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Судебные дела / Зарубежная практика  / UNITED STATES of America, Plaintiff, v. Hugh D. SUMMERS, Defendant., United States District Court, E.D. Pennsylvania., 254 F.Supp.2d 589, Civil Action No. 02-1812., March 27, 2003

UNITED STATES of America, Plaintiff, v. Hugh D. SUMMERS, Defendant., United States District Court, E.D. Pennsylvania., 254 F.Supp.2d 589, Civil Action No. 02-1812., March 27, 2003


UNITED STATES of America, Plaintiff, v. Hugh D. SUMMERS, Defendant.

United States District Court, E.D. Pennsylvania.

254 F.Supp.2d 589

Civil Action No. 02-1812.

March 27, 2003.

Charles M. Flesch, Christopher R. Zaet╜ta, Washington, DC, for Plaintiff.

Gregory R. Noonan, Walfish & Noonan PC, Norristown, PA, Jerry Arthur Jewett, Fremont, OH, for Defendant.


RUFE, Judge.

This is a civil action brought by the United States of America ("United States") to reduce to judgment federal tax assessments made against Defendant Hugh Summers for the years 1985, 1986, 1988, and 1989. Presently before the Court is the United States' Motion for Summary Judgment, Defendant Hugh Summers' Motion to Dismiss for Lack of Subject Matter Jurisdiction, and the Unit╜ed States' Motion to Dismiss Hugh Sum╜mers' Counterclaims. For the reasons set forth below, the United States' Motion for Summary Judgment is granted, Defendant Hugh Summers' Motion to Dismiss for Lack of Subject Matter Jurisdiction is de╜nied, and the United States Motion to Dismiss Hugh Summers' Counterclaims is granted.


On May 6, 1992, the United States filed a criminal information with the United States District Court for the District of Massachusetts charging Hugh Summers ("Summers") with Conspiracy to defraud the United States (Internal Revenue Ser╜vice) by concealing and diverting income in violation of 18 U.S.C. ╖ 371. More specifi╜cally, the criminal information charged that Defendant Summers worked as a sales agent in the flavoring industry 1 dur╜ing the years 1985, 1986, 1988 and 1989. During this time, Summers instructed em╜ployers to make commission checks pay╜able to a corporation named Coastal Devel╜opment. Summers then caused Coastal to make counterfeit loans to him, which actu╜ally represented his commission monies earned when employed as a sales agent in the flavoring industry. In 1992, Summers pleaded guilty to the criminal information and acknowledged and agreed that he re╜ceived unreported taxable income in the amount of $963,000.00 between the years 1982 and 1990. On May 24, 1993, Sum╜mers was sentenced pursuant to his guilty plea and a judgment in the criminal case was entered against him. 2


1. The flavoring industry generally includes bakeries, confectioneries, macaroni and pasta companies, oil and grease producers, alcohol companies, wineries and breweries. It ap╜pears that Summers represented certain com╜panies within this industry.

2. As part of the plea agreement, the Office of the United States Attorney for the District of Massachusetts consented to the transfer of this case, for purposes of pleading guilty and disposition, to the United States District Court for the Eastern District of Pennsylvania. This case was transferred to the Eastern District of Pennsylvania on January 25, 1993.


As part of the guilty plea agreement, Summers acknowledged that he would be required to make a good faith effort to pay his tax liability. Summers then filed an amended Federal Form 1040X income tax return for tax years 1982 through 1990. These amended tax forms indicated that Summers owed taxes to the federal gov╜ernment in an amount totaling $225,734.00. On November 8, 1993, a delegate of the Secretary of the Treasury assessed income tax liabilities against Summers for tax and interest for tax years 1985, 1986, 1988, and 1989. Notice of this assessment and a demand for payment were sent to Sum╜mers by the Internal Revenue Service ("IRS") at the time of said assessments. On June 1, 1995, the IRS sent Summers a Notice of Deficiency, based in part on his amended returns, for additional unpaid in╜come taxes and for civil fraud penalties. The deficiency in unpaid income taxes alone exceeded $200,000.00.

Summers then filed for Chapter 7 Bank╜ruptcy on October 9, 1998. In turn, the United States filed a complaint to deter╜mine the dischargeability of Summers' in╜come tax liabilities. On January 11, 2001, the Bankruptcy Court determined that Summers' tax liabilities were not dis╜chargeable because he acted willfully in his effort to conceal and divert income.

