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United States v. Park

United States District Court, N.D. California, San Jose Division

July 5, 2016

CHUL GOO PARK, et al., Defendants.



         Defendants Chul Goo Park and Eun Lee Lee (collectively, “Defendants”) are the proprietors of the Seoul Gom Tang restaurant located in Santa Clara, California. Plaintiff United States of America (the “Government”) brings the instant action against Defendants under 26 U.S.C. § 7402(a) to reduce to judgment certain federal income tax and other assessments. The Government also seeks an order enjoining Defendants from further violations of federal tax laws.

         Federal jurisdiction arises pursuant to 28 U.S.C. § 1340. Presently before the court is the Government’s motion for summary judgment, which is unopposed. Dkt. No. 20. This matter is suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b). Having carefully considered the moving papers in conjunction with the record, the court finds, concludes, and orders as follows:

         1. A motion for summary judgment should be granted if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). The moving party bears the initial burden of informing the court of the basis for the motion and identifying the portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this initial burden, the burden then shifts to the non-moving party to go beyond the pleadings and designate specific materials in the record to show that there is a genuinely disputed fact. Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 324.

         The court must draw all reasonable inferences in favor of the party against whom summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, the mere suggestion that facts are in controversy, as well as conclusory or speculative testimony in affidavits and moving papers, is not sufficient to defeat summary judgment. See Thornhill Publ’g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir.1979). Instead, the non-moving party must come forward with admissible evidence to satisfy the burden. Fed.R.Civ.P. 56(c); see Hal Roach Studios, Inc. v. Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir.1989). A genuine issue for trial exists if the non-moving party presents evidence from which a reasonable jury, viewing the evidence in the light most favorable to that party, could resolve the material issue in his or her favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986); Barlow v. Ground, 943 F.2d 1132, 1134-36 (9th Cir. 1991). Conversely, summary judgment must be granted where a party “fails to make a showing sufficient to establish the existence of an element essential to that party’s case, on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322.

         2. Under 26 U.S.C. § 7402(a), district courts “shall have such jurisdiction to make and issue in civil actions, writs and orders of injunction . . . and such other orders and processes, and to render such judgments and decrees as may be necessary or appropriate for the enforcement of the internal revenue laws.”

         3. “The Internal Revenue Code requires employers . . . to withhold federal social security and individual income taxes from the wages of their employees, ” which are otherwise known as “trust fund taxes.” Davis v. United States, 961 F.2d 867, 869 (9th Cir. 1992) (citing 26 U.S.C. §§ 3102(a), 3402(a)). “Although an employer collects this money each salary period, payment to the federal government takes place on a quarterly basis.” Id. “In the interim, the employer holds the collected taxes in trust for the government.” Id. (citing 26 U.S.C. § 7501(a)). But “[b]ecause the trust fund taxes seem to be a source of ready cash, it sometimes happens that a company, which has cash flow difficulties, will draw upon them rather than paying them over to the government.” Buffalow v. United States, 109 F.3d 570, 572 (9th Cir. 1997). And “[o]nce net wages are paid to the employee, the taxes withheld are credited to the employee regardless of whether they are paid by the employer, so that the IRS has recourse only against the employer for their payment.” Slodov v. United States, 436 U.S. 238, 243 (1978). “Other taxes, such as those directly owed by the business, are referred to as ‘non-trust fund taxes.’” Davis, 941 F.2d at 869.

         4. “In an action to collect taxes, the government bears the initial burden of proof.” In re Olshan, 356 F.3d 1078, 1084 (9th Cir. 2004) (quoting Palmer v. United States, 116 F.3d 1309, 1312 (9th Cir. 1997)). “The government can usually carry its initial burden . . . merely by introducing its assessment of tax due.” United States v. Stonehill, 702 F.2d 1288, 1293 (9th Cir. 1983). “Normally, a presumption of correctness attaches to the assessment, and its introduction establishes a prima facie case.” Id. “Introduction of the presumptively correct assessment shifts the burden of proof to the taxpayer.” Id. at 1294. If the taxpayer fails to rebut the presumption, the government is entitled to judgment as a matter of law. See Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993).

         5. “Generally, courts have held that IRS Form 4340 provides at least presumptive evidence that a tax has been validly assessed under [26 U.S.C.] § 6203.” Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993); Hughes v. United States, 953 F.2d 531, 535 (9th Cir. 1992) (“Official certificates, such as Form 4340, can constitute proof of the fact that the [tax] assessments were actually made.”).

         6. Here, the court finds the Government has produced sufficient evidence to establish a prima facie case for its claims that Park failed to pay employment taxes and unemployment taxes, and that Defendants failed to pay income taxes. To that end, the Certificate of Assessments and Payments (Form 4340s), which are attached as Exhibits 7 through 9 to the Declaration of Howard Baldwin, are presumptive proof that assessments were made against Park, doing business as Seoul Gom Tang, for $331, 523.79 in unpaid employment taxes for 2008 through 2011 and 2013, and $2, 000.12 in unpaid unemployment taxes for 2013. These documents also establish that assessments were made against Defendants jointly for $430, 396.69 in unpaid federal income taxes for 2006 through 2013, inclusive of interest and penalties through February, 2016.

         7. Because they did not respond to the motion, Defendants failed to rebut the presumption of correctness that arises from the Government’s evidence and have not disputed any of the facts alleged. Stonehill, 702 F.2d at 1293. In fact, the record shows Defendants admitted they filed the tax returns upon which the assessments are based. Accordingly, the Government is entitled to summary judgment on the first two claims asserted in the Complaint. See Hansen, 7 F.3d at 138; see also Cristobal v. Siegel, 26 F.3d 1488, 1491 (9th Cir. 1994) (holding the court can grant an unopposed motion for summary judgment if “the moving party bears its burden of showing its entitlement to judgment.”).

         8. What remains is the Government’s third claim for a permanent injunction. “Before a court may issue a permanent injunction, a party must show (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” W. Watersheds Project v. Abbey, 719 F.3d 1035, 1054 (9th Cir. 2013) (internal quotations omitted).

         9. The court finds the Government has satisfactorily demonstrated the need for a permanent injunction. As the Government argues in the motion, it will be irreparably harmed by the loss of employment and unemployment taxes if Defendants continue with their refusal to comply with the tax laws. And if the past if any predictor of the future, Defendants may not voluntarily comply with their obligations absent an order requiring them to do so.

         10. The court further finds that other potentially available remedies are inadequate, particularly when ongoing non-compliance results in a significant balance that Defendants’ business assets cannot cover. The balance of hardships also weighs in the Government’s favor because the injunction, ...

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