text:
(…) History does not establish that patent validity is a matter that, “from its nature,” must be decided by a court (…) There was another means of canceling a patent in 18th-century England, which more closely resembles inter partes review: a petition to the Privy Council to vacate a patent. See Lemley, infra, at 1681–1682; Hulme, Privy Council Law and Practice of Letters Patent for Invention From the Restoration to 1794, 33 L. Q. Rev. 63 (1917). The Privy Council was composed of the Crown’s advisers. Lemley, infra, at 1681. From the 17th through the 20th centuries, English patents had a standard revocation clause that permitted six or more Privy Counsellors to declare a patent void if they determined the invention was contrary to law, “prejudicial” or “inconvenient,” not new, or not invented by the patent owner. See 11 W. Holdsworth, A History of English Law 426–427, and n. 6 (1938); Davies, The Early History of the Patent Specification, 50 L. Q. Rev. 86, 102–106 (1934). Individuals could petition the Council to revoke a patent, and the petition was referred to the Attorney General. The Attorney General examined the petition, considered affidavits from the petitioner and patent owner, and heard from counsel. See, e.g., Bull v. Lydall, PC2/81, pp. 180–181 (1706). Depending on the Attorney General’s conclusion, the Council would either void the patent or dismiss the petition. See, e.g., Darby v. Betton, PC2/99, pp. 358–359 (1745–1746) (voiding the patent); Baker v. James, PC2/103, pp. 320–321, 346–347 (1752) (dismissing the petition).
The Privy Council was a prominent feature of the English system. It had exclusive authority to revoke patents until 1753, and after that, it had concurrent jurisdiction with the courts. See Hulme, 33 L. Q. Rev., at 189–191, 193–194. The Privy Council continued to consider revocation claims and to revoke patents throughout the 18th century. Its last revocation was in 1779. See id., at 192–193. It considered, but did not act on, revocation claims in 1782, 1794, and 1810. See ibid.; Board of Ordinance v. Parr, PC1/3919 (1810).
The Patent Clause in our Constitution “was written against the backdrop” of the English system. Graham, 383 U. S., at 5. Based on the practice of the Privy Council, it was well understood at the founding that a patent system could include a practice of granting patents subject to potential cancellation in the executive proceeding of the Privy Council. The parties have cited nothing in the text or history of the Patent Clause or Article III to suggest that the Framers were not aware of this common practice. Nor is there any reason to think they excluded this practice during their deliberations. And this Court has recognized that, “within the scope established by the Constitution, Congress may set out conditions and tests for patentability.” Id., at 6. We conclude that inter partes review is one of those conditions.
As I read the historical record presented to us, only courts could hear patent challenges in England at the time of the founding. If facts were in dispute, the matter first had to proceed in the law courts. See, e.g., Newsham v. Gray, 2 Atk. 286, 26 Eng. Rep. 575 (Ch. 1742). If successful there, a challenger then had to obtain a writ of scire facias in the law side of the Court of Chancery. See, e.g., Pfander, Jurisdiction-Stripping and the Supreme Court’s Power To Supervise Inferior Tribunals, 78 Texas L. Rev. 1433, 1446, n. 53 (2000); Lemley, Why Do Juries Decide If Patents Are Valid? 99 Va. L. Rev. 1673, 1686–1687 (2013) (Lemley, Juries). The last time an executive body (the King’s Privy Council) invalidated an invention patent on an ordinary application was in 1746, in Darby v. Betton, PC2/99, pp. 358–359; and the last time the Privy Council even considered doing so was in 1753, in Baker v. James, PC2/103, pp. 320–321. After Baker v. James, the Privy Council “divested itself of its functions” in ordinary patent disputes, Hulme, Privy Council Law and Practice of Letters Patent for Invention from the Restoration to 1794 (Pt. II), 33 L. Q. Rev. 180, 194 (1917), which “thereafter were adjudicated solely by the law courts, as opposed to the crown’s prerogative courts,” Mossoff, Rethinking the Development of Patents: An Intellectual History, 1550– 1800, 52 Hastings L. J. 1255, 1286–1287 (2001) (Mossoff, Rethinking Patents).
This shift to courts paralleled a shift in thinking. Patents began as little more than feudal favors. Id., at 1261. The crown both issued and revoked them. Lemley, Juries 1680–1681. And they often permitted the lucky recipient the exclusive right to do very ordinary things, like operate a toll bridge or run a tavern. Ibid. But by the 18th century, inventors were busy in Britain and invention patents came to be seen in a different light. They came to be viewed not as endowing accidental and anticompetitive monopolies on the fortunate few but as a procompetitive means to secure to individuals the fruits of their labor and ingenuity; encourage others to emulate them; and promote public access to new technologies that would not otherwise exist. Mossoff, Rethinking Patents 1288–1289. The Constitution itself reflects this new thinking, authorizing the issuance of patents precisely because of their contribution to the “Progress of Science and useful Arts.” Art. I, §8, cl. 8. “In essence, there was a change in perception—from viewing a patent as a contract between the crown and the patentee to viewing it as a ‘social contract’ between the patentee and society.” Waltersheid, The Early Evolution of the United States Patent Law: Antecedents (Part 3), 77 J. Pat. & T. Off. Soc. 771, 793 (1995). And as invention patents came to be seen so differently, it is no surprise courts came to treat them more solicitously.
See also Brief for H. Tomás Gómez-Arostegui et al. as Amici Curiae 6–37; Brief for Alliacense Limited LLC as Amicus Curiae 10–11; Gómez-Arostegui & Bottomley, Privy Council and Scire Facias 1700–1883, p. 2 (Nov. 6, 2017) (Addendum), https://ssrn.com/ abstract=3054989 (all Internet materials as last visited Apr. 20, 2018); Observations on the Utility of Patents, and on the Sentiments of Lord Kenyon Respecting That Subject 23 (2d ed. 1791) (“If persons of the same trade find themselves aggrieved by Patents taken for any thing already in use, their remedy is at hand. It is by a writ of Scire Facias”); Mancius v. Lawton, 10 Johns. 23, 24 (NY Sup. Ct. 1813) (Kent, C. J.) (noting the “settled English course” that “letters-patent . . . can only be avoided in chancery, by a writ of scire facias sued out on the part of the government, or by some individual prosecuting in its name”).
Unable to dispute that judges alone resolved virtually all patent challenges by the time of the founding, the Court points to three English cases that represent the Privy Council’s dying gasp in this area: Board of Ordnance v. Wilkinson, PC2/123 (1779); Grill [Grice] v. Waters, PC2/127 (1782); and Board of Ordnance v. Parr, PC1/3919 (1810). Filed in 1779, 1782, and 1810, each involved an effort to override a patent on munitions during wartime, no doubt in an effort to increase their supply. But even then appealing to the Privy Council was seen as a last resort. The 1779 petition (the last Privy Council revocation ever) came only after the patentee twice refused instructions to litigate the patent’s validity in a court of law. Gómez-Arostegui & Bottomley, Privy Council and Scire Facias 1700–1883, p. 6 (Nov. 6, 2017) https://ssrn.com/abstract=3054989 (citing Board of Ordnance v. Wilkinson, PC2/123 (1779), and PC1/11/150 (1779)). The Council did not act on the 1782 petition but instead referred it to the Attorney General where it appears to have been abandoned. Gómez-Arostegui & Bottomley, Privy Council and Scire Facias, supra, at 17–18. Meanwhile, in response to the 1810 petition the Attorney General admitted that scire facias was the “usual manner” of revoking a patent and so directed the petitioner to proceed at law even as he suggested the Privy Council might be available in the event of a “very pressing and imminent” danger to the public. Id., at 20 (citing PC1/3919 (1810)).
In the end, these cases do very little to support the Court’s holding. At most, they suggest that the Privy Council might have possessed some residual power to revoke patents to address wartime necessities. Equally, they might serve only as more unfortunate evidence of the maxim that in time of war, the laws fall silent. After all, the English statute of monopolies appeared to require the “force and validitie” of all patents to be determined only by “the Comon Lawes of this Realme & not otherwise.” 21 Jac. 1, c. 3, §2 (1624). So the Privy Council cases on which the Court relies may not reflect the best understanding of the British constitution.
Any lingering doubt about English law is resolved for me by looking to our own. While the Court is correct that the Constitution’s Patent Clause “ ‘was written against the backdrop’ ” of English practice, ante, at 14 (quoting Graham v. John Deere Co. of Kansas City, 383 U. S. 1, 5 (1966)), it’s also true that the Clause sought to reject some of early English practice. Reflecting the growing sentiment that patents shouldn’t be used for anticompetitive monopolies over “goods or businesses which had long before been enjoyed by the public,” the framers wrote the Clause to protect only procompetitive invention patents that are the product of hard work and insight and “add to the sum of useful knowledge.” Id., at 5–6. In light of the Patent Clause’s restrictions on this score, courts took the view that when the federal government “grants a patent the grantee is entitled to it as a matter of right, and does not receive it, as was originally supposed to be the case in England, as a matter of grace and favor.” James v. Campbell, 104 U. S. 356, 358 (1882). As Chief Justice Marshall explained, courts treated American invention patents as recognizing an “inchoate property” that exists “from the moment of invention.” Evans v. Jordan, 8 F. Cas. 872, 873 (No. 4,564) (CC Va. 1813). American patent holders thus were thought to “hold a property in their inventions by as good a title as the farmer holds his farm and flock.” Hovey v. Henry, 12 F. Cas. 603, 604 (No. 6,742) (CC Mass. 1846) (Woodbury, J.). And just as with farm and flock, it was widely accepted that the government could divest patent owners of their rights only through proceedings before independent judges.
Description de la compétence historique du Privy Council et de la Court of Chancery en matière d'annulation de brevets d'invention. Cela en rapport avec la question de savoir si un brevet peut être annulé par l'administration fédérale (ici le PTO) ou si, comme le soutient l'opinion dissidente, seule une cour de justice au sens de l'Art. III de la Constitution fédérale est compétente pour prononcer une telle annulation.

matches: v. v. v. v. v. v. v. v. §8 v. v. v. v. v. §2 v. v. v. v.


Argued Oct. 22, 23, 1968.
Mitchell Rogovin, Washington, D.C., for petitioner.
Richard L. Braunstein, Washington, D.C., for respondent.
Respondent is a corporation engaged in the manufacture and sale of bubble gum and candy and in the operation of a farm. Since 1954, all of respondent's outstanding stock has been owned by Don B. Wiener. In each of the tax years from 1955 to 1961, respondent operated profitably, increasing its undistributed earnings from $1,021,288.58 to $1,679,315.37. The company did not make loans to Wiener or provide him with benefits other than a salary, nor did it make investments unrelated to its business, but no dividends were declared during the entire period.
