                       NOT RECOMMENDED FOR PUBLICATION
                              File Name: 07a0658n.06
                             Filed: September 5, 2007

                           Nos. 05-4418, 06-3163 and 06-3166

                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT


LIVING CARE ALTERNATIVES OF                 )
KIRKERSVILLE, INC. (05-4418),               )
                                            )
and                                         )
                                            )   ON APPEAL FROM THE UNITED
LIVING CARE ALTERNATIVES OF                 )   STATES DISTRICT COURT FOR THE
UTICA, INC. (06-3163 and 06-3166),          )   SOUTHERN DISTRICT OF OHIO
                                            )
       Plaintiffs-Appellants,               )
                                            )   OPINION
v.                                          )
                                            )
UNITED STATES OF AMERICA,                   )
                                            )
       Defendant-Appellee.                  )
                                            )


Before: GIBBONS and McKEAGUE, Circuit Judges; and BUNNING, District Judge.*

       DAVID L. BUNNING, District Judge. In these consolidated appeals, Plaintiffs-

Appellants Living Care Alternatives of Kirkersville, Inc. (“Living Care Kirkersville”) and

Living Care Alternatives of Utica, Inc. (“Living Care Utica”) appeal the district courts’

summary affirmances of the Internal Revenue Service (“IRS”) Appeals Officers’

administrative decisions upholding the filing of tax levy and/or lien notices against them.

The Government argues the district courts properly concluded that the matters raised by

Living Care Kirkersville and Living Care Utica were previously litigated in Living Care


       *
       The Honorable David L. Bunning, United States District Judge for the Eastern District of
Kentucky, sitting by designation.
Alternatives of Utica, Inc. v. United States, 411 F.3d 621 (6th Cir. 2005), and are, therefore,

barred by collateral estoppel. In the alternative, the Government argues that the Appeals

Officers did not abuse their discretion in concluding that the need for the efficient collection

of taxes outweighs Appellants’ concern that the collection action be no more intrusive than

necessary.

       Appellants, on the other hand, offer that the doctrine of collateral estoppel does not

apply because the facts and issues in these consolidated cases are different from those

in Living Care Alternatives of Utica. Moreover, Appellant Living Care Kirkersville maintains

that privity between it and Living Care Utica to collaterally estop its challenges is lacking.

Absent application of collateral estoppel, they contend the IRS Appeals Officers abused

their discretion by confirming a tax collection method that would destroy their businesses,

yet yield nothing in tax collections.

       For the reasons that follow, this Court AFFIRMS the respective district court

decisions.

                                        I. BACKGROUND

       Living Care Kirkersville and Living Care Utica are Ohio corporations. Each operates

long-term nursing care facilities in Licking County, Ohio. The sole shareholder and officer

of both corporate entities is Thomas J. Rosser (“Rosser”). Medicaid payments are the

primary funding source for each facility. According to Appellants, each facility is struggling

financially, due in large part to the substantial government regulation of nursing homes and

insufficient government payment under Medicaid to maintain regulatory compliance and

also generate a profit.



                                              -2-
A.      The Living Care Utica Proceedings

        Living Care Utica has initiated four district court actions challenging tax liens and

levies for unpaid employment taxes and unemployment tax liabilities.1 The first two district

court cases were consolidated by this Court. Case No. 04-3194 (Living Care Utica I)

involved annual payments for tax year 1999 and quarterly payments in 1999 and 2001.

Case No. 04-3554 (Living Care Utica II) involved annual payments for tax years 1995,

1998, and 2000, and quarterly taxes for various quarters in 1995, 1996, 1999, 2000 and

2001.       That consolidated appeal culminated in this Court’s decision in Living Care

Alternatives of Utica v. United States, 411 F.3d 621 (6th Cir. 2005).

        The later two district court appeals, Case No. 06-3163 (Living Care Utica III) and

Case No. 06-3166 (Living Care Utica IV), were consolidated by both the district court and

this Court. Living Care Utica III involves quarterly employment taxes for fourth quarter

2001 and first quarter 2002 and annual unemployment taxes for 2001. Living Care Utica

IV involves quarterly employment taxes for the second quarter of 2002.

        On July 31, 2002, the IRS, in Living Care Utica III, sent Living Care Utica a final

notice of intent to levy with respect to certain taxes, with a notice of federal tax lien filing

for these liabilities subsequently sent on August 15, 2002. The IRS on September 25,

2002, sent Living Care Utica a final notice of intent to levy with respect to the remaining

taxes at issue in that case, with a notice of federal tax lien filing for these liabilities

subsequently sent on October 4, 2002.



        1
       There was a fifth Living Care Utica district court case, but that action was voluntarily
dismissed upon recognition that it challenged an IRS notice duplicating that issued in Sixth Circuit
Case No. 06-3163.

                                                -3-
       On April 17, 2003, the IRS, in Living Care Utica IV, sent Living Care Utica a notice

of federal tax lien with respect to the taxes at issue in that case.

       Pursuant to 26 U.S.C. § 6320, each of the various IRS notices advised Living Care

Utica of its right to a collection due process (“CDP”) hearing with respect to the proposed

levy and/or federal tax lien filings identified in the notices. Living Care Utica timely

submitted forms requesting CDP hearings in both Living Care Utica III and Living Care

Utica IV. In submitting those forms, Living Care Utica also identified by attachment the

grounds upon which it was seeking further review.

