[00:00:01] Speaker 01:
Okay, our first case this morning is number 24, 1470, Harris-Campbell v. Treasury. Ms. Blanchard.

[00:00:09] Speaker 00:
Good morning, Your Honor.

[00:00:12] Speaker 01:
Yeah, go ahead. Approach the podium.

[00:00:44] Speaker 00:
Should I start?

[00:00:44] Speaker 01:
Yes.

[00:00:45] Speaker 00:
Okay.

[00:00:47] Speaker 00:
May it please the court, Terry Blanchard for petitioner Denise Lovette Harris-Campbell. I would like to reserve two minutes for a rebuttal.

[00:01:01] Speaker 00:
This case turns on harmful evidentiary error and substantial evidence.

[00:01:10] Speaker 00:
The board did not merely mention the tax court documents as background. It used settlement-derived tax court materials as substantive proof of the disputed tax liability specifications. And this is harmful, and it's not harmless error, because those documents supplied apparent judicial confirmation the alleged deficiency amounts, and the seriousness supporting the removal of a long-time employee.

[00:01:51] Speaker 00:
So without those disputed settlement documents from the tax court, the only remaining evidence is the audit assertions, ambiguous investigative notes, incomplete documentary evidence, and contested inferences.

[00:02:12] Speaker 00:
The administrative judge originally reversed the agency's removal decision, and the board reached that opposite result only after relying on the tax court documents.

[00:02:30] Speaker 00:
Now, we understand that the administrative judge's decision is not controlling, but it does show the outcome was not inevitable. and that the error was outcome relevant.

[00:02:45] Speaker 00:
And what's important, Your Honors, is that the administrative judge relied on the Supreme Court case in international building.

[00:03:01] Speaker 03:
In that case... If I remember right, the board itself agreed with the AJ that under international building, there could not be a collateral obstacle or racial preclusion or what have you, but then said, we agree with that. We don't think it's the tax court judgment or order. was controlling. Nevertheless, it was relevant and material, and for various reasons, reliable and consistent with and supporting of other evidence.

[00:03:44] Speaker 03:
What's wrong with that analysis?

[00:03:48] Speaker 00:
The board relied on the court in Tawadros

[00:03:53] Speaker 03:
That's not our decision. So what is the error?

[00:03:59] Speaker 00:
The error is relying on the tax court documents to prove a disputed fact.

[00:04:05] Speaker 01:
And because of 408?

[00:04:06] Speaker 00:
Because of 408.

[00:04:09] Speaker 00:
And we understand that the board is not bound specifically by the rules of evidence, but the board is bound by substantial evidence. and reasonableness, and the question is, was it reasonable for the board to rely on settlement-driven documents to supply the missing information?

[00:04:34] Speaker 03:
So what were the specific documents, and which ones of them fit into the specific 408A, you know, one and two categories?

[00:04:45] Speaker 03:
Because they're really at least focused on discussions leading up to a settlement, not the resulting settlement.

[00:04:57] Speaker 00:
Well, there was a stipulation that was unsigned, and the board noted that it was unsigned.

[00:05:03] Speaker 03:
And why was the board not reasonable in attributing...

[00:05:13] Speaker 03:
pretty little, if any, significance to the fact that it was unsigned. Your client actually relied on it by submitting it to the bankruptcy court. That's true. I didn't take it that there was a dispute that the parties agreed to that stipulation. It just happens not to have a signature to it.

[00:05:31] Speaker 00:
Well, the administrative judge found it significant that it wasn't signed, and the board points out and acknowledges that the...

[00:05:42] Speaker 00:
settlement stipulation was not signed.

[00:05:45] Speaker 01:
But let's assume that we conclude that it was nonetheless agreed to, that it was an agreed settlement and that part of the settlement was the stipulated facts.

[00:05:56] Speaker 01:
Is there anything wrong under 408 for using the results of the settlement in connection with the MSPB proceeding?

