09-3600-bk United States v. Hudson UNITED STATES COURT OF APPEALS 1 2 FOR THE SECOND CIRCUIT 3 4 August Term,…

09-3600-bk
United States v. Hudson
UNITED STATES COURT OF APPEALS 1
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FOR THE SECOND CIRCUIT 3
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August Term, 2010 5
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(Argued: September 23, 2010 Decided: November 10, 2010) 8
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Docket No. 09-3600-bk 10
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UNITED STATES DEPARTMENT OF JUSTICE, TAX DIVISION, 14
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Appellee, 16
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UNITED STATES OF AMERICA, 18
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Appellee-Cross Appellant, 20
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-v.- 22
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PAUL S. HUDSON, 24
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Debtor-Appellant, 26
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GREGORY G. HARRIS, Chapter 7 Trustee, 28
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Trustee. 30
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Before: JACOBS, Chief Judge, KATZMANN and 34
LIVINGSTON, Circuit Judges. 35
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Debtor-Appellant Paul S. Hudson appeals from a July 8, 37
2009 judgment of the United States District Court for the 38
Northern District of New York (Scullin, J.), reversing the 39
decision of the Bankruptcy Court of the Northern District of 40

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2
New York (Littlefield, J.), which awarded Mr. Hudson 1
attorney’s fees under 26 U.S.C. § 7430. Mr. Hudson, a 2
lawyer, is appearing pro se here, as he did in the 3
bankruptcy court and the district court. The district court 4
held that a lawyer appearing pro se cannot be awarded 5
attorney’s fees pursuant to 26 U.S.C. § 7430. We affirm. 6
Paul S. Hudson, Law Offices of 7
Paul S. Hudson, Sarasota, FL, 8
(Troy A. Morgan, Silver Spring, 9
MD, on the brief), for 10
Debtor-Appellant. 11
12
Richard L. Parker, Department of 13
Justice, Tax Division (John A. 14
DiCicco, Acting Assistant 15
Attorney General, Bruce R. 16
Ellisen, Attorney, on the 17
brief), Washington, D.C., for 18
Appellee. 19
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DENNIS JACOBS, Chief Judge: 22
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Debtor Paul S. Hudson, having successfully challenged a 24
claim lodged against him in the bankruptcy court by the 25
Internal Revenue Service (“IRS”), sought attorney’s fees 26
pursuant to 26 U.S.C. § 7430 of the Internal Revenue Code 27
(“IRC”), which permits the prevailing party to recover 28
litigation costs, including attorney’s fees, in any 29
proceeding brought by the United States in connection with 30
the collection of interest on past due taxes. Mr. Hudson, a 31

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lawyer who appeared pro se in the bankruptcy court (as well 1
as in the district court and now here), thus sought 2
attorney’s fees on account of his legal work on his own 3
behalf. The Bankruptcy Court of the Northern District of 4
New York (Littlefield, J.) awarded IRC § 7430 attorney’s 5
fees, but the United States District Court for the Northern 6
District of New York (Scullin, J.) reversed. Mr. Hudson 7
appeals from the district court’s July 8, 2009 judgment. We 8
affirm. 9
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I 11
Mr. and Mrs. Hudson were principals in a real estate 12
rental firm that deemed its maintenance workers to be 13
independent contractors for whom the firm paid no federal 14
employment withholding tax. After an audit, the IRS 15
determined that the workers were employees, and assessed 16
withholding and Federal Insurance Contributions Act (“FICA”) 17
taxes for 1989 and 1990. See 26 U.S.C. §§ 3102(a), 3111, 18
3401, 3402(a), 3403. The firm failed to pay, and the IRS 19
assessed penalties pursuant to IRC § 6672 against Mr. and 20
Mrs. Hudson in the amount of the unpaid withholding taxes. 21
When the firm filed for bankruptcy in 1995, the IRS sought 22

