In Re: Richard York v. United States ( 2023 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In the Matter of: RICHARD W. No. 20-56047
YORK,
D.C. No. 2:19-cv-
Debtor, 06214-WDK
------------------------------
OPINION
RICHARD W. YORK,
Appellant,
v.
UNITED STATES OF AMERICA,
through its agency Internal Revenue
Service,
Appellee.
Appeal from the United States District Court
for the Central District of California
William D. Keller, District Judge, Presiding
Argued and Submitted, September 13, 2021
Submission Vacated, May 22, 2023
Resubmitted, August 7, 2023
Pasadena, California
Filed August 11, 2023
2 YORK V. USA
Before: Ronald M. Gould, Marsha S. Berzon, and Daniel
P. Collins, Circuit Judges.
Opinion by Judge Collins;
Dissent by Judge Berzon
SUMMARY *
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.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
YORK V. USA 3
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
4 YORK V. USA
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.
COUNSEL
Mark Bernsley (argued), Law Offices of Mark Bernsley
APC, Woodland Hills, California, for Appellant.
Robert J. Branman (argued) and Joan I. Oppenheimer,
Attorneys; Tracy Wilkison, Acting United States Attorney;
E. Martin Estrada, United States Attorney; David A.
Hubbert, Acting Assistant Attorney General; Tax
Division/Appellate Section, United States Department of
Justice, Washington, D.C.; Jolene Tanner, Assistant United
States Attorney; United States Department of Justice, Los
Angeles, California; for Appellee.
YORK V. USA 5
OPINION
COLLINS, Circuit Judge:
After a company failed to pay over payroll taxes for its
employees, the Internal Revenue Service (“IRS”) assessed,
pursuant to Internal Revenue Code (“I.R.C.”) § 6672, a
personal penalty for the amount of the unpaid taxes against
the company’s former Chief Financial Officer, Richard
York. When York filed for bankruptcy, the IRS filed a proof
of claim in his bankruptcy proceeding, which in turn led
York to file an adversary complaint challenging his liability
to the IRS. The parties ultimately filed cross-motions for
summary judgment, but the bankruptcy court denied them
both in relevant part. Rather than proceed to trial, York
agreed to a stipulated judgment allowing the IRS’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 district court asserted jurisdiction over the
matter as an appeal from a final judgment in an adversary
proceeding, see 28 U.S.C. § 158(a)(1), but it affirmed on the
merits. York thereupon appealed to this court.
After requesting and receiving the parties’ supplemental
briefs as to whether we have jurisdiction, on appeal from a
stipulated judgment, to review an earlier denial of summary
judgment, we conclude that we have jurisdiction over York’s
appeal. On the merits, we agree that the bankruptcy court
properly denied York’s motion for summary judgment, and
we therefore affirm.
6 YORK V. USA
I
Subject to only a handful of exceptions that are irrelevant
to our review, the IRS expressly stated below that, for
purposes of responding to York’s summary judgment
motion, it did “not dispute the facts as proposed” by York in
his “Separate Statement of Uncontroverted Facts.”
Accordingly, for purposes of this appeal, we take the
following facts as true.
For several years, York was an employee of both
Convergence Ethanol, Inc. (“Convergence”), an oil-and-gas
technology company, and its subsidiary California MEMS
USA, Inc. (“CA MEMS,” and, collectively with
Convergence, the “Company”). York “was hired primarily
to effect compliance with SEC filing requirements” for
Convergence and its subsidiaries, and in order to allow him
to sign the necessary certifications, he was given the title of
Chief Financial Officer (“CFO”) of Convergence.
Convergence’s President and Chief Executive Officer, Dr.
James Latty, specifically told York that York would “not be
involved in the day to day financial operations” or the
accounting of Convergence and its subsidiaries, which
instead would be handled by an “experienced C.P.A.”
Convergence had three main subsidiaries, one of which
was CA MEMS, and each of these subsidiaries had its own
controller to oversee its finances. For CA MEMS, that
person was Miriam Wolverton, a C.P.A. Convergence,
however, did not have its own financial accounting records
or bank accounts, and for financial purposes, it was treated
as one and the same with CA MEMS. Consequently, the
controllers for the other two subsidiaries reported to
Wolverton. York ranked higher than Wolverton as a formal
YORK V. USA 7
matter, but he nonetheless lacked the authority to issue direct
orders to her, to set her salary, or to terminate her.
York had check-signing authority for the Company, and
he kept the Company’s checks in his office locked in a
cabinet, to which only he had a key. However, it “was not
York’s function to, nor did he, originate any payments.”
Instead, Wolverton was in charge of keeping track of bills
and making sure they were paid. When checks were
required, Wolverton would prepare them, provide them to
York along with related documentation, and York would
sign them. If a question arose as to which bills to pay,
Wolverton would raise the matter with Latty directly, with
Latty and York jointly, or with York who then discussed it
with Latty. Latty “had final approval of all payments,” an
authority he sometimes abused. However, shortly after
beginning his employment in 2004, York learned that CA
MEMS owed unpaid payroll taxes. York asked that
Wolverton not make payroll payments unless the
corresponding payroll tax deposits could also be made.
After this 2004 deficiency was resolved, York did not
become aware of any subsequent incidents of past-due
payroll taxes until August 2007.
Under the Company’s “Approval Matrix” for making
payments, Wolverton had authority to make payroll tax
payments of under $10,000, and York had similar authority
up to $50,000. Each such payment that became due in 2007
for payroll taxes was under $10,000. Although Wolverton
did not pay all of the taxes that were due for that year, the
partial payments that were made were submitted
electronically by her, using an electronic account to which
York did not have the password.
8 YORK V. USA
Convergence encountered substantial financial trouble,
and by December 21, 2007, it and its three main subsidiaries
had ceased operations and were all in Chapter 7 bankruptcy
proceedings. York resigned from Convergence and CA
MEMS, effective December 31, 2007. The IRS
subsequently contended that CA MEMS had failed to pay
the payroll taxes due for three quarters of 2007 and two
quarters of 2008. In 2010, the IRS assessed a penalty against
York personally for the unpaid taxes, pursuant to I.R.C.
§ 6672(a).
In August 2016, York filed for Chapter 13 bankruptcy,
and two months later the IRS submitted a proof of claim
against him in the amount of $116,843.65. 1 York initiated
an adversary proceeding against the IRS to dispute his
liability for a penalty under I.R.C. § 6672(a). In his
complaint, York asserted that he was not a “responsible
person” for purposes of § 6672(a), which by its terms only
applies to a “person required to collect, truthfully account
for, and pay over any tax imposed by this title.” I.R.C.
§ 6672(a). York also disputed whether the Company
actually owed all of the taxes that the IRS had claimed were
due.
The parties filed cross-motions for summary judgment.
The bankruptcy court granted York’s motion as to the
remaining 2008 taxes in dispute, leaving only the payroll
taxes from 2007 at issue. As to whether York was a
responsible person subject to § 6672(a), the bankruptcy
court concluded that “the record isn’t clear enough on what
actually has happened here.” The court added that, despite
1
Although this figure was initially disputed, the parties subsequently
agreed that the amount properly at issue was only $15,119.34, and the
IRS submitted an amended claim for that lesser amount.
YORK V. USA 9
the parties’ agreement as to the underlying facts, the record
did not establish “what exactly is the scope of [the CFO]
title, what does it mean, is it required for signing SEC
documents and the like.” Because “[n]one of that is in the
record,” the bankruptcy court concluded that “there is still
an open question in my mind as to whether [York] is a
responsible person.” Believing that “a trial would perhaps
illuminate some of that information,” the bankruptcy court
denied both sides’ summary judgment motions on the issue
of whether York was a responsible person under § 6672(a).
Based upon his conclusion that a trial on the remaining
amounts at issue was neither cost effective nor necessary,
York filed a motion for entry of a judgment in favor of the
IRS, in the amount that the IRS then requested, but with the
condition that the judgment would be expressly “subject to
York retaining his right to appeal” the denial of summary
judgment. The IRS took no position as to whether such a
reservation would be effective to allow York to appeal, but
it otherwise did not oppose York’s motion. The bankruptcy
court, however, denied the motion.
Rather than proceed to trial, York and the IRS submitted
a “stipulation for entry of judgment.” The stipulation read
in its entirety as follows:
IT IS HEREBY STIPULATED AND
AGREED that the Court may enter the
following Judgment:
“IT IS HEREBY ORDERED,
ADJUDGED AND DECREED:
1. The United States Claim [Claim 3],
as amended, in the total amount of
$15,119.34, is allowed.
10 YORK V. USA
2. Plaintiff York is not entitled to a
refund.”
The bankruptcy court entered that judgment verbatim in June
2019. York then timely appealed to the district court.
The district court concluded that it had jurisdiction under
28 U.S.C. §§ 158(a)(1) and (c)(1), which authorizes appeals
to the district court from “final judgments, orders, and
decrees.” Id. at § 158(a)(1). As to the merits, the court
affirmed the denial of summary judgment, concluding that
“even with the facts stipulated to by the parties, material
facts were still at issue.” York timely appealed the district
court’s order.
II
We first address certain threshold questions of
jurisdiction that we raised sua sponte in an order directing
the parties to submit supplemental briefs. See Sahagun v.
Landmark Fence Co. (In re Landmark Fence Co.), 801 F.3d
1099, 1102 (9th Cir. 2015) (applying, in the bankruptcy
context, the settled rule that courts may raise jurisdictional
issues sua sponte).
Here, the “final” judgment that York appealed to the
district court, and then to this court, was an adverse judgment
that York stipulated should be entered against him on his
adversary complaint in the bankruptcy court, and the sole
issue he raises on appeal was whether the bankruptcy court
correctly denied his earlier motion for entry of summary
judgment in his favor. That unique posture raises two
potential concerns. First, the ordinary rule is that “orders
denying summary judgment do not qualify as ‘final
decisions’ subject to appeal,” Ortiz v. Jordan, 562 U.S. 180,
188 (2011), and at least in some circumstances, such a denial
YORK V. USA 11
may not be “reviewable on appeal” from a final judgment
either, McCollough v. Johnson, Rodenburg & Lauinger,
LLC, 637 F.3d 939, 955 n.4 (9th Cir. 2011) (citing Ortiz, 562
U.S. at 184). Second, as the Supreme Court has recently
cautioned, a party’s voluntary acceptance of an adverse
judgment on the merits may not always be sufficient to
permit review of an earlier interlocutory ruling. See
Microsoft Corp. v. Baker, 582 U.S. 23, 26–27 (2017)
(holding 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).
Having reviewed the parties’ supplemental briefs, we
conclude that we have jurisdiction to reach the merits of the
bankruptcy court’s denial of York’s summary judgment
motion. In explaining that conclusion, we begin by
summarizing the general principles governing our
jurisdiction in bankruptcy cases before turning, respectively,
to whether the principles set forth in either Ortiz v. Jordan
or Microsoft Corp. v. Baker preclude us from exercising
jurisdiction to review the bankruptcy court’s denial of
summary judgment.
A
Where, as here, a bankruptcy court order has been
appealed to a district court, our jurisdiction is controlled by
28 U.S.C. § 158. Section 158(a) provides that district courts
shall have jurisdiction “to hear appeals” (1) “from final
judgments, orders, and decrees” of the bankruptcy courts;
(2) from a specified category of interlocutory orders related
to the filing of plans under Chapter 11; and (3) with leave of
the district court, from any “other interlocutory orders and
12 YORK V. USA
decrees” of the bankruptcy court. See 28 U.S.C. § 158(a)
(emphasis added). 2 Section 158(d)(1), in turn, grants the
courts of appeals jurisdiction over “appeals from all final
decisions, judgments, orders, and decrees” entered by
district courts under § 158(a). See id. § 158(d)(1). The
district court in this case did not grant leave to appeal an
interlocutory order; instead, it rested its jurisdiction on the
conclusion that the bankruptcy court had entered a final
judgment that is reviewable under § 158(a)(1). Accordingly,
under §§ 158(a)(1) and (d)(1), both the district court’s
jurisdiction and our jurisdiction turn on whether the
bankruptcy court’s judgment was sufficiently “final.” See
Rains v. Flinn (In re Rains), 428 F.3d 893, 901 (9th Cir.
2005) (“Under 28 U.S.C. § 158(d), appellate jurisdiction
exists when the bankruptcy court order and the decision of
the district court acting in its bankruptcy appellate capacity
are both final orders.” (citation omitted)).
As the Supreme Court has explained, the rules for
determining finality “are different in bankruptcy.” Bullard
v. Blue Hills Bank, 575 U.S. 496, 501 (2015). Because a
“bankruptcy case involves ‘an aggregation of individual
controversies,’ many of which would exist as stand-alone
lawsuits but for the bankrupt status of the debtor,” “Congress
has long provided that orders in bankruptcy cases may be
immediately appealed if they finally dispose of discrete
disputes within the larger case.” Id. (citations omitted); see
also id. at 501–02 (noting that the statute defining a district
court’s appellate jurisdiction in bankruptcy cases
2
Where, as in the Ninth Circuit, a Bankruptcy Appellate Panel (“BAP”)
has been established, the BAP would instead hear any such appeals
unless one of the parties affirmatively elects to have the appeal heard by
the district court. See 28 U.S.C. § 158(c)(1). Here, York elected to have
the appeal heard by the district court.
YORK V. USA 13
“authorizes appeals as of right not only from final judgments
in cases but from ‘final judgments, orders, and decrees . . .
in cases and proceedings’” (citation omitted)). In particular,
we have held that a bankruptcy court judgment “dispos[ing]
of all claims raised in [an] adversary complaint” is
sufficiently “final” for purposes of §§ 158(a)(1) and (d)(1)
and that an “appeal from the district court’s affirmance
thereof [is] from a final judgment for jurisdictional
purposes.” Caneva v. Sun Cmtys. Operating Ltd. P’ship (In
re Caneva), 550 F.3d 755, 759 n.1 (9th Cir. 2008). That
conclusion makes sense because, had the adversary
complaint been filed as a “stand-alone lawsuit[],” Bullard,
575 U.S. at 501, a judgment disposing of all of the claims in
that suit would be considered final under the standards of 28
U.S.C. § 1291.
By allowing the IRS’s amended claim for $15,119.34
and rejecting York’s claim for a refund or for other relief
disallowing the IRS’s claim, the bankruptcy court’s
judgment in this case fully disposed of the claims raised by
York’s adversary complaint. And by affirming the
bankruptcy court’s judgment in full, the district court’s
judgment likewise disposed of all claims raised by York’s
adversary complaint. Accordingly, absent some reason to
conclude otherwise, the judgment that has been appealed to
us would appear to be sufficiently “final” for purposes of
§ 158(d)(1). We identified two such possible reasons earlier,
and we address those issues in the ensuing two sections.
B
In Ortiz v. Jordan, the Supreme Court held 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
14 YORK V. USA
of a disputed issue of material fact. See 562 U.S. at 183–84,
186–87. Neither Ortiz’s rule, nor the reasoning underlying
it, precludes us from exercising jurisdiction to review the
bankruptcy court’s denial of summary judgment here.
As Ortiz explained, a determination that the record at
summary judgment reveals a “genuine dispute as to a
material fact” is, by its nature, interlocutory, 562 U.S. at 188(simplified), and the resulting denial of summary judgment
thereafter “retains its interlocutory character as simply a step
along the route to final judgment,” id. at 184. When that
summary judgment denial is followed by a trial on the
merits, however, “the full record developed in court
supersedes the record existing at the time of the summary-
judgment motion.” Id. (emphasis added). As a result, any
post-judgment appellate inquiry into the sufficiency of the
evidence “must be evaluated in light of the character and
quality of the evidence received in court” at the trial and not
by examining the adequacy of the evidence in the record of
the summary judgment motion. Id. As the Court explained,
“[q]uestions going to the sufficiency of the evidence are not
preserved for appellate review by a summary judgment
motion alone.” Id. at 190 (citation omitted). Rather, in the
context of a jury trial, “challenges of that order ‘must be
renewed post-trial’” by invoking the procedures set forth in
Federal Rule of Civil Procedure 50. Id. (citation omitted).
Because Rule 50’s procedures had not been properly
invoked in Ortiz, the court of appeals in that case “had no
warrant to upset the jury’s decision,” nor the resulting
judgment, based on any issue concerning the sufficiency of
the evidence. Id. at 192.
The Supreme Court recently reaffirmed this
understanding of Ortiz’s rule—and that rule’s limits—in
Dupree v. Younger, 598 U.S. 729 (2023). As the Court
YORK V. USA 15
explained, Ortiz effectively created an exception to the
“general rule” that, on appeal from a final judgment, a party
may challenge any adverse interlocutory “rulings that led up
to the judgment.” Id. at 734 (citation omitted). Ortiz’s
exception, the Court explained, rests on the fact that “[s]ome
interlocutory district-court rulings, however, are
unreviewable after final judgment because they are
overcome by later developments in the litigation.” Id.(emphasis added). A “denial of summary judgment on
sufficiency-of-the-evidence grounds” is “one such ruling,”
because the facts whose sufficiency is being assessed are
“develop[ed] and clarif[ied] as the case progresses from
summary judgment to a jury verdict.” Id. Accordingly, once
the “complete trial record” has superseded the earlier
“summary-judgment record,” any error concerning the
“district court’s assessment of the facts based on the
summary-judgment record becomes ancient history and is
not subject to appeal.” Id. (simplified).
But the same is not true, the Court held, when the earlier
summary judgment ruling resolved “purely legal issues—
that is, issues that can be resolved without reference to any
disputed facts.” Id. at 735. Although the factual record has
indeed changed by virtue of the subsequent trial, nothing
about those new facts supplants those earlier “pretrial legal
rulings,” which are therefore left “undisturbed.” Id.Because a summary judgment ruling resolving purely legal
issues is not overtaken by the subsequent development of a
new factual record at trial, the rationale for Ortiz’s exception
does not apply. Id. Accordingly, “these rulings follow the
‘general rule’ and merge into the final judgment, at which
point they are reviewable on appeal.” Id. at 735 (citation
omitted).
16 YORK V. USA
Here, the crucial ingredient for triggering Ortiz’s
exception to the ordinary merger rule is absent. If York’s
claim for relief against the IRS had proceeded to a bench
trial, then the new factual record developed at that trial
would have “wholly supplant[ed]” the summary-judgment
record and the “pretrial factual rulings” made based on that
earlier record. Dupree, 598 U.S. at 735. Thus, although the
particular procedural requirements applicable to jury trials
under Rule 50 would not have applied, 3 the trial record at
that bench trial would still have “supersede[d]” the earlier
summary judgment record. Ortiz, 562 U.S. at 184; see also
Dupree, 598 U.S. at 734; Kreg Therapeutics, Inc. v. VitalGo,
Inc., 919 F.3d 405, 416 (7th Cir. 2019) (applying Ortiz in the
context of a bench trial). In that circumstance, Ortiz’s
exception to the ordinary merger rule would apply and we
would have been precluded from reviewing the bankruptcy
court’s determination that the summary judgment record
presented a genuine issue for trial. Instead, in addressing the
sufficiency of the evidence to support the ensuing judgment,
we would have examined whether the evidence at the bench
trial was sufficient to support whatever decision that trial
produced. See Eskanos & Adler, PC v. Leetien, 309 F.3d
1210, 1213 (9th Cir. 2002) (noting that we review a
bankruptcy court’s factual findings for clear error); Jamo v.
Katahdin Fed. Credit Union (In re Jamo), 283 F.3d 392, 401
(1st Cir. 2002) (noting that, in addition to reviewing factual
3
See FED. R. BANKR. P. 9015(c) (Rule 50, which by its terms applies
only to jury trials, generally applies in bankruptcy cases and
proceedings); FED. R. BANK. P. 7052 (Federal Rule of Civil Procedure
52 generally “applies in adversary proceedings”); FED. R. CIV. P.
52(a)(5) (stating that, in a bench trial, a “party may later question the
sufficiency of the evidence supporting the findings, whether or not the
party requested findings, objected to them, moved to amend them, or
moved for partial findings.”).
YORK V. USA 17
findings under the clear error standard, a court of appeals
may also consider de novo “the question of whether the
evidence is legally sufficient to support particular findings”).
But no such trial ever occurred in this case, because the
parties instead stipulated to the entry of a judgment on the
merits in favor of the IRS. Consequently, there was no “full
record developed in court” at trial that could be said to
“supersede[] the record existing at the time of the summary-
judgment motion.” Ortiz, 562 U.S. at 184; see Dupree, 598
U.S. at 735–36 (“[A]n appellate court’s review of factual
challenges after a trial is rooted in the complete trial
record.” (emphasis added)). The net result is that the
rationale that Ortiz and Dupree gave for disallowing post-
trial appellate review of fact-based summary judgment
denials is not present here. There is therefore no basis for
applying Ortiz’s exception to the otherwise applicable
“general rule” that interlocutory orders “merge into the final
judgment, at which point they are reviewable on appeal.”
Dupree, 598 U.S. at 735 (citation omitted); see also Hall v.
City of Los Angeles, 697 F.3d 1059, 1070–71 (9th Cir. 2012)
(noting the general rule that “[a]ll interlocutory rulings
merge[] in the final judg[]ment” and are brought “within the
jurisdiction of our court” on appeal from that judgment
(citations omitted)).
The dissent contends that the Ortiz rule should
nonetheless be extended to cover the very different situation
presented here, in which a party has stipulated to the entry of
an adverse judgment subject to an express reservation of the
right to appeal it. According to the dissent, any such
stipulation necessarily reflects an agreement as to the truth
of the “factual predicates” that underlie that judgment. See
Dissent at 41–42. That, in the dissent’s view, means that
“the parties have in effect stipulated to a trial record” and
18 YORK V. USA
have thereby “effectively developed the facts beyond the
summary judgment record.” See Dissent at 40 (emphasis
added). The dissent’s assumptions are factually and legally
wrong. By stipulating to an adverse judgment subject to his
express reservation of the right to appeal it, York did not
thereby admit that the correct view of the ultimate facts is
adverse to his position, nor did he stipulate to some new,
unidentified set of underlying facts that go beyond the
summary judgment record. No such agreement is reflected
anywhere in the language of the parties’ concise stipulation.
Nor is any such agreement about the actual truth of the
ultimate facts inescapably inherent in the parties’ stipulation,
as the dissent seems to think. On the contrary, that
stipulation can be—and most naturally should be—read as
simply reflecting the parties’ agreement that a trier should be
deemed to have rejected York’s contentions based on the
existing record developed at summary judgment—a record
to which, as noted earlier, the parties did in fact stipulate.
See supra at 6. The stipulation thus need not and should not
be read as resting on an unknown and unstated hypothetical
set of superseding facts. By instead effectively deeming that
a trier has entered a judgment in the IRS’s favor based on the
agreed-upon summary judgment record (as the bankruptcy
court held that a trier could do), the stipulation does not in
any sense supersede that record, and the predicate for
applying the Ortiz exception is absent here. And by leaving
the summary judgment record intact, the stipulation
preserves for appeal the question whether the bankruptcy
YORK V. USA 19
court correctly held that a judgment in the IRS’s favor could
properly be rendered on that record. 4
C
We next consider whether York’s appeal runs afoul of
the jurisdictional limitations recognized in Microsoft Corp.
v. Baker, 582 U.S. 23 (2017), and whether there are any
remaining reasons that York’s acquiescence in an adverse
judgment bars this appeal. We answer both questions in the
negative.
1
In Baker, the named plaintiffs sought to represent a
putative class of owners of Xbox videogaming systems in a
suit against Microsoft alleging that the Xbox was defectively
designed. 582 U.S. at 33. After the district court struck the
plaintiffs’ class allegations, the plaintiffs sought permission
to take an interlocutory appeal under Federal Rule of Civil
Procedure 23(f), but this court denied that petition. Id. at 33–
34. Rather than proceed to final judgment on their individual
claims—which would then have allowed them, on appeal
from that judgment, to challenge the earlier denial of class
certification—the plaintiffs “moved to dismiss their case
with prejudice.” Id. at 35. In doing so, however, they
4
Even setting aside the dissent’s flawed and counterfactual effort to fit
this case into Ortiz’s carefully limited exception, there is a further aspect
of the dissent’s position, which appears to rest on a broader premise. The
dissent appears to contend that, regardless of whether the stipulation
reflects a new, superseding factual record, the mere act of stipulating to
an adverse judgment on the merits—even subject to an express
reservation of the right to appeal it—must be understood in law as
relinquishing any ability to contest those merits on appeal. As explained
below, that position is inconsistent with our caselaw concerning appeals
from stipulated judgments. See infra section II(C)(2).
20 YORK V. USA
“reserved the right to revive their claims should the Court of
Appeals reverse the District Court’s certification denial.” Id.
at 27. Although “Microsoft stipulated to the dismissal,” it
also expressly took the position that the plaintiffs’
procedural gambit would not work and that they “would
have ‘no right to appeal’ the order striking the class
allegations after thus dismissing their claims.” Id. at 35. We
asserted jurisdiction over the plaintiffs’ appeal and reversed
the district court’s order striking plaintiffs’ class allegations.
Id. at 35–36. The Supreme Court reversed, holding that the
plaintiffs’ “tactic does not give rise to a ‘final decisio[n]’
under § 1291.” Id. at 37.
