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Puongpun Sananikone v. United States of America

March 29, 2013



Plaintiff Puongpun Sananikone (Sananikone) has moved for a new trial following a jury's verdict finding that he was responsible for collecting payroll taxes and failing to pay them for a number of quarters. The court held oral argument on the motion on February 24, 2012. David Kirsch and William Adams appeared for plaintiff; Colin Sampson and Michael Pitmann appeared for the government. After considering the parties' argument, their briefing and supplemental briefing, the court DENIES plaintiff's motion.


American Steel Frame, Inc. (ASFI) was incorporated in 1999 and manufactured

steel frame houses. ECF No. 148 at 2. From July 1999 through October 2001, Sananikone was the Chairman of the Board. ECF No. 148 at 2. He owned PacMar U.S. Asia Development Corporation. Both he and PacMar owned stock in ASFI. ECF No. 148 at 2. Sananikone did not draw a salary from ASFI during his time as Chairman of its board, was not a signatory on any of ASFI's bank accounts, and did not sign its federal tax returns. ECF No. 148 at 3.

ASFI did not pay its federal withholding taxes for the second, third and fourth quarters of 2000 and the second, third, and fourth quarters of 2001. ECF No. 148 at 2. Sananikone at some point became aware that ASFI had failed to pay its federal payroll taxes. ECF No. 148 at 3. ASFI filed bankruptcy in 2002. ECF No. 148 at 2.

In 2006, the IRS sent plaintiff a notice of assessment of tax liability against Sananikone as provided by 26 U.S.C. § 6672. ECF No. 1 at 2.

In 2007, Sananikone filed this action seeking abatement of the Trust Fund Recovery Penalty. ECF No. 1. The government answered and filed a counterclaim against Sananikone, seeking to have the assessment reduced to judgment. ECF No. 9.

The case went to trial in October 2011. On October 27, 2011, the jury returned a verdict for the government. ECF No. 226.

After the verdict plaintiff filed a motion for judgment under Federal Rule of Civil Procedure 50, or, in the alternative, for a new trial under Rule 59. The court denied the Rule 50 motion in an oral ruling and solicited supplemental briefing on the Rule 59 motion. ///// /////


Under Federal Rule of Civil Procedure 59(a)(1), the court may grant a new trial "on all or some of the issues ... (A) after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court." Because "Rule 59 does not specify the grounds on which a motion for a new trial may be granted," district courts must look to "grounds that have been historically recognized." Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1035 (9th Cir. 2003). These grounds include a verdict that is contrary to the weight of the evidence or is based on false or perjurious evidence; an excessive award of damages; or unfairness to the moving party. Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007). A court may order a new trial if an erroneous evidentiary ruling substantially prejudiced a party or if its instructions were erroneous or inadequate. Harper v. City of Los Angeles, 533 F.3d 1010, 1030 (9th Cir. 2008); Jazzabi v. Allstate Ins. Co., 278 F.3d 979, 985 n.24 (9th Cir. 2002). "The grant of a new trial is 'confided almost entirely to the exercise of discretion on the part of the trial court.'" Murphy v. City of Long Beach, 914 F.2d 183, 186 (9th Cir. 1990). Even though "the trial court may weigh the evidence and credibility of the witnesses," it should not grant a new trial "merely because it might have come to a different result from that reached by the jury." Roy v. Volkswagen of Am., Inc., 896 F.2d 1174, 1176 (9th Cir.) (internal quotation marks omitted), amended on denial of rehearing, 920 F.2d 618 (9th Cir. 1990).


Plaintiff argues that the evidence at trial was insufficient to show he was a responsible person who willfully failed to pay ASFI's withholding taxes. He also argues that the government's lawyer committed misconduct in closing argument, which influenced the jury's verdict.

A. Withholding Generally

Under 26 U.S.C. §§ 3402 and 3403, an employer must withhold certain taxes from employees' wages and is liable for the taxes withheld, which are deemed to be held in trust to the United States. United v. Technical Knock-out Graphics, Inc. (In re Technical Knock-out Graphics, Inc.), 833 F. 2d 797, 799 (9th Cir. 1987); 26 U.S.C. § 7501. If the employer does not pay the withheld taxes, the Internal Revenue Service (IRS) may assess a 100 percent penalty on certain people. There are two requirements: "(1) the party assessed was a 'responsible person,'

i.e., one required to collect, truthfully account for and pay over the tax," and (2) the responsible person "willfully refused to pay the tax." United States v. Jones, 33 F.3d 1137, 1139 (9th Cir. 1994) (internal citations, quotation marks omitted); United States v. Uptergrove, No. 1:06--CV--1630--AWI--GSA, 2008 WL 3850833, at *4 (E.D. Cal. Aug. 13, 2008), recommendation adopted by 2008 WL 4370106 (E.D. Cal. Sep. 24, 2008). When the government has satisfied its initial burden of proof by introducing its evidence of the assessment of taxes, as it did here, the taxpayer has the burden of showing he is not liable for the assessment. Oliver v. United States, 921 F.2d 916, 919-20 (9th Cir. 1990); ECF No. 213.

B. The Facts as Developed at Trial*fn2

Plaintiff Sananikone was an economic development planner for PacMar, which worked on developing infrastructure in resource-rich regions of the Third World, with the goal of reducing poverty. 10/20 RT at 136, 138-39.

Paul Ta approached Sananikone and Gary Ryness in June or July 1999, seeking board members for ASFI, his fledgling company. 10/20 RT at 141. Ta recruited Ryness because he was CEO and Chairman of the Board of a company that marketed new home communities in California and plaintiff because of his international contacts. 10/19 RT at 34, 38-39. Ta told plaintiff that light gauge steel framing had the potential of solving the housing shortage in the Third World. 10/20 RT at 141. Ta asked plaintiff to be chairman of the Board because the position is respected in Asia and he felt plaintiff would be a good person to communicate this new technology to the Third World. 10/20 RT at 147. Ta told him that the chairman's main responsibility would be presiding over board meetings called by the management team. 10/20 RT at 148. Plaintiff claimed that his only experience in board membership stemmed from his charitable work, but then conceded he and his family own all the shares of Pacmar and plaintiff sits on its board. 10/20 RT at 148; 10/24 RT at 52.

Plaintiff protested to Ta he could not contribute financially, so Ta asked for a nominal contribution in exchange for stock options. 10/20 RT at 152. Plaintiff contributed $4000 and received four million shares of ASFI stock. 10/24 RT at 113. Ryness also received stock in return for an initial investment; although the stock was being sold, it was valued at a penny a share. 10/19 RT at 46-47; ECF No. 261-2 at 18.

Ta convened two organizational meetings for the prospective ASFI board in 1999. 10/19 RT at 150. At the first of these, Ta introduced AFSI's officers, including himself as CEO. 10/19 RT at 40, 44. The board agreed to appoint John McDonald as president of ASFI and to purchase McDonald's equipment. 10/20 RT at 176. Plaintiff signed the promissory note connected with this purchase because it was ASFI's policy to require four signatures on a promissory note and McDonald, who was the seller, could not sign as buyer. 10/24 RT at 12-13, 16; ECF No. 258-5. Plaintiff did not sign any other promissory notes on behalf of ASFI. 10/24 RT at 17.

The bylaws of the ASFI board described the chairman's duties as presiding at meetings of the board of directors and exercising other powers and duties assigned by the board ...

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