Opinion
CASE NO: 00-3703-CIV-GOLD-SIMONTON.
March 5, 2002
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
THIS CAUSE is before the court upon the United States of America's motion for summary judgment (DE #23). The plaintiff, Clifford S. Perlman ("Perlman"), filed a complaint against the United States in the United States District Court for the Central District of California for a refund and abatement of his Internal Revenue taxes. Perlman seeks a refund from the Internal Revenue Service ("I.R.S.") of $103,925.74 pursuant to 26 U.S.C. § 7422. The California district court transferred Perlman's complaint to the Southern District of Florida due to improper venue. The United States filed a counterclaim based on Perlman's alleged failure to collect, account for, and pay over the federal employment taxes of his employees. According to the United States, Perlman remains indebted to the I.R.S. in the amount of $56,046.88. In its motion, the United States requests that summary judgment be entered in its favor on its counterclaim and Perlman's complaint. After carefully considering this motion, the evidence, and the parties' arguments, the court grants the United States' motion for summary judgment.
The Undisputed Facts
In support of its motion for summary judgment, the United States has filed the depositions of Clifford S. Perlman, Howard Grossman, and Joseph M. Griesser. The United States also has submitted several corporate documents related to Chelsea Title Agency, Inc. Additionally, the United States has incorporated into its motion a statement of undisputed facts pursuant to Southern District of Florida Local Rule 7.5. Perlman has not submitted any evidence in opposition to the United States's motion. Instead, he has submitted a "Memorandum in Reference to Defendant's Motion for Summary Judgment", which contains factual allegations and no memorandum of law. The following facts are derived from the United States's statement of facts and the record evidence.
At all times relevant to this case, Clifford Perlman owned at least seventy-five percent of the stock of Chelsea Title Agency, Inc. (Perlman Depo. at 4). Perlman was a member of Chelsea Title's board of directors and guaranteed loans of the corporation, including a $400,000 demand loan from the National Community Bank of New Jersey. (Perlman Depo. at 26, Ex. 1 at 4; Griesser Depo. at 8, 12; Grossman Depo. at 7). The undisputed evidence shows that Perlman also had the authority to hire, fire, and manage employees of Chelsea Title; direct and authorize the payment of bills of Chelsea Title, including payroll checks; and determine Chelsea Title's financial policy. (Griesser Depo. at 11-12).
In his "Memorandum in Reference to Defendant's Motion for Summary Judgment", Perlman contends that he did not have any authority over employees and lacked the authority to write checks for Chelsea Title, but he has failed to submit any evidence in support of these statements, including any affidavits or deposition testimony.
Howard Grossman was the Chairman of the board of Chelsea Title from approximately July of 1988 until November of 1989. Joseph Griesser handled the corporation's finances during the period of September of 1989 until mid-November of 1989. Perlman often met with Grossman and Griesser to discuss the business of Chelsea Title. (Perlman Depo. at 29). During the end of September 1989, Griesser learned that Chelsea Title's employment taxes were delinquent. He immediately informed Perlman and Grossman of this delinquency. (Griesser Depo. at 13). Grossman also discussed this problem with Perlman when he was informed of it by Griesser. (Grossman Depo. at 10). Perlman was aware that employers such as Chelsea Title were required to withhold taxes, and he was aware of Chelsea Title's poor financial condition during the relevant time period. (Perlman Depo. at 13). During the time that Chelsea Title was not paying its payroll taxes, it was paying its debts to other creditors. (Griesser Depo. at 14).
Perlman contends that he was not aware of Chelsea Title's nonpayment of employment taxes, but he has not submitted any evidence in support of this statement.
On July 19, 1993, Perlman and other "responsible persons" from Chelsea Title were assessed a trust fund recovery penalty in the amount of $103,925.74 related to the unpaid federal employment taxes of Chelsea Title for the third and fourth quarters of 1989 and the first quarter of 1990. (Gov. Ex. 1). Since the tax assessment, Perlman, Grossman, and Griesser have made payments to the I.R.S. that have reduced the amount of tax liability to $56,046.88. Exhibit 1 to the United States's motion for summary judgment contains an accounting of these credits. The government's counterclaim seeks judgment against Perlman for the remaining $56,046.88.
On July 8, 1996, Perlman filed a claim for a tax refund for $75,303.17. (Gov. Ex. 2). On October 20, 1997, the I.R.S. notified Perlman that his claim for a refund had been disallowed. Penman initiated this suit on October 20, 1999, for $103,925.74, and the United States filed its counterclaim for $56,046.88 on January 5, 2001.
