author: ED CARNES, Chief Judge:

text:
    WIREGRASS METAL TRADES COUNCIL AFL-CIO, Plaintiff-Appellant, v. SHAW ENVIRONMENTAL & INFRASTRUCTURE, INC., Defendant-Appellee.
    No. 15-11662
    United States Court of Appeals, Eleventh Circuit.
    Date Filed: 09/08/2016

      Sam Heldman, Thomas Matthew Loper, J. Cecil Gardner, The Gardner Firm, PC, Mobile, AL, for Plaintiff-r-Appellant. -
    Jennifer Carin Burford, John Richard Carrigan, Ogletree Deakins Nash Smoak & Stewart, PC, Birmingham, AL, for Defendant-Appellee.
    Before ED CARNES, Chief Judge, JORDAN, Circuit Judge, and SMITH, District Judge.

       Honorable C. Lynwood Smith, Jr., United States District Judge for the Northern District of Alabama, sitting by designation.

   ED CARNES, Chief Judge:

A dispute involving the interpretation of a collective bargaining agreement was submitted to an arbitrator, as both parties had agreed their disputes would be. As usually happens, the losing party was not happy with the loss. See Saturn Telecommunications Servs., Inc, v. Covad Communications Co., 560 F.Supp.2d 1278, 1279 (S.D. Fla. 2008) (Jordan, J.) (“Everyone supposedly loves arbitration. At least until arbitration goes badly.”). As too often happens, instead of accepting it and moving on, the loser moved the district court to set aside the arbitration award, which it did. Then the former winner, who had become a loser, appealed that decision to this Court.

We reverse the district court’s decision and restore the polarity of the parties to the status they were in when they left arbitration. We do so because of the law’s insistence that arbitration losers who resort to the courts continue to lose in all but the most unusual circumstances, of which this is not one.

Shaw Environmental & Infrastructure, Inc., a government contractor on a military facility, suspended and later fired Jack Endicott, a union worker, for possessing government property without authorization. Endicott’s union, Wiregrass Metal Trades Council AFL-CIO, filed a grievance challenging his termination. It contended, among other things, that Shaw lacked just cause to fire Endicott because he did not know that the property he possessed .was government-owned. After the parties failed to resolve their dispute through the grievance process, the Union brought this action in federal court to compel arbitration under its collective bargaining agreement with Shaw. Several provisions of that agreement are involved in the dispute.

The collective bargaining agreement gives Shaw the right to discipline an employee for “just cause,” and disciplinary guidelines in the agreement list types of conduct that “constitute just cause for disciplinary actions.” In relevant part, the guidelines prohibit employees from “possessing ... Government property without proper authority.” That guideline — which we will call the “possession policy” — says nothing about whether a violation occurs if the employee does not know that, the property he possesses is government-owned. And for that offense, termination is listed as the only “Possible Level[ ] of Action By Employer.”

With respect to arbitration, the agreement provides that “[t]he decision of the Arbitrator shall be final and binding upon both parties.” It gives the arbitrator “the authority to interpret and apply the provisions of this Agreement.” That authority is limited, however, by a “no-modification” clause, which states that “[t]he arbitrator shall not have the authority to change, alter, amend, modify, add to, or delete from this Agreement; such right is the sole prerogative of the contracting parties.” But see Bruno’s, Inc. v. United Food & Commercial Workers Int’l Union, Local 1657, 858 F.2d 1529, 1532 n.4 (11th Cir. 1988) (“In- this Court, ‘no modification’ clauses are not considered a reliable basis for overturning an arbitrator’s interpretation of a collective bargaining agreement.”).

The district court granted the Union’s motion to compel arbitration and ordered the parties to select an arbitrator, which they did. After holding a hearing, the arbitrator issued a written decision. Siding with the Union, she found that Endicott did not violate Shaw’s possession policy because he did not know that the property he possessed was government-owned. As the award explained, “[Endicott] cannot be said to have violated a policy prohibiting possession of government property when he did not know the property belonged to the government or that it had been stolen.” For that reason, the arbitrator concluded that Shaw lacked just cause to fire Endicott and she awarded him back pay and benefits.

Shaw moved the district court to vacate the award, contending, among other things, that the arbitrator had exceeded her power by improperly modifying the collective bargaining agreement instead of interpreting it. Shaw argued that the arbitrator had modified the agreement by adding a mens rea or knowledge requirement to the possession policy, essentially changing “possessing government property” to “knowingly possessing government property.” Agreeing with Shaw, the district court concluded that “the arbitrator exceeded her authority when she added a knowledge requirement to the [collective bargaining agreement’s delineation of offenses constituting just cause.” On that ground, the district court vacated the award. The Union appealed the district court’s judgment, which we review de novo. Davis v. Producers Agric. Ins. Co., 762 F.3d 1276, 1283 (11th Cir. 2014).

We begin our analysis by acknowledging that a court’s review of an arbitrator’s decision is limited. See United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union AFL-CIO-CLC v. Wise Alloys, LLC, 807 F.3d 1258, 1271 (11th Cir. 2015). While a federal court may vacate an arbitration award when it “exceeds the scope of the arbitrator’s authority,” IMC-Agrico Co. v. Int’l Chem. Workers Council of the United Food & Commercial Workers Union, AFL-CIQ, 171 F.3d 1322, 1325 (11th Cir. 1999), few awards are vacated because the scope of the arbitrator’s authority is so broad, see Bakery, Confectionery & Tobacco Workers Local Union No. 362-T, AFL-CIO-CLC v. Brown & Williamson Corp., 971 F.2d 652, 655 (11th Cir. 1992). In determining whether an arbitrator has exceeded her broad authority, two principles guide us.

The first is that we must defer entirely to the arbitrator’s interpretation of the underlying contract no matter how wrong we think that interpretation is. As the Supreme Court has explained: “Because the parties bargained for the arbitrator’s construction of their agreement, an arbitral decision even arguably constru-mg or applying the contract must stand, regardless of a court’s view of its (de)mer-its.” Oxford Health Plans LLC v. Sutter, 569 U.S. —, 133 S.Ct. 2064, 2068, 186 L.Ed.2d 113 (2013) (quotation marks omitted); see also United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 371, 98 L.Ed.2d 286 (1987). That means “the sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether [s]he got its meaning right or wrong.” Sutter, 133 S.Ct. at 2068, If we determine that “the arbitrator (even arguably) interpreted the parties’ contract,” we “must end [our] inquiry and deny ... a motion for vacatur.” S. Commc’ns Servs., Inc. v. Thomas, 720 F.3d 1352, 1359 (11th Cir. 2013).

The second principle guiding our decision is that “an arbitrator ‘may not ignore the plain language of the contract.’ ” Warrior & Gulf Nav. Co. v. United Steelworkers of Am., AFL-CIO-CLC, 996 F.2d 279, 281 (11th Cir. 1993) (quoting Misco, 484 U.S. at 38, 108 S.Ct. at 371). That means an arbitrator may not “issue[ ] an award that contradicts the express language of .the agreement,” IMC-Agrico Co., 171 F.3d at 1325; see also Bruno’s, Inc., 858 F.2d at 1531. It also means that an arbitrator may not modify clear and unambiguous. contract terms. See Houston Lighting & Power Co. v. Int’l Bhd. of Elec. Workers, Local Union No. 66, 71 F.3d 179, 184 (5th Cir. 1995) (“If the language of the agreement is clear and unequivocal, an arbitrator is not free to change its meaning.”); Sears, Roebuck & Co. v. Teamsters Local Union No. 243, 683 F.2d 154, 155 (6th Cir. 1982) (“[A]n arbitrator may construe ambiguous contract language, but lacks authority to disregard or modify plain or unambiguous contract provisions.”).

Those two principles define the scope of the arbitrator’s authority. The arbitrator acts within her authority when she even arguably interprets a contract, and she exceeds her authority when she modifies the contract’s clear and unambiguous terms. The outcome in this case depends on whether we characterize the- arbitrator’s decision as an interpretation of the collective bargaining agreement or a modification of it.

To determine whether the arbitrator engaged in interpretation, as opposed to modification, we begin by looking at the relevant language in the collective bargaining agreement and asking, as a threshold matter, whether that language is open to interpretation. We have said that contract language is susceptible to an arbitrator’s interpretation when it is “sufficiently ambiguous” on its face, Ierna v. Arthur Murray Int’l, Inc., 833 F.2d 1472, 1476 (11th Cir. 1987), or “[w]hen there are two plausible interpretations of an agreement,” IMC-Agrico Co., 171 F.3d at 1328, which is pretty much the same thing.

A contract may be susceptible to interpretation when it is not facially ambiguous. As we have stated: “Even if we were to conclude that [a contract] is not ambiguous on its face, we would not be required to overturn [an arbitration] award.” Int’l Bhd. of Elec. Workers, Local Union No. 199 v. United Tel. Co. of Fla., 738 F.2d 1564, 1568 (11th Cir. 1984). That is true because “collective-bargaining agreements may include implied, as well as express, terms,” Consol. Rail Corp. v. Railway Labor Executives’ Ass’n, 491 U.S. 299, 311, 109 S.Ct. 2477, 2485, 105 L.Ed.2d 250 (1989) (emphasis added), and an arbitrator is “empowered to discover [those] implied terms,” In re Marine Pollution Serv., Inc., 857 F.2d 91, 96 (2d Cir. 1988); see also Ethyl Corp. v. United Steelworkers of Am., AFL-CIO-CLC, 768 F.2d 180, 186 (7th Cir. 1985) (“[T]he authority of an arbitrator to interpret a collective bargaining contract includes the power to discover [implied] terms.”)- The upshot is that “an arbitrator’s award that' appears -contrary to the express'terms of the agreement may nevertheless be valid if it is premised upon reliable evidence of the parties’ intent.” United Tel. Co. of Fla., 738 F.2d at 1568.

