Summary: The defendant United States of America filed a motion for summary judgment as to its counterclaim, asserting the plaintiff has failed to fully pay a 1982 tax liability. The plaintiff filed a motion for reconsideration of order granting summary judgment and/or in the alternative motion to amend pleadings and brief in opposition to the summary judgment motion, contending her innocent spouse defense precludes summary judgment. The court rejected the government's argument that plaintiff had waived her innocent spouse defense and permitted the plaintiff to amend her complaint and reply to counterclaim to assert the claim of innocent spouse, finding that the government was not unduly prejudiced and that discovery relating to the innocent spouse defense was ongoing. This court's previous order granting summary judgment was withdrawn.

Case Name: Mavis Jones v. USA
Case Number: A3-98-142
Docket Number: 23
Date Filed: 10/20/00
Nature of Suit: 870

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
SOUTHEASTERN DIVISION

MEMORANDUM AND ORDER

Defendant United States of America (the "Government") filed a Motion for Summary Judgment as to its counterclaim (Doc. #23). The Government contends the 1982 tax liability is the sole remaining issue in the case following this court's order entered on March 21, 2000, given that the parties expect to resolve the issue of the 1985 tax liability. The Government asserts that the plaintiff has failed to fully pay the 1982 tax liability, although she does not contest the amount of the liability in her responses to discovery. ⁽¹⁾ The Government further asserts that although now plaintiff Mavis E. Jones n/k/a Sunny Crahan (hereinafter "Jones") is claiming entitlement to innocent-spouse relief, "she failed to raise that affirmative defense in her reply to the counterclaim and failed in her discovery responses to specify any facts that would warrant innocent-spouse relief," and has therefore waived the claim. The Government implicitly admits that if Jones prevails on her innocent spouse claim as to the 1982 unpaid tax balance it is not entitled to summary judgment.

Jones not only objected to the entry of summary judgment but has also filed a Motion for Reconsideration and/or Leave to Amend the Pleadings (Doc. #27). Jones asserts the court failed to consider her assertion that she is entitled to innocent spouse relief with regard to the 1981 and 1982 tax years when the court dismissed the plaintiff's challenge to the deficiency assessments for the 1981 through 1984 tax years. Jones further asserts she should now be allowed to proceed with her claim for refund for certain taxes paid in 1981 and 1982, stating "Mavis E. Jones has at all times intended to assert her claim for innocent spouse relief." Plaintiff's Brief in Support of Motion for Reconsideration , and /or Leave for Amendment, at 6.

The Government's Motion for Summary Judgment necessarily rests on whether Jones's Motion to Reconsider the Court's March 31, 2000 Order and/or in the Alternative Motion to Amend is granted or denied. That is, if this court allows the plaintiff to amend her complaint and reply to counterclaim to assert the claim of innocent spouse, the Government is not entitled to summary judgment. Further, it naturally follows that the granting of the motion to amend mandates reconsideration of this court's previous order to the extent it dismisses the plaintiff's claim for refund as to those tax years impacted by the plaintiff's assertion of the availability of the innocent spouse relief from liability.

The undersigned, after careful consideration or the parties' respective positions and review of the briefs submitted in support thereof, hereby GRANTS plaintiff's Motion to Reconsider the Court's March 31, 2000 Order and/or in the Alternative Motion to Amend (Doc. #27). Consequently, this court's order entered on March 31, 2000 is withdrawn as to those tax years impacted by the plaintiff's assertion of the availability of innocent spouse relief from liability. More particularly, tax year 1981 is reopened and the Government's Motion for Summary Judgment as to tax year 1982 is DENIED (Doc. # 23).

Rule 15 of the Federal Rules of Civil Procedure provides that permission to file an amended complaint "shall be freely given when justice so requires." Fed. R. Civ. P. 15(a). The determination of whether an amended pleading should be allowed is in the sound discretion of the trial court. Krispin v. The May Department Stores Company, 218 F.3d 919, 924 (8^th Cir. 2000). Denial of leave to amend is justified "only when it will result in undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, or futility of amendment." Dennis v. Dillard Department Stores, Inc., 207 F.3d 523, 525 (8^th Cir. 2000) (citation omitted). "However, delay alone is insufficient to deny a motion to leave to amend." Id. " Rather, the party opposing the motion must show it will be unfairly prejudiced." Id.

Plaintiff asserts, in support of her motion to amend and /or for reconsideration, that the complaint incorporated her claims for refund filed for the tax years 1981 and 1982 and that those claims for refund provided "Mavis E. Jones (now Mavis Crahan) is not liable for the deficiency in tax assessed by the IRS as she is an innocent spouse." Plaintiff further asserts that the Government did not raise her innocent spouse defense in its motion to dismiss as a substantive issue, presumably negating her responsibility to raise it as a defense. Although it is the responsibility, in fact the obligation, of the plaintiff to raise the defense at all steps in the litigation, and not the court's responsibility to "decipher" the pleadings, the court finds that the plaintiff's declaration of her belief that she was not liable for the tax deficiency because she was an innocent spouse contained in the attachment to the complaint was sufficient to have at least put the Government on notice of the claim, ⁽²⁾ precluding dismissal of her claim for refund for tax years 1981 and 1982, as well as summary judgment on the Government's counterclaim.

The Government asserts that it will be unduly prejudiced if the amendment is allowed, and that such amendment "would serve no purpose because of the defective refund claim." The court has considered and rejects the Government's claim of prejudice. The court does not believe that unfair prejudice will result if the plaintiff is allowed to assert the innocent spouse defense at this stage in the proceedings. Discovery concerning the innocent spouse claim is ongoing, and a trial date has not yet been set. See Dennis v. Dillard Department Stores, Inc., 207 F.3d 523, 525 (8^th Cir. 2000) (citations omitted) ("An adverse party's burden of undertaking discovery, standing alone, does not suffice to warrant denial of a motion to amend a pleading."). Thus, the court can accommodate the Government's concerns regarding timing of this action and will do so during a scheduling conference hereby set for Monday, October 30, 2000 at 9:30, to be conducted by telephone conference initiated by the court.

For the foregoing reasons, IT IS ORDERED that:

1. Defendant's motion for summary judgment on its counterclaim (Doc. #23) is DENIED.

2. Plaintiff's Motion for Reconsideration and/or Leave to Amend the Pleadings (Doc. #27) is GRANTED. Plaintiff is ordered to file her amended pleadings within ten (10) days of this order.

Dated this ___ day of October, 2000.

Karen K. Klein
United States Magistrate Judge

1. The Government does not request summary judgment on the 1981 tax year because Jones has fully paid her tax liability for that year. Jones has only paid a portion of her tax liability for the 1982 tax year.

2. Federal Rule of Civil Procedure 10(c) provides, in relevant part, "A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes."