              IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT
                     ________________________

                          No. 98-20540
                    ________________________


RICHARD L. MARRÉ; AGRITECH ENTERPRISES, INCORPORATED,

                            Plaintiffs-Appellees,

HP-84 NURSERY ASSOCIATES, INCORPORATED,

                            Intervenor-Plaintiff-Appellee,

v.

UNITED STATES OF AMERICA,

                            Defendant-Appellant.

                    ________________________

RICHARD L. MARRÉ,

                            Plaintiff-Appellee,

v.

UNITED STATES OF AMERICA,

                            Defendant-Appellant.

                    ________________________

AGRITECH ENTERPRISES, INCORPORATED,

                            Plaintiff-Appellee,

v.

UNITED STATES OF AMERICA,

                            Defendant-Appellant.

_________________________________________________________________
                     ________________________

                          No. 98-20717
                    ________________________


RICHARD L. MARRÉ; AGRITECH ENTERPRISES, INCORPORATED,
                            Plaintiffs-Appellees,

v.

UNITED STATES OF AMERICA,

                            Defendant-Appellant.

                    ________________________

RICHARD L. MARRÉ,

                            Plaintiff-Appellee,

v.

UNITED STATES OF AMERICA,

                            Defendant-Appellant.

                    ________________________

AGRITECH ENTERPRISES, INCORPORATED,

                            Plaintiff-Appellee,

v.

UNITED STATES OF AMERICA,

                            Defendant-Appellant.


_________________________________________________________________

          Appeals from the United States District Court
                for the Southern District of Texas
                          (H-88-CV-1103)
_________________________________________________________________

                            August 18, 1999

Before GARWOOD, DUHÉ, and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:*


     *
      Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

                                   2
     The United States of America (“Government”) appeals the

district court’s March 17, 1997 order for summary judgment and

May 26, 1998 award of attorneys fees to Richard Marré (“Marré”)

and Agritech Enterprises, Inc. (“Agritech”).    The district court

granted summary judgment in light of its finding that Government

representations made during a February 1992 wrongful disclosure

trial judicially estopped the Government from later assessing

civil tax penalties pursuant to Internal Revenue Code (“I.R.C.”)

§§ 6700 and 6701.   The district court additionally awarded

attorneys fees based upon its determination that the Government’s

position in defending against Marré and Agritech’s suit seeking

the refund of I.R.C. §§ 6700 and 6701 penalties was not

substantially justified.   For the reasons set forth below, we

reverse and remand as to both the grant of summary judgment and

the award of attorneys fees.

                                 I

     This case has a long history.   Richard L. Marré, through his

business Agritech Enterprises, Inc. (collectively “Appellees”),

marketed solar powered greenhouses to investors as tax shelters in

the early 1980's.   During an Internal Revenue Service (“I.R.S.”)

investigation of Appellees’ tax shelter activities,2 the I.R.S.

improperly disclosed to third parties that Appellees were under

criminal investigation for tax violations.     Appellees filed suit

under I.R.C. § 7431 against the IRS, seeking damages for the

    2
     In 1985, the Criminal Investigation Division of the IRS began
an investigation of Marré and Agritech relative to the greenhouse
promotion.

                                 3
unauthorized disclosure of their tax return information (“wrongful

disclosure suit”).          A bench trial was held in February 1992.              After

Appellees prevailed on their wrongful disclosure suit,3 the I.R.S.

assessed civil penalties against Appellees pursuant to I.R.C.

§§ 6700 and 6701 for promoting abusive tax shelters and aiding and

abetting the understatement of tax liabilities. Appellees paid 15%

of the penalties and sued the I.R.S. for a refund (“refund suit”).