       In Living Care Utica III, the Appeals Officer conducted the CDP hearing on

March 13, 2003, via telephone, after which on June 18, 2003, he issued a Summary and

Recommendation addressing the various challenges raised by Living Care Utica and

concluding that the levy and federal tax lien filings should be sustained. (Utica J.A. 280-85).

His Summary and Recommendation was attached to the July 9, 2003, Notice of

Determination sent by the IRS to Living Care Utica. (J.A. 279).

       More particularly, Living Care Utica protested that its failure to pay payroll taxes was

the result of decreased funding from government sources with no corresponding decrease

in operating expenses. The Appeals Officer concluded that this calculated business

decision to pay other debts instead of turning over withheld taxes was neither justification

nor reasonable cause. Living Care Utica pointed to prior dealings with the IRS wherein an

installment agreement was reached. However, the Officer concluded the prior dealings did

not involve the tax periods at hand and were therefore not relevant to providing a basis for

present relief. Living Care Utica pointed out various factors contributing to its overall

negative cash flow and consequent lack of funds to cover operating expenses. The Officer

                                              -4-
concluded these circumstances merely evidenced that an installment agreement was not

a viable collection alternative, rather than providing a basis to grant Living Care Utica relief

from the liens.

       Living Care Utica also complained that the existing IRS liens prevent it from

refinancing its real and personal property, the funds from which could be used to pay the

taxes. But the Officer concluded that none of the circumstances of 26 U.S.C. § 6323(j)

were present to sustain withdrawing the liens, and that since Living Care Utica reported

there were other liens senior to those of the IRS, leaving its liens in place was reasonable

to ensure preserving the Service’s claim in the event of private sale. Living Care Utica also

suggested that its Medicare and Medicaid payments may be exempt from levy. The Officer

disagreed.

       Finally, the Summary and Recommendation noted that, at hearing, Living Care Utica

proposed filing an offer in compromise or private sale of the business as collection

alternatives. But the Officer concluded that private sale was not a viable alternative, since

the business had been for sale over two years at that point with no buyers. And as to the

offer in compromise, the Officer concluded this was not a realistic alternative, since the

required forms had been sent to Living Care Utica with no specific follow up by either the

designated submission deadline or the time thereafter within which Living Care Utica stated

that a formal offer would be forthcoming. The report concluded with the Officer’s brief

discussion of whether the need for efficient tax collection had been balanced with Living

Care Utica’s concern that the proposed collection action be no more intrusive than

necessary. He found this requirement met, since Living Care Utica had not provided

proper documentation to evaluate proposed collection alternatives.

                                              -5-
       In Living Care Utica IV, the Appeals Officer conducted the CDP hearing on

October 16, 2003, via telephone, after which she issued a report recommending that the

subject federal tax lien filing be sustained. Her report and recommendation was attached

to the November 24, 2003, Notice of Determination sent by the IRS to Living Care Utica.

       The Officer’s report concluded Living Care Utica raised no relevant challenges to

the collection action and that none of the grounds for withdrawal of the lien pursuant to

§ 6323(j) had been shown. Although not outlined in the same detail as the Officer’s report

in Living Care Utica III, the challenges raised by Living Care Utica and rejected mirror those

it raised in the prior proceeding. Namely, its attachment to its CDP hearing request

identified it intended to propose an offer in compromise or sale or refinance as a collection

alternative; that the lien was obstructing it from procuring refinancing; that the IRS would

receive no revenue due to senior lienholders; and that it was unable to meet its tax

obligations due to financial problems from over-regulation and under-funding by the

government. In balancing the need for efficient collection with Living Care Utica’s concern

that the collection action be no more intrusive than necessary, the Appeals Officer noted

that the lien was filed because Living Care Utica’s tax liability was accruing, and therefore

protection of the tax liability was necessary. She noted that Living Care Utica had failed

to submit sufficient documentation to establish that withdrawing the lien would facilitate a

viable collection alternative nor was it compliant with current tax filing and deposit

requirements to qualify to submit an offer in compromise. The Officer’s report reflects that

she attempted but was unsuccessful in reaching Living Care Utica to discuss the fact that

an offer in compromise was not processable.



                                             -6-
       Following the IRS’s issuance of Notices of Determination in Living Care Utica III and

IV, Living Care Utica appealed each of these determinations to the district court for the

Southern District of Ohio, challenging the IRS Appeals Office determinations. The district

court consolidated the two appeals and stayed a ruling pending this Court’s decision in

Living Care Alternatives of Utica. Living Care Utica did not object to this stay.

       This Court subsequently held in Living Care Alternatives of Utica v. United States

that Living Care Utica failed to challenge its underlying tax liability at the collection due

process hearing, and therefore, the standard of review was abuse of discretion; the

Appeals Officer did not violate his statutory duty to balance the equities; the IRS did not

have a duty to investigate existing liens on property prior to a collection due process

hearing; the Appeals Officer’s Notice of Determination provided sufficient notice for an

abuse of discretion standard; and the Appeals Officer did not abuse his discretion in

rejecting Living Care Utica’s offer of compromise. 411 F.3d 621. Following the issuance

of that decision, the Southern District of Ohio on November 14, 2005, entered its

Memorandum and Order in Living Care Utica III/IV. The district court found that all nine

of the claims raised by Living Care Utica in Living Care Utica III/IV were barred by collateral

estoppel because they had been raised, litigated, and decided in Living Care Alternatives

of Utica, with the exception of claim two regarding Living Care Utica’s purported inability

to refinance due to the presence of the IRS liens. And as to the second claim, the district

court found that the Appeals Officers did not abuse their discretion in rejecting Appellant’s

contention, when there was nothing in the record to support a finding that removing the

liens and refinancing the property would have facilitated the collection of the tax liability.



                                              -7-
The Government’s motions for summary affirmance in Living Care Utica III and IV were

therefore granted by the district court. Appeals 06-3163 and 06-3166 followed.

B.     The Living Care Kirkersville Proceedings

       The Living Care Kirkersville case arises from its failure to pay quarterly employment

taxes for March 2000 through March 2001 and its annual unemployment tax liabilities for

the year 2000. On August 11, 2003, the IRS sent Living Care Kirkersville a final notice of

federal tax lien filing, which notice also advised of the right to a CDP hearing. Living Care

Kirkersville timely submitted a CDP hearing request on September 12, 2003, identifying its

grounds for challenging the tax lien filing against it. A hearing officer with the Office of

Appeals conducted the CDP hearing and subsequently issued a Summary and

Recommendation to continue the subject federal tax lien filing. (Kirkersville J.A. 35-38).

This Summary and Recommendation was attached to a March 18, 2004, Notice of

Determination letter sent by the IRS to Living Care Kirkersville informing it that the notice

of federal tax lien was being upheld with respect to its tax liability. (Kirkersville J.A. 33-34).

       Living Care Kirkersville’s attachment of purported relevant considerations is

substantially similar to that attached to the hearing requests in Living Care Utica III/IV.

(Compare Kirkersville J.A. 40-45 with Utica J.A. 272-75). The points presented by Living

Care Kirkersville can be summarized as inability to meet tax obligations because of over-

regulation and inadequate funding by the government; existence of senior lienholders,

resulting in no leftover revenue for this tax lien; inability to obtain refinancing and

consequent closure of the nursing home by continued imposition of the lien; and a

proposed offer in compromise, sale, or refinancing as an alternative to the collection action.



                                               -8-
       The Appeals Officer’s Summary and Recommendation rejected each of Living Care

Kirkersville’s challenges.    As to the proposed collection alternative of an offer in

compromise, Living Care Kirkersville had not evidenced a definite intention to submit an

offer in compromise and the related financial information.          As to the alternative of

refinancing, the summary reflected Living Care Kirkersville had not evidenced how

refinancing would result in funds to pay the IRS. The Appeals Officer also concluded that

withdrawing the lien to facilitate refinancing was not warranted, because Living Care

Kirkersville had failed to provide a specific refinancing arrangement rather than a general

assertion, and because it could apply for a certification of subordination of the tax lien and

had not done so. Nor did the Appeals Officer agree that withdrawing or removing the lien

was warranted due to the existence of senior lienholders that rendered the tax lien

valueless, since the presence of such senior lienholders, if documented, actually supported

the conclusion that the notice of lien was necessary to protect the government’s interest

pending payment of the taxes. And while Living Care Kirkersville advocated that its status

as operator of a nursing home should afford it special consideration under the tax laws, the

Appeals Officer concluded no lawful authority for affording special rights to such a taxpayer

had been identified. Finally, the Appeals Officer noted that Living Care Kirkersville had not

offered an alternative that would provide for the efficient collection of the outstanding taxes

and also be less intrusive on it. Moreover, withdrawing the notice of federal tax lien would

not serve to balance efficient tax collection against intrusiveness since there were other

prior notices that would remain, and removing all of these notices would place the

Government in a precarious position vis-à-vis other creditors and effectuating collection.



                                              -9-
       On April 16, 2004, Living Care Kirkersville filed a complaint with the district court,

challenging this IRS Appeals Office determination.           On November 8, 2004, the

Government filed a Motion and Supporting Memorandum of Law for Summary Affirmance

of the IRS Administrative Decision. In an Opinion and Order dated August 29, 2005, the

district court found in favor of the IRS. (Kirkersville J.A. 74-80). The district court

concluded that Living Care Kirkersville is in privity with Living Care Utica and that the

issues raised by Living Care Kirkersville were the same as those raised by Living Care

Utica in Living Care Alternatives of Utica. In the alternative, the district court found that

even if the doctrine of collateral estoppel did not apply, the Appeals Officer’s decision to

uphold the IRS collection action was not an abuse of discretion because removal of the lien

would place the Government in a precarious situation with respect to competing creditors.

Appeal 05-4418 followed.

                                       II. ANALYSIS

A.     Standard of Review

       In cases involving CDP hearings, courts conduct a de novo review of IRS Appeals

Office determinations when the underlying tax liability is at issue. However, when the

underlying tax liability is not at issue, such decisions are reviewed for abuse of discretion.

Living Care Alternatives of Utica, 411 F.3d at 625. In these consolidated appeals, Living

Care Utica and Living Care Kirkersville do not challenge liability for the actual tax.

Therefore, the IRS Appeals Office determinations in contest are reviewed under an abuse

of discretion standard.




                                            -10-
       These appeals differ from this Court’s earlier decision in Living Care Alternatives of

Utica in that each raises questions as to the proper scope of collateral estoppel. A lower

court’s decision on whether collateral estoppel applies is reviewed de novo. Heyliger v.

State Univ. & Cmty. Coll. Sys. of Tenn., 126 F.3d 849, 851 (6th Cir. 1997). This includes

appellate review of a tax court’s decision on the doctrine. Hickman v. Comm’r, 183 F.3d

535, 537 (6th Cir. 1999). Embodied within consideration of the conditions giving rise to

collateral estoppel is the requirement of privity – that the party to be estopped was the

party in the prior litigation, or in privity with such prior party. Montana v. United States, 440

U.S. 147, 153 (1979). Whether privity exists in a particular case is a question of fact, and

questions of fact are reviewed for clear error. Vulcan, Inc. v. Fordees Corp., 658 F.2d

1106, 1109 (6th Cir. 1981).

B.     Collateral Estoppel

       Since collateral estoppel would render merits consideration a nullity on any issues

so barred, its application is considered first. Its invocation dictates that a “‘right, question

or fact distinctly put in issue and directly determined by a court of competent jurisdiction

. . . cannot be disputed in a subsequent suit between the same parties or their privies . .

. .’” Montana, 440 U.S. at 153 (quoting Southern Pacific R. Co. v. United States, 168 U.S.

1, 48-49 (1897)). While res judicata acts to bar a party’s later claims based on the same

cause of action, collateral estoppel serves to bar the relitigation, on a different cause of

action, of issues actually and necessarily determined by a prior court. Id.

       Collateral estoppel applies where the following conditions are met: (1) the issue in

the subsequent litigation is identical to that resolved in the earlier litigation; (2) the issue



                                              -11-
must have been actually litigated and decided in the prior action; (3) the issue must have

been necessary and essential to a judgment on the merits in the prior litigation; (4) the

party to be estopped was a party to the prior litigation, or in privity with such a party; and

(5) the party to be estopped had a full and fair opportunity to litigate. Santana-Albarran v.

Ashcroft, 393 F.3d 699, 704 (6th Cir. 2005); United States v. Real Property Known and

Numbered as 415 E. Mitchell Ave., 149 F.3d 472, 476 (6th Cir. 1998). Moreover, “[t]he

doctrine applies to tax proceedings to the same extent it applies to proceedings in federal

district court.” Hickman, 183 F.3d at 537.

       1.     Living Care Utica

       In Living Care Utica III/IV, Living Care Utica is the same party as in Living Care Utica

I/II, and therefore privity is not in issue or contested. Nevertheless, Living Care Utica does

protest that the issues in Living Care Alternatives of Utica that were necessary and

essential to a judgment on the merits and that were actually litigated and decided after full

and fair opportunity are not identical to those raised by it in the instant consolidated

appeals.

       In Commissioner v. Sunnen, the United States Supreme Court cautioned that

       [w]here two cases involve income taxes in different taxable years, collateral
       estoppel must be used with its limitations carefully in mind so as to avoid
       injustice. It must be confined to situations where the matter raised in the
       second suit is identical in all respects with that decided in the first proceeding
       and where the controlling facts and applicable legal rules remain unchanged.

333 U.S. 591, 599-600 (1948); see also Kennedy v. Comm’r, 876 F.2d 1251, 1257 (6th Cir.

1989). Living Care Utica submits that its issues are not “identical in all respects” to those

presented in Living Care Alternatives of Utica because the cases involve different tax



                                             -12-
years, different facts, and different hearing officers conducting different analyses.

However, Sunnen refers to an identity in the matter raised, without change in controlling

facts, rather than identity of each and every fact. Nor must the presiding decision maker

be the same in order to invoke collateral estoppel. Under Appellant’s theory, neither

collateral estoppel nor res judicata would virtually ever apply in tax proceedings. And as

to Appellant Living Care Utica’s belief that appeals officers’ analyses are “different” unless

each nuance considered in its later tax challenges replicates those from Living Care

Alternatives of Utica, no authority is put forth for such proposition. If such identity were

required, it would be particularly problematic in establishing collateral estoppel in collection

due process proceedings such as these, because of the deferential review Congress

contemplated would be given to tax appeals versus other agency decisions. Living Care

Alternatives of Utica, 411 F.3d at 625 (“Judicial review of collection due process hearings”

historically “involved very little judicial oversight,” consequently resulting in “a surprisingly

scant record.”).

       The Supreme Court has established a three-part test to determine if applying

collateral estoppel is also appropriate: (1) “whether the issues presented by [the subject]

litigation are in substance the same as those resolved [in the prior case]”; (2) “whether

controlling facts or legal principles have changed significantly since the [prior] judgment”;

and (3) “whether other special circumstances warrant an exception to the normal rules of

preclusion.” Montana, 440 U.S. at 155.

       As noted, the district court presiding over Living Care Utica III/IV identified nine

claims presented by Living Care Utica in those consolidated administrative appeals. The



                                              -13-
district court summarized the claims presented by Living Care Utica on appeal as: (1)

because there are senior lienholders, the IRS would not realize any tax revenue from the

levy or liens; (2) the liens have harmed Living Care Utica by preventing refinancing; (3)

Medicaid and Medicare funds are exempt from levy; (4) Living Care Utica’s inability to pay

the taxes is the result of extensive government regulation in the field; (5) the IRS wrongly

rejected an offer in compromise; (6) the IRS should have accepted Living Care Utica’s plan

to maintain the business and sell it as an ongoing concern; (7) the IRS abused its

discretion in making a determination to sustain the levy and liens; (8) Living Care Utica’s

plan to sell the business as an ongoing concern will net more tax revenue; and (9) Living

Care Utica contests the underlying tax liability. (Utica J.A. 205-06). As the district court

correctly identified, all of the claims presented to it by Living Care Utica, with the exception

of the second claim, at least nominally were resolved in Living Care Alternatives of Utica,

thus satisfying Montana’s first requirement. Even though the tax years in these appeals

differ from those at issue in Living Care Utica I/II, the tax circumstances which faced Living

Care Utica, and the points and defenses raised by Rosser on behalf of it in anticipation of

the hearing and pursuant to the statutory provision to raise “any other relevant issue

relating to the unpaid tax,” 26 U.S.C. § 6330(c)(2)(A), are all matters that are “in substance”

the same as those raised in Living Care Utica I/II.

       As to the first, third, and fourth claims, courts in the prior Living Care I/II litigation

determined that Living Care Utica’s claims failed as a matter of law. See Living Care

Alternatives of Utica, 411 F.3d at 626, 628 (holding that even if the inability to pay was the

result of government regulation, it would not excuse the tax liability and that there is no



                                              -14-
requirement that the United States consider whether it will receive any revenue from the

levy); Living Care Alternatives of Utica, Inc. v. United States, No. 03-0359, 2003 WL

23311523, *4 (S.D. Ohio Dec. 12, 2003) (holding that Medicaid and Medicare funds are

subject to levy and that even if the inability to pay was the result of government regulation,

it would not excuse the tax liability). Therefore, as to the second part of Montana’s three-

part test, no controlling facts are relevant and collateral estoppel is appropriate for these

claims.2

       As to the fifth, sixth, and eighth claims, this Court previously held that the Appeals

Officer had not abused his discretion by refusing the alternatives presented by Living Care

Utica because it had previously defaulted under an installment payment plan and it had an

escalating amount of unpaid tax liability. See Living Care Alternatives of Utica, 411 F.3d

at 631. The facts that justified the Officer’s prior decision remain unchanged. Therefore,

part two of Montana’s three-part test is satisfied and so collateral estoppel is also

appropriate for these claims.

       Living Care Utica’s ninth claim in the district court challenged its underlying tax

liability. However, Living Care Utica no longer presents this as a direct challenge or issue

on appeal to this Court.




       2
         As to the third consideration, “whether other special circumstances warrant an exception
to the normal rules of preclusion,” Montana, 440 U.S. at 155, Living Care Utica points to no special
circumstance aside from its general contention that poor congressional public policy in the
regulation of nursing homes when balanced with the imposition of tax obligations upon such homes
constitutes special circumstances to overlook this Court’s prior judgment. This legislative
conundrum is not so much presented by Appellant as a special circumstance to except the
application of collateral estoppel as it is a basis for asking this Court to legislate specialized tax
laws for the nursing home industry, which of course we will not do.

                                                -15-
       As to Living Care Utica’s seventh claim – that the IRS abused its discretion in

making a determination to sustain the levy and liens – the judgment in Living Care

Alternatives of Utica arguably relied on different facts than those presented in this case.

That is, in previously deciding that the IRS did not abuse its discretion in making the

determination to sustain the levy and liens, this Court reviewed the reasoning of that

appeals officer’s decision. See id. at 630. On the one hand, this case presents different

decisions rendered by appeals officers not involved in the prior judgment. Whether the

appeals officers in Living Care Utica III/IV abused their discretion depends upon the

reasoning of these particular officers. In other words, even though the appeals officers

arrived at the same ultimate conclusion as the appeals officer in the prior litigation, it is

possible that the appeals officers abused their discretion in the reasoning justifying that

conclusion. Therefore, in this sense it is inappropriate to apply collateral estoppel.

       On the other hand, and as previously discussed, the same decision maker or

identity in reasoning (as opposed to identity in the controlling facts or legal principles) is not

a required condition to invoke collateral estoppel. Essentially this seventh claim is an all-

encompassing one, sweeping within it the various other challenges to the administrative

decision raised by Appellant Living Care Utica. Blanket rejection of collateral estoppel

amounts to an end run around applying the doctrine to particularized arguments. As a

practical matter, in this appeal Living Care Utica has already been collaterally estopped

from relitigating arguments upon which it now relies to argue why the appeals officers

abused their discretion in determining to sustain the levy and liens. The one exception is

that of claim two concerning the refinancing. The district court correctly observed that this



                                              -16-
claim was not presented in Living Care Utica I/II, and so collateral estoppel does not apply.

Merits consideration of this claim is set forth below in this decision.

       In summary, all but the second claim raised by Living Care Utica are issues that

were litigated in Living Care Utica I/II and decided by this Court in Living Care Alternatives

of Utica. They are in substance the same as issues raised presently by Living Care Utica

in Living Care Utica III/IV. The controlling facts and/or applicable legal rules remain

unchanged, with no special circumstances having been shown to except imposing upon

Living Care Utica the determinations for these issues from the prior judgment. Therefore,

Living Care Utica’s claims on appeal, with the exception of its challenge concerning the

refinancing, are barred by the doctrine of collateral estoppel.

