Ferguson v. U.S.

• Decision Date: 27 April 2007
• Docket Number: No. 06-1774.,06-1774.
• Citation: 484 F.3d 1068
• Parties: Donald R. FERGUSON, Plaintiff, v. UNITED STATES of America, Defendant/Appellee, v. Richard Musal, Third Party Defendant/Appellant, Nicholas P. Miller, Third Party Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

484 F.3d 1068

Donald R. FERGUSON, Plaintiff, v. UNITED STATES of America, Defendant/Appellee, v. Richard Musal, Third Party Defendant/Appellant, Nicholas P. Miller, Third Party Defendant.

No. 06-1774.

United States Court of Appeals, Eighth Circuit.

Submitted: January 11, 2007.

Filed: April 27, 2007.

Ronald Leigh Mountsier, argued, Des Moines, IA, for appellant.

Kenneth W. Rosenberg, argued, U.S. Dept. of Justice, Tax Division, Washington, DC, for appellee.

Before WOLLMAN and MELLOY, Circuit Judges, and NANGLE,¹ District Judge.

WOLLMAN, Circuit Judge.

This case arises from an assessment of trust fund recovery penalties pursuant to 26 U.S.C. § 6672 against Richard Musal and several other individuals involved in the operation of AccessAir, Inc. (AccessAir). Musal appeals from the district court's² grant of summary judgment, which found Musal to be a responsible person under § 6672. Musal also appeals from the district court's denial of his motions for a new trial and judgment as a matter of law. We affirm.

I.

AccessAir, a wholly owned subsidiary of AccessAir Holdings, Inc. (Holdings), was a corporation that provided commercial passenger air transportation within the continental United States. It operated from February 1999 until November 1999, when it filed for bankruptcy. Musal served as the Chief Financial Officer (CFO) of AccessAir from its inception, and as President and Chief Operating Officer (COO) of AccessAir starting in August 1999. As the CFO, Musal was in charge of overseeing the company's finances and accounting and was authorized to sign checks on behalf of AccessAir. Once Musal became President and COO, all of AccessAir's departments reported to him.

In its second, third, and fourth quarters of 1999, AccessAir failed to remit to the Internal Revenue Service (IRS) excise taxes that were collected from the sales of airline tickets as required by 26 U.S.C. § 4261.³ Using a worksheet provided to him by AccessAir (later marked as Exhibit 4050), IRS Revenue Agent Jerry Robertson determined that the company's total excise tax liability for these three quarters was $1,404,404.09 and thereafter made the corresponding assessments against the company. When AccessAir failed to pay the amount due, the IRS, pursuant to 26 U.S.C. § 6672,⁴ assessed a trust fund recovery penalty in the amount of $1,300,552.09 against Musal and two other company officials — Roger Ferguson and Nicholas Miller.⁵ After Ferguson filed a claim for a refund of his trust fund recovery penalty, the government brought a counterclaim against Ferguson, Miller, and Musal seeking to reduce to judgment the assessed penalties.

The government brought a cross-motion for summary judgment against Musal and Miller. The district court granted the government's motion against Musal, finding him to be a responsible person under § 6672 and concluding that he had not carried his burden of proof in showing that the excise tax assessment was erroneous or excessive, but denied the government's motion as to Miller. The case against Ferguson and Miller subsequently proceeded to trial, at which Ferguson was found to be a responsible person for the second and third quarters of 1999, Miller was not found to be a responsible person for any quarter, and the excise tax assessments for the second and third quarters were found to be erroneous and excessive. Musal thereafter moved for reconsideration of the district court's previous grant of the government's motion for summary judgment against him. The district court granted Musal's motion in part and set aside the portion of its previous order regarding Musal's liability for the amount of the assessment, but left in place its holding that Musal was a responsible person under § 6672. The court thereafter set for trial the sole issue of the accuracy of the second, third, and fourth quarter penalty assessment amounts against Musal.

Prior to trial, the district court granted Musal's motion for partial summary judgment, holding that collateral estoppel barred the government from relitigating the assessment amounts for the second and third quarters, which had previously been determined by the jury at Ferguson's and Miller's trial. This left the accuracy of the fourth quarter assessment as the sole issue remaining for trial. The court also denied the government's motion to take the trial deposition of Gordon Rosen, because he was not listed on the pretrial conference order and was not identified as having information relevant to the assessments.