Summary Judgment Standard
Rule 56(c) of the Federal Rules of Civil Procedure authorizes summary judgment where the pleadings and supporting materials show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986). The court's focus in reviewing a motion for summary judgment is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. Sept. 1997). The moving party has the burden to establish the absence of a genuine issue as to any material fact. See Adickes v. S.H. Kress Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608 (1970); Tyson Foods, Inc., 121 F.3d at 646. Once the moving party has established the absence of a genuine issue of material fact, to which the nonmoving party bears the burden at trial, it is up to the nonmoving party to go beyond the pleadings and designate "specific facts showing that there is a genuine issue for trial." Celotex v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553 (1986). Issues of fact are genuine only if a reasonable jury, considering the evidence presented could find for the nonmoving party. See Anderson, 477 U.S. at 247-51, 106 S.Ct. at 2510-11. In determining whether to grant summary judgment, the district court must remember that, "credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Id. 477 U.S. at 255, 106 S.Ct. at 2513.
Analysis
I. Liability Under the Internal Revenue Code
The Internal Revenue Code ("Code") and the regulations promulgated thereunder require employers to withhold from employees' paychecks the employees' share of FICA and income taxes. See 26 U.S.C. § 3102 (a), 3402(a); see also Slodov v. United States, 436 U.S. 238, 242-43, 98 S.Ct. 1778, 1782-83. Section 7501(a) of the Code requires an employer to remit withholding taxes to the I.R.S. I.R.S. regulations require that such remittances be made on a quarterly basis. See 26 C.F.R. § 31.6011 (a)-4. Regardless of whether or not the employer actually pays the withheld taxes over to the I.R.S., the United States's only recourse is against the employer. See Slodov, 436 U.S. at 243, 98 S.Ct. at 1783.
If the employer does not pay withholding taxes to the I.R.S., section 6672(a) of the Code imposes personal liability for unremitted taxes upon any person responsible for remitting the taxes.
This provision states:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.26 U.S.C. § 6672 (a). Section 6672 was designed to ensure that employers complied with their obligation to withhold and pay taxes by subjecting officers responsible for the withholding and payment of taxes to personal liability. See Slodov, 436 U.S. at 247, 98 S.Ct. at 1785. If the I.R.S. determines that an individual is a responsible person who has willfully failed to pay over taxes, it makes an assessment for each quarter in which it has determined that a wrongful withholding has occurred. The I.R.S. then commences an action pursuant to 26 U.S.C. § 6672 (a).
By the same token, the Code allows an employer against whom a tax penalty has been wrongfully assessed to file a civil action against the United States for a refund of the wrongfully assessed tax:
No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged, to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof26 U.S.C. § 7422 (a).
II. Perlman's Claim Against the United States
Perlman's complaint seeks to recover taxes he allegedly overpaid to the I.R.S. in the amount of $103,925.74. Perlman has filed his claim against the United States pursuant to 26 U.S.C. § 7422 (a), which is quoted above. When requesting relief under section 7422(a), a taxpayer must overcome the presumption of correctness that is attributed to government tax assessments. See United States v. Janis, 428 U.S. 433, 440, 96 S.Ct. 3021, 3025 (1976). A taxpayer such as Perlman, who challenges the validity of an assessment, "bears the burdens of both production and of persuasion." United States v. McCombs, 30 F.3d 310, 318 (2d Cir. 1994) (citations omitted). That is, Perlman must present evidence to establish that the challenged I.R.S. assessment was erroneous. See Webb v. Internal Rev. Svc., 15 F.3d 203, 205 (1st Cir. 1994) (finding that taxpayer failed to meet this burden); Liddon v. United States, 448 F.2d 509, 514 (5th Cir. 1971) ("A plaintiff seeking a refund of a partial payment of a section 6672 penalty has the burden of proving that the penalty assessment was erroneous both as to the plaintiffs refund claim and as to the Government's counterclaim for the unpaid balance of the assessment").
The United States correctly argues that, even if Perlman were to prevail on his complaint, the limitations provision of 26 U.S.C. § 6511 would bar him from seeking most of the relief he requests. Under this provision, Perlman may assert a claim for only $1,661.27 because more than two years have elapsed from the time Perlman "paid" to the I.R.S. sums above $1,661.27.
