Opinion ID: 3173647
Heading Depth: 2
Heading Rank: 2

Heading: The First Grant of Summary Judgment.

Text: Against this backdrop, we turn to the district court's granting of the government's first summary judgment motion. We review the entry of summary judgment de novo. See Gomez v. Stop & Shop Supermkts. Co., 670 F.3d 395, 396 (1st Cir. 2012). In conducting this tamisage, we read the record in the light most hospitable to the nonmoving parties (here, the appellants) and draw all reasonable inferences in their favor. See id. Summary judgment is appropriate where the record reflects no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). In this instance, our review is channeled by the posture of the case. The local rules of the United States District Court for the District of Rhode Island provide in pertinent part: (a) Statement of Undisputed Facts. (1) In addition to the memorandum of law required by [Local Rule of Civil Procedure] 7, a motion for summary judgment shall be accompanied by a separate Statement of Undisputed Facts that concisely sets forth all facts that the movant contends are undisputed and entitle the movant to judgment as a matter of law. (2) The Statement of Undisputed Facts shall be filed as a separate document with the motion and memorandum. Each fact shall be set forth in a separate, numbered paragraph and shall - 10 - identify the evidence establishing that fact, including the page and line of any document to which reference is made, unless opposing counsel has expressly acknowledged that the fact is undisputed. (3) For purposes of a motion for summary judgment, any fact alleged in the movant's Statement of Undisputed Facts shall be deemed admitted unless expressly denied or otherwise controverted by a party objecting to the motion. An objecting party that is contesting the movant's Statement of Undisputed Facts shall file a Statement of Disputed Facts, which shall be numbered correspondingly to the Statement of Undisputed Facts, and which shall identify the evidence establishing the dispute, in accordance with the requirements of paragraph (a)(2). D.R.I. R. 56(a)(1)-(3). In connection with the first summary judgment motion, neither appellant filed a statement of disputed facts as required by D.R.I. R. 56(a)(3). This failure has consequences. Valid local rules are an important vehicle by which courts operate and carry the force of law. Air Line Pilots Ass'n v. Precision Valley Aviation, Inc., 26 F.3d 220, 224 (1st Cir. 1994). The appellants' failure meant that all of the facts set forth in the government's statement of undisputed facts were deemed admitted. See D.R.I. R. 56(a)(3); see also Nieves-Romero v. United States, 715 F.3d 375, 377 (1st Cir. 2013). The facts contained in the statement of material facts that accompanied the government's first summary judgment motion plainly showed that each appellant was a responsible person, who - 11 - acted wilfully in failing to pay trust fund taxes. As to Schiffmann, the government sought to hold him responsible for nearly five full quarters beginning April 1, 2005 and ending June 23, 2006 (when he was cashiered). Throughout this interval, Schiffmann was ICOA's president and CEO. He also served as a director and owned stock in the company. As such, he was deeply involved in the day-to-day management of ICOA; his functions included the power to hire and fire, the development of fundraising strategies, and the formulation of a retention and compensation plan for ICOA's workforce. Furthermore, he was a signatory on ICOA's bank accounts, and regularly signed checks. Last but not least, in November of 2005 the board adopted a resolution specifically authorizing him to sign financial and contractual obligations up to $100,000 without a second signature. There is no question but that Schiffmann's status as CEO and the wide range of his functions afforded him the kind of significant suzerainty over ICOA's affairs to avoid defaulting on taxes. See Stuart, 337 F.3d at 36; Godfrey v. United States, 748 F.2d 1568, 1575 (Fed. Cir. 1984). To cinch the matter, Schiffmann's deep-seated involvement in the financial affairs of the company, including his power over ICOA's bank accounts and payroll, and his check-signing authority, gave him 'effective power' to pay the taxes. Vinick II, 205 F.3d at 8 (quoting Barnett v. IRS, 988 F.2d 1449, 1454 (5th Cir. 1993)). After all, - 12 - he had funds at his disposal and the power to allocate them. He was, therefore, a responsible person within the purview of section 6672(a). The undisputed facts likewise dictate a finding of wilfulness on Schiffmann's part. Schiffmann acted wilfully because — after becoming aware that the trust fund taxes were not being paid — he did not lift a finger to pay them. Instead, he allowed the company to use unencumbered funds to pay other creditors. Given Schiffmann's position and authority, no more was exigible to undergird a finding of wilfullness. See Jean, 396 F.3d at 454; Thomsen, 887 F.2d at 16-18. To be sure, Schiffmann argues that he did not learn specifically or in detail about ICOA's outstanding trust fund tax liabilities until, at the earliest, October of 2005. But the fact that he did not contemporaneously know of ICOA's failure to pay trust fund taxes in earlier quarters does not matter: it is settled law that when a responsible person realizes that trust fund taxes have not been paid for prior quarters in which he was a responsible person, he is under a duty to use all unencumbered funds available to the company to satisfy those tax arrearages. See Erwin v. United States, 591 F.3d 313, 326 (4th Cir. 2010); United States v. Kim, 111 F.3d 1351, 1357 (7th Cir. 1997); Mazo v. United States, 591 F.2d 1151, 1157 (5th Cir. 1979). That rule applies in this situation: Schiffmann was a responsible person during all the - 13 - quarters at issue (after all, he was president and CEO of ICOA from April of 2005 through June of 2006), and ICOA had unencumbered funds at his disposal during the second and third quarters of 2005 and thereafter. The government's statement of undisputed material facts also supports the conclusion that Cummings was a responsible person who wilfully avoided paying ICOA's trust fund taxes for the period beginning October 1, 2005, and ending June 23, 2006 (when he, too, was fired). As said, Cummings became CFO of ICOA on October 25, 2005. He served in that capacity for the rest of the period in question; owned stock in ICOA; was a signatory on two of the company's principal bank accounts; and enjoyed check-signing authority up to $75,000.00 without a second signature. Tasked to manage ICOA's financial health and develop appropriate fiscal policies, he had access to all of the company's financial records, including tax and payroll records. He decided which outstanding bills to pay, and in what order. He was, therefore, a responsible person who could have paid ICOA's taxes. See Jean, 396 F.3d at 454; Caterino, 794 F.2d at 6 (Congress has chosen to impose responsibility on one who has the ability to determine whom a company will or will not pay.). It cannot be gainsaid that Cummings acted wilfully. He knew that the corporation had hefty trust fund tax liabilities accumulated over a period of years. The expertise he had gained - 14 - as an IRS field auditor makes manifest that he surely must have understood the extent of his fiduciary obligation with respect to these liabilities. Yet, following the meeting in which the board gave him the power to sign checks and contractual obligations up to $75,000, he exercised that power to pay rent and operational expenses. The company's tax liabilities went begging. So viewed, Cummings voluntarily, consciously, and intentionally preferred other creditors to the United States. See Harrington, 504 F.2d at 1311. We summarize succinctly. On the record as it stood at the time of the first summary judgment ruling, there was no genuine issue as to any material fact. Both Schiffmann and Cummings were responsible persons during the relevant quarters. Each of them acted wilfully in failing to pay ICOA's overdue and current trust fund taxes with unencumbered funds and in prioritizing other creditors over the government. Consequently, the district court did not err in granting the government's first motion for summary judgment.