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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Alexandria Division

THE NATIONAL ORGANIZATION FOR )MARRIAGE, INC. ))

Plaintiff, ))

v. ) Civil Action No. 13-1225-JCC-IDD)

THE UNITED STATES OF AMERICA, ))

Defendant. )___________________________________________ )

UNITED STATES OF AMERICAS RESPONSE IN

OPPOSITION TO PLAINTIFFS MOTION FOR ATTORNEYS FEES

Despite losing all the significant issues in this case and settling a damages claim of hundreds

of thousands of dollars for $50,000, the National Organization for Marriage, Inc. (NOM) now

seeks over $691,000 in attorneys fees. The Court should deny NOMs motion in its entirety. The

Court need not delve into NOMs massive bills and complex algorithms to determine a reasonable

attorney fee, because NOM is not the prevailing party either with respect to the amount in

controversy or the most significant issue pled. Regarding the amount in controversy, NOM has

cherry picked the actual damages it was claiming during the course of this suit and, in fact, received

less than half of what it was claiming when all amounts are properly considered. Also, NOMs view

of the most significant issue is belied by the face of its sworn Verified Complaint. Under both

analyses, therefore, NOM is not a prevailing party. The Courts analysis should end there NOM is

not entitled to any attorneys fees.

The United States was also substantially justified in defending this case, which included

debunking claims of governmental conspiracy and gross negligence. NOMs Verified Complaint

Case 1:13-cv-01225-JCC-IDD Document 92 Filed 08/08/14 Page 1 of 32 PageID# 2034

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alleged a willful disclosure of its tax return stemming from such a conspiracy or one that resulted

from gross negligence, which, if proven at trial, would have subjected the United States to punitive

damages. As long as NOM pursued those baseless claims, the government, which admitted an

inadvertent disclosure in its Answer, was obligated to zealously represent its client and defend the

suit. Two weeks after the Court dismissed those claims upon the governments summary judgment

motion, the United States settled the remaining actual damages issue an amount that NOM

changed significantly during the course of discovery. These acts are the epitome of a reasonable

defense in the face of an over-pled and unproven complaint.

But even assuming, arguendo, that the Court were to determine that (a) NOM was the

prevailing party, and (b) the United States was not substantially justified in defending this suit,

NOMs fee request is deficient in several respects. First, NOM incorrectly uses the Vienna Metro

Matrix to determine a reasonable hourly fee for its seven timekeepers; federal law provides for a

statutory cap on an attorneys hourly rate in such suits against the government. Second, the very

request for over $691,000 in fees in order to collect a $50,000 settlement is facially unreasonable.

There are also other deficiencies in NOMs request, including the fact that counsel spent over a year

preparing for, researching and drafting its Verified Complaint. Thus, if the Court were to even reach

the issue of whether NOMs fee request is reasonable, which it should not, the Court should

significantly reduce NOMs request and award it minimal fees.

FACTS

Disclosure / Inspection Claims

On October 3, 2013, NOM filed this suit against the United States, seeking damages for the

IRS wrongful inspection and disclosure of NOMs amended 2008 Form 990, Schedule B (2008


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Schedule B) to a third party. [Dkt. 1]. The Schedule B identifies the names, addresses, and

donation amounts of NOMs major donors. While federal law requires the IRS to provide a copy of

a 501(c)(4)s Form 990 to the public upon request, it is also required to redact the names and

addresses of the organizations donors before complying with that request. See, e.g.,26 U.S.C.

6104(b). Here, an IRS clerk mistakenly neglected to redact NOMs 2008 Schedule B before the IRS

sent it to a third-party requestor. [Dkt. 79 at 11.]

Accordingly, the government admitted in its Answer that the IRS inadvertentlydisclosed one

unredacted copy of the 2008 Schedule B to that single third party-requestor, entitling NOM to $1,000

in statutory damages. [Dkt. 33 78, et seq., filed on Dec. 2, 2013.] Two weeks later, on December

17, 2013, the United States, pursuant to Fed. R. Civ. P. 68, made an offer of judgment to NOM for

$1,000, plus costs of the action to date the statutory damages limit under federal law. See26

U.S.C. 7431(c). NOM rejected that offer and elected to continue pursuing this case. [Dkt. 91 5.]

NOMs Verified Complaint wrongly alleged, among other things, that: (1) the disclosure of

the 2008 Schedule B was intentional and willful; (2) it was made to NOMs ideological opponent, the

Human Rights Campaign (HRC); and, (3) it was part of some ill-defined conspiracy against NOM.

[Dkt. 1 at 14]; [Dkt. 68-2 at Resps. #1, 6, 7, 9.] Alternatively, NOM alleged that the disclosure was

the result of gross negligence, and that the inspection (i.e.the IRS review) of the tax return was

also unlawful and done willfully or as the result of gross negligence. [Dkt. 68-2 at Resps. #1, 6, 7, 9.]

NOM never sought to amend its Verified Complaint during its suit. The complaint itself contained

two counts: one alleging a willful or grossly negligent unauthorized disclosure, and another alleging


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a willful or grossly negligent unauthorized inspection. [Dkt. 1 at 19-21.]1 Although the United

States settled the issue of actual damages, NOM prevailed on neither count as pled in its complaint.

Damages Claims

NOMs actual damages claims varied during litigation. Initially, NOMs Verified Complaint

claimed damages for (1) $10,500 in fees and costs incurred as a result of a complaint Fred Karger

filed with the California Fair Political Practices Commission; (2) $50,000 resulting from a lost

donation; (3) statutory damages resulting from an unspecified number of wrongful inspections; and,

(4) punitive damages. [Dkt. 1 124-25]; DEX 1, Pl.s Initial Disclosures. On January 21, 2014,

NOM responded to the governments interrogatories but refused to identify the donor who withdrew

the $50,000 lost donation, even while claiming it as an actual damage. [Dkt. 68-2 at Resps. #2, 3, 5.]

In the same responses, NOM increased its claimed damages from the Karger Complaint to $12,500,

and added for the first time an additional $46,086.37 for legal fees and expenses resulting from

the unauthorized disclosure. [Dkt. 68-2 at Resp. #5.] Thus, as of January 21, 2014, NOMs actual

damages claim totaled $108,586.37.2 This amount was later increased by the eight other inspections

that NOM alleged occurred after the disclosure became public. [Dkt. 79 at 19.] Throughout the

course of this litigation, then, NOMs claims for damages totaled $117,586.37in actual and statutory

damages, not including any amount of punitive damages.

As part of its defense, the government requested a full response to Interrogatories 2 and 3,

1 In response to the governments summary judgment motion, NOM added eight new inspection claims, which

allegedly occurred a year after the disclosure. [Dkt. 73 at 17-18.] The Court agreed with the governments positionthat there was no evidence that these new inspection claims which were never pled in NOMs complaint orotherwise identified in response to government interrogatories were unauthorized; the Court thus dismissedNOMs baseless claims of unauthorized post-disclosure inspections as well. [Dkt. 79 at 18-22.]

2This did not include any claim for punitive damages or $1,000 statutory damages for the initial inspection claim.


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NOM objected to these discovery requests, asserting a relevance objection and First

Amendment privilege, and refused to provide any information or produce any documents. SeeDEX

4 (Pl.s Obj.) at 40-41, 44-48; DEX 3 at 33-36. Again, the parties discussed the objections over e-

mail and at the February 5th meet-and-confer. DEX 2. NOM then agreed to provide (a) generic

fundraising correspondence to supporters that mentioned the disclosure or its lawsuit, (b) numerical

responses to the interrogatories (i.e., amounts of donations without donor names), and (c) responses

to related requests for admission concerning increases in donations post-disclosure. The United

States did not file a motion to compel as to other information originally requested.

On March 14, 2014, the United States took the 30(b)(6) deposition of NOM. During that

deposition, NOMs designee and President, Brian Brown, testified that NOM sent its donors and

supporters direct mailings that referenced (to some degree) the disclosure of NOMs amended 2008

Form 990 unredacted Schedule B and/or its lawsuit against the IRS. Mr. Brown also testified that

NOM tracked the donations it received in response to these mailings using specific codes. Finally, he

testified that NOM was still in possession of such documents, going back as far as March 30, 2012

the date NOM learned of the disclosure. On March 18, 2014, the United States sent an e-mail to

NOMs counsel stating that these documents had not been produced to the United States, despite that

they were covered under multiple requests for production of documents and were directly relevant to

the governments defense on the issue of actual damages. DEX 5 (3/18/14 e-mail). Given that

discovery had closed and in an attempt to narrow any dispute, the United States offered to forego

( continued)

Because NOMs response was that it is not within NOMs control to know the motive behind a specific donation,the format of the discovery requests directed NOM to respond to RFPs 20, 23, 24 & 25 and Interrogatory 15, so thatthe United States could conduct its own discovery and defend against NOMs allegations of actual damages.


