`
`
`
`NOTE: This disposition is nonprecedential.
`
`United States Court of Appeals
`for the Federal Circuit
`______________________
`
`UNION TELECOM, LLC,
`Plaintiff-Appellant
`
`v.
`
`UNITED STATES,
`Defendant-Appellee
`______________________
`
`2020-1052
`______________________
`
`Appeal from the United States Court of Federal Claims
`in No. 1:16-cv-01409-TCW, Judge Thomas C. Wheeler.
`______________________
`
`Decided: July 22, 2021
`______________________
`
`ANDREW PAUL KAWEL, Kawel PLLC, Miami, FL, ar-
`gued for plaintiff-appellant.
`
` JULIE CIAMPORCERO AVETTA, Tax Division, United
`States Department of Justice, Washington, DC, argued for
`defendant-appellee.
` Also represented by DAVID A.
`HUBBERT, JOAN I. OPPENHEIMER.
` ______________________
`
`Before MOORE, Chief Judge, REYNA and HUGHES, Circuit
`Judges.
`
`
`
`Case: 20-1052 Document: 58 Page: 2 Filed: 07/22/2021
`
`2
`
`UNION TELECOM, LLC v. US
`
`HUGHES, Circuit Judge.
`Union Telecom, LLC, sued the IRS for a refund of taxes
`on prepaid phonecards. After the testimony portion of a
`bench trial, a new judge was assigned to the case at the
`trial court, but the judge denied the plaintiff’s request to
`recall witnesses under Rule 63. The trial court then denied
`the plaintiff’s claim for a refund. Union Telecom appeals
`the denial of its request to recall witnesses. We hold that
`the trial court erred in its decision but that the error was
`harmless. Accordingly, we affirm.
`I
`The IRS assesses taxes on toll telephone services.
`26 U.S.C. § 4251(a)(1), (b)(1)(B). Section 4252(b)(1) defines
`such services as “telephonic quality communication[s] for
`which (A) there is a toll charge which varies in amount with
`the distance and elapsed transmission time of each individ-
`ual communication and (B) the charge is paid within the
`United States.” For prepaid phonecards, the tax is paid by
`the first non-carrier to purchase cards from a carrier.
`26 U.S.C. § 4251(d)(1)(B) (assessing the tax “when the card
`is transferred by any telecommunications carrier to any
`person who is not a carrier”); 26 C.F.R. § 49.4251-4(a).
`Until 2006, the IRS interpreted the “distance” and
`“time” variables of § 4252(b)(1) in the disjunctive. Union
`Telecom, LLC v. United States, 144 Fed. Cl. 477, 480 (2019)
`(Decision). Therefore, the IRS interpreted the statute to
`cover sales of prepaid phonecards that billed by the amount
`of elapsed time, even if charges did not vary by distance.
`Id. However, in 2006, the IRS altered its interpretation,
`recognizing that, to be subject to the tax, providers must
`vary charges by both time and distance. Id. This change
`entitled those that had paid such tax to a refund. Id.
`Union Telecom purchased prepaid phonecards from a
`group of corporate entities arranged in a structure de-
`signed to avoid the tax. IDT Corporation (IDT) is a
`
`
`
`Case: 20-1052 Document: 58 Page: 3 Filed: 07/22/2021
`
`UNION TELECOM, LLC v. US
`
`3
`
`telecommunications carrier that distributes prepaid
`phonecards. Id. at 481. IDT formed a subsidiary carrier in
`Puerto Rico (IDT PR) and transferred the cards to that sub-
`sidiary. Id. at 481–82. This transaction was not taxable be-
`cause it was between carriers. IDT PR then sold the cards
`to Union Telecard Alliance (UTA), a non-carrier partially
`owned subsidiary of IDT. Id. at 482. This transaction was
`not taxable because it was outside of the United States. Id.
`UTA then sold these cards to Union Telecom, a non-carrier.
`Id. This transaction was not taxable because it was be-
`tween non-carriers. Union Telecom then sold these cards to
`consumers. Id. The IRS was aware of this arrangement and
`raised no issues. Id. at 483.
`After the IRS altered its interpretation regarding the
`tax on prepaid telephone cards, Union Telecom sued the
`IRS for a refund in the United States Court of Federal
`Claims. Judge Susan Braden presided over a three-day
`trial. J.A. 205–346. All testimony regarding the relevant
`transactions indicated that none of the entities in the chain
`remitted the tax to the IRS or were required to do so. Deci-
`sion, 144 Fed. Cl. at 483–85. For example, Joseph Farber,
`IDT’s CFO of U.S. retail operations, testified that “there
`was no excise tax paid.” J.A. 324.
`Nevertheless, the CEO of Union Telecom, Peter Shah,
`testified that Union Telecom was entitled to a refund. Shah
`lacked personal knowledge regarding whether IDT paid
`the tax. J.A. 244 (“I don’t talk to anybody in IDT. I have no
`idea.”). Indeed, UTA had informed Shah in a letter that
`“IDT did not pay any federal excise taxes on the . . . prepaid
`calling cards.” J.A. 485. Shah contended, however, that
`IDT included the tax in the price it charged UTA, which
`was then passed on to Union Telecom, regardless of
`whether the government ever received those payments.