The United States filed the instant Com╜plaint on April 3, 2002 to reduce to judg╜ment federal tax assessments previously made against Summers. 3 The United States filed the instant motion for sum╜mary judgment. Summers responded to the United States' motion and filed a mo╜tion to dismiss for lack of subject matter jurisdiction. 4 Both parties have responded to the respective motions, and the motions are now are ripe for review and disposi╜tion.


3. This case was randomly reassigned to the calendar of this Judge on July 10, 2002.

4. Summers' Motion to Dismiss for Lack of Subject Matter Jurisdiction is more properly construed as a cross motion for summary judgment. See Fed.R.Civ.P. 12(c) (explaining that if matters outside the pleadings are pre╜sented and considered by the court, the mo╜tion shall be treated as a motion for summary judgment). Accordingly, Rule 56 provides the proper standard for analyzing Summers' in╜stant motion.


The Court will first address the United States' Motion for Summary Judgment and Summers' Motion to Dismiss in tan╜dem in Part III. The Court will then turn to the United States' motion to dismiss Summers' counterclaims.


Summary judgment is appropriate "if the pleadings, depositions, answers to in╜terrogatories, and admissions on file, to╜gether with affidavits, if any, show that there is no genuine issue as to any materi╜al fact and that the moving party is enti╜tled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is material if it might affect the outcome of the case un╜der the governing substantive law. See Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). All facts submitted to the court "must be viewed in the light most favor╜able to the non-moving party." Appel╜mans v. City of Philadelphia, 826 F.2d 214, 216 (3d Cir.1987). "This standard does not change when the issue is pre╜sented in the context of cross-motions for summary judgment." Id. Moreover, "pre╜clusion arguments are appropriate for res╜olution on motions for summary judg╜ment." Sibert v. Phelan, 901 F.Supp. 183, 185-86 (D.N.J.1995).


The United States contends that it is entitled to judgment as a matter of law because, inter alia, timely assessments of taxes were made against taxpayer Sum╜mers. On the other hand, Summers seeks a denial of the United States' motion for summary judgment .and argues that this Court lacks subject matter jurisdiction be╜cause the IRS did not provide him with (1) notice of assessments and demand for pay╜ments and (2) a notice of deficiency for taxes owed. Even viewing the facts in a light most favorable to Summers, this Court finds Summers' arguments unper╜suasive.

A. Timely Assessment and Presumption of Correctness

As an initial matter, it is impor╜tant to note that "notice and demand is unnecessary when the Internal Revenue Service files a civil action for reduction of an assessment to judgment." United States v. Singer, No. Civ.A.00-4840, 2001 WL 964144, at *2 (E.D.Pa. Aug. 21, 2001) aff'd, 43 Fed.Appx. 524 (3d Cir.2002). No╜tice and demand is, however, necessary if, as is the case here, the United States seeks to recover interest and penalties. Id. The United States establishes a prima facie case against a taxpayer when it shows that a timely assessment is made. Psaty v. United States, 442 F.2d 1154, 1159 (3d Cir.1971) (explaining that a pre╜sumption of correctness is afforded to the Commissioner's assessments).

Instantly, the United States has satisfied this burden by providing a prop╜er Certificate of Assessment. See The United States Certificate of Assessments, Payment, and Other Specified Matters, at╜tached to United States' Motion for Sum╜mary Judgment at Ex. 4. The Certificate of Assessment and Payments is afforded a presumption of correctness and is proof that a timely assessment has been made against the taxpayer. Singer, 2001 WL 964144, at *2. 5 Summers simply fails to rebut the -United States' prima facie case and provides no evidence supporting his claim that he is not liable for the assess╜ments made against him. See id. (explain╜ing that taxpayer bears the burden of proving by a preponderance of the evi╜dence that the taxes are not due). In kind, Summers' generic tax protestor ar╜guments, (i.e. that his compensation and salary are not considered gross income as defined by the code; that the IRS lacked a proper delegation to issue a certificate of assessment, etc.), fail to persuade this Court as they are another attempt made by Summers to evade the taxes for which he has admitted liability on several occa╜sions. 6 For instance, Summers admitted that he owed the taxes for his unreported income when he: (1) pleaded guilty to the criminal information, (2) signed the guilty plea, and (3) filed amended tax forms ac╜knowledging certain tax amounts owed to the United States.


5. Due to Summers' self-reported income tax liabilities for 1988 and 1989 on his amended tax returns, see infra III.C., a notice of defi╜ciency is not warranted for these amounts.

6. Interestingly, although the majority of Sum╜mers' memoranda consists of these type of arguments, Summers provides no corroborat╜ing evidence of such claims.


