Storage and Office Systems, LLC v. U.S., 4:04-CV-0190-DFH-WGH.
| Decision Date | 30 March 2007 |
| Docket Number | No. 4:04-CV-0190-DFH-WGH.,4:04-CV-0190-DFH-WGH. |
| Citation | 490 F.Supp.2d 955 |
| Parties | STORAGE AND OFFICE SYSTEMS, LLC, Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Southern District of Indiana |
Stephen F. Schuster, Ogden Newell & Welch, Thomas M. Williams, Stoll Keenon Ogden PLLC, Louisville, KY, for Plaintiff.
Douglas William Snoeyenbos, Department of Justice, Tax Division, Washington, DC, Jeffrey L. Hunter, United States Attorney's Office, Indianapolis, IN, for Defendant.
ENTRY ON MOTIONS FOR SUMMARY JUDGMENT
The federal government seeks in this case to enforce a late-filed tax lien against an independent company that bought the assets of a delinquent taxpayer. The government seeks to enforce its late-filed lien by a novel extension of a common law theory of successor liability, even though the government must lose under the statute that squarely addresses the issue, 26 U.S.C. § 6323. The court rejects the attempt, applies the statute, and holds the lien invalid against plaintiff.
Plaintiff Storage and Office Systems, LLC ("SOS, LLC") (formerly Maviba, LLC) purchased many of the assets of Storage and Office Systems, Inc. ("SOS, Inc.") under a purchase agreement (the "Agreement") whereby Maviba, LLC also assumed many of the liabilities of SOS, Inc. The Agreement, however, explicitly excluded SOS, Inc.'s unpaid federal tax liabilities, which amounted to $145,536.13, from the liabilities assumed by Maviba, LLC. After failing to collect the past-due taxes from SOS, Inc., the federal government filed a notice of federal tax lien against SOS, LLC. The government seeks to recover the tax liabilities of SOS, Inc. from SOS, LLC under a federal common law theory of successor liability. SOS, LLC has filed this suit to remove the lien. Both parties have moved for summary judgment. The court must grant the plaintiff's motion and deny the government's motion.
The purpose of summary judgment is to "pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Summary judgment must be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The motion should be granted so long as no rational fact finder could return a verdict in favor of the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, a court's ruling on a motion for summary judgment is akin to that of a directed verdict. The question for the court in both is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52, 106 S.Ct. 2505. Only genuine disputes over material facts can prevent a grant of summary judgment. Id. at 247-48, 106 S.Ct. 2505. A fact is material if it might affect the outcome of the suit under the governing law, and a dispute about a material fact is genuine only if the evidence would allow a reasonable trier of fact to find for the non-moving party. Id. at 248, 106 S.Ct. 2505.
When deciding a motion for summary judgment, the court considers those facts that are undisputed and views additional evidence, and all reasonable inferences drawn therefrom, in the light reasonably most favorable to the non-moving party. See Fed.R.Civ.P. 56(c); Anderson, 477 U.S. at 255, 106 S.Ct. 2505. A party must present more than mere speculation or conjecture to defeat a summary judgment motion. The issue is whether a reasonable jury might rule in favor of the non-moving party based on the evidence in the record. Id. at 251-52, 106 S.Ct. 2505.
The fact that both sides have filed cross-motions for summary judgment does not alter the applicable standard; the court must consider each motion independently and will deny both motions if there is a genuine issue of material fact. E.g., Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir.1993); Harms v. Laboratory Corp. of America, 155 F.Supp.2d 891, 905-06 (N.D.Ill.2001). Thus, in considering cross-motions for summary judgment, the court must consider the evidence through two lenses. When considering the government's motion for summary judgment, the court must give SOS, LLC the benefit of all conflicts in the evidence and the benefit of all reasonable inferences that might be drawn from the evidence in its favor. When considering the motion of SOS, LLC, the roles are reversed. Because the court is granting the motion of SOS, LLC, the facts set forth below are either undisputed or reflect the evidence in the light reasonably most favorable to the government.
