Stearman v. CIR

United States Court of Appeals
Fifth Circuit
F I L E D
January 13, 2006
Charles R. Fulbruge III
Clerk
Revised January 19, 2006
In the
United States Court of Appeals
for the Fifth Circuit
_______________
m 05-60521
Summary Calendar
_______________
WILLIAM C. STEARMAN, III,
Plaintiff-Appellant,
VERSUS
COMMISSIONER OF INTERNAL REVENUE,
Defendant-Appellee.
_________________________
Appeal from a Decision
of the United States Tax Court
_________________________
Before SMITH, GARZA and PRADO,
Circuit Judges.
PER CURIAM:
William Stearman, III, pro se, appeals the
judgment of the United States Tax Court dis-
missing his two consolidated cases for failure
to state a claim and failure to prosecute and
sanctioning him $12,500 per case under 26
U.S.C. § 6673 for advancing frivolous posi-
tions and maintaining the proceedings primari-
ly for delay.1 Stearman also requests damag
1 On the certificate of service in his appellate
brief, Stearman styles himself as a “moron pro se
from hickville Texas” and urges this court to de-
cide whether he “knows more about the tax sys-
(continued...)

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2
es under § 6673 against the Tax Court judge
and opposing counsel in an amount “at least
equal to the amount of the ‘judgment.’” We
affirm and grant the Commissioner’s motion to
impose sanctions for maintaining a frivolous
appeal.
I.
We review de novo the dismissal for failure
to state a claim, Lowrey v. Tex. A & M Univ.
Sys., 117 F.3d 242, 246 (5th Cir. 1997), and
review for abuse of discretion the dismissals
for failure to prosecute and the imposition of
sanctions under § 6673, Tello v. Comm’r, 410
F.3d 743, 744 (5th Cir.), cert. denied, 126 S.
Ct. 381 (2005). Dismissals with prejudice for
failure to prosecute are proper only where
(1) there is a clear record of delay or contu-
macious conduct by the plaintiff and (2) the
district court has expressly determined that
lesser sanctions would not prompt diligent
prosecution, or the record shows that the dis-
trict court employed lesser sanctions that
proved to be futile. Tello, 410 F.3d at 744.
In most cases, a plain record of delay or
contumacious conduct is found if one of the
three aggravating factors is also present:
(1) delay caused by the plaintiff; (2) actual pre-
judice to the defendant; or (3) delay as a result
of intentional conduct. Id. In Tello, we found
that the Tax Court had properly dismissed the
case because of the plaintiff’s (1) failure to
appear at the calendar call and recall of his
case; (2) failure to cooperate with the
Commissioner in preparing a stipulation of
facts; (3) refusal to address the merits of the
case; (4) wilful ignorance of warnings to stop
making frivolous arguments; and (5) wasting
the time and resources of the Tax Court. Id.
Stearman, like the plaintiff in Tello, failed
to appear at the call of the consolidated cases
despite being sent a notice setting the case for
trial and stating that “[HIS] FAILURE TO
APPEAR MAY RESULT IN DISMISSAL
OF THE CASE AND ENTRY OF DECI-
SION AGAINST [HIM].” Stearman did not
explain his non-appearance.
Also, like the plaintiff in Tello, Stearman
failed to cooperate in that he refused to com-
ply with the Tax Court’s order to file, with
that court, his requests for admissions. The
notice setting the case for trial stated that
“[HIS] FAILURE TO COOPERATE MAY
ALSO RESULT IN THE DISMISSAL OF
THE CASE AND ENTRY OF DECISION
AGAINST [HIM].” Stearman served a re-
quest for admissions on the government with-
out filing it with the Tax Court. The request
asked the government to admit that “‘Taxpay-
er’ means fiduciary,” that the “‘United States’
is a federal corporation,” and that the “‘UNIT-
ED STATES OF AMERICA’ is another fed-
eral corporation.” The Tax Court ordered
Stearman to file the request with the court, as
required by Tax Court Rule 90(b).
Instead of cooperating by complying with
the order, Stearman filed a “status report” ask-
ing “YOU WANT WHAT? BY WHEN? If
you haven’t figured this out yet, the olive
branch has been withdrawn” and stating “Vas-
quez,2 you’ve lost your mind! Go butt a
stump!!3 The “status report” also called the
1(...continued)
tem” than do the Commissioner’s “educated” and
“vastly experienced” attorneys.
2 Judge Vasquez is the Tax Court judge presid-
ing over the case.
3 Earlier, after the Commissioner had filed an
(continued...)

