The opinion of the court was delivered by: William J. Martini Judge
MARTIN LUTHER KING JR. FEDERAL BLDG. & U.S. COURT HOUSE 50 WALNUT STREET, P.O. BOX 419 NEWAR K, NJ 07101-0419 (973) 645-6340
Plaintiff Joseph Kilraine brings the instant action to recover funds paid to the Government, pursuant to a "trust fund penalty assessment" levied against him by the Internal Revenue Service ("IRS"). Currently before the Court are the parties' cross-motions for summary judgment. After review of the papers and the relevant law, and for the reasons set forth below, Plaintiff Kilraine's motion for summary judgment is GRANTED and the Government's motion is DENIED. In addition, Plaintiff Kilraine's request for attorney's fees is DENIED without prejudice.
In 2004, the IRS assessed a "trust fund penalty" against Plaintiff Joseph Kilraine to collect unpaid federal income, social security, and medicare taxes due from two employers, Ambric Group ("Ambric") and Shah Associates Engineering ("Shah"), in the first and second quarters of 2000. At that time, Kilraine was the Chief Executive Officer of GA Group -- the holding company of Ambric and Shah. In addition to being CEO of GA Group, Kilraine also served as a consultant to Ambric and Shah after they filed for Chapter 11 bankruptcy protection on January 24, 2000.
The nature and extent of Kilraine's duties with regard to Ambric and Shah during his consultancy are disputed by the parties. While the Government asserts that Kilraine was very involved in the management of the companies and helped decide which bills to pay, Kilraine asserts that he had no role in the day-to-day running of Ambric and Shah. (Government Statement of Facts ("Gov. Stmt.") ¶¶ 55, 59, 62-65; Certification of Joseph Kilraine ("Kilraine Cert.") ¶ 6.) Further, Kilraine states that he had no authority to direct which bills were paid, since the bankruptcy court approved all expenditures through a cash collateral budget. (Kilraine Cert. ¶ 17.)
In addition, the parties dispute the duration of Kilraine's consultancy with Ambric and Shah. While Kilraine states that he resigned on March 24, 2000 -- before the end of the first quarter of 2000 -- the Government asserts that Kilraine worked for the debtor companies through July 2000. (Kilraine Cert. ¶ 8; Gov. Stmt. ¶¶ 75, 77.)
At some point, the parties agree that Kilraine learned that Ambric and Shah were delinquent in paying over their employee withholding to the IRS. The parties dispute, however, when Kilraine gained this knowledge. Kilraine says that he first heard of the delinquency in March 2003 when he received a call from an IRS agent. (Kilraine Cert. ¶ 28.) The government, on the other hand, asserts that Kilraine was notified of the payroll tax delinquency on May 31, 2000 when the IRS informed Ambric and Shah's counsel through a filing in the bankruptcy proceeding; however, the Government states that he should have known of the delinquency far earlier. (Gov. Stmt. ¶ 82; Gov. Br. in Support of Mt. for Summ. J. 21.)
In 2004, the IRS imposed the trust fund penalty assessments against Kilraine for the delinquencies of Ambric and Shah in the amount of $74,785.30, pursuant to 26 U.S.C. § 6672. Subsequently, the IRS has seized Kilraine's tax refunds and placed two liens on his home. As of May 2008, Kilraine states that he has paid approximately $93,062.53 to the IRS, which he now seeks to have refunded through this action. (Kilraine Cert. ¶ 33.)
The Government disputes the amount paid by Kilraine, stating that it amounts only to $89,100.24.(Gov. Resp. to Pl.'s Statement of Disputed Material Facts ¶ 38.)
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 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). The burden of showing that no genuine issue of material fact exists rests initially on the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). A litigant may discharge this burden by exposing "the absence of evidence to support the nonmoving party's case." Id. at 325. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In evaluating a summary judgment motion, a court must view all evidence in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976).
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 Cir. 1987). If review of cross-motions for summary judgment reveals no genuine issue of material fact, then judgment may be entered in favor of the party deserving of judgment in light of the law and undisputed facts. See Iberia Foods Corp. v. Romeo Jr., 150 F.3d 298, 302 (3d Cir. 1998) (citing Ciarlante v. Brown & Williamson Tobacco Corp., 143 F.3d 139, 145-46 (3d Cir. 1988)).
This dispute centers on the following: Is Joseph Kilraine liable under 26 U.S.C. § 6672 as a responsible person who willfully failed to pay over withholding taxes to the IRS? As the question suggests, to be held liable under § 6672, a person must (1) be required to collect, truthfully account for, or pay over the employment or trust fund taxes; and (2) willfully have failed to collect, account for, or ...