       2.     Living Care Kirkersville

       Analyzing whether Living Care Kirkersville is bound by the courts’ prior adjudications

in Living Care Utica I/II gives rise to considerations different from those for Living Care

Utica. Living Care Kirkersville presents an identical set of claims in challenging the IRS

Appeals Office decision as did Living Care Utica. (Kirkersville J.A. 6-11). In adjudicating

Living Care Kirkersville’s appeal of the decision, the district court concluded that it was in

privity with Living Care Utica. The judge noted, and it is undisputed, that Rosser is the sole

shareholder and officer of both Living Care Kirkersville and Living Care Utica and that

Rosser represented both companies in the CDP hearings. But Living Care Kirkersville

maintains that the district court erred in finding that it was in privity with Living Care Utica

and thereby proceeding to apply collateral estoppel principles. And, unlike the district court

in Living Care Utica III/IV, the district court in Living Care Kirkersville applied collateral



                                             -17-
estoppel to all of the claims, including the second claim concerning the refinancing. This

issue was not presented in the prior litigation, and collateral estoppel should not be applied,

as noted by the district court in Living Care Utica III/IV. (Utica J.A. 208).

       Collateral estoppel is

       “not generally applicable unless there exists either identity or privity between
       the parties to the relevant litigation. The person being estopped from
       relitigating an issue must have been either a party to the prior lawsuit or have
       been so closely related to the interest of the party to be fairly considered to
       have had his day in court.”

Mitchell Inv. Co. v. Fed. Sav. & Loan Ins. Corp., 741 F.2d 107, 110 n.9 (6th Cir. 1984)

(citing In re Gottheiner, 703 F.2d 1136, 1140 (9th Cir. 1983)).

       Montana suggests that whether one is in “privity” with a prior party so as to be

collaterally estopped from relitigating issues is driven by that person’s involvement in the

prior litigation. In particular, can the interests of common-law adjudication fairly be said to

be implicated as to that person; namely, protecting adversaries from the inconvenience and

expense of multiple suits, conserving judicial resources, and minimizing the possibility of

inconsistent decisions thereby fostering reliance on judicial action, where a party has had

a full and fair opportunity to litigate. Montana, 440 U.S. at 153-54.

               These interests are similarly implicated when nonparties assume
       control over litigation in which they have a direct financial or proprietary
       interest and then seek to redetermine issues previously resolved. . . . [T]he
       persons for whose benefit and at whose direction a cause of action is
       litigated cannot be said to be “strangers to the cause. . . . [O]ne who
       prosecutes or defends a suit in the name of another to establish and protect
       his own right, or who assists in the prosecution or defense of an action in aid
       of some interest of his own . . . is as much bound . . . as he would be if he
       had been a party to the record.”




                                             -18-
Id. at 154 (quoting Souffront v. Compagnie des Sucreries, 217 U.S. 475, 487 (1910)). As

this Court has previously noted, “‘Privity’ is an ambiguous term, a shorthand designation

for those persons who have a sufficiently close relationship with the record parties to be

bound by the judgment.” Vulcan, 658 F.2d at 1109 (internal quotation and citation

omitted).

         There are three categories of privity recognized in this Circuit: (1) “successors in

interest to a party will be bound by a judgment against that party”; (2) “a nonparty who

controlled the original suit will be bound by the resulting judgment”; or (3) “a nonparty who

is adequately represented by a party will also be precluded from relitigating the same

issues.” Becherer v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 193 F.3d 415, 422 (6th

Cir. 1999). The first category does not apply in this case. The Government argues that

Living Care Kirkersville’s claims are barred by the doctrine of collateral estoppel because

it and Living Care Utica are in privity with one another via their shared sole shareholder and

officer, Rosser. This basis, which was accepted by the district court in finding privity and

applying collateral estoppel, would seem to be based upon privity under categories two or

three.

         Under the second category, collateral estoppel is applied to nonparties that

“assume[d] control over [the prior] litigation in which they ha[d] a direct financial or propriety

interest.” Montana, 440 U.S. at 154. “Privity exists when there is ‘substantial identity’

between parties, that is, when there is sufficient commonality of interest. When a person

owns most or all of the shares in a corporation and controls the affairs of the corporation,

it is presumed that in any litigation involving that corporation the individual has sufficient

commonality of interest.” In re Gottheiner, 703 F.2d at 1140.

                                              -19-
       In understanding how the second category is applied, this Court in Becherer

explained that “‘[t]o have control of litigation requires that a person have effective choice

as to the legal theories and proofs to be advanced in behalf of the party to the action. He

must also have control over the opportunity to obtain review.’” Becherer, 193 F.3d at 423

(quoting Benson and Ford, Inc. v. Wanda Petroleum Co., 833 F.2d 1172, 1174 (5th Cir.

1987) (citation omitted)). Examples of relationships providing such sufficient control

include “president/sole shareholder and his or her company, a parent corporation and its

subsidiary, an indemnitor and its indemnitee, or a liability insurer and an insured.” Id.

       The Government relies upon cases that have held that the owner of a corporation

is in privity with the corporation for purposes of collateral estoppel when the owner

exercises complete ownership and control of the corporation. Mitchell Inv. Co. v. Fed. Sav.

