The opinion of the court was delivered by: SPATT
In 1993, the Internal Revenue Service assessed civil penalties, pursuant to § 6672 of the Internal Revenue Code (26 U.S.C. § 6672), against Myron Bellovin, John J. Schramm, Robert B. Smith, and John Calderale upon a determination that each was a "responsible person" who willfully failed to collect, trustfully account for, and pay over withheld income taxes and Federal Insurance Contributions Act taxes due and owing from two corporations, Advanced Pipeline Technologies, Inc. ("APT"), and Real Time Systems, Inc. ("Real Time"). Bellovin was the bookkeeper for the two companies, Smith was the CEO of both companies, and Schramm was a director, officer and/or executive employee of the companies.
This action arises from the complaint filed by Bellovin in May, 1996, seeking a refund of the amount that he paid in satisfaction of the § 6672 penalties, and an abatement of the balance of these assessments. On August 5, 1996, the Government answered Bellovin's complaint and, pursuant to Fed.R.Civ.Pro. 13(b), filed counterclaims against Bellovin, Schramm and Smith seeking judgments in its favor for the assessments against them, plus statutory interest from the date of the assessments. In its subsequent Amended Answer and Counterclaim, the Government also asserted a counterclaim against Calderale, seeking a judgment for the assessments against him, plus statutory interest. Bellovin, Schramm and Calderale have answered the Government's counterclaims. Smith did not plead or otherwise defend this action, and the Government obtained a default judgment against him on January 13, 1997.
Bellovin and Schramm have filed cross-claims in this action. Bellovin asserted cross-claims against Smith for fraud, punitive damages, breach of contract, breach of fiduciary duty, indemnity and contribution. In his First and Second Cross-Claims against Smith, Bellovin seeks judgment in an amount equal to penalties assessed against him plus punitive damages, under a theory that Smith defrauded him by misrepresenting to him the following: (1) Smith, not Bellovin, was responsible for taking care of paying the taxes for the two companies; (2) Bellovin's "limited role" as bookkeeper of the two companies could not subject him to any IRS liability; (3) Smith would ensure that Bellovin was not held responsible for payment of the taxes; and (4) Smith would indemnify Bellovin for any liability he incurred as a result of the nonpayment of the taxes. His Third Cross-Claim against Smith, Bellovin seeks judgment in an amount equal to the penalties assessed against him on a breach of fiduciary duty theory, premised on the parties' respective positions with the companies and on Smith's aforementioned conduct. In his Fourth Cross-Claim, Bellovin alleges that the same conduct constituted a breach of contract and seeks damages equal to the penalties plus attorney's fees. Bellovin's Fifth, Sixth and Seventh Cross-Claims assert a right to indemnification by, and contribution from, Smith for the penalties assessed against him, as well as attorney's fees.
Bellovin also filed cross-claims against Schramm for breach of fiduciary duty, indemnification and contribution, under a theory that Schramm, as a director, officer and/or executive employee of the companies, should have taken measures to ensure that the taxes were paid. In addition, Schramm asserted cross-claims against Bellovin for breach of fiduciary duty, breach of contract, and indemnity.
At the outset, the Court is exercising its inherent authority to sua sponte dismiss Schramm's cross-claims for failure to prosecute. See Link v. Wabash R.R. Co., 370 U.S. 626, 630-31, 82 S. Ct. 1386, 1388-89, 8 L. Ed. 2d 734, rehearing denied, 371 U.S. 873, 83 S. Ct. 115, 9 L. Ed. 2d 112 (1962). Schramm was served with the Government's dismissal motion on January 2, 1997 and he did not file opposition papers during the ensuing ten months. Accordingly, this Court, in its discretion, is dismissing Schramm's cross-complaint with prejudice. See Taub v. Hale, 355 F.2d 201 (2d Cir.), cert. denied, 384 U.S. 1007, 86 S. Ct. 1924, 16 L. Ed. 2d 1020 (1966). However, for the sake of clarity and completing the record, the Court notes that even if it did not dismiss Schramm's cross-claim for failure to prosecute, it nevertheless would dismiss for the reasons set forth below.
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 since it has been held that there is joint and several liability under this statute. See, e.g., McCray v. United States, 910 F.2d 1289, 1290 (5th Cir. 1990), cert. denied sub nom., Scott v. United States, 499 U.S. 921, 111 S. Ct. 1313, 113 L. Ed. 2d 246 (1991); Wright v. United States, 1995 U.S. Dist. LEXIS 20640, 79 A.F.T.R.2d (P-H) 623, 1995 WL 838984, *16 (E.D.N.Y. 1995). Where more than one person is liable for unpaid withholding taxes under § 6672, the Government may collect the penalty from any of the persons liable or it may collect a part of the liability from each so long as the Government collects the complete money owed only once. See Kelly v. Lethert, 362 F.2d 629, 634 (8th Cir. 1966); Carlucci v. United States, 793 F. Supp. 482, 484 (S.D.N.Y. 1992).
In his cross-claims, Bellovin asserts that if he is liable for the penalties the Government assessed against him, then he should be able to pursue actions against Smith and Schramm sounding in fraud, breach of contract, breach of fiduciary duty, indemnification and contribution because they, too, are "responsible persons" for the payment of taxes under § 6672, and because Smith defrauded Bellovin as to his responsibility and accountability for paying the taxes at issue.
The Court notes that, effective for penalties assessed after July 30, 1996, § 6672 was amended to create a "Right of contribution where more than one person [was] liable for [the] penalty . . . only in a proceeding which is separate from, and is not joined or consolidated with. . . a proceeding in which the United States files a counterclaim or third-party complaint for the collection of such penalty." 26 U.S.C. § 6672(d)(emphasis added). However, prior to 1996, when the instant penalty was assessed, there existed no federal right to contribution or indemnification under section 6672. See, e.g., Sinder v. United States, 655 F.2d 729, 731 (6th cir. 1981); Carlucci v. United States, 793 F. Supp. 482 (S.D.N.Y. 1992); Rebelle v. United States, 588 F. Supp. 49, 51 (M.D. La.1984); DiBenedetto v. United States, 1974 U.S. Dist. LEXIS 5908, 35 A.F.T.R.2d (P-H) 1502, 1974 WL 791 (D.R.I. 1974). Accordingly, as Bellovin concedes, he must ground his cross-claims for indemnification and ...