against the United States. Carlucci then filed an amended third-party complaint asserting contribution claims against Romanello, Spadaro, Parker and Wittek, pursuant to common law theories of contribution. He also cross-claimed, also under a theory of common law contribution, against Magnotta.
DISMISSAL FOR LACK OF SUBJECT MATTER JURISDICTION
Section 6672(a) of the Internal Revenue Code provides:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.
26 U.S.C. § 6672(a). The Government can assess this penalty against more than one person as there is joint and several liability under this statute. McCray v. United States, 910 F.2d 1289, 1290 (5th Cir. 1990), cert. denied, sub nom., Scott v. United States, 113 L. Ed. 2d 246, 111 S. Ct. 1313 (1991); Sinder v. United States, 655 F.2d 729, 732 (6th Cir. 1981); Hartman v. United States, 538 F.2d 1336, 1340 (8th Cir. 1976). It cannot collect the penalty more than once, however, although the statute appears to so permit. See Gens v. United States, 222 Ct. Cl. 407, 615 F.2d 1335, 1339 (Ct. Cl. 1980); Kelly v. Lethert, 362 F.2d 629, 634 (8th Cir. 1966).
In his cross-claim and third-party complaint, Carlucci asserts that if he is liable for the penalty assessed against him by the Government, then he should be able to pursue contribution actions against Magnotta, Wittek, Romanello, Spadaro and Parker because they, too, are responsible parties under § 6672 for the payment of taxes withheld from the wages of Davenport employees. At the suggestion of the United States, we are considering whether this court has subject matter jurisdiction over these claims. See Fed. R. Civ. P. 12(h)(3); John B. Hull, Inc. v. Waterbury Petroleum Products, Inc., 588 F.2d 24, 27 (2d Cir. 1978), cert. denied, 440 U.S. 960, 59 L. Ed. 2d 773, 99 S. Ct. 1502 (1979). See also Fed. R. Civ. P. 12(b)(1).
An action must be dismissed, even on the court's own motion, whenever it appears that the court lacks such jurisdiction.
The parties agree that there is no federal right to contribution or indemnification under 26 U.S.C. § 6672. See, e.g., Sinder v. United States, 655 F.2d at 731; Seachrist v. Riggs, 91-1 U.S.T.C. P 50, 019 (N.D. West Va. 1990); Rebelle v. United States, 588 F. Supp. 49, 51 (M.D. La. 1985); DiBenedetto v. United States, 75-1 U.S.T.C. P 9503 (D.R.I. 1974). Carlucci contends, however, that there is a state right to contribution under Connecticut law, which governs this case, see Swift v. Levesque, 614 F. Supp. 172, 177-78 (D. Conn. 1985), and that he may assert this claim in this action under the doctrine of supplemental jurisdiction. The first question to be resolved, however, is whether this court should take jurisdiction over such a claim, assuming it exists.
Under 28 U.S.C. § 1367(a), after December 1, 1990, the district courts "shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties." This new statute codifies the doctrines of ancillary and pendent jurisdiction, in addition to permitting pendent party jurisdiction, which had been rejected by the Supreme Court in 1989. See Finley v. United States, 490 U.S. 545, 104 L. Ed. 2d 593, 109 S. Ct. 2003 (1989).
Under § 1367(a), state and federal claims form one case or controversy when they derive from a common nucleus of operative facts or when both claims would normally be expected to be tried in a single judicial proceeding. United Mine Workers v. Gibbs, 383 U.S. 715, 725, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966); Sinclair v. Soniform, Inc., 935 F.2d 599, 603 (3d Cir. 1991); McCray v. Holt, 777 F. Supp. 945, 948 (S.D. Fla. 1991). In general, when either condition was satisfied, the court's exercise of supplemental jurisdiction, although not automatic, would be a favored and normal course of action. Estate of Bruce v. City of Middletown, 781 F. Supp. 1013, 1016 (S.D.N.Y. 1992) (citing Promisel v. First American Artificial Flowers, 943 F.2d 251, 254 (2d Cir. 1991), cert. denied, 117 L. Ed. 2d 110, 112 S. Ct. 939 (1992)).
Carlucci argues that the various claims he is asserting more than satisfy the demands of § 1367(a), mandating our taking jurisdiction. The original action raises the question of whether Carlucci was a responsible person who acted willfully within the meaning of 26 U.S.C. § 6672. In that action, the United States is also suing to enforce the assessment against Magnotta, claiming that he is also a responsible party within the meaning of § 6672. Carlucci's cross-claim and third-party complaints seek contribution from Magnotta and the other defendants on the grounds that they were responsible persons. The claims arise out of a common event: someone's failure to pay the employee payroll taxes at the Davenport Restaurant. Moreover, these are all issues that would normally be expected to be resolved in one forum as it is a well-accepted principle that the federal courts take jurisdiction of contribution claims related to the primary action. Thus, were this not a § 6672 enforcement case, Carlucci would expect to try his contribution claims along with his original action.
Until the passage of § 1367, it was well established that a state claim for contribution could not be considered at the same time as the Government's § 6672 enforcement claim. See, e.g., Wright v. United States, No. 88- CV-3743 (TCP) 1992 U.S. Dist. LEXIS 775 (E.D.N.Y. 1992) [found at 1992 WL 16308); Cook v. United States, 765 F. Supp. 217, 220 (M.D. Pa. 1991); Schoot v. United States, 664 F. Supp. 293, 298 (N.D. Ill. 1987); Swift v. Levesque, 614 F. Supp. at 177. The desire to avoid complicating tax collection proceedings was consistently the primary justification for the rule that a state claim for contribution could not be considered at the same time as the Government's § 6672 enforcement claim.