Wiener gave several reasons for respondent's accumulation policy; among them were capital and inventory requirements, increasing costs, and the risks inherent in the particular business and in the general economy. Wiener also expressed a general desire to expand and a more specific desire to invest in respondent's major distributor, the Tom Huston Peanut Company. There were no definite plans during the tax years in question, but in 1964 respondent purchased 10,000 shares in Tom Huston at a cost of $380,000.
The instruction was refused and the court instructed the jury in the terms of the statute that tax avoidance had to be 'the purpose' of the accumulations. The jury, in response to interrogatories, found that respondent had accumulated earnings beyond the reasonable needs of its business, but that it had not retained its earnings for the purpose of avoiding income tax on Wiener. Judgment was entered for respondent and the Government appealed.
The Court of Appeals reversed and remanded for a new trial, holding that 'the jury might well have been led to believe that tax avoidance must be the sole purpose behind an accumulation in order to impose the accumulated earnings tax.' Donruss Co. v. United States, 384 F.2d 292, 298 (C.A.6th Cir. 1967). The Court of Appeals rejected the Government's proposed instruction and held that the tax applied only if tax avoidance was the 'dominant, controlling, or impelling motive' for the accumulation. Ibid. We granted the Government's petition for certiorari to resolve a conflict among the circuits1 over the degree of 'purpose' necessary for the application of the accumulated earnings tax, and because of the importance of that question in the administration of the tax. 390 U.S. 1023, 88 S.Ct. 1406, 20 L.Ed.2d 280 (1968).
In cases before the Tax Court, § 534 allows the taxpayer in certain instances to shift to the Commissioner the burden of proving accumulation beyond the reasonable needs of the business. Section 535 defines 'accumulated taxable income.' It also provides for a credit for that portion of the earnings and profits retained for the reasonable needs of the business, with a minimum lifetime credit of $100,000. Finally, § 537 provides that 'reasonable needs of the business' include 'reasonably anticipated' needs.
The dispute before us is a narrow one. The Government contends that in order to rebut the presumption contained in § 533(a), the taxpayer must establish by the preponderance of the evidence that tax avoidance with respect to shareholders was not 'one of the purposes' for the accumulation of earnings beyond the reasonable needs of the business. Respondent argues that it may rebut that presumption by demonstrating that tax avoidance was not the 'dominant, controlling, or impelling' reason for the accumulation. Neither party questions the trial court's instructions on the issue of whether the accumulation was beyond the reasonable needs of the business, and respondent does not challenge the jury's finding that its accumulation was indeed unreasonable. We intimate no opinion about the standards governing reasonableness of corporate accumulations.
We concl de from an examination of the language, the purpose, and the legislative history of the statute that the Government's construction is the correct one. Accordingly, we reverse the judgment of the court below and remand the case for a new trial on the issue of whether avoidance of shareholder tax was one of the purposes of respondent's accumulations.
Both parties argue that the language of the statute supports their conclusion. Respondent argues that Congress could have used the article 'a' in §§ 532 and 533 if it had intended to adopt the Government's test. Instead, argues respondent, Congress used the article 'the' in the operative part of the statute, thus indicating that tax avoidance must at least be the dominant motive for the accumulation.4 The Government argues that respondent's construction gives an unduly narrow effect to the word 'the.' Instead, contends the Government, this Court should focus on the entire phrase 'availed of for the purpose.' Any language of limitation should logically modify 'availed of' rather than 'purpose' and no such language is present. The Government further argues that Congress has dealt with similar problems in other sections of the Code and has used terms such as 'principal purpose,' §§ 269(a), 357(b)(1), and 'used principally,' § 355(a)(1)(B). Similar terms could have been used in §§ 532(a) and 533(a), but were not. Finally, the Government points to the fact that prior to adoption of § 102 of the Revenue Act of 1938, (52 Stat. 483) the forerunner of § 532(a) used the words 'the purpose,' while the evidentiary section used the words 'a purpose,' thus indicating that tax avoidance need only be one purpose. Respondent replies that the change from 'a' to 'the' in the evidentiary section supports its conclusion. Respondent also contends that the statute before the change was consistent with its construction.
We find both parties' arguments inconclusive. The phrase 'availed of for the purpose' is inherently vague, and there is no indication in the legislative history that Congress intended to attach any particular significance to the use of the article 'the.' Nor do we find the change in the evidentiary section from 'a' to 'the' at all helpful. That change came as part of a significant revision in the operation of the section, and there is no indication that it was other than a mere change in phraseology.5 Indeed, the Report of the Senate Finance Committee accompanying the bill that was to become the Revenue Act of 1938, insofar as it sheds any light on the question, supports the view of the Government. 'The proposal is to strengthen (the evidentiary) section by requiring the taxpayer by a clear preponderance of the evidence to prove the absence of any purpose to avoid surtaxes upon shareholders. * * *.' S.Rep.No. 1567, 75th Cong., 3d Sess., 5 (1938) (emphasis added). Since the language of the statute does not provide an answer to the question before us,6 we have examined in detail the relevant legislative history. That history leads us to conclude that the test proposed by the Government is consistent with the intent of Congress and is necessary to effectuate the purpose of the accumulated earnings tax.
The accumulated earnings tax is one congressional attempt to deter use of a corporate entity to avoid personal income taxes. The purpose of the tax 'is to compel the company to distribute any profits not needed for the conduct o its business so that, when so distributed, individual stockholders will become liable' for taxes on the dividends received, Helvering v. Chicago Stock Yards Co., 318 U.S. 693, 699, 63 S.Ct. 843, 846, 87 L.Ed. 1086 (1943). The tax originated in the Tariff Act of 1913, 38 Stat. 114, the first personal income tax statute following ratification of the Sixteenth Amendment. That Act imposed a tax on the shareholders of any corporation 'formed or fraudulently availed of for the purpose of preventing the imposition of such tax through the medium of permitting such gains and profits to accumulate instead of being divided or distributed * * *.' § II(A)(2), 38 Stat. 166. The same section provided that accumulation beyond the reasonable needs of the business 'shall be prima facie evidence of a fraudulent purpose to escape such tax * * *.' 38 Stat. 167.
During the next few years, numerous complaints were made about the ineffectiveness of the accumulated earnings tax. Various attempts were made to strengthen the tax during the 1920's and 1930's, but the statute remained essentially the same until 1934. See Joint Committee on the Economic Report, The Taxation of Corporate Surplus Accumulations, 82d Cong., 2d Sess., 200—205 (Comm. Print 1952). In 1934, Congress dealt with one of the more flagrant examples of that ineffectiveness, the personal holding company. Personal holding companies were exempted from the general accumulated earnings tax and were subjected to a tax on undistributed income, regardless of the purpose of that accumulation. Revenue Act of 1934, §§ 102, 351, 48 Stat. 702, 751. The reason for the change was that, '(b)y making partial distribution of profits and by showing some need for the accumulation of the remaining profits, the taxpayer makes it difficult to prove a purpose to avoid taxes.' H.R.Rep.No. 704, 73d Cong., 2d Sess., 11 (1934).
The problem continued to be acute and several proposals were made by and to Congress in 1938. The House Ways and Means Committee proposed a surtax on all closely held operating companies. Only minor changes were proposed by the Committee in the accumulated earnings tax. See H.R.Rep. No. 1860, 75th Cong., 3d Sess. (1938). The House rejected all but the changes in the accumulated earnings tax. The Senate approached the problem of retained corporate earnings in a different way. Labeling the House Co mittee's recommendation a 'drastic' remedy, the Senate Finance Committee recommended 'dealing with this problem where it should be dealt with—namely, in section 102, relating to corporations improperly accumulating surplus. The proposal is to strengthen this section by requiring the taxpayer by a clear preponderance of the evidence to prove the absence of any purpose to avoid surtaxes upon shareholders after it has been determined that the earnings and profits have been unreasonably accumulated.' S.Rep. No. 1567, 75th Cong., 3d Sess., 5 (1938). The change was thought to make it clear that the burden of proving intent, rather than the lesser burden of producing evidence on the question, was to be on the taxpayer. Id., at 16. The Senate proposal was enacted. Revenue Act of 1938, § 102, 52 Stat. 483. The Committee felt that a 'reasonable enforcement of this revised section will reduce tax avoidance * * *.' S.Rep. No. 1567, supra, at 5.
Only insignificant changes were made in the accumulated earnings tax from 1938 to 1954. Discussion of the problem continued, however, and numerous proposals were made to alter the tax. See, e.g., Joint Committee on the Economic Report, The Taxation of Corporate Surplus Accumulations, 82d Cong., 2d Sess., (Comm. Print 1952). Congress took cognizance of these complaints and incorporated many of them in the Internal Revenue Code of 1954, but no change was made in the required degree of tax avoidance purpose.9 Rather, the changes, which were generally favorable to the taxpayer,10 demonstrated congressional disaffection with the effect of the tax and its emphasis on intent. Congress' reaction to the complaints was to emphasize the reasonable needs of the business as a proper purpose for corporate accumulations11 and to make it easier for the taxpayer to prove those needs.12 As the House Ways and Means Committee said, 'Your committee believes it is necessary to retain the penalty tax on unreasonable accumulations as a safeguard against tax avoidance. However, several amendments have been adopted to minimize the threat to corporations accumulating funds for legitimate business purposes * * *.' H.R.Rep. No. 1337, 83d Cong., 2d Sess., 52 (1954), U.S. Code Cong. & Admin.News 1954, p. 4078.
As this brief summary indicates, the legislative history of the accumulated earnings tax demonstrates a continuing concern with the use of the corporate form to avoid income tax on a corporation's shareholders. Numerous methods were employed to prevent this practice, all of which proved unsatisfactory in one way or another. Two conclusions can be drawn from Congress' efforts. First, Congress recognized the tremendous difficulty of ascertaining the purpose of corporate accumulations. Second, it saw that accumulation was often necessary for legitimate and reasonable business purposes. It appears clear to us that the congressional response to these facts has been to emphasize unreasonable accumulation as the most significant factor in the incidence of the tax. The reasonableness of an accumulation, while subject to onest difference of opinion, is a much more objective inquiry, and is susceptible of more effective scrutiny, than are the vagaries of corporate motive.