The Eleventh Circuit adopted as binding precedent all cases decided by the former Fifth Circuit Court of Appeals prior to the close of business on September 30, 1981. See Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981).
Perlman has not made the requisite showing under 26 U.S.C. § 7422(a). In his complaint, Perlman fails to explain why the I.R.S.'s assessment was erroneous. He simply states that he has overpaid sums for taxes and has submitted a claim for a refund, which was rejected by the I.R.S. See Compl. at §§ 3-6. Although Perlman attaches a copy of the I.R.S.'s disallowance letter to his complaint, he does not include a copy of his Claim for Refund and Abatement. As a result, the court cannot discern the basis of his request for a refund.
Perlman's memorandum in opposition to the United States's motion for summary judgment fares no better. While Perlman essentially contends that he is not liable for the taxes because he lacked authority over Chelsea Title's affairs and had no knowledge of Chelsea Title's failure to pay the taxes, he submits no evidence in support of these points. The case law is clear that, in order to prevail on a request for a refund, Perlman must present evidence to overcome the assessment's presumption of correctness. Having failed to do this, Perlman cannot prevail on his claim.
During oral argument, Perlman requested additional time to submit evidence in support of his position, but the time for filing such proof expired several months ago. Additionally, the only evidence Perlman offered to produce was his own affidavit. This is insufficient to overcome the United States's motion because "unsupported, self-serving statements of the party opposing summary judgment are insufficient to avoid summary judgment." Penalty Kick Mgmt. v. Coca-Cola Co., 164 F. Supp.2d 1376, 1378 (N.D. Ga. 2001) (citing Midwestern Waffles, Inc. v. Waffle House, Inc., 734 F.2d 705, 714 (11th Cir. 1984)).
That Perlman is proceeding in this litigation pro se does not excuse his failure. Although the pleadings submitted by a pro se plaintiff are held to a less stringent standard than those of attorneys, this leniency does not give a court a license to serve as a de facto counsel for a pro se litigant or to rewrite deficient pleadings in order to sustain the litigant's action. See Fernandez v. United States, 941 F.2d 1488, 1491 (11th Cir. 1991) (stating that pro se pleadings are to be liberally construed); Gibbs v. Republic Tobacco L.P., 119 F. Supp.2d 1288, 1290 (M.D. Fla. 2001) (stating that court would not redraft pro se litigant's pleadings) (citations omitted). This principle is particularly applicable here, where the pro se plaintiff has had a legal education and has practiced law in this state. See Perlman Depo. at 10. Because Perlman has not met his evidentiary burden or otherwise explained why he is entitled to relief on his claim, the United States is entitled to summary judgment on Perlman's complaint. As such, Perlman's complaint must be dismissed.
III. The United States's Counterclaim
The United States's counterclaim is an action pursuant to 26 U.S.C. § 6672 (a) to reduce to judgment the assessment the I.R.S. has made against Perlman and Chelsea Title. Although Perlman is a defendant to the counterclaim, as with his claim under 26 U.S.C. § 7422 (a), he bears the burden of proving that the assessment was incorrect. For a person to be liable under section 6672(a), he or she must have been "(1) a responsible person (2) who has willfully failed to perform a duty to collect, account for, or pay over federal employment taxes." Malloy v. United States, 17 F.3d 329, 331 (11th Cir. 1994) (quoting Williams v. United States, 931 F.2d 805, 809-10, rehearing granted and opinion supplemented, 939 F.2d 915 (11th Cir. 1991)). Once an individual is established as a "responsible person", the burden shifts to the individual to disprove willfulness. See Malloy at 331.
A. Responsible Person
The "responsible person" requirement of section 6672(a) arises from that provision's term, "[a]ny person required to". Because section 6672(a) is "a vital collection tool" intended to ensure the smooth flow of necessary revenues to the government, courts take a broad view of who qualifies as a responsible person. See United States v. Rem, 38 F.3d 634, 642 (2d Cir. 1994) (citations omitted); see also Harris v. United States, 175 F.3d 1318, 1321 n. 5 (11th Cir. 1999) (citing Smith v. United States, 894 F.2d 1549 (11th Cir. 1990) (stating that responsible person requirement is construed broadly)). In determining whether an individual qualifies as a responsible person, the court must examine the individual's status, duty, and authority within the corporation, not his or her knowledge of the tax liability. See Harris, 175 F.3d at 1320 (citation omitted). According to the Eleventh Circuit, "liability attaches to any person who, based on her status in the corporation, has the `actual authority or ability' to pay the taxes." Id. at 1321 (citation omitted).