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to recover the delinquent employment taxes from the estate. 1
As to their personal exposure, the Hudsons entered into a 2
Stipulation of Settlement of Claims (“Stipulation”) which 3
provided that “[t]he total liability of Eleanor and Paul 4
Hudson shall be the trust fund portion” of the past due 5
taxes in the amount of $30,838.49. 6
On November 12, 1999, Mr. Hudson himself filed for 7
bankruptcy. The IRS filed an amended proof of claim 8
seeking, inter alia, $50,026.61, which represented the 9
employment tax penalty in the amount of $27,916.49 (i.e., 10
the unpaid past due taxes owed by the firm) plus statutory 11
interest in the amount of $22,110.12. While the bankruptcy 12
petition was pending, the IRS sent Mrs. Hudson a final 13
notice of its intent to levy penalties exceeding the amount 14
of her settlement per the Stipulation. After a collection- 15
due-process hearing pursuant to IRC § 6330, the IRS Office 16
of Appeals sustained the proposed collection action, and 17
Mrs. Hudson sought review. The United States District Court 18
for the Northern District of New York ruled that the plain 19
wording of the Stipulation absolved her of liability for any 20
interest. 21
Relying on the district court’s ruling, Mr. Hudson 22

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1 Although Mr. Hudson sought $21,106, the Bankruptcy
Court found the fee application “replete with deficiencies
and problems,” and awarded $6,831.25. In re Hudson, 364
B.R. 875, 879, 882 (Bankr. N.D.N.Y. 2007).
5
argued in his bankruptcy case that he likewise was not 1
liable for interest accrued on the employment tax penalty. 2
The bankruptcy court agreed. Having thus prevailed, Mr. 3
Hudson moved for attorney’s fees pursuant to IRC § 7430. 4
Citing the Fifth Circuit’s holding in Cazalas v. United 5
States Department of Justice, 709 F.2d 1051 (5th Cir. 1983) 6
(awarding fees in the context of the Freedom of Information 7
Act), the bankruptcy court awarded fees. 1 The bankruptcy 8
court reasoned that “[b]y allowing reasonable fees to pro se 9
attorney litigants, the court will promote the ‘vigorous 10
advocacy’ policy advanced by the Court of Appeals for the 11
Fifth Circuit in Cazalas while still retaining the ability 12
to control fees awarded based on the facts of the case.” In 13
re Hudson, 345 B.R. 477, 484 (Bankr. N.D.N.Y. 2006). 14
On the Government’s appeal, the district court 15
reversed, relying on the reasoning in Kay v. Ehrler, 499 16
U.S. 432 (1991), McCormack v. United States, 891 F.2d 24 17
(1st Cir. 1989) (per curiam), and United States v. 18
McPherson, 840 F.2d 244 (4th Cir. 1988). This appeal 19
followed. 20

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1
II 2
Although we generally review a district court’s award 3
of attorney’s fees for an abuse of discretion, see Mautner 4
v. Hirsch, 32 F.3d 37, 39 (2d Cir. 1994), Mr. Hudson’s 5
contention on appeal is that the denial of the fee award was 6
based on an error of law. We review rulings of law de novo. 7
Baker v. Health Mgmt. Sys., Inc., 264 F.3d 144, 149 (2d Cir. 8
2001). 9
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III 11
Section 7430 of the IRC provides that “[i]n any 12
administrative or court proceeding which is brought by or 13
against the United States in connection with the 14
determination, collection, or refund of any tax, interest, 15
or penalty . . . the prevailing party may be awarded a 16
judgment or a settlement for . . . reasonable litigation 17
costs incurred in connection with such court proceeding.” 18
26 U.S.C. § 7430(a)(2). “[R]easonable litigation costs” is 19
defined (inter alia) to “include[] reasonable fees paid or 20
incurred for the services of attorneys in connection with 21
the court proceeding.” 26 U.S.C. § 7430(c)(1)(B)(iii). 22

