                            District of Columbia
                             Court of Appeals
Nos. 14-AA-1401, 14-AA-1403 & 14-AA-1404

DISTRICT OF COLUMBIA OFFICE OF TAX & REVENUE,                            JUN 30 2016
                      Petitioner,

        v.                                           OTR-49-11

EXXONMOBILE OIL CORPORATION, et al.,
                     Respondents.


                           On Petition for Review of an Order
             of the District of Columbia Office of Administrative Hearings

      BEFORE: THOMPSON and MCLEESE, Associate Judges; and KING, Senior
Judge.

                                  JUDGMENT

            This case came to be heard on the administrative record, a certified
copy of the agency hearing transcript and the briefs filed, and was argued by
counsel. On consideration whereof, and as set forth in the opinion filed this date, it
is now hereby

            ORDERED and ADJUDGED that the orders issued by the Office of
Administrative Hearings, granting the oil companies summary judgment, are
vacated, and the case is remanded for further proceedings consistent with this
opinion.

                                  For the Court:




Dated: June 30, 2016.

Opinion by Senior Judge Warren R. King.
Notice: This opinion is subject to formal revision before publication in the
Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the
Court of any formal errors so that corrections may be made before the bound
volumes go to press.

                                                                          6/30/16
            DISTRICT OF COLUMBIA COURT OF APPEALS

                Nos. 14-AA-1401, 14-AA-1403 & 14-AA-1404

        DISTRICT OF COLUMBIA OFFICE OF TAX & REVENUE, PETITIONER,

                                       v.

             EXXONMOBIL OIL CORPORATION, et al., RESPONDENTS.

                     On Petitions for Review of Orders of the
             District of Columbia Office of Administrative Hearings
                                   (OTR-49-11)

(Argued February 9, 2016                                Decided June 30, 2016)

       Richard S. Love, Senior Assistant Attorney General, with whom Karl A.
Racine, Attorney General for the District of Columbia, Todd A. Kim, Solicitor
General, and Loren L. AliKhan, Deputy Solicitor General, were on the brief, for
petitioner.

      M. Miller Baker, with whom Stephen P. Kranz, Diann L. Smith, and Katie
Bukrinsky were on the brief, for respondents.

      Before THOMPSON and MCLEESE, Associate Judges, and KING, Senior
Judge.

      KING, Senior Judge: Petitioner District of Columbia Office of Tax and

Revenue (“OTR”) petitions for review of three orders issued by the Office of

Administrative Hearings (“OAH”) that grant summary judgment to respondents

Exxon Mobil Oil Corp., Shell Oil Co., and Hess Corp. (collectively, the “oil
                                        2


companies”) and reverse OTR’s Notices of Proposed Assessment of Tax

Deficiency against them. OTR contends that OAH’s grant of summary judgment

to the oil companies is premised on the erroneous application of offensive 1 non-

mutual collateral estoppel against OTR. In United States v. Mendoza, 464 U.S.

154 (1984), the Supreme Court held that offensive non-mutual collateral estoppel

does not, as a matter of law, apply against the federal government.        Citing

Mendoza, OTR contends that offensive non-mutual collateral estoppel should not,

as a matter of law, ever apply to the District government or its entities, such as

OTR. Alternatively, OTR argues that OAH abused its discretion in applying

offensive non-mutual collateral estoppel in the circumstances of these cases. For


      1
           It is not entirely clear whether these cases are properly viewed as
involving offensive rather than defensive non-mutual collateral estoppel. Although
one could view these cases as beginning when the oil companies filed their
petitions at OAH, one could also view them as beginning when OTR issued the
Notices of Proposed Assessment of Tax Deficiency to the oil companies. On the
former view, these cases involve offensive non-mutual collateral estoppel, whereas
on the latter view, they involve defensive non-mutual collateral estoppel.

        None of the parties addressed this distinction during the course of this
litigation. In their separate motions for summary judgment, all three of the oil
companies argued that OAH should apply offensive non-mutual collateral estoppel
against OTR. Similarly, in its oppositions to the oil companies’ motions, OTR
argued that OAH should not apply offensive non-mutual collateral estoppel against
OTR. Further, in their briefs to this court, the oil companies and OTR focus their
arguments about collateral estoppel on whether OAH properly applied offensive
non-mutual collateral estoppel. As a result, we proceed in this opinion on the
assumption that these cases involve offensive non-mutual collateral estoppel.
                                        3


the reasons that follow, we conclude that OAH did abuse its discretion in applying

offensive non-mutual collateral estoppel against OTR and thereby erred in granting

the oil companies summary judgment. We therefore vacate OAH’s orders and

remand for further proceedings.



                                        I.



      Between 2011 and 2012, OTR issued a Notice of Proposed Assessment of

Tax Deficiency for alleged underpayment of corporate franchise taxes for tax years

2007–2009 to each of the oil companies. Each oil company filed a petition in

OAH protesting the proposed assessment it received. Their protests were based in

part on their shared view that the methodology used by OTR to calculate their

alleged tax deficiencies (the “Chainbridge methodology”) was contrary to

applicable law. OTR and the oil companies agreed to a stay of the proceedings by

OAH pending resolution of similar challenges by other companies to tax

deficiency assessments issued by OTR that also utilized the Chainbridge

methodology.2 Thereafter, OAH lifted the stay at the oil companies’ request to


      2
        In particular, when Exxon and Shell filed their protests, OTR was already
involved in litigation against Microsoft Corp. in OAH. See generally Microsoft
Corp. v. Office of Tax & Revenue, No. 2010-OTR-12 (D.C. Office of Admin.
Hearings May 1, 2012). The Microsoft case ended after OTR voluntarily
                                                                (continued…)
                                          4


allow them to file motions for summary judgment.



      In their motions for summary judgment, the oil companies argued, inter alia,

that OTR was collaterally estopped from defending the legality of the Chainbridge

methodology by OAH’s ruling in the Microsoft case. See supra note 2; see also

Microsoft Corp., supra note 2, No. 2010-OTR-12 at *18-*27. Thereafter, OAH

specifically directed OTR to “file . . . brief[s] addressing the issue of collateral

estoppel” in each of the proceedings and scheduled oral argument to deal solely

with that issue. OTR complied with OAH’s order, submitting motions addressing

collateral estoppel in which it argued (1) that offensive non-mutual collateral

estoppel does not apply to the District government or its entities or, in the

alternative, (2) that it would be unfair and an abuse of discretion to apply offensive

non-mutual collateral estoppel in these cases, citing the fairness factors identified

by this court in Modiri v. 1342 Rest. Grp., Inc., 904 A.2d 391, 400 (D.C. 2006).
________________
(…continued)
dismissed its petition for review in this court of OAH’s order granting Microsoft
summary judgment on the ground that OTR’s use of the Chainbridge methodology
was “arbitrary, capricious, and unreasonable.” Id.

       Hess, which filed its protest later than Exxon and Shell, sought a stay
pursuant to a separate case involving a similar challenge by BP Products North
America Inc. to the Chainbridge methodology in the Superior Court. See generally
BP Prods. N. Am. Inc. v. Office of Tax & Revenue, D.C. Super. Ct. No. 2011 CVT
10619 (March 31, 2014). That case ended with a stipulated dismissal following
settlement.
                                          5




      Following oral argument on the oil companies’ motions, OAH issued nearly

identical orders in all three cases granting the oil companies summary judgment

and reversing the three Notices of Proposed Assessment of Tax Deficiency issued

by OTR. The orders were premised on OAH’s conclusion that its ruling in the

Microsoft case collaterally estopped OTR from defending the legality of its

methodology for calculating the oil companies’ alleged tax deficiencies. OTR

timely filed petitions for review in this court of OAH’s orders, which this court

consolidated sua sponte.



                                          II.



      In these cases, we must determine whether OAH properly applied offensive

non-mutual collateral estoppel against OTR. At first glance, it appears that in

making this determination, we are bound by our decision in District of Columbia v.