No single factor is dispositive as to whether the individual had actual authority or ability. Rather, the determination of the individual's degree of control must be made in light of the totality of the circumstances. See Rem, 38 F.3d at 642. The Eleventh Circuit considers the following factors in this analysis: the holding of corporate office, control of financial matters, authority to disburse corporate funds, ownership of stock in the company, and authority to hire and fire employees. See Harris at 1321; Williams v. United States, 931 F.2d 805, 810 (11th Cir. 1991). Other factors are whether the individual is a member of the board of directors, is active in the management of the company, and has check-signing authority. See Rem, 38 F.3d at 642.
The unrefuted evidence submitted by the United States in this case establishes that Perlman was a responsible person. According to the deposition testimony of Grossman and Griesser, Perlman had the authority to sign checks, hire and fire employees (and actually participated in the hiring and firing of at least two individuals), participate in management, determine Chelsea Title's financial policy, and authorize the payment of bills. Perlman also discussed Chelsea Realty business with Grossman and Griesser on a weekly basis. Additionally, the evidence shows that Perlman owned seventy-five percent of Chelsea Realty's stock, was a member of the board of directors, and guaranteed loans of the corporation (including one loan for $400,000.00). Although Perlman did not exercise all of this authority regularly, it is the existence of such authority, irrespective of whether it is actually exercised, that is determinative. See Muck v. United States, 3 F.3d 1378, 1381 (10th Cir. 1993). Other courts faced with facts similar to those of this case uniformly have found that such an individual is a responsible person under 26 U.S.C. § 6672 (a). See, e.g., Muck, 3 F.3d at 1381 (finding that plaintiff who was sole shareholder of corporation and authorized to sign checks, borrow money for the corporation, and manage corporation's affairs was responsible person, even if he did not exercise this authority) (10th Cir. 1993); Denbo v. United States, 988 F.2d 1029, 1032 (10th Cir. 1993) (finding that plaintiff who guaranteed corporation's loans, owned fifty percent of stock, attended meetings, and had status of director was a responsible person); Larson v. United States, 76 F. Supp.2d 1092, 1097 (E.D. Wash. 2000) (finding that plaintiff who was corporation's majority shareholder, authorized to sign checks, and personally borrowed money to infuse into corporation was responsible person).
Perlman has failed to establish a genuine issue of material fact as to his status as a responsible person. Although Perlman has not submitted any evidence in opposition to the United States' motion for summary judgment, the court has conducted an independent review of the record in order to ascertain whether there is any evidence to support Perlman's position that he was not a responsible person. All that can be found are Perlman's own, self-serving statements that he had no authority to hire or fire employees or to write checks for Chelsea Title. See Pl. Opp. to S.J. Mtn. These statements are not evidence, but statements made by Perlman in memorandum in opposition to the United States's motion. Even if Perlman had made these statements under oath, they would not defeat the United States' motion because the "unsupported, self-serving statements of the party opposing summary judgment are insufficient to avoid summary judgment." Penalty Kick Mgmt., Inc. v. Coca-Cola Co., 164 F. Supp.2d 1376, 1378 (N.D. Ga. 2001) (citing Midwestern Waffles, Inc. v. Waffle House, Inc., 734 F.2d 705, 714 (11th Cir. 1984)); see also Johnston v. Henderson, 144 F. Supp.2d 1341, 1360 (S.D. Fla. 2001) (stating that conclusory allegations supported by non-moving party's allegations do not satisfy non-moving party's burden on summary judgment). Accordingly, there is no factual dispute as to Perlman's status as a responsible person for purposes of 26 U.S.C. § 6672 (a).