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In other statutory contexts, this Court has ruled that 1
a lawyer appearing pro se is not entitled to attorney’s 2
fees. See Pietrangelo v. U.S. Army, 568 F.3d 341, 342 (2d 3
Cir. 2009) (per curiam) (Freedom of Information Act); 4
Hawkins v. 1115 Legal Serv. Care, 163 F.3d 684, 694-95 (2d 5
Cir. 1998) (Title VII and 42 U.S.C. § 1981); c.f. S.N. ex 6
rel. J.N. v. Pittsford Cent. School Dist., 448 F.3d 601, 604 7
(2d Cir. 2006) (attorney-parents representing children in 8
actions brought under the Individuals with Disabilities 9
Education Act). But we have not previously considered 10
whether a lawyer appearing pro se is entitled to fees under 11
IRC § 7430. 12
Finding no reason to depart from our reasoning in 13
Pietrangelo or Hawkins, and joining our sister Circuits that 14
have considered this provision of the IRC, see McCormack v. 15
United States, 891 F.2d 24, 25 (1st Cir. 1989) and United 16
States v. McPherson, 840 F.2d 244, 245 (4th Cir. 1988), we 17
hold that lawyers appearing pro se who prevail in 18
administrative or court proceedings against the United 19
States are ineligible for attorneys’ fees under IRC § 7430. 20
A 21
Section 7430 of the IRC provides that a prevailing 22

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party is entitled to collect “reasonable fees paid or 1
incurred for the services of attorneys in connection with 2
the court proceeding.” 26 U.S.C. § 7430(c)(1)(B)(iii) 3
(emphasis added). Mr. Hudson may recover therefore only if 4
he either paid or incurred fees for the services of an 5
attorney. Mr. Hudson never paid an attorney; so the 6
question is whether he may be said to have incurred 7
attorney’s fees by virtue of the time he invested litigating 8
the tax issue in bankruptcy court. 9
“Incur” means “[t]o suffer or bring on oneself (a 10
liability or expense).” Black’s Law Dictionary 836 (9th ed. 11
2009). In this context, a “liability” is “[a] financial or 12
pecuniary obligation; debt.” Id. at 997. An “expense” is 13
“[a]n expenditure of money, time, labor, or resources to 14
accomplish a result.” Id. at 658. At most one could say 15
that Mr. Hudson brought on himself an expenditure of time 16
defending himself against the IRS. While his time could be 17
characterized as an “expense,” it cannot be characterized as 18
a “fee,” which is defined as a “charge for labor or 19
services, [especially] professional services.” Id. at 690. 20
Moreover, Mr. Hudson never incurred fees for the 21
services of an attorney because an “attorney” is “one who is 22
designated to transact business for another” or is “a legal 23

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agent.” Id. at 147. An agent is “a representative”; so Mr. 1
Hudson cannot have acted as an agent for himself, id. at 72; 2
see Duncan v. Poythress, 777 F.2d 1508, 1518, 1519 (11th 3
Cir. 1985) (Roney, J., dissenting) (cataloguing the 4
definition of “attorney” from more than two dozen 5
dictionaries and finding that “[w]ithout exception they 6
define the word ‘attorney’ in terms of someone who acts for 7
another, someone who is employed as an agent to represent 8
another, someone who acts at the appointment of another”) 9
(emphasis in original); see also Frisch v. Comm’r, 87 T.C. 10
838, 846 (1986) (“An ‘attorney’ is essentially an agent for 11
another. Without the ‘other’ there can be no attorney, 12
merely a pro se litigant who happens to earn a living as a 13
lawyer. At any given time, an individual can be either a 14
pro se litigant or an attorney, but not both.”); 2A C.J.S. 15
Agency § 24 (2010) (“The parties to an agency relationship 16
are the principal and the agent, and an agent cannot exist 17
without a then–existing principal.”); Black’s Law Dictionary 18
1341 (9th ed. 2009) (defining pro se to mean “[o]ne who 19
represents oneself in a court proceeding without the 20
assistance of a lawyer”). 21
In holding that Mr. Hudson is ineligible to receive 22
attorney’s fees under the plain wording of IRC § 7430, we 23

