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In re Cooper

March 4, 2008


The opinion of the court was delivered by: Simandle, District Judge


In this case, the Court is called upon to determine whether the funds in a bank account over which the attorneys who filed this case serve as court-appointed trustees are subject to attachment by a tax levy made by the Internal Revenue Service ("IRS"). The trustees for the account (the "Trustees") filed the motion for summary judgment presently before the Court [Docket Item 3], requesting that the Court enjoin the enforcement of the tax levy. The Government filed a cross-motion for summary judgment [Docket Item 8]. For the reasons explained below, the Court will grant the Trustees' motion for summary judgment and deny the Government's cross-motion for summary judgment.


All material facts in these cross-motions are undisputed*fn1 and are summarized as follows. Jeffrey D. Cooper was a New Jersey attorney who died intestate in 2006. (Mackin Cert. Ex. A.) Following Mr. Cooper's death, the Camden County Bar Association brought an action in the Superior Court of New Jersey, Camden County, for the appointment of a trustee in order to protect the interests of Mr. Cooper's clients. (Id.) On October 26, 2006, Judge Francis Orlando issued an order pursuant to New Jersey Court Rule 1:20-19 appointing William Mackin, Esq. and Scott M. Zauber, Esq. as trustees for Mr. Cooper's law practice. (Notice of Removal Ex. A.) The October 26, 2006 order specifically directed the Trustees to inventory the active files of the attorney, [to] take control of the attorney's trust and business accounts and of any trust assets[,] and to take all such action as they deem indicated to protect the interest of the attorney and the attorney's clients, all pursuant to and in accordance with the provisions of R. 1:20-19. (Id.) Subsequently, in a November 2, 2006 order, Judge Orlando appointed a third trustee and repeated the directions to the Trustees quoted above. (Mackin Cert. Ex. A.)

Through their efforts, the Trustees learned that the funds in Mr. Cooper's Commerce Bank trust account belonged to his clients, James and Beatrice Yoder. (Mackin Cert. Ex. B.) On February 23, 2007, Judge Orlando issued an order (the "February 2007 order") directing Commerce Bank to release Mr. and Mrs. Yoders' funds to the care of their attorney, and thereby relieved the Trustees of their responsibility for Mr. Cooper's trust account. (Id.) The February 2007 order further directed the Trustees to deposit Mr. Cooper's uncashed income checks into his Commerce Bank business account. (Id.) In addition, Judge Orlando ordered that Commerce Bank within ten days of the entry of the February 2007 order "release the funds located in Cooper's Attorney Business Account . . . to William Mackin, Esquire, pursuant to Mr. Mackin's directions, to be held in trust and distributed upon Court Order after further application to the Court." (Id.) Commerce Bank complied with Judge Orlando's order and dispersed the funds in Mr. Cooper's trust account to the Yoders' attorney. (Mackin Cert ¶ 10.) As the February 2007 order instructed, the Trustees deposited Mr. Cooper's remaining checks into the Commerce Bank business account. (Id. at ¶ 12.) After these deposits, the balance of the business account was $11,657.30. (Id.)

On April 26, 2007, before Commerce Bank could comply with the direction in the February 2007 order to "release the funds located in Cooper's Attorney Business Account . . . to William Mackin," (Mackin Cert. Ex. B), it received a notice that the IRS had imposed a tax levy upon Mr. Cooper's business account in the amount of $15,795.95. (Mackin Cert. ¶ 13.) The April 26, 2007 levy arises from statutory tax liens for Mr. Cooper's income tax liabilities assessed by the IRS on December 31, 2002 and December 31, 2003, respectively. (Id. at Ex. D.) Although "Commerce Bank expressed a desire to comply with Judge Orlando's February 23, 2007 Order," it determined that it could not do so unless the IRS terminated the levy or Judge Orlando directed it to comply with his previous order in spite of the lien. (Id. at ¶ 14.) Mr. Mackin then sent a letter to Mary Hannah, the IRS collections operations manager who had sent the levy notice, informing the IRS that Judge Orlando had ordered Commerce Bank to release Mr. Cooper's funds to the Trustees and that the funds were to be distributed to the Trustees as compensation for the costs they had incurred in performing their duties. (Mackin Cert. Ex. E.) The IRS never responded to Mr. Mackin's letter. (Mackin Cert. ¶ 16.)

On May 1, 2007, Judge Orlando issued an order closing the case (the "May 2007 order"). (Mackin Cert. Ex. A1.)*fn2 The May 2007 order authorized the payment of attorneys' fees and costs to the Trustees well in excess of the balance of Mr. Cooper's business account and ordered that the business account be distributed among the three Trustees in partial satisfaction of their fees and costs. (Id. at ¶¶ 2, 6.) The order noted that "[t]he funds in Cooper's attorney business/operating account . . . at Commerce Bank . . . were previously determined in the Court's February 23, 2007 Order to be no longer Cooper's property but property to be used for satisfaction of the administrative costs of this proceeding," and directed the Trustees to "provide the IRS with a copy of the Court's February 23, 2007 Order [to request] that the IRS voluntarily release the funds" in Mr. Cooper's business account. (Id. at ¶ 4.) The May 2007 order further provided that the Trustees could reopen the case in order to seek "the entry of an Order releasing Cooper's Business Account proceeds from the IRS levy and directing Commerce Bank to turn over the . . . proceeds to the Attorney-Trustees in accordance with the Court's February 23, 2007 Order." (Id.)

After the IRS failed to respond to his letter, Mr. Mackin reopened the Superior Court action in accordance with Judge Orlando's May 2007 order. (Mackin Cert. ¶ 16.) The Government removed the case to this Court pursuant to 28 U.S.C. § 1444 [Docket Item 1]. The parties subsequently filed cross-motions for summary judgment, to which the Court now turns.


A. Subject Matter Jurisdiction

The Government removed the case to this Court pursuant to 28 U.S.C. § 1444. Section 1444 provides that "[a]ny action brought under section 2410 of this title against the United States in any State court may be removed by the United States to the district court of the United States for the district and division in which the action is pending." 28 U.S.C. § 1444. Section 2410, in turn, provides federal jurisdiction over "[a]ctions affecting property on which United States has lien," 28 U.S.C. § 2410, including actions affecting tax levies on personal property. Hudson County Bd. of Chosen Freeholders v. Morales, 581 F.2d 379, 383 (3d Cir. 1978); see also DeRewal v. United States, 572 F. Supp. 1124, 1129 (D.C. Pa. 1983). The Court has jurisdiction over the enforcement of the tax levy in this case under 26 U.S.C. §§ 7426(a)(1) and 7426(b). See I.R.S. v. Gaster, 42 F.3d 787, 790-91 (3d Cir. 1994).*fn3

B. Standard of Review

Summary judgment is appropriate when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). As noted above, the parties to these cross-motions agree, and this Court concurs, that no genuine dispute exists as to any material fact.

The summary judgment standard does not change when, as here, the parties have filed cross-motions for summary judgment. See Appelmans v. City of Phila., 826 F.2d 214, 216 (3d ...

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