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United States v. King Mountain Tobacco Co., Inc.

United States District Court, E.D. Washington

August 28, 2014

UNITED STATES OF AMERICA, Plaintiff,
v.
KING MOUNTAIN TOBACCO COMPANY, INC., Defendant.

ORDER GRANTING UNITED STATES' RENEWED MOTION FOR SUMMARY JUDGMENT

ROSANNA MALOUF PETERSON, Chief District Judge.

Before the Court is the United States' "Renewed Motion for Summary Judgment (Issue No. 1), " ECF No. 70. The motion was heard with oral argument in Yakima, Washington. W. Carl Hankla appeared on behalf of the Plaintiff, the United States. John Adams Moore, Jr., and Randolph H. Barnhouse appeared on behalf of the Defendant, King Mountain Tobacco Co. The Court has considered the briefing, the supporting documentation and the file, and is fully informed.

BACKGROUND

In its motion, the United States renews one of the issues presented in its original Motion for Summary Judgment: whether the Blue Ribbon Transcript establishes the presumptive sum for tax assessments against King Mountain which should be reduced to judgment. ECF No. 48 at 5-6. In response to the United States' original motion for summary judgment, King Mountain submitted an unopposed request to take additional discovery under Federal Rule of Civil Procedure 56(d) before responding to the particular issue of assessments owed. ECF No. 52. The Court granted King Mountain's request and provided additional time for discovery as to that issue. ECF No. 53.

The Court later granted the United States' Motion for Summary Judgment as to all substantive defenses presented by King Mountain and determined that King Mountain is liable for federal tobacco excise taxes owed. ECF No. 62. The Court left open the precise amount of taxes owed per its prior Order granting King Mountain additional time on that issue. Id.

DISCUSSION

Summary judgment is appropriate where the moving party establishes that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). If the moving party demonstrates the absence of a genuine issue of material fact, the burden then shifts to the non-moving party to set out specific facts showing a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986).

Evidence that may be relied upon at the summary judgment stage includes "depositions, documents, electronically stored information, affidavits or declarations, stipulations... admissions, [and] interrogatory answers...." Fed.R.Civ.P. 56(c)(1)(A). In evaluating a motion for summary judgment, the Court must draw all reasonable inferences in favor of the nonmoving party. Dzung Chu v. Oracle Corp. (In re Oracle Corp. Secs. Litig.), 627 F.3d 376, 387 (9th Cir. 2010) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)).

The United States asserts that the Blue Ribbon Transcript it has produced in support of its motion establishes a prima facie case for reducing to judgment the tax assessments against King Mountain as a matter of law. King Mountain argues that the Blue Ribbon Transcript is not entitled to a presumption of correctness and that a genuine issue of material fact remains as to the precise amounts owed. In addition, King Mountain raises several defenses to certain amounts claimed, including: whether the United States should be equitably estopped from collecting excise taxes on cigarettes that King Mountain shipped to a cigarette distributor that was operating under an agreement with the United States to deprive King Mountain of payment; whether King Mountain is entitled to an advice-of-counsel defense for penalties assessed against King Mountain for failure to pay excise taxes; and whether King Mountain is exempt from paying excise taxes because the failure to pay such taxes could result in forfeiture of allotment land. Each of these issues is examined in turn.

A. the Blue Ribbon Transcript

The United States has introduced into the record a certified, official "Transaction History Report, " a "Corrected Final Notice & Demand of Taxes Due/Notice of Intent to Levy, " and a "Second Corrected Final Notice & Demand of Taxes Due/Notice of Intent to Levy, " collectively referred to as the "Blue Ribbon Transcript." ECF No. 49-1; ECF No. 82-2. The Second Corrected Final Notice purported to "correct the liability assessed for May and June 2010" and account for "a recently discovered late payment that occurred in April, 2011." ECF No. 82-2. According to the Second Corrected Final Notice, King Mountain owed the United States $57, 914, 811.27 for back taxes, penalties and interest, as of February 25, 2014. ECF No. 82-2.

The United States contends that the Blue Ribbon Transcript is admissible under the Federal Rules of Evidence as a self-authenticating official record of the United States. The United States analogizes the Blue Ribbon Transcript to the substantially equivalent IRS Form 4340 Certificate of Assessments and Payments, which is a self-authenticating record that fits within the public records exception for the hearsay rule and which constitutes "presumptive proof of a valid assessment." See Rossi v. United States, 755 F.Supp. 314, 316-18 (D. Or. 1990) (citing United States v. Chila, 871 F.2d 1015, 1018 (11th Cir. 1989)).

King Mountain does not dispute the Government's analogy to IRS Form 4340 or the basis of admissibility of the Blue Ribbon Transcript. Instead, King Mountain contends that it has produced admissible evidence countering the presumed validity of the Blue Ribbon Transcript. See Chila, 871 F.2d at 1018. To illustrate the inaccuracy of the Blue Ribbon Transcript, King Mountain points to 1) the Second Corrected Final Notice that the Government issued after its original motion for summary judgment was filed in this case, and 2) a payment to be received by the TTB from funds forfeited in a related action that is not accounted for in the Blue Ribbon Transcript.

The United States has submitted all computations supporting its calculation of the amounts owed in the Blue Ribbon Transcript and the Second Corrected Final Notice. ECF No. 49-1; ECF No. 81-1 at 16-19; ECF No. 82-2. In addition, the United States provided the declaration of Tonya Geis, Section Chief of the Delinquent Tax Group at the National Revenue Center of the TTB, explaining the computations and authority for the amounts claimed. ECF No. 82. King Mountain has not disputed the accuracy of Ms. Geis' conclusions, the authorities cited, or the accuracy of the computations in the Blue Ribbon Transcript, including the Second Corrected Final Notice. Therefore, the Court finds that the issuance of a Second Corrected Final Notice does not undermine the presumption of validity attached to the Blue Ribbon Transcript.

However, the fact that the Blue Ribbon Transcript and computations do not account for a payment to be received from funds forfeited in a related action presents a greater concern. As the United States explains, the Alcohol and Tobacco Tax and Trade Bureau ("TTB") will be receive between $5, 000, 000 and $8, 995, 259 in forfeited funds to which King Mountain had previously asserted a claim. Id. The forfeited ...


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