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join our sister Circuits that have addressed this issue, as 1
well as the Tax Court, all of which have held that lawyers 2
appearing pro se “did not pay any fees for legal services 3
nor incur any debts which remain outstanding.” McPherson, 4
840 F.2d at 245; see Frisch, 87 T.C. at 845-47 (“The simple 5
truth is that the plain language of section 7430 cannot be 6
read to include lost opportunity costs, but is limited to 7
actual expenditures . . . . In representing himself, 8
petitioner did not become liable to another person for 9
attorney fees nor did he bring down upon himself any 10
debt.”). 11
While Mr. Hudson did expend time and effort to litigate 12
(successfully) the issue of the IRS’s interest assessment on 13
the settlement amount, he paid no out-of-pocket expenses and 14
incurred no obligation for the services of an attorney and 15
therefore is not entitled to attorney’s fees pursuant to IRC 16
§ 7430. 17
B 18
Awarding attorneys’ fees to lawyers appearing pro se 19
would not serve the policy of fee-shifting statutes such as 20
IRC § 7430. In Pietrangelo v. United States Army, we 21
declined to award fees to a lawyer appearing pro se under 22

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the fee-shifting provision of the Freedom of Information 1
Act, 5 U.S.C. § 552(a)(4)(E). Pietrangelo, 568 F.3d at 341. 2
Citing Kay v. Ehrler, 499 U.S. 432 (1991), which denied fees 3
to a lawyer appearing pro se under 42 U.S.C. § 1988, we 4
explained: 5
[T]he Supreme Court reasoned that although the fee- 6
shifting provision of section 1988 was “no doubt 7
intended to encourage litigation protecting civil 8
rights,” [Kay, 499 U.S.] at 436, the “overriding 9
statutory concern [was] the interest in obtaining 10
independent counsel for victims of civil rights 11
violations,” id. at 437. Representation by independent 12
counsel, the Supreme Court explained, has distinct 13
advantages over even a skilled lawyer who represents 14
himself. Id. To give just two examples, (a) ethical 15
considerations may make it inappropriate for a lawyer 16
to appear as a witness, and (b) a pro se lawyer is 17
“deprived of the judgment of an independent third party 18
in framing the theory of the case, evaluating 19
alternative methods of presenting evidence, cross- 20
examining hostile witnesses, formulating legal 21
arguments, and in making sure that reason, rather than 22
emotion, dictates the proper tactical response to 23
unforeseen developments in the courtroom.” Id. 24
25
Given the advantages of employing independent 26
counsel, the Supreme Court concluded that the statutory 27
policy of “furthering the successful prosecution of 28
meritorious claims” was best served by a rule that 29
“creates an incentive to retain counsel in every such 30
case.” Id. at 438. Permitting a fee award to a pro se 31
litigant, even one who is a lawyer, would instead 32
“create a disincentive to employ counsel.” Id. 33
Accordingly the Supreme Court held that pro se lawyers 34
did not fall within the scope of the fee-shifting 35
provision. 36
37
568 F.3d at 343-44. 38

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The policy underlying statutes such as IRC § 7430 is to 1
incentivize litigants to retain counsel in order to prevent 2
overreaching by the IRS; awarding pro se litigants 3
attorneys’ fees would run counter to that policy by 4
discouraging litigants who are lawyers from obtaining 5
outside, independent counsel. 6
The fee-shifting provision of IRC § 7430, like the fee- 7
shifting provisions of 42 U.S.C. § 1988 and 5 U.S.C. 8
§ 552(a)(4)(E), exists to further “the successful 9
prosecution of meritorious claims” and to ensure that 10
taxpayers are not forced into settlements with the IRS 11
because the cost of litigation outweighs the amount in 12
controversy. Kay, 499 U.S. at 438. We “find no reason to 13
distinguish the principles articulated in Kay and conclude 14
that they apply with ‘equal force’ to [Mr. Hudson’s] motion 15
for fees under [IRC § 7430].” Pietrangelo, 568 F.3d at 345 16
(quoting Ray v. U.S. Dep’t of Justice, 87 F.3d 1250, 1252 17
(11th Cir. 1996)). 18
CONCLUSION 19
For the foregoing reasons, we AFFIRM the judgment of 20
the district court. 21

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