Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-04942/USCOURTS-cand-3_06-cv-04942-1/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7401 IRS: Tax Liability

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For the Northern District of California

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States District C

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For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

Plaintiff,

 v.

KATHERINE KRUSS, LARRY O’CONNOR 

and JOHN D. BAILEY,

Defendants.

 /

No. C 06-04942 SI

ORDER GRANTING DEFENDANT

O’CONNOR’S UNOPPOSED MOTION

TO DISMISS CROSS-COMPLAINT OF

DEFENDANT KRUSS

Defendant Larry O’Connor has filed a motion to dismiss the cross-complaint of defendant

Katherine Kruss. Hearing on the motion is currently scheduled for January 19, 2007. Pursuant to Civil

Local Rule 7-1(b), the Court determines that the motion is appropriate for resolution without oral

argument, and VACATES the hearing. As set forth below, the Court GRANTS O’Connor’s motion to

dismiss Kruss’ cross-complaint. 

On August 16, 2006, the United States filed a complaint against defendants Katherine Kruss,

Larry O’Connor, and John D. Bailey, alleging a failure to collect, account for, and pay over income and

trust fund taxes they withheld from employees of Sable Technologies Incorporated. Along with her

answer to the complaint, defendant Kruss filled a cross-complaint against defendants O’Connor and

Bailey. Kruss’ cross-complaint alleges that O’Connor and Bailey are “responsible, either in full or to

the extent required by law, to recompense Katherine Kruss for any future payments she may be required

to make regarding this tax liability to the Department of Treasury for tax periods ending March 31, 2001

and June 30, 2001.” Kruss Answer ¶¶ 33, 37. O’Connor has now moved to dismiss Kruss’ crosscomplaint. Bailey has joined in O’Connor’s motion. Kruss has filed no opposition to the motion.

Case 3:06-cv-04942-SI Document 16 Filed 01/18/07 Page 1 of 2
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The government’s action seeks to recover penalties assessed pursuant to Title 26, United States

Code, section 6672. Subsection (d) of section 6672 provides:

(d) Right of contribution where more than 1 person liable for penalty. If more than

1 person is liable for the penalty under subsection (a) with respect to any tax, each

person who paid such penalty shall be entitled to recover from other persons who are

liable for such penalty an amount equal to the excess of the amount paid by such

person over such person's proportionate share of the penalty. Any claim for such a

recovery may be made only in a proceeding which is separate from, and is not joined

or consolidated with – (1) an action for collection of such penalty brought by the

United States, or (2) a proceeding in which the United States files a counterclaim or

third-party complaint for the collection of such penalty.

26 U.S.C. § 6672(d) (emphasis added). Accordingly, Kruss’ cross-complaint, which seeks recovery

from the co-defendants, may only be brought “in a proceeding which is separate from, and is not joined

or consolidated with” this action, which is “an action for collection of [a section 6672] penalty brought

by the United States.” Id. 

For the foregoing reasons, the Court GRANTS O’Connor’s motion to dismiss, without prejudice

to Kruss filing a claim for recovery in a separate proceeding. (Docket No. 11)

IT IS SO ORDERED.

Dated: January 18, 2007

 

SUSAN ILLSTON

United States District Judge

Case 3:06-cv-04942-SI Document 16 Filed 01/18/07 Page 2 of 2