Opinion ID: 3173647
Heading Depth: 2
Heading Rank: 3

Heading: The Second Grant of Summary Judgment.

Text: The government's second summary judgment motion, like the first, was accompanied by a separate statement of material facts not in dispute. See D.R.I. R. 56(a)(2). This time, however, the appellants' opposition included a counterstatement of disputed material facts. See id. R. 56(a)(3). Both of these statements - 15 - must be taken into account in analyzing the second summary judgment ruling. Even so, most of the salient facts adduced by the government in connection with the first summary judgment motion remain uncontradicted. To begin, the appellants' counterstatement does little to undermine the facts, recounted above, showing that Schiffmann and Cummings were responsible persons who wilfully failed to see to the payment of trust fund taxes. The counterstatement does, however, contain some further facts that the appellants suggest should alter the decisional calculus. We briefly explore the appellants' four additional arguments. First, the appellants claim that ICOA's funds were largely encumbered and, thus, unavailable for tax payments. But this claim lacks any meaningful support in the record. In this context, funds are deemed encumbered only if the taxpayer is legally obligated to use them for some purpose other than the satisfaction of a preexisting or current trust fund tax liability and that obligation is superior to the IRS's interest in the funds. See Nakano v. United States, 742 F.3d 1208, 1212 (9th Cir.), cert. denied, 134 S. Ct. 2680 (2014). The burden is on the responsible person to identify disputed facts sufficient to raise a genuine issue about whether funds used to pay other creditors were encumbered. See Conway v. United States, 647 F.3d 228, 237 (5th Cir. 2011). - 16 - Here, the record contains no facts sufficient to show the existence of such a legal obligation: ICOA received capital infusions of more than $500,000 while Cummings was its CFO and received capital infusions of more than $900,000 while Schiffmann was CEO. It also received a steady stream of revenue from its business operations. The appellants have not adduced any significantly probative evidence sufficient to support a finding that all or any substantial part of these funds were encumbered by obligations superior to the obligation owed to the IRS. Contrary to the appellants' importunings, funds are not encumbered simply because corporate officers elect to earmark them informally for specific purposes (such as payroll or trade debts). See Bradshaw v. United States, 83 F.3d 1175, 1180 (10th Cir. 1995); Kalb v. United States, 505 F.2d 506, 510 (2d Cir. 1974). Second, the appellants attempt to draw a distinction between technical power (that is, the board resolution authorizing them to make disbursements) and actual power (that is, what actually happened in the workplace). We rejected this very argument in Moulton, in which we explained that technical power versus actual power constitutes a false dichotomy. See 429 F.3d at 355-56 (collecting cases). The correct legal standard extends liability to anybody with responsibility and authority to avoid the default which constitutes a violation of the statute. Harrington, 504 F.2d at 1312. Here, the record shows beyond hope - 17 - of contradiction that each appellant had both the responsibility and the authority to pay ICOA's trust fund taxes. The appellants' third plaint is that the board of directors limited their check-signing authority by directing that it not be used to pay taxes. The record, however, belies this claim. There is no such limitation on the face of the resolution adopted by the board of directors. Though two of the directors may have voiced the sentiment during the November 2005 board meeting that any payment of taxes should be further deferred, a majority of the directors expressed no such views. At any rate, voicing a sentiment is not the same as adopting a resolution by a majority vote. Cf. R.I. Gen. Laws, §§ 7-1.2-801(a), 806 (stipulating that a majority of a corporation's board of directors is required to confer authority to act upon a corporate officer). Fourth, and finally, the appellants argue that they were subordinate to the wishes of the board of directors, so neither of them had the final word about which creditors got paid and which did not. But the fact that someone in the corporate hierarchy may outrank a corporate officer does not shield that officer from section 6672 liability. In that context, liability depends on significant, not exclusive, control over the disbursement of funds. See Hochstein v. United States, 900 F.2d 543, 547 (2d Cir. 1990); Caterino, 794 F.2d at 5-6; Neckles v. United States, 579 F.2d 938, 940 (5th Cir. 1978). What counts in this case is that, - 18 - given the totality of the circumstances, the only reasonable view of the evidence is that each appellant possessed and exerted significant control over ICOA's corporate finances and could have paid the IRS more money had he been of a mind to do so. Again, we summarize succinctly. On the full record, there is no genuine issue as to any material fact. Both Schiffmann and Cummings were responsible persons during the relevant quarters, and each of them acted wilfully in failing to see to the payment of ICOA's overdue and current trust fund taxes. Consequently, the court below did not err in granting the government's second motion for summary judgment.