& Loan Ins. Corp., 741 F.2d at 110 n.9 (referencing In re Gottheiner, 703 F.2d at 1139);

Kreager v. Gen. Elec. Co., 497 F.2d 468, 472 (2d Cir. 1974) (finding sole shareholder and

officer who controlled action involving corporation “had an identity of interest with [the

company] and was bound by judgment against it”). But these authorities offered by

Appellee do not support the expansion of the concept of privity posed by the Government

here. The Government fails to cite authority from this Court or elsewhere that applies

collateral estoppel to a legally distinct, nonparty corporation because of a judgment against

another similar corporation with which it shares a common sole shareholder/officer. While

Rosser may have had sufficient interest in and “control” over the prior Living Care Utica

litigation due to his status as its sole shareholder and officer such as to find him in privity

with Living Care Utica, that is not the extension of privity that Appellee seeks here. It seeks

to extend privity to Living Care Kirkersville, but this separate corporation did not have a

                                             -20-
direct financial or proprietary interest in nor control over the prior Living Care Utica litigation

as is necessary in order to impose privity under the second category.

       The other manner of seeking to establish that Living Care Kirkersville is in privity

with Living Care Utica is by virtue of their “sister” corporate relationship – mirror business

operations via the same owner. This arguably implicates Becherer’s third category; that

is, binding a nonparty who is adequately represented by a party to the prior litigation,

sometimes referred to as “virtual” representation. See Becherer, 193 F.3d at 423. This

presents the question of whether privity should be found between corporate entities with

similar purposes and common ownership, by posing that the nonparty corporation’s

interest, via its common ownership and business purposes, was adequately represented

in prior litigation by a sister corporation presenting identical issues. Because Living Care

Kirkersville was not an uninvolved curious observer of the outcome of the Living Care Utica

tax proceedings, application of this third category arguably has some appeal. Living Care

Kirkersville is a corporation that owns and operates a mirror image business through the

direct, personal efforts of shared sole owner and officer Rosser. The issues and concerns

identified and articulated by Rosser on behalf of each corporation are virtually identical.

       Becherer describes this third privity category of adequate or virtual representation

as requiring “‘an express or implied legal relationship in which parties to the first suit are

accountable to non-parties who file a subsequent suit raising identical issues.’ [Benson and

Ford, 833 F.2d at 1175 (emphasis added) (citation omitted). This third category may also

be established by a nonparty’s express agreement to be bound by or acquiescence to a

party’s representation. See, e.g., RESTATEMENT (SECOND) OF JUDGMENTS § 40

(1980).” Becherer, 193 F.3d at 423. In this case, while Rosser serves as the sole owner

                                               -21-
and officer of both corporations, this fact alone creates neither an express nor an implied

legal relationship making Living Care Utica accountable to Living Care Kirkersville. Nor is

there any evidence that Living Care Kirkersville expressly agreed to be bound by or

acquiesced in Living Care Utica’s representation. Certainly, corporate entities may have

an interest in the same legal issue or in proving or disproving similar facts, but this should

not be and is not sufficient to establish privity between them, even where they may have

common ownership. We will not view the mere fact of common corporate ownership as

amounting to an express agreement, particularly given Becherer’s caution that “absent an

express agreement to be bound, an agreement should not be inferred “‘except upon the

plainest circumstances.’” Becherer, 193 F.3d at 423 ((quoting Bittinger v. Tecumseh Prods.

Co., 123 F.3d 877, 882 (6th Cir. 1997) (emphasis in original) (quoting RESTATEMENT

(SECOND) OF JUDGMENTS § 40 cmt. b)). To extend privity to the common ownership

of sister corporations present here, without more, also raises due process concerns.

Applying privity between commonly-owned corporations requires proof that the nonparty

must have been “so closely related to the interest of the party to be fairly considered to

have had his day in court.” Mitchell, 741 F.2d at 110 n.9. It is not reasonable to conclude

from this record that this has occurred. The Government would have the court extend

privity to Living Care Kirkersville and thereby estop it from having its day in court on the

basis that its owner also owns and operates other similar corporations. To do so, without

more, is surely an overly broad extension of the concept of privity that could unfairly subject

business owners to legal obligations or obstacles without due process, something this

Court will not do.



                                             -22-
       In summary, the Court finds that Living Care Kirkersville lacks sufficient privity with

Living Care Utica to apply collateral estoppel from the prior litigation. Although it is possible

that a more careful examination of the interests involved in this case could have

demonstrated sufficient commonality of interests, that evidence is lacking in this record.

Therefore, in the absence of a presumption of commonality of interest, the fact that Living

Care Kirkersville’s sole shareholder can be collaterally estopped by prior litigation is

insufficient to bind Living Care Kirkersville.

C.     Merits Review

       The CDP hearing procedure requires that the Appeals Officer verify the IRS has

satisfied (1) all legal and procedural requirements to proceed with a levy/lien, (2) consider

any defenses and collection alternatives offered, and (3) determine whether the “proposed

collection action balances the need for the efficient collection of taxes with the legitimate

concern of the person that any collection action be no more intrusive than necessary.” 26

U.S.C. § 6330(c)(3) (the “balancing test”).

       Living Care Utica and Living Care Kirkersville both argue that the Appeals Officers

abused their discretion in upholding the collection actions against them. As analyzed

hereinabove, Living Care Utica is collaterally estopped from presenting all its claims except

the claim concerning its ability to refinance. Collateral estoppel does not apply to Living

Care Kirkersville’s claims, which include the same ability to refinance argument. On appeal

to this Court, Living Care Kirkersville also protests that the Appeals Officer, in affirming the

tax lien, abused his discretion in conducting the balancing test. It maintains that the Officer

failed to give appropriate weight to the fact that there were other, senior liens to the IRS

lien that exceeded receivables, meaning that the IRS would take nothing, and that

                                              -23-
imposing the lien would essentially close the business, with no resulting funds for the IRS.

