Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Ireland v. United States

United States District Court, C.D. California

April 2, 2018

MIKE L. IRELAND
v.
UNITED STATES OF AMERICA

          Present: Honorable CHRISTINA A. SNYDER, Judge.

          CIVIL MINUTES - GENERAL

         Proceedings: DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (Dkt. 22, filed February 12, 2018)

         I. INTRODUCTION

         On March 14, 2017, plaintiff Mike L. Ireland filed the instant complaint against defendant United States of America (the “government”). Dkt. 1 (“Compl.”). Plaintiff contests a trust fund recovery penalty (“TFRP”) that was assessed against him pursuant to 26 U.S.C. section 6672 for unpaid trust fund taxes[1] from Micro Capital Limited Partnership (“Micro Capital”). Plaintiff asserts that he is entitled to a refund of $333, 060.86, plus interest, resulting from his payment of the TFRP, and that he is entitled to abatement of unpaid employment taxes for the taxable periods ended 06/30/2008, 09/30/2008, and 03/31/2009. See Compl.

         On February 12, 2018, the government filed a motion for summary judgment. Dkt. 22 (“MSJ”). On February 26, 2018, plaintiff filed an opposition, dkt. 26 (“Opp'n”). On March 2, 2018, defendant filed a reply, dkt. 27 (“Reply”), and submitted a response to plaintiff's statement of genuine disputes of material fact, dkt. 28 (“Response”).

         On April 2, 2018, the Court held oral argument. After considering the parties' arguments, the Court finds and concludes as follows.

         II. BACKGROUND

         The following facts are not meaningfully disputed and are set forth for purposes of background. Unless otherwise noted, the court references only facts that are uncontroverted and as to which evidentiary objections have been overruled.

         A. Plaintiff's Involvement with Micro Capital

         Micro Capital was a limited partnership that operated under the name “Compel.” Dkt. 22-1, Defendant's Statement of Uncontroverted Facts (“DSUF”) at no. 26. Micro Capital had an office in Santa Fe Springs, California, and an office in Phoenix, Arizona. Id. at nos. 27-28. Micro Capital has two general partners: Micro-One Capital, LLC, and Micro Capital Corporation.[2] See Dkt. 22-5, Plaintiff's Response to Request for Admissions at 2.

         Plaintiff was a 44% limited partner in Micro Capital. Dkt. 26-1, Plaintiff's Statement of Facts (“PSF”) at no. 85; Dkt. 22-5, Plaintiff's Response to Request for Admissions at 3; Dkt. 22-6, Deposition of Mike L. Ireland (“Ireland Depo.) at 6:8-13.[3] In particular, plaintiff's primary role with Micro Capital was to help with sales and marketing, and upon request from Micro Capital's management team, meet with clients or potential clients in Phoenix. PSF at no. 86. Plaintiff's business card for Micro Capital listed his title as “Principal, ” and employees of Micro Capital sometimes referred to him as “the CEO.” DSUF at nos. 7-8. However, plaintiff was not the Chief Executive Office or President of Micro Capital. PSF at nos. 87-88. Plaintiff attended Micro Capital executive meetings approximately two times a year, and did not have an office at Micro Capital. Id. at nos. 94; 113.

         From July 2008, through June 2009, plaintiff lived in California. DSUF at no. 29. He traveled to Micro Capital's Arizona office approximately once per month to help with sales and marketing, and was in contact with Micro Capital's management by telephone on a monthly basis. Id. at nos. 30-31. Plaintiff participated in about half of the quarterly executive meetings. Id. at no. 32.

         Micro Capital's ownership was divided in three ways: plaintiff owned a 44% limited partner interest; T.J. Pantaleo owned a 44% limited partner interest; and Silicon Valley Bank owned 12%. Id. at nos. 4-6; PSF at no. 89.

         It is undisputed that Pantaleo was at all times actively involved in managing Micro Capital and was “much more familiar” with the books, records, and business of Compel when it was acquired by Micro Capital. PSF at nos. 90-91. Plaintiff invested in Micro Capital because he trusted Pantaleo's business acumen and expertise, and Pantaleo did all of the background work before Micro Capital decided to acquire Compel. Id. at nos. 99, 101.

         Pantaleo was not only a partner in Micro Capital, he was also the legal counsel for the company. Id. at no. 104. Nate Miller was the Chief Financial Officer, and Pat Arvizu was the Controller. Id. These three individuals “had all of the financial and tax information concerning the company.” Id. Miller hired Arvizu, and Arvizu reported to Miller. Id. at no. 114. Over a two-year period, Arvizu only saw plaintiff in the office approximately six times, and Arvizu never contacted plaintiff directly. Id. at nos. 115- 116.

