The opinion of the court was delivered by: MCAVOY
This motion seeks reconsideration of the court's order dated October 30, 1995, that denied the plaintiff's motion for litigation costs, including legal fees, pursuant to 26 U.S.C. § 7430. That motion was made following a favorable decision in a bench trial, commenced before this court on March 28, 1995. The government has appealed the court's decision in this case to the Circuit Court of Appeals for the Second Circuit.
On July 6, 1994, Edith LiButti, doing business as Lion Crest Stable ("Lion Crest"), brought the racehorse "DEVIL HIS DUE" to Saratoga, New York to run in the Whitney Handicap on August 27, 1994. On August 25, 1994, the United States Internal Revenue Service ("IRS") delivered a Notice of Seizure and Levy to Devil His Due's trainer at Saratoga. The levy was made against Edith LiButti d/b/a Lion Crest Stable "as nominee of Robert LiButti to the extent of his interest in the thoroughbred race horse named Devil His Due."
On August 26, 1994, Lion Crest Stable and the IRS entered into an agreement which allowed DEVIL HIS DUE to run in the Whitney Handicap race. Lion Crest Stable agreed not to file suit against the IRS under 26 U.S.C. § 7426 until August 30, 1994. Any money DEVIL HIS DUE earned in the Whitney
was to be held in escrow until: (1) the government permitted Lion Crest Stables to withdraw all or some of the earnings; (2) Lion Crest Stables obtained a court order allowing it to withdraw the earnings; or (3) Lion Crest Stables and the government entered into a second agreement with regard to the disposition of earnings. On September 2, 1994, the plaintiff commenced this action pursuant to 26 U.S.C. § 7426 seeking a permanent injunction barring the IRS from enforcing a levy that sought to seize a thoroughbred racehorse, DEVIL HIS DUE, to satisfy a tax assessment against Robert LiButti, Edith LiButti's father, and seeking a release of the race winnings of DEVIL HIS DUE that were being held in escrow by the IRS. The plaintiff claimed that the levy has been wrongfully placed on the horse.
The court heard a preliminary injunction motion brought by the plaintiff on September 8 and 9, 1994, which essentially sought to lift the levy until such time as the merits of the 26 U.S.C. § 7426 action could be heard. A preliminary injunction was granted which allowed the horse to continue the racing season, but which denied lifting of the levy.
On October 26, 1994, the government filed suit against Robert Libutti, Joan Libutti (Edith LiButti's mother), and Edith Libutti in the District of New Jersey. The government sought a stay of the Northern District of New York action until final judgment had been entered in the New Jersey action. The court denied this motion.
A three-day bench trial in this action commenced on March 28, 1995. On August 4, 1995, the court issued a Memorandum, Decision, and Order, and a judgment was filed on August 9, 1995, in favor of the plaintiff. The government appealed.
The plaintiff then moved for an award of the costs and fees recoverable under 26 U.S.C. § 7430, and asserted compliance with the statutory requirements. The plaintiff, however, conspicuously failed to mention or address the requirement of exhaustion of administrative remedies. The government contended that the plaintiff was not entitled to such costs and fees. It was the government's position that the plaintiff failed to exhaust the administrative remedies set forth in the Internal Revenue Code, that the plaintiff had failed to meet the net worth requirement set forth in the statute, and that the plaintiff had failed to show that the government's position was unreasonable.
In the reconsideration motion before the court, the plaintiff has contested the court's denial of a litigation costs award on the basis of the plaintiff's failure to exhaust administrative remedies. It is the plaintiff's contention that (1) a regulatory exception applies to the exhaustion requirement; and, in the alternative, (2) even if the exhaustion requirement applies, the plaintiff need not have complied because of the application of the "futility doctrine" to this case. The defendant, of course, contends that the court correctly decided the plaintiff's motion in the first instance.
A. Standard For Reconsideration
"A court is justified in reconsidering its previous ruling if: (1) there is an intervening change in the controlling law; (2) new evidence not previously available comes to light; or (3) it becomes necessary to remedy a clear error of law or to prevent obvious injustice." Hester Indus. v. Tyson Foods, 160 F.R.D. 15, 16 (N.D.N.Y. 1995) (citing, Larsen v. Ortega, 816 F. Supp. 97, 114 (D.Conn. 1992), aff'd, 990 F.2d 623 (1993)); Nossek v. Brd. of Educ. of the Duanesburgh Central School Dist., 1994 U.S. Dist. LEXIS 17686, 1994 WL 688298 (N.D.N.Y. 1994). Since the plaintiff neither has pointed to a change in the controlling law, nor has presented new evidence not previously available, the plaintiff's motion to reconsider apparently seeks to remedy a clear legal error, or to prevent an obvious injustice. The Court cautions at the outset that, although "clear error" and "preventing injustice" are valid grounds for reconsideration, the parties seeking reconsideration must not use this vehicle as a means to relitigate issues ...