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NOM producing documents evidencing specific donations if NOM fully responded to Interrogatory

number 19 with information on donations in response to NOMs mailings that referenced the

disclosure or NOMs prospective or actual lawsuit against the IRS. Id. On April 2, 2014, two weeks

after the close of discovery, NOM supplemented its discovery requests to provide information

pertaining to donations it received in response to direct mailers to its supporters in which NOM

mentioned the disclosure or its lawsuit against the IRS. See[Dkt. 68-25.]

Motion for Summary Judgment

After the completion of discovery on March 14, 2014, NOM had failed to present any

evidence: (a) that the disclosure was intentional, willful, and/or the result of any agreement or

conspiracy, (b) that the disclosure was the result of gross negligence, or (c) that there were any

unauthorized inspections of NOMs 2008 Schedule B. The United States moved for summary

judgment as to all issues, including that, as a matter of law, NOM had failed to demonstrate that the

disclosure caused it to incur any actual damages. [Dkt. 68.] After briefing and argument, the Court,

on June 3, 2014, issued a Memorandum Opinion, which granted the United States motion as to

NOMs claims of (1) a willful disclosure stemming from a conspiracy, (2) a disclosure as a result of

gross negligence, and (3) any unlawful inspections of NOMs tax return, either before the disclosure

or after. [Dkt. 79 at 10-22.]4 The Court denied the governments motion as to its arguments that

NOM could not recover any actual damages because the disclosure did not proximately cause

NOMs injuries and because NOM fully mitigated any claimed damages through fundraising related

4The Court also agreed with our argument that NOM violated its discovery obligations by failing to supplement itsinterrogatory responses pertaining to its theory of gross negligence; the Court thus sanctioned NOM and excludedthat claim pursuant to Fed. R. Civ. P. 37(c). [Dkt. 79 at 15 n.3.] NOM is thus seeking fees where the Court hasalready determined that, to some extent, NOM inappropriately litigated this case.


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to the disclosure, and set those issues over for trial. [Id.at 30-32.]

Settlement Discussions

Given NOMs unfounded allegations that the IRS intentionally and willfully conspired to

violate its rights, the parties were unable to participate in meaningful settlement discussions. During

the parties scheduling conference and the in-person conference with Judge Davis, the parties agreed

that a settlement was unlikely without the benefit of discovery, but that they would revisit the issue

afterwards. Despite this, the United States provided an offer of judgment, believing that NOM was

only entitled to $1,000, plus costs of the action. NOM rejected that offer, made no counteroffer, and

the parties did not revisit the possibility of settlement until after the close of discovery. On April 2,

2014, NOM submitted a settlement offer, totaling $707,597.37, which would have represented a full

concession on all claims of actual damages, over $37,000 of costs incurred, and over $600,000 in

attorneys fees.5

After the Court issued its June 3, 2014 summary judgment opinion, the parties resumed

settlement negotiations. Because of the enormity of NOMs fees, the parties were not able to resolve

this case globally. The parties agreed to try and settle the damages claim and then litigate the fees

issue before the Court. On June 13, 2014, NOM made a formal offer to settle this case, except for the

issue of attorneys fees which the Court would decide on the parties motions. Three days later, on

June 16, 2014, the United States accepted NOMs settlement offer.

5On April 2, 2014, NOM represented in a settlement letter that timekeepers had spent 2,200 hours on this case, withattorney time amounting to over $809,000. NOMs petition here shows that, three months later, the 31 timekeepershad expended approximately 3,000 hours, totaling $1.15 million in fees. [Dkt. 91-2 3 and page ID 1745.]


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ARGUMENT

1. NOM Is Not the Prevailing Party in this Case

In order to qualify for recovery of attorneys fees, NOM must establish that it substantially

prevailed in this litigation. Under 26 U.S.C. 7431(c)(3), reasonable attorneys fees may be

awarded only if the plaintiff is the prevailing party as determined pursuant to 26 U.S.C.

7430(c)(4). Section 7430(c)(4), defines prevailing party as: any party in any proceeding . . . (i)

which (I) has substantially prevailed with respect to the amount in controversy, or, (II) has

substantially prevailed with respect to the most significant issue or set of issues presented. Because

7430 renders the United States liable for attorneys fees for which it would not otherwise be liable,

[it] amounts to a partial waiver of sovereign immunity [and] must be strictly construed in favor of the

United States. Aredstani v. INS, 502 U.S. 129, 137 (1991); Goettee v. Commr, 192 Fed. Appx. 212,

222-223 (4th Cir. 2006). NOM has not met its burden to establish that it substantiallyprevailed with

respect to either the amount in controversy or the most significant issue or set of issues presented.

a. NOM did not substantially prevail with regard to the amount in controversy

The amount in controversy isanyamount placed at issue by the pleadings increased byany

amount subsequently placed at issued by any party. Don Johnson Motors, Inc. v. United States,

2008 U.S. Dist. LEXIS 36594, at *7 (S.D. Tex. 2008), affd, 433 Fed. Appx. 526, 528 (5th Cir. 2011)

(emphasis added and citations omitted). Initially, NOM filed suit seeking $60,500 in actual damages

$10,500 in fees and costs incurred as a result of a complaint Fred Karger filed with the California

Fair Political Practices Commission and $50,000 resulting from a lost donation as well as

statutory damages resulting from an unspecified number of wrongful inspections and punitive

damages. [Dkt. 1]; DEX 1.


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Months after filing its suit, NOM increased its actual damages claims and later identified at

least eight other alleged wrongful inspections in response to the summary judgment motion. In

written discovery responses, in January and February 2014, NOM increased its claim for damages

resulting from the Karger Complaint to $12,500, reiterated its $50,000 claim for a lost donation, and

for the first time identified $46,086.37 in attorneys fees and other costs incurred as a result of the

publication of the 2008 Schedule B.Although NOM eventually withdrew the lost donation claim

rather than confront a motion to compel, this wasafterNOM served written discovery responses

identifying these categories of actual damages and after the parties had met-and-conferred on this

topic. [Dkt. 1 33, 34 & 124.] NOM also, in response to the summary judgment motion, identified

eight other inspections that it considered unlawful for a total potential recovery of $9,000 per 26

U.S.C. 7431 (i.e., one pre-disclosure and eight post-disclosure inspections). [Dkt. 79 at 19.] In

total, including all four categories of actual and statutory damages,6NOM sought $117,586.37 in

actual and statutory damages.

In addition, this Court should include the value of NOMs punitive damages claim in order to

calculate the amount in controversy. Based upon the inflammatory allegations in NOMs complaint,

this Court should use at leasta 2:1 punitive damages multiplier (equaling $235,172.74 in punitive

damages). See Snider v. United States, 2005 U.S. Dist. LEXIS 17438, at *39-41 (W.D. Mo. 2005),

affd in part, revd in part, 468 F.3d 500, 510 (8th Cir. Mo. 2006) (court awarded punitive damages

that were two times the amount of actual damages resulting from willful and grossly negligent

disclosures); State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003) (Single-digit

6NOM provides no legal support for the proposition that its lost contribution claim should not be considered indetermining the amount in controversy, especially when narrowly construing the statute in the United States favor.


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multipliers are more likely to comport with due process). Assuming a minimum 2:1 ratio and a

damages claim of $117,586.37, NOMs $50,000 recovery is only around 14 percentof its total

claim. Even assuming a minimal 1:1 ratio,

7

NOM did not substantially prevail when it recovered 22

percent of its damages claim.

As a result, when combining all the damages claimed by NOM and comparing the claims to

the $50,000 recovery including a settlement payment for $6,698.06 in costs this Court should

reject NOMs claim that it substantially prevailed. See, e.g.,Ralston Dev. Corp. v. United States, 937

F.2d 510, 515 (10th Cir. 1991) (19% recovery does not constitute substantially prevailing); Don

Johnson Motors, 2008 U.S. Dist. Lexis 36594, at *10 (3% recovery not substantially prevailing, and

stating that a taxpayer who receives only a proportionally small award compared to the amount in

controversy has not demonstrated that it substantially prevailed);Andrews v. Commr,T.C. Memo

1985-559, 50 T.C.M. (CCH) 1404 (1985) (settlement paying 41% of tax deficiency fails to show that

taxpayer substantially prevailed).

Even if the Court omitted NOMs punitive damages claim, which it should not, NOM only

recovered 43 percent of the $117,586.37 at issue. Thus, NOM failed to substantially prevail, even

under the cases that have considered whether a fifty percent recovery was sufficient. See Estate of

Johnson v. United States, 2013 U.S. Dist. LEXIS 150120, at *3-4 (D. Mass. 2013) (citing Keeter v.

