United States District Court, S.D. New York
May 25, 2004.
BERNARD GITLOW, Plaintiff, -against- UNITED STATES OF AMERICA, Defendant-Third Party Plaintiff, -against- BERNARD STEIN, et ano., Third Party Defendants
The opinion of the court was delivered by: LEWIS KAPLAN, District Judge
This matter is before the Court on the motion of the defendant
third party plaintiff United States of America for summary judgment on its claim against
third party defendant Bernard Stein.
The government here seeks to recover a trust fund recovery penalty
assessed by the Internal Revenue Service ("IRS") against Mr. Stein as a
responsible person pursuant to 26 U.S.C. § 6672 for the delinquent
Form 941 taxes of Astro Support of South Florida, Inc. ("Astro") for the
1995 tax year and the first tax quarter of 1996.
The evidence submitted by the government shows that a responsible IRS
employee determined that Astro owed a total of $212,814.08 in delinquent
tax for the five relevant quarters and recommended that Mr. Stein and
others be assessed a trust fund recovery penalty in the amount of
$175,215.30. A duly authorized delegate of the Secretary of the Treasury
thereafter assessed against Mr. Stein a 100 percent penalty in the amount
of $175,215.30 for Astro's unpaid trust fund tax liability. The unpaid
balance of that penalty as of January 30, 2004 was $177,467.97 with
interest and statutory additions running from that date and with certain
other additions not here in dispute. For reasons explained in the agent's
declaration, that figure, as of January 30, 2004, must be adjusted upward
by $38,910.10. Hence, the total amount allegedly due and owing as of
January 30, 2004 was $216,378.07.
When the government moved for summary judgment, it served also a
detailed "Notice to Pro Se Litigants Opposing Motion for Summary
Judgment," which carefully laid out such matters as the inability of a
party opposing such a motion to rely on its pleadings, the need for
admissible evidence raising a genuine issue of fact, and S.D.N.Y. Civil
Rule 56.1 as well as the need for compliance with it and the consequences of failure to comply. Mr.
Stein submitted no Rule 56.1 Statement. In consequence, the facts set
forth in the government's statement are taken as true for purposes of the
A. Responsible Person
The first question is whether Mr. Stein is a "responsible person."
By stipulation and order dated November 12, 2003, Mr. Stein stipulated
to the entry of partial summary judgment in favor of the government
establishing that he is "a responsible person" with respect to Astro but
reserved his rights with respect to the computation of the amount due. In
his affidavit in opposition to the present motion, however, he now seeks
to "formally rescind and clarify my previous acknowledgment as a person
of responsibility" to the extent that he now admits to "responsible
person" status commencing on January 5, 1996. He seeks to justify this
change of heart by contending that his memory was refreshed by reviewing
depositions of Messrs. Mercadante and Gitlow and certain documents
produced by the government.
"A party to a stipulation is not entitled to withdraw from its
agreement unilaterally."*fn1 To be sure, the Court may relieve a party
from a stipulation to prevent manifest injustice, provided the other
parties can be restored to the status quo ante.*fn2 But this is not such
a case. Mr. Stein was well aware when he entered into the stipulation
dated November 12, 2003 that it concerned events that had occurred years before. He knew that depositions had not
yet been taken and that the Court had ordered completion of all discovery
by December 31, 2003.*fn3 He was free to conduct depositions of
Mercandante and Gitlow or to attend the government's examinations of
those individuals. But he elected to stipulate to "responsible part"
status without the benefit of those depositions and elected not to avail
himself of available means of gathering evidence. He thus assumed the
risk that his memory of the pertinent events would be imperfect.
Moreover, the government then relied upon the stipulation in completing
its discovery program and moving for summary judgment in large part on
the basis of the stipulation. In these circumstances, enforcement of the
stipulation is required to avoid an injustice to the government; relief
from it certainly is not required to avoid a manifest injustice to Mr.
B. The Assessment
An IRS assessment is presumptively correct.*fn4 A taxpayer who
challenges it "bears the burdens both of production and persuasion."*fn5
Thus, to defeat the government's motion, it was Mr. Stein's burden to
come forward with "specific evidence" that demonstrates that the proper
amount of his tax liability is different than that assessed by the
IRS.*fn6 Mr. Stein has not done so. First, the government submitted a Rule 56.1 statement setting forth the
amount due and supported it with admissible evidence. Mr. Stein, despite
having been warned that the failure to submit a responsive Rule 56.1
statement disputing the government's averments could result in the facts
alleged by the government being taken as true, submitted no Rule 56.1
statement. Accordingly, the facts set forth in the government's statement
are deemed true, and the government is entitled to summary judgment on
this basis alone.
Even if the Court were to disregard the foregoing, Mr. Stein's
affidavit would be insufficient to raise a genuine issue as to any
material fact bearing on the correctness of the amount claimed. Mr. Stein
professes a belief that "the government's facts related to the issues are
incorrect or misleading," but he has come forward with no admissible
evidence to support that belief.
The core of his position seems to be that the workers in respect of
whom the government claims that payroll taxes were not paid actually were
outside contractors or off-premises pieceworkers, that Mercandante paid
them and turned over records of those payments to the government, and
that the government wrongly treated these payments as wages subject to
withholding. There is also a claim that the payments related to persons
engaged by another company, Astro Support, Inc. Nowhere, however, does
Mr. Stein demonstrate that he has personal knowledge of any of these
matters. Moreover, he concedes that his accountant, a Mr. Wolf, provided
accounting services for Astro after January 5, 1996, that Wolf
allegedly mistakenly filed tax returns and Form 1099's for payments
made in 1995 on behalf of Astro whereas the returns should have been
filed on behalf of Astro Support, Inc.
Affidavits in opposition to motions for summary judgment must be made
on personal knowledge and must demonstrate that the evidence relied upon would
be admissible at trial.*fn7 Mr. Stein's affidavit, even if it properly
were considered in light of his failure to comply with S.D.N. Y. Civil
Rule 56.1, would be insufficient to raise a genuine issue of material
fact as to the amount sought by the government.
For the foregoing reasons, the government's motion for summary judgment
on the third party claim against Mr. Stein is granted. Judgment shall
enter in favor of the government in the amount of $216,378.07 together
with interest thereon and statutory additions thereto from January 30,
2004 to the date of entry of the judgment. As this order disposes of the
last remaining claim against the last remaining party, the Clerk shall
enter final judgment and close the case.