*1 rehearing, majority of the However, ultimately join opin- and a do asked I regular judges of the circuit in active question government’s circuit I ion for do rehearing by instituting the criminal case having voted for service not good faith in banc, petition rehearing is surprised by the court in that it was I have no doubt by the district reached denied. legal conclusions us,
court, and, I limited record before circumstances which led not know all the
do indictment. government to seek Wexler’s
Furthermore, gov- possibly I cannot fault the seeking mandamus a writ of
ernment accept representation this court as I its
from corrected,
that, the district court’s unless opinion will be circulated and will
unreported impediment to the enforcement stand as an STATES of America UNITED course, tax laws. Of now goal government of overcom- has obtained
ing opinion, the determi- the district court’s CARRIGAN, P. David L. Fendrick Robert this criminal case should be nation whether and Edward M. Sullivan continued must be made prosecuting and not this court. authorities Sullivan, Appellant. M. Edward close, however, by pointing out that our I No. 93-5687. only give directions opinion is narrow. We jury. respect charge to the to the Ac- Appeals, United States Court of cordingly, possibility do not address the Third Circuit. may way some be able to Wexler Argued May 1994. jury’s bring to the attention the district opinion support a contention that court’s Decided respect good faith with to the he acted Rehearing Aug. Sur Petition for transactions and the deductions involved. issue, however, is not before us and That
consequently express opinion I no with re-
spect to it. PETITION FOR REHEARING
SUR
Aug. Judge, and
Before:
BECKER, STAPLETON, MANSMANN,
GREENBERG, HUTCHINSON, SCIRICA,
COWEN, NYGAARD, ALITO, ROTH, McKEE,
LEWIS, Judges,
POLLAK, Judge Senior District *. rehearing by respon- filed captioned
dent Victor Wexler the above having judges
matter been submitted to the participated in the decision of this court judges all circuit the other available service, regular
the court active and no
judge who concurred the decision Poliak, vania, sitting by designation. H. Honorable Louis Senior Pennsyl- for the Eastern District of *2 Allen, Cohen,
Gary R.
Jonathan S.
Marion
(argued),
Dept,
E.M. Erickson
U.S.
of Jus-
Div.,
DC,
Washington,
Tax
appellee.
tice
(ar-
Louis,
Robert H.
Howard M. Soloman
Abrahams, Loewenstein,
gued),
Bushman &
Kauffman, Philadelphia,
appellant.
PA
Judge,
Before:
HUTCHINSON,
Judge,
DIAMOND,
Judge.*
District
THE
OPINION OF
COURT
DIAMOND,
Judge.
(“Sullivan”) appeals an
Edward M. Sullivan
order
the United States District Court
Jersey granting
sum-
the District
New
mary judgment in favor of the United States
summary judg-
denying
his motion for
Specifically,
upheld
ment.
the district court
(“IRS”) as-
the Internal Revenue Service’s
against
penalty
sessment of a
100%
Internal Revenue
6672 of the
grounds
that he
Code
pay over feder-
Diamond,
sitting by designation.
Hon. Gustave
United States District
Pennsylvania,
for the Western District of
being paid ahead of the United States.
were
believe
taxes. Because we
al
president of Pat’s
was removed as
not establish
us does
before
that the record
company the fol-
and left the
August
law, will
matter of
liability as a
lowing month.
merits.
a trial on the
reverse
remand
*3
1989,
made an assess-
April
In
the IRS
$83,-
Background Facts1
of
against
I.
in
amount
Sullivan
the
§ 6672.3 The
to 26 U.S.C.A.
pursuant
060.78
1984,
began work-
Sullivan
September
In
willfully
to
charged
failed
that Sullivan
IRS
International,
Pat’s
Ltd.
president of
ing as
to the United
pay
for and
over
account
(“Pat’s”),
operated fast food
company which
a
employment
taxes withheld
federal
States
Philadelphia-style
in
specializing
restaurants
during
wages
employees
Pat’s
of
from the
by
hired
Robert
was
Sullivan
cheesesteaks.
31, 1985,
ending March
quarters
three
of the
(“Carrigan”), chairman
Carrigan
P.