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Tax Court a “kangaroo court” and stated that
taxpayer “has absolutely no intention of ‘re-
turning’ or ‘refiling’ those original discovery
documents . . . given that those documents are
now evidence for the pending criminal investi-
gation of what may involve a whole stinking
group of you people.”4 Stearman explained
that he would not “refile” the requests of ad-
mission with the Tax Court because the “in-
sane tampering with the Record epidemic that
runs amuck in the Tax Court is not Petitioner’s
problem.”
Further, in retort to the Commissioner’s
motion to dismiss for failure to state a claim,
Stearman filed a response, also including an
“Anticipatory Rule 60(b) Motion,” which did
not address the merits of the motion to dismiss
but asserted that the Tax Court judge “is in-
competent and biased and has no authority,
whatsoever,” and that the judge had not al-
lowed sufficient time to respond to the motion
to dismiss.5 The response stated that the Tax
Court’s order to respond was “completely un-
lawful and mindless” and characterized the
motion to dismiss as “utterly and facially sanc-
tionable crap.”6
It is evident that Stearman engaged in a
pattern of delay and contumacious conduct be-
fore the Tax Court and that the delay was
caused by his personal and intentional conduct.
He expressly refused to file items required by
the court’s rules and an explicit court order,
3(...continued)
answer in No. 20928-03, Stearman also filed a
“status report” stating that “[u]pon receipt of the
Answer, Petitioner respectfully declines to animate
the person, capacity or usage proposed by Respon-
dent, and he is content to await notice of any sua
sponte activity relevant to this matter.”
4 The day before he filed the status report,
Stearman filed a “Probable Cause Affidavit” with
the Tax Court that alleged various criminal acts
committed by the court, objected to Tax Court
rules, requested “production” of Judge Vasquez,
and submitted “interrogatories” directed to the
judge.
The affidavit and several other documents filed
by Stearman in the Tax Court contained the fol-
lowing heading: “UNITED STATES TAX
COURT (a federal corporation, committing crim-
inal acts under disguise of providing professionally
incompetent arbitration services, while doing
business in ‘this state’ via a tax exemption certifi-
cate.”
5 The motion to dismiss was filed on November
2, 2004. On November 18, 2004, the Tax Court
ordered Stearman to file, by November 29, 2004,
a response to the motion to dismiss and set the
motion for a hearing at the previously-scheduled
trial session set for December 6, 2004. Stearman
argued that he received this order on November 22,
2004, and because of the Thanksgiving holiday he
had only “two days” to respond. Stearman, how-
ever, was served with the motion to dismiss filed on
November 2, 2004. Therefore, he had at least
three weeks to prepare a response by November
29, 2004. Further, had he filed for an extension,
rather than filing a response insulting the presiding
judge, the extension could have been granted.
6 The response contended that the government
could not file a motion to dismiss for failure to
state a claim nine months after it filed a responsive
pleading because, under Federal Rule of Civil
Procedure 12(b), such a motion must be made
“before pleading if a further pleading is permitted.”
This argument lacks merit. As explained in Fed-
eral Rule of Civil Procedure 12(h), which deals
specifically with waiver or preservation of certain
defenses, a defense for failure to state a claim “may
be made in any pleading permitted or ordered under
[Federal Rule of Civil Procedure] 7(a), or by
motion for judgment on the pleadings, or at the trial
on the merits.”