     During the course of litigating their refund suit, Marré and

Agritech moved the district court for summary judgment, arguing

that:       (1)    the   Government    ought     be    judicially      estopped   from

assessing         I.R.C.   §§   6700   and   6701     penalties   as    a   result    of

representations made during the February 1992 wrongful disclosure

trial wherein the Government stated that its investigation of

Appellees had been closed; (2) the Government improperly duplicated

penalties in violation of I.R.C. § 6701(f)(3); (3) the Government’s

assessment         of    penalties     constituted      an   untimely       compulsory

counterclaim that the Government should have brought in response to

the Plaintiffs’ wrongful disclosure suit; and (4) laches and

statute of limitations precluded the assessment of penalties.                        The

district court granted summary judgment based on judicial estoppel,

addressing and rejecting Appellees’ alternative grounds for summary

judgment.          Subsequently, the district court awarded Appellees

attorneys fees pursuant to I.R.C. § 7430 in light of its finding


        3
      The parties appealed this case twice to the Fifth Circuit
during this phase. See United States v. Marré, 38 F.3d 823, (5th
Cir. 1994) (“Marré I”); United States v. Marré, 117 F.3d 297 (5th
Cir. 1994) (“Marré II”).

                                             4
that the Government’s position in defending Marré and Agritech’s

refund suit was not substantially justified.

     The Government appeals the district court’s grant of summary

judgment    and   award   of    attorneys     fees.    In    particular,     the

Government    challenges       the   district   court’s     finding   that   the

Government during the February 1992 wrongful disclosure trial

stipulated, or in any way represented, that all investigations of

Marré and Agritech were closed; that even if such a representation

had been made, the district court erred in finding that such a

statement judicially estopped the Government from assessing civil

tax penalties against Appellees for unlawful conduct discovered

during the investigation; and that the district court erred in

finding that the Government’s position in defending the refund suit

was not substantially justified.            In response, Marré and Agritech

urge anew the arguments earlier made to the district court as

alternative grounds supporting summary judgment.4

                                       II

                                        A

     We review the district court’s grant of summary judgment de

novo.      In so doing, we view the evidence in the light most

favorable to the non-movant, i.e. the Government, and apply the

same standard as the district court.            See Wenner v. Texas Lottery

Comm’n, 123 F.3d 321, 324 (5th Cir. 1997).            If the pleadings and

    4
     HP-84 Nursery Associates (“HP-84") is a judgment creditor of
Marré intervening in this case to obtain any damages awarded to
Marré had we affirmed the district court’s ruling. HP-84 filed a
letter in lieu of a brief essentially adopting the position of
Marré.

                                        5
other summary judgment evidence demonstrate that no genuine issue

as to any material fact exists, then we grant judgment as a matter

of law to the movants, i.e. Marré and Agritech.          See Celotex Corp.

v. Catrett, 477 U.S. 317, 322-24, 106 S. Ct. 2548, 2552-53 (1986);

see also      Fed. R. Civ. P. 56(c).    With regard to attorneys fees, we

review the district court's award for abuse of discretion.                See

Marré v. United States, 117 F.3d 297, 301 (5th Cir. 1997).

                                        B

       The Government argues that the district court erred in holding

that    the    Government’s     stipulation   and    assertions   at   trial

judicially      estopped   it   from   assessing    penalties   against   the

Appellees for the following reasons: (1) the Government did not

stipulate or assert at the wrongful disclosure trial that the civil

investigation of the Appellees was closed; (2) the question of

whether the Government stipulated that all investigation of the

Appellees was closed, rather than just the criminal investigation,

is a genuine issue of material fact precluding summary judgment for

the Appellees; (3) the Government did not “successfully maintain”

in the disclosure litigation that the investigation was closed; and

(4) even assuming that the Government did stipulate or assert that

all investigations of the Appellees were closed, judicial estoppel

does not prevent the Government from assessing penalties based on

conduct discovered in those investigations.

         The doctrine of judicial estoppel “prevents a party from

asserting a position in a legal proceeding that is contrary to a

position previously taken in the same or some earlier proceeding.”


                                       6
Ergo Science, Inc. v. Martin, 73 F.3d 595, 598 (5th Cir. 1996).

The    doctrine     “applies       to     protect      the     integrity      of     the

courts--preventing a litigant from contradicting its previous,

inconsistent position when a court has adopted and relied on it.”

Afram Carriers, Inc. v. Moeykens, 145 F.3d 298, 303 (5th Cir.

1998).