Living Care Kirkersville further argued on appeal that viable collection alternatives,

including sale of the business, refinancing, or an offer in compromise, do exist and were

proposed yet not appropriately considered. Finally, it submits that the collection due

process hearing system is inherently flawed because there is no recording required, which

results in a lack of an adequate administrative record below for effective appellate review.

       Living Care Kirkersville’s last argument – regarding the informal nature of the

proceedings and the lack of a sufficient administrative record – relates to the first factor of

the CDP Appeals Officer’s duties to ensure all legal and procedural requirements are met.3

This same argument was also posed by Living Care Utica in cases Living Care Utica I/II

and rejected by this Court in Living Care Alternatives of Utica. Appellant’s reliance upon

Mesa Oil, Inc. v. United States, 86 A.F.T.R.2d 7312 (D. Colo. 2000) is misplaced, given the

distinctions in the notice of determination in that case compared with those in these

appeals. The notice in Mesa Oil contained no factual details, legal analysis, or discussion

of the balancing test. Id. at 7315-16. As this Court previously noted, “Mesa Oil’s remand

is an exception to the general practice of reviewing courts showing deference to the

Appeals Officers’ conclusions regarding the balancing analysis.” Living Care Alternatives

of Utica, 411 F.3d at 627-28. While the lack of a formal administrative record could make

abuse of discretion review problematic, given the historically broad discretion in tax

collection proceedings, appropriate due process is afforded unless the reviewing court is



       3
         Arguably also included as part of this first factor is Living Care Kirkersville’s argument on
appeal that courts have rendered meaningless Congress’s intent in enacting the Tax Reform Act;
that is, to curb the excesses of the IRS. This policy argument is more appropriately left for
Congress to consider, not us. See footnote 2.
                                                -24-
“convinced that the type of taxpayer abuse that Congress sought to remedy has occurred

in the case.”    Id. at 629.    As in Living Care Alternatives of Utica, the Notices of

Determination here fall short of the exceptional circumstances presented in Mesa Oil and

“provide a sufficient basis for an abuse of discretion review, as that standard is applied in

tax levy and lien appeals.” Id.

       The second and third factors addressed by the Appeals Officer can be reviewed

together, given that the assessment and viability of proposed collection alternatives

dovetails into consideration of whether the collection action is no more intrusive than

necessary. Living Care Kirkersville argues that the Appeals Officer abused his discretion

because he did not include the existence of senior lienholders in the balancing analysis

and failed to consider that the net effect of the lien would be to shut down the business

without generating any tax revenue for the Service. The Government counters that the

district court properly concluded that the Appeals Officers did not abuse their discretion

because the IRS is not required to consider whether it will receive revenue from the

collection or whether the collection will negatively impact the taxpayer’s business.

       As this Court has noted, there is little about this requirement in Sixth Circuit case law

and, in most cases, a reviewing court affirms the Appeals Officer’s determination that the

balancing test was correctly applied. Living Care Alternatives of Utica, 411 F.3d at 627.

Current case law supports the Government’s argument that the IRS is not required to

include in its balancing analysis whether it “will receive any revenue from a levy or sale, or

whether the business will have to close down due to the levy and sale.” Living Care

Alternatives of Utica, 411 F.3d at 628; Medlock v. United States, 325 F. Supp. 2d 1064,



                                             -25-
1079 (C.D. Cal. 2003) (holding that the appeals officer was not required to consider the

impact of a levy on the taxpayer’s customers).

       Appellants also complain that the Appeals Officers abused their discretion by

preventing them from refinancing so as to pay the taxes, not allowing them to conduct a

private sale to maximize proceeds, or refusing to accept an offer in compromise. The

Appeals Officers reviewed each of these contentions, and it cannot be said that their

rejection of each as a collection alternative was irrational or unreasonable. Each proposed

alternative was presented by Appellants in general terms only, lacking the requisite

specificity to permit the Appeals Officers to give informed consideration.         Offers in

compromise require specific, detailed submissions, which was not done by Appellants.

Withdrawing liens as a prerequisite to refinancing was only presented by Appellants as

being required by their particular bank, with no details about the rate and return to the IRS

if the refinancing were provided. Nor did Appellants address whether refinancing was

actually available, given that other liens would still be in place. Any expected increased

revenue and return to the IRS from permitting a private sale were also not provided. As

the Appeals Office noted, if the tax liens were to be withdrawn, given the particular

circumstances of these taxpayers, the IRS would be placed in a precarious situation with

respect to competing creditors and collection of any of the unpaid taxes.

       The aforementioned consideration, deliberation, and conclusions by the Appeals

Officers do not evidence the “abuse of discretion in the sense of clear taxpayer abuse and

unfairness by the IRS.” Living Care Alternatives of Utica, 411 F.3d at 631. That Appellants

disagree with the results from the exercise of the Appeals Officers’ discretion does not

correlate with that discretion thereby being abused. To second-guess the considerations

                                            -26-
and rationale articulated by the Officers necessitates delving into the details of tax

enforcement that reviewing courts should not do, as explained by this Court in Living Care

Alternatives of Utica.

                                   III. CONCLUSION

       For the reasons stated, the decisions of the district courts upholding the Appeals

Office’s Notices of Determination are AFFIRMED.




                                          -27-
