US v. Buckner, Civ. 1:99-CV-288.
| Decision Date | 10 April 2001 |
| Docket Number | No. Civ. 1:99-CV-288.,Civ. 1:99-CV-288. |
| Citation | 264 BR 908 |
| Parties | UNITED STATES of America, Plaintiff, v. David E. BUCKNER and Federal Express Corporation, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
John V. Cardone, U.S. Department of Justice, Tax Division, Washington, DC, for United States of America.
Kirk A. McCarville, Phoenix, AZ, for David E. Buckner.
J. Michael Oehmler, Federal Express Corporation, Legal Department, Litigation, Memphis, TN, for Federal Express Corporation.
On December 20, 2000, and in accordance with 28 U.S.C. § 636(b)(1)(B)(C), and N.D.Ind.L.R. 72.1(d)(1) this case was referred to Magistrate Judge Roger Cosbey to submit a Report and Recommendation on Count 1 of the Amended Complaint filed by the plaintiff, the United States of America against the Defendant, David E. Buckner. On February 27, 2001, Magistrate Judge Cosbey conducted a bench trial, and on March 14, 2001 issued his Report and Recommendation, recommending that judgment be GRANTED in favor of the United States of America and against David E. Buckner on Count 1 of the plaintiff's amended complaint. This Report and Recommendation also informed the parties that, pursuant to § 636(b)(1)(C) of the Federal Magistrates' Act, they had ten days after being served with a copy of the Report and Recommendation to file written objections with the Clerk of the Court, and that failure to object may constitute a waiver of objection on appeal. See also N.D.Ind.L.R. 72(d)(2).
More than ten days have passed since the parties have been served with a copy of Magistrate Judge Cosbey's Report and Recommendation and no objections have been filed with the Clerk of the Court. Consequently, this court hereby ADOPTS Magistrate Judge Cosbey's Report and Recommendation, and GRANTS judgment in favor of the United States of America and against the defendant David E. Buckner on Count 1 of the plaintiff's amended complaint.
On December 20, 2000, and in accordance with 28 U.S.C. § 636(b)(1)(B)(C) and N.D.Ind.L.R. 72.1(d)(1) Chief Judge William C. Lee entered an order referring this case to the undersigned Magistrate Judge to submit a Report and Recommendation on Count I of the Amended Complaint filed by the Plaintiff, the United States of America ("the United States"), against the Defendant, David E. Buckner ("Buckner").
Count I was tried to the undersigned Magistrate Judge on February 27, 2001. Counsel conceded, and the court found subject matter jurisdiction pursuant to 28 U.S.C. §§ 1340 and 1345 and 26 U.S.C. § 7402. See, January 22, 2001 Pretrial Order ¶ B.
For the following reasons, the undersigned Magistrate Judge recommends that judgment be GRANTED in favor of the United States on its Amended Complaint.
On August 30, 1988, the United States Tax Court entered a decision determining that there were deficiencies with respect to Buckner's 1981, 1982 and 1983 federal income tax liability (the "Subject Liabilities"). (Pretrial Order, G2, Stipulated Fact.)
Pursuant to the Tax Court decision, a delegate of the Secretary of the Treasury made assessments against Buckner for the Subject Liabilities as follows:
Type Date of Tax Amount
of Tax Assessment Period Assessed
1040 10-07-88 1981 $47,125.86
1040 10-07-88 1982 $27,579.63
1040 10-07-88 1983 $25,302.62
(Pretrial Order, G3, Stipulated Fact; Certificates of Assessments and Payments, Exhs. 1, 3, 5.)
A delegate of the Secretary of the Treasury then issued notices of the assessments and made demands for payment upon Buckner. (Pretrial Order, G4, Stipulated Fact.) Buckner either refused or neglected to pay fully, and as of July 13, 1990, he owed at least $80,000 on the Subject Liabilities. (Pretrial Order, G5, Stipulated Fact.)
On July 13, 1990, Buckner held an interest in a retirement plan known as Flying Tiger, Inc. Individually Vested Equity & Security Trust Plan for Pilots (the "Invest Plan") valued at approximately $82,504. (Pretrial Order, G6, Stipulated Fact.) The Vanguard Group ("Vanguard") was the Trustee of the retirement plan and Defendant, Federal Express Corporation ("Federal Express"), was the Plan Administrator.2 (Pretrial Order, G8, Stipulated Fact.)
On July 13, 1990, a delegate of the Secretary of the Treasury served a Notice of Levy upon Vanguard, as the agent of Federal Express, to collect the Subject Liabilities. The Notice of Levy notified Vanguard of the taxes due and owing from Buckner, and demanded surrender of Buckner's interest in the Invest Plan. (Pretrial Order, G9, Stipulated Fact.). Vanguard never surrendered the Invest Plan, and the levy was never released.