Gould, 852 A.2d 50 (D.C. 2004), in which we directly addressed the applicability

of offensive non-mutual collateral estoppel against the District and its entities, such

as OTR.3 However, the oil companies argue that we are not bound by Gould’s


      3
         None of the parties cited Gould in the proceedings before OAH or in their
briefs to this court. This court, having recognized that we previously addressed in
                                                                (continued…)
                                          6


discussion of this issue.4 Therefore, before we can decide the ultimate question

presented, we must address the antecedent question of whether we are bound by

Gould’s discussion.



                                         A.



      Gould involved a claim against the District brought by a class of former

Metropolitan Police Department (MPD) officers who “retired on account of

disability . . . but [did not] complete[] twenty years of active service.” 852 A.2d at

52. The officers sought payment of a 5% “‘base retention differential’ (BRD)

pursuant to” the applicable statute and allegedly “in conformity with a

compensation settlement negotiated between the MPD and the Fraternal Order of

Police (FOP) and approved by the Council of the District of Columbia.” Id. at 52-

53. The terms of that settlement provided, in relevant part, that only officers “who

________________
(…continued)
Gould the question presented in these petitions for review, issued an order sua
sponte directing the parties to address Gould at oral argument. The parties
complied, completing the record for this decision.
      4
          In addressing Gould, counsel for OTR mainly emphasized that if Gould
applies, it does not preclude this court from adopting Mendoza because it did not
discuss Mendoza at all. Beyond that, counsel for OTR focused argument on why
we should adopt Mendoza.
                                          7


ha[ve] completed or complete[] twenty (20) years of service under the Police

Service salary schedule shall receive [the 5% BRD].” Id. at 53 n.2 (emphasis

omitted). This plain language led us to observe that because “[a]ll of the members

of the plaintiff class retired prior to completing the requisite twenty years[, t]he 5%

BRD [in the settlement] has no application to the members of the plaintiff class.”

Id. at 53.



       In an effort to overcome this plain language, the officers relied on a prior

decision of this court, District of Columbia v. Tarlosky, 675 A.2d 77 (D.C. 1996),

and a decision of the Superior Court based on Tarlosky, Abbott v. District of

Columbia, C.A. No. 95-5668 (D.C. Super. Ct. July 23, 1996), to argue that the

District was “collaterally estopped from contesting the retirees’ claim of eligibility

for the 5% BRD.” Gould, supra, 852 A.2d at 55. We rejected the officers’

argument on two grounds.



       Our first ground for rejection relied on the proper application of collateral

estoppel. We observed that collateral estoppel (whether mutual or non-mutual) can

apply only if “the previously resolved issue [is] identical to the one presented in

the current litigation” and then only if “the issue to be concluded [was] raised and

litigated, and actually adjudged.”      Gould, supra, 852 A.2d at 56 (internal
                                           8


alterations, citations, emphasis, and quotation marks omitted).           We observed

further that the issue addressed in Tarlosky and Abbott (whether “the 5% BRD is a

salary increase”) was not the same as the issue raised by the plaintiff class in Gould

(whether they were “eligib[le] for the 5% BRD”), and also that, “in Abbott, the

‘judicial mind’ did not pass on the question before us in this case.” Id. at 55-56.

Finally, we observed that “[a]lthough it may well be that the District could have

raised this issue vis-à-vis at least some of the plaintiffs in the Abbott case, the point

was not actually litigated or decided.” Id. at 56. We therefore held that “the

decision in Abbott, a case in which the present issue was not raised by the District

or resolved by the court, cannot collaterally estop the District from raising that

issue here . . . .” Id.



