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United States v. Wales

United States District Court, S.D. New York

July 11, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
H. ELLIOT WALES AND FANEE WALES, Defendants.

          OPINION AND ORDER

          GABRIEL W. GORENSTEIN United States Magistrate Judge.

         Plaintiff the United States of America (the “Government”) has moved for summary judgment in this case, which seeks to reduce tax assessments against the defendant taxpayers to judgment.[1] For the following reasons, the Government's motion for summary judgment is granted.

         I. BACKGROUND

         A. The Claims in this Case

         This case was brought by the Government, on behalf of the Internal Revenue Service (“IRS”), against defendants to obtain a judgment for outstanding federal tax liabilities - initially, for tax years 2002 through 2008. Complaint, filed Feb. 10, 2014 (Docket # 2) (“Compl.”), ¶¶ 1, 7-19. Since filing the complaint, however, defendants “fully paid tax years 2002, 2007, and 2008.” Gov't Mem. at 1 n.2. Thus, the only tax years at issue are 2003, 2004, 2005, and 2006, for which the Government is seeking a total of $122, 072.59 in unpaid taxes, penalties and interest as of September 1, 2016. Id. at 1 nn.1-2; accord Account Transcripts (attached to Sun Decl. as Ex. A) (“Transcripts”), at 0750, 0758, 0766, 0772.[2] The Government notes that interest will continue to accrue and that “statutory additions” may also become due before the date judgment is entered. See Gov't Mem. at 1 n.1. Thus, the Government asks that its motion “be understood to incorporate a request for [any] additional interest as well as for statutory additions that will have accrued” through the date of judgment. Id.

         B. Defendants' Failure to Respond Properly to the Government's Statement Under Local Civil Rule 56.1

         Under Local Civil Rule 56.1, a summary judgment movant is required to file a “concise statement, in numbered paragraphs, of the material facts as to which the moving party contends there is no genuine issue to be tried.” Local Civ. R. 56.1(a). The responding party must “include a correspondingly numbered paragraph responding to each numbered paragraph in the statement of the moving party.” Local Civ. R. 56.1(b). Both the movant and opposing party must cite to admissible evidence to support each of their statements of material fact. Local Civ. R. 56.1(d). Under Local Civ. R. 56.1(c), “[e]ach numbered paragraph in the statement of material facts . . . will be deemed to be admitted for purposes of the motion unless specifically controverted by a correspondingly numbered paragraph in the statement required to be served by the opposing party.” Accord Giannullo v. City of New York, 322 F.3d 139, 140 (2d Cir. 2003).

         Here, the Government submitted a statement under Local Civil Rule 56.1 that contained 95 numbered paragraphs. See Gov't Statement. While defendants filed a counterstatement that denied the truth of a number of those paragraphs, see Defs. Statement, defendants' counterstatement cites to no admissible evidence. Indeed, defendants provide no citations to evidence at all.[3] Thus, Local Civ. R. 56.1(c) dictates that all of the Government's statement be deemed admitted.

         While a court is expected to give special consideration to pro se litigants, that doctrine does not apply here because Wales - as he himself has pointed out, see, e.g., Defs. Statement ¶¶ 111-116 - is an experienced attorney. See, e.g., Harbulak v. County of Suffolk, 654 F.2d 194, 198 (2d Cir. 1981) (lawyer proceeding pro se “cannot claim the special consideration which the courts customarily grant to pro se parties”) (citation omitted); accord Cayo v. Sefceik, 2014 WL 5038056, at *3 (D. Conn. Oct. 8, 2014); Corsini v. Bloomberg, 2014 WL 2029178, at *14 (S.D.N.Y. May 15, 2014); see also Smith v. Plati, 258 F.3d 1167, 1174 (10th Cir. 2001) (declining to construe pleading liberally because litigant was licensed attorney); Olivares v. Martin, 555 F.2d 1192, 1194 n.1 (5th Cir. 1977) (plaintiff would not be “accord[ed] . . . the advantage of the liberal construction of his complaint normally given pro se litigants because he is a licensed attorney”) (citation omitted). In fact, Mr. Wales claims expertise specifically in federal litigation. See Defs. Statement ¶ 113 (noting his chairmanship of the “Federal Court Committee” at the New York County Lawyers' Association).

         The application of Local Civil Rule 56.1(c) by itself would require the granting of the Government's motion inasmuch as all the facts necessary for it to prevail are contained in its Rule 56.1 Statement. Nonetheless, a district court “has broad discretion to determine whether to overlook a party's failure to comply with local rules.” Holtz v. Rockefeller & Co., 258 F.3d 62, 73 (2d Cir. 2001) (citations omitted). We will exercise our discretion here to examine the admissible evidence that defendants have submitted notwithstanding their failure to comply with Local Rule 56.1 because doing so has no effect on the outcome of the Government's motion.