On July 31, 1990, Buckner filed a Chapter 7 petition for bankruptcy. (Pretrial Order, G10, Stipulated Fact.) The Bankruptcy Trustee did not file an action to recover the Invest Plan, and it never became a part of Buckner's bankruptcy estate. (Pretrial Order, G12, Stipulated Fact.) With Buckner's filing for bankruptcy, his income tax indebtedness was referred by the Internal Revenue Service ("I.R.S.") to its Special Procedures Branch ("SPB") in Indianapolis.
On December 20, 1990, the Bankruptcy Court granted Buckner a discharge pursuant to 11 U.S.C. § 727, and pursuant to 11 U.S.C. § 523(a)(1) and 11 U.S.C. § 507(a)(8), the Subject Liabilities were discharged. (Pretrial Order, G10, G11, Stipulated Facts.)
When a bankruptcy discharge is received at the SPB a "bankruptcy technician" determines whether the tax liabilities are dischargeable in accordance with certain criteria, and if so, the technician prepares tax abatement forms for the SPB Manager to approve. However, the policy and routine practice in the SPB was that if more than $100,000 was owed in tax liabilities, such as Buckner owed here, the bankruptcy technician would not take them directly to the Manager, but would have an SPB "advisor" review the matter to make sure the abatements were appropriate.
SPB advisors are responsible for reviewing a large number of bankruptcy cases, all those filed in both Districts of Indiana, and they are to refer them to the I.R.S. District Counsel if a legal issue arises. Thereafter, as to any referred case, the advisor is the liaison between the District Counsel and the SPB. Thus, when the Revenue Officer in the field raised questions about the prior levy (Def.Exh. I), the adviser assigned to Buckner's case, George Roberts ("Roberts") referred the matter in October 1990 to the District Counsel. (See Def.Exh. J.)
The referral was assigned by the District Counsel to I.R.S. attorney Timothy Lohrstorfer ("Lohrstorfer"), who undertook to enforce the levy against the Invest Plan. As Lohrstorfer followed this course, he assumed that because Roberts had referred the matter to the District Counsel, no abatement of the assessments would occur while he pursued assets, even if a bankruptcy discharge were granted. So, on April 22, 1991, he contacted both Federal Express and Vanguard, with a copy to Roberts, requesting that the levy be honored. (See Plnf.Exh. 12.) On May 8, 1991, Federal Express indicated that they would honor the levy on June 3, 1991. (See Plnf.Exh. 13.) Thus, by early May 1991, Lohrstorfer thought it was just a matter of time before the levy would be honored. Nevertheless, Lohrstorfer contacted Vanguard again on May 28, 1991, with another copy to Roberts. (See Def.Exh. P.) On May 31, 1991, Lohrstorfer wrote Roberts with more information (Def.Exh. S), attaching a letter from Buckner's counsel (Plnf.Exh. 14) acknowledging that Lohrstorfer had agreed to take no action on the levy until June 10, 1991.
Meanwhile, some months before, and shortly after Buckner's bankruptcy discharge, his attorney wrote the SPB requesting that Buckner's tax liabilities be abated and that all liens be released. (Def.Exh. M). However, while Buckner's counsel attached a separate lien schedule to his letter, he made no mention of the outstanding levy. Given the discharge, and perhaps inspired by counsel's letter, the SPB bankruptcy technician in Buckner's case, Connie Bray ("Bray"), prepared abatement forms. However, because the abatements involved more than $100,000 in taxes, Bray first brought the matter to Roberts in accordance with SPB practice and procedure to verify that the abatements could be entered. The reason for this step is the expectation that Roberts would advise Bray, for example, of any referrals to the District Counsel, or that pre-petition assets were subject to a levy and were about to be collected. However, Roberts inexplicably failed to tell Bray of his referral of the outstanding levy to District Counsel or that collection was being pursued (see Plnf.Exh. 12), and apparently expressed no objection to the proposed abatements.3
Bray, whose job would not have involved investigating for any prior levies, and thus unaware of one in Buckner's case, took the abatements (Plnf.Exhs. 9, 10 and 11) to the Manager of the SPB, Lawrence Van Der Moere ("Van Der Moere"). Van Der Moere, equally unaware of the levy, but correctly assuming that Bray had discussed the matter with Roberts in accordance with SPB policy and routine, approved the abatements on May 20, 1991. If Van Der Moere had known of prepetition assets available to pay Buckner's subject liabilities, such as the levy on the Invest Plan, he would not have authorized the abatements, and would have taken collection action with an abatement occurring only after receipt of the funds. In any event, with Van Der Moere's authorization, the I.R.S. abated the assessments for the Subject Liabilities. However, while the I.R.S. then released its liens, it did not release the levy.
Ultimately, on April 19, 1993 Lohrstorfer checked on the levy because he had heard that tax abatements had occurred in the SPB when assets were otherwise available for the collection of taxes....
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