Hudak et al v. The United States of America Internal Revenue Service

Filing 73

MEMORANDUM AND ORDER Re: Motion for Reconsideration. Signed by Judge Marvin J. Garbis on 12/27/12. (bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
TIMOTHY J. HUDAK, et ux.

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Plaintiffs

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vs.

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THE UNITED STATES OF AMERICA
INTERNAL REVENUE SERVICE

CIVIL ACTION NO. MJG-11-1271

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Defendant
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MEMORANDUM AND ORDER RE: MOTION FOR RECONSIDERATION
The Court has before it the document entitled Statement of
"Complete Defense," Statement of Extent of Continuing
Participation ("the Statement") [Document 72] that shall be
deemed to be a Motion for Modification of Disqualification
Order.

Neither response nor a hearing is necessary.

In the Memorandum and Order Re: Motion To Disqualify
Counsel [Document 71] the Court provided:
2. Except as may be permitted by further Order,
Thomas F. DeCaro, Jr., Esquire shall not act as
counsel in regard to the instant case in any
manner.
3. The Court will consider a modification of the
instant Order to permit DeCaro to act as counsel
herein in a limited manner based upon:
a. A statement of the "Complete Defense"
contentions adequate to enable the Court to
determine the extent to which Hudak and
Mules may have no adverse interest, and

b. A proposed Order establishing a practicable
process whereby DeCaro could act as counsel
for Hudak only on "Common Defense" matters
as to which there is no adverse interest on
the part of Mules.
The aforesaid Memorandum and Order was placed on the docket
at approximately 2:52 PM on December 26, 2012.

In less than an

hour and a half, by approximately 4:21 PM the same day,
Plaintiffs filed the document here at issue.

While speedily

prepared, the Statement does no more than quote excerpts from
the First Amended Complaint.

It is not, by any means, "adequate

to enable the Court to determine the extent to which Hudak and
Mules may have no adverse interest."
The Court, of course, had the First Amended Complaint
before it when it issued the Memorandum and Order Re: Motion to
Disqualify Counsel.

If this had been adequate to enable the

Court to "determine the extent to which Hudak and Mules may have
no adverse interest," there would have been no need for the
requested statement.
The excerpts from the First Amended Complaint set forth
alleged facts based upon which, presumably, Plaintiffs have a
"Complete Defense" theory.

The excerpts do not, however,

specify what that theory is so that the Court can determine the
existence vel non of any adverse interest between Hudak and
Mules.
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Assumingly, a "Complete Defense" theory would be one
whereby there could be no § 6672 assessment against Hudak and/or
Mules for any period at issue.
The pleading excerpts allege (1) that the General Services
Administration did not timely pay amounts due the Hudak
Companies, a subcontractor on a government project, (2) that the
Hudak Companies were required by law to continue working on the
project, and (3) that in order to continue working on the
project, it was necessary to become, and remain, noncompliant
with employment tax (including withholding) obligations.
Presumably, Hudak has a "Complete Defense" theory based
upon which he would not be subject to a § 6672 assessment even
if he were found to be aware of the pertinent facts and found
knowingly to have made the decision to use all available funds
to pay creditors rather than to have the Hudak Companies pay the
employment tax obligations at issue.

Presumably, also, this

"Complete Defense" theory would exonerate Mules even if he were
found to have had the authority to cause the Hudak Companies to
pay the employment tax obligations at issue.
To consider modification of the disqualification of Thomas
F. DeCaro, Jr., Esquire ("DeCaro"), the Court must be informed
of the "Complete Defense" theory to be presented based upon the
alleged facts in detail. Only with that information can the
Court determine the existence vel non of any adverse interest
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between Hudak and Mules.
For example,1 a theory might be that the failure of a
government agency to make timely payments, without fault on the
part of the Hudak Companies, put the Hudak Companies in a "selfdefense" position whereby any potential responsible person was
compelled to use the income tax withholdings from employees to
keep the business operating.

Thus, Hudak and/or Mules would not

have acted "willfully" within the meaning of § 6672.

If that

theory were articulated, the Court might be able to determine
the extent to which underlying issues would be enmeshed with
Hudak's and Mules' inconsistent defenses.

To do so, the Court

would need to consider, among other things, the extent to which
the question whether the Hudak Companies were "at fault" would
require findings relating to Mules performance of his duties and
the extent to which Hudak delegated authority to Mules; matters
as to which Hudak and Mules appear to have conflicting
positions.
The Court is not now determining the merits of any
"Complete Defense" theory.

The Court is, also, most certainly,

not restricting Hudak from presenting any contention or theory
whatsoever.

The Court has, however, disqualified DeCaro from

acting as counsel for Hudak in the case.

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The Court will modify

The Court is not determining that this would be a valid
theory.
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the disqualification Order only to the extent that it can do so
without having DeCaro act as Hudak's attorney in regard to
matters as to which his former client, Mules, has an adverse
interest.
For the foregoing reasons:
1.

The document entitled Statement of "Complete
Defense," Statement of Extent of Continuing
Participation [Document 72] is deemed to be a
Motion for Modification of Disqualification
Order.

2.

The said Motion for Modification of
Disqualification Order is DENIED WITHOUT
PREJUDICE to renewal.

3.

DeCaro's disqualification remains in effect.

4.

The instant case shall proceed pursuant to
existing scheduling expeditiously without the
participation of DeCaro as counsel.

SO ORDERED, on Thursday, December 27, 2012.

/s/__________
Marvin J. Garbis
United States District Judge

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