The opinion of the court was delivered by: Herndon, Chief Judge:
This matter is before the Court on defendant United States of America's renewed motion for judgment as a matter of law and alternative motion for a new trial (Doc. 64). A jury trial was held from March 14--16, 2011, to decide whether plaintiff John A. Tarpoff was personally liable under 26 U.S.C. § 6672 for Social Security and income taxes that his former employer had failed to pay the IRS. The jury found for plaintiff (Doc. 48).
Defendant now moves for renewed judgment as a matter of law under Federal Rule of Civil Procedure 50(b), contending there was not a sufficient evidentiary basis for the jury to have found plaintiff was not a responsible person who willfully failed to pay the taxes. In the alternative, defendant moves for a new trial under Rule 59, claiming that the jury's verdict was against the weight of evidence and that the jury instructions did not sufficiently state the law. For the reasons that follow, defendant's motions are DENIED.
Still pending before the Court is plaintiff's motion for judgment on the jury's verdict and for attorney's fees and costs (Doc. 55), which has been held in abeyance until now. Defendant was previously given 14 days to respond after the Court rendered its decision in today's order (Doc. 62). But in the meantime plaintiff has filed a motion to supplement his pending motion (Doc. 70). The motion to supplement is GRANTED, and instead of 14 days after today's order, defendant will have the customary time to respond to plaintiff's motion (Doc. 55) after the supplement is filed. See SDIL-LR 7.1.
Plaintiff John A. Tarpoff was the head cattle buyer at Gateway Beef, LLC,*fn1 a slaughterhouse and beef-packaging facility. Gateway Beef was formed in September 2003 by the Gateway Beef Cooperative, an organization of farmers and ranchers, together with Brach's Glatt Meat Markets, a grocery store in New York owned by Sam Brach. The Cooperative invested in, and sold cattle to, Gateway Beef, which then produced kosher beef for Brach's Glatt Meat Markets.
Control of Gateway Beef's finances is the crux of this case. Concerning his role at the company, plaintiff testified he was not an owner, officer, shareholder, member, or manager, and that he did not attend meetings of the board of directors (although the bookkeeper believed he did attend them). "[I]t was very evident I was an employee," he said (Doc. 59, 63:13--19). Sam Brach notified a local bank that plaintiff was not and never had been a manager of Gateway Beef. Plaintiff also testified that he had never made a capital contribution to Gateway Beef. Nevertheless, because he knew all the parties involved, plaintiff filed Gateway Beef's articles of organization with the Illinois Secretary of State, signing them as the "organizer." The articles described Gateway Beef as managed by its managers, the Cooperative and Brach's Glatt Meat Markets.
Plaintiff was a signatory on both of Gateway Beef's checking accounts. He also filled out three forms for the accounts, called "corporate authorization resolutions," giving him authority to open accounts, endorse checks, withdraw or transfer funds, and enter into agreements for financial products on behalf of Gateway Beef. These forms affirm that the resolutions in them were made at a meeting of the board of directors. Plaintiff signed the forms above their signature lines, one of which had "Secretary" preprinted under it. The other two said "Manager or Designated Member."
The office manager and bookkeeper, Marsha Caughron, testified that Brach financed the company and was responsible for all bills. Caughron handled the payroll, accounts payable, accounts receivable, and some sales. She received all the mail, including bills and notices from the IRS,*fn2 and sent them with printed checks attached overnight to Brach in New York. He would sign some of the checks, then send them back to her. Caughron estimated she would only get a fourth of the checks back. She said Brach's signature was required on all checks and his approval required for the payment of all bills; no one else could approve them. Plaintiff could not sign checks without Brach's approval either, she said. "Mr. Brach was adamant that he was the only one that ever signed checks. He made that very clear" (Doc. 68, 62:11--13). She added that plaintiff had nothing to do with payables or with payroll. At one point, plaintiff had to ask Brach for his own paycheck.
But plaintiff had check-signing authority. He wrote or signed over 1,700 checks from one checking account.*fn3 Indeed, he signed all of Gateway Beef's checks between January--May 2004, and most checks after that through July 2004, including payroll checks, checks to himself and his company (the Tarpoff Packing Company), and checks to the U.S. Treasury. Plaintiff explained that "whatever checks were given to me, I would look at them, glance at them, and sign them" (Doc. 59, 201:24--25). He looked at the bills provided with the checks to make sure they matched. But he did not ensure that Gateway Beef's accounts had sufficient funds before he wrote a check; he commented, "I had no idea what was in the account" (id., 146:16--18). He never called the bank, asked a bookkeeper to check the balance, or asked to see financial statements. Plaintiff could not recall whether he had ever refused to write or sign a check (id., 162:16--18, 203:1--3). Nonetheless, he ventured that he could have refused and told Brach, "You're on your own. Got to sign everything yourself" (id., 203:4--11).
Plaintiff signed checks in 2004 for Gateway Beef's delinquent 2003 taxes. He testified, however, that he did not know as of March 31 or June 30, 2004, whether Gateway Beef had paid its payroll taxes or whether the checks he'd signed were for delinquent taxes. Nor did he look into whether the payroll taxes had been paid. A pattern of writing the company's payroll checks without inquiring into the taxes continued through July 2004. Even so, plaintiff was aware of an employer's duty to pay withholding taxes; he had paid them himself in the past, as the president of a different company.
Brach directed the hiring and firing of employees at Gateway Beef. He would give instructions to plaintiff, who would then carry them out, working with the unions if necessary. Plaintiff interviewed new employees and suggested new hires to Brach and the Cooperative. With Brach's permission, plaintiff hired his sons when they were home from school. He had also hired employees at Gateway Beef, Inc. (a separate organization) who later became employees of Gateway Beef, LLC.
