WRK Rarities, LLC v. United States
| Decision Date | 29 February 2016 |
| Docket Number | CASE NO. 4:13cv791 |
| Citation | 165 F.Supp.3d 631 |
| Parties | WRK Rarities, LLC, Plaintiff, v. United States of America, et al., Defendants. |
| Court | U.S. District Court — Northern District of Ohio |
John D. Falgiani, Jr., Ford, Gold, Falgiani Law Group, Warren, OH, for Plaintiff.
Carina Clark Federico, Karen A. Smith, Stephanie Weiner Chernoff, U.S. Department of Justice, Washington, DC, David Augustin Ruiz, Office of the U.S. Attorney, Cleveland, OH, for Defendants.
Benita Y. Pearson
Pending before the Court is a motion for summary judgment filed by the United States of America. ECF No. 70. The Court has been advised, having reviewed the record, including the parties' briefs and the applicable law. For the reasons that follow, the Court grants the motion for summary judgment.
In 1957, William R. Kimpel's father and uncle founded Kimpel's Jewelry and Gifts (“KJG”), a jewelry store located at 111 Columbiana Plaza, Columbiana, Ohio. ECF No. 69 ¶ 1 (Joint Stipulation of Undisputed Facts). The two co-owned the company until 1979, when William R. Kimpel purchased his uncle's half of KJG. Kimpel purchased his father's half in 1994. ECF No. 69 ¶ 1. From that point forward, Kimpel was the sole owner, president, and the person responsible for managing the day-to-day operations of KJG. ECF No. 69 ¶ 1.
On October 15, 2005, KJG filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Northern District of Ohio, Eastern Division. ECF No. 69 ¶ 4. The Internal Revenue Service filed a proof of claim for unpaid federal tax liabilities, including corporate income taxes and employment taxes. ECF No. 69 ¶ 4. The Court approved a plan of reorganization on May 23, 2007. ECF No. 69 ¶ 4. The bankruptcy case was dismissed on August 23, 2010 because KJG had failed to make required payments under the bankruptcy plan. ECF No. 69 ¶ 5. Kimpel attributed KJG's failure to make payments on an investor wrongfully taking KJG assets and two replevin actions in 2008, which resulted in KJG losing its inventory to creditors and forced KJG to sell merchandise on consignment. ECF No. 69 ¶¶ 6, 8. Kimpel admitted, however, to subsequently replenishing KJG's inventory through the profits obtained from the consignment sales. ECF No. 74-1 at PageID# 856.
KJG failed to pay its federal taxes while its bankruptcy case was pending. ECF No. 69 ¶ 9. KJG ceased making quarterly deposits of federal employment taxes altogether in March 2007. ECF No. 69 ¶ 9. In response, a delegate of the Secretary of the Treasury made assessments against KJG for unpaid employment taxes, penalties, and interest for all four quarters of 2007 and all four quarters of 2008, and the IRS filed notices of federal tax liens for those years as well. ECF No. 69 ¶¶ 10–11. An IRS Revenue Officer visited KJG in 2010 to interview KJG employees and to speak with Kimpel. ECF No. 69 ¶¶ 12–13. Kimpel acknowledged his responsibility for paying KJG's taxes, which had been unpaid for the past four years (2007 through 2010). ECF No. 69 ¶¶ 13–14. KJG allegedly ceased operations on December 31, 2010. ECF No. 69 ¶ 15.
On or about September 1, 2010, Kimpel formed a new company, WRK Rarities, LLC d/b/a Kimpel's Fine Diamonds (“WRK”). WRK owns and operates a jewelry store at 111 Columbiana Plaza, Columbiana, Ohio—the same address that KJG has been located since 1957—and has Kimpel as its sole owner, president, and manager of its day-to-day operations. ECF No. 69 ¶¶ 18–19. WRK occupies the same space that KJG did, under identical terms for its lease, and has retained KJG's same signage, furniture, and fixtures. ECF No. 69 ¶¶ 20–22. WRK continued to employ the same employees as KJG when the latter allegedly ceased operations on December 31, 2010. ECF No. 69 ¶ 24. These employees retained the same titles and salaries that they had from working for KJG. ECF No. 69 ¶¶ 24, 28. WRK continued KJG's business of jewelry, colored gems, loose diamonds, and watches, among other items, using some of the same suppliers and consignors as KJG. ECF No. 69 ¶¶ 23, 25–26. Kimpel also opened a new bank account in WRK's name at Farmer's National Bank—the same bank at which KJG had its operating bank account. ECF No. 69 ¶¶ 2, 17. Both Farmer's National Bank accounts had the same two authorized signatories: Kimpel and Cindy Leonard. ECF No. 69 ¶¶ 2, 17.
