United States v. Williams
20-10433
5th Cir.Jul 6, 2021Background
- Dr. Charles I. Williams was sole owner and officer of two dentistry corporations (WDA North and WDA South) and owned Williams Business Management, Inc.; payroll tax liabilities arose for 2012–2014.
- Williams’s businesses experienced a cash‑flow crisis; he reduced salary, refinanced his house, and placed the dental practices in Chapter 11, but payroll taxes remained unpaid.
- Williams signed IRS forms acknowledging balances due; his bookkeeper, Brenda Beauchamp, declared that he knew of the unpaid trust fund taxes yet directed payments to other creditors.
- Williams submitted declarations from two treating physicians asserting he was in a “mental fog” and incapable of willful conduct; the district court excluded those declarations for failure to provide Rule 26 expert reports.
- The district court granted the United States summary judgment under 26 U.S.C. § 6672, finding Williams willfully failed to pay withheld payroll taxes and ordering application of sale proceeds to satisfy his tax liabilities; Williams’s Rule 59(e) motion and counterclaim were denied/dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Was Williams’s failure to remit payroll taxes "willful" under § 6672? | Government: undisputed evidence Williams knew taxes were due and paid other creditors, establishing willfulness as a matter of law. | Williams: personal health and opioid treatment caused incapacity; therefore he lacked the mental state to act willfully. | Affirmed: willfulness established as matter of law based on directing payments to private creditors while knowing of tax deficiency. |
| 2. Admissibility of bookkeeper Beauchamp’s declaration | Government: Beauchamp’s declaration is admissible lay witness testimony showing Williams’s knowledge and directions. | Williams: broadly objected as hearsay and unsupported lay testimony. | Affirmed: district court did not abuse discretion in admitting the declaration; objections were not sufficiently specific and testimony was within her knowledge. |
| 3. Exclusion of treating physicians’ declarations | Government: physicians failed to provide Rule 26 expert reports for litigation‑formed opinions; exclusion proper. | Williams: treating physicians’ opinions are admissible without expert reports and show incapacity negating willfulness. | Affirmed (procedurally): exclusion upheld; but Court ruled that even if considered, physicians’ declarations do not create a genuine dispute of willfulness. |
| 4. Rule 59(e) motion / counterclaim about IRS application of seized Social Security payments | Government: district court lacked subject‑matter jurisdiction over refund counterclaim because Williams did not file administrative IRS refund claim; Rule 59(e) relief not shown. | Williams: IRS misapplied seized social security payments; half of sale proceeds belong to wife’s estate; judgment should be amended. | Affirmed: counterclaim dismissed for lack of jurisdiction; Rule 59(e) denial not an abuse of discretion (no manifest error or newly discovered evidence). |
Key Cases Cited
- Barnett v. I.R.S., 988 F.2d 1449 (5th Cir. 1993) (willfulness requires voluntary, conscious, intentional act; paying creditors in preference to IRS evidences willfulness)
- Mazo v. United States, 591 F.2d 1151 (5th Cir. 1979) (knowledge of payments to other creditors after awareness of tax deficiency suffices for summary judgment on willfulness)
- Slodov v. United States, 436 U.S. 238 (U.S. 1978) (personal liability under § 6672 requires responsible person who willfully failed to pay)
- Conway v. United States, 647 F.3d 228 (5th Cir. 2011) (where responsible person directs payments to others while knowing of deficiency, willfulness can be decided as a matter of law)
- Howard v. United States, 711 F.2d 729 (5th Cir. 1983) (preference payments to other creditors establish willfulness)
- Munoz v. Orr, 200 F.3d 291 (5th Cir. 2000) (standard of review for evidentiary rulings and summary judgment principles)
- Griener v. United States, 900 F.3d 700 (5th Cir. 2018) (de novo review of subject matter jurisdiction)
- St. Paul Mercury Ins. Co. v. Fair Grounds Corp., 123 F.3d 336 (5th Cir. 1997) (standard of review for Rule 59(e) denial)