Abu-Awad v. U.S.

Decision Date14 August 2003
Docket NumberNo. Civ.A. H-02-2068.,Civ.A. H-02-2068.
Citation294 F.Supp.2d 879
PartiesNaman ABU-AWAD d/b/a Stat Physical Therapy, Plaintiff, v. UNITED STATES of America, Defendant.
CourtU.S. District Court — Southern District of Texas

John H. Polk, Attorney at Law, Houston, TX, for plaintiffs.

Cynthia E. Messersmith, Christopher R. Egan, US Dept. of Justice, Dallas, TX, for defendant.

MEMORANDUM AND ORDER

CRONE, United States Magistrate Judge.

I. Introduction

Pending before the court is Defendant United States of America's ("United States") Motion to Dismiss or for Summary Judgment (# 12). The United States, on behalf of the Commissioner of the Internal Revenue Service ("IRS"), seeks summary judgment on the complaint of Plaintiff Naman Abu-Awad ("Awad"), doing business as Stat Physical Therapy ("Stat"), challenging a federal tax lien and underlying assessment of penalties by the IRS. Having reviewed the pending motion, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that summary judgment is warranted.

II. Background

Stat is a sole proprietorship owned by Awad. During the fourth quarter of 2000 and first quarter of 2001, Stat underpaid its employment taxes. By virtue of assessments made March 12, March 19, and June 4, 2001, the IRS determined that Stat owed the United States the sum of $42,205.06 in delinquent taxes, penalties, and interest. Shortly after accruing these taxes and penalties, Stat's administrator, Catherine Herridge ("Herridge"), requested the IRS's Compliance Division to abate the penalties. By letter dated September 12, 2001, the Compliance Division denied the request for a penalty adjustment because Herridge did not provide requested documentation and repeatedly missed scheduled appointments with IRS representatives.

Upon Stat's failure to pay the taxes and penalties assessed, the IRS filed a Notice of Federal Tax Lien against Awad on November 13, 2001, and sent Awad a Notice of Federal Tax Lien Filing on November 16, 2001. This notice informed Awad of his right to request a Collection Due Process ("CDP") Hearing before the IRS Appeals Office to appeal the IRS's proposed collection action and to discuss payment method options. On December 18, 2001, Awad requested a CDP hearing via a form signed by Patricia Mead ("Mead"), a certified public accountant. Neither Mead nor Awad, however, submitted a Form 2848, Declaration of Representation, or other separate written consent to permit her to receive taxpayer information concerning Awad. See 26 U.S.C § 6103(a), (c); 26 C.F.R. § 301.6103(c)-1. An attachment to the Request for a CDP Hearing outlines four general issues in connection with the lien: (1) all taxes related to the lien have been paid and a hearing to review the penalties assessed is requested; (2) there are "extenuating problems which created the penalties related to the lien;" (3) "dramatic changes" to Stat's method of making payroll tax deposits have been made; and (4) the filing of the lien would have "extremely adverse affects [sic]" on Stat's banking relationships. The attachment requests a meeting to review Stat's payment schedule and to discuss how Awad could best handle the balance due without lien filings. The attachment, however, does not explain these contentions or provide a factual basis for any of the allegations; there is no identification or description of the "extenuating problems," the "dramatic changes," or the "extremely adverse [e]ffects."

On February 12, 2002, the IRS Appeals Office accepted the case and sent a letter directly to Awad (the only address reflected on the Request for a CDP Hearing), signed by Christopher B. Darling ("Darling"), Settlement Officer. The letter notified Awad of a conference scheduled for March 6, 2002, at which time he would have an opportunity to present facts, arguments, and legal authority to support his position. Furthermore, the letter requested that Awad notify Darling which of his four listed Power of Attorney representatives would be handling the case. Awad did not respond to the letter or attend the conference on March 6, 2002. On March 13, 2002, Darling mailed Awad a second letter, noting that Awad had failed to appear on March 6 and rescheduling the conference for April 1, 2002. The letter further stated that if the time selected was inconvenient, Darling would arrange another time. The letter reminded Awad that any representative he selected would be required to submit a Form 2848 Declaration of Representative, power of attorney, or similar written authorization. Awad did not attend the second conference, nor did he submit a Form 2848 or power of attorney designating a representative to attend on his behalf.

On May 2, 2002, after verifying that the IRS Compliance Division had met all procedural and legal requirements, the IRS Appeals Office issued its "Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330," sustaining the tax lien and approving the proposed collection action. The Notice of Determination notes that the tax liability was self-assessed and was not in dispute. The notice addresses the issues raised by Awad, as follows:

1. All of the taxes have been paid and all that remains on these periods is penalties and interest and we want a conference to review these penalties.

The penalties related to these periods were reviewed and nothing seems to be out of the ordinary regarding these assessments.

2. There are extenuating circumstances which created the problems related to these penalties. We want to speak to an officer about a payment schedule without lien filings.

It appears that you and the revenue officer have discussed the penalties and a denial of abatement was issued by the Compliance Division. You were informed that your arguments [sic] did not meet `reasonable cause' and you could pursue penalty abatement through Appeals.

The case history also shows that you have been negotiating the terms of an installment agreement with the Compliance Division but have not come to terms.

3. The filing of a lien would adversely affect our relationship with our bank which could result in the business being shut down.

The lien filed November 16, 2001 was not the first lien to be filed and the business is still operating.

Unfortunately, we will not be able to address any of these issues since you did not appear for the hearings I set for March 6, 2002 at 9:00 am or April 1, 2002 at 1:00 p.m.

The notice further observes that "[n]o collection alternatives were raised since no conferences took place."

On May 10, 2002, in response to a facsimile dated May 9, 2002, Darling wrote to Awad's current counsel, John H. Polk ("Polk"), advising him of the reasons for the Notice of Determination. In his letter, Darling states in pertinent part:

Your client never responded to repeated attempts to contact them [sic] to hold a hearing to hear their [sic] appeal. After two missed appointments, the case was closed based on the information contained in the file.

The offer in compromise filed on behalf of your client never reached my desk and I was never informed of its existence. The Due Process Appeal was completed and sent because a lien had been filed. While the filing of an offer in compromise will not affect the status of the lien, it can be considered a collection alternative. The offer in compromise will be considered independently of the CDP request.

It should be noted that your client has four (4) forms 2848, Power of Attorney, filed for the periods listed on the form 12153, Request for Collection Due Process. Three of the P.O.A. forms were received on the same day and a fourth was filed a few days earlier. Instead of guessing who was going to represent the taxpayer, I sent all communications to your client and let them [sic] choose who they [sic] wished to represent them [sic]. I will not carry on five conversations at the same time regarding the same issues. When no response came, I decided to send copies of the final letter to all listed P.O.As.

According to the affidavit of Radha Thiagarajan ("Thiagarajan"), an attorney employed by Polk, she spoke with Darling on May 14, 2002, and requested another hearing due to the filing of an offer in compromise. Darling responded that the Request for a CDP Hearing was filed by an unregistered agent whom he could not contact and that he would not give Awad another hearing. Thiagarajan further states in her affidavit that when she spoke with Darling again on May 30, 2002, he stated he could not revoke the IRS determination letter. In addition, Thiagarajan indicates that Darling stated that "at court, Plaintiffs could raise the issues written in their collection due process hearing request according to the Internal Revenue Service manual." On May 31, 2002, Awad instituted this action seeking judicial review of the Notice of Determination. In his complaint, Awad requests relief in the form of a determination that the federal tax lien is improper, the removal of the federal tax lien, and an abatement of the penalties assessed.

III. Analysis
A. Summary Judgment Standard

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106...

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