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COOK v. U.S.

May 29, 1991


The opinion of the court was delivered by: Caldwell, District Judge.


I. Introduction

This action arises pursuant to Section 6672 of the Internal Revenue Code (26 U.S.C. § 6672), which imposes penalties for failure of responsible persons to collect and pay over taxes to the United States. Plaintiff, Dean A. Cook, filed a complaint against the United States of America, to recover an amount paid in partial satisfaction of a § 6672 assessment against him, which he alleges was improperly administered. The Government responded with a counterclaim against Cook to enforce judgment and collect the balance of the assessment. Additionally, the Government filed a third-party complaint against defendants, Lawrence L. Cirillo and Nicholas Spithogianis, to reduce to judgment assessments imposed on them under § 6672. Cook and Cirillo, in turn, filed separate cross-claims against Spithogianis, seeking indemnity or contribution in the event judgment is entered against them. Each allege that Spithogianis was the person responsible for withholding taxes, and Cirillo contends that Spithogianis also contracted to indemnify him.

Pending is the Government's motion to strike the cross-claims of Cook and Cirillo on the grounds that this Court lacks subject matter jurisdiction over them pursuant to Rule 12(h)(3) of the Federal Rules of Civil Procedure. The Government's central contention is that there is no federal common law or statutory right to contribution or indemnity under § 6672.

II.  Federal Right to Contribution or Indemnity under § 6672
  It is well settled that an individual subject to a tax
assessment pursuant to § 6672 has no federal common law or
statutory right of action for contribution or indemnity against
another individual who may also be so liable. DiBenedetto v.
United States, 75-1 U.S. Tax Cas. para. 9503, 1974 WL 791
(D.R.I., 1974); Padalino v. United States v. Murray, et al.,
1989 WL 154322, 1989 U.S. Dist. LEXIS 13,543, 89-2 U.S. Tax
Cas. para. 9632 (D.C.N.J. 1989); Swift v. Levesque, 614 F. Supp. 172
 (D.C.Conn. 1985); Rebelle v. United States, 588 F. Supp. 49
(M.D.La. 1984); Schoot v. United States, 664 F. Supp. 293
(N.D.Ill. 1987); Moats v. United States, 564 F. Supp. 1330
(W.D.Mo. 1983); Hanhauser v. United States, 85 F.R.D. 89
(M.D.Pa. 1979). The Government contends that neither Cook nor
Cirillo have asserted any independent grounds for this Court's
jurisdiction over those claims. "[I]t has been consistently
recognized in the federal courts that where an action is
patently without merit, a federal court may dismiss such an
action for want of subject matter jurisdiction." Carver v.
England, 599 F.2d 1055 (6th Cir. 1979); Duke Power Co. v.
Carolina Environmental Study Group, 438 U.S. 59, 70, 98 S.Ct.
2620, 2628, 57 L.Ed.2d 595 (1978); Studen v. Beebe,
588 F.2d 560, 566 (6th Cir. 1978).
A.  Public Policy Considerations

First, regardless of the alleged existence of diversity or ancillary jurisdiction in this matter, we are convinced that there is a clearly defined public policy which disfavors allowing claims of contribution or indemnity to interfere with the tax collection process under § 6672. The majority of jurisdictions express a genuine concern "to avoid complicating the Government's action to collect the § 6672 penalty with collateral litigation between the parties." Schoot, supra, 664 F. Supp. at 298. "The practice and procedures developed over the years to test the validity of a § 6672 assessment were not and are not designed for and should not be complicated by collateral litigation that may be instituted by and between various persons who may be determined to be `responsible persons' in a particular case." Moats, supra, 564 F. Supp. at 1341-1342.

Rather, the primary purpose of § 6672 is to "ensur[e] that the tax which is unquestionably owed to the government is paid." Feist v. United States, 607 F.2d 954, 957, 221 Ct.Cl. 531 (1979); Botta v. Scanlon, 314 F.2d 392, 393 (2d Cir. 1963). Clearly, the "statute serves as a collection device for the government, and not as a source of a cause of action between or among persons found to be `responsible' parties." Swift, supra, 614 F. Supp. at 173.

Additionally, § 6672 has been construed by several courts as penal in nature. Thus, to allow parties to recover from other responsible persons would greatly hinder the deterrent purpose of the statute. "[W]ithout the possibility that any one of several responsible persons might be held solely accountable for a penalty imposed without benefit of contribution, little incentive would exist for anyone to act in accordance with the law by coming forward sua sponte to pay or account for the taxes in question." Continental Illinois Nat. Bank & Trust Co. v. United States, 87-2 U.S. Tax Cas. para. 9442, at 89,245, 1987 WL 12206 (N.D.Ill. 1987). As the District Court in Rebelle reasoned:

  A `responsible persons' resolve to willfully fail
  to collect such taxes may be weakened when faced
  with the possibility of bearing all of the 100%
  penalty than it would be if there was a right to
  spread and diversify this burden or risk among the
  group. The need for government action is obviated
  if only one potentially liable person in a group
  of potentially liable people acts properly. The
  risk of bearing this penalty alone may bring that
  one person to the forefront a little more readily,
  and thus save the government the additional
  enforcement expense.

Id. 588 F. Supp. at 51.

Finally, any party liable under § 6672 must necessarily be found to have "willfully" failed to collect or truthfully account for and pay over taxes to the Government. § 6672(a). Under the general principles of contribution and indemnity, a person who acts willfully cannot seek contribution. Hanhauser, supra, 85 F.R.D. at 92; Rebelle, supra, 588 F. Supp. at 51; Continental, supra; Cohen v. United States, 75-1 U.S. Tax Cas. para. 9391, at 86,967, 1975 WL 556 (E.D.Mich. 1975); DiBenedetto, supra; Cage v. New York C. Railroad Co., 276 F. Supp. 778 (W.D.Pa. 1967), aff'd, 386 F.2d 998 (3d Cir. 1967); Rhoads v. Ford Motor Co., 374 F. Supp. 1317 ...

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