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4
although he had been warned that the sanction
for failure to cooperate could be dismissal.
Stearman also failed to appear at trial al-
though he had been warned that the sanction
for this action could also be dismissal. In his
response to the motion to dismiss, he refused
to address the merits of the motion, but rather
insulted the judge. His insults to the judge,
opposing counsel, and the Tax Court, and his
general contempt and defiance of the court’s
authority and accusations of criminal conduct
are intentional, not mistakes or oversights. As
we explained in John v. Louisiana, 828 F.2d
1129, 1131 (5th Cir. 1987), it is not a party’s
negligence, regardless of how careless or in-
considerate, that makes conduct contuma-
cious; instead, it is “the stubborn resistance to
authority” that justifies a dismissal with preju-
dice.
Moreover, Stearman’s frivolous arguments,
insults, failure to cooperate and other dilatory
practices wasted the Tax Court’s resources.
Because Stearman was pro se, he was also
personally responsible for the delay.
Given the obstinate and harassing nature of
Stearman’s conduct, including his wilful failure
to cooperate and to appear at trial despite the
judge’s explicit warnings, it is apparent from
the record that lesser sanctions were futile.7
Therefore, the dismissal for failure to pro-
secute is proper under Tello, 410 F.3d at 744.8
We also affirm the dismissal for failure to
state a claim. Whatever arguments Stearman
may have on appeal on why dismissal for fail-
ure to state a claim was improper are waived
because he did not raise them in his invective-
filled response to the motion to dismiss.9
We also agree with the Tax Court that
Stearman “has advanced shopworn arguments
characteristic of tax-protester rhetoric that has
been universally rejected by this and other
courts.” T.C. Memo 2005-39. Stearman ap-
pears to have borrowed his theories and liti-
gating strategy from the taxpayer in Tello v.
Comm’r, 143 Fed. Appx. 568 (5th Cir.) (per
curiam), cert. denied, 126 S. Ct. 667 (2005).
As with Stearman, the plaintiff in Tello did
not deny receiving the income stated in the no-
tice of deficiency or the fact that he did not file
a tax return for the years at issue. Also as
here, Tello alleged that the notice of deficiency
was improper because (1) the accounting
method the Commissioner employed was not
as suitable as Tello’s preferred accounting
method; (2) the Commissioner is not permitted
to provide accounting services in the State of
Texas; (3) the Commissioner is not permitted
to practice law in the State of Texas; and (4)
the taxpayer has no “fiduciary obligation” to
7 See Rogers v. Kroger Co., 669 F.2d 317, 323
(5th Cir. 1982) (noting that lesser sanctions in-
clude, among others, explicit warnings).
8 See also TAX COURT R. 123(b) (“For failure
of a petitioner properly to prosecute or to comply
with these Rules or any order of the Court or for
(continued...)
8(...continued)
other cause which the Court deems sufficient, the
Court may dismiss a case at any time and enter a
decision against the petitioner.”).
9 See Little v. Liquid Air Corp., 37 F.3d 1069,
1071 n.1 (5th Cir. 1993) (en banc) (per curiam)
(explaining that court of appeals will not consider
evidence or arguments that were not raised in dis-
trict court).

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5
pay taxes to the Internal Revenue Service.10
Id. In Tello, we affirmed the Tax Court’s dis-
missal for failure to state a claim, labeling the
claims as “patently frivolous.”11 For the same
reasons, we affirm here.
Furthermore, the Tax Court did not abuse
its discretion in sanctioning Stearman $12,500
per case under § 6673(a), which allows sanc-
tions where a taxpayer institutes or maintains
a proceeding primarily for delay or his position
in the proceeding is frivolous or groundless.
As discussed above, Stearman failed properly
to prosecute his case, which indicates that he
maintained the proceedings primarily for delay,
and his position in the proceeding was utterly
frivolous.
II.
The Commissioner moves in this court to
sanction Stearman $6,000 for maintaining a
frivolous appeal so that the government can be
compensated for the cost of defending this ap-
peal. Stearman has not responded to the mo-
tion; his main arguments on appeal are the
same frivolous ones he advanced in the Tax
Court.
As we recently cautioned in Tello, 410 F.3d
at 745, a party who continues to advance
long-defunct arguments invites sanctions.12
Sanctions on pro se litigants are appropriate if
10 Although, on appeal and in various filings
with which he inundated the Tax Court, Stearman
also challenged the constitutionality of various Tax
Court rules and asserted violations of due process
and equal protection by Judge Vasquez,
Stearman’s complaint makes only the four claims
discussed above.
11 In Tello, 143 Fed. Appx. at 569-70, the court
held as follows:
It is clear that Tello’s petition was the proper
subject of a dismissal for failure to state a
claim. Petitions in the Tax Court are governed
by TAX CT. R. 34(b)(4), which states that a
petition must contain: “Clear and concise as-
signments of each and every error which the
petitioner alleges to have been committed by the
Commissioner in the determination of the
deficiency or liability . . . . Any issue not raised
in the assignments of error shall be deemed to
be conceded.” The assignments of error Tello
made in his petition for redetermination were
patently frivolous. The heart of Tello’s argu-
ment in the Tax Court was that the CIR has no
authority to collect tax revenue. It is manifest
that the CIR and the IRS have the authority to
collect tax r evenue by virtue of the Internal
Revenue Code. See I.R.C. §§ 7801-7804
(2000). Thus, his primary assignment of error
was plainly without merit. Furthermore, it is
evident that by virtue of promulgating official
tax documents, the CIR has not engaged in the
unauthorized practice of accounting or law.
We have previously upheld the Tax Court's
dismissal of petitions for redetermination under
Rule 34(b)(5) for failure “to allege any justicia-
ble error in the determinations upon which the
notice of deficiency was based or any facts
tending to support any such error.” Sochia v.
(continued...)
11(...continued)
Comm'r, 23 F.3d 941, 943 (5th Cir. 1994).
Accordingly, we affirm the Tax Court’s dis-
missal of Tello’s petition for redetermination.
(Ellipses in original.)
12 See also Parker v. Comm’r, 117 F.3d 785,
787 (5th Cir. 1997) (noting that despite the warn-
ing “that their claims were meritless, the Parkers
filed the present appeal in which they continued to
maintain that the entire Tax Code is an elaborate
‘fraud’ designed to ‘catch the naive’”); Coghlan v.
Starkey, 852 F.2d 806 (5th Cir. 1988) (per
curiam).

