Etter v. Commissioner

JAMES F. ETTER AND MARY LOUISE H. ETTER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Etter v. Commissioner Docket No. 22946-87 United States Tax Court T.C. Memo 1991-43; 1991 Tax Ct. Memo LEXIS 62; 61 T.C.M. (CCH) 1772; T.C.M. (RIA) 91043; February 5, 1991, Filed *62 B. W. Enlow, for the petitioners. Willard N. Timm, Jr., for the respondent. PARKER, Judge. PARKER SUPPLEMENTAL MEMORANDUM OPINION This case is before us on petitioners' motion to vacate or revise decision. The issue in the case was whether Solomon Co., petitioner James F. Etter's 1 employer, had granted him stock options pursuant to a qualified or a nonqualified plan. Before petitioner exercised these options, Solomon Co. had merged into Service Merchandise. We held that petitioner had failed to establish that the option was granted under a qualified incentive stock option plan ( Etter v. Commissioner, T.C. Memo 1990-552, filed October 23, 1990). On October 25, 1990, the Court entered its decision for the respondent. On November 26, 1990, petitioners timely filed a motion pursuant to Rule 162, Tax Court Rules of Practice and Procedure, in which they ask the Court to vacate or revise its decision and grant a new*63 or further trial. As the basis for this motion, petitioners assert that they had "extreme difficulties" in producing documents for trial, and that they were only recently able to obtain the desired information. Petitioners state that "The law firm of Skadden, Arps, Slate, Meaghan (sic) & Flom, counsel to Service Merchandise, graciously consented to search their files and have furnished the materials now offered as exhibits and submitted in support of this motion." Petitioners proffer five documents in support of this motion. Document 1 is a Form S-3 Registration Statement under the Securities Act of 1933, filed by Service Merchandise with the Securities and Exchange Commission on September 17, 1982. A copy of this document was sent to Roger S. Aaron, Esq., at the law firm of Skadden, Arps, Slate, Meagher & Flom. Document 2 appears to be a letter, dated August 12, 1982, from Skadden, Arps, Slate, Meagher & Flom to Stewart Kresge, attorney, concerning shares for the options to purchase shares of Solomon Co. outstanding at the time of the merger with Service Merchandise. Document 3 is a handwritten document entitled "1980 & Officers Stock Options at 8/11/82." Document 4 purports*64 to be the stock option plan agreement that was annexed to Mr. Etter's employment contract. Petitioners admit that "read alone" this agreement "sheds no light on the issue of the identity of the Plan to which it refers." Document 5 is entitled "Form of Stock Option under 1980 Stock Option Plan" and is provided only for the sake of comparison. Petitioners do not disclose when they first requested these documents from the law firm of Skadden, Arps, Slate, Meagher & Flom. Petitioners also do not explain why they could not have obtained these documents from that law firm prior to trial. In Boryan v. United States, 884 F.2d 767, 771 (4th Cir. 1989), the Fourth Circuit held: in order to support a motion for reconsideration, "the movant is obliged to show not only that this evidence was newly discovered or unknown to it until after the hearing, but also that it could not with reasonable diligence have discovered and produced such evidence at the hearing." Evidence that is available to a party prior to entry of judgment, therefore, is not a basis for granting a motion for reconsideration as a matter of law. [Emphasis in original; citations omitted.] *65 Although Boryan dealt with Rules 59 and 60 of the Federal Rules of Civil Procedure, we have held that cases interpreting these rules are precedents in regard to motions for reconsideration and motions to vacate decisions under Tax Court Rules 161 and 162. Estate of Kraus v. Commissioner, 875 F.2d 597, 602 (7th Cir. 1989), affg. in part, revg. in part a Memorandum Opinion and Order of this Court; Pietanza v. Commissioner, T.C. Memo 1990-524, 1990 Tax Ct. Memo LEXIS 577, 60 T.C.M. 948, 949, T.C.M. (RIA) P90524 at 2565. See also Selwyn Operating Corp. v. Commissioner, 11 B.T.A. 593, 595 (1928) (party requesting reconsideration must "show affirmatively that the failure to ascertain the additional facts prior to the hearing was due to no lack of diligence on his part"). Petitioners have given no explanation as to why, prior to 1990, they were unable to obtain copies of a 1982 public record. Nor have they explained why Skadden, Arps, Slate, Meagher & Flom was only recently able to provide documents that have been in its possession for the last eight years. Petitioners merely note that they were unable to *66 locate the necessary documents prior to trial and that petitioners' original counsel apparently had the same difficulty. Petitioners correctly note that this Court was inclined to impose sanctions for their original counsel's failure to comply with the Court's order to produce documents, but had no occasion to do so. 2 The case law is clear in its requirement that petitioners make an affirmative showing of due diligence. They have not done so here. *67 For the sake of completeness, we note that even if this Court were to consider the new evidence, particularly document 4, the result in this case would not change. Assuming these documents could be deemed to establish that Mr. Etter's option was not issued under Solomon Co.'s 1980 plan, the documents, individually and as a whole, do not establish that the option issued under his employment agreement was issued under a qualified incentive stock option plan. In any event, because the option price ($ 1 per share) is less than the fair market value on the date of grant ($ 1.25 per share), the plan under Mr. Etter's employment agreement does not meet the requirements of an incentive stock option under section 422A of the Internal Revenue Code. 3 Moreover, petitioners have not advanced a sufficient reason for giving them a second bite at the apple and, in their*68 case, what would amount to a third bite. See supra note 2. In any event, granting a motion for reconsideration or for a new trial rests within the sound discretion of the Court. Vaughn v. Commissioner, 87 T.C. 164, 166 (1986). "A rehearing will not be granted merely because the losing party or his counsel did not exercise prudence or erred in judgment and can probably make a better case or defense on another trial." Selwyn Operating Corp. v. Commissioner, 11 B.T.A. at 594. Accordingly, petitioners' motion to vacate or revise decision will be denied, and An appropriate order will be entered. Footnotes 1. All references to petitioner in the singular are to Mr. Etter.↩ 2. The Court had no occasion to consider imposition of sanctions because petitioners' original counsel of record signed and submitted to the Court a stipulated decision document for the amount of the entire deficiency, which the Court entered as its decision on October 25, 1988. Petitioner James Etter testified in the case of Haydon v. Commissioner, T.C. Memo 1990-551, at which time he informed the Court that he had "settled" his case because he could not afford to litigate it. By Order dated March 3, 1989, this Court vacated the decision and petitioners agreed to be bound by the record in the Haydon↩ case, as then supplemented by petitioners. 3. Petitioners make a type of estoppel argument against this result, but are really asking this Court to ignore a clear statutory requirement. Sec. 422A(b)(4)↩.