Respondent would have us adopt a test that requires that tax avoidance purpose need be dominant, impelling, or controlling. It seems to us that such a test would exacerbate the problems that Congress was trying to avoid. Rarely is there one motive, or even one dominant motive, for corporate decisions. Numerous factors contribute to the action ultimately decided upon. Respondent's test would allow taxpayers to escape the tax when it is proved that at least one other motive was equal to tax avoidance. We doubt that such a determination can be made with any accuracy, and it is certainly one which will depend almost exclusively on the interested testimony of corporate management. Respondent's test would thus go a long way toward destroying the presumption that Congress created to meet this very problem. As Judge Learned Hand said of the much weaker presumption contained in the Revenue Act of 1921, § 220, 42 Stat. 247, '(a) statute which stands on the footing of the participants' state of mind may need the support of presumption, indeed be practically unenforceable without it * * *.' United Business Corp. v. Commissioner of Internal Revenue, 62 F.2d 754, 755 (C.A.2d Cir. 1933). And, '(t)he utility of * * * (that) presumption * * * is well nigh destroyed if * * * (it) is saddled with requirement of proof of 'the primary or dominant purpose' of the accumulation.' Barrow Mfg. Co. v. Commissioner of Internal Revenue, 294 F.2d 79, 82 (C.A.5th Cir. 1961), cert. denied, 369 U.S. 817, 82 S.Ct. 827, 7 L.Ed.2d 783 (1962).
The cases cited by respondent do not convince us to the contrary. For the most part, they lack detailed analysis of the precise problem. Perhaps the leading case for respondent's position is Young Motor Co. v. Commissioner of Internal Revenue, 281 F.2d 488 (C.A.1st Cir. 1960). That case relied in part upon the use of the article 'the' instead of 'a.' We have previously rejected that argument. The case also relied as did the court below, on certain cases from the gift and estate tax areas.13 We find those cases inapposite. They deal with areas of the Code whose language, purpose, and legislative history are entirely different from those of the accumulated earnings tax. See Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 284, 80 S.Ct. 1190, 1196, 4 L.Ed.2d 1218 (1960).
Finally, we cannot subscribe to respondent's suggestion that our holding would make purpose totally irrelevant. It still serves to isolate those cases in which tax avoidance motives did not contribute to the decision to accumulate. Obviously in such a case imposition of the tax would be futile. In addition, 'purpose' means more than mere knowledge, undoubtedly present in nearly every case. It is still open to the taxpayer to show that even though knowledge of the tax consequences was present, that knowledge did not contribute to the decision to accumulate earnings.
Mr. Justice HARLAN, whom Mr. Justice DOUGLAS and Mr. Justice STEWART join, concurring in part and dissenting in part.
I agree with the Court that the Court of Appeals erred in framing its remand order in this case. However, I would modify the order in a different way, which I find more in harmony with the statutory scheme than the one the Court has chosen.
Our task is to decide what jury instruction with respect to the definition of 'purpose' comports best with Congress' intent as revealed by this statutory language and the underlying legislative history.
I am in accord with much of the Court's opinion. I too find that the successive changes in the wording of the statute, even when read together with the legislative history, do not help in our inquiry. I too find that the legislative history reveals a progressive congressional intention to rely more and more heavily upon a comparatively objective criterion: whether the accumulated earnings were in excess of the corporation's reasonable business needs. Nevertheless, it is apparent from the language of § 533(a), and from the legislative materials that Congress chose still to give the taxpayer a 'last clear chance' to prove that, despite the unreasonableness of the accumulation by business standards, the accumulation was not due to the proscribed purpose. My difficulty with the instruction approved by the Court is that in most instances it will effectively deny to the taxpayer the 'last clear chance' which Congress clearly meant to afford and substitute a very fuzzy chance indeed.
Under these circumstances, the jury is very likely to believe that it must find the forbidden purpose and impose the tax whenever the Government shows that the taxpayer has accumulated earnings with knowledge of the resultant tax saving, irrespective of any contrary evidence put forward by the taxpayer. The approved instruction simply tells the jury that the taxpayer must have had a 'purpose' to avoid individual taxes. In everyday speech, we commonly say that a person has a 'purpose' to do something when he acts with knowledge that the thing will inevitably result. Even were the jury legally knowledgeable, it might reach the same conclusion, for, assuming that the word 'purpose' as used in § 532 is synonymous with 'intention,'2 there is ample authority for the proposition that an actor will be deemed to have an 'intention' to cause consequences of an act if 'the actor * * * believes that the consequences are substantially certain to result from (the act.).'3 To confront the taxpayer with this likelihood that its evidence of another purpose will be entirely disregarded is inconsistent with the provision of § 533(a) which explicitly affords the taxpayer an opportunity to avoid the tax by showing 'by the preponderance of the evidence' that it had a 'contrary' purpose.
The Court, while conceding that the shareholders will know of the expected tax saving 'in nearly every case,' see ante, at 309, reasons that the taxpayer will have its opportunity because '(i)t is still open to the taxpayer to show that even though knowledge of the tax consequences was present, that knowledge did not contribute to the decision to accumulate earnings.' Ibid. If, as appears from the Court's opinion, this exegesis is not to be a part of the jury instruction, then the Court is simply engaging in wishful thinking. If by chance the explication is to be included in the instruction, then the jury will be told to impose the tax only if it finds that a desire to avoid tax 'contribute(d) to the decision to accumulate earnings.' Such an instruction would at least inform the jury that the tax consequence must actually have been in the shareholders' minds when they decided to accumulate. However, once the shareholders are shown to have had knowledge of the tax saving, it still will be extraordinarily difficult for the taxpayer to convince the jury that the knowledge did not play some part, however slight, in the decision. Again, it seems to me that such an instruction would not give proper scope to the congressional intention that the taxpayer have a chance to prove 'by the preponderance of the evidence' that it had a 'contrary' purpose. I would therefore adopt an instruction less loaded against the taxpayer.
The Court of Appeals for the Sixth Circuit decided, and respondent argues, that the tax should apply only if the jury finds that tax avoidance was the 'dominant, controlling, or impelling motive' for the accumulation. I agree with the Court that such an instruction would be improper. It apparently would require the Government to show that tax avoidance was stronger than any other motive, and perhaps that it was stronger than all other motives put together. This would largely negate the statutory presumption of improper purpose contained in § 533(a). In my view, it would also result in nonimposition of tax in cases where Congress meant there to be liability, for I think that Congress must at least have intended that the tax should apply whenever the taxpayer would have distributed, instead of accumulating, corporate earnings had there been no possibility of a tax saving.
These considerations suggest what I believe to be the best rule: the jury should be instructed to impose the tax if it finds that the taxpayer would not have accumulated earnings but for its knowledge that a tax saving would result. This 'but for cause' test would be consistent with the statutory language. It would allow the Government to succeed if it could show, with the aid of the § 533(a) presumption, that without the spur of tax avoidance the taxpayer would not have accumulated the taxpayer would giving effect to the presumption and fulfilling Congress' desire to penalize those with a 'purpose' to avoid the tax. It would permit the taxpayer to escape the tax if it could convince the jury that for other, perhaps irrational, reasons it would have accumulated even had no tax saving been possible, thus affording the opportunity for proof of a 'contrary' purpose which Congress intended to provide. In addition, I believe that this instruction would be relatively easy for a jury to understand and apply. For all of these reasons, I consider it preferable to the standard adopted by the Court.
The court below adopted the view of the First Circuit. See Young Motor Co. v. Commissioner of Internal Revenue, 281 F.2d 488, 491 (1960); see also Apollo Industries, Inc. v. Commissioner of Internal Revenue, 358 F.2d 867, 875—876 (1966). The Second Circuit has rejected 'the view that the prevention of the imposition of surtaxes must have been shown to have been the dominant factor behind the ac umulations.' Trico Products Corp. v. Commissioner of Internal Revenue, 137 F.2d 424, 426, cert. denied, 320 U.S. 799, 64 S.Ct. 369, 88 L.Ed. 482 (1943). See also United States v. Duke Laboratories, Inc., 337 F.2d 280 (1964). The Fifth Circuit has also rejected the position that tax avoidance must be the 'primary or dominant' purpose of the accumulation. Barrow Mfg. Co. v. Commissioner of Internal Revenue, 294 F.2d 79, 82 (1961), cert. denied, 369 U.S. 817, 82 S.Ct. 827, 7 L.Ed.2d 783 (1962). The Eighth and Tenth Circuits have taken what appears to be an intermediate position, holding that imposition of the tax is proper if tax avoidance is one of the 'determinating purposes.' Kerr-Cochran, Inc. v. Commissioner of Internal Revenue, 253 F.2d 121, 123 (C.A.8th Cir. 1958); World Pub. Co. v. United States, 169 F.2d 186, 189 (C.A.10th Cir. 1948), cert. denied, 335 U.S. 911, 69 S.Ct. 480, 93 L.Ed. 443 (1949). The Sixth Circuit has adhered to its view in Shaw-Walker Co. v. Commissioner of Internal Revenue, 390 F.2d 205 (1968). A petition for certiorari in that case is now pending in this Court.
The rates are 27 1/2% of the accumulated taxable income (defined in § 535) not in excess of $100,000, plus 38 1/2% of the accumulated taxable income in excess of $100,000. Internal Revenue Code of 1954, § 531.
Section 532(b) exempts personal holding companies, foreign personal holding companies, and certain tax-exempt corporations. Internal Revenue Code of 1954, § 532(b). Both types of holding companies are taxed under other provisions of the Code. See Internal Revenue Code of 1954, §§ 541—547 (personal holding companies); Internal Revenue Code of 1954, §§ 551—558 (foreign personal holding companies).
No change was made in that part of the statute providing that '(t)he fact that any corporation is a mere holding or investment company shall be prima facie evidence of a purpose' to avoid tax. Revenue Act of 1938, § 102(b), 52 Stat. 483 (emphasis added).
The Regulations shed no light on the problem. See Treas.Reg. §§ 1.531—1.537, 26 CFR §§ 1.531—1.537.
Another major change was made in the Revenue Act of 1921, 42 Stat. 227. Section 220 of that Act shifted the incidence of the accumulated earnings tax from the shareholders to the corporation itself. 42 Stat. 247. The change was prompted by the decision in Eisner v. Macomber, 252 U.S. 189, 40 S.Ct. 189, 64 L.Ed. 521 (1920). See H.R.Rep. No. 350, 67th Cong., 1st Sess., 12—13 (1921).
Tax avoidance and evasion were a major subject of congressional concern in 1937. See, e.g., H.R.Rep. No. 1546, 75th Cong., 1st Sess. (1937). Congress addressed itself to another aspect of the problem by establishing a separate method for the taxation of foreign personal holding companies, again without regard to corporate intent. Revenue Act of 1937, § 201, 50 Stat. 818.
Congress was urged to adopt a test of purpose similar to that proposed by respondent in the present case. See, e.g., Hearings before the House Committee on Ways and Means Pertaining to the General Revision of the Internal Revenue Code, 83d Cong., 1st Sess., pt. 3, p. 2142 (1953).
The changes were expected to decrease revenues by $10,000,000 in fiscal year 1955. See S.Rep. No. 1622, 83d Cong., 2d Sess., 72 (1954), U.S.Code Cong. & Admin.News 1954, p. 4629.
Section 535(c) provided a credit for such accumulations.