United States, 82 A.F.T.R. 2d 98-5943 (E.D. Cal. 1998) (55% recovery sufficient),Estate of Holmes

7NOM citesExxon Shipping Co. v. Baker, 554 U.S. 471, 515 (2008), for the proposition that a 1:1 multiplier wouldbe used to value its punitive damages claim. But that multiplier is inapplicable because the damages claim is lessthan $120,000. By contrast,Exxonstated that a 1:1 multiplier could be appropriate where the compensatorydamages were substantial, as in$507.5 million. See id.(quoting State Farm that When compensatory damages aresubstantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of thedue process guarantee) (internal citation omitted). In light ofExxon, NOMs claim was clearly not substantial.


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v. United States, 1990 WL 10062, at *4 (E.D. Pa. Feb. 9, 1990) (54% recovery insufficient)); see also

Cox v. Commr, 1996 Tax Ct. Memo LEXIS 98, T.C.M. 1996-103, at *4 (T.C. 1996) (50% recovery

makes it questionable whether plaintiff substantially prevailed on amount in controversy), affd,

121 F.3d 390 (8th Cir. 1997). NOMs assertion that a 43 percent recovery would be substantial is

not supported by the cases referenced above, and NOM has not cited any case supporting that a 43

percent recovery (or far less as is the case here) is substantial. [Dkt. 91 at 7-8.]

b. NOM did not substantially prevail as to the most important issues

In determining whether NOM substantially prevailed with regard to the most important

issues, the Court starts with NOMs complaint. See Christian Coalition Intl v. United States, 133 F.

Supp. 2d 437, 439 (E.D. Va. 2001). An issue is the most significant if . . . the issueobjectively

represents the most significant issue for the taxpayer or the IRS. Don Johnson Motors, 2008 U.S.

Dist. Lexis 36594, at *13 (emphasis added). In an attempt to justify the thousands of hours its

numerous attorneys spent, NOM self-servingly identifies the primary and most significant issue in

this case as whether the IRS unlawfully disclosed NOMs 2008 IRS Form 990, Schedule B, and

whether that disclosure resulted in actual damages. [Dkt. 91 at 5.]

NOMs attempt to change the crux of its Verified Complaint rings hollow. Those two issues

were not the primary reasons NOM filed suit. NOMs fee petition cites to paragraph 2 of the Verified

Complaint to support its characterization of the ultimate issue. Id. But paragraph 2 alleged that the

IRS disclosure was part of a deliberate attempt to chill the First Amendment activity of NOM, its

donors, and others who associate with NOM. The IRSs actions constitute gross violations of

NOMs statutory and constitutional rights and have caused appreciable harm to NOM for which must

it be compensated which is not what NOM is saying now in an attempt to win fees. See[Dkt 1


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2.] NOM also repeatedly asserted that the IRS disclosed the return intentionally to third parties,

including NOMs ideological opponent, HRC, as part of an ill-defined conspiracy against it. [Dkt. 1

at 14]; [Dkt. 68-2 at Resps. #1, 6, 7, 9]. Alternatively, NOM alleged that the disclosure was the result

of gross negligence, and that the inspection of the return, which preceded the disclosure at issue,

was also willful or the result of gross negligence. Id.

By way of illustration, the Verified Complaint asserted two counts: (1) Count I alleged a

willful or grossly negligent unauthorized disclosure of its tax return; (2) Count II alleged willful

or grossly negligent unauthorized inspection of its return. Both Counts focus on the requirements

for punitive damages, not the requirement for a finding of negligence.8 Then, in its opposition to the

United States motion, NOM alleged that the IRS unlawfully inspected its return information on at

least eight other occasions.

In granting the United States motion, in part, the Court rejected NOMs arguments. This

Court held that NOM failed to present any evidence that the: (a) disclosure of its 2008 Schedule B

was willful or the result of a conspiracy; (b) disclosure was the result of gross negligence; (c)

disclosure was made to HRC, NOMs ideological opponent; (d) inspection preceding the disclosure

was willful; (e) inspection preceding the disclosure was grossly negligent; and, (f) eight other

inspections NOM identified in response to the motion were unauthorized. Indeed, even assuming

that NOM prevailed in establishing that the IRS negligently disclosed its 2008 Schedule B and that

this resulted in actual damages, NOM only prevailed on two of the eight issues at stake. Under either

8The fact that this case centered on whether the disclosure of NOMs 2008 Schedule B resulted from an intentionaland willful disclosure distinguishes this case fromHuckaby v. United States Dept of Treasury, where the courtfound that the plaintiff was a prevailing party on the most significant issue: an IRS disclosure had in fact occurredbecause a State agency had provided only an oral, and not written, request for the taxpayers information. 804 F.2d297, 299-300 (5th Cir. 1986). Here, the fact of a disclosure was admitted in the Answer and not litigated.


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characterization, NOM cannot establish that it substantially prevailed on the most significant issues

presented in its Verified Complaint.

Nor is NOMs argument assisted by the United States admission, in its Answer, that the IRS

inadvertently disclosed one unredacted copy of NOMs 2008 Schedule B to a single third party-

requestor, entitling it to $1,000 in statutory damages. Without more, this admission does not mean

that NOM substantially prevailed. See Goettee, 192 Fed. Appx. at 223. In Goettee, the taxpayers

contended that the IRS had abused its discretion in waiting 16 months to respond to an offer-in-

compromise. Id.at 221-223. In deciding the underlying substantive tax issues, the Tax Court abated

three months of interest, not the 16 months claimed. Although the plaintiff presented a conflated

abuse-of-discretion claim against the IRS, the Fourth Circuit found that the taxpayer presented a

seriesof claims and that the vast majority of them were decided in the IRS favor. Id.at 223.

Thus, the court affirmed the decision that the taxpayers did not substantially prevail, even though

they proved that the IRS had abused its discretion. Id. Similarly, here, even though the United States

admitted that the IRS inadvertently disclosed the tax return, that admission and a settlement payment

of a fraction of its damages claim does not constitute substantially prevailing when the majority of

NOMs other claims were either decided against it or withdrawn. Thus, the Court should reject that

NOM substantially prevailed.9

9 Moreover, NOMs position that it filed suit to determine that the IRS was the source of the disclosure is belied bythe fact that because of the unique markings on NOMs disclosed return it already knew the IRS was thesource. [Dkt. 1 20-28.] NOM cant have it both ways: either its suit was to determine that the IRS was thesource (a fact it already knew and which we conceded in our Answer), in which case the continuation of its claimsregarding willful conspiracy and gross negligence were unwarranted; or, as is the case, its suit was truly about whatwas pled in the complaint willful conspiracy and gross negligence, issues that the Court dismissed.


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2.

The United States Was Substantially Justified in Successfully Defending Against NOMsFalse Allegations, and its Shifting and Disputed Actual Damages Claims

Because NOMs complaint alleged significantly false facts and claims, the United States was

substantially justified in defending this suit in its entirety, including debunking claims of

governmental conspiracy and gross negligence. NOMs Verified Complaint alleged inspections and

disclosures stemming from a conspiracy or as a result of gross negligence, which, if proven at a trial,

would have subjected the United States to costly punitive damages. As long as NOM pursued those

baseless claims, the government was obligated to zealously represent its client and defend the suit.

After the Court dismissed those claims upon the governments summary judgment motion, the

government quickly settled the remaining issue of actual damages. These actions epitomize a

reasonable defense.

If the Court determines that NOM substantially prevailed and, as shown above, it did not

the Court must still determine that the governments position was not substantially justified in

order to award NOM attorneys fees. 26 U.S.C. 7430(c)(4)(B)(i). A position is substantially

justified if it has a reasonable basis in law and fact or if it is justified to a degree that could satisfy a

reasonable person. Ripley v. Commr, 1998 U.S. App. LEXIS 2732, at *4 (4th Cir. 1998); Secret v.

United States, 373 F. Supp. 2d 619, 629 (N.D. W. Va. 2005) (internal citations omitted); see also

Pierce v. Underwood, 487 U.S. 552, 565 (1988).

Importantly for purposes of NOMs fee petition, In evaluating whether the governments

position is substantially justified under 7430, the relevant position of the government is

exclusively the one taken in the actual litigation. Secret, 373 F. Supp. 2d at 629 (citing Phillips v.

Commr, 851 F.2d 1492, 1499 (D.C. Cir. 1988)) (emphasis added). The starting point for


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identifying the issues presented for litigation is the face of the Complaint. Christian Coalition Intl

v. United States, 133 F. Supp. 2d 437, 439 (E.D. Va. 2001). The fact that the United States might not

succeed on every issue does not establish that its litigation position was not substantially justified.

