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U.S. v. WEST PRODUCTIONS

April 19, 2001

UNITED STATES OF AMERICA, PLAINTIFF,
v.
WEST PRODUCTIONS, LTD., WEST PRODUCTIONS LIMITED PARTNERSHIP, DIANE CORTO, FRANCINE LEFRAK, SEAT OF THE PANTS PRODUCTIONS, INC., AND DIANA CORTO, DEFENDANTS.



The opinion of the court was delivered by: Haight, Senior District Judge.

MEMORANDUM OPINION AND ORDER

In this action brought under the revenue laws, plaintiff United States of America ("the Government") sues one of the individual defendants, Diana Corto, to recover unpaid federal withholding taxes and unemployment taxes assessed by the Internal Revenue Service ("IRS") against an entity the Government calls "West Productions." The parties now cross-move for summary judgment.*fn1

I. BACKGROUND

In 1984 defendant Diana Corto, whose professional experience is as a singer and performer, began to explore the possibility of producing a nationwide tour of West Side Story, the musical play to which Arthur Laurents, Leonard Bernstein, Stephen Sondheim, and Jerome Robbins (collectively "the Authors") had contributed their creative talents. To that end, "[d]uring April 1985 Corto filed a d/b/a certificate under the name West Productions."*fn2 By July 1985, Corto had obtained from the Authors "second-class rights to the production" of West Side Story, "i.e., rights limited to performance in smaller regional theaters."*fn3 When Corto attempted to book the production at the Kennedy Center in Washington, D.C., the Authors, acting through their representative, insisted that Corto obtain a first-class license, which in turn required Corto to associate herself with one Francine Lefrak. On August 8, 1985, Corto and Lefrak entered into a license agreement with the Authors to produce West Side Story "on the firstclass stage in the United States and Canada." Corto and Lefrak referred to themselves in that license agreement as Producers."*fn4

The production of West Side Story opened at the Kennedy Center in early September 1985 and closed on September 21, never to reopen. During that period the association between Corto and Lefrak dissolved amid mutually rancorous exchanges. While West Side Story had a short run at the Kennedy Center, the subsequent run of the lawsuits and arbitrations generated by these events rivals that of The Fantasticks.

In the case at bar, the Government seeks to recover federal taxes which the IRS says were incurred as the result of the labors devoted to the West Side Story production. Specifically, IRS agent Rifkin's declaration recites that:

(a) On December 1, 1986, the IRS made an assessment in the amount of $166,012.92 against West Productions for unpaid withholding taxes for the quarter ended September 30, 1985. The IRS later abated $8,115.32 of that assessment, leaving a total of $157,897.69.
(b) On May 30, 1988, the IRS made an assessment in the amount of $14,972.97 against West Productions for unpaid federal employment taxes for the year ended December 31, 1985.
(c) On January 30, 1989, the IRS made an additional assessment of $6,021.84 against West Productions for unpaid federal employment taxes for the year ended December 31, 1985.

Corto does not deny that these assessments were made and remain unpaid; nor has she ever challenged their amounts.

The Government's complaint to recover these assessments named a number of defendants in addition to Corto, including Francine Lefrak. This Court has had occasion to write a number of opinions in the case, prompted primarily by Corto's efforts to use the Government's tax suit as a vehicle to litigate or relitigate her several contract and tort claims against Lefrak.*fn5 Those efforts failed, and the case ends as it began, an action by the Government to recover unpaid taxes.

Corto is the sole remaining defendant. Some time ago the Government settled with Lefrak and agreed to dismiss its tax claim against her.*fn6 At the same time the Government offered to dismiss its tax claim against Corto without requiring any payment by her, if Corto would make documentary disclosure of her then-existing financial situation. Corto declined to make that disclosure when the Government first requested it. Having retained new counsel, in May, 2000 Corto forwarded the requested financial disclosure to the Assistant United States Attorney in charge of the case, and agreed to be questioned about the matter. At that time, however, the Government took the position that a payment by Corto was required to settle the case, which the Government was no longer willing to discontinue against Corto based solely on her financial disclosure.

The Court has no role to play in response to that hardening of the Governmental heart. That is so even if, as Corto's counsel states in a letter to the Court dated April 16, 2001 at 1, the financial disclosure Corto made "showed that Ms. Corto had neither the assets nor income to make any payments to the Government." The Executive Branch of Government, here the Department of Justice acting through the United States Attorney for this District, has the discretionary authority to commence actions on behalf of the Government and thereafter agree to settle them or decline to do so. I must perforce decide the parties' cross-motions for summary judgment.

The Government bases its motion for summary judgment on the asserted fact that at the pertinent times Corto was a general partner of West Productions, and the proposition of law that, as a general partner, Corto is liable for the tax assessments against West Productions. For ...


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