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`

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

LARRY W. O’CONNOR, 

Plaintiff,

v.

UNITED STATES OF AMERICA,

Defendant.

Case No. C06-0554RSL

ORDER GRANTING MOTION 

TO STAY THE CASE

This matter comes before the Court on defendant’s Motion to Stay This Case (Dkt. #7-1)

until the resolution of a separate action in the United States District Court for the Northern

District of California. For the reasons discussed herein, the motion by the United States is

GRANTED. 

I. FACTS AND PROCEDURAL HISTORY

Plaintiff filed a complaint in the Western District of Washington on April 20, 2006. In

the complaint, plaintiff contested a $330,060.01 tax penalty exacted by the United States under

26 U.S.C. § 6672 (“Section 6672”). Plaintiff’s penalty arose from his employment as Vice

President of Sable Technologies, Incorporated (“Sable Technologies”), a California-based

company. The statute assigns culpability if a person responsible for collecting, accounting for,

and paying over to the United States taxes withheld from employees’ wages fails to do so. 26

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All three co-defendants in U.S. v. Kruss were penalized under Section 6672 for the tax

period ending March 31, 2001 for the sum of $62,149.99. Both Katherine Kruss and plaintiff

were penalized for the tax period ending June 30, 2001 for the sum of $267,910.02. John D.

Bailey was not penalized for the tax period ending June 30, 2001. (Dkt. #7-2).

ORDER GRANTING MOTION TO STAY- 2

U.S.C. § 6672(a). More than one person may share liability jointly and severally for the full

amount of the unpaid taxes. 26 U.S.C. § 6672(d). Plaintiff contends that his role as Vice

President did not accord him the duties described in Section 6672. Plaintiff followed the

standard procedure to oppose the penalty by remitting $100 which allowed him to initiate the

present action. He seeks both a refund of the $100 and a determination that the United States

erred in assessing a Section 6672 violation against him. 

On July 25, 2006, the Court granted the United States’ unopposed motion to extend time

to respond to the complaint. The United States asserted that it would use the time extension to

coordinate a “cogent and accurate response” with the Internal Revenue Service to advance the

litigation. (Dkt. #5-1). Subsequently, the United States initiated a suit against plaintiff and two

other Sable Technologies employees, Katherine Kruss and John D. Bailey (“U.S. v. Kruss”) in

the United States District Court for the Northern District of California. The three co-defendants

in U.S. v. Kruss are alleged to have willfully failed to turn over withheld taxes during the same

fiscal periods.1

 The United States now moves to stay the present action for the sake of judicial

economy. 

II. DISCUSSION

Plaintiff argues that lack of service of process on plaintiff in U.S. v. Kruss bars a stay in

the present action. However, the Ninth Circuit has rejected a similar contention. “A federal

action is commenced with the filing of the complaint, not by service of process. It is thus the

filing of actions in coordinate jurisdictions that invokes considerations of comity.” Pacesetter

Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 96 (9th Cir. 1982) (citing Product Eng’g and Mfg.,

Inc. v. Barnes, 424 F.2d 42, 44 (10th Cir. 1970)). The United States commenced the action in the

Northern District of California by filing. As a result, lack of service of process on plaintiff in

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U.S. v. Kruss does not present a roadblock to considering the merits of the United States’

argument. 

The United States urges this Court to stay the present action pending the resolution of

U.S. v. Kruss. The comity doctrine vests a district court with discretion to decline jurisdiction

over a case in order to avoid parallel litigation in a coordinate court. Kerotest Mfg. Co. v. C-OTwo Fire Equip. Co., 342 U.S. 180, 184 (1952). A court may employ the comity doctrine where

two claims have been filed in different courts over the same issue involving the same parties. 

Church of Scientology of California v. U.S. Dep’t of Army, 611 F.2d 738, 749 (9th Cir. 1979). 

The “first to file” rule gives deference to the court with the earlier filing date. Pacesetter

Systems, 678 F.2d at 95. However, the Supreme Court criticized this formulaic approach where

the logistical problems were equitable in nature and the second forum best promoted resolution. 

Kerotest, 342 U.S. at 183. “Wise judicial administration, giving regard to conservation of

judicial resources and comprehensive disposition of litigation, does not counsel rigid mechanical

solution of such problems.” Id. The Ninth Circuit noted that it is “imperative to avoid

concurrent litigation in more than one forum whenever consistent with the rights of the parties.” 

Crawford v. Bell, 599 F.2d 890, 893 (9th Cir. 1979). Thus, concerns of conserving judicial

resources may outweigh the “first to file” rule. 

Strictly applied, the “first to file” rule favors plaintiff’s position. Plaintiff filed his

complaint prior to the United States initiating U.S. v. Kruss. Furthermore, the United States

requested additional time to file an answer in order to craft a coordinated response with the

Internal Revenue Service. The United States filed the parallel action with full knowledge of the

present action and as a reaction to plaintiff’s suit. However, a “first to file” analysis is too

simplistic in the present matter. The California forum represents the only place in which the

government may pursue its claim against all three alleged tax evaders. It argues that litigating

simultaneously in two forums wastes judicial resources. Given the factual overlap between the

two cases, comity favors granting the motion to stay the present action. The same factual and

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legal question lies at the heart of both proceedings: “Is plaintiff a responsible person under

Section 6672?” Without the stay, two courts will examine the same issue regarding plaintiff. 

That situation would waste judicial resources and could lead to inconsistent results. 

Plaintiff correctly asserts that his choice of forum deserves a degree of deference. He

underscores the Supreme Court’s observation that “a plaintiff’s choice of forum should rarely be

disturbed.” Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 (1981). However, Plaintiff’s

reliance upon Piper Aircraft is misplaced. That dispute revolved around transfer and dismissal

of an action based upon the doctrine of forum non conveniens. Id. at 240. Plaintiff is correct

that transfer can only occur if the new venue is a place where the claim could have been

brought. 28 U.S.C. § 1404(a). Granting a transfer in this case would be inappropriate since

plaintiff resides in Washington and could not bring a claim against the government in the

Northern District of California. 28 U.S.C. § 1402(a)(1). However, the United States seeks a

stay, not a transfer. Staying the current litigation does not divest this court of jurisdiction. 

Pending the outcome of the California case, plaintiff may move to reopen this case. 

Accordingly, although plaintiff’s choice of forum is entitled to deference, a stay would both

preserve his rights and avoid concurrent litigation. 

III. CONCLUSION

For all of the foregoing reasons, the Court GRANTS the United States’ Motion to Stay

This Case.

DATED this 18th day of October, 2006.

A

Robert S. Lasnik

United States District Judge

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