United States v. Feldman

• Decision Date: 12 February 2020
• Docket Number: Case No. 2:17-cv-11292
• Citation: 439 F.Supp.3d 946
• Parties: UNITED STATES, Plaintiff, v. Joseph E. FELDMAN, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

439 F.Supp.3d 946

UNITED STATES, Plaintiff,

v.Joseph E. FELDMAN, Defendant.

Case No. 2:17-cv-11292

United States District Court, E.D. Michigan, Southern Division.

Signed February 12, 2020

Larry Steven Schifano, U.S. Department of Justice, Washington, DC, for Plaintiff.

Stuart Sandweiss, Metro Detroit Litigation Group, Southfield, MI, Venar R. Ayar, Ayar Law, Farmington Hills, MI, for Defendant.

OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT [36]

LAURIE J. MICHELSON, UNITED STATES DISTRICT JUDGE

In 2001 and 2002, Joseph Feldman profited from making and using counterfeit checks. He used the phony money for everything from purchasing personal items to funding brokerage accounts. And he didn't file tax returns. Eventually the federal government caught on, and in 2006 Feldman pled guilty to wire fraud. In 2010, Feldman completed his prison term.

But apparently there is some truth in the saying, "nothing is certain except for death and taxes." Over 10 years after Feldman pled guilty, the Internal Revenue Service filed this lawsuit to collect on unpaid taxes for money Feldman received in 2001 and 2002. In particular, the IRS says that Feldman now owes around $200,000 in taxes, interest, and penalties.

And the IRS says that every reasonable jury would agree with it and so this Court should grant it summary judgment. But the Court believes that there is a genuine dispute over how much income Feldman received in 2001 and 2002, and thus a genuine dispute over whether the IRS has reasonably determined the amount of tax owed. Accordingly, as explained below, the Court will deny the IRS' motion for summary judgment.

I.

A.

In or around 2001, Feldman's company began failing and Feldman resorted to making and using counterfeit checks to support himself. (ECF No. 40, PageID.298, 303.) For now, it suffices to say that Feldman used the fake checks to buy and short sell stocks. (See ECF No. 40-2, PageID.322–325.)

In 2001, Feldman and his wife divorced and so Feldman moved from the couple's home in Farmington Hills, Michigan to a new place in Southfield, Michigan. (ECF No. 40, PageID.304–305.) Feldman avers, "Contemporaneous with my divorce in 2001, I filed a Change of Address Form with the United States Post Office changing my address from 30100 Summit Dr., Farmington Hills, Michigan to 15605 George Washington, Southfield, Michigan 48075." (ECF No. 24, PageID.164.)

Although Feldman's bad-check scheme went on for a time, federal authorities eventually caught on. In August 2005, the federal government filed a criminal complaint against Feldman. The affidavit supporting the complaint indicated that Feldman was living at the Southfield address. (See ECF No. 24, PageID.172–173.) The 2005 case was dismissed without prejudice, but the federal government filed a second criminal case against Feldman in May 2006. See United States v. Feldman , No. 06-20301, 2006 WL 4941235 (E.D. Mich. filed May 31, 2006). Feldman pled guilty to wire fraud in June 2006 and, in March 2007, was sentenced to 27 months in prison and $137,000 in restitution. See id.

Around this time, the Internal Revenue Service was also investigating Feldman. As relevant to the IRS' motion for summary judgment, Feldman had not filed tax returns for the 2001 and 2002 tax years. (ECF No. 24, PageID.164.) (The IRS also says Feldman owes around $1,000 for the 2015 tax year which, apparently, Feldman does not dispute.) In August 2006, the IRS sent Feldman a "Proposed Individual Income Tax Assessment" for the 2002 tax year. (ECF No. 18, PageID.103, 105.) The IRS mailed the proposed assessment to the Farmington Hills address. (Id. ) As part of the mailing, the IRS listed seven payments from brokerage firms to Feldman. (ECF No. 18, PageID.103, 107–108.) According to the IRS, Feldman owed taxes on these seven payments. But according to the list, none of the payments were sent to the Farmington Hills address; they were all sent to a W. 12 Mile address, which was a UPS Store that Feldman's business (or former business) used for mail. (See ECF No. 18, PageID.107–108; ECF No. 24, PageID.170; ECF No. 40-2, PageID.300.)

In October 2006, the IRS received notice that documents it had sent to the Farmington Hills address had been returned "undelivered." (ECF No. 40, PageID.265 (2001 tax year), PageID.280 (2002 tax year).) Indeed, the IRS kept a computerized log for each tax investigation (one for 2001 and one for 2002) and both logs have an October 26, 2006 entry stating, "Undelivered Mail[.] Research needed." (ECF No. 40, PageID.265, 280.)

