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Horovitz v. United States

February 11, 2008

JACK M. HOROVITZ, PLAINTIFF,
v.
THE UNITED STATES (INTERNAL REVENUE SERVICE), DEFENDANT,
v.
JACK T. CONSTANTINO, THIRD-PARTY DEFENDANT.



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

MEMORANDUM OPINION AND ORDER

Pending before the Court are cross-motions for summary judgment which were filed by all three parties: PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (Document No. 27) filed by Jack M. Horovitz; UNITED STATES' MOTION FOR SUMMARY JUDGMENT (Document No. 28); and the MOTION FOR SUMMARY JUDGMENT (Document No. 31) filed by third-party defendant Jack T. Constantino. Also pending is a MOTION TO SELL REAL PROPERTY (Document No. 40) filed by Horovitz. The motions have been thoroughly briefed and are ripe for disposition.

Factual and Procedural History

The issue in this case is whether Horovitz and/or Constantino are liable as "responsible persons" for the failure of CDS Lines, Inc. ("CDS") to pay its federal employment tax obligations for the tax periods ending 9/30/98, 12/31/98 and 3/31/99 (the "periods at issue"). Horovitz and Constantino each try to escape liability by arguing strenuously that the other was the sole "responsible person."

CDS was a trucking company based in Canonsburg, Pennsylvania. Constantino founded CDS in 1981, owned 80% of the company, and served as its Chief Executive Officer, President and Treasurer at an annual salary of $232,000. Horovitz owned 20% of CDS, and served as its Chief Financial Officer, Vice President and Secretary at an annual salary of $180,000. Constantino had hiring and firing authority for all of CDS. Horovitz managed the accounting department and could hire and fire employees in the accounting department. Both Constantino and Horovitz had signature authority for the corporate bank accounts at Mellon Bank and West Banco Bank. Horovitz signed the Form 941 payroll tax returns for the periods at issue.

Horovitz advised Constantino on at least one occasion in December 1998, that CDS was failing to pay its federal employment tax obligations. Both Horovitz and Constantino were aware that CDS was struggling financially and had previously failed to pay federal tax obligations from 1995-1997. Constantino did not do anything to check up to make sure that the taxes were paid. Constantino caught wind of the issue again in February 1999 when an agent came to the office. Horovitz signed approximately 400 checks totaling approximately $1.8 million to creditors other than the IRS after learning that CDS was not paying its federal employment taxes.

On March 19, 2002, the IRS assessed a trust fund recovery penalty against both Horovitz and Constantino in the amount of $774,745.66 for the periods at issue. Payments totaling $12,890.10 were credited toward the assessment. Statutory additions for interest and penalties have accrued. The United States' Counterclaim against Horovitz asserts that as of April 3, 2006, Horovitz owed $941,328.34. The United States' Third-Party Complaint against Constantino asserts that $842,018.43, plus statutory interest and penalties, remains due and owing.*fn1 In this litigation, Horovitz and Constantino seek a judgment that they bear no liability for this assessment and Horovitz seeks a refund of amounts paid. The United States seeks the entry of a judgment against Horovitz and Constantino, jointly and severally, for the full tax liability.

Standard of Review

Rule 56(c) of the Federal Rules of Civil Procedure reads, in pertinent part, as follows: [Summary Judgment] shall be rendered forthwith 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 judgment as a matter of law.

In interpreting Rule 56(c), the United States Supreme Court has stated:

The plain language . . . mandates entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to material fact," since a complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 (1986).

An issue of material fact is genuine only if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The court must view the facts in a light most favorable to the non-moving party, and the burden of establishing that no genuine issue of material fact exists rests with the movant.

Celotex, 477 U.S. at 323. The "existence of disputed issues of material fact should be ascertained by resolving all inferences, doubts and issues of credibility against the moving party." Ely v. Hall's Motor Transit Co., 590 F.2d 62, 66 (3d Cir. 1978) (quoting Smith v. Pittsburgh Gage & Supply Co., 464 F.2d 870, 874 (3d Cir. 1972)). Final credibility determinations on material issues cannot be made in the context of a motion for summary judgment, nor can the district court weigh the evidence. Josey v. John R. ...


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