`J.A. 245, 250. The invoices for the cards Union Telecom
`purchased did not include a line item for the tax, but Shah
`testified that in the phone card industry, carriers do not
`itemize taxes. J.A. 245.
`
`
`
`Case: 20-1052 Document: 58 Page: 4 Filed: 07/22/2021
`
`4
`
`UNION TELECOM, LLC v. US
`
`Before Judge Braden issued her ruling, the case was
`transferred to Judge Thomas Wheeler. Decision, 144 Fed.
`Cl. at 483. Union Telecom then requested that Judge
`Wheeler recall witnesses Farber and Shah under Rule 63
`of the Court of Federal Claims. The trial court denied the
`motion. J.A. 1–2. The trial court then issued a final judg-
`ment that Union Telecom was not entitled to a refund. De-
`cision, 144 Fed. Cl. at 489. The trial court’s opinion gave
`two alternative grounds for its decision. First, no entity in
`the chain paid or was required to pay the tax, so no refund
`was warranted. See id. at 484 (“Plaintiff certainly pur-
`chased the cards from UTA, but the Government’s swath of
`uncontroverted evidence shows that IDT never included
`[the tax] in those cards’ price during the relevant period.”)
`(citation omitted). Second, even if the tax had been paid,
`Union Telecom was not the first non-carrier transferee and
`therefore lacked standing. Id. at 486.
`Union Telecom appeals, arguing that the trial court
`erred by not recalling the witnesses. Although we agree
`that the trial court’s analysis of Rule 63 was erroneous, we
`hold that the error was harmless.
`II
`Rule 63 applies when a new judge takes over a hearing
`or trial at the Court of Federal Claims. In relevant part,
`the rule reads: “In a hearing or trial, the successor judge
`must, at a party’s request, recall any witness whose testi-
`mony is material and disputed and who is available to tes-
`tify again without undue burden.” The phrasing of the rule
`is mandatory (“must”), and there are only three listed ex-
`ceptions: (1) the testimony is immaterial, (2) the testimony
`is undisputed, or (3) there would be an undue burden on
`the witness. If a party makes a request under Rule 63, the
`trial court must find one of these exceptions in order to re-
`fuse to recall witnesses.
`Here, the trial court did not mention any of the three
`exceptions in its opinion. Instead, the trial court stated:
`
`
`
`Case: 20-1052 Document: 58 Page: 5 Filed: 07/22/2021
`
`UNION TELECOM, LLC v. US
`
`5
`
`The Court is familiar with the record and has ex-
`tensively reviewed the audio recordings of live tes-
`timony given during the three-day trial and the
`accompanying transcripts. The limited amount of
`testimony coupled with the Court’s access to these
`audio recordings well-positions the Court to render
`a decision on any purported credibility determina-
`tions.
`J.A. 1–2.
`Rule 63 does not grant an exception for when the court
`is familiar with the record. Because the trial court must
`find one of the three exceptions in order to refuse to recall
`witnesses, we hold that the trial court erred in its reason-
`ing.
`But the trial court’s error was harmless. None of the
`testimony that the plaintiff requested be reheard could
`have altered the outcome of the case. One of the reasons for
`the trial court’s judgment was that the chain of entities in
`this case was designed to avoid the tax on prepaid phone-
`cards, and with no entity responsible to pay the tax, Union
`Telecom was not entitled to a refund. None of the witnesses
`that Union Telecom seeks to recall have personal
`knowledge to the contrary.
`Shah, as the CEO of Union Telecom, has no personal
`knowledge regarding the tax liability of the entities earlier
`in the corporate structure. Union Telecom argues that his
`testimony could still alter the outcome because Shah has
`personal knowledge that phone card companies do not sep-
`arately list taxes on invoices. But, even if fully credited,
`this generalized knowledge of the industry could not alter
`the outcome. General practices regarding owed taxes are
`irrelevant because there is undisputed testimony that IDT
`designed a corporate structure to avoid owing the tax and
`that no party paid the tax. We therefore agree with the trial
`court that “[g]iven the lack of . . . first-hand knowledge,
`Shah’s assessment is not probative. In short, Union
`
`
`
`Case: 20-1052 Document: 58 Page: 6 Filed: 07/22/2021
`
`6
`
`UNION TELECOM, LLC v. US
`
`Telecom ignores the reality of the situation here—IDT
`structured its business to avoid paying the [tax].” Decision,
`144 Fed. Cl. at 484.
`Farber’s testimony also could not have altered the hold-
`ing. He testified that IDT did not pay the tax and that it
`structured its business as to not owe the tax. Thus, his tes-
`timony supported the government on the key issue. How-
`ever, even if his testimony were fully discredited, it was
`only one piece of evidence in a “swath of uncontroverted
`evidence show[ing] that IDT never included [the tax] in
`[the] cards’ price during the relevant period.” Id.
`III
` We have considered Appellant’s other arguments and
`find them unpersuasive. We hold that the trial court erred
`by refusing to recall witnesses under Rule 63 without find-
`ing any of the exceptions to the rule. But because none of
`the witnesses that the plaintiff requested be recalled could
`have altered the outcome, that error was harmless. There-
`fore, we affirm.
`
`No costs.
`
`AFFIRMED
`
`