See Pierce, 487 U.S. at 569 (holding that the United States could take a position that is substantially

justified, yet lose).10

Here, the governments positions were substantially justified throughout the course of this

litigation. NOM brought this civil action under two counts: (1) Count I alleged a willful or grossly

negligent unauthorized disclosure of its tax return; (2) Count II alleged willful or grossly negligent

unauthorized inspection of its return. Both of these claims were unfounded and dismissed upon the

governments motion for summary judgment. But until the Court agreed, NOM was alleging a set of

facts conspiracy with and intentional disclosures to NOMs ideological adversary which, if

proven at a trial, would have subjected the United States to costly punitive damages and significant

non-monetary injury to the IRS reputation. As long as NOM continued to pursue these baseless

claims, the government had to represent its client and defend the suit. See Jones v. United States, 207

F.3d 508, 513 (8th Cir. 2000) (affirming a finding of substantial justification and further observing

that the district court quite rightly concluded that the governments aggressive resistance to the

Joneses various and excessive damages claims, including the claim for punitive damages, was

entirely warranted).

NOM never sought to amend its sworn complaint to remove these counts or claim that the

10 The Court must view the totality of the circumstances and, in so doing, determine that a reasonable person wouldnot find the position taken by the United States justifiable. Pierce, 487 U.S. at 565. While the government bears theburden of proving substantial justification, see 26 U.S.C. 7430(c)(4)(B), the Court should also keep in mind that,at all times, NOM carried the burden to prove all elements of its case for all of its counts.


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IRS was simply negligent in disclosing NOMs tax return. When the Court dismissed both of

NOMs pled counts upon the governments motion for summary judgment, the United States moved

quickly to resolve the remaining issue of actual damages, which was settled less than two weeks

later. The United States defense therefore was reasonable at every phase of the litigation.

Even considering the issue of NOMs actual damages in isolation,11the United States was

substantially justified in defending against those claims. As late as May 13, 2014 (two months after

the close of discovery), NOM agreed that there was a Genuine Factual Dispute as to Whether the

Disclosure of NOMs Return Information Caused Actual Damages, and elected not to file its own

summary judgment motion on the issue of actual damages. [Dkt. 73 at 18.]12

Second, that NOM shifted the amount of damages during discovery adding $46,086 in

attorneys fees as actual damages, dropping the $50,000 claim for a lost donation, and then later

adding eight unauthorized inspections in its summary judgment opposition substantially justified

the United States defending the actual damages claim. Indeed, the actual damages defense caused

NOM to completely remove its highest dollar amount damages claim in the face of a government

motion to compel. Regardless of NOMs rationale about why it withdrew this claim,13

the facts are

11NOMs entire substantial justification argument concerns what the government must have known about NOMsactual damages. [Dkt. 91 at 9-12.] But the Court must measure the governments defense against what was allegedin the complaint, i.e., a willful disclosure of its return directly to its main ideological opponent, HRC. NOM omits

anydiscussion of substantial justification vis--vis NOMs claims of willfulness or gross negligence. NOM ignoresthat the complaints allegations were at odds with what the government knew; therefore, the government needed tooppose the complaint and raise proper legal defenses in response to NOMs overreaching lawsuit.

12NOMs position is thus incongruous: it can hardly maintain that the United States was not reasonable in defending

the actual damages portion of NOMs claim while at the same time conceding that the issue of actual damages wasnebulous enough to be subject to a genuine dispute of fact, which would necessitate a trial before the Court.

13NOMs ostensible rationale would have supported not raising the lost donation claim in the complaint in the firstplace. If it had done so, that issue would not have been considered for prevailing party or substantialjustification. But NOM elected to include that claim in its complaint, and it is therefore relevant.


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simple: (a) NOM pled a lost $50,000 donation; (b) NOM refused to provide any support for such a

proposition; (c) the parties had a frank meet-and-confer where the government threatened a motion to

compel; (d) NOM withdrew the claim and supplemented its interrogatory responses accordingly. As

for this $50,000 damages claim, then, the United States was 100 percent justified in defending

against NOMs unprovable ipse dixitclaim of damages.

With regard to the newly added $46,086.37 in attorneys fees, NOMs argument seems to be

that the government should have known about these damages before NOM disclosed them in an

interrogatory response on January 21, 2014, and then acquiesced the moment NOM identified them

as an actual damage. See[Dkt. 91 at 9-11]; [Dkt. 68-2 at 9]. Of course, that is not what substantial

justification requires; it requires only that the government have a reasonable basis in law and fact for

its position. At the time NOM proffered these new damages, six weeks before the close of discovery,

it was unclear that the damages NOM incurred were necessary. The $46,086.37 included six FOIA

and Privacy Act requests and appeals, and attorneys fees used to lobby on Capitol Hill, the purpose

of which was allegedly to seek information relating to the circumstances of the disclosure and to

testify before Congress. [Dkt. 68-16.] Discovery of and defense against these claims was reasonable

and substantially justified.

Third, NOMs resistance to providing information regarding whether it mitigated its damages

also substantially justified the governments position. The United States primary defense of NOMs

actual damages claim was two-fold (lack of proximate causation and mitigation of any actual

damages). NOM did not fully disclose the extent to which it had received donations in response to

solicitations referring to the disclosure or its lawsuit against the government until April 2, 2014.

Accordingly, from a factual perspective, the United States was substantially justified in raising the


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issue of mitigation until at least that point in the litigation. From a legal perspective, the

governments motion for summary judgment and reply laid out reasonable legal bases for the

application of the mitigation defense and for why the collateral source rule was inapplicable. [Dkt.

68 at 28-30]; [Dkt. 77 at 15-17].14

3. NOMs Fee Request is Unreasonable and Deficient

Even if the Court determines that NOM was the prevailing party and that the United States

was not substantially justified, the Court should award NOM only minimal fees because its request is

facially unreasonable and deficient for a number of reasons.

a. The statutory cap under federal law precludes NOMs requested hourly rates

NOM is incorrect that the hourly rates provided by the Vienna Metro Matrix apply to this

case.15 Instead, the statutory cap regarding attorneys fees in 26 U.S.C. 7430(c)(1)(B)(iii) governs

NOMs petition, and any award of fees must utilize that cap. That Code provision provides that fees

actually paid or incurred cannot be more than $125 per hour unless the court determines that a

special factor . . . justifies a higher rate.

NOMs claim that the few recent cases involving a matter brought pursuant to 26 U.S.C.

14Furthermore, the legislative history clarifies that the point of the substantial justification analysis is to prevent thegovernment from adopting legal positions that it has lost in the Courts of Appeals. S. Rep. 105-174 (1998), at 47;see also Marre v. United States, 117 F.3d 297, 301-02 (5th Cir. Tex. 1997) (This is not a case where thegovernment unreasonably defended [its] position after several earlier courts had rejected it, when the IRS hadignored state law that clearly supported the taxpayer, [or] when the IRS had failed to conduct a reasonableinvestigation that would have revealed the flaw in its position.). This is not the case here. NOM has onlyidentified one case a district court case from Nebraska to support its position that the government lost on arelated issue previously (in a case with completely different facts than those here). [Dkt. 91 at 12.] Moreover,NOM has not cited any case holding against the governments mitigation or its collateral source rule position.

15Mr. Zalls affidavit contains many pages of pure legal argument and factual assertions that should be in NOMsbrief and subject to the 30-page limit the local rules impose. The Court should not condone NOMs attempt atcircumventing that limit, and should strike Zalls affidavit as inappropriate expert testimony. See, e.g., United Statesv. McIver, 470 F.3d 550, 562 (4th Cir. 2006) (expert testimony, which states a legal standard, is inadmissible).


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7431 [do] not apply[] any statutory cap, [Dkt. 91 at 18 n.9], is erroneous. In fact and contrary to

NOMs misrepresentation of the law in the primary case NOM cites via the Affidavit of Barnaby

Zall for this proposition, see id. (citing Zall Aff. 63-65), the courtdidhold that 7430s statutory

cap applied to a case brought under 7431. Snider, 2005 WL 3150761 at *1 (W.D. Mo. 2005).16

In

Snider, the district court explicitly said that it may award fees to plaintiffs counsel pursuant to 26

U.S.C. Section 7430, and that the maximum hourly rate allowed by Section 7430(c)(1)(B)(iii) is

$150.00 for fees incurred in calendar years 2002 through 2005. Id.17 Thus, Sniderinvolved the

straightforward application of the statutory cap outlined in 7430(c)(1)(B)(iii) to a case brought

pursuant to 7431.18

Applying the statutory cap of 7430 to cases brought under 7431 is also supported by the

provisions legislative history. Before 1998, 7431 did not explicitly provide for an award of

attorneys fees for unauthorized inspection or disclosure of tax returns. This ambiguity led to the

16In addition to Snider, the Zall Affidavit cites Callies v. United States, 269 F. Supp. 2d 1189 (D. Ariz. 2003), as arecent case[] on IRC 7431 that does not apply the statutory cap for attorneys fees. [Dkt. 91-2 63 & n.23.]This characterization is also wrong. The district court in Calliesdenied the plaintiffs request for attorneys feesunder 7431(c)(3) because the court concluded that plaintiffs were not the prevailing party and were therefore notentitled to an award of attorneys fees. 269 F. Supp. 2d at 1191. Therefore, the Calliescourtneverconsideredwhether the statutory cap of 7430 applied. Callies fee discussion concerned the reasonableness of counsels feesvis--vis his own clients under a contingency contract, not attorneys fees against the government (indeed there werenone). Id.at 1192. The government had nothing to do with the contingency contract and 7430 was inapplicable.