Section 534 allowed the taxpayer to shift to the Commissioner in certain instances the burden of proving unreasonable accumulation. Section 537 included anticipated needs as reasonable needs of the business. In addition to those changes, § 533(a) omitted the requirement that the taxpayer negate the existence of tax avoidance purpose by a 'clear preponderance of the evidence,' and substituted a 'preponderance' test.
Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960); Allen v. Trust Co. of Georgia, 326 U.S. 630, 66 S.Ct. 389, 90 L.Ed. 367 (1946); City Bank Farmers Trust Co. v. McGowan, 323 U.S. 594, 65 S.Ct. 496, 89 L.Ed. 483 (1945); United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 75 L.Ed. 867 (1931).
See S.Rep. No. 1622, 83d Cong., 2d Sess., 69 (1954); B. Bittker & J. Eustice, Federal Income Taxation of Corporations and Shareholders 213—214 (2d ed. 1966).
'Purpose' is listed as a synonym for 'intention' in Black's Law Dictionary, at 948 (4th ed. 1968). Many courts have used the two words interchangeably in construing §§ 532 and 533(a). See, e.g., Henry Van Hummell, Inc. v. Commissioner, 364 F.2d 746 (10 Cir. 1966); Youngs Rubber Corp v. Commissioner, 331 F.2d 12 (2 Cir. 1964); Smoot Sand & Gravel Corp. v. Commissioner, 241 F.2d 197 (4 Cir. 1957); Harry A. Koch Co. v. Vinal, 228 F.Supp. 782 (D.C.1964); Motor Fuel Carriers, Inc. v. United States, 202 F.Supp. 497 (D.C.1962), vacated on other grounds, 322 F.2d 576 (5 Cir. 1963).
Restatement (Second), Torts § 8A (1965). See also id., Comment b; R. Perkins, Criminal Law 657—658 (1957); Cook, Act, Intention, and Motive in the Criminal Law, 26 Yale L.J. 645 (1917).


Craft LLC and 30 Hop LLC, collectively doing business as 30 Hop (Defendants) violated Title III of the Americans with Disabilities Act of 1990 (ADA), 42 U.S.C. §§ 12181–12189, and its implementing regulation, 28 C.F.R. part 36, by failing to design and construct a restaurant and bar, 30 Hop, so that it is readily accessible to and usable by individuals with disabilities, including by failing to design and construct 30 Hop in compliance with the 2010 ADA Standards for Accessible Design. See C.F.R. § 36.104 (defining the “2010 ADA Standards” as the requirements set forth in appendices B and D to 36 C.F.R. part 1191 and the requirements contained in subpart D of 28 C.F.R. part 36). More specifically, Defendants failed to provide an accessible route between stories and throughout 30 Hop; an accessible entrance; stairs with closed risers; accessible tables; and accessible toilet rooms, and that discrimination raises an issue of general public importance. 42 U.S.C. § 12188(b)(1)(B).
The Court has jurisdiction over this action pursuant to 42 U.S.C. § 12188(b)(1)(B) and 28 U.S.C. §§ 1331 and 1345. The Court may grant declaratory and other relief pursuant to 28 U.S.C. §§ 2201 and 2202.
Venue lies in this District and this Division pursuant to 28 U.S.C. § 1391 because all of the claims and events giving rise to this action occurred in this District.
Defendants’ principal place of business is at 900 East 2nd Avenue, Coralville, Iowa.
Defendants own and operate 30 Hop, a place of public accommodation, located at 900 East 2nd Avenue, Coralville, Iowa.
Defendants are public accommodations under the ADA. 42 U.S.C. § 12181(7)(B); 28 C.F.R. § 36.104.
Defendants designed and constructed 30 Hop. 42 U.S.C. § 12183.
Defendants started constructing 30 Hop in March 2013 and it opened for business in August 2014.
30 Hop is a restaurant and bar with an upper level rooftop patio. 30 Hop’s rooftop patio seats 130 customers, and includes food service and a selection of craft beers. The rooftop has different amenities than other areas in 30 Hop including patio seating, lava rock fireboxes, heat lamps, sparkle lighting, and a panoramic view of the surrounding area. 30 Hop’s rooftop patio has served as a venue for live entertainment, including weekly live music advertised as “rhythm and brews” at the “top of the hop,” and local groups and organizations have held events on the rooftop patio.
Defendants failed to provide elevator access to the rooftop patio; the only access they provided to the rooftop patio is by stairs from the ground level.
Employee work areas that allow individuals with disabilities to approach, enter, and exit the employee work area, and common use circulation paths within employee work areas that are on an accessible route in violation of 2010 ADA Standards §§ 203.9, 206.2.8.
Exterior doors: Defendants failed to provide sufficient maneuvering clearance at the latch side in the pull direction at the front entrance single hinged door adjacent to the revolving door in violation of 2010 ADA Standards § 404.2.4.1.
Stairways: Defendants failed to provide closed risers on the unenclosed stairs between the first and second floors in violation of 2010 ADA Standards § 504.3.
Dining surfaces: Defendants did not provide 5 percent accessible dining surfaces dispersed throughout the restaurant, including the ground floor bar, bar dining area, main dining area, and outdoor dining area; and upper level rooftop patio terrace bar, floor mounted drink rails, and outdoor dining area, with clear floor space at a minimum of 30 inches wide and a minimum of 48 inches deep positioned for a forward approach, knee and toe clearance extending a minimum of 17 inches under the dining surface, and a dining surface 28 inches minimum and 34 inches maximum above the finish floor in violation of 28 C.F.R. § 36.302(a), and 2010 ADA Standards §§ 226.1, 226.2, 305, 306,902.2, 902.3.
The door, an interior hinged door, has a maximum opening force for pushing or pulling of greater than 5 pounds in violation of 2010 ADA Standards § 404.2.9.
The lavatory has knee space depth less than 8 inches deep and knee space height less than 27 inches above the finish floor in violation of 2010 ADA Standards § 306.3.3.
The mirror located above the countertop has a height to the bottom edge of the reflecting surface of greater than 40 inches above the finish floor in violation of 2010 ADA Standards § 603.3.
The forward and side reach height of the operable controls are mounted more than 48 inches above the finish floor in violation of 2010 ADA Standards §§ 308.2.1, 308.3.1.
The dispenser is not operable with one hand and requires tight grasping, pinching, or twisting of the wrist in violation of 2010 ADA Standards § 309.4.
The toilet compartment door swings into and encroaches on the minimum required compartment length in violation of 2010 ADA Standards § 604.8.1.2.
The door pulls are not placed on both sides of the door near the latch in violation of 2010 ADA Standards § 604.8.1.2.
The toilet paper dispenser centerline is not between 7 and 9 inches horizontally from the front of the water closet measured to the centerline of the dispenser in violation of 2010 ADA Standards § 604.7.
The side grab bar has less than 11/2 inches between the grab bar and projecting objects below, such as the toilet paper dispenser, in violation of 2010 ADA Standards § 609.3.
The coat hook is mounted more than 48 inches above the finish floor in violation of 2010 ADA Standards §§ 604.8.3, 308.2.1, 308.3.1.
The rear grab bar does not extend from the centerline of the water closet 12 inches minimum on one side and 24 inches minimum on the other side in violation of 2010 ADA Standards § 604.5.2.
Individuals have been unable to visit or dine at 30 Hop's rooftop patio, despite their desire to do so, because there is no access for individuals with a mobility disability. The failure to provide an accessible route to 30 Hop's rooftop patio and its unique amenities has resulted in significant frustration, emotional distress and harm to individuals.
Defendants discriminated against individuals on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of Defendants' place of public accommodation. 42 U.S.C. § 12182(a); 28 C.F.R. § 36.201.
Defendants discriminated on the basis of disability by failing to design and construct 30 Hop to be readily accessible to and usable by individuals with disabilities in accordance with the ADA, its implementing regulation and the 2010 ADA Standards. 42 U.S.C. § 12183(a)(1); 28 C.F.R. §§ 36.401, 36.406(a).
Individuals were aggrieved by Defendants' discriminatory actions. 28 C.F.R. § 36.504(a)(2).
Grant judgment in favor of the United States and declare that Defendants discriminated against individuals on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of a place of public accommodation; and declare that Defendants are discriminating against individuals with disabilities through a failure to design and construct 30 Hop to be readily accessible to and usable by individuals with disabilities, in violation of Title III of the ADA, 42 U.S.C. §§ 12181–12189, and its implementing regulation at 28 C.F.R. part 36.
Enjoin Defendants, their officers, agents, and employees and all other persons and entities in active concert or participation with Defendants, from discriminating on the basis of disability.
Order Defendants to bring 30 Hop into compliance with the ADA, its implementing regulation, and the 2010 ADA Standards.
Award monetary damages to aggrieved persons as compensation for harms endured as a result of Defendants' discriminatory actions, as authorized by 42 U.S.C. § 12188(b)(2)(B).
Assess a civil penalty against Defendants as authorized by 42 U.S.C. § 12188(b)(2)(C) to vindicate the public interest.


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IRVING ABRAMS vs. FACTORY MUTUAL LIABILITY INSURANCE COMPANY.
Present: RUGG, C.J., CROSBY, DONAHUE, LUMMUS, & QUA, JJ.
The insurer under a policy of motor vehicle liability insurance, which was given the sole right, to the exclusion of the insured, to defend an action against him and agreed so to defend, was liable to him either in contract or in tort for its negligence in preparation for and trial of an action resulting in a judgment against him in excess of the policy limit.
The policy limit in a motor vehicle liability insurance policy did not limit the insurer's liability to the insured for its negligence in the performance of its promise to defend him.
The insurer under a motor vehicle liability insurance policy which provided for defence of the insured by the insurer and gave it authority at its option to settle claims could not be found liable for negligence in refusing in good faith to settle a claim for a sum within the policy limit although a reasonably prudent person exercising due care "from the standpoint of the" insured would have made such settlement and, in an action upon the claim following such refusal, there was judgment against the insured for an amount in excess of that limit.
No appeal lies from the denial of a motion to amend the declaration in an action at law.
CONTRACT OR TORT. Writ in the Superior Court dated September 28, 1936.
A demurrer by the defendant to a substitute declaration was sustained as to each count, and a motion by the plaintiff to amend the substitute declaration was denied, by Williams, J. The plaintiff appealed from both orders.