30,
30,
1985,
September
1985.4
and
June
officer
and chief executive
of directors
board
1992,
a
States filed
In
United
October
designation
his
to
of Pat’s. Pursuant
seeking to
complaint in the district court
(1)
responsible for
president, Sullivan was
judgment
that had
to
the assessments
reduce
raising capital
Carrigan in
for
assisting
Sullivan, Carrigan,
against
and
been made
(2)
investors;
man-
potential
by meeting with
Thereafter,
§
to
6672.5
Fendrick
(3) locating
and
operations;
aging restaurant
of
seeking dismissal
filed an answer
Sullivan
was au-
sites. Sullivan also
new restaurant
him
to
complaint against
failure
state
for
from the com-
to
checks drawn
thorized
granted,
could be
upon
a
which relief
claim
operating ac-
general
and
pany’s payroll
seeking
re-
a
and also filed a counterclaim
counts.
penal-
paid
of
on account of the
fund
$100.00
1985,
first
In
or March
Sullivan
February
against
Upon
him.6
consider-
ty assessed
not current in
that Pat’s was
became aware
summary judg-
for
ation of cross-motions
quarterly employment taxes
payment
its
of
ment,
that “[a]l-
the district court found
During this same
States.2
to the United
may
always had the
though
not have
Sullivan
$20,000.00,
period,
creditors,
loaned Pat’s
apoc-
time
Sullivan
say
paying
in the
‘final’
about
Carrigan,
word,”
so
it could
request
responsi-
at the
of
that
alyptic
of the
he was a
sense
(1)
creditors, including
pay
§
the IRS. Sullivan
he had
ble
6672 because
however,
gener-
steps,
signature authority
payroll
to
that the
and
took no
ensure
accounts,
liability,
at
$20,000.00
operating
which he exercised
applied to the tax
al
was
payment
making
to
other creditors
least once
tax
though
even
he knew that
thereof, shall,
to other
exclusively
payment
addition
are drawn
from the
1. These facts
law,
provided by
penal-
stipulations
penalties
liable to a
parties’ joint
and
be
pretrial admissions
evaded,
ty equal
of the tax
to the district court.
to
total amount
submitted
collected,
paid
and
or
or not
not
accounted
during
over.
demonstrates
his
2. The record also
that
§
Pat's,
6672.
26 U.S.C.A.
president
was aware
tenure as
of
Sullivan
pay
employer
duty
and
that an
has a
to withhold
time,
the IRS
assessments
4. At the same
made
employment
the federal
over to the
States
$204,820.33
Carrigan and
against
the amount
employees.
was aware
taxes of its
Sullivan also
("Fen-
against David Fendrick
those
the collec-
individuals
drick”),
taxes,
for the
payment
employment
chief financial officer
tion and
30, 1985,
so,
through
ending
personally
quarters
March
liable for
four
failed to do
could be held
31,
paid
1985.
taxes not
December
the amount of
the United States.
Carrigan
plead
failed to
or other-
5.
and Fendrick
part:
provides
pertinent
defend,
3.
This section
against
wise
and defaults were entered
14,
May
They are
them this action
1993.
on
Tax,
Pay
and
Over
6672.
to Collect
Failure
parties
appeal.
not
to this
Attempt to Evade or Defeat Tax.
(a)
Any person required to
Rule.
General
for,
collect,
February
$100.00 of the
truthfully
pay
paid
account
over
him,
against
and simultaneous-
any
imposed
fails
made
tax
this title who
assessment
tax,
request
ly
truthfully
filed a claim for refund and
or
to collect such
account
tax,
The refund
willfully attempts
of the entire
pay
assessment.
over such
abatement
8,May
any
any
such tax or
claim was denied
IRS
to evade or defeat
manner
(3)
Pat’s;
IRS;
pay
any
he
account for or
over
he
tax due to the
States,
significant
raising capital for United
time to
States. Brounstein v. United
devoted
(3d
Cir.1992).
company 979 F.2d
company;
“Responsi-
loaned the
he
Further,
status,
bility
duty,
is a matter of
authority,
creditors.
Quattrone Accountants,
knowledge.”
district court found
IRS,
(3d Cir.1990).
Inc.
v.
895 F.2d
taxes be-
responsible person
A
unpaid
need not
cause he was aware of the
tax
have exclusive
finances,
being paid
control over the
and that other creditors
he need
were
IRS,
only
have
yet
failed to exercise his
control. United
ahead
(3d Cir.1989).
Vespe,
868 F.2d
authority
paid,
to ensure that the taxes were
*4
significant
“A
personally
the
that he
has
control if
either with
he has
significant
the final or
existing
the
word over which bills
loaned to Pat’s
from
balances
get paid.” Quattrone,
on
he had
creditors
895
in the
accounts
which
F.2d
authority.7
determining
at 927. In
signature
whether an individu-
responsible person,
al is a
courts also consid-
jurisdiction
The district court had
(1)
er other factors. These include:
the
by
parties’ claims
virtue of 28 U.S.C.A.
corpo-
duties of the officer as outlined
the
1340, 1345,
§§
and 1355 and 26 U.S.C.A.