In holding that the plaintiffs’ voluntary dismissal with
prejudice did not give rise to a final judgment allowing
review of the earlier class certification denial, the Court
relied on two primary considerations. First, the plaintiffs’
tactic “invites protracted litigation and piecemeal appeals,”
by placing “the decision whether an immediate appeal will
lie” exclusively in the hands of the plaintiff and by creating
the possibility (in the event of a remand of such an appeal)
that the plaintiffs could “exercise that option more than once,
stopping and starting the district court proceedings with
repeated interlocutory appeals.” Id. at 37–38. Second, by
“allow[ing] indiscriminate appellate review of interlocutory
orders” as of right, the plaintiffs’ tactic would “severely
undermine[]” the “careful calibration” reflected in Rule
23(f)’s specific rules, which require the discretionary
permission of the court of appeals in order to obtain
immediate appellate review of “inherently interlocutory”
orders concerning class certification. Id. at 39–40 (citations
omitted). The Court also noted that the plaintiffs’ tactic
would undermine “Rule 23(f)’s evenhanded” approach,
which expressly allows both plaintiffs and defendants to
YORK V. USA 21
seek review of class certification decisions. Id. at 42. In
contrast, the Court observed, the plaintiffs’ “theory permits
plaintiffs only, never defendants, to force an immediate
appeal of an adverse certification ruling.” Id. at 41. In light
of these considerations, the Court held that “the voluntary
dismissal essayed by [the plaintiffs] does not qualify as a
‘final decision’ within the compass of § 1291.” Id. at 27.
Nothing comparable to that confluence of considerations
is present here. York’s request for a stipulated judgment and
his ensuing narrowly focused appeal present no possibility
of reopening the proceedings below, much less reopening
them multiple times. If we consider York’s appeal and agree
with him that his motion for summary judgment should have
been granted, then we would reverse and direct the entry of
that different final judgment. But if we conclude that his
motion was properly denied, then we would affirm the
judgment in the IRS’s favor. Either way, there will be no
further proceedings below (beyond any additional ancillary
matters that might be associated with entry of any final
judgment). Thus, in contrast to Baker, there is no sense in
which York’s procedural device here could return him to his
earlier interlocutory position in which the case was in a
pretrial posture, with the potential for a trial on the merits.
As a result, one of the essential ingredients that made the
judgment in Baker nonfinal is missing here. 5
5
Moreover, York did not proceed by way of a simple request for
voluntary dismissal of his adversary complaint with prejudice. Cf. FED.
R. BANKR. P. 7041 (stating that, except for an adversary “complaint
objecting to the debtor’s discharge,” the voluntary dismissal provisions
of Federal Rule of Civil Procedure 41 apply in bankruptcy court). He
instead proceeded by way of a proposed stipulated judgment that
specified a disposition on the merits and that required the affirmative
approval of the bankruptcy court.
22 YORK V. USA
The remaining crucial consideration identified by the
Baker Court was that the plaintiffs’ tactic in that case would
“severely undermine[]” the court of appeals’ gatekeeping
role under Rule 23(f) and, relatedly, the Supreme Court’s
authority, by such rules, to allow specified categories of
interlocutory appeals under 28 U.S.C. § 1292(e). 582 U.S.
at 30–31, 40 (citation omitted). No such evasion or
undermining of federal statutes or rules is presented here.
The IRS argues that the stipulated judgment here would
defeat the objectives of Federal Rule of Civil Procedure Rule
56—which generally applies in adversary proceedings in
bankruptcy court, see FED. R. BANKR. P. 7056—by
“undermin[ing] the district court’s discretion to send a case
to trial if the judge has doubt as to the wisdom of terminating
the case before trial.” General Signal Corp. v. MCI
Telecomms. Corp., 66 F.3d 1500, 1507 (9th Cir. 1995)
(citation and internal quotation marks omitted). We reject
this contention, because the IRS takes this comment out of
context and thereby misconstrues its meaning.
Although its exact phrasing has varied over the years,
Rule 56 has long been phrased in mandatory terms that
require a court to grant summary judgment if the movant
makes the necessary showing. See FED. R. CIV. P. 56(a)
(stating that “[t]he court shall grant summary judgment if the
movant shows” what the rule requires (emphasis added));
FED. R. CIV. P. 56(c) (2006 ed.) (stating that “[t]he judgment
sought shall be rendered forthwith” if the requisite showing
is made (emphasis added)). Although the word “shall” was
changed to “should” in 2007 as part of an overall restyling
of the federal rules that was “intended to be stylistic only,”
see FED. R. CIV. P. 56, advis. comm. note (2007 amend.), it
was promptly changed back in 2010. As the Advisory
Committee explained, the 2007 change had been a mistake:
YORK V. USA 23
“Eliminating ‘shall’ created an unacceptable risk of
changing the summary-judgment standard. Restoring ‘shall’
avoids the unintended consequences of any other word.” See
FED. R. CIV. P. 56, advis. comm. note (2010 amend.).
Given Rule 56’s mandatory language, if there is no
genuine issue of material fact and the movant is entitled to
judgment as a matter of law, the court lacks “discretion” to
insist that, in defiance of Rule 56, a trial will be held anyway.
As the Supreme Court has explained, “the plain language”
of Rule 56 “mandates the entry of summary judgment, after
adequate time for discovery and upon motion, 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.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)
(emphasis added). Against this backdrop, our comment in
General Signal—contrary to what the dissent contends—did
not signify endorsement of any such non-existent
“discretion” to defy Rule 56 but instead used that term more
loosely in recognizing that, although summary judgment
motions ultimately raise questions of law reviewed de novo,
they often involve fact-intensive evaluations as to whether
the demanding standards of Rule 56 have been met. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 255
(1986) (reaffirming that, while “Rule 56(c) provides that the
trial judge shall then grant summary judgment” if the
requisite showing is made, courts should act “with caution”
in granting summary judgment and should deny summary
judgment when, under the Rule’s standards, “the better
course would be to proceed to a full trial”). And, as
Anderson notes, see 477 U.S. at 250 n.5, Rule 56 motions
also may require the preliminary exercise of discretionary
judgment as to whether there has been a sufficient
24 YORK V. USA
opportunity for discovery at the time the motion is made.
See FED. R. CIV. P. 56(d). Here, neither side contended that
more discovery was needed, and the IRS is therefore wrong
in suggesting that the bankruptcy court had discretion to
deny York’s summary judgment motion even if York made
the showing required by Rule 56. The stipulated judgment
in this case therefore did not contravene or undermine any
policy of Rule 56.
The parties have not identified any other statutory or
rules-based policy that would be undermined by the
stipulated judgment here. To be sure, York could have asked
the district court to hear a discretionary appeal of the denial
of his summary judgment motion under 28 U.S.C.
§ 158(a)(3), and in that sense his request for a stipulated
judgment arguably evaded the district court’s discretionary
gatekeeping authority. But in contrast to the genuinely
interlocutory appeal authorized by § 158(a)(3), York’s
appeal after the stipulated judgment creates no possibility
that he could return to his earlier, pretrial interlocutory
posture. See supra at 21. The opposite was true of the Baker
plaintiffs’ evasion of Rule 23(f), and it was that critical
feature that “severely undermined” “Rule 23(f)’s careful
calibration.” 582 U.S. at 40 (citation omitted). York’s
appeal thus does not resemble an unauthorized interlocutory
appeal; on the contrary, it has all the features of an appeal
from a “final” judgment. Cf. Rodriguez v. Taco Bell Corp.,
896 F.3d 952, 955 (9th Cir. 2018) (stating that “a voluntary
dismissal of remaining claims can render the earlier
interlocutory order appealable, so long as the discretionary
regime of Rule 23(f) is not undermined”).
Our recent decision in Trendsettah USA, Inc. v. Swisher
Int’l, Inc., 31 F.4th 1124 (9th Cir. 2022), confirms that Baker
does not preclude our exercise of jurisdiction here. In
YORK V. USA 25
Trendsettah, the district court entered judgment on a jury
verdict in favor of plaintiff Trendsettah, but thereafter the
district court granted the defendant’s motion to set aside that
judgment under Federal Rule of Civil Procedure 60(b). Id.at 1128–30. After Trendsettah unsuccessfully sought
reconsideration of that Rule 60(b) ruling and certification of
an appeal under 28 U.S.C. § 1292(b), Trendsettah “filed a
motion to voluntarily dismiss its claims with prejudice to
take an immediate appeal of the district court’s orders.” Id.
at 1130. The district court granted that motion, and
Trendsettah appealed. Id. We rejected the defendant’s
argument that this tactic did not produce a final, appealable
judgment under Baker. We explained that, unlike the
plaintiffs in Baker:
Trendsettah is not attempting to take an
appeal midstream, such that success on
appeal would allow it to continue litigating its
claims in a preferred posture or forum.
Trendsettah’s claims have already been
litigated and a final decision on those claims
has been reached. Thus, however we decide
this appeal, the case will be over—either the
jury’s prior verdict will be reinstated or the
district court’s dismissal of Trendsettah’s
claims with prejudice will stand.
