Shaw v. Georgia (In re Shaw)

• Decision Date: 02 April 2014
• Docket Number: ADVERSARY NO. 12-5353,CASE NO. 12-58761
• Court: U.S. Bankruptcy Court — Northern District of Georgia
• Parties: IN RE: Harold A. Shaw, Debtor. Harold Shaw, Plaintiff, v. State of Georgia, et al., Defendants.

IN RE: Harold A. Shaw, Debtor.Harold Shaw, Plaintiff, v. State of Georgia, et al., Defendants.

CASE NO. 12-58761

ADVERSARY NO. 12-5353

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

Date: April 2, 2014

IT IS ORDERED as set forth below:

___________________

James E. Massey

U.S. Bankruptcy Court Judge

CHAPTER 7

JUDGE MASSEY

ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

AND GRANTING JUDGMENT FOR PLAINTIFF

In 2009 and 2010, the Georgia Department of Labor offset a tax refund otherwise due to Plaintiff Harold Shaw and applied the refund to unemployment taxes, including interest, owed to the Department of Labor by American Power, Inc., which had employed Mr. Shaw. On April 12,2012, Mr. Shaw filed a Chapter 7 bankruptcy under Case No. 12-58761, and he represents himself. On July 10, 2012, acting pro se, he filed a complaint, entitled "Request for Injunction or Relief from Collection," commencing this adversary proceeding. He seeks to enjoin the Defendants, which include the State of Georgia, the Commissioner of the Georgia Department of Labor and the Georgia Department of Revenue, from continuing efforts to collect from him taxes owed by American Power. Mr. Shaw received a discharge on January 16, 2013. The Court interprets Mr. Shaw's complaint as one seeking the determination of the dischargeability of any debt he may owe for unemployment taxes.

In their answer to the complaint Defendants denied its allegations and asserted the affirmative defense of sovereign immunity.

Defendants moved for summary judgment on March 15, 2013. They contend that American Power failed to pay some or all unemployment taxes for the last three quarters of 2007, for all four quarters of 2008 and for the first two quarters of 2009. They further assert that Mr. Shaw is liable for tax debt owed by American Power pursuant to O.C.G.A. §34-8-167(e), which provides in part that such debt is the "personal debt of the officer, major stockholder, or other person having charge of the affairs of a corporate or association employing unit who is required to file returns or pay the contributions required by this chapter."

Defendants further argue that the debt allegedly owed by Mr. Shaw for unpaid unemployment taxes is not dischargeable pursuant to 11 U.S.C. §§ 523(a)(1)(A) and 507(a)(8)(C) and (D).

Mr. Shaw denies he was an officer of American Power but acknowledges that he was the office manager of American Power. He contends that American Power paid all of the taxes dueand that he was assured by employees of the Department of Labor that all unemployment taxes had been paid.

For the reasons stated below, the Court holds that the contributions (taxes) that O.C.G.A. § 34-8-150(a) requires employers such as American Power to make to Georgia's Unemployment Compensation Fund, do not constitute a "tax required to be collected or withheld" within the meaning of section 507(a)(8)(C) of the Bankruptcy Code. Section 507(a)(8)(D) applies only to unemployed taxes on wages "earned from the debtor." Because Mr. Shaw was not the employer, that subsection is inapplicable to the facts here. Hence, Mr. Shaw is entitled to a judgment that the debt he owes to the Georgia Department of Labor is dischargeable.

Because Mr. Shaw received a discharge in his Chapter 7 case, section 524 of the Bankruptcy Code enjoins any act to collect from Mr. Shaw as his personal liability the debt of American Power for unemployment taxes, interest and penalties with respect to wages paid by American Power.

This Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 1334 and 157, and this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I) and (O).

I. Facts.

The following facts are not in dispute, except as noted.

A. Mr. Shaw's Role at American Power.

In his motion to dismiss, Plaintiff Harold Shaw stated that upon joining American Power, Inc. in 2005, the business had no employees and was "$40,000 in the whole (sic)" and that he turned the business around "through a lot of footwork and phone calls," spending "many long days and evenings up to 70 hours a week to build American Power Inc. Staffing . . . totally alonewhile not receiving a paycheck until around May or June 2006." Plaintiff's Motion to Dismiss Proof of Debt, Doc. No. 12, p. 2. In a response to an interrogatory posed by Defendants, Mr. Shaw stated that in May or June 2006, he went on the payroll as "Office Manager who would oversee any operations with American Power Inc. Staffing." Plaintiff's Discovery Responses, Doc. No. 29, p. 2.¹ He remained with the company until December 2009. Id. at p. 7. It is not disputed that American Power provided temporary personnel who were its employees to other companies and that it was subject to the provisions of the Georgia Employment Security Law, O.C.G.A. § 34-1-1, et seq.

