IN RE: RICHARD YORK, ET AL V. USA, No. 20-56047 (9th Cir. 2023)
Annotate this Case
Appellant, former Chief Financial Officer of Convergence Ethanol, Inc., and former employee of Convergence and its subsidiary California MEMS USA, Inc., challenged his liability for the unpaid payroll taxes of California MEMS. The bankruptcy court denied both sides’ motions for summary judgment on the issue of whether Appellant was a “responsible person” regarding the payroll taxes under 26 U.S.C. Section 6672. Rather than proceed to trial, Appellant agreed to a stipulated judgment allowing the Internal Revenue Service’s claim, but he made clear on the record that his consent was subject to his stated intention to appeal that judgment on the grounds that his motion for summary judgment should have been granted.
The Ninth Circuit affirmed the district court’s order affirming the bankruptcy court’s judgment in favor of the United States. The panel concluded that the bankruptcy court’s judgment was sufficiently “final” under Section 158(d)(1) because it fully disposed of the claims raised by Appellant’s adversary complaint. The panel held that jurisdiction was not precluded by the holding of Ortiz v. Jordan, 562 U.S. 180 (2011), and Dupree v. Younger, 598 U.S. 729 (2023), that, on appeal from a final judgment after a trial on the merits, an appellate court may not review a pretrial order denying summary judgment if that denial was based on the presence of a disputed issue of material fact. The panel held that the bankruptcy court correctly concluded that Appellant failed to show that, viewing the summary judgment record in the light most favorable to the IRS, a rational trier of fact could not reasonably find in the IRS’s favor.
Court Description: Bankruptcy. The panel affirmed the district court’s order affirming the bankruptcy court’s judgment in favor of the United States in an adversary proceeding brought by Richard York, a Chapter 13 debtor.
York, former Chief Financial Officer of Convergence Ethanol, Inc., and former employee of Convergence and its subsidiary California MEMS USA, Inc., challenged his liability for the unpaid payroll taxes of California MEMS. The bankruptcy court denied both sides’ motions for summary judgment on the issue of whether York was a “responsible person” regarding the payroll taxes under 26 U.S.C. § 6672. Rather than proceed to trial, York agreed to a stipulated judgment allowing the Internal Revenue Service’s claim, but he made clear on the record that his consent was subject to his stated intention to appeal that judgment on the grounds that his motion for summary judgment should have been granted. The panel held that it had jurisdiction under 28 U.S.C.
§ 158, on appeal from the stipulated judgment, to review the earlier denial of summary judgment. The panel concluded that the bankruptcy court’s judgment was sufficiently “final” under § 158(d)(1) because it fully disposed of the claims raised by York’s adversary complaint. The panel held that jurisdiction was not precluded by the holding of Ortiz v. Jordan, 562 U.S. 180 (2011), and Dupree v. Younger, 598 U.S. 729 (2023), that, on appeal from a final judgment after a trial on the merits, an appellate court may not review a pretrial order denying summary judgment if that denial was based on the presence of a disputed issue of material fact. Here, there was no full record developed at trial that could be said to supersede the summary judgment record. The panel held that jurisdiction also was not precluded by the holding of Microsoft v. Baker, 582 U.S. 23 (2017), that plaintiffs who were refused class certification could not obtain review of that interlocutory order by voluntarily dismissing their individual claims with prejudice while reserving a right to revive them if the appeal of the class-certification denial was successful. The panel concluded that the normal rule against appealing a consent judgment did not apply because the circumstances made clear that York intended to preserve his right to appeal the adverse summary judgment order, and his reservation of a right to appeal the consent judgment was not fundamentally inconsistent with his consent. Finally, the panel concluded that this was not a case in which York’s acquiescence to the stipulated judgment destroyed the adversity required to establish the case or controversy required by Article III.
Turning to the merits, the panel held that the bankruptcy court correctly concluded that York failed to show that, viewing the summary judgment record in the light most favorable to the IRS, a rational trier of fact could not reasonably find in the IRS’s favor. The panel held that the IRS may impose a penalty on a person required to collect and then pay over a payroll tax if that individual (1) qualifies as a “responsible person,” (2) fails to collect or account and pay over the tax, and (3) acts willfully in doing so. York did not dispute that the relevant payroll taxes were not paid over. The panel concluded that York could reasonably be found, on the record in this case, to be a responsible person because he had the effective power to pay the taxes. The panel further concluded that a trier of fact could reasonably determine that York acted willfully.
Dissenting, Judge Berzon wrote that the parties’ agreement that the IRS would prevail at trial superseded the bankruptcy court’s earlier decision to deny summary judgment and send the case to trial. As a result, York could not appeal the denial of summary judgment.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.