In 2011, the IRS levied KJG's accounts, but recovered little or no proceeds because the accounts in KJG's name contained only minimal funds. ECF No. 69 ¶ 34. In September 2011, the IRS determined that WRK was the nominee, alter ego, and/or fraudulent conveyee of KJG, and proceeded to levy bank accounts in WRK's name to collect taxes owed by KJG. ECF No. 69 ¶ 35. WRK submitted to the IRS a proposal to have WRK purchase the assets of KJG for $2,236.00, and to provide that sum to the IRS in exchange for a discharge of all federal tax liens on KJG's property. ECF No. 69 ¶ 36. The IRS rejected that offer, however, because WRK's appraisal had been conducted without an in-person inspection, the proposal included no payment to KJG for inventory, goodwill, or other assets, and the amount offered was nominal compared to KJG's tax liabilities. ECF No. 69 ¶ 37. The IRS subsequently filed a Notice of Federal Tax Lien against WRK, as “nominee and/or alter ego and/or fraudulent conveyee” of KJG, with the Columbiana County Recorder. ECF No. 69 ¶ 38. The United States obtained a Writ of Entry on Premises to Effect Levy, permitting the IRS to enter WRK's premises for seizing assets which were subject to levy. ECF No. 69 ¶ 39. The IRS executed the Writ of Entry on January 20, 2013. ECF No. 69 ¶ 40.
WRK, and former Plaintiffs Cindy Leonard and Barry Kimpel, initiated the instant lawsuit for wrongful levy on April 10, 2013. ECF No. 1. Plaintiffs moved for a temporary restraining order (ECF No. 3), but the Court denied the motion. ECF No. 8. Plaintiffs filed an amended complaint on May 30, 2013, alleging a single claim for wrongful levy. ECF No. 17. Plaintiffs Cindy Leonard and Barry Kimpel were voluntarily dismissed on November 4, 2013. ECF No. 35. WRK's counsel moved to withdraw on May 9, 2014, which the Court granted the same day. ECF No. 54. The United States moved for an order to show cause why the case should not be dismissed, on the grounds that WRK could not proceed pro se as a limited liability company. ECF No. 57. The case was dismissed without prejudice on November 26, 2014, subject to being reopened if WRK retained new counsel. ECF No. 60. WRK did so, and the case was reopened on March 11, 2015. The United States of America moved for summary judgment on July 10, 2015. ECF No. 70. WRK opposed (ECF No. 75); the United States replied. ECF No. 76. The matter is ripe for adjudication.
Summary judgment is appropriately granted when the pleadings, the discovery and disclosure materials on file, and any affidavits show “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a)
; see also
Johnson v. Karnes, 398 F.3d 868, 873 (6th Cir.2005). The moving party is not required to file affidavits or other similar materials negating a claim on which its opponent bears the burden of proof, so long as the movant relies upon the absence of the essential element in the pleadings, depositions, answers to interrogatories, and admissions on file. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party must “show that the non-moving party has failed to establish an essential element of his case upon which he would bear the ultimate burden of proof at trial.” Guarino v. Brookfield Twp. Trustees, 980 F.2d 399, 403 (6th Cir.1992).
After the movant makes a properly supported motion, the burden shifts to the non-moving party to demonstrate the existence of material facts in dispute. An opposing party may not simply rely on its pleadings; rather, it must “produce evidence that results in a conflict of material fact to be resolved by a jury.” Cox v. Ky. Dep't of Transp., 53 F.3d 146, 150 (6th Cir.1995)
. A fact is “material” only if its resolution will affect the outcome of the lawsuit. In determining whether a factual issue is “genuine,” the court must evaluate whether the evidence could persuade a reasonable factfinder that the non-moving party is entitled to a verdict. Id.
To defeat a motion for summary judgment, the non-moving party must “show that there is doubt as to the material facts and that the record, taken as a whole, does not lead to a judgment for the movant.” Guarino, 980 F.2d at 403
. In reviewing a motion for summary judgment, the court must view the evidence in the light most favorable to the non-moving party when deciding whether a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). The existence of a mere scintilla of evidence in support of the non-moving party's position ordinarily is not sufficient to defeat a motion for summary judgment. Klepper v. First Am. Bank, 916 F.2d 337, 342 (6th Cir. 1990).
WRK has brought a wrongful levy action against the United States of America, pursuant to 26 U.S.C. § 7426
, which provides in relevant part:
If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States.
26 U.S.C. § 7426(a)(1)
. To prevail in a wrongful levy action, WRK must initially show that it was not the entity against whom the tax...
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