17While the text of the statute caps the hourly fee rate at $125 per hour, it includes a cost-of-living adjustment,which is why Snideridentified $150 per hour as the cap for those calendar years. Currently, the cap is $180 perhour for 2012 and $190 per hour for 2013 and 2014. SeeIRS Rev. Proc. 2011-52; 2012-41 & 2013-35. Thus, if theCourt were to award any fees, the cap applies absent some special factor (which NOM has not claimed).

18As Zall notes, the Snidercourt approved higher rates than the statutory cap. [Dkt 91-2 63.] This does not mean,however, as Zall claims, that the court did not apply the cap. See id. Again, the courts opinion makes clear that the

court applied the cap in accordance with the statutory language, which allows for an increase under certainexceptional circumstances. See Snider, 2005 WL 3150761, at *1 (Unless the Court determines that a higher rate isjustified . . . the maximum hourly rate allowed by Section 7430(c)(1)(B)(iii) is $150.00 . . . .). Thus, the Snideropinion only proves that the cap applies, but that certain exceptional factors which NOM has not claimed here could justify a fee higher than the one provided for by 7430(c)(1)(B)(iii).


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development of a circuit split on the question of whether attorneys fees were properly awardable in

such cases. CompareHuckaby, 804 F.2d at 298 (attorneys fees provisions of 7430 applied to a

7431 case), withMcLarty v. United States, 6 F.3d 545 (8th Cir. 1993) (taxpayer may not recover

fees). Congress resolved the split by adding 7431(c)(3) to the Code, which explicitly provided for

attorneys fees in connection with unauthorized disclosure cases.19 SeeInternal Revenue Service

Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112 Stat. 685. The interconnectedness

of these two adjacent statutes is underscored by the structure of the 1998 Act itself; the addition of

7431(c)(3) was one of several changes to 7430 and 7431, all of which were subsumed under the

single heading Expansion of authority to award costs and certain fees. This history demonstrates

that Congress intention in adding 7431(c)(3) to the Code was solely to Clarif[y] that the award of

attorneys fees is permitted in actions for civil damages for unauthorized inspection or disclosure of

tax returns. SeeH.R.Conf. Rep.105-599 (1998). There is no indication that Congress meant to

sever 7431 from the limitations on awards of attorneys fees provided by 7430, which would

amount to the grant of significantly more expansive fees in 7431 cases than in other 7430 cases.

Moreover, any ambiguity in either the statutes or their legislative history must be resolved in

favor of the United States. Section 7431 is a limited waiver of sovereign immunity, and waivers of

sovereign immunity must be strictly construed in favor of the government. See, e.g.,Goettee, 192

Fed. Appx. at 222 (noting that 7430 renders the United States liable for attorneys fees for which it

19Congress explained the change by stating that it believe[d] that when the IRS violates taxpayers right to privacyby engaging in unauthorized inspection or disclosure activities, it is appropriate to reimburse taxpayers for the costsof their damages and noting that, under the previous law, [t]he Federal appellate courts [were] split over whether aparty who substantially prevails over the United States in an action under Code section 7431 is eligible for an awardof fees and reasonable costs. S.Rep. No. 105-174, at 47 & n.28, 48 (1998).


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would not otherwise be liable, and therefore amounts to a partial waiver of sovereign immunity

[and] must be strictly construed in favor of the United States) (quotingArdestani v. INS, 502 U.S.

129, 137 (1991)). Thus, even if the Court were to question the applicability of the statutory cap to

7431, the Court must resolve that question in the governments favor. SeeFAA v. Cooper, 132 S. Ct.

1441, 1448 (2012) (waiver of immunity must be unequivocally expressed in the statutory text;

otherwise, ambiguity is resolved using the interpretation most favorable to the Government).

Indeed, construing the attorneys fees provisions of 7431(c)(3) to mean that there is no

hourly cap would not only make the fee provision of 7431 significantly more expansive than

7430, it would also make the fee provision of 7431 more extensive than the Equal Access to Justice

Act (EAJA), which generally caps the allowable hourly rate for attorneys fees at $125 per hour.

28 U.S.C. 2412(b), (d)(2)(A). Before 1982, EAJA was the sole authorization for the award of

attorneys fees to prevailing parties in civil tax cases. See McLarty, 6 F.3d at 548. In 1982, Congress

enacted 7430 and made it the exclusive provision for the award of attorneys fees in the

governments civil tax litigation, id., which lasted until Congress resolved the circuit split by adding

7431(c)(3) to the Code. It is unlikely that Congress expanded 7431 beyond both 7430 and

EAJA without any express provision or discussion in the legislative history. NOM has proffered no

evidence that Congress intended this result, and any ambiguity must be construed in the

governments favor. Thus, to the extent the Court awards any fees, the statutory cap on the hourly

rate for attorneys fees under 7430(c)(1)(B)(iii) applies.

b.

NOMs attorneys fees for actual damages claims are wholly distinct from its

bills relating to its unsuccessful claims of willfulness and gross negligence

After determining the governing hourly rate, the court then should subtract fees for hours


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spent on unsuccessful claims unrelated to successful ones. SeeRobinson v. Equifax Info. Servs.,

LLC, 560 F.3d 235, 244 (4th Cir. 2009). This Court should reject NOMs attempt to have the

taxpayers pay for its poor exercise in billing judgment. While NOM had every opportunity to prove

that a conspiracy caused the disclosure or that the disclosure was grossly negligent, it utterly failed at

that task even after 31 timekeepers spent 3,000 hours and generated over a million dollars in fees.

NOM simply has not established that its actual damages claims are interconnected with its other

claims or that they arose from a common core of facts. Because NOM cannot prove otherwise, this

Court should reject its attempt to lump its fees together.

While the United States recognizes that, in certain circumstances, a prevailing party may be

entitled to fees spent litigating unsuccessful claims, see Hensley, 461 U.S. at 440;Abshire v. Walls,

830 F.2d 1277, 1283 (4th Cir. 1987), this is simply not one of those cases where the claims of

negligence and actual damages involved a common core of facts. The United States admitted in its

Answer that the IRS inadvertently disclosed NOMs 2008 Schedule B; thus, negligence was not at

issue. NOM has not established how discovery related to its punitive damages claims the

remaining liability issue along with the inspections claims impacted its actual damages claim.

Though NOM asserts that the facts supporting its willfulness/gross negligence theories were

inextricably intertwined with the facts supporting NOMs successful claims, it has not shownhow

the facts were intertwined. See[Dkt. 91 at 22]. Given that NOM was takingaffirmativediscovery

on the disclosure claim but wasrespondingto discovery on actual damages, the opposite is true.

In reality, the facts regarding the claims of willfulness/gross negligence and the claims for

actual damages were not at all intertwined involving different witnesses, different evidence, and

even a different time period as all of the claimed damages occurred well over a year after the


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disclosure.20

Most tellingly, had NOM simply not brought its willfulness/gross negligence claims,

nearly all of the work that its attorneys completed and for which it seeks compensation would

never have happened. This is not a case where the same work would have occurred regardless of

whether a particular unsuccessful claim was brought. See Hensley, 461 U.S. at 435 (explaining that

the Courts concern with regard to a common core of facts or related legal theories is purely a

practical consideration that it may be difficult to divide the hours expended on a claim-by-claim

basis). Rather, there is a clear delineation here, and the evidence and witnesses regarding whether

there was a conspiracy do not overlap with the evidence and witnesses regarding whether NOM

suffered damages more than a year later.

The cases NOM relies upon simply do not support an expansive interpretation that would

reward it for filing an action based primarily on groundless allegations. Although NOM relies

heavily onHensley, the Court stated that limited success should severely limit fees:

[If] a plaintiff has achievedonly partial or limited success, the product of hoursreasonably expended on the litigation as a whole times a reasonable hourly rate maybe an excessive amount. This will be true even where the plaintiff's claims wereinterrelated, nonfrivolous, and raised in good faith. Congress has not authorized anaward of fees whenever it was reasonable for a plaintiff to bring a lawsuit orwhenever conscientious counsel tried the case with devotion and skill. Again, themost critical factor is the degree of success obtained.

Hensley, 461 U.S. at 436; see also id.at 440 (We hold that the extent of a plaintiffs success is a

crucial factor in determining the proper amount of an award of attorneys fees).