Id. at 1132 (emphasis added). We further noted that, unlike
Baker, Trendsettah’s appeal would not undermine any policy
set forth in statutes or rules. Id. at 1131–32 (similarly
distinguishing Langere v. Verizon Wireless Servs., LLC, 983
F.3d 1115 (9th Cir. 2020), in which the plaintiff attempted
to use voluntary dismissal to evade the statutory bar on
appealing orders compelling arbitration). And we also
26 YORK V. USA
concluded that the district court’s “involvement in the
voluntary dismissal” weighed in favor of the finality of the
judgment. Id. at 1132 (quoting Galaza v. Wolf, 954 F.3d
1267, 1272 (9th Cir. 2020)). As our earlier discussion makes
clear, each of these reasons for distinguishing Baker is
applicable here: regardless of how we rule on the appeal, the
case is over and will not be revived in the lower courts; York
is not evading any statutory or rules-based policy; and the
bankruptcy court agreed to enter the stipulated judgment.
See supra at 21–26 & n.5. Under Trendsettah, Baker poses
no obstacle to our jurisdiction here.
2
The last question is whether there is any remaining sense
in which York’s acquiescence to the adverse judgment
precludes his appeal. The answer is no.
“The normal rule is that a party cannot appeal from an
order which it consented to have entered against it.”
Christian Sci. Reading Room Jointly Maintained v. City &
Cnty. of San Francisco, 784 F.2d 1010, 1017 (9th Cir.), as
amended, 792 F.2d 124 (9th Cir. 1986). By agreeing to the
entry of an adverse judgment, a party necessarily gives up
the ability to raise on appeal “any errors that may be assigned
which were in law waived by the consent.” Pacific R.R. v.
Ketchum, 101 U.S. 289, 295 (1880). But we have held that
the normal rule against appealing a consent judgment does
not apply where the objective circumstances make “clear”
that the party acquiescing in the adverse consent judgment
“intended to preserve its right [to] appeal” an earlier adverse
order that merges into that judgment and that, if reversed on
appeal, would require vacatur or reversal of that judgment.
Christian Sci. Reading Room, 784 F.2d at 1017. That is the
case here.
YORK V. USA 27
The IRS affirmatively—and correctly—concedes that
the record makes unambiguously clear that York’s consent
to the entry of the adverse judgment in this case was subject
to his express reservation of any rights to appeal he retained.
Cf. Gatto v. Comm’r, 1 F.3d 826, 828 (9th Cir. 1993)
(declining to “entertain the Gattos’ argument that their
consent was conditioned upon the oral assurance of the
Commissioner’s counsel that they would retain the right to
appeal” when nothing in the record of the district court
supported that assertion, which was “raised for the first time
on appeal”); Tapper v. Comm’r, 766 F.2d 401, 403 (9th Cir.
1985) (holding that the record failed to show that the
appellants’ consent to an adverse judgment did not extend to
the issues sought to be raised on appeal).
Moreover, contrary to what the dissent suggests, this is
not a case in which York’s reservation of a right to appeal
the consent judgment must be deemed “in law” to be
fundamentally inconsistent with his consent and thereby
necessarily waived by it. Pacific R.R., 101 U.S. at 295.
York’s position was that the case should have ended in his
favor at summary judgment based on the parties’ agreement
as to the underlying facts. It is neither logically nor legally
inconsistent with that position to say that, if the bankruptcy
court was wrongly going to insist on continued litigation of
the matter, the outcome of that fundamentally flawed
endeavor should be deemed, in accordance with the
bankruptcy court’s order, to have been an adverse judgment
based on those same agreed-upon facts. See, e.g.,
Comsource Indep. Foodservice Cos., Inc. v. Union Pac. R.R.
Co., 102 F.3d 438, 441–42 (9th Cir. 1996) (reviewing, on
appeal from a stipulated judgment on the merits, the district
court’s earlier denial of a summary judgment motion that
had sought dismissal based on the statute of limitations). To
28 YORK V. USA
be sure, had those proceedings actually occurred, they would
then have triggered the Ortiz rule and barred review of the
earlier summary judgment denial, but as we explained
earlier, there is no predicate for invoking that rule when no
such trial actually occurs. And as our discussion of Baker
makes clear, there is no basis here for concluding that York’s
reservation of a right to appeal the earlier summary judgment
denial is so contrary to the policies of the statutes and federal
rules that, despite that reservation, he must be deemed in law
to have forfeited it. 6
The dissent insists that Comsource is distinguishable on
this point, but that is wrong. In Comsource, a food service
company sued the defendant railroad in connection with a
shipment of produce that was damaged while being
transported by the railroad. 102 F.3d at 440–41. After the
district court denied the railroad’s motion seeking summary
judgment on statute of limitations grounds, the railroad
ultimately stipulated to a judgment in the plaintiff’s favor,
6
This situation also differs from one in which a plaintiff effectively
attempts to bait the district court into committing error—e.g., by
provoking the court to dismiss the case for failure to prosecute—so that,
in the ensuing appeal challenging the dismissal for failure to prosecute,
the plaintiff (if successful in setting aside that independent ground for
dismissal) can then also seek review of wholly unrelated issues earlier
in the case. Cf. Ash v. Cvetkov, 739 F.2d 493, 497–98 (9th Cir. 1984)
(affirming dismissal for failure to prosecute and declining to consider
additional interlocutory rulings, even though dismissal was without
prejudice and issues might arise again); James v. Price Stern Sloan, Inc.,
283 F.3d 1064, 1067 (9th Cir. 2002) (describing Ash as a case involving
“unquestionably a manipulation of appellate process”); compare United
States v. Procter & Gamble Co., 356 U.S. 677, 680–81 (1958) (holding
that, although Government suggested dismissal as a sanction for its
refusal to comply with a challenged court order, Government could
challenge that underlying order in ensuing appeal of dismissal).
YORK V. USA 29
while reserving its right to appeal the denial of summary
judgment. Id. at 441. We held that the denial of summary
judgment was properly reviewable on the railroad’s appeal
from the stipulated judgment, because the railroad had
expressly “reserved the right to appeal the denial of
summary judgment.” Id. at 442 (citing Smigiel v. Aetna Cas.
& Surety Co., 785 F.2d 922 (11th Cir. 1986)). According to
the dissent, Comsource does not apply here because the
stipulated judgment in Comsource assertedly involved only
the railroad’s acquiescence in an adverse “merits
determination,” and it therefore did not entail an implicit
stipulation to adverse facts concerning the statute of
limitations. See Dissent at 43 (emphasis added). The
dissent’s proffered distinction is factually incorrect, as our
opinion in Comsource makes clear. In reviewing the denial
of summary judgment to the railroad, we expressly
addressed whether there was a triable issue of material fact
with respect to the statute of limitations issue and ultimately
held that there was. Id. at 444. Under the dissent’s theory
that a stipulation to an adverse judgment necessarily
stipulates to the correctness of all of the underlying facts
necessary to support it, the railroad in Comsource
necessarily stipulated to the facts needed to defeat its
summary judgment defense and therefore could not
challenge on appeal whether there was in any respect a
triable issue of material fact as to its limitation defense.
Nonetheless, contrary to the dissent’s position, Comsource
proceeded to squarely address that very question whether
there was a triable issue of material fact that could be
resolved in the plaintiff’s favor.
Finally, this is not a case in which York’s acquiescence
to the stipulated judgment destroys the adversity required to
establish the “‘case’ or ‘controversy’” required by Article
30 YORK V. USA
III. See Baker, 582 U.S. at 44–45 (Thomas, J., concurring in
the judgment). York did not acquiesce to a judgment that
necessarily forfeited all relief, thereby leaving the parties
non-adverse. On the contrary, as we have explained, York’s
consent to the judgment was subject to his reservation of
whatever right he had to appeal the court’s earlier refusal to
enter a different judgment. A favorable ruling on that
substantive issue in this ensuing appeal would require
vacatur of that stipulated judgment and entry of the different
judgment that had been denied to York. That creates
sufficient adversity to allow us to decide whether, as a matter
of statute, York has a right to such an appeal and, if he does,
to decide its merits. Because York otherwise does have a
right to such an appeal, Article III interposes no obstacle to
our proceeding to the merits.
III
We turn then, at last, to the merits of the bankruptcy
court’s denial of summary judgment. “We review de novo
the district court’s judgment in the appeal from the
bankruptcy court, and apply the same de novo standard of
review the district court used to review the bankruptcy
court’s” ruling denying summary judgment. Suncrest
Healthcare Ctr. LLC v. Omega Healthcare Investors, Inc.
