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McLain v. McLain
United States District Court, D. Montana, Billings Division
March 6, 2018
FAITH MCLAIN, CHRISTEEN MCLAIN, JOHN MCLAIN, MOLLY MCLAIN, MIRA MCLAIN, AND MATTHEW MCLAIN, AS BENEFICIARIES OF THE ESTATE OF BERNARD MCLAIN, AND MARY MCLAIN, INDIVIDUALLY AS BENEFICIARY OF THE ESTATE OF BERNARD MCLAIN AND AS TRUSTEE OF THE E-3 RANCH TRUST, Plaintiffs,
FRANCIS MCLAIN, INDIVIDUALLY AND AS CO-MANAGER OF TERA BANI RETREAT MINISTRIES, CAROLINE MCLAIN, INDIVIDUALLY AND AS MANAGING DIRECTOR OF TERA BANI RETREAT MINISTRIES, ALAKHI JOY MCLAIN, SOHNJA MAY MCLAIN, AND DANE SEHAJ MCLAIN, AS PURPORTED CERTIFICATE HOLDERS OF THE E-3 RANCH TRUST, Defendants. THE UNITED STATES OF AMERICA, Intervenor Defendant and Counter/Cross Claimant,
FAITH MCLAIN, CHRISTEEN MCLAIN, JOHN MCLAIN, MOLLY MCLAIN, MIRA MCLAIN, AND MATTHEW MCLAIN, as Beneficiaries of THE ESTATE OF BERNARD MCLAIN; and MARY MCLAIN, as Beneficiary of the ESTATE OF BERNARD MCLAIN, and as Trustee of the E-3 RANCH TRUST, Counterclaim Defendants, and FRANCIS MCLAIN, Individually, and as Co-Manager of TERA BANI RETREAT MINISTRIES; CAROLINE MCLAIN, Individually, and as Managing Director of TERA BANI RETREAT MINISTRIES; and ALAKHI JOY MCLAIN, SOHNJA MAY MCLAIN, AND DANE SEHAJ MCLAIN, as Beneficiaries of the E-3 RANCH TRUST, Crossclaim Defendants, and AMERICAN BANK OF MONTANA, Additional Defendant on United States' Claims
P. Watters United States District Court Judge.
the Court are United States Magistrate Judge Timothy
Cavan's findings and recommendations filed January 17,
2018. (Doc. 121). Judge Cavan recommends this Court grant the
United States' motion to dismiss (Doc. 79) Francis
("Frank") McLain's counterclaim seeking a tax
filed timely objections to the findings and recommendations.
(Doc. 126 and 128). Frank is entitled to de novo review of
those portions of Judge Cavan's findings and
recommendations to which Frank properly objects. 28 U.S.C.
§ 636(b)(1); Fed.R.Civ.P. 72(b)(3).
Court has carefully reviewed Frank's multiple objections
but declines to address them because they do not relate to
the dispositive issue before the Court. At best, Frank's
objections can be characterized as arguments for the
dismissal of the United States' claim against him. But
the objections contain no argument for denying the United
States' motion to dismiss Frank's counterclaim.
2008, Frank was convicted on nine counts of failing to
collect employment taxes in violation of 27 U.S.C. §
7202. (Doc. 121 at 4). In 2014, the United States assessed a
civil penalty against Frank under 26 U.S.C. § 6672 for
the same taxes at issue in the 2008 criminal case. (Doc. 121
at 5). Frank's counterclaim seeks a refund for the civil
penalty imposed under § 6672. (Doc. 79 at 17-39).
Internal Revenue Code requires employers to withhold federal
income taxes from their employees' wages and pay the
taxes over to the Internal Revenue Service. United States
v. Jones, 33 F.3d 1137, 1139 (9th Cir. 1994). To enforce
collection and payment of federal employment taxes, Congress
imposed both civil and criminal liability on persons
responsible for the collection and payment of such taxes.
§ 7202, the criminal liability statute, provides:
Any person required under this title to collect, account for,
and pay over any tax imposed by this title who willfully
fails to collect or truthfully account for and pay over such
tax shall, in addition to other penalties provided by law, be
guilty of a felony and, upon conviction thereof, shall be
fined not more than $10, 000, or imprisoned more than 5
years, or both, together with the costs of prosecution.
26 U.S.C. § 6672(a), the civil liability statute,
Any person required to collect, truthfully account for, and
pay over any tax imposed by this title who willfully fails to
collect such tax, or truthfully account for and pay over such
tax, or willfully attempts in any manner to evade or defeat
any such tax or the payment thereof, shall, in addition to
other penalties provided by law, be liable to a penalty equal
to the total amount of the tax evaded, or not collected, or
not accounted for and paid over.
are permitted to challenge a civil penalty imposed under
§ 6672(a) by filing a claim for a tax refund. To
establish entitlement to a refund, the taxpayer must show, by
a preponderance of the evidence, that he either (1) is not a
responsible person within the meaning of § 6672; or (2)
did not act willfully in failing to collect or pay over the
withheld taxes. Sananikone v. United States, 623
Fed.Appx. 324, 325 (9th Cir. 2015) (citing United States
v. Jones, 33 F.3d 1137, 1139 (9th Cir. 1994)).
preclusion bars the relitigation of issues actually
adjudicated in previous litigation between the same parties.
Beauchamp v. Anaheim Union High School Dist., 816
F.3d 1216, 1225 (9th Cir. 2016). Issue preclusion applies
when: (1) the issue is identical to one alleged in prior
litigation; (2) the issue was "actually litigated"
in the prior litigation; (3) and the determination of the
issue in the prior litigation was "critical and
necessary" to the judgment. Beauchamp, 816 F.3d
issue preclusion bars relitigating the two elements necessary
for Frank to establish a claim for relief. In order to
convict Frank under § 7202, it was critical and
necessary for the jury to determine beyond a reasonable doubt
both whether Frank was a person responsible for the
collection of employment taxes and whether Frank willfully
failed to do so. Because Frank cannot establish the elements
necessary to prove his claim, his counterclaim fails to state
a claim for which relief can be granted. The United
States' motion to dismiss Frank's counterclaim is
it is hereby ordered:
Judge Cavan's findings and recommendations (Doc. 121) ...