Gray v. United States America

Filing 42

ORDER by Judge Samuel Conti denying 25 Motion for Joinder (sclc1, COURT STAFF) (Filed on 2/16/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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STEVEN A. GRAY,

) Case No. 11-0680 SC
)
Plaintiff,
) ORDER DENYING MOTION FOR
) JOINDER OF ADDITIONAL PARTY
v.
)
)
UNITED STATES OF AMERICA; and DOES )
1 through 30, inclusive,
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)
Defendants.
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UNITED STATES OF AMERICA,
)
)
Counter-Claimant,
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)
v.
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MANUEL MARTINEZ and STEVEN A.
)
GRAY,
)
)
Counter-Defendants
)
)

I.

INTRODUCTION

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Now before the Court is Plaintiff/Counter-Defendant Steven A.

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Gray's ("Gray") motion to compel Defendant/Counter-Claimant United

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States of America ("United States") to join Madeline Martinez ("Ms.

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Martinez") as an additional Counter-Defendant in this action.

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No. 25 ("Mot.").

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Gray has filed a reply.

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Pursuant to Civil Local Rule 7-1(b), the Court finds the Motion

ECF

The United States has filed an opposition and
ECF No. 29 ("Opp'n"), 33 ("Reply").

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suitable for determination without oral argument.

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For the reasons

set forth below, the Court DENIES the Motion.

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II.

BACKGROUND

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In April 2009, the United States assessed a trust fund penalty

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against Gray and Counter-Defendant Manuel Martinez ("Mr. Martinez")

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for unpaid federal employment taxes withheld from the employees of

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Ace Roofing, Inc. ("Ace").

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United States seized Gray's income tax refunds for the year 2008,

ECF No. 1 ("Compl.") ¶¶ 9-10.

Gray filed

United States District Court

For the Northern District of California

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as well as funds from Gray's financial accounts.

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this action against the United States alleging he is not liable for

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the trust fund recovery penalty and, therefore, is entitled to a

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refund for those amounts paid toward the assessment.

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The United States subsequently filed a counterclaim against Gray

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and Mr. Martinez to collect the unpaid balance of the trust fund

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recovery penalty.

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to a judgment with respect to the trust fund recovery penalty

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against him.

ECF No. 7 ("Countercl.").

Id.

The

Id. at 10.

Mr. Martinez agreed

ECF No. 22 ("Martinez Stip.").

Gray now seeks to join Ms. Martinez, Mr. Martinez's wife, as a

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party to this action.

Mot. at 1.

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presence is necessary because: (1) Ms. Martinez was a signatory on

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Ace's bank accounts; (2) Ms. Martinez consistently loaned money to

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Ace to pay its tax and wage obligations; and (3) Mr. Martinez

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transferred substantial personal and real property to Ms. Martinez

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to make Mr. Martinez appear insolvent and thwart collection efforts

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by the United States.

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entitled to some form of contribution from Ms. Martinez.

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///

Id.

Gray claims that Ms. Martinez's

In short, Gray claims that he is

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III. LEGAL STANDARD
Compulsory joinder is governed by Federal Rule of Civil

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Procedure 19.

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Rule 19(a)(1) provides:

A person who is subject to service of process and whose
joinder will not deprive the court of subject-matter
jurisdiction must be joined as a party if:

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(A) in that person's absence, the court cannot
accord complete relief among existing parties; or

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(B) that person claims an interest relating to the
subject of the action and is so situated that
disposing of the action in the person's absence may:

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United States District Court

For the Northern District of California

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(i) as a practical matter impair or impede the
person's ability to protect the interest; or

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(ii) leave an existing party subject to a
substantial risk of incurring double, multiple,
or otherwise inconsistent obligations because
of the interest.

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The Ninth Circuit has enunciated a two-pronged analysis to

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determine whether a non-party is necessary under Rule 19(a).

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Yellowstone Cnty. v. Pease, 96 F.3d 1169, 1172 (9th Cir. 1996).

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The non-party is deemed necessary if it meets either prong.

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First, the court must determine whether "complete relief" is

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possible among those already a party to the suit.

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court must determine whether the non-party has a legally protected

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interest in the suit.

Id.

Id.

Second, the

Id.

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IV.

DISCUSSION
Gray argues that, under the first prong of the Ninth Circuit

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test, complete relief is impossible without the joinder of Ms.

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Martinez because Gray is entitled to some form of contribution from

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Ms. Martinez.

Mot. at 7-8.

Gray claims that Martinez was the

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signatory on Ace's bank accounts, that she loaned money to Ace, and

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that Mr. Martinez, Gray's co-counter-claimant, transferred

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substantial assets to Ms. Martinez to make himself appear

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insolvent.

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is not a necessary party since liability for the trust fund

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recovery penalty is joint and several.

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States further argues that, by statute, any claim for contribution

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for the trust fund recovery penalty must be brought in a separate

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action.

United States District Court

For the Northern District of California

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Id. at 8.

The United States responds that Ms. Martinez

Opp'n at 2.

The United

Id. at 3.

The Court agrees with the United States.

The United States

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assessed the trust fund recovery penalty against Gray under 26

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U.S.C. § 6672.

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amount of the tax evaded, or not collected, or not accounted for

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and paid over."

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the statute are entitled to recover from other liable persons, but

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"only in a proceeding which is separate from, and is not joined or

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consolidated with -- (1) an action for collection of such penalty

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brought by the United States, or (2) a proceeding in which the

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United States files a counterclaim or third-party complaint for the

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collection of such penalty."

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under section 6672 is joint and several among responsible persons,

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and each responsible person can be held for the total amount of

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withholding not paid."

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2004 U.S. Dist. LEXIS 2158, at *27 (D. Kan. 2004) (internal

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quotations and citations omitted).

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obligated to pursue every responsible party" under 26 U.S.C. §

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6672.

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"[T]he fact that there may be other fiscally 'responsible persons'

Section 6672 imposes liability for "the total

26 U.S.C. § 6672(a).

Persons found liable under

Id. § 6672(d).

Thus, "liability

Leiter v. United States, No. 03-2149-GTV,

The United States "is not

Howard v. United States, 711 F.2d 729, 735 (5th Cir. 1983).

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does not relieve [Gray] of his duty to pay these taxes as a

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'responsible person.'"

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is not necessary to accord the parties complete relief in the

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instant action.

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Id.

Accordingly, joinder of Ms. Martinez

Gray argues 26 U.S.C. § 6672(d) does not bar the United States

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from bringing a counterclaim against Ms. Martinez.

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This is true, but beside the point.

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States has the discretion to bring a counterclaim against Ms.

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Martinez does not mean that joinder is compulsory.

Reply at 2.

The fact that the United

The pertinent

United States District Court

For the Northern District of California

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question is whether joinder of Ms. Martinez is necessary for the

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Court to accord complete relief.

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6672 is joint and several, the court can accord complete relief

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absent Ms. Martinez's joinder in the instant action.

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is not unfairly prejudiced by Ms. Martinez's absence since he may

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bring a separate contribution action against her.1

As liability under 26 U.S.C. §

Further, Gray

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V.

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CONCLUSION
For the foregoing reasons, the Court DENIES Plaintiff/Counter-

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Defendant Stephen A. Gray's motion for joinder of Madeline

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Martinez.

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IT IS SO ORDERED.

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Dated:

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February 16, 2012
UNITED STATES DISTRICT JUDGE

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Gray also argues that he cannot adequately defend this action
without joinder of Ms. Martinez, but offers no coherent argument as
to why this is the case. Reply at 2-3.
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