B. Summers' Guilty Plea

In further support of Summers' tax liability, Summers entered a guilty plea where he acknowledged and agreed that between 1982 and 1990 he received ap╜proximately $963,000.00 in unreported income. In the case sub judice, Summers is estopped from denying his civil liability for taxes owed.

"The doctrine of collateral estop╜pel or issue preclusion has the dual pur╜pose of protecting litigants from the bur╜den of relitigating an identical issue with the same party . . . and of promoting judi╜cial economy by preventing needless litiga╜tion." American Int'l Airways, Inc. v. American Int'l Group, No. Civ.A.90-7135, 1992 WL 97829, at *1 (E.D.Pa. May 1, 1992). As a general matter, the party wishing to invoke issue preclusion must establish that:

(1) the issue decided in the prior adjudi╜cation was identical [to] the one present╜ed in the later action; (2) there was a final judgment on the merits; (3) the party against whom the plea is asserted was party [to] or in privity with a party to the prior adjudication; and (4) the party against whom it is asserted has had a full and fair opportunity to litigate the issue in question in the prior action.

Id. Even still, a more stringent standard is applied when a party wishes to invoke collateral estoppel based on a prior guilty plea. Accordingly, a "court must examine the record of the criminal proceedings or plea colloquy to determine what issues were comprehended and decided." State Farm Mut. Auto. Ins. Co. v. Rosenfield, 683 F.Supp. 106, 108 (E.D.Pa.1988). Hence, "collateral estoppel only applies to questions directly put in issue and directly determined in the criminal prosecution." Id.

Upon review of Summers' plea col╜loquy, this Court determines that Sum╜mers is estopped from denying his tax liability. The issue in the criminal proceeding against Summers, in addition to his plea agreement, is the very issue in question in the case at bar. In fact, the agreement entered into between the Unit╜ed States Attorney and Hugh Summers states, inter alia, that:

Summers acknowledges and agrees that between 1982 and 1990, he received $963,000 in unreported commission in╜come from the activities described in the attached Information, and similar activi╜ties. Summers acknowledges that the Internal Revenue Service believes that the total amount of unreported commis╜sion income received by Summers from the activities described in the attached Information and similar activities, is $1,192,530.30. Summers agrees to coop╜erate with the Internal Revenue Service in determining the correct amount of unreported commission income.

See Plea Agreement, attached to United States Motion for Summary Judgment at Ex. 2. The issue of whether Summers owed taxes on unreported income is the precise issue of Summers' guilty plea and the identical issue at hand. 7 It is hard to imagine a more direct issue at play be╜tween a criminal guilty plea and a civil case. Summers attempts to negate the pro╜found legal significance of his guilty plea by arguing that he had ineffective assis╜tance of counsel in that criminal case. His argument will not prevail here. Since Summers did not raise that argument in the criminal arena, and has failed to utilize any of the statutory and procedural actions available to him to timely or otherwise attack his criminal conviction, he cannot now argue that he does not owe the taxes on income that he pleaded guilty to con╜cealing in the prior proceeding.


7. The criminal court determined the issue of whether Summers acted to defraud the Unit╜ed States. This is the exact issue before this Court. However, the amount presented by the Service in the criminal plea hearing is different from the amount the United States requests today. Therefore, the United States must submit a clearly supported full and final accounting of Summers' tax liability.


C. Summers' Amended Tax Forms and Tax Court Decision

Beyond the notice of assessments and guilty plea, the United States supplies fur╜ther evidence to bolster its case against Summers. First, the United States pres╜ents amended tax returns filed by Sum╜mers under penalty of perjury. See Decla╜ration of Charles M. Flesch, at Exhibits D & E. In fact, Summers agreed to file an amended tax form, Federal Form 1040X, as part of his plea agreement with the United States Attorney. These amended tax returns acknowledge that between 1982 and 1990 Summers received $963,000.00 in unreported income. As amended, the tax forms reflect an amount due in the sum of $225,734.00.

Additionally, the United States has pre╜sented evidence of Summers' attempt to avoid his tax obligations by filing a Chap╜ter 7 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania. The Bankruptcy Court ordered that the income tax liabili╜ties for the years 1985, 1986, 1988, and 1999 were not dischargeable due to Sum╜mers' willful attempt to evade payment of the tax liabilities. See In re Summers, 266 B.R. 292, (Bankr.E.D.Pa.2001) (emphasis added). The Bankruptcy Court held that Summers was estopped from challenging his conclusive admissions made within the criminal case and the corresponding guilty plea. Id. Summers is bound by his prior admissions of tax liability.

