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United States v. Yuill

November 5, 2007

UNITED STATES OF AMERICA, PLAINTIFF,
v.
JOANN C. YUILL AND JOHN C. KAVANAUGH, DEFENDANTS.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER OF COURT

Before the Court for disposition are Defendant Joann C. Yuill's ("Yuill") MOTION TO DISMISS/MOTION TO STAY/MOTION TO TRANSFER (Document No. 8), with brief in support (Document No. 9), Plaintiff's brief in opposition (Document No. 11), and Yuill's reply brief (Document No. 12). For the reasons that follow, the Court will sever the claims against Yuill from the claims against her co-defendant pursuant to Federal Rule of Civil Procedure 21, and transfer the claims against her to the United States District Court for the Northern District of West Virginia pursuant to 28 U.S.C. § 1404(a).

Background

On October 2, 2006, Yuill commenced an action against the United States of America ("United States") in the United States District Court for the Northern District of West Virginia.*fn1

NDWV: 06-150, Doc. No. 1. The action sought a refund and/or an abatement of trust fund liabilities incurred by Alliance Home Health Care, Inc. ("Alliance") and assessed against Yuill personally by the Internal Revenue Service ("IRS"). Id., ¶¶ 1, 7. Yuill was apparently assessed with a 100% penalty pursuant to 26 U.S.C. § 6672*fn2 for Alliance's failure to withhold and pay employment taxes for the quarters ending on September 30, 1997, December 31, 1997, and March 31, 1998. Id., ¶ 2.

Yuill resides in Morgantown, West Virginia. Id., ¶ 5. Alliance, Yuill's former employer, was located in Washington, Pennsylvania. Id., ¶ 7. Alliance is apparently no longer in business. Id. On February 11, 2002, the United States informed Yuill that it considered her to be a responsible party under § 6672, and that it had assessed penalties against her on the trust fund portion of the employment taxes allegedly owed by Alliance. Id. Yuill served as Alliance's Vice-President of Support Services and Vice-President of Improving Organizational Performance from 1988 through 1999. Id., ¶ 9. She served as Alliance's Corporate Secretary from 1991 through 1999. Id., ¶ 10. During the relevant period of time, John Kavanaugh ("Kavanaugh") was Alliance's President. Id., ¶ 12.

In her complaint against the United States, Yuill sought the entry of an order adjudging that she was not a responsible party for purposes of § 6672 and, hence, not liable for the trust fund recovery penalties attributable to Alliance's deficient assessment. Id., ¶¶ 27-32. She also sought an order compelling the United States to disclose the name of any other person deemed to be liable under § 6672 for the same penalty and whether the Secretary of the Treasury had attempted to collect the penalty from such other person. Id., ¶¶ 33-36. These disclosures are required under 26 U.S.C. § 6103(e)(9)*fn3 upon written request. On December 11, 2006, the United States filed an answer and counterclaim, seeking an order adjudging that Yuill was indebted to the United States for tax assessments, penalties, interest and statutory additions. NDWV: 06-150, Doc. No. 4, ¶ 42.

The United States commenced the instant action against both Yuill and Kavanaugh in this Court on April 2, 2007, claiming that they both refused or failed to pay tax assessments for past taxable periods. Doc. No. 1. One day later, the United States filed a motion to stay in the District Court for the Northern District of West Virginia, seeking a stay of Yuill's action in that Court pending the resolution of the claims presently before this Court. NDWV: 06-150, Doc. No. 15. In support of its motion to stay, the United States explained that it had chosen the Western District of Pennsylvania as the venue for this action because the District Court for the Northern District of West Virginia did not have in personam jurisdiction over Kavanaugh. Id., p. 7. The United States conceded that Yuill's action could not be transferred to this Court pursuant to 28 U.S.C. § 1404(a), which permits a district court to "transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a)(emphasis added). Except for circumstances not relevant here, a civil action against the United States can only be brought "in the judicial district where the plaintiff resides[.]" 28 U.S.C. § 1402(a)(1). Thus, the District Court did not have the option of transferring Yuill's action to this Court. Yuill opposed the United States' motion to stay on the ground that the liability of herself and Kavanaugh were distinct issues. NDWV: 06-150, Doc. No. 18, p. 7. She argued that the United States was precluded from arguing that its resources should not have to be allocated between two separate actions, since it had created the potential for duplicative proceedings itself by commencing an action in this Court. Id., p. 9.

