United States District Court, C.D. California
MIKE L. IRELAND
UNITED STATES OF AMERICA
Present: Honorable CHRISTINA A. SNYDER, Judge.
CIVIL MINUTES - GENERAL
DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (Dkt. 22, filed
February 12, 2018)
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
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.
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”).
April 2, 2018, the Court held oral argument. After
considering the parties' arguments, the Court finds and
concludes as follows.
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.
Plaintiff's Involvement with Micro Capital
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
See Dkt. 22-5, Plaintiff's Response to Request
for Admissions at 2.
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. 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;
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.
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.
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.
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.
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.
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.
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.
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.
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.
Micro Capital's Employment Tax Liabilities
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.
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. 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.
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.
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.
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,