Arnett v. US

• Decision Date: 28 May 1996
• Docket Number: 94-4040-SAC.,No. 94-4140-SAC,94-4140-SAC
• Citation: 927 F. Supp. 1464
• Parties: Rodney ARNETT, Plaintiff, v. UNITED STATES of America, Defendant (Two Cases).
• Court: U.S. District Court — District of Kansas

927 F. Supp. 1464

Rodney ARNETT, Plaintiff, v. UNITED STATES of America, Defendant (Two Cases).

Nos. 94-4140-SAC, 94-4040-SAC.

United States District Court, D. Kansas.

May 28, 1996.

COPYRIGHT MATERIAL OMITTED

Justice B. King, Fisher, Patterson, Sayler & Smith, Topeka, KS, for plaintiff.

Virginia Navarrete Brooks, Office of Special Litigation Tax Division, Washington, DC, for U.S.

MEMORANDUM AND ORDER

CROW, District Judge.

On April 29, 1991, the Internal Revenue Service assessed Rodney Arnett a total penalty under 26 U.S.C. § 6672 in the amount of $21,591.72. In these cases, Arnett and the United States government are embroiled in a battle concerning Arnett's liability under § 6672 for certain unpaid employment withholding taxes of TSP, Inc., a company in which Arnett acted as, inter alia, vice-president and secretary.

History of the Dispute

On July 26, 1993, Arnett commenced his first lawsuit against the United States regarding the April 29, 1991, assessment. On February 18, 1994, this court entered a memorandum and order denying United States' motion to dismiss Arnett's claim for failure to exhaust his administrative remedies. See Arnett v. United States, 845 F.Supp. 796 (D.Kan.1994). However, concerned that Arnett had not exhausted his administrative remedies, the court entered an order requiring the parties to file additional briefs regarding the court's jurisdiction to consider the case. On April 1, 1994, rather than attempt to satisfy the court's February 18, 1994, memorandum and order, Arnett and the United States reached an agreement stipulating to the dismissal without prejudice of all of Arnett's claims, each party to bear its own costs.

Arnett subsequently filed a second and third lawsuit against the United States regarding the April 29, 1991, assessment. On May 11, 1995, the court entered a memorandum and order granting the United States' motion to dismiss Arnett's claim based upon 26 U.S.C. § 7433. See Arnett v. United States, 889 F.Supp. 1424 (D.Kan.1995). Based upon its review of all of the pleadings filed by Arnett, including his original complaint and "amended and supplemental complaint" in Case No. 94-4040-SAC, it appeared to the court that Arnett had for whatever reason abandoned his refund claim pursuant to 26 U.S.C. § 7422 and his claim for attorney's fees pursuant to 26 U.S.C. § 7430. Consequently, the court instructed the clerk of the court to enter judgment in favor of the United States.

Arnett subsequently filed a motion to alter or amend. In his motion, Arnett contended that the court had misconstrued § 7433. Arnett also contended that he did not intend to abandon his § 7422 refund claim or his claim for attorney's fees. In a memorandum and order entered on November 8, 1995, the court denied Arnett's motion to the extent that he contended that the court had improperly construed § 7433. See Arnett v. United States, 910 F.Supp. 515, 517-518 (D.Kan. 1995). However, in light of the fact that the government did not oppose Arnett's desire to pursue his refund claim, the court set aside the judgment and permitted Arnett to pursue his refund claim and his claim for attorney's fees. 910 F.Supp. at 517. In that memorandum and order, the court permitted the parties to file motions for summary judgment regarding the outstanding claims.

Pending before the court are cross-motions for summary judgment:

Rodney Arnett's "Motion for Summary Judgment" (Dk.45).¹

The United States' "Motion for Summary Judgment" (Dk.42).

Each party has filed a response.

Arguments of the Parties

Arnett contends that he is not liable under § 6672 as he was not a "responsible person" within the meaning of that section. According to Arnett, William Anderson, the president of TSP, was and is the person responsible for the unpaid withholding taxes. Alternatively, Arnett contends that even if he was a "responsible person" within the meaning of § 6672, his failure to pay the withholding taxes was not willful. Arnett seeks (1) a determination that the United States' assessment of a 100% penalty was wrongful; (2) a refund of the $6,013.40 that the IRS has collected from him to date; and (3) a finding that the United States' position in this case was not substantially justified, therefore entitling him to recover his reasonable attorney's fees pursuant to 26 U.S.C. § 7430.