The possession policy identifies as a fireable offense “[possessing ... Government property without proper authority.” While the parties agree that the policy says nothing about whether the offender must know that the property is government-owned when he possesses it, they disagree about the effect of that silence. Shaw contends that the policy’s silence renders it unambiguous and impervious to interpretation. According to Shaw, the policy’s failure to say anything about a knowl-édge requirement definitively shows that the parties did not intend any such requirement, but instead intended for the possession of government property without proper authority to be a strict liability offense. Thé Union, on the other hand, contends that the policy’s silence renders it open to interpretation, allowing the arbitrator to read into it (or infer from it) a knowledge requirement.

The language of the possession policy certainly could have been clearer. It could have stated, for example, that possessing government property without’ proper authority is an offense “whether or not the employee knows -that the. property ■ -belonged to the government at the time he possesses it.” But it does not say that. The policy also could have said that “knowingly possessing government property without proper authority” is an offense. But it does not say that either. While Shaw argues that the Union could have bargained for an express knowledge requirement and failed to do so, it is equally'true that Shaw could have bargained for language expressly excluding a knowledge requirement and failed to do so.

According to the Union, the failure of the policy languagé to state one way or the other whether knowledge that the property belonged to' the government is required leaves the'door open for an arbitrator to read a knowledge requirement into the policy language as an implied term. In support of its view, the Union points to decisions in which courts have read' mental state requirements into criminal statutes that said nothing about them. See, e.g., Staples v. United States, 511 U.S. 600, 619, 114 S.Ct. 1793, 1804, 128 L.Ed.2d 608 (1994) (interpreting a criminal statute to include a requirement of intent and knowledge even though it was silent on those points). The district court rejected the analogy, stating: “While [the Union] argues that the arbitrator’s adding of .a knowledge requirement to the possession offense was merely an act of interpretation akin to the Supreme Court’s interpretation of a [criminal statute], such an analogy is attenuated and fails to-recognize the important differences between bargained for agreements and laws proscribing criminal behavior.”

That is a good" point, but the Union’s point behind the analogy is (or should be) a different one! The point is that when the Supreme Court reads a knowledge or intent requirement into a criminal statute, it is interpreting the statute, not modifying it. We-know that because courts do not have the authority to amend, modify, or revise statutes. See Pavelic & LeFlore v. Marvel Entm’t Grp., 493 U.S. 120, 126, 110 S.Ct. 456, 460, 107 L.Ed.2d 438 (1989) (“Our task is to apply the text, not to improve' upon it.”); Nguyen v. United States, 556 F.3d 1244, 1256 (11th Cir. 2009) (‘We are not authorized to rewrite, revise, modify, or amend statutory language in the guise of interpreting it.”). If the Supreme Court engages in interpretation when it reads a knowledge or intent requirement into a criminal statute — and we must follow the official party line that it is interpreting the statute instead of amending it when it does that — then the arbitrator can be said to have engaged in interpretation when she read a knowledge requirement into the possession policy of the collective bargaining agreement. Her interpretation may be wrong, but it is nonetheless an interpretation. Or so goes the argument.

But an arbitrator’s authority to discover implied terms is not boundless. There are circumstances in which an arbitrator acts beyond her authority in “discovering” such terms. She does so, for instance, when she imposes a remedy that the collective bargaining agreement does not allow. See Butterkrust Bakeries v. Bakery, Confectionery & Tobacco Workers Int’l Union, AFL-CIO, Local No. 361, 726 F.2d 698, 700 (11th Cir. 1984). In this case, for example, the collective bargaining agreement listed termination as the only possible disciplinary action for possessing government property without proper authority. If the arbitrator found that Endi-cott had violated the possession policy but nonetheless ordered Shaw to reinstate him and impose a reprimand instead of termination, the arbitrator would have amended the agreement and exceeded the scope of her authority.

Having determined that the possession policy is at least open to interpretation, the next question is whether the arbitrator did interpret it. In many cases, courts determine whether an arbitrator engaged in interpretation, as opposed to modification, by looking at the arbitrator’s reasoning. The reasoning might show that she engaged in a textual analysis of the relevant terms. See Sutter, 133 S.Ct. at 2068-69; Thomas, 720 F.3d at 1358-60. It might also show that she attempted to give meaning to express terms — or discover implied terms — based on extrinsic evidence of the parties’ intent, such as their bargaining history or past practices. See Loveless v. Eastern Air Lines, Inc., 681 F.2d 1272, 1279-80 (11th Cir. 1982); United Tel. Co. of Fla., 738 F.2d at 1569. If the arbitrator’s reasoning shows that she did either of those things, that will ordinarily mean she engaged in interpretation, not modification.

That approach works, however, only when the arbitrator provides a reasoned explanation for her award. Arbitrators usually are not required to include explanations, much less detailed ones, and they often do not. See Wise Alloys, LLC, 807 F.3d at 1275 (“Unless the parties stipulate otherwise ... an arbitrator is under no obligation to provide explanations with h[er] award.”); Cat Charter, LLC v. Schurtenberger, 646 F.3d 836, 844 (11th Cir. 2011) (“Generally, an arbitrator need not explain her decision; thus, in a typical arbitration where no specific form of award is requested, arbitrators may provide a ‘standard award’ and simply announce a result.”). The problem that arises is what to do when an arbitrator’s award fails to articulate a rationale from which we can infer whether she engaged in interpretation or instead in modification of the underlying agreement.

That problem exists in this case. In the written explanation accompanying her award, the arbitrator quoted the policy in the agreement prohibiting employees from possessing government property without proper authority, acknowledged the parties’ disagreement about whether the policy required knowing possession, and then simply announced that Endicott had not violated the policy because he did not know that property he possessed was government-owned. While that shows the arbitrator ruled in favor of Shaw because of her finding that he did not knowingly possess the government property without authority, there, is no indication that her imposition of the knowledge requirement resulted from interpretation of the agreement instead of her own view of right and wrong. She did not characterize her task as one of interpretation. She did not describe the plain meaning of the terms in the policy. She did not invoke canons of construction. She did not look to extrinsic aids to find the parties’ intent. She did not explicitly do any of. the things that we ordinarily associate with an interpretive effort. But that does not mean that she failed to do some of them implicitly — in her. head instead of on the page.

Given what we have and what we don’t have from the arbitrator, one could fairly characterize her decision as an interpretation of the agreement or as a modification of it. One characterization is as fair as the other. So we are, like Buridan’s ass, stuck between two equally, plausible choices. Did the arbitrator interpret the possession policy and discover an implied knowledge requirement, or did she impermissibly modify the policy by simply adding that requirement?

Unlike Buridan’s ass, we need not starve for want of an answer because the Supreme Court provided one more than a half century ago. In the Enterprise Wheel case a labor arbitrator had awarded wrongly fired employees reinstatement and back pay for a period of time that went beyond the expiration of the collective bargaining agreement. United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 595, 80 S.Ct. 1358, 1360, 4 L.Ed.2d 1424 (1960). The arbitrator did not expressly “premise his award on his construction of the contract.” Id. at 598, 80 S.Ct. at 1361. When the employer refused to comply with the award, the union brought a lawsuit in federal court to enforce it. Id. at 595, 80 S.Ct. at 1360. The court of appeals held that the award of back pay for a period that extended after the date of termination of the collective bargaining agreement could not be enforced. Id. at 596, 80 S.Ct. at 1360.

In reversing, the Supreme Court noted that the basis for the arbitrator’s award was ambiguous. Id. at 597, 80 S.Ct. at 1361. On the one hand, the award could be read as based solely on the arbitrator’s personal view “of the requirements of enacted legislation, which would mean that he exceeded the scope of the submission.” Id. On the other hand, the award could also be read “as embodying a construction of the agreement itself,” which would mean that he had not gone beyond his proper role “in determining the sense of the agreement.” Id. at 597-98, 80 S.Ct. at 1361. Because it was “not apparent” that the arbitrator had exceeded his authority, the Court concluded that the award had to be enforced. Id at 598, 80 S.Ct. 1358, 1360. It held that: “A mere ambiguity in the opinion accompanying an award, which permits the inference that the arbitrator may have exceeded his authority, is not a reason for refusing to enforce the award.” Id. at 598, 80 S.Ct. at 1361. The policy behind the holding is that “[t]he refusal of courts to review the merits of an arbitration award is the proper approach to arbitration under collective bargaining agreements.” Id at 596, 80 S.Ct. at 1360. It is the proper approach because “[t]he federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards.” Id.

The rule of Enterprise Wheel is that, when it is “not apparent” from the arbitrator’s stated reasoning (or lack thereof) whether she permissibly interpreted a collective bargaining agreement or impermissibly modified it, and one can plausibly read the award either way, the court must resolve the ambiguity by finding that the award is an interpretation of the contract and enforcing it. The rule reflects a strong, albeit not irrebuttable, presumption that the arbitrator has interpreted the agreement instead of modifying it. See Sullivan, Long & Hagerty, Inc. v. Local 559 Laborers’ Int’l Union of N. Am., 980 F.2d 1424, 1426 (11th Cir. 1993) (“[Ar-bitral awards enjoy a strong presumption of finality in the labor arena.”). As the Seventh Circuit put it, “the reviewing court’s function ... is at an end when it concludes that what-the arbitrator did was interpretation,” and “when in doubt the court must find that it was interpretation.” Ethyl Corp., 768 F.2d at 187.