       Our second ground for rejecting the officers’ collateral estoppel argument

rested on broader principles. We noted that “decisions of the Supreme Court make

clear that estoppel can rarely be asserted against the government . . . because the

government is never disabled from protecting the public interest by reason of the

past mistakes of its agents.” Id. (internal alterations and quotation marks omitted)

(citing, inter alia, Schweiker v. Hansen, 450 U.S. 785, 788-89 (1981), and Utah

Power & Light Co. v. United States, 243 U.S. 389, 409 (1917)). We further noted:
                                          9


             Estoppels against the public are little favored, and they
             generally cannot be asserted against, and are not
             applicable to, the government or governmental entities.
             They should not be invoked except in rare and unusual,
             or exceptional, circumstances, and may not be invoked
             where they would operate to defeat the effective
             operation of a policy adopted to protect the public. They
             must be applied with circumspection, restraint,
             reluctance, and caution, especially where their
             application would have an adverse impact on the public
             fisc. The doctrine should be applied only in those special
             cases where the interests of justice, as variously stated,
             clearly require it.



Id. at 56-57 (quoting 31 C.J.S. Estoppel and Waiver § 168, at 648-49 (1996 &

Supp. 2003)). In light of these principles, we held “that even if the District could

have raised in Abbott the issue now before us, this is not an appropriate case for

applying the doctrine of offensive collateral estoppel against the District.” Id. at

57.

                                          B.



      The oil companies contend that our discussion of general principles

underlying application of offensive non-mutual collateral estoppel to the District

and its entities is not binding, but rather is better read as dicta. In support of this

contention, they point to a footnote contained in that discussion, in which we

observed, “The District should not be compelled to pay out legally unauthorized
                                           10


pension money simply because its attorneys failed to raise the present issue in

Abbott.” Gould, supra, 852 A.2d at 57 n.7. The oil companies argue that this

footnote appears to link our discussion of the general applicability of offensive

non-mutual collateral estoppel against the District to our initial holding;5

consequently, they argue, that discussion is not and should not be viewed as an

independent, binding holding. In addition, the oil companies point out that (1) we

do not explicitly distinguish between mutual and non-mutual collateral estoppel in

our discussion in Gould and (2) our rationale for limiting the application of

collateral estoppel against the District applies equally in both situations.

According to the oil companies, this would “represent a dramatic departure from

settled law,” as it would require litigants against the District to show exceptional

circumstances to justify invoking even mutual collateral estoppel against the

District. Thus, the oil companies’ logic seems to be that because our discussion of

non-mutual collateral estoppel in Gould appears to (1) be interlinked with our

alternative holding in Gould and (2) have potentially dramatic implications for

previously settled law, that discussion is better interpreted as non-binding dicta

than as an independent, binding holding.


      5
         I.e., that “the decision in Abbott, a case in which the present issue was not
raised by the District or resolved by the court, cannot collaterally estop the District
from raising that issue here.” Gould, supra, 852 A.2d at 56.
                                          11




                                          C.



      We are not persuaded that Gould’s discussion of the general applicability of

offensive non-mutual collateral estoppel against the District is dicta, rather than an

independent, alternative holding binding this division of the court. See M.A.P. v.

Ryan, 285 A.2d 310, 312 (D.C. 1971). Although we do not disagree with the oil

companies’ first argument that our discussion of the application of non-mutual

collateral estoppel against the District in Gould is linked with our alternative

holding, that link does not make that discussion dicta. Both holdings in Gould do

rely on the fact that the District’s attorneys did not raise in Abbott the issue that we

faced in Gould. In our first holding, that fact was dispositive because it meant that

the officer-appellees failed to satisfy one of the basic elements of collateral

estoppel because the issue they sought to estop the District from re-litigating had

not been “actually litigated” in Abbott. See infra note 8. By contrast, in our

second, alternative holding, the fact that the District’s attorneys did not raise in

Abbott the issue that we faced in Gould was dispositive for the separate reason that

we did not want to estop the government from litigating the issue based on a past

mistake of its attorneys. In essence, then, our alternative holding in Gould was

that, even if the District’s attorneys’ failure to raise in Abbott the issue that we
                                         12


faced in Gould could justify estopping the District, we would not estop the District

based on the authorities we cited, including Supreme Court precedent and a treatise

summarizing relevant case law, that indicated that “[e]stoppels against the public

are little favored” and “should not be invoked except in rare and unusual, or

exceptional, circumstances . . . .” 852 A.2d at 56. We thus see no reason to

interpret our second holding in Gould as dicta simply because of its link to our first