Here, where NOM has not established that its claims for punitive damages and wrongful

inspections related to its actual damages claims, especially where the United States conceded a

20Indeed, NOMs will call witness list dropped from twelve witnesses to a single witness its own President once the Court determined that NOM could not go forward on its willfulness/gross negligence claims. [Dkt. 84]


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violation of 6103, this Court should reject NOMs argument. Instead, this Court should follow the

holding inHensleythat, where a plaintiff has not prevailed on a claim that is distinct in all respects

from his successful claims, the hours spent on the unsuccessful claim should be excluded in

considering the amount of a reasonable fee Id.at 440. Even if NOM establishes some common

factual core, this Court should limit its award to what is reasonable. See id.(where the plaintiff

achieved only limited success, the district court should award only that amount of fees that is

reasonable in relation to the results obtained).21

Other cases NOM cites do not support its position. InMallas v. United States, the attorneys

initially represented ten plaintiffs and spent 1100 hours in their representation. 876 F. Supp. 86, 89

(M.D.N.C. 1994). Due to the difficulty in separating the work for each plaintiff and their respective

claims, the court grouped the plaintiffs into different categories and then awarded Mallas attorneys a

share of the fees Mallas paid on behalf of all the plaintiffs.22 Similarly, the other two cases NOM

cites are distinguishable, because, unlike here, the claims were all based on the same evidence and

witnesses. See Tech Sys. v. Pyles, 2013 U.S. Dist. LEXIS 110636 (E.D. Va. Aug. 6, 2013)

(explaining in detailwhy the same evidence and witnesses was necessary for both claims covered

21If this Court concludes that NOM is entitled to recover the fees resulting from any limited success on the issue ofactual damages, the most reasonable way to approach this matter is to recognize that NOM spent almost all of itstime taking affirmative discovery against the United States and third parties almost none of which had to do withthe issue of actual damages and spent almost no time defending against the governments discovery requests,which would have separately involved its claim of willfulness / gross negligence and its claims for damages. Cf.[Dkt. 91 at 21 n.13] (NOM recognizes this possibility but does not perform this breakdown in its motion). TheCourt could thus direct NOM to submit a new fee petition solely for the time it spent proving its successful damagesclaims or responding to the governments discovery regarding the same. Steven N.S. Cheung, Inc. v. United States,

2007 U.S. Dist. LEXIS 85488, at *24 (W.D. Wash. Jan. 17, 2007) (directing plaintiff to file amended petition,without any further briefing, for fees under 7430).

22Interestingly, inMallas, the attorneys worked only 1100 hours in order to represent tendifferent plaintiffs. TheMallascourt awarded $48,751 in fees and costs on a $73,000 statutory damages award (almost 67 %). UsingMallasas a guide, NOM would be entitled to $33,391 in fees on $50,000.


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and uncovered by attorney fee provisions);Emplrs Council on Flexible Comp. v. Feltman, 2010 U.S.

Dist. LEXIS 2744 (E.D. Va. Jan. 13, 2010) (similar).

c.

NOMs unsuccessful claims dominated this case, and consequently, it did notenjoy a significant degree of success overall

After a court subtracts fees for unsuccessful claims, it may award some percentage of the

remaining amount, depending on the [plaintiffs] degree of success. Robinson, 560 at 244. (internal

quotations omitted). Because the degree of success obtained by the plaintiff is the most critical

factor in determining the reasonableness of a fee award, the district court may simply reduce the

award to account for the limited success. Lilienthal v. City of Suffolk, 322 F. Supp. 2d 667, 675

(E.D. Va. 2004) (quoting Hensley, 461 U.S. at 436-37). A reduced fee award is appropriate if the

relief, however significant, is limited in comparison to the scope of the litigation as a whole.

Signature Flight Support Corp. v. Landow Aviation L.P., 730 F. Supp. 2d 513, 528 (E.D. Va. 2010)

(Cacheris, J.) (internal citation omitted).

As stated above in the prevailing party section, NOM did not succeed on any claims in this

case, including the majority of its damages claim after accounting for all amounts asserted under its

theories. Seesupraat 9-14. But assuming that the Court disagrees, at a minimum, NOM was

unsuccessful concerning its claim: (a) that the disclosure of its 2008 Schedule B was willful or the

result of a conspiracy; (b) that the disclosure was the result of gross negligence; (c) that the

inspection preceding the disclosure was willful; (d) that the inspection preceding the disclosure was

grossly negligent; (e) that the eight other inspections identified in response to the governments

summary judgment motion were unauthorized; and, (f) that it suffered a $50,000 damage as a result

of a lost donation. The only claims it was marginally successful on were the claims relating to the


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Karger Complaint ($12,500), and its claims for attorneys fees spent in sending the government FOIA

and Privacy Act requests, and lobbying Congress ($46,086.37).

Thus, at most, NOM was successful on two of eight separate issues (and that assumes that the

Court does not count the eight post-disclosure inspections as separate issues). Even if the Court were

to award fees for these two discrete issues, it should take into consideration the time NOM spent

litigating these two issues in this case. This should be a de minimusamount considering that the vast

majority of NOMs fees were spent trying to unsuccessfully prove its claims of conspiracy and gross

negligence, and that NOM was fully in control of the information relating to its claims for damages,

and thus, need not have expended significant time and effort.

d. NOMs billing records involve block billing, inappropriate billing increments

and insufficient descriptions, and must be significantly reduced

NOMs billing records are insufficient and warrant a significant percentage decrease in any

award the Court may provide. Most notably, a number of NOMs counsel engaged in significant

block billing and provided time entries that are too vague for the Court to make a reasoned

determination of whether the time spent on tasks was appropriate.23 As this court has previously

stated, Inadequate documentation practices like block billing or lumping are a proper basis for

reducing a fee because they prevent an accurate determination of the reasonableness of the time

expended in a case. Ebersole v. Kline-Perry, 2012 U.S. Dist. LEXIS 138659, at *14-15 (E.D. Va.

Sept. 26, 2012) (Cacheris, J.) (internal citations omitted) (citing cases and noting that courts apply a

23Moreover, Mr. Davis, who billed over 300 hours, billed in half-hour increments, and Messrs. Torchinksy andSheehy, who billed over 200 hours in total, billed in quarter-hour increments. [Dkt. 91-3 at 54.] All of these areplainly inappropriate, and thus, a significant reduction to these attorneys hours is warranted. SeeBroyles v. Dir.,OWCP, 974 F.2d 508, 510-11 (4th Cir. 1992) (cited inEastern Associated Coal Corp. v. Dir., OWCP, 724 F.3d 561,576 (4th Cir. 2013)) (both expressing concern about attorneys billing in quarter-hour increments).


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10% to 25% block billing reduction). Here, a review of the records indicates that at least the

following attorneys habitually block billed their time in this matter: Ms. Mitchell and Messrs. Davis,

Torchinsky and Sheehy. Those four timekeepers equal 556 hours of time, after NOMs final

adjustments. See[Dkt. 91-3 at page ID 1878.]

Separately, with regard to vague or insufficiently detailed time entries, Where the

documentation of hours is inadequate, the district court may reduce the award accordingly. Hensley,

461 U.S. at 433; see alsoAbusamhadaneh v. Taylor,2013 U.S. Dist. LEXIS 7451 at *63-64 (E.D.

Va. Jan. 17, 2013) (Cacheris, J.) (reducing fee award for insufficiently descriptive documentation of

tasks). Many of the time entries here are vague and cannot provide the Court with a basis to

determine whether the time spent was appropriate or reasonable, as detailed by way of example in

the chart below. Dozens of other examples like the ones below exist in NOMs billing records,

requiring further reduction in an award if one were warranted.

Date Attorney Description Time

11/29/2012 Phillips Collect and organize research 0.3

9/5/2013 Davis Review correspondence. 0.509/25/2013 Torchinsky Call with Cleta; Correspondence. 0.75

9/27/2013 Torchinsky Correspondence re: filing. 0.75

10/30/2013 Phillips C JAV re LR into pre-answer discovery. 0.2

12/20/2013 Torchinsky Correspondence re: discovery issues. 0.75

12/23/2013 Torchinsky Correspondence re: discovery matters. 0.75

1/7/2014 Davis Conference call with Bruce Brown; conference call withDOJ.

2.00

3/13/2014 Torchinsky Correspondence re: deposition prepare. 0.75

e. In the final analysis, NOMs fees are unreasonable, and represent an overstaffed

and over-litigated case

NOMs fee request is unreasonable for additional reasons. NOM spent, and is seeking to

have the American taxpayer pay for,over a yearof researching, discussing, and drafting a severely


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flawed complaint. See[Dkt. 91-2] (start date for billing was September 19, 2012); [Dkt. 1] (case

filed October 3, 2013). There are hundreds of entries, covering the first nine pages of Dkt. 91-2,

which relate to a complaint that proved consistently wrong in its allegations.