So the IRS conducted research into Feldman's current address. But the IRS has not provided the Court with any details about this investigation. (See ECF No. 40, PageID.265, 280.) All that is known is that by November 7, 2006, the research concluded with "no results." (See id. )

On December 4, 2006, the IRS sent notices of deficiency to Feldman for the 2001 and 2002 tax years. See 26 U.S.C. §§ 6212(a), 6213. Having found no other address for Feldman, the IRS sent the two statutory notices to the Farmington Hills address. (ECF No. 15, PageID.71, 78; ECF No. 40, PageID.261, 273, 286.) The notice for the 2001 tax year indicated that brokerage firms had paid Feldman about $174,000, that Feldman owed the IRS about $47,000 in taxes for those payments, and that Feldman owed another $40,000 in interest and penalties. (ECF No. 15, PageID.74.) The notice for the 2002 tax year indicated that Feldman owed about $19,000 in taxes and another $9,000 in interest and penalties. (ECF No. 15, PageID.78; ECF No. 40, PageID.290.) The IRS calculated the $47,000 tax amount for the 2001 tax year and the $19,000 tax amount for the 2002 tax year using information supplied by brokerage firms to the IRS on 1099 forms (Form 1099-B, Form 1099-INT, and Form 1099-DIV). (See ECF No. 46, PageID.347–353.)

As Feldman had moved from his and his ex-wife's Farmington Hills home in 2001, the two notices were not sent to where Feldman was living in December 2006. Indeed, on the envelopes containing the notices, the postal service stamped, "Not Deliverable as Addressed[.] Forwarding Order Expired." (ECF No. 40, PageID.268 (2001 tax year); ECF No. 40, PageID.283 (2002 tax year).) At some point (most likely sometime in late December 2006 or early January 2007), USPS returned the notices to the IRS. (See ECF No. 40, PageID.268, 283.)

The two notices indicated that Feldman had 90 days to file a petition challenging the IRS' claim that he owed taxes, interest, and penalties for the 2001 and 2002 tax years. Apparently because Feldman never received the notices, he never filed a petition. The 90-day period expired in March 2007.

B.

The IRS filed this lawsuit just over 10 years later, on April 25, 2017. (Technically, the suit was filed by the Tax Division of the U.S. Department of Justice but, for convenience, the Court uses "IRS.") The IRS asserts that Feldman now owes around $200,000 in taxes, interest, and penalties. (See ECF No. 15, PageID.68 (indicating $193,000 owed as of November 2017).) And the IRS believes that every reasonable jury would agree with its assertion. So the IRS asks this Court to grant it summary judgment. (ECF No. 36.)

II.

Unfortunately, the parties in this case have put little effort into figuring out the proper summary-judgment burdens.

Usually, a defendant moves for summary judgment on a claim on which the plaintiff bears the burden of proof at trial. And in that common situation, the defendant discharges its initial burden by pointing out that one or more essential elements of the plaintiff's claim lack evidentiary support. Celotex Corp. v. Catrett , 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Max Arnold & Sons, LLC v. W.L. Hailey & Co. , 452 F.3d 494, 507 (6th Cir. 2006). If the defendant identifies evidentiary gaps on essential elements, it puts the onus on the plaintiff to identify record evidence that would permit a reasonable jury to find for it on those elements. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

But sometimes a plaintiff moves for summary judgment on its claim or the defendant moves for summary judgment on an affirmative defense. In these and like situations, the moving party's initial burden is not merely to identify holes in the non-moving party's case. Instead, the moving party "must lay out the elements of the claim, cite the facts which it believes satisfies these elements, and demonstrate why the record is so one-sided as to rule out the prospect of a finding in favor of the non-movant on the claim." Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund , 778 F.3d 593, 601 (7th Cir. 2015) ; accord Surles v. Andison , 678 F.3d 452, 455–56 (6th Cir. 2012) ("In cases where the party moving for summary judgment also bears the burden of persuasion at trial, the party's initial summary judgment burden is higher in that it must show that the record contains evidence satisfying the burden of persuasion and that the evidence is so powerful that no reasonable jury would be free to disbelieve it." (internal quotation marks omitted)); Wright & Miller, 10A Fed. Prac. & Proc. § 2727.1 (4th ed.).

Here, the IRS filed this case to collect taxes, and it now seeks summary judgment. So it would appear that it has the more-demanding initial burden. But some of Feldman's arguments are best cast as affirmative defenses. Unfortunately, neither party explains how the summary-judgment burdens differ for different claims.

Fortunately, the Court can simplify things. Regarding the parties' primary dispute over the amount of taxes owed, the Court fleshes out the relevant burden of production and proof below. As for Feldman's argument that his "last known address" was the address on the change-of-address form he completed, the Court ultimately does not resolve that issue and thus need not resolve the associated burdens of production and proof. As for all other issues in this case, the Court will assume in Feldman's favor that the IRS...