THE CONTINUING ATTORNEYS' FEES MESS
To the Editor:
I enjoyed James Serven's article, "Oral Argument in Hukkanen-Campbell:
Taxpayers' Last Stand?" Tax Notes, Nov. 5, 2001, p. 854. Apart from providing
useful background on the status of the cases in the various circuits, Professor
Serven provides interesting insight into the oral argument in Hukkanen-Campbell.
More fundamentally, he states plainly some of the theoretical underpinnings
for the decisions in the Fifth, Sixth, and Eleventh Circuits for not requiring
plaintiffs to include the amount of contingent attorneys' fees in their
own income.
I have only a couple of observations. First, we need more plain speaking
on this topic (and perhaps we need to carry a big stick). I especially
liked Professor Serven's statement that "[t]here is simply no public policy
or conceptual theory by which the denial of a deduction under the AMT for
the attorney's fees so incurred can be plausibly defended." Id. at 859.
Hukkanen-Campbell involves an award under the Age Discrimination
and Employment Act (ADEA). Fee-shifting provisions, such as those in the
ADEA which call for fees to be awarded to the prevailing party, not directly
to the attorney, arguably should change the result. It may be possible
to alter this by contract, and a panoply of state law cases deal with the
entitlement of attorneys to fee awards in a variety of causes of action
(in California, for example, see Flannery v. Prentice, et al., 26 Cal.
4th 572 (Cal. S.Ct. 2001). Thus far, courts have not been especially persuaded
by the existing law concerning attorneys' fee awards and liens over or
ownership of the awards. Recently, that issue was thoroughly argued --
unsuccessfully -- by the taxpayer and the amicus curiae in Sinyard v. Commissioner,
88 AFTR2d Par. 2001-5350, Doc 2001-24862 (15 original pages), 2001 TNT
188- 11 (9th Cir. 2001).
Some practitioners (including me) hoped that the Supreme Court would
resolve this split in the circuits. As more and more cases are decided,
many of them adverse to taxpayers (including the Seventh Circuit's recent
harsh decision in Kenseth v. commissioner, 259 F.3d 881, 88 AFTR2d Par.
2001-5153, Doc 2001-21203 (4 original pages), 2001 TNT 154-9 (7th
Cir. 2001), I am less hopeful. The Supreme Court has denied certiorari
in at least one case, Coady v. Commissioner, 213 F.3d 1187, Doc 2000-16766
(7 original pages), 2000 TNT 117-9 (9th Cir. 2000), cert. denied
Doc 2001-10983 (4 original pages), 2001 TNT 74-2 (April 16, 2001).
I do not know why the Supreme Court denied cert. in this case, but it is
not a hopeful sign. Perhaps the emphasis on state law has dissuaded the
Supreme Court from weighing in.
In the meantime, cries to Congress are not out of order. Despite
nearly universal condemnation for the individual AMT, Congress seems more
interested in the corporate AMT. Go figure. Maybe somebody should adopt
the line from the movie "Network": "I'm mad as hell and I'm not going to
take it any more."
Very truly yours,
Robert W. Wood
The Continuing Attorneys’ Fees Mess,
Tax Notes (November 19, 2001), p. 1115.
Robert W. Wood PC
San Francisco
November 8, 2001
www.robertwwood.com