The government contends that Arnett was properly assessed the penalty pursuant to § 6672. Based upon Tenth Circuit precedent, the government contends that Arnett was a responsible person within the meaning of § 6672 and that his failure to pay those taxes was wilful. In its counterclaim, the United States seeks judgment in the amount of the unpaid balance of the assessment, plus statutory interest from the date of the assessment.

Summary Judgment Standards

A court grants a motion for summary judgment if a genuine issue of material fact does not exist and if the movant is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The substantive law governing the suit dictates which facts are material or not. Id. at 248, 106 S.Ct. at 2510. "Only disputes over facts that might affect the outcome of the suit under the governing law will ... preclude summary judgment." Id. There are no genuine issues for trial if the record taken as a whole would not persuade a rational trier of fact to find for the nonmoving party. Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). "There are cases where the evidence is so weak that the case does not raise a genuine issue of fact." Burnette v. Dow Chemical Co., 849 F.2d 1269, 1273 (10th Cir.1988).

The movant's burden under Rule 56 of the Federal Rules of Civil Procedure is to lay out the basis of its motion and to "point to those portions of the record that demonstrate an absence of a genuine issue of material fact given the relevant substantive law." Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir.), cert. denied, 506 U.S. 1013, 113 S.Ct. 635, 121 L.Ed.2d 566 (1992). "A movant is not required to provide evidence negating an opponent's claim." Committee for First Amendment v. Campbell, 962 F.2d 1517, 1521 (10th Cir.1992) (citation omitted).

If the moving party meets its burden, then it becomes the nonmoving party's burden to show the existence of a genuine issue of material fact. Bacchus Industries, Inc. v. Arvin Industries, Inc., 939 F.2d 887, 891 (10th Cir.1991); see Martin v. Nannie and the Newborns, Inc., 3 F.3d 1410, 1414 (10th Cir.1993) ("If the moving party meets this burden, the non-moving party then has the burden to come forward with specific facts showing that there is a genuine issue for trial as to elements essential to the nonmoving party's case."). When the nonmoving party will have the burden of proof at trial, "`Rule 56(e) ... then requires the nonmoving party to go beyond the pleadings and by her own affidavits or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Mares v. ConAgra Poultry Co., Inc., 971 F.2d 492, 494 (10th Cir.1992) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986)). "Unsubstantiated allegations carry no probative weight in summary judgment proceedings." Phillips v. Calhoun, 956 F.2d 949, 951 (10th Cir.1992) (citations omitted); see Martin, 3 F.3d at 1414 (non-moving party cannot rest on the mere allegations in the pleadings). "Speculation does not create a genuine issue of fact; instead, it creates a false issue, the demolition of which is a primary goal of summary judgment." Hedberg v. Indiana Bell Telephone Co., Inc., 47 F.3d 928, 929 (7th Cir.1995); see Vega v. Kodak Caribbean, Ltd., 3 F.3d 476, 479 (1st Cir.1993) ("Optimistic conjecture, unbridled speculation, or hopeful surmise will not suffice."). The court views the evidence of record and draws inferences from it in the light most favorable to the nonmoving party. Burnette v. Dow Chemical Co., 849 F.2d at 1273.

More than a "disfavored procedural shortcut," summary judgment is an important procedure "designed `to secure the just, speedy and inexpensive determination of every action.' Fed.R.Civ.P. 1." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). At the same time, a summary judgment motion is not the chance for a court to act as the jury and determine witness credibility, weigh the evidence, or decide upon competing inferences. Windon Third Oil and Gas v. Federal Deposit Ins. Corp., 805 F.2d 342, 346 (10th Cir.1986), cert. denied, 480 U.S. 947, 107 S.Ct. 1605, 94 L.Ed.2d 791 (1987).

Uncontroverted Facts

When confronted with cross-motions for summary judgment, the court endeavors to streamline the uncontroverted facts into a singular account. Although the court has considered all of the facts presented, the court will only set forth the facts necessary to its decision.

TSP was a Kansas corporation, organized by William B. Anderson to develop, design, and market a wireless tail light. The corporation operated out of Topeka, Kansas. During the tax periods in issue, William E. Anderson was the president of TSP. During the tax periods in issue, Arnett was the vice president and the secretary of TSP. Arnett was employed at TSP at a starting salary of $60,000 per year.

Arnett was informed by Anderson that his duties would consist of assisting in the development, manufacture and marketing of the wireless tail lights. Included within those duties, Arnett was responsible for sales, promotions and administration and other related activities pertaining to the wireless tail light. Prior to manufacturing the wireless tail light, Arnett participated in the decision to relocate the offices of TSP from the Merchants National Bank Building to Forbes Field in Topeka, Kansas....