         C. Facts Defendants Do Not Purport to Dispute

         In 2003, 2004, 2005, and 2006, the defendants timely filed their tax returns. Gov't Statement ¶¶ 22, 37, 47, 57; Defs. Statement ¶¶ 22, 37, 47, 57. At the time they filed their returns, however, they failed to pay the taxes they owed for any of these years. For tax year 2003, the IRS assessed $17, 551.00 in taxes due.[4] Gov't Statement ¶ 23; Defs. Statement ¶ 23. For tax year 2004, the IRS assessed $29, 476.41. Gov't Statement ¶ 38; Defs. Statement ¶ 38. For tax year 2005, the IRS assessed $14, 994.52 and defendants claimed $3, 590.00 in withholding credit. Gov't Statement ¶¶ 48, 49; Defs. Statement ¶¶ 48, 49. For tax year 2006, the IRS assessed $14, 708.97 and defendants claimed $3, 500.00 in withholding credit. Gov't Statement ¶¶ 58, 59; Defs. Statement ¶¶ 58, 59.

         Defendants do not even purport to contest any of these assessments. Instead, the issue in this case centers on what payments defendants made toward their tax liabilities for these four tax years. Apart from defendants's admission they “made a payment of $317.33 towards their 2006 taxes” on December 4, 2014, see Gov't Statement ¶ 63; Defs. Statement ¶ 63, the parties dispute what payments were made.

         D. IRS Tax Records

         Essentially all the evidence offered by the Government regarding defendants' payments is derived from IRS “tax transcripts, ” which are described in detail by IRS Revenue Officer Karen Sun. See generally Sun Decl.; Sun Suppl. Decl. Copies of the defendants' transcripts are attached to Sun's declarations.

         Sun has worked for the IRS as a Revenue Officer for 26 years. Sun Decl. ¶ 1. Sun described her familiarity and experience working with the IRS's Integrated Data Retrieval System (“IDRS”) - the system that generates the tax transcripts - as well as her work on defendants' own account since May 12, 2012. Id. ¶¶ 1-2. The IDRS is the basis by which the IRS maintains account information for taxpayers for each taxable year. Id. ¶ 3. For these accounts, the IRS contemporaneously notes any transactions, payments, communications, and any other occurrence with taxpayers in the IDRS, with each occurrence type identified by a numeric code. Id. ¶¶ 2, 4-6, 10. These entries cannot be backdated. Id. ¶ 7. Information in the IDRS may be retrieved in the form of a “literal transcript” which shows occurrence codes and a description of each occurrence, as well as a “‘certified transcript' (also known as a ‘Form 4340'), which omits the transaction code information.” Id. ¶ 8. Sun attached to her declaration copies of literal and certified transcripts from the defendants' tax accounts for tax years 2003, 2004, 2005, and 2006. Sun Decl. ¶ 16 n.1; Transcripts.

         For tax year 2003, the IRS assessed $17, 551.00 against defendants on May 31, 2004. Sun Decl. ¶ 19; Transcripts at 0742. Defendants claimed $1, 440.00 in withholding credits, but the IRS later reduced that amount to $86.00 after determining that the defendants overstated their withholdings. Sun Decl. ¶ 20 & n.2; Transcripts at 0742, 0744. Thus, the effective amount owed on the initial IRS assessment was $17, 465.00. Over the next 12 years, the IRS assessed an additional $11, 857.69 in penalties, interest, and costs, while the defendants made a total of $6, 879.65 in subsequent payments, for a net increase of $4, 978.04 in the amount due. See Transcripts at 0742-49; Sun Decl. ¶¶ 19-30. This lead to an outstanding balance of $22, 443.04 as of September 1, 2016. Transcripts at 0750; accord Sun Decl. ¶ 30.

         For tax year 2004, the IRS assessed $29, 476.41 against defendants on May 30, 2005. Sun Decl. ¶ 33; Transcripts at 0752. Defendants claimed $300.00 in withholding and paid $4, 000.00 in estimated taxes, Sun Decl. ¶ 34; Transcripts at 0752, for a starting assessment balance of $25, 176.41. Sun Decl ¶ 37. Over the next 11 years, defendants made no additional payments to this account and the IRS imposed penalties and interest totaling an additional $20, 782.30. Transcripts at 0752-58; Sun Decl. ¶ 34-39. This lead to an outstanding balance of $45, 958.71 as of September 1, 2016. See Transcripts at 0758; Sun Decl. ¶ 40.

         For tax year 2005, the IRS assessed $14, 994.52 on June 12, 2006, and the defendants claimed $3, 590.00 in withholding credit, Sun Decl. ¶¶ 43-44; Transcripts at 0760, for an initial balance of $11, 404.52, see Sun Decl. ¶ 47. Over the next 10 years, defendants made no payments toward this account and the IRS imposed penalties and interest on the original balance, totaling $8, 786.93. Transcripts at 0760-66; Sun Decl. ¶ 46, 48-49. The ...


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