proposed-501c4-Rulemaking.pdfhttp://www.campaignfreedom.org/wp-content/uploads/2013/12/2014-02-23_Barnaby-Zall_IRS-Comment-On-Litigation-Risk-Of-Proposed-501c4-Rulemaking.pdf

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and federal courts, including this one.7I am a graduate of the National Institute

for Trial Advocacys D.C. training program.I have litigated cases from

complaint through appeals to final resolution, including argument before the

Supreme Court in an extremely complex procedural matter,8in which, for

example, my client intervened after judgment in the Court of Appeals when a

Governor would not defend a law passed by initiative.9

15. Unfortunately, since 1996, my active trial practice has been significantlycurtailed by an illness of my inner ears which caused severe and permanent

hearing loss. Since that time, I have mainly practiced appellate advocacy.

16. Nevertheless, I am familiar with current practice in representation andlitigation against government agencies, including the IRS. I routinely cooperate

with, coordinate and review the work of attorneys who perform such services

for my clients and others. In 2011, I founded the Cause of Action Institute,

which specializes in litigation against government secrecy and over-reach.10

Cause of Action has sued the IRS on a variety of grounds, including proposed

regulations restricting the activities of 501(c)(4) organizations.11

7See, ProEnglish v. Bush, CA-02-356-A (unpublished) (E.D. Virginia, Aug. 16, 2002) (Judge Brinkema dismisseswithout prejudice, as not ripe, challenge to Executive Order 13166 requiring physicians to make available extensivefree language translation services), affd,ProEnglish v. Bush, 70 Fed. Appx. 84 (4thCir. 2003).8Arizonans for Official English v. Arizona, 520 U.S. 43 (1997).9Yniguez v. Arizona, 939 F.2d 727 (9thCir. 1991).10www.causeofaction.org.11http://causeofaction.org/related-documents-irs-targeting-politicization/.

http://www.causeofaction.org/http://www.causeofaction.org/http://www.causeofaction.org/http://causeofaction.org/related-documents-irs-targeting-politicization/http://causeofaction.org/related-documents-irs-targeting-politicization/http://causeofaction.org/related-documents-irs-targeting-politicization/http://causeofaction.org/related-documents-irs-targeting-politicization/http://www.causeofaction.org/

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17. Through my own practice, my clients activities, and my interaction withother active attorneys, I am familiar with challenges similar to this one.

18. In this affidavit, I am applying my own experience to the standards outlinedin similar litigation as I understand those standards. Under my agreement with

NOM, my opinions are not preordained, might be contrary to Clients position,

and are subject to modification as a result of new or additional information.

19. I am being compensated for my participation in this matter. I am chargingapproximately $495 per hour for my services, which is a reduction from my top

hourly rate of $800 per hour. Because of the size and nature of this review, I am

also utilizing the services of a skilled and experienced database consultant, who

is billed at approximately $165 per hour. Under my agreement with NOM, my

compensation is not dependent upon the findings or opinions which I render, or

on the outcome of any legal action, mediation, arbitration, or the amount or

terms of any settlement of the underlying legal cause, or on any contractual

arrangement between any other person or party.

GENERAL BACKGROUND

20. This affidavit will present an opinion on the reasonableness of the request tobe submitted for an award of attorneys fees in this case. All decisions on

reasonableness in such cases are always at the discretion of the Court; this

affidavit is simply an informed opinion provided for the benefit of the Courts


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review. My opinion is based on my understanding of the current state of the law

regarding Internal Revenue Code (IRC) 7431, governing challenges to

disclosures of confidential taxpayer information and to unjustified positions of

the Internal Revenue Service

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