Gessert v. U.S.
| Decision Date | 31 March 2009 |
| Docket Number | No. 06-C-448.,06-C-448. |
| Citation | 627 F.Supp.2d 942 |
| Parties | Robert J. GESSERT and The Gessert Group, Inc., Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Douglas H. Frazer, Dewitt Ross & Stevens SC, Brookfield, WI, for Plaintiffs.
Jacqueline C. Brown, United States Department of Justice, Washington, DC, Lisa T. Warwick, United States Department of Justice, Office of the U.S. Attorney, Milwaukee, WI, for Defendant.
DECISION AND ORDER
Plaintiffs Robert J. Gessert (Gessert) and a corporation that he controlled, the Gessert Group ("Corporation"), bring this suit against defendant United States under 26 U.S.C. § 7433, seeking damages based on the alleged unlawful collection practices of an Internal Revenue Service ("IRS") revenue officer (Count I), and under 26 U.S.C. § 7422 seeking refunds of taxes allegedly erroneously assessed or collected from the Corporation (Count II) and Gessert (Count III). Defendant counterclaims seeking to reduce plaintiffs' unpaid tax liabilities to judgment. Before me now are the parties' motions for summary judgment.1
Summary judgment is required "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The mere existence of some factual dispute does not defeat a summary judgment motion; "the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). For a dispute to be genuine, the evidence must be such that a "reasonable jury could return a verdict for the nonmoving party." Id. For the fact to be material, it must relate to a dispute that "might affect the outcome of the suit." Id. In evaluating a motion for summary judgment, the court must draw all inferences in a light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). However, it is "not required to draw every conceivable inference from the record-only those inferences that are reasonable." Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir.1991). The fact that both parties have moved for summary judgment, and thus both parties simultaneously are arguing that there is no genuine issue of fact, does not establish that a trial is unnecessary or empower me to enter judgment as I see fit. See 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2720 at 327-28 (3d ed.1998). I may grant summary judgment only if one of the moving parties is entitled to judgment as a matter of law on the basis of the material facts not in dispute. See Mitchell v. McCarty, 239 F.2d 721, 723 (7th Cir.1957).
In 1989 Gessert organized the Corporation and served as its Chief Executive Officer (CEO) at all times from January 1, 2000 to January 31, 2005.2 Between 2000 and 2004, the Corporation employed up to thirty employees and an accountant, Vytautas Jonynas ("Jonynas"), served as its Chief Financial Officer (CFO). At various times between January 1, 2000 and January 31, 2005, the Corporation failed to pay federal employment taxes. The IRS assigned revenue officer Lillie Johnson to collect the Corporation's unpaid taxes.
The Corporation's unpaid employment taxes included Federal Income Contribution Act (FICA) taxes withheld from employees' wages, the employer's FICA tax contribution, and income taxes withheld from employees' wages under 26 U.S.C. § 3402(a). The FICA and income taxes withheld from employees' wages are designated as the "trust-fund" portion of employment taxes. See 26 U.S.C. § 7512; 26 C.F.R. § 301.7512-1. Because the Corporation failed to pay trust-fund taxes, the IRS assessed a Trust Fund Recovery Penalty Assessment against Gessert on different occasions pursuant to 26 U.S.C. §§ 6671 and 6672. See United States v. Schroeder, 900 F.2d 1144, 1146 (7th Cir. 1990) (). Thus, both Gessert and the Corporation were liable for the unpaid trust-fund taxes.
During the relevant time period, the Corporation made several voluntary payments to the IRS. When a taxpayer makes a voluntary payment, the taxpayer can designate to which liabilities the payment should apply. Muntwyler v. United States, 703 F.2d 1030, 1032 (7th Cir.1983). When a taxpayer makes no designation, the IRS applies the payment in its best interest. The Corporation designated some of its payments to the unpaid trustfund taxes and the IRS so applied them, thereby decreasing both the Corporation's and Gessert's liability. The IRS did not apply undesignated payments to the trust-fund liability, thus such payments did not reduce Gessert's liability but only the Corporation's. The IRS also levied several financial institutions where the Corporation had accounts, and in 2004 and 2005 it levied DePuy Orthopaedics, Inc. ("DePuy") and Pfizer, Inc. ("Pfizer"), both of which owed money to the Corporation. The IRS may apply levied funds in its best interest.