(In re Raintree Healthcare Corp.), 431 F.3d 685, 687 (9th
Cir. 2005). To be entitled to summary judgment against the
IRS, York had 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 under
the “governing law.” Anderson, 477 U.S. at 254. The
bankruptcy court correctly concluded that York had failed to
make that showing.
YORK V. USA 31
A
The IRS’s claim against York rested on § 6672(a) of the
Internal Revenue Code, which provides, in relevant part:
Any person required to collect, truthfully
account for, and pay over any tax imposed by
this title who willfully fails to collect such
tax, or truthfully account for and pay over
such tax, or willfully attempts in any manner
to evade or defeat any such tax or the
payment thereof, shall, in addition to other
penalties provided by law, be liable to a
penalty equal to the total amount of the tax
evaded, or not collected, or not accounted for
and paid over.
I.R.C. § 6672(a). Among the taxes that a person might be
required to collect and then pay over are “federal income and
social security taxes” that must be withheld by employers
“from the wages of their employees.” Purcell v. United
States, 1 F.3d 932, 936 (9th Cir. 1993); see also I.R.C.
§ 3402 (describing withholding requirements). A “person
required to collect, truthfully account for, and pay over” such
a tax, see I.R.C. § 6672(a), “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,” id.
§ 6671(b). Such an individual is commonly referred to as a
“responsible person,” although the statute itself does not
employ that phrase. Using that shorthand, we can
summarize the statutory criteria for imposing such a penalty
on an individual such as York as follows: (1) the individual
qualifies as a “responsible person”; (2) the individual
32 YORK V. USA
“fail[ed] to collect” or “account for and pay over such tax”;
and (3) the individual acted willfully in doing so. I.R.C.
§ 6672(a); see also Purcell, 1 F.3d at 936.
Once such a penalty has been assessed, the individual
challenging it “bears the burden of proving by a
preponderance of the evidence” that one or more of these
required elements “is not present.” United States v. Jones,
33 F.3d 1137, 1139 (9th Cir. 1994) (citation omitted).
Accordingly, to defeat the IRS’s assessment of penalties
against York (which was the basis of its claim in
bankruptcy), York had to show that, at least as to one such
element, no reasonable trier of fact could find in the IRS’s
favor. York does not dispute that the relevant 2007 payroll
taxes were not paid over, but he does contend that no rational
trier of fact could find that he was a “responsible” person or
that he had acted willfully. As explained in the next two
sections, we disagree on both counts.
B
In identifying the person “responsible” for the payment
of withholding taxes, we have said that we look to whether
a person “had the final word as to what bills should or should
not be paid, and when.” Purcell, 1 F.3d at 936 (quoting
Wilson v. United States, 250 F.2d 312, 316 (9th Cir. 1958)).
But our use of the word “final” is a bit of a misnomer,
because we have clarified that, in this context, “[t]he final
word does not mean ‘final’” in the sense of the ultimate
authority in the corporate hierarchy. Jones, 33 F.3d at 1139.
Rather, the “crucial examination is whether a person had the
effective power to pay taxes,” such that the person could
have made a decision that the taxes be paid. Purcell, 1 F.3d
at 937 (citations and internal quotation marks omitted). If
“the scope and nature of an individual’s power to determine
YORK V. USA 33
how the corporation conducts its financial affairs” gives that
individual “authority to pay or to order the payment of
delinquent taxes,” then that person is a responsible person
under § 6672(a). Id. What matters is that the “individual
had the authority required to exercise significant control
over the corporation’s financial affairs, regardless of
whether he exercised such control in fact.” Id. (emphasis
added); see also Jones, 33 F.3d at 1139. So long as that
standard is met, it is “irrelevant” that “an individual’s day-
to-day function in a given enterprise is unconnected to
financial decision making or tax matters.” Purcell, 1 F.3d at
937.
We conclude that, under this standard, a reasonable trier
of fact could readily find that York was a responsible person.
The summary judgment record included evidence showing
that York was the CFO of the Company; that he had the
authority to sign checks for the Company; that he had
physical custody of the Company’s checks; and that the
Company’s “Approval Matrix” for financial transactions
expressly stated that York had the authority to pay taxes up
to $50,000. See supra at 7. Relying on this evidence, a trier
of fact could reasonably conclude that York had sufficient
“significant control over the corporation’s financial affairs”
that he could have paid or ordered the payment of the
delinquent taxes. Purcell, 1 F.3d at 937. Indeed, when a
prior payroll tax deficiency problem had arisen in 2004,
York reported to the Company’s Board of Directors
concerning the matter, took steps to resolve the deficiency,
and told Wolverton that no payroll checks were to be paid
“unless the payroll taxes would have been paid over.”
Because “the duty to ensure that withheld employment taxes
are paid over [to the IRS] flows from the authority that
34 YORK V. USA
enables one to do so,” id., York could reasonably be found,
on this record, to be a responsible person.
In arguing to the contrary, York emphasizes that,
functionally, his check-writing authority was “ministerial”;
that he was “not authorized to make the decisions as to which
bills would get paid”; that Wolverton exercised the day-to-
day responsibility for making tax payments; and that Latty,
as president and CEO, “had final approval of all payments.”
York relies further on the fact that his duties were limited
under the bylaws, which provided that the CFO “was to act
under and subject to the direction of the President, and was
only authorized to disburse funds ‘as may be ordered by the
President or the Board of Directors.’” But none of these
points, individually or collectively, would necessarily
preclude a reasonable trier of fact from concluding that York
had the requisite authority.
The Board of Directors had approved the “Approval
Matrix” that gave both York and Wolverton authority to pay
taxes up to specified amounts, and York conceded below that
this matrix gave Wolverton the authority to pay tax and
payroll-related obligations, “without the need to secure other
approvals.” A rational factfinder could conclude that the
matrix gave York comparable authority. Moreover, the fact
that Wolverton typically handled such matters on a day-to-
day basis does not establish that York lacked such authority.
“More than one individual may be a responsible person
within a given entity,” see Brounstein v. United States, 979
F.2d 952, 955 (3d Cir. 1992), and “liability attaches to all
those under the duty set forth in the statute,” Purcell, 1 F.3d
at 937 (quoting Thomsen v. United States, 887 F.2d 12, 17
(1st Cir. 1989)). In assessing whether York is one such
person, what matters is the “scope and nature of [his] power
to determine how the corporation conducts its financial
YORK V. USA 35
affairs,” and not whether such payments fall within his “day-
to-day function” in the Company. Purcell, 1 F.3d at 937; see
also id. (stating that, so long as the person has the requisite
control, it is irrelevant “whether he exercised such control in
fact”). For the reasons we have explained, York could
reasonably be found to have the relevant authority within the
Company, even if he typically did not initiate payments. Cf.
Alsheskie v. United States, 31 F.3d 837, 839 (9th Cir. 1994)
(holding that district court did not clearly err in finding that
Alsheskie was not a “responsible person” given that controls
arising from the company’s unique financing arrangement
“precluded Alsheskie from paying the Corporation’s tax
obligations” (emphasis added) (citation omitted)).
York is likewise wrong in contending that Latty’s
ultimate authority to make final decisions concerning
payments—an authority that he often abused—precludes a
finding that York had “significant control over the
corporation’s financial affairs.” Purcell, 1 F.3d at 937. As
we have explained, see supra at 32–33, our cases have not
referred to “final” authority to make payments in the narrow
sense of referring only to the person at the apex of corporate
decisionmaking; instead, the question is whether the person
possesses the necessary “authority to pay or to order the
payment of delinquent taxes.” Purcell, 1 F.3d at 937. Given
that a rational trier of fact could conclude that the Approval
Matrix gave York authority to pay the delinquent taxes
without the need for Latty’s advance approval, York’s
remaining arguments on this score necessarily rest on the
premise that, as a functional matter, York would have felt
obligated to run the matter by his tyrannical CEO. But the
fact that York might have hesitated to “exercise[] such
control in fact,” provides no basis for him to evade the
responsibility that came from his authority within the
36 YORK V. USA
Company. Id. Indeed, even if Latty had purported to instruct
York not to pay the taxes, a reasonable trier of fact could still
find, on this record, that York was a responsible person. See
id. (“Instructions from a superior not to pay taxes do not take
a person otherwise responsible under section 6672(a) out of
that category.” (simplified)).
C
We further conclude that a trier of fact could reasonably
determine that York acted willfully.
We have defined willfulness, for purposes of § 6672, as
“a voluntary, conscious and intentional act to prefer other
creditors over the United States.” Purcell, 1 F.3d at 938(quoting Davis v. United States, 961 F.2d 867, 871 (9th Cir.