holding.6

      Furthermore, we are not persuaded by the oil companies’ second argument

that we should interpret our alternative holding in Gould as dicta because if we

interpret it as a binding holding it has potentially dramatic implications for

previously settled law concerning mutual collateral estoppel. We do not disagree

in principle that Gould may have implications for mutual collateral estoppel that

we did not contemplate.      However, we were not required to consider those

      6
          Our discussion in footnote 7 of Gould, which the oil companies emphasize
to support their argument, does not change our conclusion. When we said, “The
District should not be compelled to pay out legally unauthorized pension money
simply because its attorneys failed to raise the present issue in Abbott,” what we
essentially meant was that it would be unfair in the absence of exceptional
circumstances to leave the District with a legally unauthorized bill in Gould just
because its attorneys failed to challenge the legality of a similar bill in Abbott.
Although the specific concern identified in the footnote—failure of the District’s
agents—is not applicable in the cases sub judice, our general concern with the
fairness of applying offensive non-mutual collateral estoppel against the District in
the absence of exceptional circumstances, which is also articulated in the footnote,
is at the heart of what we must decide here.
                                          13


implications in Gould because the facts of Gould were limited to the application of

offensive non-mutual collateral estoppel against the District. To put it in Gould’s

terms, “the ‘judicial mind’ did not pass” on the question of how our holding would

affect the application of mutual collateral estoppel against the District, and thus our

holding in Gould “does not constitute precedent with respect to that question.” 852

A.2d at 55; see also Richman Towers Tenants’ Ass’n, Inc. v. Richman Towers LLC,

17 A.3d 590, 610 (D.C. 2011) (“The rule of stare decisis is never properly invoked

unless in the decision put forward as precedent the judicial mind has been applied

to and passed upon the precise question.” (internal alterations omitted) (quoting

District of Columbia v. Sierra Club, 670 A.2d 354, 360 (D.C. 1996))).7 The

judicial mind did, however, pass on the precise question we face here: whether

offensive non-mutual collateral estoppel applies to the District of Columbia and its

entities. As a result, we conclude that our answer to that question in Gould is

binding on this division of the court, see M.A.P., supra, 285 A.2d at 312, and

therefore guides our further analysis.

      7
          As the cases sub judice do not involve the application of mutual collateral
estoppel against the District or its entities, we need not further explore this
question. We note, however, that a situation involving mutuality between the
District and another litigant has some serious fairness concerns for the litigant
pointing in favor of applying collateral estoppel that do not exist in the absence of
mutuality. Moreover, the Supreme Court has approved the use of mutual collateral
estoppel against the federal government notwithstanding Mendoza. See United
States v. Stauffer Chem. Co., 464 U.S. 165, 174 (1984).
                                          14




                                         III.



      Having determined that we are bound by Gould’s discussion of the

applicability of offensive non-mutual collateral estoppel against the District, we

must determine the proper resolution of OTR’s petitions for review. Ordinarily,

“[p]roper application of non-mutual offensive collateral estoppel requires a two-

step inquiry.” In re Wilde, 68 A.3d 749, 759 (D.C. 2013) (quoting Modiri, supra,

904 A.2d at 395). “In the first step, the trial court must determine whether a case

meets the traditional requirements for invoking collateral estoppel.”8 Id. The

second step involves a discretionary balancing of a long list of factors to

“determin[e] whether the offensive use of non-mutual collateral estoppel would be

fair.” Id. at 760 (quoting K.H., Sr. v. R.H., 935 A.2d 328, 333-34 (D.C. 2007)); see


      8
          Collateral estoppel

              renders conclusive in the same or a subsequent action
              determination of an issue of fact or law when (1) the
              issue is actually litigated and (2) determined by a valid,
              final judgment on the merits; (3) after a full and fair
              opportunity for litigation by the parties or their privies;
              (4) under circumstances where the determination was
              essential to the judgment, and not merely dictum.