The interpretation presumption is grounded in the policies underlying federal arbitration law and the consequences of too eagerly vacating awards. For one thing, if we were to vacate arbitration awards based on aftibiguity in the arbitrator’s reasoning, we would dissuade arbitrators from providing explanations for their awards. As the Supreme Court explained in-Enterprise Wheel: “To require opinions free of ambiguity may lead arbitrators to play it safe by writing no supporting opinions. This would be undesirable for a well-reasoned opinion tends to engender confidence in the integrity of the process and aids in clarifying the underlying agreement.” 363 U.S. at 598, 80 S.Ct. at 1361 (footnote omitted).

This case exemplifies what the Supreme Court said in Enterprise Wheel. At oral argument, Shaw’s counsel acknowledged that if the arbitrator had issued a standard award, simply announcing her result without explanation, there would be no grounds for vacating the award. We should not vacate award because the arbitrator provided an incomplete explanation for the award instead of none at all. We don’t want to discourage arbitrators from saying anything beyond who won and how much.

Applying the presumption in favor of enforcing arbitration awards also promotes “[t]he federal policy of settling labor disputes by arbitration.” Id. at 596, 80 S.Ct. at 1360; see also Wallace v. Civil Aeronautics Bd., 755 F,2d 861, 863-64 (11th Cir. 1985) (“Although such extreme deference has its costs in the particular case,' those costs are far outweighed by the general benefits that accrue to the national labor scheme from giving arbitral awards a strong presumption of finality.”). A readiness to vacate arbitration awards would undermine the purpose of arbitration, which is to reduce the number of disputes coming into the courts, and it “would make meaningless the provisions that the arbitrator’s decision is final, for in reality it would almost never be final.” Enterprise Wheel, 363 U.S. at 599, 80 S.Ct. at 1362.

We have lamented the fact that, all too often, parties “try[ ] to convert arbitration losses into court victories.” B.L. Habert Int’l, LLC v. Hercules Steel Co., 441 F.3d 905, 913 (11th Cir. 2006), abrogated on other grounds by Frazier v. CitiFinancial Corp., 604 F.3d 1313 (11th Cir. 2010). Here is what we have said:

When a party who loses an arbitration award assumes a never-say-die attitude and drags the dispute through the court system ..., the promise of arbitration is broken. Arbitration’s allure is dependent upon the arbitrator being the last decision maker in all but the most unusual cases. The more cases there are, like this one, in which the arbitrator is only the first stop along the way, the less arbitration'there will be. If arbitration is to be a meaningful alternative to litigation, the parties must be able to trust that the arbitrator’s decision will be honored sooner instead of later.

Id. The Enterprise Wheel presumption, which we apply today, helps keep the promise of arbitration. By presuming, in the absence of evidence to the contrary, that an arbitrator’s award rested on an interpretation and not a modification of an agreement, we discourage parties from trying to snatch court victories from the jaws of arbitration defeats.

Viewed through the spokes of Enterprise Wheel and its presumption, the outcome in this case is clear to us. Because we must resolve the ambiguity in the stated reasons for the award in favor of enforcement, we conclude that the arbitrator interpreted instead of modified the agreement. Our inquiry is at an end, and the award must be upheld.

REVERSED AND REMANDED.

      . The Supreme Court has recognized that the Labor Management Relations Act of 1947 (LMRA) provides an independent basis for federal jurisdiction over labor arbitration awards arising out of collective bargaining agreements, and that the LMRA empowers federal courts to fashion a body of federal .common law standards for confirming and vacating labor arbitration awards. Textile Workers Union v. Lincoln Mills of Ala., 353 U.S. 448, 450-52, 77 S.Ct. 912, 914-15, 1 L.Ed.2d 972 (1957); see also United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union AFL-CIO CLC v. Wise Alloys, LLC, 642 F.3d 1344, 1352 (11th Cir. 2011) (explaining that the LMRA "governs suits to enforce or vacate an arbitration award arising out of a collective bargaining agreement”).
      But Shaw moved to vacate the arbitration award under the Federal Arbitration Act (FAA), 9 U.S.C. § 10(a), not the LMRA. There is some ambiguity in our case law about whether the FAA applies to labor arbitration awards arising out of collective bargaining agreements. Compare Weeks v. Harden Mfg. Corp., 291 F.3d 1307, 1314 (11th Cir. 2002) ("[T]he FAA [is] applicable to all contracts of employment except those contracts involving transportation workers.”), with Wise Alloys, 642 F.3d at 1353 n.4 (stating in dicta that "the FAA does not apply to collective bargaining agreements”); see also Brisentine v. Stone & Webster Eng'g Corp., 117 F.3d 519, 525 (11th Cir. 1997) (acknowledging that "[neither this Court nor the Supreme Court has decided whether collective bargaining agreements are subject to the FAA,” and noting that .other circuits had "reached conflicting results”).
      The LMRA clearly applies to labor cases. Whether the FAA also applies does not matter in this case, Shaw sought to vacate the arbitration award on the ground that the. arbitrator .exceeded her authority. That is a recognized ground for vacatur under both the FAA and federal common law developed under the LMRA. See 9 U.S.C. § 10(a)(4); Wise Alloys, 642 F,3d at 1352. And even if the FAA does not apply to collective bargaining agreements, we may “look to the FAA for guidance when dealing with'[labor] arbitration cases.” Wise Alloys, 642 F.3d at 1353 n.4.


source: Caselaw Access Project

author: COOGLER, District Judge:

license: Public Domain

text:
    Gregory G. BOREE, Melanie M. Boree, Petitioners-Appellants, v. COMMISSIONER OF the INTERNAL REVENUE SERVICE, Respondent-Appellee.
    No. 14-15149
    United States Court of Appeals, Eleventh Circuit.
    Date Filed: 09/12/2016

      David DeCoursey Aughtry, William E. Buchanan, Chamberlain Hrdlicka White Williams & Aughtry, Atlanta, GA, for Petitioners-Appellants.
    Julie Ciamporcero Avetta, Ivan Clay Dale, Joan I. Oppenheimer, U.S. Department of Justice, William J. Wilkins, Chief Counsel — IRS, Washington, DC, David Delduco, John W. Sheffield, III, Brianna B. Taylor, Office of Chief Counsel — IRS, Atlanta, GA, for Respondent-Appellee.
    Before MARTIN and JORDAN, Circuit Judges, and COOGLER, District Judge.

       The Honorable L. Scott Coogler, United States District Judge for the Northern District of Alabama, sitting by designation.

   COOGLER, District Judge:

This is an appeal from a decision of the United States Tax Court (the “Tax Court”) sustaining a determination by the Commissioner of the Internal Revenue . Service (“Commissioner”) of deficiencies in the 2007 income tax return of Appellants Gregory and Melanie Boree (“the Bo-rees”). The Tax Court ruled that the Bo-rees were liable for a deficiency of $1,784,242 due to an improper characterization of income from the sale of property as a capital gain rather than as ordinary business income and imposed a 20% penalty for substantial understatement of income tax pursuant to § 6662 of the Internal Revenue Code (the “I.R.C.”). After careful review of the record and briefs of the parties, and having the benefit of oral argument, we affirm the Tax Court on the issue of the Borees’ tax liability but reverse the Tax Court’s imposition of the statutory penalty.

I. BACKGROUND

In November 2002, Gregory Boree (“Mr. Boree”), a former logger, and a partner, Daniel Dukes . (“Dukes”), doing business as Glen Forest, LLC (“Glen Forest”), acquired 1,892 acres of vacant real property formerly owned by International Paper in Baker County, Florida. Glen Forest bought the property for $965 per acre, for a total of $3.2 million, and borrowed much of the funds needed to purchase it. In December 2002, Glen Forest sold one ten-acre parcel of the property to an individual purchaser.

In January 2003, Glen Forest submitted to the Baker County Planning and Zoning Department a conceptual map of a planned residential development called West Glen Estates, which would consist of more than 100 lots, to be developed and sold in multiple consecutive phases. The following month, the county adopted the proposal and rezoned the West Glen Estates property into ten-acre lots. Glen Forest also petitioned the Baker County Board of Commissioners to exempt West Glen Estates from county platting requirements so that it could continue to sell lots without completing interior roads or submitting plans to the board. During 2003, Glen Forest sold' approximately fifteen lots located around the perimeter of the West Glen Estates property.

On February 18, 2003, Mr. Boree also executed a Declaration of Covenants, Conditions, and Restrictions for West Glen Estates which, among other things, created a homeowners association to maintain roads within the subdivision. The declaration consistently referred to Glen Forest as the “developer” of West Glen Estates and provided Glen Forest the right to elect at least one member of the homeowners association’s board of directors as long as the “[d]eveloper holds for sale in the'ordinary course of business at least five percent (5%) of the acreage in all phases of the property.” The declaration applied to the entire 1,892 acres of the Glen Forest property and did not distinguish between lots with frontage on county roads or other lots.

During the remainder of 2003 and through 2004, Glen Forest engaged in a series of other development activities, including obtaining county approval of the first three phases of development of West Glen Estates, applying for an Environmental Resource Permit, establishing and recording easements in collaboration with the local water and electrical utilities, and constructing Braxton Road, an unpaved road on the property, at a cost of roughly $280,000, However, Glen Forest did not install water lines, sewer lines, electrical lines, gas lines, telephone lines, cable lines, or a storm drainage system. Nor did it pave any roads, perform any grading or landscaping work, or build any structures on the property. Glen Forest did not have a sales office for West Glen Estates or hire a broker to sell lots, but it did place classified advertisements for the subdivision in local papers from time to time. During 2004, Glen Forest sold approximately twenty-six lots.