[00:06:04] Speaker 00:
Well, yes, because without that stipulation, which...

[00:06:12] Speaker 00:
doesn't go to prove the disputed facts regarding the specifications that the board relied on, there is no substantial evidence of what happened.

[00:06:26] Speaker 01:
So from that tax stipulation... Okay, but what I'm trying to get at, and I think it's the same thing that Judge Toronto is asking about, is what's wrong under Rule 408 with using the product of the settlement? Let's assume that the stipulation was the product of the settlement.

[00:06:45] Speaker 01:
in the MSPB proceeding as evidence of the fact?

[00:06:50] Speaker 00:
Because it's relying on an adjudication of the merits.

[00:06:55] Speaker 00:
And that is exactly what the Supreme Court addressed in the international paper case. So what the board did is it relied on the tax court documents as an adjudication on the merits and it used that information to supply the numbers regarding the tax deficiencies and the relationship between her and her household members.

[00:07:22] Speaker 00:
So I would argue that under 408 and why there is error is because the board used the tax court documents as an adjudication on the merits in the employment case when those issues weren't adjudicated.

[00:07:43] Speaker 00:
And that is what 408 is trying to prevent. It's not an adjudicated issue, and it is a settlement, but it's a settlement used against her. So I had started talking about the Tawadris case. I believe the Tawadris case, case is in opposite to the facts of this case. In that case, as you know, the employer had given the tax court settlement documents to lessen the penalty, showing that it was a lesser amount at issue.

[00:08:23] Speaker 00:
I would say that that is akin to somebody waiving their right, like waiving your right to a speedy trial. You can do that, but the law doesn't impose that upon you. And so in this case, because the board relied so heavily on the settlement-driven tax court documents that is being used against her, that is what 408 prohibits.

[00:08:55] Speaker 00:
And that's why there is error and reversible error and the Board relying so heavily on the tax court documents that were driven by settlement negotiations.

[00:09:21] Speaker 00:
The issue is not whether the Board can never or ever consider tax court documents. The issue is, in this case, how the Board used these documents. The Board used these documents to prove validity and the amount of the disputed tax liability allegations. So without the tax court documents, there's no basis for that. The documents converted a compromise resolved tax matter into an apparent adjudicated proof of removable conduct.

[00:09:57] Speaker 00:
And that was prejudicial because the documents went to the heart of the tax liability specifications, the dependency treatment issue, the seriousness of the alleged misconduct, and the penalty.

[00:10:13] Speaker 00:
So in this case, the Board used the tax court documents to do what the remaining record could not independently do, and that is make disputed liability appear conclusively established.

[00:10:30] Speaker 03:
Which documents that were in evidence and relied on were outside the group of what you call tax court documents?

[00:10:43] Speaker 00:
There was other evidence. There was the investigation notes, and that's basically it. So there was just the investigation, and the investigation notes are just assertions.

[00:11:03] Speaker 00:
So the tax court documents supplied the specific dollar amounts the apparent judicial confirmation, the seriousness for removal, but more importantly, it provided a bridge from the audit dispute, which was just a dispute, to sustained misconduct. The remaining evidence was not substantial evidence. So the agency had to prove that the charge specifications were not merely evidence and not merely just show an audit, an investigation, and concern about judgment.

[00:11:42] Speaker 00:
Regarding the tax liability specifications, the audit materials are not self-proving misconduct. An audit position is just the agency's assertion. It's not an adjudication.

[00:11:59] Speaker 00:
A later adjustment or compromise or settlement is not proof of the charge specifications.

[00:12:06] Speaker 03:
I thought that the investigation notes and whatnot reported a number of statements, both by your client, maybe by the goddaughter and others, which in the absence of some admissibility concern would be evidence, and then the board could inquire or well, what is the contrary evidence that you all have submitted and conclude?

[00:12:40] Speaker 03:
Even on that alone, we credit the, we make the inference that this wrong was committed.

