United States District Court, D. New Mexico
J. Jaramillo, Kelly A. Stout Sanchez Martinez, Maria E.
Touchet Touchet Law Firm, P.C. Albuquerque, New Mexico
Attorneys for the Plaintiff
C. Anderson United States Attorney Erin Langenwalter Ruth
Fuess Keegan Assistant United States Attorneys United States
Attorney's Office Albuquerque, New Mexico Attorneys for
MEMORANDUM OPINION AND ORDER
MATTER comes before the Court on the Unopposed
Motion for Approval of the Settlement of Plaintiff Troy
Dwayne Shaw's Claims, filed June 6, 2018 (Doc.
74)(“Motion”). The Court held a hearing on June
11, 2018. The primary issue is whether Plaintiff Troy Dwayne
Shaw's attorneys may recover, in a settlement agreement,
New Mexico gross receipts tax payments beyond the twenty-five
percent attorney's fees cap in the Federal Tort Claims
Act, 28 U.S.C. § 2678 (“FTCA”). The Court
concludes that gross receipts tax obligations are neither
taxable costs nor attorney's fees, so passing those
obligations on to FTCA plaintiffs does not implicate the
FTCA's attorney's fees cap. Accordingly, the Court
will grant the Motion and approve Shaw's settlement.
case began following an alleged sexual assault. Shaw was a
patient at the Veteran's Administration Medical Center
(“VA Hospital”) in Albuquerque, New Mexico, where
he was seeking treatment for mental health problems. Second
Amended Report of the Guardian ad Litem at 1-2, filed June
12, 2018 (Doc. 77)(“Report”). During the early
morning hours of January 13, 2016, another patient “was
permitted to wander the halls of the Ward and enter Mr.
Shaw's room, ” where he allegedly sexually
assaulted Shaw. Report at 1.
sues Defendant United States of America under the FTCA,
alleging that the VA Hospital's negligence caused the
assault. See Complaint to Recover Damages for
Personal Injury ¶ 34, at 6, filed February 1, 2017 (Doc.
1)(“Complaint”). The Court appointed a guardian
ad litem (“GAL”), because Shaw was
“committed to the Las Vegas Behavioral Health Institute
during the pendency of this case.” Report at 2-3.
See Order to Appoint Guardian ad Litem at 1, filed
August 14, 2017 (Doc. 23). More specifically, Shaw has
“been determined to be 100% disabled as a result of
PTSD from . . . military sexual trauma.” Report at 2.
After discovery, the parties agreed to settle the case for
$150, 000.00. See Report at 3. The GAL recommends
that Shaw's attorneys be awarded $37, 500.00 in
attorney's fees -- twenty-five percent of the settlement
-- plus gross receipts tax payments of $2, 812.50, and costs
of $16, 249.32. See Report at 7. The GAL states:
“These costs include filing fees, expert fees, travel
expenses, and deposition fees.” Report at 7. The GAL
further recommends that the Court approve the settlement.
See Report at 7. In the Motion, the parties ask the
Court to approve the settlement. See Motion at 1-2.
Court held a hearing on June 11, 2018. See Draft
Transcript of Motion Hearing at 1:9-11 (taken June 11,
2018)(“Tr.”)(Court). The Court began by stating
that the one question it had about the proposed settlement
involved the gross receipts tax. See Tr. at 4:10-11
(Court). Specifically, the Court questioned whether the New
Mexico gross receipts tax should be considered part of the
attorney's fee or a separate cost for FTCA purposes.
See Tr. at 4:14-15 (Court). Shaw responded that he
was unsure how gross receipts payments should be classified.
See Tr. at 5:14-17 (Touchet). The United States
asserted that gross receipts payments should be included
within the FTCA's twenty-five percent cap on
attorney's fees. See Tr. at 6:10-13
(Langenwalter). The United States continued that, “if
they are going to call it out separately, then it needs to be
included within the 25 percent. If they want to call it out
as costs with their client, then that's an issue on a
settlement of this size that I'm not going to get
involved in.” Tr. at 6:23-7:2 (Langenwalter). The
United States added that, if this case involved a one million
dollar settlement, gross receipts would be included as part
of attorney's fees. See Tr. at 7:9-11
GAL, Timothy White, responded that state law should determine
whether gross receipts payments are costs or attorney's
fees. See Tr. at 8:15-17 (White). The Court replied
that federal law will decide what a fee is within the
FTCA's meaning, although state law “may be of
interest in determining what a gross receipts tax is.”