Beginning in late 2004, the Baker County Board of Commissioners adopted a series of land use restrictions that affected West Glen Estates. In October 2004, the board adopted a temporary one-year moratorium on the development of non-platted subdivisions. In November 2004, it adopted another temporary one-year moratorium on development along certain county roads, including Cowpen Road, which ran adjacent to the West Glen Estates property. In December 2004, the board adopted a third temporary one-year moratorium on the development of any platted subdivisions containing dirt roads. In April 2005, it adopted a requirement that all roads within subdivisions be paved. West Glen Estates was a non-platted subdivision that contained multiple unpaved roads. Mr. Bo-ree testified that complying with the requirement that Glen Forest pave internal roads in West Glen Estates would have cost roughly $7 million.

The Borees assert that in 2005, Glen Forest sold approximately eight lots. In March 2005, Dukes sold his interest in Glen Forest to Mr. Boree. Then, Melanie Boree (“Mrs. Boree”) succeeded Dukes as the second member of the LLC. Mr. Boree then requested an exception for the “whole parcel” of his property to the April 2005 ordinance requiring that roads in subdivisions be paved, but he was unsuccessful.

After his request was denied, Mr. Boree hired a land-use lawyer to pursue a different strategy. His new strategy included a higher-density development plan for West Glen Estates that would justify having to bear the costs of paving the roads imposed by the county’s requirements. Mr. Boree testified that his intention was to “up-zone” the property to make it more appealing to other developers who might be interested in purchasing the property from him. With his attorney’s help, Mr. Boree prepared and submitted applications in May and June 2005 to rezone the West Glen Estates property to accommodate the denser “Planned Unit Development.” This new Planned Unit Development proposal related to 982 acres of the original West Glen Estates property and included a densely zoned residential area, a 10.8-acre commercial zone, a 44-acre recreational parcel with equestrian amenities, and paved internal roads. However, the preliminary maps did not include any roads leading to the development. In April 2006, the Borees’ attorney appeared on behalf of Mr. Boree before the Baker County Board of Commissioners, where he advised the Northeast Florida Regional Planning Council that Mr. Boree was planning a “large-lot subdivision with associated commercial to serve the neighborhoods” with a 40-acre “equestrian facility and bridle trails throughout the residential subdivision.” The attorney, on behalf of Mr. Bo-ree, requested that the county adopt,a new land use designation of “rural commercial,” never before used in Baker County, for the proposed 10.8 acres of commercial property. The board ultimately adopted the new land use category.

In January 2006, the county adopted a requirement that developers pave certain public roads leading to their subdivisions. Mr. Boree testified that complying with the requirement that Glen Forest • pave connecting county roads would have cost an additional $4.4 million. The Borees assert that they did not sell -any lots in 2006.

Around that time, the Borees discovered that a successful Miami developer, Adrian Development (“Adrian”), was planning a large-scale development on a parcel of property adjoining the West Glen Estates property. In April 2006, Mr. Boree negotiated a real estate purchase agreement with Adrian, whereby Adrian would purchase nearly all of Mr. Boree’s remaining unsold West Glen Estates property, totaling over 1,067 acres, for a price of no less than $9,000 per acre.

In June 2006, Mr. Boree’s attorney again appeared before the county board on Mr. Boree’s behalf at a public hearing on the rezoning action for the West Glen Estates Planned Unit Development. The attorney confirmed to the board that the West Glen Estates lots, earlier sold by Mr. Boree, all had access to ingress-egress roads. He also represented that Mr. Boree had originally wanted to sell the interior lots with access to a gravel road, but that, in response to the ordinance requiring the paving of subdivision internal roads, he had pursued the higher-density plan. Lastly, the attorney explained that Glen Forest had changed ownership, and he referred to Glen Forest as “the development entity that originally owned all this land and sold off some of it.”

In August 2006, the county recommended approval of the West Glen Estates Planned Unit Development, on the condition that Glen Forest pave the private Braxton Road and certain other county roads that transected the property. However, in late September 2006, Glen Forest withdrew the Planned Unit Development proposal and indicated its intent to rezone the West Glen Estates property into 7.5-acre agricultural lots for a “residential subdivision.”

On February 6, 2007, Adrian closed the purchase of the remaining West Glen Estates property consisting of 1,067.63 acres for $9,608,670, or roughly $9,500 per acre. The sales agreement referred to the property as “unimproved.” The property sold to Adrian included tracts from approved phases I through III of the West Glen Estates subdivision, tracts that were part of the proposed Planned Unit Development, and lots in the remaining acreage. One week after the sale, Glen Forest withdrew its pending rezoning application from the county.

In all, between 2002 and 2006, Glen Forest sold approximately sixty lots comprising approximately 600 acres of its original 1,892 acres. During that time period, Glen Forest’s only business activities involved sales and development related to the property. Glen Forest never made any distributions to its members. Rather, it used all proceeds to pay the carrying costs of the property.

The Borees employed the firm Austin Bovay, P.A. for tax matters and return preparation. Mr. Boree had been using Mr. Bovay, the founding CPA of the Bovay firm, since 1998. Mr. Bovay was also a tax professor at the University of Florida Lev-in College of Law Master’s in Taxation program. Ms. Messal, an employee in the Bovay office, handled the Borees’ tax returns, and the Borees testified that she was extremely detail-oriented. Mrs. Boree testified that she entered all of the sales information and other data related to the maintenance of the property into Quick-Books and then provided that to Ms. Mes-sal. In the years 2002, 2003, and 2004, Glen Forest reported on its K-l Schedules that it had sustained ordinary (non-capital) losses on the sale of lots from the West Glen Estates property, and that Mr. Bo-ree’s share of such losses exceeded $100,000. In the years 2005, 2006, and 2007, Glen Forest reported the activities associated with Glen Forest on each Schedule C “Profit or Loss from Business” form. The Borees did not capitalize the costs associated with the West Glen Estates property, but instead characterized those costs as ordinary and necessary business expenses and took deductions for them. More specifically, the Borees deducted expenses of $293,445 in 2005; $138,168 in 2006; and $46,360 in 2007 for Glen Forest. The Borees also claimed on their Schedule C “Profit or Loss from Business” form ordinary losses of $147,196 in 2005; ordinary losses of $63,228 in 2006; and ordinary losses of $15,633 in 2007, as their business expenses exceeded their business income in each of those years. Although the Borees took deductions of $46,360 for ordinary and necessary business expenses in 2007, they nevertheless reported the gain ($8,578,636) from the sale to Adrian as a long-term capital gain, rather than as ordinary income, on their 2007 tax return.

On September 27, 2011, the Commissioner issued the Borees a deficiency notice pursuant to § 6212 of the I.R.C. relating to their 2007 income tax return. Specifically, the Commissioner found that the Borees’ income from selling the West Glen Estates property to Adrian should have been characterized as ordinary income, rather than as a capital gain, resulting in a $1,784,242 tax deficiency. Additionally, the Commissioner imposed a penalty under § 6662(b)(2) of the I.R.C. in the amount of $356,848.40 for substantial understatement of income tax.

On December 27, 2011, the Borees filed a petition with the Tax Court asking it to redetermine their tax liability and remove the statutory penalty. During a two-day bench trial in 2013, the Borees testified that Mr. Boree purchased the West Glen Estates property intending primarily to hold it as an investment and that he sold perimeter lots only to make payments on the debt he incurred to purchase the property. While the Tax Court expressed an inclination to find the Borees’ testimony credible at the conclusion of the trial, it later issued a nine-page opinion noting that the documentary evidence “convincingly contradicted” Mr. Boree’s testimony and revealed that his true intent was to develop the property for sale in the ordinary course of business. The Tax Court explained that the Borees “consistently treated Glen Forest as a business” by such activities as -subdividing the West Glen Estates property, building a road, spending significant time and money on zoning activities, and continuing to pursue development activities after the board had adopted the moratoria on unpaved roads. The court added that, the Borees consistently represented, Glen Forest as a real estate business to the buyers of its property, to the county board, and on their 2005, 2006, and 2007 tax returns. It also noted that between 2002 and 2006, the Borees made frequent and substantial sales of property to customers in the ordinary course of business. Even after the Borees took full control of Glen Forest, the court noted, they “continued to engage in significant sales and development activities; reported their salés of lots [in 2005] as ordinary income; deducted, rather than capitalized, expenses relating to their real estate activities; and did not segregate the property sold to Adrian from the rest of the [West Glen Estates] property.” The court thus found that the Borees’ “actions from the time Glen Forest acquired the [West Glen Estates] property, through the date of the Adrian transaction, reflect their intent to develop [that] property and sell subdivided lots to customers.” The Tax Court thus concluded that the Borees were not entitled to capital gains treatment on their 2007 tax return. The court further ruled that they were liable for the 20% statutory penalty because they had “not established reasonable cause for the underpayment or that the return was prepared in good faith.”

The Borees timely appealed. This Court has jurisdiction to review the decision of the Tax Court under I.R.C. § 7482.

II. STANDARDS OF REVIEW

This Court “review[s] the Tax Court’s legal conclusions de novo, and its factual findings for clear error.” Gustashaw v. Comm’r, 696 F.3d 1124, 1134 (11th Cir.2012). The determination of whether income derived from the sale of property is subject to taxation as ordinary income or as a capital gain is a “legal conclusion.” Suburban Realty Co. v. United States, 615 F.2d 171, 180 (5th Cir.1980). However, it is a question of fact whether the taxpayer intended to hold the property primarily for sale in the ordinary course of business or for investment purposes. Id. at 180-81. “Whether a taxpayer acted with reasonable cause and in good faith with regard to an underpayment of tax is a question of fact that we review for clear error.” Gustashaw, 696 F.3d at 1134.

