Quatloos! > Tax
Scams > Tax
Protestors > EXHIBIT:
Tax Protestor Dummies > Cases
("Damn, We Lost Again! And why is
it that people who sell
tax protestor materials file their tax returns anyway . . .")
885 F.2d 547
In re Lowell H. BECRAFT, Jr.
UNITED STATES of America, Plaintiff/Appellee,
Kenneth W. NELSON, Defendant/Appellant.
United States Court of Appeals,
Sept. 6, 1989.
Before FERGUSON, NORRIS and WIGGINS, Circuit Judges.
In February 1988, Kenneth Nelson was convicted in the United States District
Court for the District of Nevada on three counts of failure to file income
tax returns in violation of 26 U.S.C. s 7203. Nelson, represented by counsel
Lowell H. Becraft, Jr., then appealed to this court claiming, inter alia,
that the district court erred in refusing to give his proposed jury instruction
that a United States citizen residing in the United States is not subject
to the federal income tax laws.
By memorandum disposition dated March 22, 1989, this court affirmed Nelson's
conviction, noting that Becraft's argument regarding the inapplicability of
the federal tax laws to resident United States citizens had no basis in law.
Becraft thereafter filed a petition for rehearing and/or suggestion for rehearing
en banc [hereafter "petition for rehearing"]. In the petition for
rehearing, Becraft once again argued that the federal tax laws are inapplicable
to resident United States citizens.
Upon receipt of the petition for rehearing, we, sua sponte, issued a show
cause order requesting Becraft to explain why damages in the sum of $2500 should
not be assessed against him for filing a frivolous petition for rehearing.
See Appendix A. We have now reviewed Becraft's several-hundred- page reply
to our show cause order [hereinafter "reply"] and have reached the
conclusion that Becraft's conduct warrants sanctions. Federal Rule of Appellate
Procedure 38 provides this court with the authority to impose sanctions to
deter frivolous appeals and to conserve limited federal judicial resources.
[FN1] See, e.g., Grimes v. Commissioner, 806 F.2d 1451, 1454 (9th Cir.1986)
(per curiam); Trohimovich v. Commissioner, 776 F.2d 873, 876 (9th Cir.1985);
Nunley v. Commissioner, 758 F.2d 372, 373 (9th Cir.1985) (per curiam). Pursuant
to Rule 38, sanctions may be imposed against pro se litigants, Grimes, 806
F.2d at 1454; Trohimovich, 776 F.2d at 876, litigants represented by counsel,
First Investors Corp. v. American Capital Financial Services, Inc., 823 F.2d
307, 310 (9th Cir.1987); Wisconsin v. Glick, 782 F.2d 670, 673-74 (7th Cir.1986),
and/or directly against appellate counsel. Nevijel v. North Coast Life Ins.
Co., 651 F.2d 671, 675 (9th Cir.1981); Coghlan v. Starkey, 852 F.2d 806, 818
(5th Cir. 1988); Braley v. Campbell, 832 F.2d 1504, 1511 (10th Cir.1987).
FN1. Rule 38 provides: If a court of appeals shall determine that an appeal
is frivolous, it may award just damages and single or double costs to the appellee.
In assessing the propriety of appellate sanctions, we must determine whether
the issue raised on appeal--or as in this case, a petition for rehearing--is
indeed frivolous. It is well settled that an appeal is frivolous when the result
is obvious or the arguments of error are wholly without merit. Grimes, 806
F.2d at 1454; Gattuso v. Pecorella, 733 F.2d 709, 710 (9th Cir.1984); Dewitt
v. Western Pacific Railroad Co., 719 F.2d 1448, 1451 (9th Cir.1983). We have
no hesitation concluding that the petition for rehearing filed by Becraft in
this case meets the frivolity standard.
