In its motion, the Department provides two reasons why this case should be dismissed. First, it asserts that MPC, pursuant to the doctrine of res judicata, is precluded from litigating it. (See Resp’t Mem. Supp. Mot. Dismiss (“Resp’t Br.”) at 4-7.) In the alternative, the Department asserts that the affirmative defense of accord and satisfaction defeats any claims made by MPC in the current case. (See Resp’t Br. at 8.)
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The Department asserts that this case – Miller Pipeline 2 – must be dismissed because judgment has already been rendered on its merits. (See Resp’t Br. at 3-5.) Indeed, the Department contends that this case “regards the same tax years, the same legal issues, the same tax types, and [stems from] the same Audit” as Miller Pipeline 1. (See Resp’t Br. at 5; Hr’g Tr. at 20-21.) The Court disagrees.
“Claim preclusion applies where a final judgment on the merits has been rendered and acts as a complete bar to a subsequent action on the same issue or claim between those parties and their privies.” Afolabi, 849 N.E.2d at 1173 (citation omitted). “When claim preclusion applies, all matters that were or [that] might have been litigated are deemed conclusively decided by the judgment in the prior action.” Id. (citation omitted). In order for claim preclusion to bar a subsequent claim, the following requirements must be satisfied: (1) the former judgment must have been rendered by a court of competent jurisdiction; (2) the matter now in issue was, or could have been, determined in the prior action; (3) the former judgment must have been rendered on the merits;10 and (4) the controversy adjudicated in the former action must have been between the parties to the present suit. See Foursquare Tabernacle Church of God in Christ v. State Bd. of Tax Comm’rs, 550 N.E.2d 850, 851-52 (Ind. Tax Ct. 1990) (footnote added and citation omitted).
The parties do not dispute that Miller Pipeline 1 satisfies the first, third, and fourth requirements. (See Hr’g Tr. at 9; Pet’r Mem. Law Supp. Mot. Opp’n Resp’t Mot. Dismiss (“Pet’r Br.”) at 5-7; Resp’t Br. at 5.) The dispute lies then in whether the claim in this case – Miller Pipeline 2 – was, or could have been, determined in Miller Pipeline 1. The Court finds the claim in the current case – the propriety of the statistical sample used by the Department to calculate the proposed assessments – could not have been litigated in Miller Pipeline 1 because, at that time, this Court lacked subject matter jurisdiction over that claim.
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There is no question that the current case arises under Indiana’s tax laws; therefore, the question to be answered is whether, at the time Miller Pipeline 1 was filed, the Department had issued a final determination on MPC’s fourth claim for refund from which MPC could appeal. There are only two ways in which a taxpayer can receive a final determination from the Department. A taxpayer may either pay the taxes owed, request a refund, and sue in the Tax Court when the refund is denied or protest the tax at the assessment stage and appeal to the Tax Court from a letter of findings denying the protest. See State v. Sproles, 672 N.E.2d 1353, 1357 (Ind. 1996) (citations omitted); Etzler v. Indiana Dep’t of State Revenue, 957 N.E.2d 706, 709 (Ind. Tax Ct. 2011) (citation omitted). Moreover, the Tax Court does not have jurisdiction over any appeal of the Department’s denial of a claim for refund until a decision is rendered by the Department on the claim or until 180 days have passed from the date the refund claim was filed. See IND. CODE § 6-8.1-9-1(c) (2009) (amended 2011).
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When Miller Pipeline 1 was dismissed on July 22, 2010, the Department had not yet issued a final determination regarding MPC’s fourth claim for refund nor had 180 days passed from the date MPC filed it with the Department (March 24, 2010). Thus, Miller Pipeline’s fourth claim for refund, and the matters which it encompassed, could not have been adjudicated in Miller Pipeline 1 because of a lack of a final determination. Therefore, claim preclusion will not bar the litigation of this case. See Restatement (Second) of Judgments § 26(1)(c) (1982) (claim preclusion generally does not apply where “[t]he plaintiff was unable to rely on a certain theory of the case or to seek a certain remedy . . . because of the limitations on the subject matter jurisdiction of the courts”).
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The Department argues that “if claim preclusion does not apply, issue preclusion bars this matter from being relitigated.” (Resp’t Br. at 6.) …
As previously stated, Miller Pipeline 1 and Miller Pipeline 2 each raise entirely separate and distinct issues: Miller Pipeline 1 concerned the denial of the portion of MPC’s third refund claim relating to the purchases of safety equipment, while Miller Pipeline 2 concerns only the propriety of the statistical sample used by the Department in calculating its proposed assessments. Supra at pp. 3-4. Thus, the issue in Miller Pipeline 2 cannot be precluded as it was not actually litigated in Miller Pipeline 1. See Miller Brewing, 903 N.E.2d at 68. Further, when this Court dismissed Miller Pipeline 1, the Department had not yet issued a final determination with respect to MPC’s fourth refund claim nor had 180 days passed since MPC filed it with the Department. Supra at pp. 8-9.
Consequently, the Tax Court would have lacked subject matter jurisdiction over the issues raised in the fourth claim for refund. See I.C. § 6-8.1-9-1(c); Etzler, 957 N.E.2d at 709. Because MPC could not have made any argument regarding the propriety of the proposed assessments against it until the Department denied its refund claim on September 27, 2010, it did not have a “full and fair opportunity” to litigate that issue in Miller Pipeline 1. Therefore, issue preclusion does not bar the current action from being litigated.
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Alternatively, the Department argues that the affirmative defense of accord and satisfaction defeats MPC’s claims in Miller Pipeline 2. Specifically, the Department argues that because both parties signed a contract agreeing to settle Miller Pipeline 1, and that the Department, in good faith, fully complied with that contract’s terms, accord and satisfaction has been established and defeats the claims now made by MPC in Miller Pipeline 2. (See Resp’t Br. at 8.)
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Here, the settlement agreement unambiguously applies to the 2007 tax year only. (See Pet’r Des’g Evid., Ex. 6 at 1.) The agreement applies to “state gross retail/use tax paid on purchases of certain items for the Year at Issue” and “does not bind either Party to any position for any other issue for the Year at Issue, or for any other tax year.” (See Pet’r Des’g Evid., Ex. 6 at 2-3 (emphasis added).) The agreement gives the Department the right to audit and assess MPC for any “tax periods, issues and tax types other than the tax periods, issues and tax type for the Year at Issue covered in the [Miller Pipeline 1] Litigation” and MPC the “right to file refund claims for any tax period, issues and tax types other than the tax periods, issues, and tax type for the Year at Issue covered in the [Miller Pipeline 1] Litigation.” (See Pet’r Des’g Evid., Ex. 6 at 3.)
This language does not reveal a meeting of the minds between the Department and MPC such that accord and satisfaction would defeat MPC’s claims found in Miller Pipeline 2. Indeed, the agreement’s language clearly limits its application to the sole issue found in Miller Pipeline 1, whether MPC owed tax on its purchases of safety equipment for the 2007 tax year. (See Pet’r Des’g Evid., Ex. 6 at 1-4 (emphasis added).) The Department has failed to demonstrate a meeting of the minds regarding the settlement’s applicability to the issues contained in Miller Pipeline 2, and accord and satisfaction will not bar the current action from being litigated.
