United States District Court, S.D. California
MYCLES CYCLES, INC. dba SAN DIEGO HARLEY DAVIDSON, Plaintiff,
UNITED STATES OF AMERICA, Defendant.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT'S AMENDED MOTION FOR SUMMARY JUDGMENT (ECF NO.
Janis L. Sammartino, United States District Judge.
before the Court is Defendant and Counter Claimant the United
States of America's Amended Motion for Summary Judgment
(“MSJ, ” ECF No. 19). Plaintiff and Counter
Defendant Mycles Cycles, Inc. dba San Diego Harley Davidson
filed a Response in Opposition to (“Opp'n, ”
ECF No. 22) and the United States filed a Reply in Support of
(“Reply, ” ECF No. 26) the Motion. After
reviewing the Parties' arguments, the evidence, and the
law, the Court rules as follows.
Mycles Cycles is a family owned Harley Davidson Dealership
that has been operating in San Diego, California, since 1993.
MSJ at 9. Mycles Cycles was founded by Michael Shelby, who
was the owner during all times relevant to this case.
trouble with the Internal Revenue Service (“IRS”)
began in August 2006, when the IRS conducted the first of
several compliance audits. Id. at 10. The compliance
audit was to ensure Plaintiff fulfilled its reporting
obligations under Internal Revenue Code
(“I.R.C.”) section 6050I, which requires persons
engaged in business to file a Form 8300 disclosure statement
any time the business receives more than $10, 000 in cash in
a single transaction from an individual. 26 U.S.C. §
6050I(a). Revenue Agent Tim Burke conducted the audit and
determined that although Plaintiff had generally complied
with the reporting requirements, two Forms 8300 were
incomplete because they lacked tax payer identification
numbers (“TINS”). MSJ at 10 (citing Declaration
of Carl Hankla (“Hankla Decl.”) Ex. 2, ECF No.
19-4). Revenue Agent Burke provided instructional materials
related to the section 6050I reporting requirements and
assessed no penalties. Id.
months later, the IRS returned. See Hankla Decl. Ex. 4.
Revenue Agent Elizabeth Arnold conducted the audit and
concluded that Plaintiff had not fully complied with the
section 6050I requirements during the audit period. See
Id. Revenue Agent Arnold found Plaintiff had failed to
file one Form 8300, id. Ex. 17; had failed to file
timely four Forms 8300, id. Ex. 5; had omitted TINS
from three Forms 8300, id. Ex. 17; and had failed to
send eight customer information statements, id. at
Ex. 5. Revenue Agent Arnold conducted an in-person closing
conference outlining the compliance issues and assessed a
$600 negligence penalty under I.R.C. sections 6721 and 6722.
MSJ at 12.
this second visit, Plaintiff's general manager, Tyler
Miller, sent a letter to the IRS that acknowledged there had
been “a couple of items” that had been “not
in compliance resulting in a penalty.” Hankla Decl. Ex.
7. The letter stated that Plaintiff was “taking
immediate measures to become 100% compliant.”
Id. The corrective actions included “task[ing]
its managers in the finance and insurance
(“F&I”) department with compliance” to
ensure completion of all Forms 8300 and notices sent to
consumers. Opp'n at 11 (citing Deposition of Tyler Miller
(“Miller Depo.”) at 19:18-20; 32:10-14, ECF No.
22-1). Plaintiff also “instituted a training and
quality control system for its employees on the Form 8300
compliance.” Id. (citing Miller Depo. at
19:6-7). Additionally, Plaintiff “create[ed] an
internal log so that ‘if for whatever reason a finance
manager didn't fill it out, didn't think it applied,
forgot, it would get caught by accounting, '”
id. (citing Miller Depo at 18:10-15), as well as a
“binder to keep track of its Forms 8300 and notices
sent to consumers.” Id. (citing Miller Depo.