C. M. Goldman, for the plaintiff.
M. Z. Kolodny, for the defendant.
QUA, J. The first count is in contract. It alleges in substance that the defendant issued a motor vehicle liability policy to the plaintiff; that the plaintiff was concerned in an accident in the State of Connecticut which was covered by the policy and as a result of which one Lawrence brought an action against the plaintiff; that the action was defended by the defendant; that the plaintiff complied in all respects with the terms of the policy, but that the defendant, in violation of its obligations under the policy, "failed to use proper care and due diligence in the investigation, preparation of the case for trial and trial of the case," as a result of which judgment was entered against the plaintiff in the sum of $15,000 and costs, or $10,000 in excess of the limit of the defendant's liability in the policy; and that the defendant, in further violation of its obligations under the policy, wilfully failed and refused to settle Lawrence's claim within the policy limit of $5,000, "when in a position to do so," and "when a reasonable [sic] prudent person exercising due care from the standpoint of the assured would have so settled the case, and such failure constituted bad faith on the part of the defendant." It is further alleged that the defendant paid $5,000 on account of the judgment against the plaintiff, and that the plaintiff was compelled to expend $2,500, including his counsel fees, to settle the balance of the judgment against him.
The second count is in tort for negligence. Its allegations are practically the same as those of the first count, except that the failure to settle is alleged to have been negligent.
to assist in the defence, was forbidden to "interfere in any negotiation for settlement or legal proceeding, without the consent of the Company."
A demurrer was sustained as to each count on the ground that the matters contained therein were insufficient in law to maintain the action.
We think that each count did contain a statement of a cause of action. By the express terms of the policy the defendant obligated itself to defend lawsuits. If it did not settle, it was bound to defend. Connolly v. Bolster, 187 Mass. 266, 270. Miller v. United States Fidelity & Guaranty Co. 291 Mass. 445, 448. When a party binds himself by contract to do a work or to perform a service, he agrees by implication to do a workmanlike job and to use reasonable and appropriate care and skill in doing it. This is true whether the work consists in building a house, repairing an automobile, treating a patient or defending against a claim or a lawsuit. The plaintiff could maintain an action of contract against the defendant if, without excuse, the defendant wholly refused to defend. He can likewise maintain an action of contract if the defendant defended negligently.
however, G.L. [Ter. Ed.] c. 231, Section 140A, as inserted by St. 1932, c. 130.) In short the insured has transferred to the insurer his right to defend himself as security to the insurer for the risk undertaken. But the insured still has an interest in his own defence which may be financially greater than the interest of the insurer, if the claim is likely to result in a large judgment, and if the limit of the insurer's liability is low. In general a security holder may use the security to the extent necessary for his own protection, but he must not negligently sacrifice the rights of others. Guinzburg v. H. W. Downs Co. 165 Mass. 467. Benj. N. Moore & Sons Co. v. Manufacturers National Bank, 261 Mass. 328, 332.
The count in tort states a cause of action as well as the count in contract. Although the duty arises out of the contract and is measured by its terms, negligence in the manner of performing that duty as distinguished from mere failure to perform it, causing damage, is a tort. Bryant v. Rich, 106 Mass. 180, 190. Tuttle v. George H. Gilbert Manuf. Co. 145 Mass. 169, 174. Vannah v. Hart Private Hospital, 228 Mass. 132. Hebbard v. McDonough, 245 Mass. 204, 208. Attleboro Manuf. Co. v. Frankfort Marine, Accident & Plate Glass Ins. Co. 240 Fed. 573, 578.
We need not at this stage of the case consider whether an attorney employed by the insurer to defend is an independent contractor for whose negligence the insurer is not liable. The declaration alleges negligence on the part of the defendant itself.
The limit of $5,000 placed in the policy upon the defendant's liability under its promise of indemnity has no effect in limiting its liability for negligence under its additional promise to defend. Attleboro Manuf. Co. v. Frankfort Marine, Accident & Plate Glass Ins. Co. 240 Fed. 573, 582.
to attempt to settle comparable to the promise to defend where there is no settlement. Defence is a part of the protection of the policy. Settlement is optional with the insurer. Although the insured may be prejudiced by the insurer's refusal to accept an advantageous offer, yet we think that the policy entrusts the matter of settlement to the judgment of the insurer, and that its judgment, exercised in good faith, is final. The practical difficulties of any other construction are strongly stated in Best Building Co. Inc. v. Employers' Liability Assurance Corp. Ltd. 247 N.Y. 451. See also Long v. Union Indemnity Co. 277 Mass. 428; Georgia Casualty Co. v. Mann, 242 KY. 447; Schmidt v. Travelers Ins. Co. 244 Penn. St. 286; McDonald v. Royal Indemnity Ins. Co. 109 N.J. L. 308; Johnson v. Hardware Mutual Casualty Co. 108 Vt. 269; Noshey v. American Automobile Ins. Co. 68 Fed. (2d) 808. We need not decide that there can never be actionable negligence of any kind in connection with the handling of settlements, but something more must be shown than failing to make a settlement which a reasonably prudent person exercising due care "from the standpoint of the assured" would have made. The declaration also mentions "bad faith," but the context shows that nothing more is meant by this than the refusal to make a prudent settlement.
The weight of authority supports these conclusions. Some of the apparent differences can be explained by differences in the wording of the policies. Rumford Falls Paper Co. v. Fidelity & Casualty Co. 92 Maine, 574. Wakefield v. Globe Indemnity Co. 246 Mich. 645. Mendota Electric Co. v. New York Indemnity Co. 175 Minn. 181. Cavanaugh v. General Accident Fire & Life Assurance Corp. 79 N. H. 186. Douglas v. United States Fidelity & Guaranty Co. 81 N. H. 371. Brassil v. Maryland Casualty Co. 210 N.Y. 235. McAleenan v. Massachusetts Bonding & Ins. Co. 173 App. Div. (N.Y.) 100. Hilker v. Western Automobile Ins. Co. 204 Wis. 1. Attleboro Manuf. Co. v. Frankfort Marine, Accident & Plate Glass Ins. Co. 240 Fed. 573. American Mutual Liability Ins. Co. v. Cooper, 61 Fed. (2d) 446. Noshey v. American Automobile Ins. Co. 68 Fed. (2d) 808.
The case of Nesson v. United States Casualty Co. 201 Mass. 71, arose under a different form of policy and does not touch the questions here discussed.
The order sustaining the demurrer is reversed.
The plaintiff's appeal from the order of the court denying his motion to amend his substitute declaration is not properly before us and must be dismissed. Means v. Leveroni, 297 Mass. 61.

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Stephen PAUL et al., Plaintiffs and Appellants, v. Richard PATTON, Defendant and Respondent.
The decedent, Gilbert Paul, retained attorney Richard Patton to draft an amendment to his revocable living trust. The decedent signed the “Trust Amendment,” which, as drafted by Patton, named the decedent's wife, Helen, and his children, Stephen Paul, David Paul, Alan Paul, and Nancy Dybdahl as beneficiaries. Stephen and David Paul also are the successor trustees of the trust. Following the decedent's death, they petitioned the probate court to modify the Trust Amendment, alleging it failed to conform to the decedent's intentions by erroneously granting Helen an interest in decedent's brokerage accounts and personal and real property. In connection with that probate court action, Patton admitted the Trust Amendment did not reflect the decedent's intention that his brokerage accounts and personal and real property be divided among his children. Stephen and David settled the probate court action with Helen.
Subsequently, Stephen, David, Alan, and Nancy (the Pauls) filed the legal malpractice action that is the subject of this appeal against Patton. They alleged that Patton failed to exercise reasonable care in performing legal services for the decedent by failing to draft the Trust Amendment in a manner consistent with the decedent's intentions. The trial court sustained without leave to amend Patton's demurrer to the Pauls' first amended complaint. We shall reverse.
Because this matter comes to us following a judgment sustaining a demurrer without leave to amend, we assume the truth of the material facts properly pleaded in the Pauls' operative first amended complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank ).) Facts appearing in exhibits attached to the first amended complaint also are accepted as true and are given precedence, to the extent they contradict the allegations. (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.) The exhibits to the first amended complaint were: (1) the Trust Amendment; (2) a December 13, 2011 letter from Patton regarding the decedent's intent in connection with the Trust Amendment; and (3) a partial transcript of a 2012 deposition of Patton in which he discussed the decedent's intent in connection with the Trust Amendment.1 In addition to the first amended complaint and its exhibits, we also may consider matters subject to judicial notice. (Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th 1295, 1300.) The Pauls request that we take judicial notice of the amended petition to modify the Trust Amendment filed in the probate court action and its exhibits, which include the decedent's original revocable living trust. We grant that request pursuant to Evidence Code sections 452 and 459. Accordingly, the following factual recitation is based on the facts properly pleaded in the first amended complaint, facts appearing in exhibits attached to the first amended complaint, and facts appearing in the amended petition to modify the Trust Amendment and its exhibits.
The Pauls are the decedent's four children with his first wife, who died in 1970. The decedent married Helen in 1988. At that time, he had substantial separate property, including real property referred to as “the Quick Stop Property,” other real property, brokerage accounts, and personal property.
In 1995, the decedent established a revocable living trust (the “1995 Trust”) under which he was both trustor and trustee. The 1995 Trust provided that if Helen survived the decedent, she would have the right to live in (or lease) the marital home for the rest of her life and to receive the net income from the Quick Stop Property. The rest of decedent's property was to be divided among his children, the Pauls. Upon Helen's death, the Pauls were to receive the decedent's one half community property interest in the marital home.
The decedent's health and his relationship with Helen began to decline in 2009. In 2011, he retained Patton to amend the 1995 Trust.
With respect to the income from the Quick Stop Property, the Trust Amendment directs the successor trustees “to use up to $4,000 per month” of that income “to pay for the mortgage, insurance, taxes and maintenance of the marital home.” If the marital home has been sold, the successor trustees are to pay “$4,000 per month from the Quick Stop Property to Helen” as monthly income.
Thus, as drafted and executed, the Trust Amendment (1) entitled Helen to one-half plus one-fifth of the proceeds of the sale of the martial home, (2) limited the income Helen could receive from the Quick Stop Property to $4,000 per month, and (3) gave Helen a one-fifth share of the decedent's other assets (aside from his personal property). Under the 1995 Trust, she was entitled to live in or lease (but not to sell) the marital home and to all of the Quick Stop Property income, but to none of the decedent's other assets.
The decedent died in July 2011. In their capacities as successor trustees of the 1995 Trust, Stephen and David filed a petition to modify the Trust Amendment, arguing it did not conform to decedent's intentions. (In re the Matter of Gilbert L. Paul Revocable Living Trust dated April 6, 1995, as amended, Superior Court, Santa Cruz County, case No. PR 045678.) Helen opposed the petition.
Stephen and David reached a settlement agreement with Helen under which she received more than decedent intended.
Patton demurred to the first amended complaint, arguing he owed no duty of care to the Pauls because they were not his clients. In an order filed on December 16, 2013, the trial court sustained the demurrer without leave to amend, stating “no liability exists as a matter of law under the analysis and precedent set forth in, inter alia, Chang v. Lederman (2009) 172 Cal.App.4th 67.” A judgment of dismissal was entered on December 27, 2013. Patton served a notice of entry of judgment on January 6, 2014 and the Pauls timely appealed on February 10, 2014.
