Not what you're
looking for? Try an advanced search.
Buy This Entire Record For
SELECT REHAB, INC. v. U.S.
April 8, 2002
SELECT REHAB, INC., PLAINTIFF,
UNITED STATES OF AMERICA, DEFENDANT.
The opinion of the court was delivered by: A. Richard Caputo, United States District Judge.
Plaintiff, Select Rehab, Inc., filed the present action seeking a
refund of taxes paid when Defendant determined that Plaintiff's medical
directors were employees rather than independent contractors for purposes
of federal employment tax liability.
Presently before the Court is Plaintiff's motion for summary judgment.
(Doc. 4.) The motion has been fully briefed and is ripe for disposition.
Because I find that Plaintiff acted reasonably and in good faith in
making the decision to treat the physicians as independent contractors,
Plaintiff's motion for summary judgment will be granted.
Plaintiff, a subsidiary of Continental Medical Systems, Inc. (CMS),*fn1
provided a management team to rehabilitation units in acute care
hospitals, (Marcus Dep., Doc. 22, Ex. 1 at 58-59), and contracted with
physicians and therapists to serve as a medical directors and program
directors. (Welsh Dep., Doc. 11, Ex. 3 at 11-12.) Plaintiff treated
these physicians as independent contractors for employment tax purposes,
and did not pay any federal employment or unemployment tax with respect
to their compensation. (LaMonna Decl., Doc. 22. Ex. 11 at ¶¶ 3-4.)
Plaintiff was audited by the Internal Revenue Service (IRS) for the
years 1992, 1993, 1994, and 1995. At that time, the IRS determined that
the physicians should have been treated as employees rather than as
independent contractors for employment tax purposes. (Id.)
Accordingly, Plaintiff was assessed additional employment and
unemployment taxes (and failure to deposit penalties). Plaintiff
unsuccessfully appealed, and ultimately filed fourteen (14) amended
employment tax returns, paid a portion of the tax due, and filed a claim
for a refund and request for abatement for each of the amended returns.
After waiting the mandatory six (6) month period without action by the
IRS, Plaintiff filed the instant action seeking a refund of the $7,644.20
paid for the employment taxes based on Defendant's assessment that the
physicians were independent contractors. Defendant filed a counterclaim
seeking $638,926.13, the total amount of the assessment. Plaintiff now
moves for summary judgment.*fn2
Summary judgment is appropriate if "the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled
to a judgment as a
matter of law." Fed.R.Civ.P. 56(c). A disputed fact is material if
proof of its existence or non-existence might affect the outcome of the
suit under the applicable substantive law. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986).
Where there is no material fact in dispute, the moving party need only
establish that it is entitled to judgment as a matter of law. Where,
however, there is a disputed issue of material fact, summary judgment is
appropriate only if the factual dispute is not a genuine one. See id. at
248. An issue of material fact is genuine if a reasonable jury could
return a verdict for the nonmoving party under the governing standard.
See id. at 248-53.
Where there is a material fact in dispute, the moving party has the
initial burden of proving that: 1) there is no genuine issue of material
fact; and 2) she is entitled to judgment as a matter of law. Celotex
Corp. v. Catrett, 477 U.S. 317, 329, 106 S.Ct. 2548, 2554 (1986). The
moving party may present its own evidence or, where the nonmoving party
has the burden of proof, simply point out to the court that "the
nonmoving party has failed to make a sufficient showing of an essential
element of her case." Id. at 323. All doubts as to the existence of a
genuine issue of material fact must be resolved against the moving
party, and the entire record must be examined in the light most favorable
to the nonmoving party. See Colburn v. Upper Darby Township, 838 F.2d 663,
666 (3d Cir. 1988).
The sole issue in this case is whether Plaintiff had a reasonable basis
to classify the physicians as independent contractors rather than
employees. Plaintiff argues that long-standing industry practice
supports treating such physicians as independent contractors. In the
alternative, Plaintiff argues that it is entitled to the safe harbor
relief of § 530 of the Revenue Act of 1978. Defendant argues that
other medical directors were treated as employees, and that Plaintiff's
assertions of reliance on industry practice, advice of counsel, and
states' prohibitions against corporations employing doctors are based on
overbroad, generalized testimony.
A. § 530 of the Revenue Act of 1978
Section 530 of the Revenue Act of 1978 provides in relevant part:
(a) Termination of certain employment tax liability
purpose for ...
Buy This Entire Record For