- 80 -
the Alabama law that provides for the transfer of a proprietary
interest in the claim to the attorney. The language of the
additional statement supports the offset approach in all
contingent fee situations in which the proceeds of the settlement
or judgment are pursuant to prearrangement paid directly to the
attorney (or to attorney and client as joint payees) with the
understanding that the attorney will calculate and pay himself
the fee and pay the balance to the client. To make the result
depend upon whether a technical ownership interest was
transferred under State law would make the outcome depend on
“attenuated subtleties” and “refinements” that, as Justice Holmes
said in Lucas v. Earl, supra at 114, and Judge Raum said in
O’Brien v. Commissioner, supra at 712, should be disregarded.55
iii. “Two Keys” Simile
The contingent fee situation is much like that in Western
Pac. R.R. Corp. v. Western Pac. R.R. Co., 345 U.S. 247, 277
(1953) (Jackson, J. dissenting), which concerned the respective
interests of former parent corporation and subsidiary in the tax
55 It also appears, notwithstanding that petitioners did not
argue the point in the case at hand, that plaintiffs in a class
action, such as Mr. Kenseth, in a legal and practical sense have
less control over the prosecution of their claims than a sole
plaintiff who has signed a contingent fee agreement. See Newberg
on Class Actions, sec. 5.25--Individual Settlements More
Difficult after Commencement of Class Action (3d ed. 1992).
Compare Eirhart v. Libbey-Owens-Ford Co., 726 F. Supp. 700 (N.D.
Ill. 1989), with Sinyard v. Commissioner, T.C. Memo. 1998-364,
and Brewer v. Commissioner, T.C. Memo. 1997-542, affd. without
published opinion 172 F.3d 875 (9th Cir. 1999).
Page: Previous 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 NextLast modified: May 25, 2011