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they were warned, as Stearman was, that their
claims are frivolous and if they were aware of
“ample legal authority holding squarely against
them.” Stelly v. Comm’r, 761 F.2d 1113,
1116 (5th Cir. 1985) (per curiam) (“Although
a court can demand a higher degree of respon-
sibility from members of the bar, litigants
cannot be treated as free to advance frivolous
claims merely because they appear without
counsel.”). Because Stearman explicitly ques-
tions the wisdom of the Tello cases in his brief,
he must have been aware that the Tello cases
rejected the theories that he advanced as
patently frivolous.13 We accordingly grant the
motion for sanctions of $6,000 for pursuing a
frivolous appeal pursuant to 26 U.S.C.
§ 7482(c)(4), 28 U.S.C. § 1912, and Federal
Rule of Appellate Procedure 38.14
Moreover, because the sanctions imposed
by the Tax Court (cumulatively $25,000) did
not deter Stearman from pursuing the same
frivolous arguments on appeal, we impose sua
sponte an additional sanction of $6,000. See
28 U.S.C. § 1912; FED. R. APP. P. 38. As
pointed out in Coghlan, 852 F.2d at 808 &
n.1, “there is no question that the courts of ap-
peals have the ability to impose sanctions sua
sponte.” As we warned in Stelly, 761 F.2d at
1115-16, sanctions greater than reasonable at-
torney’s fees and double costs may “be im-
posed under appropriate circumstances.” In
Stoecklin v. Comm’r, 865 F.2d 1221 (11th Cir.
1989), for example, the court doubled sua
sponte the amount of lump-sum appellate
sanctions requested by the Commissioner be-
cause the circumstances indicated that higher
damages were appropriate.15
The extraordinary circumstances of this
case indicate that greater sanctions are called
for. Stearman knew that this court had dis-
missed similar arguments as frivolous in the
Tello cases, as shown by Stearman’s offensive
insinuations with respect to this court’s alleged
lack of preparation in those cases.16 He was
also warned by the Tax Court that his argu-
ments are frivolous. Yet on appeal, rather
than explaining why the Tax Court committed
error, Stearman restated the myriad of claims
with which he inundated the Tax Court and
added insults to the address of the Tax
13 See infra note 16.
14 See Tello, 410 F.3d at 745 (awarding the
same amount in a case where petitioner advanced
similar arguments); Parker, 117 F.3d at 787 (ap-
proving the practice of imposing a lump sum sanc-
tion in lieu of costs because it “saves the govern-
ment the additional cost of calculating its expenses,
and also saves the court the time and expense of
reviewing the submission of costs”).
15 See also Billman v. Comm’r, 847 F.2d 887
(D.C. Cir. 1988) (finding that the tax protester’s
reassertion of the very claims for which he was
previously sanctioned warranted doubling of earlier
sanction).
16 In his appellate brief, Stearman appears to
insinuate that this court is incompetent:
It’s difficult to figure how this court could both
(A) know the legal reality of the “federal in-
come tax system” and (B) press these matters to
the extent this court have [sic] pressed them.
Upon review of this court’s decisions in the
Tello cases, it’s very clear that a review of the
“naked case” is necessary.
Similarly, Stearman also insinuates that this court
has not afforded tax litigants adequate consider-
ation: “There is no amount of sanctions or penal-
ties that will ever change the law or make up for
this court’s well-demonstrated disinclination to
study these matters.”