The primary purpose of § 6672 is to "ensure that the tax which is unquestionably owed the Government is paid." Feist v. United States, 221 Ct. Cl. 531, 607 F.2d 954, 957 (Ct. Cl. 1979); Botta v. Scanlon, 314 F.2d 392, 393 (2d Cir. 1963); Cook v. United States, 765 F. Supp. at 219. In essence, § 6672 is a collection device. Swift v. Levesque, 614 F. Supp. at 177; accord Cook, 765 F. Supp. at 219; see United States v. Sotelo, 436 U.S. 268, 271, 56 L. Ed. 2d 275, 98 S. Ct. 1795 (1978). Indeed, "the existence of other responsible persons does not affect or preclude recovery of a § 6672 penalty in the amount of the entire tax owed from one of the persons responsible for a corporation's payment of withholding taxes." Brown v. United States, 591 F.2d 1136, 1142 (5th Cir. 1979).
Plaintiff acknowledges that his attempt to seek contribution from the various third-party defendants in this action would be barred by this vast precedent. He suggests, however, that these cases, in so far as they hold that a state contribution claim may not be brought during the pendency of a § 6672 action, have been overruled by 28 U.S.C. § 1367. We have given this very careful consideration and have decided that is not so.
The grant of supplemental jurisdiction is not absolute but is instead vested in the sound discretion of the court. See 28 U.S.C. § 1367(c). In particular, the district court may decline to exercise jurisdiction over a claim under subsection (1) if "in exceptional circumstances, there are other compelling reasons for declining jurisdiction." We believe that there are such reasons here.
First, permitting these various third party actions to continue during the pendency of the Government's § 6672 proceedings against Carlucci and Magnotta would interfere with the efficient collection of the taxes owed on behalf of the Davenport employees because it would simply prolong and complicate the proceedings. In the enforcement proceedings against Carlucci and Magnotta, the proof will focus on whether they were responsible persons under § 6672 and will not address the issue of others' culpability.
The cross-claim and third-party complaint introduce a new theory, common-law contribution, which means that evidence will be heard, not only about the roles of four other people, namely Spadaro, Romanello, Wittek and Parker, but about everyone's relative responsibilities so that the jury can make comparative judgments. This will unduly complicate and prolong matters.
Second, the court's declining to decide the contribution actions will not prejudice Carlucci as he may bring his contribution action after the resolution of this action. See Foster v. Board of Trustees of Butler Cty. College, 771 F. Supp. 1118, 1122 (D. Kan. 1991); Swift v. Levesque, 614 F. Supp. at 173.
Finally, the judiciary is charged with the duty to promote, not undermine, the goals of Congress as manifested in the public laws of the United States. In recognition of this policy, it has been a long-standing rule among the federal courts that contribution actions should not be heard during the pendency of a § 6672 because those claims would inappropriately prolong and complicate a tax collection proceeding.
See Schoot, 664 F. Supp. at 298 and n.4; Swift v. Levesque, 614 F. Supp. at 177. Indeed, those few courts who have recognized a state right of contribution under § 6672, have always insisted that it be raised in a proceeding separate from the enforcement action in order to keep the government's action uncomplicated. Schoot, 664 F. Supp. at 298.
We do not see that the passage of § 1367 nullifies, in any way, those considerations which animated these pre-§ 1367 collection cases. It is true that § 1367 overruled those cases which barred pendent party actions. See, e.g., Bruce v. Middletown, 781 F. Supp. at 1015; McCray v. Holt, 777 F. Supp. 945 (allowing spouses to assert loss of consortium claims in § 1983 action brought by plaintiffs).
However, the common law doctrines of ancillary and pendent jurisdiction existed while those § 6672 cases were being decided and uniformly the courts declined to exercise their discretion to take jurisdiction of the contribution claims that were asserted. "The practice and procedures developed over the years to test the validity of a § 6672 assessment were not and are not designed for and should not be complicated by, collateral litigation that may be instituted by and between various persons who may be determined to be 'responsible persons' in a particular case." Moats v. United States, 564 F. Supp. 1330, 1341-42 (W.D. Mo. 1983), aff'd sub nom, United States v. O'Crowley, 786 F.2d 1171 (8th Cir. 1986); accord Schoot v. United States, 664 F. Supp. at 294. In short, jurisdiction over contribution actions was always declined because it unnecessarily cluttered a collection proceeding.
The reasons for declining jurisdiction over the contribution claims of Magnotta and Carlucci are as compelling today as they were prior to the passage of § 1367. We see no reason to depart from the established rule that if a state action of contribution is permitted under § 6672, a proposition about which we express no opinion, then it must be asserted in a separate proceeding. For have jurisdiction over the contribution actions.
There is no need, therefore, to address the question of whether a state cause of action for contribution exists under 26 U.S.C. § 6672.
The following matters are dismissed without prejudice to their renewal: the cross-claim by Carlucci against Magnotta and the third-party action by Carlucci against Romanello, Spadaro, Parker and Wittek.
This case will be added to the July trial calendar.
Dated: White Plains, N.Y.
June 16, 1992
GERARD L. GOETTEL