SOS, Inc. engaged in the business of material handling and storage systems in Jeffersonville, Indiana. SOS, Inc. failed to pay its federal employment taxes over seven separate quarters from 2001 to 2003. By September 2003, SOS, Inc. had an unpaid federal tax liability of $145,536.13. On October 14, 2003, the Internal Revenue Service filed a notice of federal tax lien against SOS, Inc. The government's attempts to collect the unpaid employment taxes from SOS, Inc. were unsuccessful. The assessed amount remains due and owing to the United States.
Maviba, LLC was formed in 2002 by Mark Barter, who was the sole member of the limited liability company. Before May 9, 2003, Maviba, LLC did not have any assets, liabilities, or employees, but had been actively pursuing, unsuccessfully, the acquisition of other companies. On May 9, 2003, Barter, on behalf of Maviba, LLC, and Ron Frazier, on behalf of SOS, Inc., entered into an agreement under which Maviba, LLC agreed to purchase the assets of SOS, Inc. On the advice of Barter's counsel, the sale as structured as an asset purchase rather than a stock sale so that Maviba, LLC would not automatically inherit the liabilities of SOS, Inc. Under the Agreement, Maviba, LLC acquired most of the assets of SOS, Inc. in exchange for assuming most of its liabilities. Section 4.1 of the Agreement, however, explicitly excluded "pre-existing tax liability of any kind" from the liabilities to be assumed by Maviba, LLC. The total value of the purchase was $502,326, but SOS, Inc. did not receive any cash in connection with the Agreement.
Barter knew that SOS, Inc. was behind in its federal employment taxes when he signed the Agreement. Before signing the Agreement, Barter instructed his company's attorney to search public records to see if the Internal Revenue Service had filed a notice of federal tax. lien in the name of SOS, Inc. At the time the Agreement was signed, no such lien had been filed.
Soon after the Agreement was signed, Maviba, LLC changed its name to Storage and Office Systems, LLC. The SOS name with its familiarity among SOS, Inc.'s customers was one of the major assets purchased by Maviba, LLC under the Agreement. The newly renamed SOS, LLC engaged in the same type of business activities as SOS, Inc. It operated from the same building that SOS, Inc. had used. A pre-existing lease agreement between Biltco Corp. and SOS, Inc. was assigned to Maviba, LLC as part of the Agreement. SOS, LLC and Biltco Corp. complied with the terms of that assigned lease agreement until late 2004 or early 2005, when they signed a new lease agreement. The "Storage and Office Systems" building sign that SOS, Inc. had used remained on the building occupied by SOS, LLC until March 2005. SOS, LLC used the same telephone and fax numbers that SOS, Inc. had used. The internet web site that had been used by SOS, Inc. stayed in operation after the Agreement was signed and was modified to describe the acquisition as a change in ownership.
Before the sale, SOS, Inc. owed money to Bank One under one or two promissory notes. The bank debt was secured by all of SOS Inc.'s inventory, accounts receivable, chattel paper, equipment, and general intangibles. By written agreements dated May 14, 2003, Maviba, LLC assumed this secured debt and gave Bank One the same security for the debt that had been given by SOS, Inc.
Maviba, LLC acquired most of the inventory of SOS, Inc. as part of the Agreement. It also acquired the computers of SOS, Inc. and the information on those computer, including sales records. All of the customers of SOS, Inc. were told of the change in ownership. The top ten customers were called on personally by Barter and Frazier. The medium sized customers were called and told what had happened. Both the medium and small sized customers were sent a letter telling of the sale of the business. The majority of the suppliers for SOS, LLC after the Agreement was signed had also supplied SOS, Inc. At least some of the SOS, Inc. vendors who claimed a balance due received letters asking them to send copies of their invoices to SOS, LLC. After signing the Agreement, SOS, LLC rehired four of the eight or nine people who had been employed by SOS, Inc. SOS, LLC then began business under the management of Barter with the assets that had been purchased from SOS, Inc.
In 2004, after failing to collect the past-due employment taxes from SOS, Inc., the Internal Revenue Service filed notices of federal tax lien against SOS, LLC. After exhausting administrative remedies, SOS, LLC filed this action under 28 U.S.C. § 2410 to remove the liens. The government asserted a counterclaim to recover the tax liability of $140,032.75, plus interest and other additions. Additional facts are noted below as needed, keeping in mind the standard for summary judgment.
The Federal Tax Lien Act of 1966, 26 U.S.C. § 6321, established a lien in favor of the government against property owned by a...
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