## Facts

- The Internal Revenue Service (IRS) issued a third-party administrative summons to the attorney for the Cleveland Golden Gloves Association, Inc. (GG) during an investigation.
- The IRS did not notify GG before issuing the third-party summons, contrary to the IRS’s own rules governing notice in this setting.
- On March 24, 2000, GG filed a motion in federal district court to quash the summons.
- On June 2, 2000, the United States notified GG that the IRS had withdrawn the summons.
- GG did not withdraw its motion to quash after receiving notice that the summons had been withdrawn.
- On June 26, 2000, the United States moved to dismiss GG’s motion to quash as moot.
- On July 5, 2000, the district court granted the United States’ motion and dismissed GG’s motion to quash on mootness grounds.
- GG then moved for an award of attorney’s fees and costs under I.R.C. § 7430, arguing it was the prevailing party because the United States withdrew the summons after GG sued.
- The United States opposed the fee request, arguing its position was substantially justified because it was reasonable to withdraw the summons before answering GG’s complaint, and it also sought sanctions on the ground that GG’s fee motion was frivolous.

## Issues

1. Whether GG was entitled to attorney’s fees and costs under I.R.C. § 7430 after the IRS withdrew the third-party summons and the court dismissed the motion to quash as moot.
2. Whether the United States carried its burden to show its position was substantially justified, which would bar any award under § 7430.
3. Whether GG’s § 7430 fee motion was frivolous such that sanctions should be imposed.

## Decision

- The court denied GG’s motion for attorney’s fees and costs under I.R.C. § 7430.
- The court concluded the United States’ position was substantially justified, which prevented a fee award under § 7430.
- The court denied the United States’ request for sanctions based on alleged frivolousness.

## Legal Principles

- I.R.C. § 7430 permits an award of reasonable litigation costs to a qualifying party in certain tax-related proceedings, subject to statutory conditions.
- A party seeking fees under § 7430 must satisfy the statute’s prevailing-party requirements, and fees are not available if the United States shows its position was substantially justified.
- “Substantially justified” generally means the government’s position, viewed as a whole in the case, had a reasonable basis in law and fact.
- When the government withdraws an IRS summons and the court dismisses a motion to quash as moot, a fee request under § 7430 still turns on the statutory requirements, including whether the government’s position was substantially justified.
- Sanctions are not imposed merely because a fee request is denied; the request must lack an arguable legal or factual basis to warrant sanctions.

## Conclusion

In Cleveland Golden Gloves Association, Inc. v. United States, the district court dismissed GG’s motion to quash as moot after the IRS withdrew a third-party summons issued without notice to GG, then denied GG’s request for attorney’s fees under § 7430 because the United States’ position was substantially justified, and also denied the government’s request for sanctions.


Cleveland Golden Gloves Association, Inc. v. United States, 2000 WL 172776 (2000)