Notwithstanding Becraft's insistence that his argument regarding the inapplicability
of the federal income tax laws to resident United States citizens raises numerous
complex issues, his position can fairly be reduced to one elemental proposition:
The Sixteenth Amendment does not authorize a direct non-apportioned income
tax on resident United States citizens and thus such citizens are not subject
to the federal income tax laws. [FN2] We hardly need comment on the patent
absurdity and frivolity of such a proposition. For over 75 years, the Supreme
Court and the lower federal courts have both implicitly and explicitly recognized
the Sixteenth Amendment's authorization of a non- apportioned direct income
tax on United States citizens residing in the United States and thus the validity
of the federal income tax laws as applied to such citizens. See, e.g., Brushaber
v. Union Pacific Railroad Co., 240 U.S. 1, 12-19, 36 S.Ct. 236, 239-42, 60
L.Ed. 493 (1916); Ward, 833 F.2d at 1539; Lovell v. United States, 755 F.2d
517, 519 (7th Cir.1984); Parker v. Commissioner, 724 F.2d 469, 471 (5th Cir.1984);
United States v. Romero, 640 F.2d 1014, 1016 (9th Cir.1981). Indeed, in Lovell,
one of the more recent cases explicitly rejecting a Sixteenth Amendment argument
virtually identical to Becraft's position in this case, the court sanctioned
the pro se appellants for raising this and other federal tax exemption claims
on appeal. See Lovell, 755 F.2d at 520. If a claim is sufficiently frivolous
to warrant sanctions against a pro se appellant, it unarguably supports the
assessment of sanctions against a seasoned attorney with considerable experience
in the federal courts.
FN2. While Becraft devotes a good portion of his brief, petition for rehearing,
and reply to a discussion of the structure of the Internal Revenue Service
and the control numbers designated to income tax forms pursuant to the Paperwork
Reduction Act, he does so only to provide support for his fundamental proposition
that the Sixteenth Amendment does not authorize a direct non-apportioned tax
on citizens residing in the United States. Hence, his entire legal argument
hinges on the constitutionality of directly taxing resident United States citizens.
Additionally, we note that much of Becraft's reply is also devoted to a discussion
of the limitations of federal jurisdiction to United States territories and
the District of Columbia and thus the inapplicability of the federal income
tax laws to a resident of one of the states. We are somewhat perplexed as to
why he included this contention in his reply since he omitted any reference
to this issue in the petition for rehearing. In any event, as Becraft should
be well aware, this claim also has no semblance of merit. The Eleventh Circuit
summarily rejected the identical argument in United States v. Ward, 833 F.2d
1538, 1539 (11th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 1576, 99
(1988), a case in which Becraft served as the defendant's appellate counsel.
In reaching the conclusion the Becraft's petition for rehearing is frivolous,
we rely not only on the fact that the argument is in direct conflict with "firmly
established rules of law for which there is no arguably reasonable expectation
of reversal or favorable modification," McDougal v. Commissioner, 818
F.2d 453, 455 (5th Cir.1987), but also on the fact that this wholly meritless
claim was pressed in a petition for rehearing after this court had already
summarily rejected the claim and characterized it as having no basis in law.
Thus, the result of the petition for rehearing was even more obvious than the
initial appeal. Indeed, it is beyond our comprehension that a competent attorney,
which Becraft certainly is, could harbor a good faith belief that this panel
or the court sitting en banc would reconsider the rejection of Nelson's claim
of federal tax exemption. While a finding of bad faith is not necessary to
impose sanctions under Fed.R.App.P. 38, see Coghlan, 852 F.2d at 814-815 (bad
faith not required element of imposition of sanctions under rule 38); Braley
v. Campbell, 832 F.2d at 1512 (finding of subjective bad faith unnecessary
to impose sanctions under Rule 38); Grimes, 806 F.2d at 1454 ("The purpose
of Rule 38 ... is to induce litigants to conform their behavior to the governing
rules, regardless of their subjective belief."), the fact that Becraft
likely filed the petition for hearing absent a good faith belief of its justification
contributes to our strong conviction that Becraft's conduct warrants the imposition
of sanctions. See Coghlan, 852 F.2d at 814 ("Bad faith may aggravate the
circumstances justifying sanctions....") Moreover, we believe that Mr.