Because no genuine issue of material fact exists regarding the liability of taxes owed by Summers, the United States is entitled to judgment as a matter of law. Summers' Motion to Dismiss, i.e., Cross Motion for Summary Judgment, is denied as this Court finds that this action is prop╜erly before this Court. However, due to the lack of clarity in the United States' submission for the specific amount that Summers' owes to the United States, this Court has only addressed the issue of lia╜bility in today's decision.

D. United States' Motion to Dismiss Summers' Counterclaims

In his counterclaims, Summers requests this Court to find not only that he does not owe the tax liability that he pleaded guilty to, but also that he is entitled to a refund for any money paid during the tax years in question. 8 The Court is not persuaded by the arguments advanced by Summers.


8. Although Summers responded to the United States Complaint with two "cross-claims," the proper designation of such a claim is a counterclaim. The Court will therefore refer to Summers' claims as counterclaims.


1. Summers' Collection Due Process Claim

Turning first to Summers' Collection Due Process Claim, it is unclear what spe╜cific relief Summers requests of this Court. In his first counterclaim, Summers claims that he received a Notice of Intent to Levy by the Internal Revenue Service on April 15, 2001. Thereafter, Summers requested a Collection Due Process Hearing, pursu╜ant to 26 U.S.C. ╖ 6320 and 26 U.S.C ╖ 6330. It appears that Summers would argue, during this hearing, that he did not receive notice and demand for taxes owed or a Notice of Deficiency, the same argu╜ments that Summers presented to this Court in his motion to dismiss for lack of subject matter jurisdiction. Summers fur╜ther states that:

Because the issues involved in the Col╜lection Due Process Hearing request are identical to the issues involved in this cause, if the Court issues a decision in favor of defendant on the subject matter jurisdiction issue in this case, the United States must be bound by that decision in the Collection Due Process hearing.

Summers Answer at ╤ 55. Although not specifically stated, it appears that Sum╜mers is seeking judicial review of the ad╜ministrative hearing, or lack thereof, be╜fore the IRS Appeals Officer. The United States argues that this Court lacks subject matter jurisdiction over such an appeal. This Court agrees with the United States.

The provision governing adminis╜trative hearings, 26 U.S.C. ╖ 6330(b), ex╜plains that a taxpayer has a right to re╜quest an administrative hearing within 30 days of a notice of intent to levy. "Howev╜er, 26 U.S.C. ╖ 6330(d)(1) provides for re╜view to the Tax Court, unless the Tax Court does not have jurisdiction, in which case the appeal goes to the district court ...." Hart v. IRS , No. Civ.A.00-4658, 2001 VVL 393699, *1 (E.D.Pa. Feb.8, 2001), aff'd 281 F.3d 221 (3d Cir.2002). In Hart the Honorable Stewart Dalzell held, and the Third Circuit affirmed, that where the income tax liabilities were at issue, the Tax Court is the court with jurisdiction to hear any appeal, not the district court. Accordingly, because this Court lacks sub╜ject matter jurisdiction to hear an appeal of the Collection Due Process determina╜tion, the United States' Motion to Dismiss is granted.

2. Summers' Refund Request

The Court now considers the United States' Motion to Dismiss Summers' sec╜ond counterclaim. Summers alleges that any payments received by the United States for the tax years under review were obtained by "fraud, deception, coercion and duress." See Summers Counterclaim at ╤╤ 57-58. Again, it is unclear the spe╜cific relief sought by Summers as he fails to provide the Court with any amount paid or any amount he claims is owed to him. This, however, is of no event because this Court lacks subject matter jurisdiction over this claim as well.

It is axiomatic that a full payment is required before a right to sue the collec╜tor for a refund may attach. Flora v. United States, 357 U.S. 63, 68, 78 S.Ct. 1079, 2 L.Ed.2d 1165 (1958), aff'd on reh'g, 362 U.S. 145, 80 S.Ct. 630, 4 L.Ed.2d 623 (1960). Hence, "a taxpayer must both pay the contested amount and file a claim for refund before suing in district court." Kane v. United States, 942 F.Supp. 233, 235 (E.D.Pa.1996), aff'd, 118 F.3d 1576 (3d Cir.1997).

Here, it is clear that Summers has not paid the amount .of the. assessments made against him. Therefore, this court lacks subject matter jurisdiction over Summers' counterclaims seeking a refund and the United States' Motion to Dismiss is grant╜ed.


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