The jury heard testimony from a number of individuals, including Rosen, who was allowed to testify despite the district court's prior deposition ruling. A number of exhibits were also presented, including Exhibit 4050 (the worksheet provided by AccessAir to Robertson) and Exhibit 4502 (an alleged summary of AccessAir's reservation accounting records). The jury was instructed that the IRS's assessment was presumptively correct and that Musal carried the burden of proving that the assessment was erroneous and excessive. The jury's verdict found that Musal had not proved that the fourth quarter assessment was erroneous or excessive. Judgment was accordingly entered against Musal for $452,934.85 — the amount of the IRS's fourth quarter assessment.

Musal subsequently filed motions for judgment as a matter of law and for a new trial, arguing that the fourth quarter assessment should not have been accorded a presumption of correctness and that Exhibits 4050 and 4502, as well as Rosen's testimony, were erroneously admitted into evidence. The district court denied both motions.

II.

We first address whether the district court erred in granting summary judgment for the government on the issue of Musal's status as a responsible person. "We review a district court's grant of summary judgment de novo." Keller v. United States, 46 F.3d 851, 853 (8th Cir.1995). Summary judgment is proper if the "record, when viewed in the light most favorable to the nonmoving party, shows that there is no genuine dispute of material fact and that the moving party is entitled to judgment as a matter of law." Id.

To incur liability under 26 U.S.C. § 6672, an individual must be a responsible person and must willfully fail to pay over the taxes in question. Jenson v. United States, 23 F.3d 1393, 1394 (8th Cir.1994). A responsible person is someone who has "`the status, duty and authority to avoid the corporation's default in collection or payment of the taxes.'" Barton v. United States, 988 F.2d 58, 59 (8th Cir.1993) (quoting Kenagy v. United States, 942 F.2d 459, 464 (8th Cir.1991)). "A responsible person acts willfully if he `acts or fails to act consciously and voluntarily and with knowledge or intent that as a result of his action or inaction trust funds belonging to the government will not be paid over but will be used for other purposes, or by proceeding with a reckless disregard of a known or obvious risk that trust funds may not be remitted to the government.'" Keller, 46 F.3d at 854 (quoting Honey v. United States, 963 F.2d 1083, 1087 (8th Cir.1992)).

The undisputed facts in this case show that Musal was the CFO of AccessAir throughout the first three quarters of 1999 and the President and COO of AccessAir throughout the fourth quarter of 1999. In these capacities, Musal was authorized to sign checks and disburse corporate funds on behalf of AccessAir, and he admits that he had the authority to pay the company's excise taxes without board or management approval. These facts indicate that Musal had at least the initial authority to pay the excise taxes. What Musal contends on appeal, however, is that he was divested of this authority when the board directed him to pay only the obligations of the company that were necessary to keep the company's planes in the air. We find this argument unpersuasive.

First, as noted by the district court and as Musal himself acknowledges, the board never explicitly instructed Musal to not pay the excise taxes. Rather, he chose to forgo doing so in order to pay other company expenses. He therefore retained the authority to pay the taxes had he decided to do so. Second, even if the board's directive could be construed as an instruction to not pay the taxes, such instructions "`do not . . . take a person otherwise responsible under section 6672(a) out of that category.'" Greenberg v. United States, 46 F.3d 239, 243-44 (3d Cir.1994) (quoting Brounstein v. United States, 979 F.2d 952, 955 (3d Cir.1992)).⁶ Musal's argument that the board's directive removed him from responsible person status under § 6672 is therefore unavailing.

We are also satisfied that Musal acted willfully in failing to pay the excise taxes. Musal had knowledge of AccessAir's financial condition and was fully aware that the company had not been turning over the required excise taxes for the second, third, and fourth quarters of 1999. Despite this knowledge, Musal continued to direct payments to the company's other creditors in lieu of paying the excise taxes. These facts support a determination that Musal's failure to pay the required excise taxes was willful. Olsen v. United States, 952 F.2d 236, 240 (8th Cir. 1991) ("Evidence that the responsible person had knowledge of payments to other creditors, including employees, after he was aware of the failure to pay over withholding taxes is proof of willfulness as a matter of law.").

We therefore conclude that the district court did not err in granting summary judgment for the United States on the issue of Musal's status as a responsible person.

III.

We next turn to whether the district court erred in denying Musal's motion for a new trial. Musal contends that this motion should have been granted because the district court erred in admitting Exhibits 4050 and 4502, in permitting Rosen to testify at trial, and in instructing the jury that the IRS's assessment was presumed to be correct. We review a district court's evidentiary rulings, jury...