The Pauls argue their suit against Patton should have been permitted to go forward on either of two alternate theories—(1) Patton owed them a duty of care as trust beneficiaries or (2) they had standing as successor trustees. We address each theory in turn.
The first amended complaint does not allege Patton owed the Pauls a duty. Therefore, the trial court properly sustained Patton's demurrer. The more difficult question is whether there was a reasonable possibility that the Pauls could have amended their complaint to allege the duty element of their legal malpractice claim, such that the court should have granted leave to amend. At this early stage in the litigation, we cannot say as a matter of law that Patton did not owe the Pauls a duty to ensure the Trust Amendment reflected the decedent's testamentary intent. Accordingly, we conclude the Pauls should have been accorded the opportunity to amend their complaint.
Here, there is no executed trust instrument reflecting the decedent's alleged intent. According to Patton, that is fatal to the Pauls' action because attorneys owe a duty of care only to beneficiaries of executed wills or trust instruments that expressly reflect the testator's intent. The Pauls contend that whether the testamentary document properly reflects the testator's intent is irrelevant; as long as the testator's intent to benefit the plaintiff is clear, a duty exists.
Read liberally, as it is appropriate in evaluating a demurrer, the amended complaint alleges the decedent intended to grant the Pauls a particular bequest, directed Patton to draft an amendment to his trust effectuating that bequest, and signed the resulting Trust Amendment believing it made the intended bequest. But, as a result of Patton's drafting error, the Trust Amendment does not contain the terms that were intended by the decedent. Accepting those allegations as true, as we must, we view this case as more analogous to Osornio than to Radovich. Unlike in Radovich, here the decedent signed the testamentary document at issue, alleviating any concern that he changed his mind after directing Patton to amend the trust. And, under the facts as alleged, “there is none of the ambiguity concerning the testator's donative intent as was presented in Radovich.” (Osornio, supra, 124 Cal.App.4th at p. 336.) Of course, discovery may reveal more ambiguity than does the complaint. We merely conclude that, at this stage, we cannot say as a matter of law that Patton does not owe the Pauls a duty.
The six Biakanja/Lucas factors support our conclusion. We find Chang instructive as to the first four factors. In Chang, the plaintiff alleged the decedent instructed the defendant attorney to revise the decedent's trust (which named the decedent's son and plaintiff as beneficiaries) to leave the entire trust estate to the plaintiff. (Chang, supra, 172 Cal.App.4th at p. 73.) The attorney refused and advised his client, who was seriously ill, to “have a psychiatric evaluation before making any changes to his estate plan.” (Ibid.) While, unlike here, there was no allegation the attorney confirmed the decedent intended to revise his trust, Chang also was decided at the demurrer stage. Accordingly, the court “accept[ed] as true the factual allegation[ ]” that the decedent “advised [his attorney] of his desire to leave his entire estate to [the plaintiff].” (Id. at p. 83.) In view of that allegation, the court concluded that “at least four of the six Biakanja/Lucas factors point[ed] toward extending [the attorney's] duty of care to include” the plaintiff: “the transaction ․ was intended to directly affect [the plaintiff] (the first factor) and it was plainly foreseeable [the attorney's] failure to exercise due care in carrying out [the decedent's] instructions would harm [the plaintiff] (the second factor). [The plaintiff] has also alleged she suffered injury as a result of [the attorney's] negligence (the third factor); and from the allegations in her complaint there appear to be no intervening circumstances that might have broken the causal connection between [the attorney's] conduct and [the plaintiff's] damage (the fourth factor).” (Ibid.) To this point, the Chang court's analysis applies equally here.
Finally, the sixth factor—whether extension of liability would impose an undue burden on the profession—also favors the Pauls. Imposing liability on attorneys to properly define and use basic terms such as “beneficiaries” and “children” to carry out the testator's wishes does not impose an undue burden on the legal profession. And, where, as is alleged here, there is no dispute regarding the decedent's intent, the imposition of liability will not compromise the attorney's duty of undivided loyalty to the testator.
We recognize that in Chang, which is factually analogous to this case in many ways, the court found no duty based exclusively on the sixth factor. The Chang court expressed concern that “any disappointed potential beneficiary—even a total stranger to the testator—could make factual allegations similar in most respects to those in the second amended complaint․” (Chang, supra, 172 Cal.App.4th at p. 83.) “Without a finite, objective limit on the identity of individuals to whom they owe a duty of care, the burden on lawyers preparing wills and trusts would be intolerable.” (Id. at p. 84.) We find that analysis inapplicable to the facts of this case. While in Chang the plaintiff merely alleged the decedent “instructed [the attorney] to revise his trust” (id. at p. 73), something “any disappointed potential beneficiary” could allege (id. at p. 83), here the Pauls allege Patton admitted to a drafting error in another action. That is not an allegation most disappointed beneficiaries can make.
For the foregoing reasons, we conclude the trial court erred in concluding as a matter of law that the Pauls could not establish Patton owed them a duty as beneficiaries. On remand, the Pauls should be permitted to amend their complaint to allege such a duty.
The Pauls also maintain that Stephen and David stated a claim against Patton in their capacity as successor trustees. The Pauls did not raise this argument below, but we agree with their contention that they can assert it for the first time on appeal. (20th Century Ins. Co. v. Quackenbush (1998) 64 Cal.App.4th 135, 139, fn. 3 [“When a demurrer is sustained without leave to amend the petitioner may advance on appeal a new legal theory why the allegations of the petition state a cause of action.”].) However, we find the argument to be without merit.
The judgment is reversed and, on remand, the trial court is directed to grant the Pauls leave to amend. The Pauls shall recover their costs on appeal.
1. The Pauls request that we take judicial notice of their first amended complaint and the documents attached to it as exhibits. Judicial notice is unnecessary because, in our review of the demurrer ruling, we accept the allegations in the complaint and the facts in the exhibits as true. (Blank,supra, 39 Cal.3d at p. 318; Dodd v. Citizens Bank of Costa Mesa, supra, 222 Cal.App.3d at p. 1627.) Therefore, we deny their request as to the first amended complaint and its exhibits.
2. Biakanja v. Irving (1958) 49 Cal.2d 647.

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The aged domain Globalvision.com was hit with a UDRP; the complaint was brought by GVE Global Vision Inc., asserting it has rights to the GLOBAL VISION mark since 2017.
The Respondent stated that the domain is made up of generic, dictionary words.
“Respondent further contends that Globalvision is a parent company of a number of subsidiaries and has been active since its original incorporation in 1992. The domain has since 1995 been in constant use, for corporate communication, and running numerous core infrastructure internal systems. The lack of a client facing website does not negate the active and constant use of the disputed domain name.
The fact that Globalvision.com was registered more than 20 years before the Complainant’s Canadian trademark, led Darryl C. Wilson, Panelist at the National Arbitration Forum to deny its transfer.
Respondent asserts Complainant and Respondent’s companies co-existed for 21 years without issue until 2016, when Complainant made an attempt to purchase the disputed domain name from Respondent, which Respondent refused on the grounds Respondent is an active company.
Respondent asserts Complainant subsequently registered a trademark and engaged a legal team to intimidate Respondent by filing the Complaint to illegitimately gain control over the domain. The Panel here finds that Complainant knew or should have known that it was unable to prove that Respondent lacks rights or legitimate interests in the <globalvision.com> domain name and that Respondent registered and is using the disputed domain name in bad faith. The Panel thus concludes that reverse domain name hijacking has occurred.
Complainant is GVE Global Vision Inc. (“Complainant”), represented by Legal Logik Inc., Quebec, Canada. Respondent is SDB Organisation Limited (“Respondent”), United Kingdom.
The domain name at issue is <globalvision.com>, registered with Domain.Com, Llc.
The undersigned certifies that he has acted independently and impartially, and to the best of his knowledge, has no known conflict in serving as Panelist in this proceeding.
Complainant submitted a Complaint to the Forum electronically on April 26, 2018; the Forum received payment on April 27, 2018.
On April 26, 2018, Domain.Com, Llc confirmed by e-mail to the Forum that the <globalvision.com> domain name is registered with Domain.Com, Llc and that Respondent is the current registrant of the name. Domain.Com, Llc has verified that Respondent is bound by the Domain.Com, Llc registration agreement and has thereby agreed to resolve domain disputes brought by third parties in accordance with ICANN’s Uniform Domain Name Dispute Resolution Policy (the “Policy”).
On April 30, 2018, the Forum served the Complaint and all Annexes, including a Written Notice of the Complaint, setting a deadline of May 21, 2018 by which Respondent could file a Response to the Complaint, via e-mail to all entities and persons listed on Respondent’s registration as technical, administrative, and billing contacts, and to postmaster@globalvision.com. Also on April 30, 2018, the Written Notice of the Complaint, notifying Respondent of the e-mail addresses served and the deadline for a Response, was transmitted to Respondent via post and fax, to all entities and persons listed on Respondent’s registration as technical, administrative and billing contacts.
A timely Response was received and determined to be complete on May 21, 2018.
A compliant Additional Submission was received from Complainant on May 23, 2018. A compliant Additional Submission was received from Respondent on May 24, 2018.
On May 30, 2018, pursuant to Complainant’s request to have the dispute decided by a single-member Panel, the Forum appointed Darryl C. Wilson, as Panelist.
Complainant, GVE Global Vision Inc., uses its GLOBAL VISION mark to promote its products and services and established rights in the mark through registration with the Canadian Intellectual Property Office (“CIPO”) (e.g., Reg. No. TMA976,165, registered Jul 19, 2017).
Respondent’s <globalvision.com> domain name is identical or confusingly similar to Complainant’s mark.
Respondent does not have rights or legitimate interests in the <globalvision.com> domain name. Respondent has never made an active use of the disputed domain name.
Respondent registered the disputed domain name in bad faith. Respondent registered the domain name in 1995, when international cybersquatting rules did not apply. Further, the WHOIS information of record lists the registrant’s email address as domains@sdborganisation.com, which indicates that Respondent has an intent to profit from the purchase and sale of domain names.
Complainant’s GLOBAL VISION is made up of common, generic terms and Complainant may not maintain an exclusive monopoly on such terms.
Respondent has rights and legitimate interests in the <globalvision.com> domain name dating back to February 22, 1995, when Respondent registered the domain name. The domain name is used by an existing, active company.
In 2016, Complainant emailed Respondent and attempted to purchase the <globalvision.com> domain name and Respondent refused Complainant’s offer. In 2017, Complainant registered the GLOBAL VISION mark and filed this complaint. Complainant’s conduct amounts to reverse domain name hijacking.
Complainant further contends that Complainant registered its trademark for a legitimate business purposes, and the disputed domain name does not resolve to an active website, which makes it clear that the <globalvision.com> domain name is no longer in “constant use.” Also, Complainant states it did not bring the Complaint in an attempt to Reverse Domain Name Hijack as the disputed domain name does not resolve to an active website.