Becraft's litigation record in the federal appellate courts demonstrates the
necessity of sending a message to Becraft that frivolous arguments will no
longer be tolerated. Our research reveals that we are not the first appellate
court in which Becraft has raised this patently frivolous Sixteenth Amendment
claim. In Ward, a case in which Becraft served as defendant's appellate counsel,
see supra, n. 1, the Eleventh Circuit characterized as "utterly without
merit" the identical argument raised by Becraft here regarding the applicability
of the federal tax laws to resident United States citizens. 833 F.2d at 1539.
Moreover, Becraft also advanced the patently frivolous claim in Ward that the
federal income tax laws apply only to residents of federal territories and
the District of Columbia. Id.; see supra, n. 1. Unfortunately, Becraft's record
of advancing wholly meritless claims does not end with Ward. United States
v. Stahl, 792 F.2d 1438 (9th Cir.1986), cert. denied, 479 U.S. 1036, 107 S.Ct.
888, 93 L.Ed.2d 840 (1987), and United States v. Sitka, 845 F.2d 43 (2d Cir.),
cert. denied, --- U.S. ----, 109 S.Ct. 77, 102 L.Ed.2d 54 (1988), appeals in
which Becraft served as co-counsel and counsel respectively, addressed the
claim that the Sixteenth Amendment was never properly ratified and that therefore
the federal courts lack jurisdiction to entertain tax evasion prosecutions.
Needless to say, both courts soundly rejected this contention. See Sitka, 845
F.2d 44- 47; Stahl, 792 F.2d 1438-1441. Becraft's record in the federal courts
thus exhibits an alarming willingness to utilize appellate court resources
to adjudicate claims that a competent attorney should realize have no reasonable
possibility of success.
Based on Becraft's conduct in this case and prior cases, it is clear to us
that Becraft has no appreciation for the limited nature of the federal judicial
resources upon which all aggrieved individuals depend for vindication of statutory
and constitutional rights. For if he did have respect for the extreme demands
constantly placed on the court's resources, he would not continue to use the
courts as testing ground for revisionist historical theories that have absolutely
no basis in law.
While we are in general accord with the Seventh Circuit's statement that "[c]riminal
defendants and their lawyers must abide by the rules that apply to other litigants,
... including the principle that litigating positions must have some foundation
in existing law or be supported by reasoned, colorable arguments for change
in the law," Wisconsin v. Glick, 782 F.2d 670, 673 (7th Cir.1986) (citation
omitted), we are hesitant to exercise our power to sanction under Rule 38 against
criminal defendants and their counsel. With respect to counsel, such reluctance,
as evidenced by the absence of authority imposing sanctions against defense
counsel, [FN3] primarily stems from our concern that the threat of sanctions
may chill a defense counsel's willingness to advance novel positions of first
impression. Our constitutionally mandated adversary system of criminal justice
cannot function properly unless defense counsel feels at liberty to press all
claims that could conceivably invalidate his client's conviction. Indeed, whether
or not the prosecution's case is forced to survive the "crucible of meaningful
adversarial testing" may often depend upon defense counsel's willingness
and ability to press forward with a claim of first impression. See United States
v. Cronic, 466 U.S. 648, 656, 104 S.Ct. 2039, 2045, 80 L.Ed.2d 657 (1984).
Moreover, because of the significant liberty deprivation often at stake in
a criminal prosecution, courts generally tolerate arguments on behalf of criminal
defendants that would likely be met with sanctions if advanced in a civil proceeding.
See Glick, 782 F.2d at 673.
FN3. Our research did not reveal any case in which the court has imposed
sanctions on defense counsel under Rule 38 and only one case in which sanctions
were assessed against a criminal defendant. See Glick, 782 F.2d at 673-74 (state
criminal defendants sanctioned for bringing frivolous appeal after unsuccessfully
attempting to remove their state criminal prosecutions to federal court).
Notwithstanding the legitimate countervailing concerns that accompany imposing
sanctions against defense counsel, we nevertheless believe that when a criminal
defense counsel reasserts an argument in a petition for rehearing which was
summarily rejected on direct appeal, and which flies in the face of unambiguous,
firmly established law, that attorney exposes himself to the imposition of
sanctions under Rule 38. Accordingly, we order Becraft to pay $2,500 in damages.