Second, NOM is claiming that it was reasonable to spend $691,000 in attorneys fees to

collect $50,000 in damages. This is facially unreasonable. See Fiolek v. Tucson Unified School Dist.,

2004 WL 3366149, *5 (D. Ariz. Sep. 10, 2004) (reducing fee request by about one-third because fees

sought were seven times higher than the damages awarded the plaintiff).24 NOM tries to justify this

expenditure by claiming that the IRS had a bunker mentality and engaged in hardball tactics in

this case. [Dkt. 91-2 at 20-25, 53.] Nothing could be further from the truth. Far from a bunker

mentality, the government in this case produced thousands of pages of documents in response to

discovery requests, responded in detail to interrogatories, and took no actions to hinder the taking of

any depositions of any government or third-party witnesses. In fact, NOM learned the identity of the

person responsible for the inadvertent disclosure and took that persons deposition. NOM also took

the deposition of the TIGTA agent primarily responsible for the investigation of the disclosure, as

well as a manager in the IRS Exempt Organizations division, and the database systems administrator

relating to the disclosure at issue. Name-calling aside, NOM has made no specific allegation that the

manner in which the government conducted itself in this case was anything other than responsive,

reasonable and cooperative.

Third, NOM overstaffed this case. While NOM is only seeking fees for seven attorneys out

of 31 timekeepers, even seven attorneys were unnecessary to reach the result NOM obtained. See

24And, this fact also undercuts NOMs argument that actual damages were the key issue. If damages were the keyissue, NOM never would have spent that amount of money to establish those limited damages.


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Abusamhadaneh, 2013 U.S. Dist. LEXIS 7451 at *65-66 (noting that the Fourth Circuit has been

sensitive to the need to avoid use of multiple counsel for task where such use is not justified by the

contributions of each attorney).

25

As further evidence of the overbilling, even after reducing its

billing, NOM still has over 150 entries and 165 hours related to its summary judgment opposition. A

30-page response brief should not require that much time.26

CONCLUSION

In sum, the Court should deny Plaintiffs attorney fee petition for several reasons. NOM is

not the prevailing party, either with regard to the amount in controversy or the most important issues

presented. Moreover, the United States was substantially justified in its defense of this case, which

alleged conspiracy and flagrant violations of federal law. Finally, should the Court even reach the

issue of a reasonable fee amount, NOMs fee application is deficient, filled with overstaffed and

overbilling attorneys, and utilizes an excessive hourly rate in contravention of federal law.

25As explained in footnote 4, NOM expended 800hours and$300,000between April 2, 2014 which wasafterdiscovery closed and the end of the case. Although we have the billing records, it is still unclear how NOMgenerated this excessive time. The sheer fact that timekeepers spent so much time between April 2nd and July 25thunderscores the haphazard manner in which NOM litigated this case, regardless of whether it is seeking those fees.

26Other problems also abound: (a) NOM researched whether it could bring aBivensclaim, which it never brought,and thus was unrelated and unnecessary; (b) NOM spent time taking the depositions of two third-party witnesseswhere counsel knew that they would invoke their 5th Amendments rights, and that no adverse inference wouldattach to the government; (c) NOM should not recover fees for its Chairman, Dr. Eastmans, work as a litigant andnot an attorney, see, e.g., [Dkt. 91-2 at 90] (1/15/2014) Review personal files for documents responsive todiscovery requests (4.0); (d) NOM habitually billed for multiple attorneys to attend nearly every deposition,including four for the depositions of all government witnesses and three todefendits own 30(b)(6); and, (e) NOMsfees for preparing its petition are themselves unreasonable, see Feltman, 2010 U.S. Dist. LEXIS 2744 at *20(reducing time spent on fee petition by 50% where firm spent 43.5 hours and $16,012 to prepare petition). Finally,while NOM claims that counsel is representing itpro bono, it failed to attach a copy of NOMs fee arrangement with

the firms / public interest groups that represented it in this suit. SeeAbusamhadaneh, 2013 U.S. Dist. LEXIS 7451at *37 ([T]o be incurred within the meaning of a fee shifting statute, there must also be an express or impliedagreement that the fee award will be paid over to the legal representative.). In order to ensure that NOM (who willreceive any fee award as the prevailingparty) has paid or incurred the services of an attorney, the Court mustsatisfy itself that NOM is contractually obligated to pay its attorneys the previously agreed-upon fee. See id. NOMhas not adequately demonstrated that here.


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August 8, 2014 TAMARA W. ASHFORDActing Assistant Attorney General,Tax Division

PHILIP M. SCHREIBER*CHRISTOPER D. BELENTrial Attorneys, Tax DivisionU.S. Department of JusticePost Office Box 14198Ben Franklin StationWashington, DC 20044(202) 514-6069 (Mr. Schreiber)(202) 307-2089 (Mr. Belen)Fax: 202 514-9868E-Mail: [email protected]

[email protected]

BENJAMIN L. TOMPKINS*Assistant United States AttorneyUnited States Attorneys Office for theCentral District of CaliforniaFederal Building, Suite 7516300 North Los Angeles StreetLos Angeles, CA 90012Telephone: (213) 894-6165Facsimile: (213) 894-0115

E-mail: [email protected]

DANA J. BOENTEUNITED STATES ATTORNEY

/s/David MoskowitzAssistant U.S. Attorney2100 Jamieson AvenueAlexandria, Virginia 22314Telephone: (703) 299-3845

Fax: (703) 299-3983E-Mail: [email protected]

Attorneys for the United States of America

* Admittedpro hac vice


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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on August 8, 2014, I will electronically file the foregoing with the

Clerk of Court using the CM/ECF system, which will send a notification of electronic filing to the

following:

Jason TorchinskyShawn Toomey SheehyHoltzman Vogel Josefiak PLLC45 North Hill Drive, Suite 100Warrenton, VA 20186(540) 341-8808 (telephone)(540) 341-8809 (fax)

[email protected]@hvjlaw.com

/s/David MoskowitzAssistant U.S. Attorney2100 Jamieson AvenueAlexandria, Virginia 22314Telephone: (703) 299-3845Fax: (703) 299-3983E-Mail: [email protected] for the United States


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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

The NATIONAL ORGANIZATION FOR

MARRIAGE, INC.,

Plaintiff,

v.

The UNITED STATES OF AMERICA,

INTERNAL REVENUE SERVICE,

Defendants.

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

Plaintiffs Initial Disclosures Pursuant to F.R.C.P 26(a)(1)

Plaintiff National Organization for Marriage, Inc. (NOM), by and through itsundersigned counsel, hereby submits the following initial disclosures pursuant to F.R.C.P.26(a)(1)(A):

Individuals Likely to Have Discoverable Information

1.

Mr. Brian Browna. Contact through Counsel.b. Mr. Brown is the Executive Director of NOM and as such is likely to have

discoverable information relating to the claims, occurrences, and damages allegedin the Complaint.

2. Mr. Joseph Solmonesea. Managing Director, Gavin/Solmonese

1050 Connecticut Avenue, N.W.Washington, D.C. 20036

b.

Phone: (202) 772-3172c. Mr. Solmonese was the President of the Human Rights Campaign (HRC) at the

time that Plaintiffs return and return information, allegedly disclosed by the IRSwithout authorization, was published by HRC and the Huffington Post. As such,

Mr. Solmonese is likely to have discoverable information relating to theunauthorized disclosure and subsequent publication of Plaintiffs return and returninformation.

3. Mr. Matthew Meisela. c/o Harvest Power, Inc.

Case 1:13-cv-01225-JCC-IDD Document 92-1 Filed 08/08/14 Page 1 of 6 PageID# 2066

Defendant

Exhibit

_____________1

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2

221 Crescent St., Suite 402Waltham, MA 02453

b. Phone: (781) 314-9500c. According to media reports on the House of Representatives Ways and Means

Committees investigation of the IRS, Mr. Meisel was the recipient of Plaintiffs

return and return information, allegedly disclosed by the IRS withoutauthorization. As such, Mr. Meisel is likely to have discoverable informationrelating to the unauthorized disclosure and subsequent publication.

4.

Representative(s) of the Human Rights Campaigna. 1640 Rhode Island Avenue, N.W.

Washington, D.C. 20036-3278b. Phone: (202) 628-4160c. On March 30, 2012, HRC published Plaintiffs return and return information that

was allegedly disclosed by the IRS without authorization. As such, HRC is likelyto have discoverable information relating to the unauthorized disclosure and

subsequent publication.

5. Representative(s) of the Huffington Posta. 770 Broadway

New York, New York 10003

b. Phone: Plaintiff does not have the telephone number for the Huffington Post in itspossession at this time.

c. Also on March 30, 2012, the Huffington Post published Plaintiffs return andreturn information that was allegedly disclosed by the IRS without authorization.As such, the Huffington Post is likely to have discoverable information relating tothe unauthorized disclosure and subsequent publication.

6.

Mr. Fred Kargera. 3699 Wilshire Boulevard, Suite 1290

Los Angeles, California 90010

b. Phone: Plaintiff does not have the telephone number for Mr. Karger in itspossession at this time.

c. In a complaint to the California Fair Political Practices Commission, Mr. Karger

republished Plaintiffs return and return information that was allegedly disclosed

by the IRS without authorization. As such, Mr. Karger is likely to have

discoverable information relating to the subsequent publication of disclosed

information and the damages incurred by Plaintiff.