       In a stipulation filed with the district court one month

before the wrongful disclosure trial, the Government agreed to the

following:

       The parties agree and stipulate that Appellees Richard L.
       Marré and Agritech Enterprises, Inc. are no longer under
       any   grand   jury   or   administrative   criminal   tax
       investigation and that Appellees have never been charged
       or indicted as a result of the I.R.S. investigation
       conducted by Special Agent Lindell Parrish or the grand
       jury. The United States objects to the admissibility of
       this stipulated fact on the ground that it is not
       relevant.

Additionally,      the    Government’s         trial    counsel       made     similar

representations      to    the     district     court        during   the    wrongful

disclosure trial.

       While it would appear that the Government at most represented

that Marré and Agritech as of the time of the wrongful disclosure

trial were no longer under criminal investigation, resolution of

the appeal now before us does not turn on the characterization of

the Government’s representations to the district court regarding

the status of I.R.S. investigations of Marré and Agritech. Even if

we    were   to   find    that   the      Government     represented         that    all

investigations      had     been        terminated      (including      any         civil

investigation), such a representation would not be inconsistent


                                           7
with the assessment of penalties pursuant to I.R.C. §§ 6700 and

6701.   The fact that the I.R.S. may have closed its investigations

into the conduct of Marré and Agritech does not necessarily mean

that the I.R.S. could not at some later time choose to reopen an

investigation.   Additionally, the fact that an investigation has

been closed does not prevent the Government from later assessing

penalties based on improper conduct discovered during the course of

that investigation.    Because the Government at no time represented

to the district court that tax penalties would not be assessed

against Marré    and   Agritech,    we    find   that   the    district     court

improperly concluded that the Government was judicially estopped

from assessing civil tax penalties.         For this reason, we hold that

the district court erred in granting summary judgment on this

ground.

                                     C

     As an alternative basis for the district court’s grant of

summary   judgment,    Marré   and       Agritech   argue      (1)   that    the

Government’s assessment of penalties under the Internal Revenue

Code constituted a compulsory counterclaim which in accordance with

Fed. R. Civ. P. 13 should have been brought in response to the

Appellees’ wrongful disclosure suit and (2) that the Government

duplicated   penalties    against    the     Appellees    in    violation     of

§ 6701(f)(3).    The district court denied summary judgment as to

both these grounds.    First, the district court rejected Marré and

Agritech’s compulsory counterclaim argument relying on Pfeiffer Co.

v. United States, 518 F.2d 124, 130 (8th Cir. 1975) (“[B]ecause the


                                     8
Government has a wide range of extra-judicial tax collection

devices at its disposal, we doubt that the Federal Rules of Civil

Procedure can be read to compel the Government to litigate when, as

in this case, for reasons of its own it chooses not to.”) and

Gustin v. United States, 876 F.2d 485, 490 n.1 (5th Cir. 1989)

(“The   strictures   of   Fed.R.Civ.P.   13    simply   do   not   apply   to

counterclaims for delinquent taxes.”). Second, consistent with the

requirements of § 6701(f)(3) which provides that “no penalty shall

be assessed under section 6700 on any person with respect to any

document for which a penalty is assessed on such person under

subsection (a),” the district court rejected Appellees’ duplicated

penalty claim noting that “[n]othing in the record supports Marré

and Agritech’s argument that the assessments were based on the same

document.”   Marré v. United States, Civil Action H-88-1103, slip

op. at 3 (S.D. Tex. Mar. 18, 1998).

     After careful review of the record, we adopt the conclusions

of the district court on these points and find that neither

provides a basis for summary judgment.        With regard to the district

court’s award of attorneys fees pursuant to I.R.C. § 7430, we find

that Marré and Agritech no longer qualify as “prevailing part[ies]”

and therefore reverse that award.             See Internal Revenue Code

§ 7430(a) (providing that a prevailing party may be awarded a

judgment for reasonable litigation costs in any court proceeding

against the United States).

                                  III

     For the foregoing reasons, we reverse both the district


                                   9
court’s grant of summary judgment and award of attorneys fees.

     REVERSED




                               10