III. DISCUSSION

A. Whether the . Tax Court Correctly Held that the Borees’ Gain from the 2007 Sale of 1,067 Acres of Real Property was Taxable as Ordinary Income and Not as a Capital Gain

The I.R.C. distinguishes between ordinary income and capital gains. “Income representing proceeds from the sale or exchange of a capital asset that a taxpayer holds for over a year is considered a capital gain and is taxed at a favorable rate.” Long v. Comm’r, 772 F.3d 670, 675 (11th Cir.2014) (per curiam). The purpose behind capital gain treatment is to “ameliorate the hardship of taxation of the entire gain in one year.” Comm’r v. Gillette Motor Transp., Inc., 364 U.S. 130, 134, 80 S.Ct. 1497, 1500, 4 L.Ed.2d 1617 (1960). However, “[o]ther income, or ‘ordinary income,’ is taxed at a higher rate.” Long, 772 F.3d at 675. “[T]he term ‘capital asset’ means property held by the taxpayer (whether or not connected with his trade or business), but does not include ... property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.” Id. (quoting I.R.C. § 1221(a)(1)). Because capital gains treatment “is an exception from the normal tax requirements of the Internal Revenue Code, the definition of a capital asset must be narrowly applied and its exclusions interpreted broadly.” Com Prods. Ref. Co. v. Comm’r, 350 U.S. 46, 52, 76 S.Ct. 20, 24, 100 L.Ed. 29 (1955).

To determine whether property is a “capital asset” within the meaning of § 1221 of the I.R.C., the Fifth Circuit enumerated a list of factors:

(1) the nature and purpose of the acquisition of the property and the duration of the ownership; (2) the extent and nature of the taxpayer’s efforts to sell the property; (3) the number, extent, continuity and substantiality of the sales; (4) the extent of subdividing, developing, and advertising to increase sales; (5) the use of a business office for the sale of the property; (6) the character and degree of supervision or control exercised by the taxpayer over any representative selling the property; and (7) the time and effort the taxpayer habitually devoted to the sales.

United States v. Winthrop, 417 F.2d 905, 909-10 (5th Cir.1969); see Sanders v. United States, 740 F.2d 886, 889 (11th Cir.1984) (applying the Winthrop factors). No factor or combination of factors is controlling. Biedenharn Realty Co. v. United States, 526 F.2d 409, 415 (5th Cir.1976) (en banc). Rather, each case must be decided on its particular facts. Id. Still, the “frequency and substantiality” of sales is the “most important” of these factors. Id. at 416. This is because “the presence of frequent sales ordinarily belies the contention that property is being held ‘for investment’ rather than ‘for sale.’ ” Suburban Realty Co., 615 F.2d at 178.

Despite the Tax Court discussing several of the Winthrop factors in reaching the determination that the Borees’ 2007 income was ordinary income, and not a capital gain, the Borees nonetheless raise several points on which they assert the court legally and factually erred.

1. The Tax Court’s consideration of the Borees’ purpose in holding the property from the time it was acquired until the sale to Adrian in 2007

The Borees first argue that their purpose in holding the West Glen Estates property, changed from development to investment as a result of the Baker County land use restrictions in 2005 and 2006, which made further development so expensive as to be practically impossible, and that it was thus error for the Tax Court to have considered their purpose in holding the property at any time other than at the moment of their bulk sale to Adrian. However, in Suburban Realty Co., the Fifth Circuit rejected the notion that “the decisive question is the purpose for which (the property) ‘primarily’ was held when sold.” 615 F.2d at 182 (emphasis added). Rather, the court reasoned, “At the very moment of sale, the property is certainly being held ‘for sale.’ The appropriate question certainly must be the taxpayer’s primary holding purpose at some point before he decided to make the sale in dispute.” Id. The court thus analyzed the taxpaying entity’s purpose in holding the property over multiple years prior to its sale, finding that although the company originally acquired the property as an investment, it engaged in such frequent sales through a ten-year period that its primary purpose changed to “for sale” at some point during that time. Id. at 183-85. While the Borees would have us focus instead on this Court’s statement in the subsequent case of Sanders v. United States that “it was the taxpayer’s intent at the time of the sales that is relevant for an inquiry as to whether capital gains treatment is justified,” 740 F.2d at 889, Sanders is not at all inconsistent with Suburban Realty Co. The Sanders court also analyzed the taxpayer’s activities over multiple years in sustaining the Tax Court’s decision that the taxpayer’s income was ordinary income, finding that although the taxpayer’s original purpose was not to establish a real estate business, by the time he earned the profits at issue in the years 1974 and 1975, he had been engaging in the business of subdividing land, making improvements, and selling lots for several years. Id. Thus the “sales” the Sanders court referred to in the above-quoted statement were the taxpayer’s “continuous and frequent sales of the lots over the period from 1972 to 1976.” Id. Far from diverging from Suburban Realty Co.’s direction to look at the circumstances leading up to the sale, the Sanders court actually did the same thing, in fact citing Suburban Realty Co. as its source. See id. Thus, we find no legal error m the Tax Court’s consideration of the Borees’ intent during the years leading up to the sale. We think that a proper analysis of a taxpayer’s primary purpose in holding property should take into account a reasonable period of time prior to the sale, if for nothing else but to determine whether the taxpayer’s intent changed.

In determining whether property is held for sale in the ordinary course of business within the meaning of § 1221(a)(1) of the I.R.C., considerations include (1) whether the taxpayer was engaged in a trade or business, and if so, what business; (2) whether the taxpayer was holding the property primarily for sale in that business; and (3) whether the sales contemplated by the taxpayer were ‘ordinary’ in the course of that business. Suburban Realty Co., 615 F.2d at 178. There is no real dispute at this point that prior to the enactment of the county land use restrictions, Glen Forest held the West Glen Estates property for sale in the ordinary course of the business of developing a subdivision. When Glen Forest acquired the West Glen Estates property in 2002, it began subdividing and selling lots immediately. Soon thereafter, Glen Forest began seeking approval for subdivision of the property and submitted plans for development in multiple phases. Within a few months, the Borees executed covenants and restrictions for the entire property, which identified Glen Forest as the “developer” of West Glen Estates, and provided Glen Forest a board position in the homeowners association as long as the “[developer holds for the sale in the ordinary course of business at least five percent (5%) of the acreage in all phases of the property.” Mr. Boree repeatedly represented West Glen Estates to the Baker County Board of Commissioners and the Northeast Florida Regional Planning Commission as a planned residential subdivision. Through all of its efforts, including building an expensive unpaved road, obtaining various permits, creating easements, setting up a homeowners association, and submitting development plans in multiple phases to the board for approval, Glen Forest always identified itself as the “developer” of the project.

According to the Borees, however, they abandoned all intent to develop the property after the paving requirements were imposed, and they liken their case to others in which an “adverse government action” renders the taxpayer’s original purpose futile. For instance, they rely on Ridgewood Land Co. v. Commissioner, in which the taxpayer acquired property intending to develop arid sell it in the ordinary course of business. 477 F.2d 135, 136 (5th Cir. 1973) (per curiam). The State of Mississippi then authorized condemnation proceedings against the property for use in the construction of a highway. Id. Under threat of condemnation, the taxpayer sold the property to an adjacent landowner who was negotiating to sell the land to the state for inclusion in the highway project. Id. In a decision the court emphasized was based on the “the particular facts of the case,” the court found that the taxpayer’s purpose in holding the property had changed from ordinary course of business to investment because any development of the land would have been futile due to the impending condemnation. Id. That case is distinguishable, however, because an exercise of the government’s eminent domain power, unlike an ordinance mandating the paving of roads, deprives a landowner of all potential uses of his property except selling the property to the government. It was appropriate for the court to conclude in Ridge-wood Land Co. that because the property was condemned, the taxpayer lost the opportunity to develop it, and therefore had no other purpose for holding the property aside from investment. The Baker County-paving requirements, however, merely placed additional costs on developers interested in pursuing certain types of development. The restrictions did not foreclose all development of property in Baker County. Potential developers just had to be financially able to pave internal and connecting roads. As such, “adverse government action” cases like Ridgeivood Land Co. are of no help to the Borees.

More importantly, even if we were to focus only on the Borees’ intentions for the property after the land use restrictions were imposed in 2004 and 2005, their actions in the years 2004 through the sale in 2007 betray their true intent to continue to develop the property. When compliance with the moratoria threatened to render the original West Glen Estates development plan unprofitable, Mr. Boree did not passively hold the property in hopes that he could sell it to a buyer at an attractive price, but instead first sought to obtain exceptions to the paving requirements so that his subdivision could proceed. When that was unsuccessful, he hired a land-use attorney and applied to rezone the property for a more densely zoned residential and commercial development that would fund his costs of complying with the new county paving requirements. Indeed, Mr. Boree was successful in persuading the county board to create a new land use designation of “rural commercial,” never before used in the county, for part of the Planned Unit Development. The Borees assert that the fact that their preliminary maps of the Planned Unit Development had no roads leading to it reveals that it was a mere hypothetical and that they were only trying to “up-zone” the property to make it more attractive to a buyer in hopes of selling it in bulk, but they offer no explanation for the fact that they continued to pursue the Planned Unit Development strategy even after they entered into the sales agreement with Adrian in April 2006. Indeed, at the June 2006 meeting of the Baker County Board of Commissioners, Mr. Boree’s attorney confirmed that the Planned Unit Development had been undertaken to justify the paving costs imposed by the county restrictions and that Glen Forest, “the development entity that originally owned all this land and sold off some of it,” was the same developer who owned the remaining acreage. Such evidence of strategic and thorough involvement in pursuit of developing the property indicates that the Borees were holding the property for sale in the ordinary course of business right 'up until they sold it to Adrian, and not merely as an investment property. Not only that, but the Borees continued to sell, or attempt to sell, some lots to individuals after the land use restrictions were first imposed in 2004, and they deducted (instead of capitalized) expenses related to the property in 2006 and 2007. Thus, the Tax Court’s factual finding that the Borees “continued to pursue development ■ activities after, the board adopted the moratoriums and requirements” was not clearly erroneous.