On July 1, 2005, Gessert filed an administrative claim for a tax refund for the second, third, and fourth quarters of 2002, and all quarters of 2003 and 2004, and the Corporation filed a refund claim for the first and second quarters of 2001. Gessert and the Corporation filed administrative damages claims for all quarters from the third quarter of 2000 to the fourth quarter of 2004.
I will state additional facts in the course of the decision.
Defendant first argues that I lack jurisdiction over plaintiffs' refund claims specified in paragraphs 6, 7, 9 and 11 of the Amended Complaint because plaintiffs failed to timely file an administrative claim as required by 26 U.S.C. § 7422(a). "A timely sufficient claim is a jurisdictional prerequisite to a refund suit." Goulding v. United States, 929 F.2d 329, 331 (7th Cir.1991). Under 26 U.S.C. § 6511(a), a taxpayer must file such a claim two years after paying the tax or three years from filing the return, whichever is later. Neither Gessert nor the Corporation filed an administrative refund claim until July 1, 2005. The IRS applied the sums referred to in paragraphs 6, 7, 9 and 11 of the Amended Complaint to tax liabilities assessed for quarters in 2000, 2001, and 2002, and plaintiffs filed tax returns for such quarters on or before June 10, 2002. Thus, plaintiffs did not file the July 1, 2005 administrative claim within three years of filing the return. Further, the tax payments that are the subject of paragraphs 6, 7, 9 and 11 occurred before May 30, 2003, more than two years before July 1, 2005. Thus, plaintiffs administrative refund claim filed on July 1, 2005, was untimely as to the claims in paragraphs 6, 7, 9 and 11. Therefore, I lack jurisdiction to consider such refund claims.
Plaintiffs' disagree with the above conclusion but do not clearly explain why. They seem to contend that because they are not challenging the validity of the initial assessments, but only the correctness of various current balances of their tax liabilities, they did not have to file an administrative claim. Plaintiffs cite no legal authority for this contention or for their assertion that I have jurisdiction over the refund claims at issue. Therefore, their argument fails.
Plaintiffs seek a refund of the money that the IRS obtained by levying De-Puy and Pfizer.3 They assert that such money was wrongly levied because it was not owed to the Corporation. This claim fails on several counts. First, plaintiffs lack standing to challenge the levies at issue. This is so because 26 U.S.C. § 7426 authorizes suits against the United States for wrongful levies by persons "other than the person against whom is assessed the tax out of which such levy arose ..." Plaintiffs are the persons against whom the tax out of which the levy arose is assessed. See Allied/Royal Parking L.P. v. United States, 166 F.3d 1000, 1004 (9th Cir.1999). Thus, plaintiffs may not challenge the DePuy and Pfizer levies.
Even if plaintiffs have standing, their claims would fail because based on their evidence, no reasonable factfinder could conclude that the levies were wrongful. A levy attaches only to property possessed or obligations existing at the time of the levy. 26 C.F.R. § 301.6331-1(a)(1). When determining whether a levy attaches to property, a court places itself in the position of the taxpayer at the time of the levy: the levy attaches to whatever property rights the taxpayer has with respect to the property in question. United States v. Gen'l Motors Corp., 929 F.2d 249, 252 (6th Cir.1991). Obligations exist when the liability of the obligor is fixed and determinable, although the right to receive payment may be deferred. 26 C.F.R. § 301.6331-1(a)(1). Thus, while a payment contingent upon future performance is not an existing right to which a levy would attach, see United States v. Long Island Drug Co., 115 F.2d 983, 986 (2d Cir.1940), an IRS levy can reach a vested, accrued right to receive money in the future, see United States v. Morey, 821 F.Supp. 1438, 1440 (W.D.Okla.1993). Whether a taxpayer has property or a right to property is a question of state law. Aquilino v. United States, 363 U.S. 509, 513, 80 S.Ct. 1277, 4 L.Ed.2d 1365 (1960).
Plaintiffs contend that the IRS wrongfully levied DePuy and Pfizer arguing that the Corporation had not yet performed the services they required and that payment was contingent on such performance. Plaintiffs further...
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