Tr. at 9:4-9 (Court). The Court continued that
I'm not sure that you can just . . . call something a
cost if it's not -- if it's not a cost. That's
something that I'm struggling with a little bit in the
sense that the way New Mexico structures its gross receipts
tax, it's not probably a real cost. It's, instead,
something that falls upon the taxpayer. I mean, it falls no
differently than the federal income tax.
Tr. at 9:22-10:2 (Court). The Court then asked Mr. White to
discuss the rest of the settlement. See Tr. at
10:8-9 (Court). Mr. White recommended that the Court approve
the settlement, stating that “we all believe that this
is in Troy's best interest to be able to settle this case
now under the proposal that's been presented to the
Court.” Tr. at 10:23-25 (White). The Court replied that
the settlement is a good resolution to the case and that it
questions only the gross receipts tax issue. See Tr.
at 11:14-25 (Court). At the hearing's conclusion, the
Court invited the parties to submit to the Court any
authorities on the gross receipts tax issue. See Tr.
at 11:19-22 (Court).
the hearing, the United States submitted a letter to the
Court. See Letter from Assistant United States
Attorney Erin E. Langenwalter to the Court at 1-3 (dated June
11, 2018), filed July 25, 2018 (Doc.
78)(“Letter”). In the Letter, the United States
asserts that, “in the absence of state law treating the
tax payment as a litigation cost, ” the gross receipts
tax should be included in the FTCA's twenty-five percent
cap. Letter at 2. The United States notes that it cannot find
any New Mexico or United States Court of Appeals for the
Tenth Circuit cases regarding the gross receipts tax's
treatment under the FTCA, but it asserts that at least one
judge has held that gross receipts tax payments are not
“fees and expenses” within the meaning of the
Equal Access to Justice Act., 28 U.S.C. 2412(d)(2)(A). Letter
at 2 (citing N.L.R.B. v. Pueblo of San Juan, 305
F.Supp.2d 1229, 1238 (D.N.M. 2003)(Vazquez, C.J.)). The
Letter further notes that the Tenth Circuit has held that a
district court did not abuse its discretion in disallowing
gross receipts tax recovery in a Truth in Lending
case. See Letter at 2 (citing Herrera v. First
Northern Savings & Loan Ass'n, 805 F.2d 896, 902
(10th Cir. 1986)). The Letter concludes that the gross
receipts tax “should be included in the 25% limitation
on fees under the FTCA so as not to subject [the United
States] to having to prosecute a claim on behalf of a
plaintiff who later argues the fees unauthorized.”
Letter at 2-3.
REGARDING THE FTCA
any jurisdictional issue, the party bringing the suit against
the United States bears the burden of proving that Congress
has waived sovereign immunity. See James v. United
States, 970 F.2d 750, 753 (10th Cir. 1992). It is
“axiomatic that the United States may not be sued
without its consent and that the existence of consent is a
prerequisite for jurisdiction.” United States v.
Mitchell, 463 U.S. 206, 212 (1983). “Challenges to
jurisdiction can . . . be raised at any time prior to final
judgment.” Grupo Dataflux v. Atlas Global Group,
L.P., 541 U.S. 567, 571 (2004)(citing Capron v. Van
Noorden, 6 U.S. (2 Cranch) 126 (1804)).
terms of the United States' consent define the parameters
of federal court jurisdiction to entertain suits brought
against it. See United States v. Orleans, 425 U.S.
807, 814 (1976); Ewell v. United States, 776 F.2d
246, 248 (10th Cir. 1985). When the United States waives its
immunity from suit, a court should neither narrow the waiver
nor “take it upon [itself] to extend the waiver beyond
that which Congress intended.” Smith v. United
States, 507 U.S. at 203 (quoting United States v.
Kubrick, 444 U.S. 111, 117-18 (1979)).
1948, Congress enacted the FTCA, which waives the United
States' sovereign immunity for certain torts that federal
employees commit. See FDIC v. Meyer, 510 U.S. 471,
475 (1994). Congress waives sovereign immunity only for
certain torts that United States employees cause while acting
within the scope of their office or of their employment.
See 28 U.S.C. § 1346(b); Warren v. United
States, 244 F.Supp.3d 1173, 1212 (D.N.M. 2017)(Browning,