Johnson v. United States

• Decision Date: 22 March 2012
• Docket Number: Civil Action No. DKC 09–0787.
• Parties: Mary JOHNSON v. UNITED STATES of America.
• Court: U.S. District Court — District of Maryland

861 F.Supp.2d 609

Mary JOHNSON
v.
UNITED STATES of America.

Civil Action No. DKC 09–0787.

United States District Court,
D. Maryland.

March 22, 2012.

[861 F.Supp.2d 610]

Alexei M. Silverman, Bethesda, MD, Douglas R. Taylor, Law Office of Douglas R. Taylor, Kensington, MD, Sheila Thurmond Mayers, Law Offices of Sheila Mayers, Washington, DC, for Mary Johnson.

Allie C. Yang–Green, Melissa Dickey, United States Department of Justice, Washington, DC, for United States of America.

MEMORANDUM OPINION
DEBORAH K. CHASANOW, District Judge.

Presently pending and ready for resolution in this action are three motions filed by Defendant and Counterclaim Plaintiff the United States of America: ¹ (1) a motion for summary judgment against Plaintiff and Counterclaim Defendant Mary Johnson (ECF No. 80), (2) a motion for summary judgment against Counterclaim Defendant Ford Johnson (ECF No. 81), and (3) a motion to strike expert reports and testimony of Leo Bruette (ECF No. 82). Also pending is a motion for “partial summary judgment” filed by Counter Defendant Ford Johnson. (ECF No. 93).

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The issues are fully briefed, and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, the Government's motions for summary judgment will be granted, and Ford Johnson's motion will be denied. The motion to strike will be denied as moot.

I. BackgroundA. Factual Background

The following facts are either uncontroverted, taken in the light most favorable to Mary and Ford Johnson, or have been admitted by the Johnsons in their pleadings.² The Johnsons are husband and wife. In 1969, Mr. Johnson began a non-profit organization named Koba Institute to perform various government contracts in conjunction with Koba Associates, another company that he owned and managed. Mrs. Johnson performed limited human resources duties for both organizations. When Koba Associates failed to pay its payroll taxes in the mid–1990s, the IRS assessed Mr. Johnson with trust fund recovery penalties pursuant to 26 U.S.C. § 6672.³ The outstanding payroll taxes, accompanied by the lien subsequently imposed on Mr. Johnson for the trust fund recovery penalties, ultimately led Mr. Johnson to close Koba Associates.⁴ The lien also severely damaged his ability to obtain credit for Koba Institute.

These difficulties led Mr. Johnson to approach Mrs. Johnson about changing the ownership structure of Koba Institute. In 1998, Koba Institute became a for-profit corporation in Maryland, with Mrs. Johnson as its sole shareholder. Mr. Johnson served as the corporation's president and managed its affairs. Because Mrs. Johnson “was not encumbered by a lien,” her status as the corporation's owner enabled Koba Institute to enter into leases and other contracts, as well as obtain lines of credit. (ECF No. 80–10, Ford Johnson Dep., at 42–43).

Mrs. Johnson appointed herself as “Chairperson” of the corporation's board

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of directors in 2001. (ECF No. 80–21). Koba Institute's bylaws mandate that the chairperson of the board “be elected President of the Institute.” (ECF No. 80–20 ¶ 2.1). The bylaws describe the President's role as follows:

The President [who] shall be chairperson of the Board of Directors ... shall preside at all meetings of the Board and/or officers. [S]he shall review, approve and recommend to the Board all proposed projects and budgets on an annual basis. [S]he shall be authorized to execute ... legal papers, documents and instruments on behalf of the Institute. [S]he shall have general authority to manage the business and affairs of the Institute on a day to day basis, subject to and in accordance with the directions of the Board of Directors.

( Id. ¶ 3.2). The bylaws also authorize board members to “approv[e] ... proposed projects and budgets,” “establish[ ] ... banking relations including power to borrow money,” and “control and manage[ ] ... property, including power to purchase, ... and dispose of the same.” ( Id. ¶ 2.2). But because the Johnsons had agreed that Mrs. Johnson would be the primary caregiver of the couple's children, Mrs. Johnson “delegated” and “entrusted” her authority in the corporation to Mr. Johnson, and Mr. Johnson was appointed President of Koba Institute. (ECF No. 94–7, Mary Johnson Dep., at 16–17; ECF No. 80–12, Ford Johnson Dep., at 12).⁵ Mrs. Johnson, in turn, served as the corporation's vice president.⁶

The same day that Mrs. Johnson appointed herself as board chairperson, Koba Institute's board of directors—comprised of the Johnsons and Vanessa Fogg, the corporate secretary-unanimously approved the following resolution:

The present holders of the offices of President, Vice–President, Treasurer and Secretary are authorized to sign checks, drafts, instruments, ... and ... orders for the payment of money from [Koba Institute] accounts, to endorse checks, instruments, evidences of indebtedness and orders payable owned or held by [Koba Institute], and to .... sign any application, deposit agreement, signature card or other documentation required by the Bank [of America], with the following limitation: ... that either Ford T. Johnson, Jr. (President of the Company/Treasurer) or Mary L. Fogg Johnson (Vice–President of the Company/Chairperson) may act alone or with any other named signatory to said accounts in any transactions with the Bank; however, any transactions ... which are not signed by either [of them] must be signed by at least two of the following people ....