B. Willfulness
Once an individual is established as a responsible person, he or she has the burden of disproving willfulness. See United States v. Rem; 38 F.3d 634, 643 (2d Cir. 1994); Williams v. United States, 931 F.2d 805, 810 (11th Cir. 1991); Smith v. United States, 894 F.2d 1549, 1553 (11th Cir. 1990). Under 26 U.S.C. § 6672 (a), willfulness does not require a fraudulent or bad motive. See Williams, 931 F.2d at 810. According to the Eleventh Circuit, the willfulness requirement is satisfied "if the responsible person has knowledge of payments to other creditors after he becomes aware of the failure to remit the withheld taxes." Williams, 931 F.2d at 810. The willfulness requirement also is met if the responsible person shows "a reckless disregard of a known or obvious risk that trust funds may not be remitted to the government, such as by failing to investigate or to correct mismanagement after being notified that withholding taxes have not been duly remitted." Malloy v. United States, 17 F.3d 329, 332 (11th Cir. 1994) (citations omitted); see also Smith, 894 F.2d 1554 n. 5 (citations omitted). Under the latter definition of willfulness, the Eleventh Circuit recognizes that "something less than actual knowledge . . . is sufficient to satisfy the willfulness requirement." Malloy, 17 F.3d at 332.
In this case, Perlman has not presented any evidence to support his position that his failure to pay the withholding taxes was not willful. The record supports the United States's position that, once Perlman learned of Chelsea Title's delinquency, he failed to fulfill his obligation to apply unencumbered corporate funds to pay the corporation's tax liabilities. According to Grossman's and Griesser's deposition testimony, Perlman had actual knowledge that Chelsea Title's taxes were not being paid because both individuals informed Perlman of this delinquency and met with him to discuss this problem. After being informed of this, Perlman did nothing to change the situation. His failure to investigate or to correct mismanagement after receiving notice that withholding taxes had not been paid satisfies the willfulness requirement of 26 U.S.C. § 6672. See Denbo v. United States, 988 F.2d 1029, 1033 (10th Cir. 1993) (finding that responsible person's awareness that taxes had not been paid and his subsequent reliance on false assurance that everything would be "worked out" subjected him to liability under 26 U.S.C. § 6672). Because Perlman acquiesced in Chelsea Title's payment to other creditors while the taxes remained unpaid, the court finds that he "willfully" failed to remit federal payroll taxes as a matter of law. See McDonald v. United States, 939 F.2d 916, 919 (11th Cir. 1991) (finding that willfulness requirement was satisfied where taxpayer was aware of nonpayment of taxes and failed to remedy it).
Perlman's self-serving statements that he had no knowledge of the corporation's failure to pay taxes are not sufficient to meet his burden of production or to defeat the United States's motion. See Smith, 894 F.2d at 1554 (finding that taxpayer had failed to carry burden of proof on willfulness issue where he presented no witnesses to support his statement that he did not know of tax withholding problems); Penalty Kick Mgmt., Inc. v. Coca-Cola Co., 164 F. Supp.2d 1376, 1378 (N.D. Ga. 2001) ("unsupported, self-sewing statements of the party opposing summary judgment are insufficient to avoid summary judgment") (citing Midwestern Waffles, Inc. v. Waffle House, Inc., 734 F.2d 705, 714 (11th Cir. 1984)). Based on the record submitted by the parties, there is no factual dispute concerning the United States's contention that Perlman was a person who had ultimate authority over the corporation, could have seen to it that the taxes were paid, and who willfully devoted corporate funds to purposes other than the payment of withholding taxes. Because Perlman has not met his burden under either 26 U.S.C. § 7422 (a) or 6672(a), the United States is entitled to swumary judgment. Accordingly, it is hereby:
Even if Perlman did not have actual knowledge of Chelsea Title's liability, it is clear that he acted with reckless disregard of a known or obvious risk of nonpayment. See Malloy, 17 F.3d at 332 (stating that reckless disregard of risk is sufficient to establish willfulness requirement and that actual knowledge is not necessary). Perlman knew that his corporation had an obligation to pay withholding taxes, yet he also knew that the corporation was having serious financial problems. When Griesser submitted his notice of resignation, which Perlman concedes to having read, he stated, "I will involve myself no further at this point given the personal liability issues which surround my employment" Griesser Depo., Ex. 2. Griesser's fear of personal liability should have alerted Perlman to the fact that things were amiss at Chelsea Title. At that point, he should have taken a more active role in Chelsea Title's operational affairs, such as by checking corporate records. Instead, he did nothing to ensure that Chelsea Title was operating legitimately.
ORDERED AND ADJUDGED THAT:
1. The United States' motion for summary judgment (DE #23) is GRANTED.
2. Perlman's complaint is DISMISSED in its entirety.
3. The United States is entitled to judgment on its counterclaim to recover $56,046.88 from Perlman.
4. The Clerk of the Court shall CLOSE this case.
5. All pending motions are DENIED AS MOOT.