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United States v. North Mail, Inc.

United States District Court, D. Alaska

March 28, 2016

UNITED STATES OF AMERICA, Plaintiff,
v.
NORTH MAIL, INC., GEORGE O’BRIEN, COLLEEN VAN VLEET, and THE MUNICIPALITY OF ANCHORAGE, Defendants.

ORDER AND OPINION [RE: MOTION AT DOCKET 43]

JOHN W. SEDWICK, SENIOR UNITED STATES DISTRICT JUDGE

I. MOTION PRESENTED

At docket 43, Plaintiff United States of America (the “Government”) moved for summary judgment against George O’Brien (“George”) and Colleen Van Vleet (“Colleen”; collectively, “Defendants”) pursuant to rule 56 of the Federal Rules of Civil Procedure. Specifically, the Government seeks an order setting aside the transfer of the subject property owned by Defendants and directing that the proceeds from the sale of the property are distributed to the Government in partial satisfaction of Defendant North Mail, Inc.’s (“North Mail”) unpaid tax liabilities.[1] Defendants oppose at docket 49. The Government replies at docket 53. Oral argument was not requested and would not be of assistance to the court.

II. BACKGROUND

North Mail operated as a mailing service provider, maintaining contracts with large organizations that had high-volume mailing requirements and also franchise agreements with two companies that provided mailing supplies to other companies. It was started by Kenneth O’Brien, who had three children: Dennis O’Brien (“Dennis”) and Defendants, George and Colleen. Kenneth O’Brien combined North Mail with a similar business owned by Dennis and thereby Dennis obtained a 49% interest in North Mail with Kenneth retaining a 51% interest. When Kenneth retired he divided his shares equally between his three children; Dennis ended up with about two-thirds of North Mail shares while George and Colleen each owned about 17%.

In 1998 North Mail purchased a property located at 5720 B Street in Anchorage, Alaska (the “Property”). On May 26, 2011, North Mail transferred the Property to its minority shareholders, George and Colleen. In exchange for the Property, George and Colleen relinquished their shares to Dennis and North Mail, and they agreed to drop a lawsuit that they had filed against Dennis regarding his mismanagement of North Mail. North Mail leased the Property back from George and Colleen for $6, 000 a month and also agreed to be responsible for an IRS lien and a Municipality of Anchorage lien that were recorded against the property. North Mail never paid the rent and was evicted from the Property. It ceased operations in September of 2011 with unpaid employment and income tax liabilities totaling more than $9 million. The Government now seeks to invalidate the transfer of the Property to George and Colleen as a fraudulent conveyance so that all the proceeds of the subsequent sale of the Property, $436, 654, can be used in partial satisfaction of the judgment against North Mail. In a related but separate argument, the Government also asserts that two other tax liens totaling a little over $250, 000 were assessed prior to the Property transfer, and while the liens were not recorded, the Government argues they should nonetheless have priority over Defendants’ interest in the Property because Defendants cannot be considered valid “purchasers” under the applicable statute due to a lack of adequate consideration.

III. STANDARD OF REVIEW

Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[2] The materiality requirement ensures that “only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”[3] Ultimately, “summary judgment will not lie if the . . . evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[4] However, summary judgment is mandated “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.”[5]

The moving party has the burden of showing that there is no genuine dispute as to any material fact.[6] Where the nonmoving party will bear the burden of proof at trial on a dispositive issue, the moving party need not present evidence to show that summary judgment is warranted; it need only point out the lack of any genuine dispute as to material fact.[7] Once the moving party has met this burden, the nonmoving party must set forth evidence of specific facts showing the existence of a genuine issue for trial.[8] All evidence presented by the non-movant must be believed for purposes of summary judgment, and all justifiable inferences must be drawn in favor of the non-movant.[9] However, the non-moving party may not rest upon mere allegations or denials, but must show that there is sufficient evidence supporting the claimed factual dispute to require a fact-finder to resolve the parties’ differing versions of the truth at trial.[10]

IV. DISCUSSION

Defendants do not dispute that North Mail was having financial problems in late 2010. They knew that North Mail had quit paying a monthly retirement payment owed to Kenneth O’Brien and that some employees’ paychecks had bounced. They also knew in November of 2010 that there was an IRS investigation regarding unpaid employment taxes. They assert that Dennis prevented them from inquiring into the business’s financial status. Colleen independently obtained the company’s bank statements and learned that Dennis had been diverting North Mail’s income for his personal use. Colleen and George hired a lawyer and began discussing possible settlements and strategies for getting North Mail back on track. Defendants assert that they believed North Mail should be profitable because of its long-term contracts. Defendants state that Dennis failed to cooperate, and therefore, they filed a lawsuit against him in May of 2011 regarding his diversion of North Mail funds and other corporate malfeasance.

On May 26, 2011, Dennis agreed to a settlement whereby the Property, worth about $500, 000, would be transferred to Defendants. The consideration for the Property was stated to be Defendants’ surrender of their one-third ownership in North Mail, which then gave Dennis sole control of the business, and the release of all claims arising out of Dennis’s mismanagement of the company. Based upon a 1999 shareholders agreement which valued the company at $1.5 million, Defendants believed that their portion of the business was worth $500, 000, or $250, 000 each.

At the time of the transfer there were two recorded liens on the Property: 1) one in favor of the Municipality of Anchorage for unpaid property taxes; and 2) the other one in favor of the IRS for unpaid FICA employment taxes for the tax period September 30, 2010, which was assessed on January 31, 2011, and recorded against the Property on February 28, 2011. Defendants were aware of these two liens and acknowledged that the Property was subject to these liens when they obtained the Property from North Mail, but as part of the settlement agreement with Dennis, North Mail and Dennis remained responsible for paying the debt. It is also undisputed that on May 9, 2011, the Government made an assessment against North Mail for unpaid FICA employment taxes for the period December 31, 2010, and that on May 16, 2011, it made an assessment against North Mail for unpaid FUTA unemployment taxes for the 2010 tax period.[11] However, federal tax liens based on these assessments were not recorded against the Property. ...


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