(ECF No. 80–19, at 9). Around this time, Koba Institute opened a payroll account with Bank of America and expressly noted on the account documentation that Mrs. Johnson had the power to “sign singularly” on that account. (ECF No. 80–25, at 10).⁷

Having “delegated” her authority to Mr. Johnson, Mrs. Johnson's actual involvement at Koba Institute was quite limited.

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(ECF No. 94–7, at 16–17). Although she had an office at Koba Institute and received an annual salary ranging from approximately $100,000 to $193,000 from 2001 until 2004, as well as a corporate car and cell phone,⁸ Mrs. Johnson only came to work once per month. When she did so, she would approve any board resolutions, such as ratification of Mr. Johnson's acts as President, or perform tasks in the human resources department.⁹ Thus, while Mrs. Johnson “may have given an opinion” regarding hiring and firing, Mr. Johnson made the ultimate decisions regarding employment during this time. (ECF No. 80–11, Mary Johnson Dep., at 4). Indeed, because Mr. Johnson oversaw the corporation's day-to-day operations, other employees viewed him as “the one who decides everything” and went to Mr. Johnson—rather than Mrs. Johnson—with any questions that arose in the business, including questions about financial matters such as payroll taxes. (ECF No. 94–14, Adam Sharif Dep., at 4).

When Mr. Johnson was out of the office, he left explicit instructions for Mrs. Johnson to follow about any actions that needed to be taken. For instance, Mr. Johnson would leave written instructions for Mrs. Johnson to sign specific checks in his absence, just as he did for other employees who needed to sign checks while he was away. Because of her limited involvement with the corporation's daily operations, Mrs. Johnson was unaware of “the background or the context” for these checks and thus did not feel comfortable signing any checks that Mr. Johnson had not authorized. (ECF No. 94–11, Ford. Johnson Supp. Dep., at 16).¹⁰ Accordingly, from 2001 through 2004, she never attempted to write any checks that Mr. Johnson had not already approved.

Near the end of 2004, Mrs. Johnson received a notice from the IRS that Koba Institute had not paid its payroll taxes for several quarters during 2001, 2002, 2003, and 2004. Prior to that time, Mrs. Johnson was unaware that the corporation had failed to remit all payroll taxes to the IRS. Upon receipt of the notice, she had “a serious talk” with Mr. Johnson and “told him” that the situation was “unacceptable” and that Koba Institute had “to take steps to make sure it [did not] happen again.” (ECF No. 94–7, at 18, 36). Mrs. Johnson then proceeded to “fire[ ] the finance director,” who had been tasked with making payroll tax payments, and “directed Mr. Johnson to personally handle all future tax payments as of January 2005.” (ECF No. 1, Compl., ¶ 16). She “required” Mr. Johnson to provide her with “visual proof” of all tax payments that Koba Institute made. ( Id.). Additionally, at least with regard to the payroll account, Mrs. Johnson no longer followed the corporation's

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internal procedure for check authorization. That is, following her “serious talk” with Mr. Johnson, Mrs. Johnson did not require instruction from Mr. Johnson before writing checks from the payroll account. (ECF No. 94–7, at 18–20).

Due to Mrs. Johnson's “revamped oversight of tax payments,” Koba Institute began remitting its subsequent payroll taxes to the IRS in full and, generally, on time. (ECF No. 1 ¶ 17). The corporation did not, however, pay the outstanding payroll taxes for 2001 through 2004 in full, although it continued to pay other debts, such as employee wages. Accordingly, following an investigation, the IRS assessed trust fund recovery penalties against Mr. Johnson and Mrs. Johnson pursuant to § 6672. Mrs. Johnson subsequently paid $351 toward her assessment.

B. Procedural Background

On March 30, 2009, Mrs. Johnson filed a suit in this court for a refund of the taxes she had paid, asserting that the IRS's § 6672 assessment against her was erroneous. (ECF No. 1). The Government answered the complaint and filed a counterclaim against both of the Johnsons in order to reduce its § 6672 assessments to judgment. (ECF No. 12). The Johnsons answered the counterclaim and asserted various affirmative defenses. (ECF Nos. 17–18).

A scheduling order was then entered, and the parties began discovery. The parties requested numerous extensions...