2. The Tax Court’s determination that the Borees did not segregate the prop-ertg ultimately sold to Adrian

The Borees’ second argument is that the Tax Court essentially ignored Mr. Boree’s testimony that he always segregated the interior acreage ultimately sold to Adrian from the perimeter lots that Glen Forest regularly sold to individuals, treating the former as an investment asset and the latter as inventory merely to generate funds to pay off his debt.

A taxpayer may hold some property for sale in- the ordinary course of business and some for investment, but

the burden is on the taxpayer to establish that the parcels held primarily for investment were segregated from other properties held primarily for sale. The mere lack of development activity with respect to parts of a large property does not sufficiently separate those parts from the whole to meet the taxpayer’s burden.

Suburban Realty Co., 615 F.2d at 185. Whether a taxpayer-segregated property for investment as opposed to inventory purposes would appear to be a question of fact, just as is the taxpayer’s overall primary purpose for holding the property. See id. at 180-81 (“[T]he question of taxpayer’s purpose or purposes for holding the property is primarily factual, as is the question of which purpose predominates.”).

There was no error in the Tax Court’s factual determination that the Borees “did not segregate the property sold to Adrian from the rest of the [West Glen Estates] property.” The Borees argue that they never platted the large interior parcel and that the sales agreement with Adrian described it as “unimproved,” but all of the maps and development plans for West Glen Estates that the Borees originally provided to the Baker County Board of Commissioners included all of the acreage, and nowhere set aside or separated out the acreage later sold to Adrian from the ten-acre lots that were sold to individuals over the years. Indeed, of the acreage ultimately -sold in bulk in 2007, eighty to ninety acres had been included in phases I to III of the initial West Glen Estates development plan. Early maps of the project envisioned the entire property divided into ten-acre lots, and Mr. Boree sought an exemption from the county paving requirements for the “whole parcel.” Later, the plans for the Planned Unit Development encompassed the entire acreage, undermining Mr. Boree’s argument that he changed his primary purpose in holding the property after the county required paving.

3. The Tax Court’s alleged failure to consider that the Borees’ gain resulted solely from market appreciation

The Borees next argue that the Tax Court erred in failing to find dispositive the fact that then $8 million profit in 2007 was due to the property appreciating in value over a substantial period of time and was not reflective of any improvements made to the property or other efforts on the part of Glen Forest in conducting ordinary business activities. However, the Fifth Circuit rejected the notion that just because an increase in' property value is attributable more to market appreciation than to improvements made to the property, that the taxpayer is automatically entitled to capital gains treatment. Suburban Realty Co., 615 F.2d at 186 (rejecting the notion that “all gains emanating from appreciation in value over a substantial period of time are to be treated as capital gains”). Rather, the court stated that the converse is true: “i.e., that capital gain treatment will be proper only if the gain emanates from appreciation in value. Instances of gain emanating from appreciation being treated as ordinary income are not inconsistent with this proposition.” Id. The Borees’ fortuitous sale of their property to Adrian in 2007 was not entitled to capital gains tax treatment simply because the property had appreciated in value, when the sale arose from their engaging in the ordinary course of the business of developing real estate.

4. The Tax Court’s treatment of the Winthrop factors

The Borees’ final argument is that the Tax Court “misapplied” two of the Winthrop factors and .failed to consider others. First, they say that if the “number, extent, continuity and substantiality of sales,” Winthrop, 417 F.2d at 910, is considered the most important factor, see Biedenharn Realty Co., 526 F.2d at 416, then the Tax Court should have also considered that they sold far. fewer lots after the county imposed the paving restrictions, which they say proves that they abandoned any intent to develop the property in favor of the bulk sale to Adrian. The Tax Court understandably found that the sale of approximately sixty lots comprising approximately 600 acres and over one-third of the property the Borees acquired in 2002 constituted “frequent and substantial” sales. Even if three of the four sales the Tax Court attributed to 2006 were merely the executions of deeds that the Borees held as security for the purchase price of lots sold in earlier years, the fact remains that individual purchasers continued to acquire lots from Glen Forest in 2006, contrary to the Borees’ contention that all business operations ceased. Further, .Glen Forest engaged in.no income-producing activity other than the sales of lots over the years. See Suburban Realty Co., 615 F.2d at 179 n.24 (“The taxpayer’s claim to capital gain treatment is likely to be weaker if he can point- to no other- business activities; i.e,, if close to 100 percent of his income is derived from sales of. real estate.”). Additionally, .even if the Borees did not close a single sale in 2006, they still sought to develop their property by creating and presenting the Planned Unit Development to the county board, which would increase the value of lots in future sales, and they continued to report sales of lots each year as ordinary business income on their tax returns.

Second, the Borees argue that the Tax Coürt misapplied the second Winthrop factor, “the extent of subdividing, developing, and advertising,” 417 F.2d at 910, by failing to consider that Glen Forest did not advertise West Glen Estates beyond the small classified ads abandoned before the ordinances were imposed and that it never installed water, sewer, or electricity, and built only one' dirt road on the property. However, the evidence discussed by the Tax Court is of development activities over a period of time. Perhaps the development activities were not as extensive as in other cases, or perhaps different inferences could be drawn from the facts. However, we discern no error related to the Tax Court’s application of the second Winthrop factor.

Finally, the Borees argue that the Tax Court erred as a matter of law by not considering the remaining Winthrop factors, which they say tilt in their favor. However, they have not cited any authority requiring courts to address each and every factor. - In fact, Winthrop itself states, “Despite their frequent use .,. these seven [factors] ‘in and of themselves ... have no independent significance, but only form part of a situation which in the individual case must be considered in its entirety....”-’ 417 F.2d at 910 (quoting Cole v. Usry, 294 F.2d 426, 427 (5th Cir. 1961)). We do not think that the factors are meant to be mechanically applied so as to disallow a court from viewing the evidence in its totality and drawing appropriate inferences from that evidence. For example, the Tax Court, we think appropriately, appeared to give great weight to the fact that the Borees deducted expenses related to the property from 2002 to 2007, Á practice inconsistent with capital gains treatment, even though the deduction of expenses is not contemplated in the Winthrop factors.

As we do not find any of the Borees’ arguments in support of reversal meritorious, the Tax Court’s determination of their tax liability will be affirmed.

B. Whether the Tax Court Correctly Sustained the Imposition of a Statutory Penalty for Substantial Understatement of Income Tax

The Borees’ second request on appeal is for the reversal of the Tax Court’s imposition of the substantial understatement penalty. While § 6662 of the I.R.C. imposes a 20% accuracy-related penalty on taxpayers for “[a]ny substantial understatement of income tax,” I.R.C. § 6662(b)(2), the penalty shall not be imposed with respect to any portion of the underpayment “if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.” I.R.C. § 6664(c)(1). It is the taxpayer’s burden to establish that he acted with reasonable cause and good faith. Calloway v. Comm’r, 691 F.3d 1315, 1334 (11th Cir.2012).

A court’s determination of a taxpayer’s reasonable cause must be “made on a case-by-case basis, taking into account all pertinent facts and circumstances.” Treas. Reg. § 1.6664-4(b)(l). The most important factor in this determination is the “extent of the taxpayer’s effort to assess [his] proper tax liability.” Id. “Reliance on ... professional advice ... constitutes reasonable cause and good faith if, under all the circumstances, such reliance was reasonable and the taxpayer acted- in good faith.” Id.; see also Gustashaw, 696 F.3d at 1139 (“A taxpayer may meet his burden by showing that he reasonably relied in good faith on the advice of an independent professional, such as a tax advisor, lawyer, or accountant, as to the transaction’s tax treatment.”). “The taxpayer’s education and business experience are relevant to the determination of whether the taxpayer’s reliance on professional advice was reasonable and done in good faith.” Gustashaw, 696 F.3d at 1139 (citing- Treas. Reg. § 1.6664-4(c)(l)). The Supreme Court recognized in United States v. Boyle, 469 U.S. 241, 251, 105 S.Ct. 687, 692-93, 83 L.Ed.2d 622 (1985), that a taxpayer exercises “ordinary business care and prudence” when he reasonably relies on his accountant’s advice on matters beyond a layperson’s understanding:

When an accountant or attorney advises a taxpayer on a matter of tax law, such as whether a liability exists, it is reasonable for the taxpayer to rely on that advice. Most taxpayers are not competent to discern error in the substantive advice of an accountant or attorney. To require the taxpayer to challenge the attorney, to seek a “second opinion,” or to try to monitor counsel on the provisions of the Code himself would nullify the very purpose of seeking the advice of a presumed expert in the first place.

To be eligible for the reasonable cause and good faith exception, the taxpayer must also show that his professional’s advice was based on “all pertinent facts and circumstances and the law as it relates to those facts and circumstances.” Treas. Reg. § 1.6664-4(c)(l)(i). Further, the advice relied upon must not be based on any “unreasonable factual or legal assumptions,” and must not “unreasonably rely on the representations, statements, findings, or agreements of the taxpayer or any other person.” Id. § 1.6664 — 4(c)(1)(ii).

