United States District Court, D. Montana, Butte Division
MORRIS UNITED STATES DISTRICT COURT JUDGE.
and Counter-Plaintiff the United States has filed the
following motions: (1) Motion for Order/Judgment Applying
Issue Preclusion (Doc. 28), and (2) Motion for Summary
Judgment Regarding Liability (Doc. 30.) Plaintiff and
Counter-Defendant James Tarpey (“Tarpey”) opposes
both motions. (Docs. 36, 38.) The Court held a hearing on the
motions on March 6, 2019, in Great Falls, Montana. (Doc. 50.)
formed Project Philantropy, Inc. d/b/a/ Donate for Cause
(“DFC”) in or about 2006. DFC operated a business
that facilitated the donation of timeshares. Timeshares often
involve significant fees and expenses, including membership
fees, maintenance fees, and the payment of real estate taxes.
A timeshare's market value may be significantly less than
the timeshare owner's original purchase price. DFC
allowed timeshare owners who faced burdensome timeshare fees
and expenses to donate their unwanted timeshares.
formed DFC as a non-profit organization. Tarpey served as the
sole voting member of DFC. Tarpey possessed authority to
nominate and remove board members. Tarpey obtained tax-exempt
status for DFC from the Internal Revenue Service
promised potential customers generous tax savings from
donations of their unwanted timeshares. Tarpey hired real
property appraisers Ron Broyles and Curt Thor to conduct
timeshare appraisals for DFC. Tarpey and his sister Suzanne
Tarpey also conducted timeshare appraisals for DFC. Suzanne
Tarpey served as the secretary, treasurer, and bookkeeper of
founded a for-profit timeshare closing service that operated
as Resort Closings. Resort Closings initially provided
closing services for the sale of timeshares. Tarpey
eventually integrated his timeshare donation business,
operated through DFC, into his timeshare closing business at
Resort Closings. Resort Closings handled the real estate
closings for timeshares donated to DFC.
accepted timeshares into its donation program. DFC would then
open a “closing file” on these donated timeshares
with Resort Closings. DFC and Resort Closings marketed
generous tax savings of up to $6, 000 for donated timeshares.
DFC accepted at least 7, 600 timeshare donations. Tarpey,
Suzanne Tarpey, Broyles, and Thor appraised the timeshares
Tarpey I (the Injunction Lawsuit)
United States filed an action to enjoin six defendants,
including the Tarpey, Suzanne Tarpey, Ron Broyles, Curt Thor,
Resort Closings, and DFC, from engaging further in timeshare
donation practice and appraisal. The United States alleged
that the timeshare closing business constituted a
“bogus tax scheme.” (2:15-cv-00072-SEH, Doc. 1.)
United States alleged that the customers contacted DFC to
inquire about donating an unwanted timeshare. Id. at
7. The United States alleged that DFC enlisted an appraiser
to determine the fair market value of the timeshare.
Id. at 8. The United States alleged that DFC used a
conflicted appraiser who overstated the value of the
timeshare. Id. The United States alleged that DFC
acted merely as a conduit to hold title briefly to timeshares
before being sold for a fraction of the appraised amount. The
United States alleged that DFC falsely told customers that
they could deduct the full appraised amount of the timeshare,
conducted by DFC, and the associated processing fees.
court in Tarpey I entered final judgments of
permanent injunction against all six defendants.
(2:15-cv-00072-SEH, Docs. 36, 88, 89, 90, 103, 124.) Tarpey
consented to judgment against him. (2:15-cv-00072-SEH, Doc.
90.) The consent judgment permanently enjoined Tarpey from:
(1) preparing (or assisting others in preparing) any property
appraisal that will be used in connection with federal taxes;
(2) encouraging or advising (or assisting others in
encouraging or advising) others to claim charitable
contribution deductions on any federal tax return; and (3)
organizing, promoting, selling, marketing, or advising with
respect to (or assisting others in organizing, promoting,
selling, marketing, or advising with respect to) any plan or
arrangement regarding charitable contribution deductions
claimed on federal tax returns. Id. at 2.
United States filed an unopposed motion for summary judgment
against Broyles on February 10, 2017. (2:15-cv-00072-SEH,
Doc. 116.) Broyles previously had been represented by
counsel. The court permitted Broyles's attorney to
withdraw on November 22, 2016. (2:15-cv-00072-SEH, Doc. 112.)
Broyles did not oppose the United States's motion for
summary judgment. The court granted the United States's
motion for summary judgment on March 3, 2017, and the Court
entered final judgment. (2:15-cv-00072-SEH, Doc. 123, 124,
Tarpey II (the Present Action)
Treasury Department assessed penalties against Tarpey
pursuant to the conduct at issue in Tarpey I. Tarpey
brought the present action against the United States on
December 27, 2017. (Doc. 1.) Tarpey filed his Amended
Complaint on April 20, 2018. (Doc. 10.) Tarpey alleges that
he did not overestimate the fair market value of timeshares.
Id. at 6. Tarpeys alleges that the IRS inaccurately
assessed penalties against him. Id. Tarpey seeks a
refund of amounts paid toward the penalties made against him.
Id. at 13.
United States filed a counterclaim against Tarpey. (Doc. 11.)
Tarpey seeks a money judgment for the unpaid balance of the
penalties. Id. The United States has moved for
summary judgment regarding the issue of Tarpey's
liability under 26 U.S.C. § 6700. (Doc. 28.) The United
States's motion does not seek resolution of the amount of
penalties as this issue must be reserved for trial.
Judgment is appropriate where the movant demonstrates that no
genuine dispute exists “as to any material fact”
and the movant is “entitled to judgment as a matter of
law.” Fed.R.Civ.P. 5(a); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986). Summary judgment
may be rendered on liability despite a remaining genuine
issue regarding the amount of damages. See Pac. Fruit
Express Co. v. Akron, Canton & Youngstown R.R. Co.,
524 F.2d 1025, 1029-30 (9th Cir. 1975). The moving party
bears the initial burden of demonstrating the absence of a
genuine issue of material fact. Celotex, 477 U.S. at
322-23. If the moving party satisfies ...