Respondent further contends that Globalvision is a parent company of a number of subsidiaries and has been active since its original incorporation in 1992. The domain has since 1995 been in constant use, for corporate communication, and running numerous core infrastructure internal systems. The lack of a client facing website does not negate the active and constant use of the disputed domain name. Respondent also stands by the claim that this is a blatant attempt to Reverse Hijack the disputed domain name as evidenced by Respondent commencing this proceeding, in an attempt to bully the rightful registrant by falsely exerting the recently filed Trademark as legitimate grounds for obtaining the domain.
Complainant is GVE Global Vision Inc., Quebec, Canada. Complainant is the owner of a 2017 domestic registration for its mark, GLOBAL VISION, which it uses in connection with its provision of computer software and hardware, as well as related goods and services, for use in packaging, inspection, and quality control. Complainant is also the owner of the domain name <globalvisioninc.com>, which it registered and has allegedly continuously used since 1997.
Respondent is SDB Organisation Limited, London, United Kingdom. Respondent registered the disputed domain name in 1995 and has allegedly continuously used it since that time in a variety of manners through its principal company and subsidiaries. One of Respondent’s companies is GlobalVision Inc., which it incorporated in 1992. Respondent was contacted in 2016 by Complainant regarding its desire to purchase Respondent’s <globalvision.com> domain name, but Complainant declined to sell. Complainant thereafter registered the GLOBAL VISION trademark and brought this UDRP action, requesting that Respondent’s domain name be transferred to Complainant.
Complainant contends it has rights in its GLOBAL VISION mark through registration with the CIPO (e.g., Reg. No. TMA976,165, registered July 19, 2017). Registration of a mark with a trademark authority, such as the CIPO, confers rights in a mark. See The Toronto-Dominion Bank v. Chris Minor, FA 1710082 (Forum Feb. 13, 2017) (“Previous [p]anels have routinely held, and this Panel holds as well, that Complainant has rights in a mark based on registration of the mark with the CIPO.”). The Panel here finds that Complainant established rights in the GLOBAL VISION mark under Policy ¶ 4(a)(i).
Complainant asserts that Respondent’s <globalvision.com> domain name is identical or confusingly similar to Complainant’s mark, but does not argue as to why it is either identical or confusingly similar. The Panel however notes that the changes between the disputed domain name and the GLOBAL VISION mark are the removal of a space and the addition of the “.com” generic top-level-domain (“gTLD”). Similar changes to a mark have been found insufficient to defeat a test for confusing similarity pursuant to Policy ¶ 4(a)(i). See Tupelo Honey Hospitality Corporation v. King, Reggie, FA 1732247 (Forum July 19, 2017) (“Addition of a gTLD is irrelevant where a mark has been fully incorporated into a domain name and the gTLD is the sole difference.”); see also Research Now Group, Inc. v. Pan Jing, FA 1735345 (Forum July 14, 2017) (“Complainant also asserts that Respondent’s <researchnow.host>, <researchnow.top> and <researchnow.club> domain names are confusingly similar to Complainant’s mark because each merely eliminates the space and appends a gTLD to the fully incorporated mark. The addition of a gTLD and elimination of spacing are both considered irrelevant when distinguishing between a mark and a domain name.”). The Panel here finds that Respondent’s <globalvision.com> domain name is identical or confusingly similar to Complainant’s mark.
While Respondent argues that its registration of the <globalvision.com> domain name predates Complainant’s alleged rights in the mark, the Panel here finds that such a determination is not necessary under Policy ¶ 4(a)(i) as this portion of the Policy considers only whether Complainant has rights in the mark and whether the disputed domain name is identical or confusingly similar to Complainant’s mark. See AB Svenska Spel v. Zacharov, D2003-0527 (WIPO Oct. 2, 2003) (holding that the UDRP does not require a complainant to have registered its trademark prior to the respondent’s registration of the domain name under Policy ¶ 4(a)(i) but may prevent a finding of bad faith under Policy ¶ 4(a)(iii)); see also Clear!Blue Holdings, L.L.C. v. NaviSite, Inc., FA 888071 (Forum Mar. 5, 2007) (“Although the domain name in dispute was first registered in 1996, four years before Complainant’s alleged first use of the mark, the Panel finds that Complainant can still establish rights in the CLEAR BLUE marks under Policy ¶ 4(a)(i).”).
Although Respondent contends that the <globalvision.com> domain name is comprised of common and generic terms and as such cannot be found to be identical/confusingly similar to Complainant’s mark, the Panel here finds that such a determination is not necessary under Policy ¶ 4(a)(i) as this portion of the Policy considers only whether Complainant has rights in the mark and whether the disputed domain name is identical or confusingly similar to Complainant’s mark. See Precious Puppies of Florida, Inc. v. kc, FA 1028247 (Forum Aug. 10, 2007) (examining Respondent’s generic terms arguments only under Policy ¶ 4(a)(ii) and Policy ¶ 4(a)(iii) and not under Policy ¶ 4(a)(i)); see also Vitello v. Castello, FA 159460 (Forum July 1, 2003) (finding that the respondent’s disputed domain name was identical to complainant’s mark under Policy ¶ 4(a)(i), but later determining the issue of whether the disputed domain name was comprised of generic terms under Policy ¶¶ 4(a)(ii) and 4(a)(iii)).
The Panel recognizes that Complainant must first make a prima facie case that Respondent lacks rights and legitimate interests in the disputed domain name under Policy ¶ 4(a)(ii), then the burden shifts to Respondent to show it does have rights or legitimate interests. See Hanna-Barbera Prods., Inc. v. Entm’t Commentaries, FA 741828 (Forum Aug. 18, 2006) (holding that the complainant must first make a prima facie case that the respondent lacks rights and legitimate interests in the disputed domain name under UDRP ¶ 4(a)(ii) before the burden shifts to the respondent to show that it does have rights or legitimate interests in a domain name). The Complainant here has set forth the requisite prima facie case.
Complainant alleges that Respondent does not have rights or legitimate interests in the <globalvision.com> domain name and that Respondent is not using the <globalvision.com> domain name in connection with any bona fide offering of goods or services or legitimate noncommercial or fair use. Complainant claims that Respondent failed to actively use the domain name. Nonuse of a domain name may not be considered a bona fide offering of goods or services or legitimate noncommercial or fair use. See Thermo Electron Corp. v. Xu, FA 713851 (Forum July 12, 2006) (finding that the respondent’s non-use of the disputed domain names demonstrates that the respondent is not using the disputed domain names for a bona fide offering of goods or services under Policy ¶ 4(c)(i) or a legitimate noncommercial or fair use pursuant to Policy ¶ 4(c)(iii)). The Panel notes, however, that Complainant does not provide any evidence, nor articulate any legitimate argument to support its conclusion that Respondent has not actively used the domain name. Complainant does provide an exhibit indicating that at some point Complainant unsuccessfully tried to reach a website that the disputed domain name resolved to, but a party’s mere illustration of its inability to reach a website at one particular moment in time does not indicate an opposing party’s failure to actively use the domain name.
Respondent asserts that its Globalvision Inc. is a parent company of a number of subsidiaries and has been active since original incorporation in 1992. Respondent provides evidence that the domain has been registered since 1995, and asserts that it has been in constant use, for corporate communication and running numerous core infrastructure internal systems. Use of a disputed domain name in connection with a bona fide offer or a noncommercial or otherwise fair use can evince a finding that a respondent has rights and legitimate interests in a disputed domain name. See Workshop Way, Inc. v. Harnage, FA 739879 (Forum Aug. 9, 2006) (finding that the respondent overcame the complainant’s burden by showing it was making a bona fide offering of goods or services at the disputed domain name); see also Larry S. Nichter, M.D. and Jed H. Horowitz, M.D., a Medical Corporation, DBA Pacific Center for Plastic Surgery v. DOMAIN ADMINISTRATOR / THOUGHT CONVERGENCE, INC., FA 1702547 (Forum Jan. 3, 2017) (finding for respondent when complainant failed to adequately allege respondent’s lack of rights and legitimate interests in the disputed domain name). Respondent submits screenshots of the use of the disputed domain name in connection with Respondent’s business. The Panel here finds that Respondent has rights and legitimate interests in the <globalvision.com> domain name.
Next, Respondent contends that the <globalvision.com> domain name is comprised of common and generic terms and thus cannot be deemed identical/confusingly similar to Complainant’s mark. The Panel declines to address this issue since it has already found that Respondent has rights and legitimate interests in the disputed domain name.
The Complainant has NOT proven this element.
The Panel finds that Complainant failed to meet the burden of proof of bad faith registration and use under Policy ¶ 4(a)(iii). See Tristar Products, Inc. v. Domain Administrator / Telebrands, Corp., FA 1597388 (Forum Feb. 16, 2015) (“Complainant makes conclusory allegations of bad faith but has adduced no specific evidence that warrants a holding that Respondent proceeded in bad faith at the time it registered the disputed domain name. Mere assertions of bad faith, even when made on multiple grounds, do not prove bad faith.”); see also Chris Pearson v. Domain Admin / Automattic, Inc., FA 1613723 (Forum Jul. 3, 2015) (finding that the complainant could not establish the respondent registered and used the disputed domain name in bad faith because it failed to present evidence that would support such a holding).
Respondent asserts it registered and used the <globalvision.com> domain name prior to Complainant’s registration of the GLOBAL VISION mark. Complainant does not dispute Respondent’s domain name was registered more than 20 years before it registered its mark, and prior to Complainant’s registration of its own domain name. The Panel notes that since Respondent’s registration of the <globalvision.com> domain name predates Complainant’s first claimed rights in the GLOBAL VISION mark, Complainant generally cannot prove registration in bad faith per Policy ¶ 4(a)(iii). See Platterz v. Andrew Melcher, FA 1729887 (Forum Jun. 19, 2017) (“Whatever the merits of Complainant’s arguments that Respondent is using the Domain Name in bad faith, those arguments are irrelevant, as a complainant must prove both bad faith registration and bad faith use in order to prevail.”); see also Faster Faster, Inc. DBA Alta Motors v. Jeongho Yoon c/o AltaMart, FA 1708272 (Forum Feb. 6, 2017) (“Respondent registered the domain name more than a decade before Complainant introduced the ALTA MOTORS mark in commerce. Respondent therefore could not have entertained bad faith intentions respecting the mark because it could not have contemplated Complainant’s then non-existent rights in [the mark] at the moment the domain name was registered.”).