Washington Med. Ctr., Inc. v. Holle, 573 A.2d 1269, 1283 (D.C. 1990). OTR does
not challenge OAH’s conclusion that these cases satisfy these requirements.
                                              15


also id. at 760-61 (listing factors). However, in cases involving the assertion of

offensive non-mutual collateral estoppel against the District or one of its entities,

Gould adds a third step to the inquiry. “Estoppels against the public are little

favored” and “should not be invoked except in rare and unusual, or exceptional,

circumstances . . . , especially where their application would have an adverse

impact on the public fisc.” Gould, supra, 852 A.2d at 56. Thus, when the party

against whom offensive non-mutual collateral estoppel is asserted is the District or

one of its entities, courts and administrative bodies should apply the doctrine “only

in those special cases” involving “exceptional[] circumstances,” “where the

interests of justice . . . clearly require it.”9 Id.



       Whether such exceptional circumstances exist in these cases is a matter for

OAH to decide in the first instance, subject to our deferential review. Cf. Modiri,

supra, 904 A.2d at 400 (applying abuse-of-discretion standard of review to trial

court’s ruling as to fairness factors). None of the parties cited Gould to OAH, see


       9
         We emphasize that this exceptional circumstances inquiry is distinct from
the fairness inquiry. This does not mean that the fairness factors listed in Wilde
must be ignored when conducting the exceptional circumstances inquiry.
However, an affirmative finding of fairness does not dictate an affirmative finding
of exceptional circumstances, and vice versa. Thus, OAH’s determination
regarding the fairness factors in these cases does not answer the different question
of whether there are exceptional circumstances warranting application of offensive
non-mutual collateral estoppel against OTR.
                                        16


supra note 3, and OAH did not address the question of whether exceptional

circumstances exist in these cases. As a result, OAH’s application of offensive

non-mutual collateral estoppel against OTR was an abuse of discretion, see Ford v.

Chartone, Inc., 908 A.2d 72, 84 (D.C. 2006) (“A discretionary judgment must be

founded upon correct legal principles, and a court by definition abuses its

discretion when it makes an error of law.” (internal alterations, citations, and

quotation marks omitted)),10 and we therefore must remand the case for OAH to

address this question.



                                       IV.



      In sum, we hold that Gould’s discussion of the applicability of offensive

non-mutual collateral estoppel against the District and its entities is binding and

applies in these cases and that OAH’s decision to apply offensive non-mutual

collateral estoppel against OTR without accounting for Gould’s discussion was an

      10
          This holding renders it unnecessary for us to address the oil companies’
alternative argument that if Gould applies, they have demonstrated the requisite
exceptional circumstances justifying application of offensive non-mutual collateral
estoppel against OTR in these cases. See Ford, supra, 908 A.2d at 85 (“Ordinarily,
we may not salvage an unsound discretionary ruling by substituting our own
reasons for those of the trial court.”). The oil companies are free to make that
argument on remand, and we express no opinion here on the merits of that
contention.
                                        17


abuse of discretion. Consequently, OAH erred in granting the oil companies

summary judgment.11

      Accordingly, for the foregoing reasons, we vacate the orders issued by OAH

granting the oil companies summary judgment and remand for further proceedings

consistent with this opinion.12



                                                   So ordered.




      11
          In so holding, we express no view as to how OAH should decide the oil
companies’ summary judgment motions on remand after conducting the
exceptional circumstances inquiry. Furthermore, at this stage in the proceedings,
considering neither OAH nor OTR addressed the merits of the underlying dispute
in these cases (i.e., whether the Chainbridge methodology for assessing tax
deficiencies is valid) in the proceedings below, we decline the oil companies’
invitation to affirm OAH’s orders on the alternate ground that the Chainbridge
methodology is faulty as a matter of law.
      12
          In light of this outcome, we decline to address OTR’s further arguments
that (1) Gould does not foreclose application of Mendoza in the District, see supra
note 4, and (2) assuming Gould does not foreclose application of Mendoza, we
should apply Mendoza to hold that non-mutual collateral estoppel does not apply to
the District or its entities—such as OTR—as a matter of law.