The Tax Court did not elaborate on why it found that the Borees did not establish reasonable cause or that their tax return was prepared in good faith, and the record does not support the court’s conclusion. Mr. Boree, a former logger with no accounting experience, had relied on the Bovay accounting firm since 1998, a firm that enjoyed a strong reputation due in part to Mr. Bovay serving as a tax professor at the University of Florida Levin College of Law. But see Treas. Reg. § 1.6664-4(c)(l) (“[Rjeliance may not be reasonable or in good faith if the taxpayer knew, or reasonably should have known, that’ the advisor lacked knowledge ih the relevant aspects of Federal tax law.”). Mrs. Boree testified that the Borees never had any cause to question the advice of their accountant until this case. Mrs. Bo-ree personally provided Ms. Messal in the Bovay firm, whom she described as extremely detail-oriented, with the information and records she kept relating to all of the land transactions, indicating that the Borees engaged in appropriate efforts to assess their tax liability. There is no indication in the record that the Borees withheld any information from their accountant, and the Commissioner conceded at oral argument that the Borees did not provide any false information. Although the Borees’ accountant prepared the 2007 tax return claiming deductions of $46,360 for business expenses while claiming a capital gain from the same activity, we find that it was reasonable for the Borees, who were untrained in tax matters, to have relied in good faith on that decision. The Tax Court clearly erred in finding that the Borees did not establish reasonable cause and that the return was prepared in good faith.

IY. CONCLUSION

The Tax Court correctly concluded that the Borees were liable for the tax deficiency. We thus affirm the Tax Court on the issue of the Borees’ tax liability for the year 2007. However, we find clear error in the Tax Court’s determination that the Borees failed to establish that they acted with reasonable cause and in good faith. Accordingly, the Tax Court’s assessment of the substantial understatement of income tax penalty is reversed.

AFFIRMED IN PART AND REVERSED IN PART.

      . The Tax Court found that the Borees sold seventeen lots in 2005. The Borees dispute the Tax Court’s findings as to how many lots they sold for the years 2005 and 2006. The discrepancy apparently stems from the Borees’ practice of entering into a type of seller financing called an "Agreement to Deed,” where the Borees would hold the deed as security for the purchase price and not record it until the purchaser fully paid the debt, which might occur years after the property was first sold. Thus, the Tax Court’s finding that seventeen lots were sold in 2005 appears to be based on the execution of deeds related to lots that were actually sold in years prior. Because the exact number of lot sales the Borees closed in 2005 and 2006 is not dispositive with regard to our analysis, we will assume that the Bo-rees entered into only eight new sales agreements for lots in 2005.

      . The Tax Court found that Glen Forest sold four lots in 2006. Again, however, three of these appear, to be deed executions in completion of earlier-executed sales agreements. The fourth "sale” in 2006 was actually a sales agreement entered into by the Borees that was never effectuated. See note 1, supra.

      . Decisions of the former Fifth Circuit issued prior to October 1, 1981, are binding precedent on this Court. See Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir.1981) (en banc).

      . Nor could the Sanders panel reach a holding directly inconsistent with that of Suburban Realty Co. without violating our Circuit’s laws. See, e.g., Cargill v. Turpin, 120 F.3d 1366, 1386 (11th Cir.1997) ("The law of this circuit is 'emphatic' that only the Supreme Court or this court sitting en banc can judicially overrule a prior panel decision.”), cert. denied, 523 U.S. 1080, 118 S.Ct. 1529, 140 L.Ed.2d 680 (1998).

      . Although Mri Boree testified at trial that he always intended to hold the property for investment and that his holding purpose never changed, he now argues that his purpose changed as a result of altered circumstances.

      . The Supreme Court’s discussion is dicta because it is unnecessary to the holding in that case, which is that a taxpayer’s failure to make a timely filing of his tax return is not excused by his reliance on an agent, and such reliance is not "reasonable cause” for a late filing under § 6651(a)(1) of the I.R.C. Id. at 252, 105 S.Ct. at 693.

      . The Tax Court’s wording implies that one may establish reasonable cause or good faith to comply with § 6664(c)(1), but the statute actually requires both. I.R.C. § 6664(c)(1).

      . Because we so hold, we need not address the Borees' alternative defense against the imposition of the penalty, which is that they had substantial authority for their tax treatment pursuant to § 6662(d)(2)(B)(i) of the I.R.C.


author: ROBRENO, District Judge:

text:
    Wallace DEAN-MITCHELL, Petitioner-Appellant, v. Warden Constance REESE, Respondent-Appellee.
    No. 13-14111
    United States Court of Appeals, Eleventh Circuit.
    (September 13, 2016)

      Christopher Scott Randolph, Jr., Hare Wynn Newell & Newton, LLP, Birmingham, AL, for Petitioner-Appellant.
    Michael B. Billingsley, Jenny Lynn Smith, Carolyn W. Steverson, Joyce White Vance, • U.S. Attorney’s Office, Birmingham, AL, for Respondent-Appellee.
    Before JORDAN and JULIE CARNES, Circuit Judges, and ROBRENO, District Judge.

       Honorable Eduardo C. Robreno, United States District Judge for the Eastern District of Pennsylvania, sitting by designation.

   ROBRENO, District Judge:

Before the Court is an appeal by Wallace Dean-Mitchell of his 28 U.S.C. § 2241 habeas corpus petition, which was denied by the district court for the Northern District of Alabama. For the reasons set forth below, we will reverse the decision of the district court granting summary judgment in favor of the Warden and remand the case for proceedings consistent with this opinion.

I.

Dean-Mitchell, a District of Colombia Code offender, is currently serving a sentence of thirty-five years to life in a federal Bureau of Prisons (“BOP”) facility. Because his offenses occurred in 1990, his sentence is subject to the District of Columbia Good-Time Credits Act of 1986, D.C. Code § 24-428, et seq. (1987), repealed by the Omnibus Criminal Justice Reform Amendment Act of 1994, D.C. Law 101-151. Under that statute, inmates receive statutory Good-Time credits that count toward their terms of imprisonment. D.C. Code § 24428(b) (1987). Thus, Good-Time credits may reduce Dean-MitchelTs period of incarceration to less than thirty-five years.

While incarcerated, Dean-Mitchell has been the subject of a number of disciplinary actions, for which various sanctions have been imposed by a Disciplinary Hearing Officer (“DHO”). On November 5, 2009, Dean-Mitchell filed the instant § 2241 habeas petition challenging ten of those disciplinary actions, seeking to have his Good-Time credits restored and his disciplinary records expunged. On appeal, Dean-Mitchell challenges only one of the ten disciplinary actions.

Specifically at issue in this appeal is Incident Report 1507668 (the “Incident Report”), in which Dean-Mitchell was charged with making a threat against another person and failing to obey an order on August 30, 2006. As a result of the Incident Report, Dean-Mitchell was sanctioned twenty-seven days of Good-Time credits.

In his petition before the district court, Dean-Mitchell argued that, in violation of his due process rights, he did not receive adequate notice of the charges against him. Specifically, he alleged that he did not receive a copy of the Incident Report prior to his disciplinary hearing and was denied a copy when he requested one. Dean-Mitchell also contended that, in violation of his due process rights, he never received a copy of the DHO report, which would have outlined the DHO’s factual findings and explained the basis for revoking the Good-Time credits. He further asserted that there was no copy of the DHO report in his file in August 2010 and that he was not provided a copy of it when he filed his administrative appeal.

In her response to the petition, the Warden asserted that she did provide Dean-Mitchell with copies of the Incident Report and DHO report, which she also attached to the response. Accepting the recommendation of the magistrate judge, the district court re-characterized and converted the Warden’s response into a motion for summary judgment. Dean-Mitchell responded to the now-converted motion for summary judgment, asserting again that he never received those documents and alleging, based on the format of the DHO report attached to the Warden’s motion, that the report was generated after he filed his habeas petition.

The district court granted summary judgment in favor of the Warden on the first nine of Dean-Mitchell’s claims. As to the tenth claim regarding Incident Report 1507668, the district court recognized that the loss of Good-Time credits implicated a protected liberty interest and initially ordered an evidentiary hearing to determine whether Dean-Mitchell received copies of the two reports and, thus, due process under Wolff v: McDonnell, 418 U.S. 539, 94 S.Ct. 2963, 41 L.Ed.2d 935 (1974).

However, the district court later reversed its ruling regarding the necessity of an evidentiary hearing after receiving an additional declaration from the Warden. The declaration asserted that: (1) Dean-Mitchell filed administrative appeals regarding his discipline; (2) he “had to have a copy of the incident report and the [DHO] Report in order to file the appeals”; but (3) due to BOP document retention policies, the original file no longer existed. Dean-Mitchell denied that he submitted the reports when he filed his administrative appeal.

Based on this newly submitted evidence, the district court granted summary judgment as to Dean-Mitchell’s final claim in favor of the Warden. It concluded, incorrectly citing Superintendent, Massachusetts Correctional Institution, Walpole v. Hill, 472 U.S. 445, 105 S.Ct. 2768, 86 L.Ed.2d 356 (1985), that the denial of the § 2241 petition was proper because there was now “some evidence” in the record that the disciplinary action taken against Dean-Mitchell comported with due process under Wolff.

On appeal, Dean-Mitchell argues that the district court erred by failing to hold an evidentiary , hearing to determine whether he received the Incident Report or the DHO report and instead granting summary judgment on the basis that “some evidence” supported the fact that he did receive the reports.

II.

A..