1992)). “An intent to defraud the Government or other bad
motive need not be proven.” Rykoff v. United States, 40 F.3d
305, 307 (9th Cir. 1994). Indeed, “conduct motivated by
reasonable cause, such as meeting the payroll, may be
‘willful.’” Phillips v. U.S. I.R.S., 73 F.3d 939, 942 (9th Cir.
1996). “[F]or nonpayment to be willful there must be either
knowledge of nonpayment or reckless disregard of whether
the payments were being made.” Teel v. United States, 529
F.2d 903, 905 (9th Cir. 1976). Under these standards, a
factfinder could reasonably conclude that York acted
willfully.
In arguing to the contrary, York emphasizes that it was
undisputed that he did not have actual knowledge of the
payroll tax deficiency until August 2007, by which time, he
contends, Latty controlled all payment decisions. But we
have held that willfulness may be established within the
meaning of § 6672(a) even in the absence of actual
knowledge of the tax deficiency: “‘[R]eckless disregard’ of
whether the taxes are being paid over, as distinguished from
YORK V. USA 37
actual knowledge of whether they are being paid over, may
suffice to establish willfulness.” Phillips, 73 F.3d at 942; see
also Teel, 529 F.2d at 905. Here, York was aware that the
Company had previously failed to pay over payroll taxes in
2004. He reported on that subject to the Board of Directors
and worked with the IRS to resolve the matter in 2005. York
also testified that, throughout his tenure, the Company
“always had financial difficulty” and “lived hand to mouth.”
Those problems became worse in 2007, and by June of that
year, the Company stopped paying York, Latty, and
Wolverton. A rational trier of fact could conclude from this
evidence that York “preferred ignorance,” Sorenson v.
United States, 521 F.2d 325, 329 (9th Cir. 1975), and that he
acted in reckless disregard of whether the payroll taxes were
being paid over to the IRS. See Phillips, 73 F.3d at 942
(stating that, where the company’s chief executive “knew
that the controller had once failed in the past to pay over the
withholding taxes, and the chief executive did nothing to
prevent a recurrence, that was willfulness as a matter of law”
(citing United States v. Leuschner, 336 F.2d 246, 248 (9th
Cir. 1964))). And a reasonable factfinder could further
conclude that, once York acquired actual knowledge that the
taxes were not being paid, he willfully failed to take any
steps to pay them or to see that they were paid. See
Leuschner, 336 F.2d at 248 (director’s “complete failure to
do anything to see that [controller], or he himself, performed
that duty, is, we think, as a matter of law, a ‘voluntary,
conscious and intentional’ failure”).
IV
Because the bankruptcy court correctly denied York’s
summary judgment motion, the district court properly
affirmed the judgment against York.
38 YORK V. USA
AFFIRMED.
BERZON, Circuit Judge, dissenting:
Richard York seeks to appeal the bankruptcy court’s
fact-based denial of summary judgment. But after the
summary judgment decision, York agreed to a stipulated
final judgment in favor of his adversary, the Internal
Revenue Service (“IRS”). In my view, the parties’
agreement that the IRS would prevail at trial supersedes the
bankruptcy court’s earlier decision to deny summary
judgment and send the case to trial. As a result, the summary
judgment denial is yesterday’s news, and York may not now
appeal it. I therefore respectfully dissent.
1. A fact-based denial of summary judgment is a
procedural ruling that does not resolve any legal dispute or
entail any liability determination. “[T]he denial of a motion
for a summary judgment because of unresolved issues of fact
does not settle or even tentatively decide anything about the
merits of the claim. It is strictly a pretrial order that decides
only one thing—that the case should go to trial.” Switz.
Cheese Ass’n, Inc. v. E. Horne’s Mkt., Inc., 385 U.S. 23, 25
(1966).
Given their nature, denials of summary judgment on
factual grounds are a species of interim rulings that are
“unreviewable after final judgment because they are
overcome by later developments in the litigation.” Dupree
v. Younger, 598 U.S. 729, 734 (2023). “Once the case
proceeds to trial, the full record developed in court
supersedes the record existing at the time of the summary-
judgment motion.” Ortiz v. Jordan, 562 U.S. 180, 184
YORK V. USA 39
(2011); see also Dupree, 598 U.S. at 734. At that point, “a
district court’s assessment of the facts based on the
summary-judgment record becomes ‘ancient history and [is]
not subject to appeal.’ ” Dupree, 598 U.S. at 734 (citation
omitted). After a trial, the order denying summary judgment
“retains its interlocutory character as simply a step along the
route to final judgment.” Ortiz, 562 U.S. at 184. The bottom
line is that, in contrast to denials of summary judgment based
on matters of law, “factual issues addressed in summary-
judgment denials are unreviewable on appeal.” Dupree, 598
U.S. at 735.
2. The majority’s decision to the contrary stresses the
“full record” language in Ortiz, 562 U.S. at 184, and Dupree,
598 U.S. at 734, concluding that so long as there was no
superseding trial record that could be said to displace the
earlier summary judgment record, the earlier fact-based
denial of summary judgment merges into the final judgment
and, ordinarily, can be reviewed on appeal. See Majority Op.
at 16–17. The majority reasons that because there was no
trial here, there was no superseding trial record, and the
summary judgment denial is therefore appealable. Id.
The majority’s conclusion that a fact-based summary
judgment denial is reviewable so long as there is no actual
trial record has some basis in snippets of language in Ortiz
and Dupree. But, after careful consideration of those two
Supreme Court opinions and of the finality principle
underpinning them, I am in the end unpersuaded by the
majority’s conclusion that we can review the denial of
summary judgment on appeal from the stipulated judgment.
On my reading, Dupree, interpreting Ortiz, draws a firm
line between fact-based denials of summary judgment and
law-based denials. As Dupree explained, although “factual
40 YORK V. USA
issues addressed in summary-judgment denials are
unreviewable on appeal, the same is not true of purely legal
issues—that is, issues that can be resolved without reference
to any disputed facts.” 598 U.S. at 735. Law-based
summary judgment denials are appealable after a final
judgment “[b]ecause a district court's purely legal
conclusions at summary judgment are not ‘supersede[d]’ by
later developments in the litigation.” Id. (citation omitted);
see also id. at 736 (“A district court’s resolution of a pure
question of law . . . is unaffected by future developments in
the case.”).
Dupree and Ortiz make clear that a fact-based summary
judgment denial is not appealable because it is a type of
ruling that is “ ‘supersede[d]’ by later developments in the
litigation,” without specifying that the later development
must be an actual trial. Dupree, 598 U.S. at 735 (quoting
Ortiz, 562 U.S. at 184); see also id. at 734. The parties’
stipulated judgment is precisely such a development.
The bankruptcy court, in denying summary judgment,
issued no order determining liability. Pursuant to that
summary judgment ruling, neither party was yet entitled to
judgment, and, in the ordinary course, a trial would have
been necessary to determine liability. The parties, via their
stipulated judgment, established that the record at trial, were
there one, would result in a final judgment for the IRS. By
entering into that stipulation, the parties effectively
developed the facts beyond the summary judgment record.
See Dupree, 598 U.S. at 734. The parties did so—that is,
“superseded” the summary judgment denial “by later
developments in the litigation,” id.—when they stipulated
YORK V. USA 41
that the result of that trial would be that the IRS was entitled
to judgment. 1
It is true, of course, that there was no actual trial and the
stipulated judgment does not detail the factual
determinations upon which it is premised. But York’s
consent to the judgment “is equivalent to an admission . . .
on the record that the facts exist on which the decree rests.”
Pac. R.R. v. Ketchum, 101 U.S. 289, 296 (1879). And we
know that the necessary factual predicates for an IRS
judgment would have to be that (1) York qualifies as a
“responsible person” for purposes of collecting and paying
the tax; (2) he “fail[ed] to collect” or “account for and pay
over [the] tax”; and (3) he acted willfully in doing so. See
I.R.C. § 6672(a); Majority Op. at 8–9, 31–32. The
stipulation, therefore, is necessarily based on specific factual
predicates that the district court ruled could not be
determined on the summary judgment record.
In light of the implicitly stipulated findings, the parties’
agreement as to the outcome of a hypothetical trial, just like
an actual trial, renders “a district court’s factual rulings
based on the obsolete summary-judgment record . . .
useless.” Dupree, 598 U.S. at 736. By determining the
factual issues left open by the denial of summary judgment,
the stipulation, together with the underlying factual premises
it necessarily subsumes, supersedes the bankruptcy court’s
earlier decision to send the case to trial by specifying the
result of that trial. Accordingly, under Ortiz and Dupree, the
1
The majority insists that the stipulation, rather than reflecting the
outcome of a hypothetical trial, instead reflects the parties’ agreement
that on the same stipulated record considered on the summary judgment
motions, the IRS would prevail. But as I later explain, if that is the case,
then York has conceded the merits of his appeal. See infra at 8-9.