[00:12:53] Speaker 00:
The investigation notes were contradicted by other evidence that was more formally presented by TIGNA.

[00:13:04] Speaker 00:
So we would say that the investigative notes do not constitute substantial evidence because they were contradictory, and that is another issue that the administrative judge pointed out, the contradictions between the notes and the more formal documents that were submitted by the agency. So they're not substantive evidence.

[00:13:34] Speaker 00:
Regarding the dependency issue, dependency is fact-specific. It turns on residence, support, income, household status, and related requirements. The agency's proof on support and income was incomplete and contested.

[00:13:56] Speaker 00:
The investigative notes were ambiguous and did not supply the necessary monthly payment details required to sustain the specifications in this case.

[00:14:10] Speaker 00:
Regarding the health benefit allegations, the agency had to prove ineligibility and a basis for discipline. So absence of blood relationship alone is not enough. The record included household and family support circumstances and Ms. Harris-Campbell disputed key aspects of the agency's theory.

[00:14:35] Speaker 00:
Regarding the penalty issue, Your Honors, even if some lesser misconduct was proven, the penalty analysis was distorted by reliance on the tax court documents.

[00:14:51] Speaker 00:
Removal is the most severe civil service penalty, and the Board had to consider the seriousness, the amount, the nexus, and the mitigation. Ms. Harris Campbell had 30 years of service, was near retirement.

[00:15:10] Speaker 00:
Now, the facts don't excuse proven misconduct, but they do matter to the penalty.

[00:15:20] Speaker 00:
And here, the board could not fairly weigh mitigation while treating the disputed tax allegations as effectively confirmed by the tax documents.

[00:15:34] Speaker 00:
If the seriousness finding was inflated by the improper evidence of the tax court documents, the penalty analysis must be redone.

[00:15:44] Speaker 01:
Okay, I think we're out of time. We'll give you two minutes.

[00:16:07] Speaker 02:
Your Honors, may it please the Court, I can tell by your questions that you are familiar with the facts in the law in this case, so I will be brief. The Court should affirm the decision below because the Board's evidentiary rulings fell within its sound discretion and the MSPB's final decision sustaining Ms. Harris-Campbell's removal was supported by substantial evidence.

[00:16:27] Speaker 01:
I know the tax court rule isn't raised on appeal, but it's sort of puzzling. What do you make of it?

[00:16:36] Speaker 01:
Literally, it would seem to preclude using these stipulations in any other proceeding. What's the interpretation of that rule? I know there's not a lot of case law on it, but do you see that the tax court rule as...

[00:16:51] Speaker 01:
addressed to only other tax court proceedings as opposed to proceedings generally, or how does that rule get interpreted?

[00:17:00] Speaker 02:
Well, yes, Your Honor, it's a good question. There's not a lot on that. I mean, we would argue that in a situation like this with the MSPB where there's broad discretion sort of for the administrative law judge and the board to take into that evidence, we would argue that it would be admissible and usable in those cases.

[00:17:20] Speaker 02:
But I agree with Your Honor that the way, the broadness with which that rule is written does suggest that there could be an alternative possibility.

[00:17:28] Speaker 01:
But I'm not sure the tax court would have authority to tell MSPB that it can't rely on documents from the tax court. I don't know.

[00:17:36] Speaker 01:
It's not briefed.

[00:17:38] Speaker 02:
Yes, not briefed, Your Honor.

[00:17:43] Speaker 02:
But as Your Honors have spoken about previously, the Board's evidentiary rulings did fall within its sound discretion. The federal rules of evidence did not apply to the MSPB. They did not apply to the administrative law judge.

[00:17:58] Speaker 03:
Can I ask, do I remember right that the Board's opinion itself does not refer to Rule 408? That's correct, Your Honor. Was a 408-specific argument presented to the Board?

