Truth, Justice and Unclean Hands

In law school, you learn about something called Equity. Equity is one of those doctrines where you go when you have nothing... Basically, its the "its not fair" argument. You know how often "but its not fair...." Works in real life? Yeah, not very often.... And its the same in Court; Equity is rarely invoked, and even more rarely applied. (Referring back to my "Pound the law, pound the facts, pound the table" entry from a few weeks ago- you're usually going into Equity country when you're pounding the table....)

So, I was reading my new case law today, and I came across a fun, albeit inequitable, use of Equity.

HealthSouth, Alabama's infamous, big "we don't have to follow the rules everyone else does" scandal ridden corporate greed exemplar tried to take it to the next level. Balls? Oh yeah, they have big brass ones.

It seems that during 2000- 2003 HealthSouth decided to make its bottom line assets appear more substantial than they were, so they created a list of personal property "owned" by the corporation. Only the list was a purely fictional work. HealthSouth didn't actually own any of the items listed. (Frankly, it amuses me to imagine the list. If I lived in Jefferson Co, I might go to the Courthouse and copy the list for you just for amusement purposes. Works of art? Non-existent chairs? Fully furnished conference rooms that never were? How does one populate such a list?)

But I digress.

Now, in addition to bolstering the company's bottom line, ownership of property by corporations also creates tax liability. Specifically, Ad Valorum tax liabilities.

Naturally, after the scandal broke, HealthSouth suddenly needed to cut expenses- so its inflated bottom line needed to be reconciled with reality. Now, the County allowed them to restate 2003 property, since at the time this began 2003 taxes had not been paid, but they refused the company's request to restate the 2000-2002 property lists.

After the County refused, HealthSouth began its legal quest to restate those lists. The Probate Court read the statute and looked up the meaning of "mistake" and "error," which are the two times when a list can be revised, and decided that the "plain meaning" of neither of these terms applied to a fact situation where a company "purposefully" and "intentionally" overstated its possessions. (I picture the Judge, calling to his chief clerk, "Judy, will you bring me my dictionary? I have to look up whether an intentional act can be a mistake." She rolls her eyes at him. Naturally, the Probate Judge says No. The paid taxes stay paid.

HealthSouth appealed. (Surprise!)

On appeal, one of the issues they argued was that because the tax office allowed them to restate 2003, they couldn't treat the earlier years any differently. It was only fair, they argued. The Supreme Court denied their appeal and stated succinctly: "A party seeking Equitable relief must have acted with equity and must come into Court with clean hands."

And folks, from what I've read in the papers, the only person at HealthSouth who definitely has clean hands is the janitor.