Further, the Panel’s conclusion that Respondent has rights or legitimate interests in the <globalvision.com> domain name pursuant to Policy ¶ 4(a)(ii), provides additional support for the conclusion that Respondent did not register or use the disputed domain name in bad faith pursuant to Policy ¶ 4(a)(iii). See Record Connect, Inc. v. Chung Kit Lam / La-Fame Corporation, FA 1693876 (Forum Nov. 3, 2016) (finding that the issue of bad faith registration and use was moot once the panel found the respondent had rights or legitimate interests in the disputed domain name); see also Sheet Labels, Inc. v. Harnett, Andy, FA 1701423 (Forum Jan. 4, 2017) (finding that because the respondent had rights and legitimate interests in the disputed domain name, its registration of the name was not in bad faith).
Respondent alleges that Complainant has acted in bad faith and is engaging in reverse domain name hijacking by initiating this dispute. Respondent contends that Complainant is attempting to deprive Respondent, the rightful, registered holder of the <globalvision.com> domain name, of its rights to use the disputed domain name. Respondent asserts Complainant and Respondent’s companies co-existed for 21 years without issue until 2016, when Complainant made an attempt to purchase the disputed domain name from Respondent, which Respondent refused on the grounds Respondent is an active company. Respondent asserts Complainant subsequently registered a trademark and engaged a legal team to intimidate Respondent by filing the Complaint to illegitimately gain control over the domain. The Panel here finds that Complainant knew or should have known that it was unable to prove that Respondent lacks rights or legitimate interests in the <globalvision.com> domain name and that Respondent registered and is using the disputed domain name in bad faith. The Panel thus concludes that reverse domain name hijacking has occurred. See NetDepositVerkaik v. Crownonlinemedia.com, D2001-1502 (WIPO Mar. 19, 2002) (“To establish reverse domain name hijacking, Respondent must show knowledge on the part of the complainant of the Respondent’s right or legitimate interest in the Domain Name and evidence of harassment or similar conduct by the Complainant in the fact of such knowledge.”); see also Labrada Bodybuilding Nutrition, Inc. v. Glisson, FA 250232 (Forum May 28, 2004) (finding that complainant engaged in reverse domain name hijacking where it used “the Policy as a tool to simply wrest the disputed domain name in spite of its knowledge that the Complainant was not entitled to that name and hence had no colorable claim under the Policy”).
The Respondent has proven this claim and this Panel finds the complaint was brought in bad faith and constitutes an abuse of the administrative proceeding.
As the Complainant has failed to established all three elements required under the ICANN Policy, the Panel concludes that Complainant’s requested relief shall be DENIED.
Accordingly, it is Ordered that the <globalvision.com> domain name REMAIN WITH Respondent. The Panel further finds that Complainant engaged in reverse domain name hijacking.
Anon – Great decision too!

matches: v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v.


Frivolous Return Fraud Frivolous Return Filer IRS and Due Process Frivolous Penaly Ref.
If IRC 6703 requires burden of proof for liability for penalties under IRC 6700, IRC 6701, and IRC 6702 to be on the Secretary, how does a taxpayer get to a proceeding to compel the Secretary to meet its burden of proof for liability for a penalty charge under 6702? Either 6700 or 6701 can apply to a person(s) activities or documents, respectively, but both penalties cannot apply concurrently to the same person(s). However, both penalties must be displayed on a return of tax for IRC 6702 to be assessable.
IRC 6700. - Promoting abusive tax shelters, etc.
6700 charges a penalty of $1000 or 100% of the gross income derived from each activity for an overstatement of deductions, credits, etc. to any person who organizes an entity or assists in the sale of any interest in an entity and makes or furnishes or causes another person to furnish a statement who knows is false or fraudulent as to any material matter.
ions is false or fraudulent but could also apply to the individual who files a return of tax who also knows an overstatement of deductions is false or fraudulent. A penalty under 6700 could apply to one or more persons, to include the filer of such a return of tax.
IRC 6701. - Penalties for aiding and abetting understatement of tax liability.
6701 charges a general penalty of $1000 to any person who aids or assists in, procures, or advises the preparation, or presentation of any return, affidavit, claim, or other document that would result in an understatement of the liability for tax of another person. 6701 charges a corporation penalty of $10,000 for the same conduct.
The person authorized or required to present the return of tax does not have knowledge or consent to the understatement then 6702 would not apply to the filer of the return of tax. If the person authorized or required to present the return of tax does have knowledge of the understatement purported on the return of tax then 6701 and 6702 would apply to the individual who files the return of tax.
The individual filing a return of tax where a person who is authorized or required to present the same return is assessed a penalty under 6701 would have access to a proceeding through the provisions for a proceeding provided for in 6703 addressing the rules for 6701. Then, the Sec. would have the burden of proof to establish the individual filing the return of tax had knowledge or consented to the understatement of tax shown on the return and would therefore be liable for a penalty under 6701 and 6702.
Either 6700 applies and/or 6701 applies to an abusive tax shelter return. If 6700 applies to the organizer, then 6702 cannot apply to a filer due to dependence on the information supplied by the organizer unless the filer had knowledge or consented to the overstatement then 6702 would apply.
If 6701 applies to a return due to an understatement of tax then 6702 could only apply to a filer of the return of tax if the filer had knowledge of or consented to the understatement of tax.
IRC 6703 - Rules Applicable to penalties under sections 6700, 6701, and 6702.
Burden of proof is on the Sec. for liability of person/individual. With respect to 6700 and 6701, if within 30 days after Notice and Demand, a person pays 15% and files a claim for a refund with the Sec. No levy or proceeding in court for collection until liability is determined by the court. Court, in a proceeding, can enjoin any levy or proceeding.
30 days after claim for refund of bond (15% of penalty) under 6700 and 6701, a proceeding in court is allowed to determine liability for penalty. 6702 liability would follow for an individual who filed a return of tax where a person or persons assessed a penalty under 6700 or 6701 were to be found liable. A filer of such a return or some other individual who filed such a return is not a taxpayer but is a pseudo tax return preparer, in other words, a nontaxpayer.
If 6700 and 6701 is charged, then 6702 can also be charged. However, a claim for refund must be filed by a person charged a penalty under 6700 or 6701 within 30 days of Notice and Demand and if denied such a person must file in proper court within 30 days of denial. If no liability is found for penalty charged under 6700 or 6701 then no penalty charged under 6702 could lie unless the filer had knowledge or consented to the overstatement of deductions or understatement of tax.
If 6702 is charged without assessment of a penalty on a person liable for a penalty under 6700 or 6701 then the person charged with 6702 could not proceed to claim a refund and would not be able to file for a proceeding to determine liability within 30 days of denial of any claim for a refund.
It follows then, if a person is not charge with a penalty under 6701 then a penalty could not lie for an individual under 6702 because the individual charged a penalty under 6702 would not have an opportunity, in a proceeding, to allow the Sec. to meet its burden of proof of filer liability. In other words, the access to a proceeding where an individual charged a penalty under 6702 depends on the liability of the person charged a penalty under 6701 and whether the person pursues the refund process as provided for under 6703. The assessment of a penalty under 6702 on a taxpayer or nontaxpayer without an accompanying penalty under 6700 and 6701 would be a clear attempt to deny due process and would be intentional and fraudulent collection by the IRS of a penalty not due.
On the other hand, a individual assessed a penalty under 6702 could be held to not be connected to the liability of a person charged a penalty under 6701 if the individual filer of the return attempted to correct the gross value overstatement or tax understatement when filing ato establish no intent to evade tax liability for the tax shelter or other persons depending on the correctness of statements or returns required of the tax shelter. This could be accomplished by attaching a statement to the return of tax explaining any discrepancy purported on the return. But the only opportunity for an individual filer to establish a lack of liability, in a proceeding, is if the person assessed a penalty under 6700 or 6701 timely filed for a refund, and if denied, sought a proceeding to determine liability.
So it stands, an individual charged a penalty under 6702 does not have access to due process unless the individual is the person charged a penalty under 6700 and 6701. IRC 6702 cannot be charged as a stand alone penalty assessed against a taxpayer or nontaxpayer due to lack of due process to determine liability as outlined in 6703.
Black’s Law Dictionary, 5th Ed., West Pub.
A real being; existence. An organization or being that possesses separate existence for tax purposes. Examples would be corporations, partnerships, estates and trusts. The accounting entity for which accounting statements are prepared may not be the same as the entity defined by law. A sole proprietorship is not an entity for tax purposes.
Of little weight or importance. A pleading is “frivolous” when it is clearly insufficient on its face, and does not controvert the material points of the opposite pleading and is presumably interposed for mere purposes of delay or to embarrass the opponent.
(Economy Heating v. United States, 470 F.2d 585 (1972); Long v. Rasmussen, 2181 F236; Gerth v. United States, 132 F. Supp. 894 (1955)).
Title 26, Subtitle F, Chapter 79, §7701 Definitions.
Title 26, Subtitle F, Chapter 68, Subchapter B, Part I, §6671.
(a) Penalty assessed as tax. . .
(b) Person defined. The term “person”, as used in this subchapter, includes an [individual] officer or [individual] employee of a corporation, or a [individual] member or [individual] employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs. [emphasis added by author].
In a general sense, the form and manner of conducting juridical business before a court or judicial officer. Regular and orderly progress in form of law, including all possible steps in an action from its commencement to the execution of judgment. Term also refers to administrative proceedings before agencies, tribunals, bureaus, or the like. [with respect to 6703, term refers to a Federal district court].
(A) Secretary of the Treasury The term “Secretary of the Treasury” means the Secretary of the Treasury, personally, and shall not include any delegate of his.
(B) Secretary The term “Secretary” means the Secretary of the Treasury or his delegate.
A form of business in which one person owns all the assets of the business in contrast to a partnership and corporation. The sole proprietor is solely liable for all the debts [and taxes] of the business. [emphasis added by author].
References Concerning Internal Revenue Code.
• IRC 6700, 6701, 6702, and 6703 were added by Pub. L. 97-248, title III, § 320(a), § 324(a), § 326(a), §322(a), Sept. 3, 1982 and by 96 Stat. 611, 615, 617, 612, respectively . IRC 6700 was amended in 1984 and 1989. IRC 6701 and 6703 were also amended in 1989. IRC 6702 has not been amended since 1982.
• It must be noted 6700, 6701, 6702, and 6703 are found in United States Code (USC), Title 26, Subtitle F, Chapter 68, Subchapter B, Part I. It must also be noted all sections of code in Subchapter B are applicable only to nontaxpayers with respect to their filing status of statements, memos, information returns, returns of tax, etc.
These sections of code refer to persons who file documents that will be used by taxpayers to voluntarily make themselves subject to Internal Revenue tax and these documents are required to be available or filed with the IRS directly or included with the Form 1040 Individual Income Tax Return of a taxpayer. In other words, persons referred to in Title 26, Subtitle F, Chapter 68, Subchapter B are not taxpayers within the meaning of 7701 and are, therefore, nontaxpayers due to a person’s filing status. For assessable taxpayer penalties see: Title 26, Subtitle F, Chapter 68, Subchapter A.
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