[00:18:14] Speaker 02:
I don't recall whether a 408 argument was presented to the Board. I think in reading between the lines of the Board's decision, Your Honor, I think the reason they did not bring up the federal rules of evidence is because they're not applicable. So I know it was raised in Ms. Harris Campbell's briefing that they did not.

[00:18:35] Speaker 03:
And your red brief doesn't say that this argument is forfeited.

[00:18:39] Speaker 02:
What's that?

[00:18:39] Speaker 03:
Your red brief here does not say that this was forfeited.

[00:18:42] Speaker 02:
That's correct, Your Honor. That's correct.

[00:18:46] Speaker 03:
The 408 argument.

[00:18:47] Speaker 02:
Yes. We did not say that the argument was forfeited as a result of the MSP. We basically took the argument at face value, Your Honor.

[00:18:56] Speaker 03:
And which documents, you make a couple of arguments about why you think 408, even if it was applicable, wouldn't be violated.

[00:19:11] Speaker 03:
One of those I'm actually not that interested in, which is that the claim is different. So put that aside. But your first argument, the one that appears, I think, in a paragraph on page 14 of your red brief, says, at least the ultimate stipulation embodied in the tax court order is not barred by 408A, either paragraph one or paragraph two.

[00:19:43] Speaker 03:
And I think I understand that argument. Are there other so-called tax court documents at issue that might come within 401, 408A1 or 2?

[00:19:56] Speaker 02:
If I understand Your Honor's question, you're saying that

[00:20:00] Speaker 03:
you think, or the... You say on page 14, reasonably, I think, that at least for one of the documents, we're talking about the result of the settlement, not conversations leading to it, and so on. Are there other... There's this group of documents that I think are referred to here as the tax court documents. It's not... I'm trying to understand what those documents are. There's the actual – yeah, what are – Okay, yes, Your Honor.

[00:20:30] Speaker 02:
I see what you're talking about here. Rather, Ms. Harris-Campbell and the MSP agree the tax documents are the product of a settlement between the IRS and the appellant. I think what we're referring to there, Your Honor, is sort of, you know, the other documents that sort of went into determining the settlement. So I think the – Perhaps, you know, the discussion, any documents related to the discussions between the tax counsel that was handling that for the IRS and things like that, or, you know, that might be settlement documents.

[00:21:04] Speaker 02:
But I'm actually not unsure, Your Honor, if those are part of the record.

[00:21:08] Speaker 01:
Were those part of the record?

[00:21:10] Speaker 02:
I was just saying, Your Honor, I don't believe any of that was part of the record. I believe it was just the settlement.

[00:21:17] Speaker 02:
To Your Honor's point, though...

[00:21:20] Speaker 02:
the things that were part of the record were sort of the basis of the tax case, which were the audit records.

[00:21:29] Speaker 01:
They were the product of the settlement.

[00:21:31] Speaker 02:
I'm sorry, say that again.

[00:21:31] Speaker 01:
They were the product of the settlement, the result of the settlement.

[00:21:37] Speaker 02:
Well, the only – if I understand Your Honor's question, the settlement that was – the unsigned settlement document that was part of the MSPB record, that's the product of the settlement, right? Then there are the documents that sort of were before – not before as in in front of, but before the tax settlement as like the IRS audit records, the Inspector General's notes and things like that. Those sort of predate that. I think –

[00:22:08] Speaker 01:
Yeah, but the fact that those happen to be involved in the settlement negotiations doesn't make them large.

[00:22:14] Speaker 02:
Yes, it wouldn't exclude them by virtue of them sort of transiting that process. No, Your Honor. No.

[00:22:22] Speaker 02:
And, yes, which brings me to my sort of point. Ms. Harris-Campbell has suggested that there really wasn't much evidence except the inspector's notes besides...

