Annotations 03/2013

(plaintiff brought negligence and breach of implied warranty claims against manufacturer of butter flavoring used in producing microwave popcorn after she contracted lung disease allegedly from exposure to butter flavored microwave popcorn; butter flavoring contained diacetyl which has been linked to lung disease and plaintiff had a pattern of eating two bags of popcorn per day; defendants’ motions for summary judgment before the court; court denied motions to dismiss negligence in the failure to warn of the danger of diacetyl due to questions of fact regarding knowledge of danger posed; court also denied motion because expert witnesses could establish question of fact regarding proximate cause of lack of warning and plaintiff’s injuries; motions denied for inadequate warnings as a defect, but granted regarding a claim of “design defect” because no evidence established alternative production without diacetyl; motion granted for one defendant based on expired statute of repose; motions denied regarding punitive damages due to factual questions raised regarding knowledge of danger and when it was known).

(petitioner claimed $188,070 theft loss deduction for loss associated with home remodeling project; construction company found to have engaged in criminal statutory offense of home repair fraud under state (IL) law and petitioner's contract with construction company was for home repair; as such, petitioner was victim of "theft" for purposes of I.R.C. Sec. 165; loss claimed on 2007 return and court agreed inasmuch as petitioner had reasonable prospect of recovery in 2006 what expired in 2007 and, therefore, 2007 is correct year for theft loss to be claimed; while theft loss claimable in year theft discovered, under Treas. Reg. Sec. 1.165-1(d)(1) if there is a reasonable prospect of recovery in year of discovery no deduction allowed until tax year in which it can be ascertained with reasonable certainty that reimbursement cannot be received).

(case involves unpaid amounts for shipment of Polish cherries and PACA trust; payment not made and plaintiff sought temporary restraining order (TRO) to preserve PACA trust assets; TRO granted - plaintiff entitled to establishment of PACA trust, defendant has not complied with duties under PACA to maintain trust assets and plaintiff will suffer irreparable injury in absence of TRO). 

(petitioner is president of company that is owned by a trust with petitioner and spouse as trustees; petitioner failed to pay employment taxes and IRS moved to levy to collect and notified petitioner that tax lien had been filed; petitioner had previously failed to pay employment taxes and income taxes and those taxes and associated penalties also remained unpaid; petitioner sought partial payment installment agreement and reported monthly income of $27,633 and monthly expenses of $24,416 including $2,110 of tithe (well short of the biblical 10 percent) and college expenses for child of $2,952; petitioner proposed to pay $3,000 monthly on unpaid tax liabilities on total amount owed of $888,351.15 which, without interest, would take petitioner 24 years to pay in full; IRS only allowed $19,244 in monthly expenses as necessary living expenses to be set aside with tithe and college expenses as conditional expenses; as such, IRS determined that petitioner could make monthly payment of $8,389 on unpaid tax liability; court upheld IRS determinations - tithing not for production of income or for petitioner's health and welfare (alleged spiritual health and welfare irrelevant) and not made as condition of employment (petitioner's "employment" with religious organization only as unpaid volunteer and is not tied to production of income) but is purely voluntary; no violation of First Amendment because IRS not interfering with religious organization's decision as to whether to keep petitioner as unpaid volunteer (IRS not responsible for extra-biblical beliefs of petitioner's religious organization) and petitioner not entitled to use the Constitution to escape paying delinquent tax liabilities and penalties so as to pay tithe; no violation of Religious Freedom Restoration Act of 1993; IRS has compelling interest in collecting taxes in timely manner and IRS settlement officer acted reasonably; tithe is conditional expense; same holding for college expenses).

(plaintiff, small domestic wine producer, attempts to recover excise taxes on wine that plaintiff produces based on plaintiff's alleged improper claim to "Small Producers Tax Credit" of I.R.C. Sec. 5041(c); defendant claimed that plaintiff lacked standing to sue for requested relief on basis that another plaintiff was liable for assessment and that claim is time-barred; plaintiff contracted with another plaintiff to transport wine to place of storage before sale and parties agreed that transporter plaintiff would pay federal excise tax and then be reimbursed by plaintiff; parties agreed that transported would claim I.R.C. Sec. 5041(c) tax credit to which they believed plaintiff was entitled to; transported paid all taxes, less the credit, for tax years in issue; defendant determined that plaintiff not entitled to credit because wine never physically touched plaintiff's premises, so credit could not be transferred to transporter plaintiff; tax deficiency assessment issued against transporter plaintiff in amount of $433,238.37 and transporter plaintiff paid deficiency  and plaintiff reimbursed transporter plaintiff for such amount and sought reimbursement from defendant; plaintiff has standing to pursue refund because it has financial interest in outcome of litigation due to contractual obligation to reimburse transporter for excise taxes paid; statute of limitations not tolled). 

(plaintiffs, farmers that use water from San Luis Unit of Central Valley Project to irrigate their crops, filed a claim under Administrative Procedure Act (APA) to compel defendant (Bureau of Reclamation) to provide irrigation districts with more water than is currently provided by ensuring that farmers' needs are met before water provided to anyone else for non-agricultural purposes or to protect fish and wildlife; court ruled that defendant must satisfy obligations of Endangered Species Act as part of its mission; plaintiffs' claim fails for lack of subject matter jurisdiction). 

(cross motions for summary judgment filed in gas lease dispute; court held plain meaning of lease stated that gross proceeds are to be paid and these would be determined by purchase price not price received without delivery charges, but questions of fact remained regarding whether the sale of gas was made to an affiliate of lessee; court also held that contract required payment per rod for each pipeline when two rods were placed in same trench).

(debtor borrowed money from lender and pledged dairy cattle as collateral; lender secured interest in cattle; debtor borrowed additional money from lender pledging crops, farm products and livestock as collateral with security interest containing dragnet clause; lender secured interest; debtor later entered into "Dairy Cow Lease" with third party to allow for expansion of herd; lessor perfected its interest in the leased cattle; debtor filed bankruptcy and court determined that lease arrangement actually created a security interest rather than a true lease - lease not terminable by debtor and lease for longer than economic life of dairy cows, lessor never provided any credible evidence of ownership of cows, parties did not strictly adhere to lease terms; lender filed first and has priority to proceeds from dairy cows; lender's prior perfected security interest attaches to all cows on debtor's farm and to all milk produced post-petition and milk proceeds under 11 U.S.C. Sec. 552(b)).