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Court,17 and, as discussed above, of this court.
Stearman’s contempt for the judicial system
further demonstrates that he did not institute
the proceedings in good faith, but merely to
harass the collection of public revenues.
The $12,000 in sanctions is modest com-
pared to the amount of unpaid taxes Stearman
owes for 1999, 2000 and 2001, which exceeds
$280,000. Although Stearman styles himself
as a “moron pro se from hickville Texas,” his
annual income for 1999, 2000 and 2001 sug-
gests that he may not be as unsophisticated as
he pretends and that his pro se status relates to
an unwillingness, not an inability, to secure an
attorney.
Even if we were to assume that Stearman is
unsophisticated, what distinguishes this case
from other tax protester cases in which we im-
posed lesser sanctions is that Stearman in-
sulted this court, the Tax Court, and the op-
posing party. Even a pro se petitioner is re-
quired to be respectful in judicial proceedings.
Thus, it is difficult to imagine a lesser sanction
that would vindicate the integrity of the court
proceedings and deter Stearman from similar
misconduct.18 Wasteful and dilatory appeals
unjustifiably consume the limited resources of
the judicial system: “While judges, staff and
support personnel have expended energy to
dispose of this meritless appeal, justice has
been delayed for truly deserving litigants.”
Foret v. S. Farm Bureau Life Ins. Co., 918
F.2d 534, 539 (5th Cir. 1990).
Other circuits have also long recognized the
waste of judicial resources occasioned by such
groundless tax protester appeals:
17 Stearman argued in his appellate brief that
the Tax Court is a “kangaroo court the likes of
which are rather difficult to match.” He also states
that “Vasquez is completely in the dark regarding
the legal mechanics of the ‘federal income tax
system.’ That may go a long way to explain his
maniacal conduct in this matter. Either way, a real
judge doesn’t do what Vasquez does.”
18 Rule 38 of the Federal Rules of Appellate
Procedure provides that a court of appeals may
award “just damages” and single or double costs
for frivolous appeals. Rule 38 does not specify
whether attorney’s fees that may be awarded are
(continued...)
18(...continued)
part of “just damages,” or single or double “costs.”
Generally, statutes allowing sanctions either
“define attorney’s fees as an element of costs” or
“separate fees from other taxable costs.” Hutto v.
Finney, 437 U.S. 678, 697 n. 28 (1978) (compar-
ing 42 U.S.C. § 2000a-3(b) with 29 U.S.C. §
216(b) (1970 ed., Supp. V)). Section 2000a-3(b)
is in the former category because it provides, in
pertinent part, that the court in its discretion “may
allow the prevailing party . . . a reasonable attor-
ney’s fee as part of the costs.” In contrast, §
216(b) states that the court shall “allow a reason-
able attorney’s fee to be paid by the defendant, and
costs of the action.”
Unlike § 216(b), rule 38 does not define at-
torney’s fees as an element separate from costs.
Therefore, if attorney’s fees are an element of
costs, double costs may include double attorney’s
fees. Additionally, “just damages” that would vin-
dicate the integrity of the judicial proceeding and
deter Stearman from future misconduct could
include double attorney’s fees. Here, the Com-
missioner argued in his motion for sanctions that
the average expense in attorney salaries and other
costs that it incurred in defending frivolous tax-
payer appeals in which sanctions were awarded
during 2001 and 2002 was approximately $6,900.
Thus, $12,000 is not more than double attorney’s
fees and other costs, that is, not more than “double
costs” and “just damages.”

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The doors of this courthouse are of course
open to good faith appeals . . . . But we
can no longer tolerate abuse of the judicial
review process by irresponsible taxpayers
who press stale and frivolous arguments,
without hope of success on the merits, in
order to delay or harass the collection of
public revenues or for other nonworthy
purposes.
Granzow v. Comm’r, 739 F.2d 265, 270 (7th
Cir. 1984). The court in Granzow also
warned that it will not hesitate to impose even
greater sanctions for frivolous tax protester
appeals under appropriate circumstances. Id.
We therefore AFFIRM the decision of the
Tax Court, including the $25,000 in sanctions,
and impose $12,000 in sanctions on Stearman
for pursuing a frivolous appeal.

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