(2)
by-laws;
ability
rate
the
of the individual
jurisdiction
§§ 7401 and 7402. We have
over
(3)
corporation;
to
checks of the
the
§
appeal
the
to 28 U.S.C.A.
taxpayer’s signature
employer’s
feder-
grant
reviewing
the district court’s
(4)
returns;
al employment or other tax
the
summary judgment
plenary
of
we exercise
officers,
identity of the
directors and share-
employ
appli
review and
the same standard
corporation;
of
identity
holders
the
cable in the district court. Davis v. Portline
employ-
the individuals who hired and fired
(3d
Maritime,
Transportes
16 F.3d
536
individual(s)
ees;
identity
Cir.1994). We must consider all of the facts
charge
who were
of the financial
affairs
light
and inferences in the
most favorable to
Brounstein,
corporation.
979
at
F.2d
nonmoving party.
moving party
The
can
954-55.
summary judgment
prevail in its motion for
Applying
foregoing principles
to
only
genuine
if there is no
issue of material
case,
present
we find that
there is a
moving party
judg
to
fact and the
is entitled
concerning
issue of material
fact
ment as a matter of law. Peters v. Delaware
“significant
whether Sullivan had
control”
(3d
Authority,
River Port
16 F.3d
Although
over
financial
Pat’s
affairs.
Cir.1994).
undisputed
evidence
this record establish
president
es that Sullivan functioned as the
II. Discussion
Pat’s,
signature authority
exercised his
question
of Sullivan’s
under
sign corporate
one occasion to
check which
presents
§ 6672
two issues: whether Sullivan
liabilities,
applied
to Pat’s tax
and devot
responsible person
is a
and whether he will-
raising
ed a
amount of his time to
collect,
fully
truthfully
failed to
account for or
capital
company,
undisputed
for the
evi
employment
over federal
taxes. As we
dence also indicates that
control
extensively
have
discussed the standards for
significantly
over Pat’s financial affairs was
before,
addressing these two issues
we will
by Carrigan
circumscribed
and Fendrick.
only
points.
summarize their salient
willWe
opinion:
As the district court stated
responsible person issue.
first address the
undisputed
It is
that Sullivan did not
manage-
control over the
have exclusive
A.
parties agree
ment of Pat’s. Both
person responsible
Carrigan
A
defendants
and Fendrick were
collect, truthfully
willfully
person required
responsible persons
is a
to
period
During
payroll
that Sullivan was
account of no more than
positive
general operating
and knew that the
taxes were not
balance in the
account
$132,770.43.
being paid,
positive
in the
more than
there was a
balance
of no
B.
taxes.
collect and
responsible for
Carrigan was
Defendant
whether
We next consider
Defendant
handling financial affairs.
truthfully
account for and
failed
Officer,
Fendrick,
Financial
David
due. The term willfulness
pay over the taxes
books, records, and
all of Pat’s
maintained
broadly
encompass a
interpreted
has been
Carrigan and
Defendants
bank accounts.
persons.
range
actions
inquiries
handled all creditors’
Fendrick
Generally,
“voluntary, con
willfulness is a
prepared
Fendrick
and bills. Defendant
prefer oth
and intentional decision to
scious
employ-
income and
all federal
and filed
Quat
er creditors
the Government.”
over
Fendrick
Defendant
trone,
tax returns.
regard,
F.2d at 928.
In this
“a
negotiations
the IRS
all
pays
also directed
responsible person acts
if he
tax liabilities. Sulli-
regarding
unpaid
preference
to the IRS
other creditors
any meetings
participate
respon
Id. A
knowing
van did
that taxes are due.”
willfully if
person also acts
he demon
with the IRS.
sible
disregard for
tax
strates a reckless
whether
Additionally,
not own stock
Sullivan did
paid. Vespe,
district
judgment in favor of the United States issue.
this
III. Conclusion reasons, foregoing judgment
For the granting summary judg- district court for the United will be reversed
and the case will be remanded for further
proceedings opinion.8 consistent with this
SUR PETITION FOR REHEARING
Aug. Judge,
Present:
HUTCHINSON, Judge,
DIAMOND,* Judge. rehearing Appel- filed
lant Edward M. Sullivan the above-entitled judges to the
case been submitted court, participated in the decision of this judge
and no who concurred the decision *6 rehearing, asked for
rehearing is denied. America,
UNITED STATES of
Appellant 94-7000, at No. SCHEIN, Appellant M.
Michael
at No. 93-7809.
Nos. 94-7000. 93-7809 & Appeals,
United States Court of
Third Circuit. 34.1(a)
Submitted Under Third Circuit LAR
June
Decided Diamond, appealed 8. Sullivan also has the denial of his Hon. Gustave summary judgment. motion for Because we Pennsylvania, for the Western District of have determined that there is a issue of sitting by designation. regarding material fact we hold that court the district did not err denying summary judgment. his motion for