[00:22:37] Speaker 02:
or sorry, the settlement record and then the, or the settlement agreement, the unsigned settlement agreement, and then the inspector's notes. But there were things, Your Honor. It was the audit, the audit records, the Inspector General's interviews notes, and then obviously what Judge Tarantino, Taranto, suggested was the discussions and the interviews, the examination changes reports, and then also, Your Honor, I mean, there was substantial testimony at the hearing, right? And all of that would be evidence. So,

[00:23:08] Speaker 03:
We don't have a question here, I think this is right, about any reliance by the AJ on demeanor in such a way that the...

[00:23:20] Speaker 03:
board's self-adopted rule to defer to demeanor assessments of the AJA is somewhat difficult.

[00:23:29] Speaker 02:
Correct, Your Honor. That wasn't raised. I mean, I think if you look at the MSPB board's decision, it falls well within, you know, sort of the, I believe it's Long v. Social Security Administration case where, you know, it basically, which Your Honor is referring to, you know, if you are going to base a ruling and sort of override the administrative law judge's discussion of demeanor and things like that, you basically have to walk through it and describe it thoroughly.

[00:24:00] Speaker 02:
And I think the board here, although that issue wasn't raised, I think the board here did that substantially and took care of that.

[00:24:13] Speaker 03:
I think your friend on the other side argued that the board...

[00:24:21] Speaker 03:
over-relied or over-read.

[00:24:24] Speaker 03:
Tawadros, is that the name of it? Yes, Your Honor. Can you explain that?

[00:24:30] Speaker 02:
I mean, we just disagree, Your Honor.

[00:24:33] Speaker 02:
I think if I heard her correctly, I believe the distinction they were trying to make was that he was using it affirmatively and it was in a different context. I mean, our opinion on Tawadros is that It shows that, you know, these documents, these settlement documents can be used in these MSP matters, and it provides support for that. But I think the stronger support, Your Honor, is the 408 idea that these are not, I mean, it's actually back to basic 408 premises, right?

[00:25:10] Speaker 02:
These are not the negotiations. The agreement is not the negotiations and things like that. So we would rely more heavily on that than the Tawadris case.

[00:25:29] Speaker 02:
Okay. Yes, sorry, Your Honor. I was just reviewing my notes to make sure the last point here. The other thing is, in the final part of her argument, Ms. Harris-Campbell, it seemed like she was asking, Your Honor, to sort of reweigh the evidence that the MSPB considered, and obviously that's beyond what can be done here, Your Honor. We would ask that the court affirm the MSPB's decision. Thank you for your time.

[00:25:56] Speaker 01:
Thank you.

[00:25:59] Speaker 01:
Ms. Blanchard, you have two minutes.

[00:26:14] Speaker 00:
Your Honor, in response to my colleague's question about are we asking you to re-weigh the evidence, No, we're not asking you to re-weigh the evidence. What we're asking you to do is to enforce the evidence of substantial evidence review and evidentiary discretion.

[00:26:38] Speaker 00:
The decision was not supported by substantial evidence because it rests on illegally improper evidence when the remaining record does not independently support the agency's charges. Without those settlement-derived tax court documents, there is no substantial evidence. And it was not reasonable for the agency to rely on those documents.

[00:27:15] Speaker 00:
Respondent treats the tax court documents as just one more piece of evidence, but they were not. These tax court documents supplied the judicial confirmation of the disputed tax liability allegations. Respondent's other evidence shows an investigation, an audit dispute, and contested family support issues, but it does not independently prove the charged misconduct or the removal penalty.

[00:27:49] Speaker 00:
The administrative judge originally reversed the removal, and this shows that this outcome was not inevitable, and the only difference is the consideration of the tax court documents.

[00:28:05] Speaker 00:
Ms. Harris-Campbell was a longtime IRS employee. She had served nearly 30 years, and she was near retirement. That matters to the penalty. At minimum, we're asking you to vacate and remand.

[00:28:21] Speaker 01:
Okay. Thank you. Thank you, both counsel. The case is submitted.

[00:28:25] Speaker 00:
Thank you.