When a district court converts a response to a § 2241 petition into a motion for summary judgment, it must generally give the petitioner notice and an opportunity to respond with additional evidence which may raise a genuine dispute as to a material fact. See Santiago-Lugo v. Warden, 785 F.3d 467, 475 n.6 (11th Cir. 2015). “Dismissal of a habeas corpus petition on summary judgment is reviewed de novo on appeal.” Madriz-Alvarado v. Ashcroft, 383 F.3d 321, 327 (5th Cir. 2004); Frye v. Lee, 235 F.3d 897, 902 (4th Cir. 2000); Sanders v. Freeman, 221 F.3d 846, 851 (6th Cir. 2000); Ortiz v. Stewart, 149 F.3d 923, 930 (9th Cir. 1998); see also Ramos-Barrientos v. Bland, 661 F.3d 587, 594 (11th Cir. 2011) (providing in a FLSA case that “[w]e review a summary judgment de novo”).

Summary judgment is appropriate when the moving party establishes that, based upon the evidence presented, “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “[T]he requirement that a dispute be ‘genuine’ means simply that there must be more than some metaphysical doubt as to the material facts.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 261, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citations and internal quotation marks omitted). The court views the record and draws all factual inferences in the light most favorable to the non-movant. Carlson v. FedEx Ground Package Sys., Inc., 787 F.3d 1313, 1317 (11th Cir. 2015). “If reasonable minds could differ on the inferences arising from undisputed facts, then a court should deny summary judgment.” Id. at 1318 (quoting Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997)).

B.

To state a cognizable claim for the denial of due process in connection with prison discipline, a prisoner must show a protected liberty interest of which he was deprived without minimum procedural protections, Wolff, 418 U.S. at 557-58, 94 S.Ct, 2963. As the district court correctly recognized, Dean-Mitchell has a protected liberty interest in the statutory Good-Time credits that he has earned. Id,

In Wolff, the Supreme Court held that minimum due process protections in the context of a prison disciplinary hearing include the following: (1) advance written notice of the charges against the inmate (in this case, the Incident Report); (2) an opportunity for the inmate to call witnesses and present documentary evidence, so long as doing so is consistent with institutional safety and correctional goals; and (3) a written statement by the factfinder outlining the evidence relied on and' the reasons for the disciplinary action (here, the DHO report). Id. at 563-67, 94 S.Ct. 2963; O’Bryant v. Finch, 637 F.3d 1207, 1213 (11th Cir. 2011). At issue in this case are the first and third Wolff factors.

m.

A.

Before addressing the substantive issues, the Warden first suggests that the Court lacks subject matter jurisdiction over the action since neither the district court nor this Court issued Dean-Mitchell a Certificate of Appealability (“COA”). Title 28 U.S.C. § 2253(c)(1)(A) provides that without a COA, a petitioner may not appeal “the final order in a habeas corpus proceeding in which the detention complained of arises out of process issued by a State court.”

The Warden asserts that Dean-Mitchell’s federal detention “arises out of a process issued by a State court” because his case originated in the District of Columbia. The Court need not delve into the issue of whether the District of Columbia is a “state” for the purposes of § 2253 because, in any event, the Court can construe Dean-Mitchell’s notice of appeal as a request for a COA. Fed. R. App. P. 22(b)(2); 11th Cir. R. 224(b).

A court will grant a COA when the ’petitioner “demonstrates[s] that reasonable jurists would find the district court’s assessment of the constitutional claims debatable or wrong.” Slack v. McDaniel, 529 U.S. 473, 484, 120 S.Ct. 1595, 146 L.Ed.2d 542 (2000). Here, neither party disputes that the district court applied the incorrect standard to Dean-Mitchell’s denial of due process claim and dismissed it because it found that “some evidence” supported the Warden’s position. Under the circumstances, because we find that Dean-Mitchell “has made a substantial showing of the denial of a constitutional right,” we will grant Dean-Mitchell a COA. 28 U.S.C. § 2253(c)(2).

B.

There is no dispute that under Wolff, due process required that Dean-Mitchell receive, inter alia, advance notice of the charges (such as the Incident Report) and the DHO report. It is also clear that the district court erred in granting summary judgment as to Dean-Mitchell’s tenth claim on the basis that the Warden had supplied “some evidence” that Dean-Mitchell had actually received the two reports.

It is apparent that the district court applied the “some evidence” language from Hill, 472 U.S. 445, 105 S.Ct. 2768, in which the Supreme Court concluded that the factfinder’s decision in a disciplinary proceeding must be “supported by some evidence in the record.” Id. at 454, 105 S.Ct. 2768. However, as both parties acknowledge, the holding' in Hill is “irrelevant” “when the basis for attacking the judgment is not insufficiency of the' evidence.” Edwards v. Balisok, 520 U.S. 641, 648, 117 S.Ct. 1584, 137 L.Ed.2d 906 (1997) (providing that Hill did not abrogate the due process requirements enunciated in Wolff, but merely held that in addition to those requirements, some' evidence must support the decision to revoke Good-Time credits). Dean-Mitchell does not challenge the sufficiency of the evidence supporting his discipline, nor does he contest that “some evidence” supported the DHO’s decision. Indeed, he admitted to the DHO that the facts in the Incident Report were true. Dean-Mitchell asserts only that he was not afforded the due process required by Wolff in connection with the discipline.

The district court converted the Warden’s response to the petition into a motion for summary judgment. Thus, in order to grant the motion for summary judgment and dismiss Dean-Mitchell’s claim, the district court had to conclude that there was no genuine dispute as to any material facts regarding his receipt of the Incident Report and DHO report. Fed. R. Civ. P. 56(a).

Dean-Mitchell asserts on’ appeal that there exist genuine disputes as to material facts concerning the due process he received, which required the district court to hold an evidentiary hearing. In support of this assertion, Dean-Mitchell points to his own signed declarations that: (1) he did not receive the Incident Report, even after requesting -it; (2) he never received the DHO report and it was missing from his file in August 2010 when he looked for it; (3) prison officials noted in emails that the DHO report was missing from his files in 2007; (4) he did not attach either report to any of his administrative appeals; and (5) the DHO report submitted by the Warden in response to his petition was suspect because it did not look like the standard DHO report form. Dean-Mitchell also submits the 2007 email chain from the BOP staff indicating , that the DHO report could not be found in his file.

In support of her position that Dean-Mitchell received the reports, the Warden asserts that that the DHO report provides, directly above the DHO’s signature, that “[a] copy of the report has been given to the inmate.” Similarly, the Incident Report provides the handwritten date and time that it was allegedly delivered to Dean-Mitchell and the initials of the deliverer.

There is conflicting evidence in the record regarding whether Dean-Mitchell received or did not receive the reports. The Warden said he did receive them, and Dean-Mitchell said he did not. Moreover, the documentation relied on by the Warden is inconclusive, as it does not provide a clear paper trail establishing Dean-Mitchell’s receipt of the reports.

First, while there is some indication on the reports themselves that they were delivered to Dean-Mitchell, there is also evidence that the DHO report was missing from his file in 2007 and again in 2010, casting doubt on whether regular protocols regarding the reports were followed.

Second, although the Warden asserted that the relevant regulation required Dean-Mitchell to have attached the Incident Report and DHO report to his administrative appeals, it is clear that 28 C.F.R § 541.19 (2007), applicable to administrative appeals at the time, required Dean-Mitchell to “forward a copy of the DHO report, or, if not available at the time of filing, ... [to] state in his appeal the date of the DHO hearing and the nature of the charges against the inmate,” (emphasis added). Under this regulation, a copy of the DHO report is not a necessary component of filing an administrative appeal. Thus, the Warden’s declaration indicating that Dean-Mitchell must have attached the reports to his administrative appeals, which was relied upon by the district court to conclude that there was “some evidence” that Dean-Mitchell received the reports, was incorrect and cannot form the basis of the district court’s decision.

Under the circumstances, given the presence of a genuine dispute as to a material fact, it was error for the district court to take sides in this battle of affidavits and to grant summary judgment in favor of the Warden.

IV.

For the reasons set forth above, the district court’s decision granting summary judgment in favor of the Warden shall be reversed and the matter shall be returned to the district court for proceedings consistent with this opinion.

REVERSED AND REMANDED.

      . Dean-Mitchell was subject to these disciplinary actions over a period of about two years in four different BOP facilities. The other nine actions involved incidents such as refusing to obey orders, interfering with the duties of the staff, making threats, fighting, forging an official paper, and interfering with lock and security devices.

      . In that the district court converted the Warden’s response into a motion for summary judgment and ruled on that motion, the Court will apply the standards and burdens of proof applicable to summary judgment motions rather than those typically utilized when reviewing the disposition of a § 2241 habeas petition.

      . This document was also the Warden’s response to two orders to show cause why the relief requested by Dean-Mitchell should not be granted.' Dean-Mitchell had moved BOP facilities several times after filing his petition which seems to have created confusion, causing the Warden to fail to timely file her response to the petition and necessitating the issuance of the orders to show cause.

      . While a hard copy .was not found in his file, the emails indicate that an electronic version of the DHO report was . eventually located twelve days later.

      .The Warden also argues that even if Dean-Mitchell did not receive the Incident Report, he received otherwise adequate notice of the charges in that he received a copy of the "Notice of Discipline Hearing Before the (DHO)” (the "Hearing Notice”). The Warden acknowledges that the Hearing Notice does not contain the facts alleged in the Incident Report and identifies only the alleged violations ("Refusing an order of a staff member/Threating another with bodily harm”) and the date of the offenses. The Court concludes that the Hearing Notice did not adequately inform Dean-Mitchell of the facts necessary to defend against the charges in that it provided no factual information regarding the incident. See Sira v. Morton, 380 F.3d 57, 70 (2d Cir. 2004) (providing that "due process requires more than a conclusory charge; an inmate must receive notice of at least some ‘specific facts’ underlying the accusation”) (quoting Taylor v. Rodriguez, 238 F.3d 188, 193 (2nd Cir. 2001)).