In his response to Interrogatory 8 seeking a description of his duties and responsibilities, Mr. Shaw stated:

As an Office Manager, my job description was like any other Office Manger. Take care of the office and manage it according to instructions. Plaintiff conducted interviews with some job applicants. Other times an office assistant would conduct the interviews, especially if they were women. Manage the clientele and try to solicit new business. All operations with regard to management was plaintiff's responsibilities. Design policies and procedures. Communicate with vendors and company clients, otherwise known as employers. Called clients if payments were delinquent to manage accounts according to Mr. Tran's instructions, handle employee concerns, at times conducted interviews with outside individuals when needed for employee concerns, make decisions to release employees for many different reasons. Also had the final decision to hire or not hire potential employees. Processed marketing tools needed to give employers knowledge of who American Power Inc. was and what we could offer their company in terms of service.

Id. at pp. 6-7.

In response to Interrogatory 14 concerning Mr. Shaw's involvement with bookkeeping and/or accounting of American Power Inc., during the period from January 1, 2006 through December 31, 2009, Mr. Shaw stated:

There was only a Pennsoft Program which Mr. Tran showed plaintiff how to work with, and it allowed him to be in constant touch with his office. The program kept a list of active employees, as well as inactive employees, and employees that had signed on with companies or was terminated.

Id. at p. 10.

In response to Interrogatory 15 concerning Mr. Shaw's involvement with respect to issuing payroll and vendor checks of American Power Inc., during the period from January 1, 2006 through December 31, 2009, he stated:

Issuing payroll was a matter of collecting the time cards and entering employees names and time worked. The Pennsoft program was a sophisticated system that calculated the payroll and deductions. Once that information was entered on Monday, Mr. Tran could see it as he always kept an eye on his money. He did know plaintiff very long but was impressed with his honesty. If Mr. Tran saw a problem he would always contact plaintiff.

Id. at pp. 10-11.

In response to Interrogatory 5 concerning preparation of tax returns, Mr. Shaw stated:

The Quarterly Wage and Tax reports were handled by the plaintiff, and the information regarding such tax returns were cleared with the Arizona office, and monitored by Mr. Tran.

Id. at p. 5.

In his response to Interrogatory 6 concerning bank accounts and signature authority, Mr. Shaw stated:

One person had signature authority over all bank accounts to his company. John Tran, and he made that plain. For convenience he allowed plaintiff to be a co-signor as Mr. Tran travels a lot.

Id. at p. 5.

In his response to Defendants' Interrogatory 3 asking for the names, addresses and telephone numbers of each person who was an officer of America Power Inc. from January 1, 2006 through December 31, 2009, Plaintiff stated:

Plaintiff contacted an affiliate of American Power Inc. at times to get in touch with Mr. Tran. Plaintiff did not have a relationship with the employees there and only knew one by name which was Nicole. The telephone number for anyone at that location has been disconnected. Each location operated as its own corporation.

Id. at pp. 3-4.

Defendants contend in their motion for summary judgment that Mr. Shaw was an officer of American Power.² Motion for Summary Judgment, Doc. No. 33, pp. 4-5. In a request to admit, a copy of which was attached to a supplemental brief filed on June 26, 2013, Defendants requested Mr. Shaw to admit that he was "an officer of American Power, Inc. during the period from January 1, 2006 through December 31, 2009." Defendants' Supplemental Brief, Doc. No. 47, Part 2, Exhibit, p. 8. There is no certificate of service attached to that Discovery Request.

In the Supplemental Brief, Defendants argue that "Defendants properly served Plaintiff with requests for admissions on January 15, 2013, by mailing the requests for admission to his given address on January 15, 2013." Defendants' Supplemental Brief, Doc. No. 47, Part 1, pp. 4-5. In a letter to Mr. Shaw dated February 20, 2013, Defendants' counsel wrote that the "Defendants served" Requests to Admit on Mr. Shaw on January 15, 2013 and that he failed to respond. Letter to Debtor, Doc. No. 23. But the assertion that the Requests to Admit wereserved on January 15, 2013 is not supported by an affidavit or a certificate of service and is not a substitute for proof of service. Mr. Shaw filed his responses on March 3, 2013 and denied he was an officer. Plaintiff's Discovery Responses, Doc. No. 29, pp. 11-12.

In his affidavit as amended, Donald Newton asserted that "[t]he records of the Department reflect that Harold Shaw was a responsible corporate officer for American Power, Inc., as he signed the Quarterly Tax Reports, and signed the employment tax checks on behalf of American Power, Inc." Amended Affidavit of Donald Newton, Doc. No. 68, Part 1, p. 2....