With so many worthy claims waiting to be adjudicated, we are not obliged to
stand by silently when an attorney repeatedly breaches his professional responsibility
to the court
We are fully confident that our assessment of sanctions for a frivolous petition
for rehearing in this case will have no deterrent effect on litigants and attorneys'
advancement of reasonably based novel positions in the future. We sincerely
hope, however, that this assessment will deter Becraft from asking this and
other federal courts to expend more time and resources on patently frivolous
legal positions. [FN4]
FN4. We wish to emphasize that our decision in this case should not be read
as authority for imposing sanctions against a criminal defense counsel for
a frivolous direct appeal following conviction; we express no opinion on whether
or in what circumstances Rule 38 sanctions may be
imposed for such an appeal.
The Clerk of this Court shall enter a judgment in the sum of $2,500 in favor
of the United States of America and against Lowell H. Becraft, Jr.
Counsel for the Appellant Lowell H. Becraft, Jr., 209 Lincoln Street, Huntsville,
Alabama 35801, is ordered to show cause why damages in the sum of $2,500
should not be imposed upon him for filing a frivolous petition for rehearing
and suggestion for rehearing en banc. The reasons for the issuance of this
order to show cause are as follows:
1. Appellant Kenneth Nelson was convicted in the United States District Court
for the District of Nevada on three counts of failure to file income tax returns
in violation of 26 U.S.C. s 7203.
2. By memorandum disposition dated March 22, 1989, this court affirmed the
judgment of the district court.
3. On appeal, Nelson claimed, inter alia, that the district court erred in
refusing to give his proposed jury instructions concerning his theory that
a United States citizen is not a "person" and that his wages were
not "income" within the meaning of the Internal Revenue Code.
4. In affirming Nelson's conviction, this court emphasized that his construction
of the Internal Revenue Code has been consistently rejected by federal courts
and had no basis in law.
5. On April 5, 1989, Lowell H. Becraft, Jr., as attorney for Appellant Nelson,
filed with this court a petition for rehearing and suggestion for rehearing
6. In this petition, Nelson realleges the inapplicability of federal tax laws
to income earned by United States citizens.
7. Counsel for Nelson acknowledges in his petition that this issue had been
presented to, and rejected by, this court in its memorandum disposition of
March 22, 1989.
8. While the court did not impose sanctions in its memorandum disposition,
the issue of the applicability of federal tax laws to this case was and is
patently frivolous as it finds no support in the Internal Revenue Code and
ignores clear legal precedent. See Malhiot v. S. Cal. Retail Clerks Union,
735 F.2d 1133, 1137 (9th Cir.1984), cert. denied, 469 U.S. 1189, 105 S.Ct.
959, 83 L.Ed.2d 965 (1985) (appeal frivolous when "result is obvious or
[when] the claims of error are wholly without merit").
9. Frivolous petitions such as this impose an unjustified burden on the federal
judiciary. To raise the same frivolous contention on a petition for rehearing
and suggestion for en banc review forces this court to consider sanctions in
order to assure that its responsibilities are not hindered by wasteful, time-consuming
petitions requiring consideration by not only a three- member panel of the
court but also the entire court because of the en banc suggestion.
10. Pursuant to F.R.App.P. 38, this court has the authority to impose sanctions
to deter frivolous appeals and to conserve federal judicial resources. See,
e.g., First Investors Corp. v. American Capital Financial Services, Inc., 823
F.2d 307, 310 (9th Cir.1987); Trohimovich v. Commissioner, 776 F.2d 873, 875-76
(9th Cir.1985); Nunley v. Commissioner, 758 F.2d 372, 373 (9th Cir.1985) (per
curiam); Stites v. United States Government, 746 F.2d 1085, 1086 (5th Cir.1984)
Therefore, Lowell H. Becraft, Jr., is ordered to show cause as set forth in
All documents in opposition to this order must be filed with the Clerk of
this court within 20 days from the date of the filing of this order.
The Clerk of the Court shall serve a copy of this order upon Mr. Becraft by
United States mail and shall furnish counsel for appellee with a copy of this
to Tax Protestor Exhibit