42 YORK V. USA
earlier procedural ruling has lapsed and is not now
reviewable.
That the parties have chosen not to develop a detailed
record underlying the implicitly stipulated factual findings
cannot render the earlier summary judgment ruling
appealable. Trial findings supersede an earlier fact-based
summary judgment decision regardless of whether the trial
transcript is in the appellate record. See Jones v. City of
Santa Monica, 382 F.3d 1052, 1057 (9th Cir. 2004) (“By
failing to provide a trial transcript, [the appellant] may not
avoid our practice of not reviewing the denial of summary
judgment when there has been a factual trial.”). Here, the
parties have in effect stipulated to a trial record entitling the
IRS to judgment; that they did not develop that record in an
actual trial is irrelevant to whether the denial of summary
judgment remains of any significance.
In sum, the denial of summary judgment determined that
there were factual issues that had to be resolved by later
proceedings, and they were so resolved—through a
stipulation as to the ultimate findings of fact. Under Ortiz
and Dupree, the earlier ruling no longer has any significance
to the final judgment in this case and is not appealable.
3. Additionally, given that York has necessarily
stipulated to the factual predicates supporting judgment for
the IRS, I disagree with the majority’s assertion that York’s
stipulation should not be deemed to be an abandonment of
his challenge to the summary judgment denial. See Majority
Op. at 27–28 (citing Comsource Indep. Foodservice Cos. v.
Union Pac. R.R. Co., 102 F.3d 438, 442 (9th Cir. 1996)). A
party whose assertion of error on appeal is inconsistent with
a consent judgment is deemed to have waived the assertion
of that error on appeal. See Pac. R.R., 101 U.S. at 295;
YORK V. USA 43
Majority Op. at 26. By agreeing to the stipulation, York
voluntarily agreed to factual findings in favor of the IRS on
the same fact questions at issue in his summary judgment
appeal. Yet, for purposes of his summary judgment appeal,
he takes a position on those fact issues at odds with the
position to which he has stipulated.
In concluding that the stipulation is not inconsistent with
York’s position on appeal, the majority relies on Comsource,
a case in which the parties stipulated to final judgment on the
merits after the district court issued a summary judgment
order rejecting a statute of limitations defense. Comsource,
102 F.3d at 441; see Majority Op. at 27–29. The parties in
Comsource stipulated to a final merits judgment in the
plaintiff’s favor, allowing the defendant to appeal the
logically prior and factually distinct statute of limitations
ruling. See id. at 441–42. The defendant’s reservation of the
right to appeal the limitations issue was not inconsistent with
the position taken in the stipulation, because the appeal
challenged the limitations ruling only, not the separate
merits determination stipulated to after the district court
resolved the limitations issue. 2
2
In responding to my discussion of Comsource, the majority emphasizes
that the stipulation in that case must have “entail[ed] an implicit
stipulation to adverse facts concerning the statute of limitations,”
Majority Op. at 29 – a point relevant to the question whether the
summary judgment record was superseded by a later-developed record
under Ortiz and Dupree. But Comsource was decided long before Ortiz
and Dupree, and so provides no support for the majority’s conclusion
concerning the application of the rule set forth in those cases. Compare
Comsource, 102 F.3d at 442 (“a denial of a summary judgment order is
appealable after the entry of a final judgment”), with Dupree, 598 U.S.
44 YORK V. USA
Here, in contrast, the bankruptcy court’s summary
judgment order did not pre-determine any issue independent
of the one that formed the basis for the parties’ stipulation.
Instead, York elected to stipulate to factual predicates
inconsistent with the position he now asserts on appeal. The
majority cites no case in which a party has been permitted to
appeal after stipulating to a judgment factually interwoven,
as here, with the issues sought to be appealed.
In the majority’s view, the stipulation reflects York’s
agreement that, based on the undisputed summary judgment
record, the IRS would prevail at the bench trial. Majority
Op. at 27. If that is the case, then York’s agreement amounts
to a concession that the IRS is entitled to judgment on the
summary judgment record – a position directly inconsistent
at 735 (“factual issues addressed in summary-judgment denials are
unreviewable on appeal”).
In any event, I addressed Comsource because it was cited in support
of the majority’s conclusion that York should not be deemed to have
waived his position on appeal, see Majority Op. at 27–28. As to that
issue, the district court in Comsource decided the statute of limitations
question against the appellant on a legal ground, concluding that under
the applicable law, for the one-year limitations period to apply, the
appellant was required to first offer the default two-year limitations
period as an option; because the appellant had not done so, the district
court denied the appellant’s summary judgment motion. Comsource,
102 F.3d at 441–42. The parties’ stipulation to a merits judgment while
reserving an appeal of the district court’s legal ruling on the statute of
limitations was not logically inconsistent. That the court of appeals in
Comsource subsequently chose to affirm the district court’s denial of
summary judgment on a different ground – that there was a fact dispute
on the question whether the appellant provided adequate notice that a
one-year limitations period would apply – is irrelevant to whether the
appellant’s stipulation was inconsistent with its reservation of the statute
of limitations issue at the time it was made. It was not, unlike the
situation here.
YORK V. USA 45
with the position he now asserts on appeal. Under the
majority’s approach, York has reserved his right to appeal,
but he has conceded the merits of that appeal.
4. My conclusions are reinforced by the practical
concern that the majority’s decision undermines the trial
court’s discretion to send a case to trial in the face of an
underdeveloped record. Gen. Signal Corp. v. MCI
Telecomms. Corp., 66 F.3d 1500 (9th Cir. 1995), explained
that reviewing a fact-based summary judgment denial
“would . . . undermine the district court’s discretion to send
a case to trial ‘if the judge has doubt as to the wisdom of
terminating the case before trial.’ ” Id. at 1507 (citation
omitted); see also Jones, 382 F.3d at 1057 (declining to
review a fact-based summary judgment denial and
explaining in part that “the preliminary ruling at summary
judgment . . . may have been the result of some doubt on the
part of the trial judge whether it was wise to terminate the
case at an early stage”).
The Supreme Court has long recognized that the trial
court may “deny summary judgment . . . where there is
reason to believe that the better course would be to proceed
to a full trial.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255 (1986) (citing Kennedy v. Silas Mason Co., 334
U.S. 249 (1948)). In keeping with this principle, we have
held that although Federal Rule of Procedure 56(c) speaks in
mandatory terms, an appellate court may reverse a grant of
summary judgment and remand a case for trial where the
“record[] ha[s] not been sufficiently developed to allow the
court[] to make [a] fully informed decision.” Anderson v.
Hodel, 899 F.2d 766, 770–71 (9th Cir. 1990) (quoting
Schwarzer, Summary Judgment Under the Federal Rules:
Defining Genuine Issues of Material Fact, 99 F.R.D. 465,
475 (1984)); see also, e.g., United States ex rel. Plumbers &
46 YORK V. USA
Steamfitters Loc. Union No. 38 v. C.W. Roen Constr. Co.,
183 F.3d 1088, 1095 & n.3 (9th Cir. 1999); S & N Equip. Co.
v. Casa Grande Cotton Fin. Co., 97 F.3d 337, 345 (9th Cir.
1996); Tovar v. U.S. Postal Serv., 3 F.3d 1271, 1278–79 (9th
Cir. 1993). Thus, notwithstanding the majority’s suggestion
to the contrary, see Majority Op. at 22–24, the bankruptcy
court had leeway to send the case to trial if the undisputed
facts presented by the parties were inadequate in the court’s
informed view to permit summary resolution. Respect for
that discretion is another reason to doubt the majority’s
approach.
5. I recognize that the majority’s approach may make
some practical sense. Strict application of the finality rules
can lead to an unsatisfying rigidity in low-stakes cases like
this one. It is understandable that, in cases in which the
amount in controversy is less than the cost of a trial, the
parties would prefer appeal of the denial of summary
judgment over incurring the expense of trial. As a result of
its advantages in low-stakes cases, the tactic York employed
here could be, and probably will be, used by other litigants
with little financially at stake to obtain review of fact-based
summary judgment denials.
Congress could, of course, revisit the application of the
finality doctrine in circumstances such as these and allow the
sort of stipulation and appeal undertaken here. Given the
impracticality of funding a full trial that will cost more in
attorney’s fees and costs than the amount of damages at
stake, perhaps Congress should do just that. But it has not
done so.
***
The majority’s decision impermissibly permits an end
run around the well-established finality doctrine. I would
YORK V. USA 47
conclude that York’s appeal should fail because he may not
appeal the bankruptcy court’s denial of summary judgment.
I therefore respectfully dissent. I would not reach the
remaining questions addressed in the majority opinion.