2014, the IRS conducted another audit. After reviewing
Plaintiff's sales, Revenue Agent Brian Kuhns found that
Plaintiff sold ten motorcycles for cash over $10, 000. MSJ at
14 (citing Hankla Decl. Ex. 10). Plaintiff filed Forms 8300
for only nine of these transactions,  all of which lacked
customers' TINS. Id. (citing Hankla Decl. Ex.
8). Of the nine completed forms, eight lacked the
customer's occupation. Id. After the field
visit, Revenue Agent Kuhns discovered the 2006 and 2007 audit
files, noting Revenue Agents Burke and Arnold had found
Plaintiff had failed to comply with its section 6050I
responsibilities, had educated Plaintiff about its filing
responsibilities under section 6050I, and had assessed
negligence penalties. Id. at 16 (citing Hankla Decl.
on the findings made during the field visit, in addition to
the previous deficiencies found during the 2006 and 2007
visits, Revenue Agent Kuhns levied intentional disregard
penalties under section 6721(e) for filing the nine Forms
8300 without TINS. Id. at 17 (citing Hankla Decl.
Ex. 12). The IRS assessed penalties of $25, 000 for each of
the nine incomplete Forms 8300 filed by Plaintiff under
section 6721(e)(2)(C), totaling $225, 000. Id. The
IRS also assessed negligence penalties under section
6721(a)(2) totaling $700 for failure to send ten customer
information statements and one late filing. Id. The
IRS denied Plaintiff's administrative appeal, after which
Plaintiff paid one of the $25, 000 penalties and requested a
refund. Id. After the IRS denied Plaintiff's
request, Plaintiff filed this lawsuit. See ECF No.
Federal Rule of Civil Procedure 56(a), a party may move for
summary judgment as to a claim or defense or part of a claim
or defense. Summary judgment is appropriate where the Court
is satisfied that 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); Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986). Material facts are
those that may affect the outcome of the case. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
genuine dispute of material fact exists only if “the
evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Id. When the
Court considers the evidence presented by the parties,
“[t]he evidence of the non-movant is to be believed,
and all justifiable inferences are to be drawn in his
favor.” Id. at 255.
initial burden of establishing the absence of a genuine issue
of material fact falls on the moving party. Celotex,
477 U.S. at 323. The moving party may meet this burden by
identifying the “portions of ‘the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, '” that
show an absence of dispute regarding a material fact.
Id. When a plaintiff seeks summary judgment as to an
element for which it bears the burden of proof, “it
must come forward with evidence which would entitle it to a
directed verdict if the evidence went uncontroverted at
trial.” C.A.R. Transp. Brokerage Co. v. Darden
Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (quoting
Houghton v. South, 965 F.2d 1532, 1536 (9th Cir.
the moving party satisfies this initial burden, the nonmoving
party must identify specific facts showing that there is a
genuine dispute for trial. Celotex, 477 U.S. at 324.
This requires “more than simply show[ing] that there is
some metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986). Rather, to survive summary
judgment, the nonmoving party must “by her own
affidavits, or by the ‘depositions, answers to
interrogatories, and admissions on file,' designate
‘specific facts'” that would allow a
reasonable fact finder to return a verdict for the non-moving
party. Celotex, 477 U.S. at 324. The non-moving
party cannot oppose a properly supported summary judgment
motion by “rest[ing] on mere allegations or denials of
his pleadings.” Anderson, 477 U.S. at 256.
contends that Plaintiff intentionally disregarded the section
6050I reporting requirements when it knowingly omitted TINS
from its Forms 8300. MSJ at 23-29. According to Defendant,
the uncontested material facts show that Plaintiff had actual
knowledge of its compliance deficiencies, yet willfully
failed to take corrective measures to fully comply with the
law, proving Plaintiff intentionally disregarded its filing
obligations under 26 U.S.C. § 6721 as a matter of law.
MSJ at 23-25. Further, Defendant argues that Plaintiff is not
entitled to “reasonable cause” relief under 26
U.S.C. § 6724 because Plaintiff failed to seek that
relief in its administrative refund claim or in the Complaint
and, therefore, Plaintiff cannot raise that claim in this
refund suit. Reply at 4.