Supreme Court hears arguments on tax, forum issues

[JURIST] The US Supreme Court [official website] heard oral arguments [day call, PDF] in two cases Wednesday. In United States v. Woods [transcript, PDF; JURIST report] the court heard arguments on whether 26 USC § 6662 of the Internal Revenue Code [texts], which prescribes a penalty for an underpayment of federal income tax that is "attributable to" an overstatement of basis in property, applies to an underpayment resulting from a determination that a transaction lacks economic substance because the sole purpose of the transaction was to generate a tax loss by artificially inflating the taxpayer's basis in property. Counsel for the respondent argued, "On both jurisdiction and the merits, the Government is asking this Court to adopt an overly expansive interpretation of the code to reach a result that would upset the statutory scheme devised by Congress and lead to further problems down the road."

In Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas [transcript, PDF; JURIST report] the court is considering whether its decision in Stewart Organization, Inc. v. Ricoh Corp. [opinion] changed the standard for enforcement of clauses that designate an alternative federal forum, limiting review of such clauses to a discretionary, balancing-of-conveniences analysis under 28 USC § 1404(a) [text] and whether district courts should allocate the burdens of proof among parties seeking to enforce or to avoid a forum-selection clause. In the case, Atlantic Marine Construction [corporate website] contracted with J-Crew Management, Inc. on a construction project in Texas, providing a forum-selection clause in their agreement that disputes "shall be litigated in the Circuit Court for the City of Norfolk, Virginia, or the US District Court for the Eastern District of Virginia, Norfolk Division." The US Court of Appeals for the Fifth Circuit ruled [opinion] that the forum selection clause in the contract was proper, although advised the parties to petition for certiorari due to the murkiness of the issue. Counsel for the petitioner argued, "Forum selection clauses have been frequently used in contracts of all types. They should be enforced as written and the enforcement of a contractual forum selection clause should not just be left to convenience discretionary balancing tests." Counsel for the respondent, however, argued, "We brought this $160,000 construction case in the Western District of Texas, which is where we performed our work, where the project's located, where all the witnesses reside, and where virtually all of the evidence is located."

 

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