Gateway Beef lost money throughout its short existence. Plaintiff had advised Brach in the beginning that he expected Gateway Beef to lose $8,000--10,000 per week until improvements to the facilities could be made. Those improvements were never completed, though. At some point, Brach stopped paying the payroll taxes and certain bills. Caughron calculated the payroll tax withholdings and would send the amounts to Brach. She sent him checks to pay the taxes, but he did not return them. When she pressed him on the issue, Brach told her to contact his accountant, Michelle Weiss. So Caughron faxed letters from the IRS to Weiss three or four times per week. She also notified the treasurer of the Cooperative, Bill Boston, that the taxes were not being paid. Caughron said she made statements to plaintiff that Brach was not paying the taxes, though she did not say when.
At least ten checks plaintiff wrote between March--May 2004 bounced. He testified that he only knew about one check at the time, however. As the head cattle buyer, plaintiff attended cattle auctions. At one auction, he wrote a check to Calloway Livestock for about $49,000. A week later when plaintiff returned to the auction barn, one of the owners informed him the Calloway check had bounced. Plaintiff immediately called Brach and others at Gateway Beef, but was unable to reach anyone. He finally spoke with the president of the Cooperative, Rob Meyer. But Meyer too failed to come up with funds to cover the check. Plaintiff then offered to cover it himself, but said he didn't have the money and Gateway Beef would need to pay him back. Meyer guaranteed that plaintiff would have his money back in a few days. Plaintiff was never repaid, however, and ultimately had to refinance his home.
Gateway Beef ceased operations in July 2004, and plaintiff left. Later, after learning some vendors had not been paid, he suspected that the withholding taxes had not being paid either. Toward the end of 2004 or early 2005, Boston told him Brach had not paid the taxes, and Caughron told him she had been receiving the notices from the IRS.
The IRS has levied a total penalty of $66,693.02 against plaintiff to recover Gateway Beef's unpaid withholding taxes for the tax periods ending March 31 and June 30, 2004, under 26 U.S.C. § 6672 (Doc. 27, p. 7). Plaintiff brings this suit to recover money the IRS withheld from one of his tax refunds, as well as money he paid under protest, with interest. He also seeks an abatement of the remainder of the penalty. Defendant counterclaims to collect the remainder.
III.JUDGMENT AS A MATTER OF LAW
In ruling on a renewed motion for judgment as a matter of law, the district court may: "(1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial; or (3) direct the entry of judgment as a matter of law." Fed. R. Civ. P. 50(b). The court may direct the entry of judgment as a matter of law only if there was not a legally sufficient evidentiary basis for the jury's verdict. Thomas v. Cook Co. Sheriff's Dep't, 604 F.3d 293, 301 (7th Cir.), cert. denied, 131 S. Ct. 643 (2010); Alexander v. Mount Sinai Hosp. Med. Ctr., 484 F.3d 889, 902 (7th Cir. 2007); Tincher v. Wal-Mart Stores, Inc., 118 F.3d 1125, 1129 (7th Cir. 1997). The question for the court is whether, in light of the evidence, a reasonable jury could have found in favor of the nonmoving party. Marcus & Millichap Inv. Servs. of Chi., Inc. v. Sekulovski, 639 F.3d 301, 313 (7th Cir. 2011). Only if no rational jury could have found for the nonmoving party may the jury's verdict be overturned. Thomas, 604 F.3d at 301; Waite v. Bd. of Trs. of Ill. Cmty. Coll. Dist. No. 508, 408 F.3d 339, 343 (7th Cir. 2005).
The court views the evidence in the light most favorable to the nonmoving party and draws all reasonable inferences in that party's favor. Sekulovski, 639 F.3d at 313; Waters v. City of Chi., 580 F.3d 575, 580 (7th Cir. 2009). The court may not weigh the evidence or make credibility determinations. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Thomas, 604 F.3d at 300.
A. Liability Under 26 U.S.C. § 6672
Employers are required to withhold Social Security and income taxes from employees' wages. 26 U.S.C. § 3102, 3402; United States v. Running, 7 F.3d 1293, 1294 (7th Cir. 1993). Those withholdings must be held in trust for the benefit of the United States. 26 U.S.C. § 7501; Running, 7 F.3d at 1294. If the employer fails to do that, then certain individuals in the company may be personally liable under 26 U.S.C. § 6672. Further, an assessment of a tax deficiency by the IRS is presumed to be correct, so an individual against whom the assessment is made bears the burden of proving it is incorrect. United States v. Kim, 111 F.3d 1351, 1357 (7th Cir. 1997); Running, 7 F.3d at 1297.
To be personally liable, the individual must be (1) a "responsible person" who (2) has "willfully" failed to collect, account for, or pay over payroll taxes to the United States. Jefferson v. United States, 546 F.3d 477, 480 (7th Cir. 2008). Such a person is "liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over." § 6672(a). A "person" under this section "includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs." 26 U.S.C. § 6671(b); accord Running, 7 F.3d at 1297. "Corporate office does not, per se, impose the duty to collect, account for and pay over the withheld taxes." Monday v. United States, 421 F.2d 1210, 1214 (7th Cir. 1970). Rather, the duty "attaches to those with power and responsibility within the corporate structure for seeing that the taxes withheld from various sources are remitted to the Government." Id. (citing Scott v. United States, 354 F.2d 292, 296 (1965)). "This duty is generally found in high corporate officials ...