         Plaintiff did not have firsthand knowledge of the day-to-day business at Micro Capital, and the information that he received came directly from Pantaleo or other executives running the company. Id. at no. 92. Moreover, plaintiff's knowledge concerning Micro Capital's business was generally limited to a verbal or written report from Pantaleo approximately once a month. Id. at no. 95. Plaintiff did not have the working knowledge of the company, its financials, its accounting department, or its tax obligations, though the parties dispute whether plaintiff was a “passive investor.” Id. at no. 105.

         It is undisputed that plaintiff was involved in the hiring and firing of Jason Crandall, the president of Micro Capital, and that this was the only hiring decision in which plaintiff ever participated. DSUF at nos. 17-18; PSF at no. 110.

         On January 31, 2008, Micro Capital opened a Wells Fargo Bank account ending in 5755, and the business account application for this account lists plaintiff as CEO. DSUF at nos. 9-10. Plaintiff signed the business account application for account 5755. Id. at no. 80. On May 7, 2008, Micro Capital opened another Wells Fargo Bank account ending in 9397, and the business account application for this account listed plaintiff as CEO. Id. at nos. 11-12. Similarly, plaintiff is listed on the business account application as CEO for the Wells Fargo Bank account ending in 9405, which was opened on May 7, 2008. Id. at nos. 13-14. Plaintiff had signature authority for each of these Wells Fargo bank accounts. Id. at nos. 19-21.

         Micro Capital obtained loans for its outstanding receivables from Rexford Funding, LLC (“Rexford”). Id. at no. 22. On February 21, 2008, plaintiff signed an agreement with Rexford, guaranteeing payment for the receivables (the “Guarantee”). Id. at no. 23. Under the Guarantee, payments from Micro Capital's customers were sent to Rexford, and Rexford advanced a portion of the weekly receivables to Micro Capital. Id. at no. 24. Micro Capital used the payments it received from Rexford to fund its operations. Id. at no. 25.

         Though the parties dispute whether, as an owner of Micro Capital, all employees reported to plaintiff, the dispute appears to concern whether employees directly reported to plaintiff, or whether, all employees “effectively” reported to plaintiff vis-à-vis his status as part-owner. It is undisputed that plaintiff had some authority to tell employees of Micro Capital which creditors to pay, though the extent of this authority is unclear.

         B. Micro Capital's Employment Tax Liabilities

         For the quarters ending June 30, 2008, September 30, 2008, and March 31, 2009, Micro Capital had employees but failed to withhold and pay the employees' portion of employment taxes. Id. at nos. 1-3. When Arvizu learned that payroll taxes were not being paid, she reported this to Miller. PSF at no. 117.

         Plaintiff learned that Micro Capital was not paying its employment taxes to the Internal Revenue Service (“IRS”) at some point in or after mid-2008, though the parties dispute precisely when this occurred.[4] When plaintiff learned that Micro Capital was not paying its employment taxes, the unpaid liability was approximately $400, 000. DSUF at no. 34. Plaintiff was not familiar with the “everyday decisions” at Micro Capital and does not know how those factors may have contributed to cash flow problems facing Micro Capital. PSF at no. 98.

         It is undisputed that plaintiff had some power to control how Micro Capital resolved its unpaid employment tax liabilities, though the parties dispute to what extent plaintiff had this power. DSUF at nos. 16, 51; Ireland Depo. at 36:17-23;37:17-19. The parties also dispute whether plaintiff attempted to delegate his power to control how Micro Capital resolved its unpaid employment tax liabilities. It is undisputed that plaintiff trusted that others would pay the unpaid employment taxes to the IRS. DSUF at no. 53. Moreover, plaintiff was not involved in the day-to-day decision-making concerning which creditors were to be paid. PSF at no. 118.

         During the twelve months after plaintiff learned about Micro Capital's tax delinquency, plaintiff received calls from Micro Capital executives requesting money from plaintiff-in particular, the executives requested approximately $1 million to pay Micro Capital's creditors. Id. at nos. 35-36. During this time, plaintiff provided approximately $1 million to Micro Capital, and specifically instructed that payment of the delinquent employment taxes was Micro Capital's first priority. DSUF at nos. 37-38; Response at 4. When additional amounts were requested from plaintiff, he demanded that the unpaid taxes be paid prior to the other vendors. PSF at no. 107.

         Pantaleo, Miller, and Arvizu were the individuals directed to resolve these tax liabilities. Id. at no. 103. Despite plaintiff's money that he sent to Micro Capital's executives in order to pay the employment tax liabilities, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.