from the United States District Court for the Eastern
District of Michigan at Detroit. 2:16-cv-11002-Mark A.
Goldsmith, District Judge.
A. Klug, KLUG LAW FIRM, Okemos, Michigan, for Appellant.
E. McLaughlin, Marion E.M. Erickson, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., for Appellee.
Before: SUTTON, McKEAGUE, and KETHLEDGE, Circuit Judges.
SUTTON, Circuit Judge.
Jon Hartman and Dan Ott co-founded Spectrum Tool &
Design, they divvied up management responsibilities. Ott was
supposed to handle the company's payroll taxes, a task
that required him to withhold federal taxes from
employees' wages and send the money to the Internal
Revenue Service on a regular basis. When Spectrum encountered
financial difficulties, however, Ott failed to pay the taxes
several times in 2004 and 2005. After Spectrum went bankrupt,
the government sued Hartman to recover the unpaid taxes, and
the district court granted the government's motion for
summary judgment. Because Hartman "willfully"
failed to pay Spectrum's taxes, we affirm.
case revolves around a facet of life familiar to any American
who receives a paycheck: tax withholding. Federal law
requires employers to withhold taxes from their
employees' wages to account for the income, Social
Security, and Medicare taxes each individual owes. Known as
"payroll taxes" or "trust fund taxes,"
they represent an essential means by which the federal
government collects taxes from its citizens. See Slodov
v. United States, 436 U.S. 238, 243 (1978). So
essential, the federal government imposes personal liability
for outstanding payroll taxes on anyone who (1) was
"required to" pay these taxes and (2)
"willfully" failed to pay the funds to the Internal
Revenue Service. 26 U.S.C. § 6672(a).
co-founding their business, Hartman and Ott initially relied
on an outside automated payment company to manage
Spectrum's payroll. Hartman told the company the number
of hours his employees worked and their wages. And the
company told him the amount Spectrum owed (including
corresponding payroll taxes) and issued checks for his
December 2003, Spectrum could not afford to pay its
employees' wages and the appropriate payroll taxes. When
the automated payment company learned about the shortfall, it
dropped Spectrum as a client. Hartman and Ott made
arrangements to pay their employees' wages but not the
payroll taxes. Hartman delegated responsibility for managing
future payroll taxes to Ott, who chose to handle the task
himself with the help of a software program called Peachtree.
Hartman continued to sign the company's other checks,
including employees' wages.
realized something was amiss when he found unmailed checks
made payable to the Internal Revenue Service on Ott's
desk in July 2004. Hartman confirmed that Ott had not been
paying Spectrum's payroll taxes. Hartman phoned the
Internal Revenue Service and met with an agent, who informed
him that Spectrum should pay its current taxes going forward
and make up the shortfall over time. In October, the Revenue
agent told Hartman that Spectrum still was not paying its
nonetheless left Ott in charge of the company's payroll
obligations, convinced his partner had paid the payroll taxes
after seeing notations to that effect when he reviewed
entries in Peachtree, the company's accounting software.
Hartman's "best guess" was that Ott paid the
older back taxes instead of Spectrum's ongoing payroll
obligations, perhaps misapprehending the agent's
instructions. R. 21-2 at 34. When Hartman and Ott met with
the Internal Revenue Service agent again in October 2004,
Hartman signed tax forms under penalty of perjury that
spelled out Spectrum's delinquencies, though Hartman
claims that he did not prepare or review the forms.
Hartman met with the Revenue agent a second time, he realized
the company could not pay the government what it owed.
Hartman sought the advice of a tax attorney, who advised
Spectrum to seek protection under Chapter 11 of the
Bankruptcy Code. Hartman did just that in January 2005. ...