In a memorandum opinion dated May 10, 2007, the District Court for the Northern District of West Virginia denied the United States' motion to stay. Yuill v. United States, 2007 WL 1723320, 2007 U.S. Dist. LEXIS 38445 (N.D.W.Va. May 10, 2007). The District Court recognized that if the United States' action presently before this Court had asserted claims only against Yuill, it clearly would have been duplicative of the action pending in the Northern District of West Virginia. Yuill, 2007 WL 1723320, at *2, 2007 U.S. Dist. LEXIS 38445, at *6-7 ("If the United States only asserted claims against Yuill in the Pennsylvania suit, that action would clearly be duplicative of the present action because the claims brought by the United States against Yuill in the Pennsylvania suit are identical to the claims brought by the United States against Yuill in its counterclaim in this case."). Nevertheless, the issue was complicated by the fact that the United States had sued both Yuill and Kavanaugh in this action, whereas the District Court for the Northern District of West Virginia could not exercise in personam jurisdiction over Kavanaugh. Yuill, 2007 WL 1723320, at *3, 2007 U.S. Dist. LEXIS 38445, at *7 ("The United States could not file a third-party complaint against Kavanaugh in this case because the Court does not have personal jurisdiction over Kavanaugh."). Although the District Court noted that discovery regarding the assessments allegedly owed by Yuill "may minimally overlap" with discovery regarding the assessments allegedly owed by Kavanaugh, the District Court concluded that determinations as to whether Yuill and Kavanaugh were responsible parties needed to be made "upon the facts and circumstances specific to each individual and each specific tax assessment." Yuill, 2007 WL 1723320, at *4, 2007 U.S. Dist. LEXIS 38445, at *10. The District Court concluded its analysis by observing:

Based on the procedural history of the present matter and the Pennsylvania suit, the Court reasonably concludes that the United States filed the Pennsylvania action solely for its convenience in hopes of consolidating the discovery for its claims against Yuill and Kavanaugh as much as possible. Furthermore, the United States motion to stay could easily be seen as a method through which the United States could obtain its choice of forum and avoid the requirement that refund suits be filed in the district in which the individual taxpayer resides.

Yuill, 2007 WL 1723320, at *4, 2007 U.S. Dist. LEXIS 38445, at *12. Hence, the District Court for the Northern District of West Virginia has demonstrated its intention to proceed with Yuill's action against the United States.

The United States' claims against Yuill and Kavanaugh in this case are based not only on assessments related to employment taxes allegedly left unpaid when they worked for Alliance, but for similar assessments related to taxes allegedly left unpaid by Westwood Home Health Care, Inc. ("Westwood"), and Dominion Health Care, Inc. ("Dominion"). Doc. No. 1, ¶ 1. The United States also asserts that Kavanaugh failed to pay employment taxes owed by Community Nursing Network, Inc. ("Community").*fn4 Id. The Court notes that the United States has amended its counterclaim against Yuill in the Northern District of West Virginia to incorporate the alleged indebtedness of Yuill with respect to Westwood and Dominion. NDWV: 06-150, Doc. Nos. 17 & 19.

On August 20, 2007, Yuill filed a motion to dismiss or stay the United States' action against her in this Court. Doc. No. 8, ¶ 6. In the alternative, Yuill asks this Court to transfer the claims against her to the District Court for the Northern District of West Virginia pursuant to 28 U.S.C. § 1404(a). Id., ¶ 7. The United States opposes Yuill's motion to dismiss, stay or transfer. Doc. No. 11. It is this ...


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