7. Mr. William Wilkins, IRS Chief Counsela. Department of the Treasury

Internal Revenue Service

1111 Constitution Avenue, N.W.Washington, DC 20224


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b. Phone: 202-803-9000c. Mr. Wilkins is the Chief Counsel of the IRS and as such is likely to have

discoverable information relating to the internal investigation regarding the

alleged unauthorized disclosure of Plaintiffs return and return information.

8.

Mr. Russell George, Treasury Inspector General for Tax Administrationa. Department of the Treasury

Internal Revenue Service

1111 Constitution Avenue, N.W.Washington, DC 20224

b. Phone: 202-803-9000c.

Mr. George is the Treasury Inspector General for Tax Administration. Mr.

George and his office conducted an investigation into the alleged unauthorized

disclosure of Plaintiffs return and return information. Mr. George is likely to

have discoverable information related to facts in this matter.

9.

Unknown Representative(s) of the Internal Revenue Servicea. Address and phone number currently unknown.

b. Certain currently-unknown representatives of the Internal Revenue Service may

have discoverable information relating to the alleged unauthorized disclosure of

Plaintiffs return and return information, the training of IRS employees who have

inspected and/or disclosed Plaintiffs return and return information, the policy of

the IRS regarding the disclosure of returns and return information, the reason(s)

or motivation(s) for the inspections and disclosures, and any interaction with the

White House or any other government agencies regarding the targeting of

nonprofit organizations such as Plaintiff.

10. Unknown Representative(s) of the White House

a. Address and phone number currently unknown.

b. Certain currently-unknown representatives of the White House may have

discoverable information relating to the alleged unauthorized disclosure of

Plaintiffs return and return information, the reason(s) or motivation(s) for the

inspections and disclosures, and any interaction with the White House or any

other government agencies regarding the targeting of nonprofit organizations such

as Plaintiff.

11. All individuals listed in Defendant United States of Americas disclosures pursuant to

F.R.C.P. 26.

12. All individuals necessary or appropriate to impeach or rebut any statements or allegations

made by Defendant or any of its witnesses.


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13. All individuals necessary to authenticate any evidence.

Documents, Electronically Stored Information, and Tangible things in the Possession,

Custody, or Control of Plaintiff

All documents are located at the office of Plaintiffs counsel, ActRight Legal Foundation, andlocated at 209 West Main Street, Plainfield, IN 46168. ActRight Legal Foundations telephonenumber is (317) 203-5599.

1. NOM Formation Documents

2. NOM 2008 990 (with redacted Schedule B)

3. Screen shots of HRC article

4.

Screen shots of Huffington Post article

5. Online news articles relating to alleged unauthorized disclosure

6. Copies of letters from Members of Congress to the IRS and to TIGTA requesting

investigations of the alleged unauthorized disclosure.

7.

Correspondence regarding TIGTAs subsequent investigation, referred to as Complaint

Number 63-1204-0051-C.

8. Fred Kargers complaint to the California Fair Political Practices Commission

9. Financial Records related to NOMs legal fees and expenses

10.TIGTA and IRS Letters In Response to Plaintiffs Freedom of Information Act and

Privacy Act Requests

Computation of Damages

1. Plaintiff seeks damages pursuant to 26 U.S.C. 7431(c) in an amount equal to the greater

of: $1,000 for each act of unauthorized inspection or disclosure of its return or returninformation; or the sum of the actual damages sustained by Plaintiff as a result of such

unauthorized disclosure, plus punitive damages.

2. Actual damages are calculated as follows:

a. Lost contributions exceeding $50,000.

Mr. Brown will testify as to the lost contributions that resulted from the alleged illicit

disclosure.

b. Attorney fees and costs in prosecuting the legal complaint filed with the

California Fair Political Practices Commission amount to $12,500.

Documents supporting this amount are in possession of ActRight Legal Foundation,located at 209 West Main Street, Plainfield, IN 46168. The documents consist of legal invoices


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and an affidavit from the attorney managing the litigation in California. Plaintiff asserts thatatthe very leastportions of the legal invoices are protected under the Attorney-Client privilege. SeeChaudhry v. Gallerizzo, 174 F.3d 394, 402-404 (4th Cir. 1999) (holding that the Attorney Clientprivilege extends to bills that include information about litigation strategy, legal research, mentalimpressions, conclusions, and legal theories about a case).

Attorneys fees and costs in prosecuting this legal matter are not included in the $12,500.

Total actual damages, therefore, are at least $62,500 and continue to climb as NOM prosecutes

this matter.

3. Plaintiff is unable to calculate punitive damages at this time. Consistent with the Rules,

Plaintiff reserves the right to supplement these disclosures as warranted by further

discovery and required by F.R.C.P. 26(e).

4.

Costs and attorneys fees pursuant to 26 U.S.C. 7431(c).

Insurance AgreementsNot applicable.

Plaintiff reserves the right to supplement these disclosures as warranted by further discovery and

required by F.R.C.P. 26(e).


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Respectfully submitted this 20th day of December, 2013.

/s/Jason Torchinsky

Jason Torchinsky (Va. 47481)Shawn 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

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

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

* Admitted Pro Hac Vice


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Schreiber, Philip M. (TAX)

From: Kaylan Phillips

Sent: Monday, February 03, 2014 12:33 PM

To: Schreiber, Philip M. (TAX)

Cc: [email protected]; [email protected]; [email protected];

[email protected]; [email protected]; [email protected];

[email protected]; [email protected]; Tompkins, Benjamin L. (TAX);Moskowitz, David (USAVAE); Belen, Christopher D. (TAX)

Subject: RE: NOM - Responses to Defendant's First Set of Discovery Requests

Phil,

Bill Davis and I are available to meet Wednesday morning before the deposition. How about 11:15 inthe Foley office?

When you arrive, please go to the 6thFloor to be checked in. Also, please send me a list of the

individuals attending on behalf of the Government so that your names will be put on the list.

Kaylan

Kaylan L. PhillipsLitigation Counsel

ActRight Legal Foundation209 W. Main StreetPlainfield, IN 46168(317) [email protected]

www.actrightlegal.org

The above communication is confidential and may be protected by the attorney-client privilege and/orthe work product doctrine. If you believe you received this email by mistake, please notify the senderby return email as soon as possible.

From:Schreiber, Philip M. (TAX) [mailto:[email protected]]Sent:Thursday, January 30, 2014 11:50 AMTo:Kaylan PhillipsCc:[email protected]; [email protected]; [email protected]; [email protected]; [email protected];[email protected]; [email protected]; [email protected]; Tompkins, Benjamin L. (TAX); Moskowitz,David (USAVAE); Belen, Christopher D. (TAX)

Subject:RE: NOM - Responses to Defendant's First Set of Discovery Requests

Kaylan,

IhopeyouhadasafeandeasytripbackfromUtah. Canyoupleaseadvisewhetheryouareavailabletomeetand

conferWednesdaymorningbeforeMr.Meiselsdepositionregardingyouremailbelowand,morebroadly,the

positionsNOMhastakenconcerningitsdiscoveryresponses?

Kindregards,


Defendant

Exhibit

_____________2

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2

PhilSchreiber

From:Kaylan Phillips [mailto:[email protected]]

Sent:Monday, January 27, 2014 4:15 PM

To:Schreiber, Philip M. (TAX)Cc:[email protected]; [email protected]; [email protected]; [email protected]; [email protected];[email protected];[email protected]; [email protected]; Tompkins, Benjamin L. (TAX); Moskowitz,David (USAVAE); Belen, Christopher D. (TAX)Subject:RE: NOM - Responses to Defendant's First Set of Discovery Requests

Phil,

Thank you for your email. Please see our responses to your questions below. Please let me know ifa phone call would be helpful to clarify/discuss any of these matters further.

First, NOM did not wholly withhold any documents on the basis of its Constitutional right topetition the government objection. Although, such communications are marked "Confidential"pursuant to the parties' agreement.

Second, pursuant to its First Amendment Privilege, NOM is withholding the names of any NOMdonor, including the donor who stopped financially supporting NOM following the Government'sunauthorized disclosure. Regarding that specific donor, NOM states that there are no documentsregarding the donor's cessation of financial support. NOM will provide testimony in order to supportthis portion of its actual damages.

The Government's RPFs 20, 23-25 and Interrogatories 15 and 16 seek documents andinformation that is, among other objections, irrelevant and not reasonably calculated to lead to thediscovery of admissible evidence. As we stated on our phone conference on January 7, we believethat documents or information relating to NOM's fundraising activities are wholly irrelevant to anyclaim or defense in this case. Despite our numerous relevancy and other objections to many of theGovernment's requests, NOM