United States District Court, W.D. Texas, Austin Division
W. AUSTIN UNITED STATES MAGISTRATE JUDGE.
the Court are Plaintiff's Request to Amend Admission No.
23 under Rule 36(b) (Dkt. No. 42); the United States'
Response (Dkt. No. 47); and Plaintiff's Reply (Dkt. No.
a suit seeking a refund of taxes pursuant to 26 U.S.C. §
7422, as well as a demand for attorney's fees and damages
under 26 U.S.C. § 7430. Quigley argues the penalty
assessed by the IRS was erroneous because he did not
willfully fail to pay the taxes. On November 2, 2016, the
United States served requests for admissions on Quigley,
which included the following request:
REQUEST FOR ADMISSION NO. 23: Admit that you signed checks or
authorized payments for St. Gumbeaux, Inc. to payee(s) other
than the IRS after you knew that St. Gumbeaux, Inc. had
unpaid federal withholding taxes.
Dkt. No. 37-2 at 6. Quigley responded to Request No. 23
“Admit.” Recently, the United States filed a
Motion for Summary Judgment (Dkt. No. 37) arguing that
Quigley's answers to the United States' Requests for
Admissions, in particular No. 23, establish as matter of law
that Quigley willfully failed to collect, or account
for, or pay over, the payroll taxes at issue in violation of
26 U.S.C. § 6672. This led Quigley to file the Request
to Amend Admission No. 23 now before the Court. The motion
contends that the admission was a mistake and that
Quigley's counsel “was completely unaware of the
mistake until examining Defendant's recent Motion for
Summary Judgment.” Dkt. No. 42 at 3. Quigley concedes
that the United States is correct that an admission to
Request No. 23 would conclusively establish that he acted
wilfully and thus violated 26 U.S.C. § 6672. Quigley
argues that denying him leave to amend his response
“will completely prevent presentation of the case on
the merits.” Id. The Court agrees.
Standard of Review under Rule 36(b)
Rule of Civil Procedure 36 provides that a party may serve
another party written requests for admission of the truth of
any matters within the scope of Rule 26(b). Fed.R.Civ.P.
36(a). Once a request is admitted, the matter is
“conclusively established unless the court, on motion,
permits the admission to be withdrawn or amended.”
Fed.R.Civ.P. 36(b). In order to allow withdrawal of a deemed
admission, as Quigley is requesting, Rule 36(b) requires that
a court find that withdrawal or amendment: “1) would
serve the presentation of the case on the merits, but 2)
would not prejudice the party that obtained the admissions in
its presentation of the case.” In Re Carney,
258 F.3d 415, 419 (5th Cir. 2001). This rule is permissive,
and “[e]ven when these two factors are established, a
district court still has discretion to deny a request for
leave to withdraw or amend an admission.” Id.
Further, the Fifth Circuit “has . . . determined that a
court acts within its discretion in considering the fault of
the party seeking withdrawal . . . or its diligence in
seeking withdrawal.” Le v. Cheesecake Factory
Rests. Inc., 2007 WL 715260, at *2 (5th Cir. Mar. 6,
2007) (internal quotations and citations omitted).
Has Quigley met the standard under Rule 36(b)?
considering whether allowing an amendment to a response would
serve the presentation of the case on the merits, “it
is proper to consider whether denying [amendment] would have
the practical effect of eliminating any presentation of the
merits of the case.” Id. at *2. Courts have
found Rule 36(b)'s first prong satisfied where admissions
“directly bear on the merits of the case, ”
S.E.C. v. AmeriFirst Funding, Inc., 2008 WL 2073498,
at *2 (N.D. Tex. May 13, 2008), and when “upholding the
admissions would practically eliminate any presentation of
the merits of the case, ” Curtis v. State Farm
Lloyds, 2004 WL 1621700, at *5 (S. D. Tex. April 29,
2004). As noted, both parties agree that Quigley's
admission to Request No. 23 conclusively establishes a
violation of 26 U.S.C. § 6672. Because denying the
amendment would completely prevent presentation of the case
on the merits, Quigley has met the first factor of the test.
regard to prejudice, “[c]ourts have usually found that
the prejudice contemplated by Rule 36(b) relates to special
difficulties a party may face caused by a sudden need to
obtain evidence upon withdrawal or amendment of an
admission.” Amer. Auto. Ass'n (Inc.) v. AAA
Legal Clinic of Jefferson Crooke, P.C., 930
F.2d 1117, 1120 (5th Cir. 1991). However, “merely
having to prove the matters admitted does not constitute
prejudice.” Le, 2007 WL 715260 at *3. Courts
also consider “the timing of the motion for withdrawal
as it relates to the diligence of the party seeking
withdrawal and the adequacy of time remaining for additional
discovery before trial.” Id. The United
States' primary objection to allowing the amendment is
that Quigley did not request leave to amend until the
discovery deadline had expired, and after it filed its Motion
for Summary Judgment relying on Quigley's admission to
Request No. 23. As noted, however, merely having to prove the
matters admitted does not constitute prejudice under Rule
36(b). Id.; see also, S.E.C., 2008 WL 2073498, at *2
(“That it would be necessary for a party to prove a
fact that it would not otherwise be obligated to prove if the
matter were deemed admitted does not constitute the kind of
prejudice contemplated by Rule 36(b)”). More to the
point, the United States does not only rely on Quigley's
admission to Request No. 23 to support its summary judgment
argument. Instead, it relies on several other pieces of
evidence in the record to support its arguments. Nor does it
contend that it did not conduct discovery based on the
admission, and it is clear from the United States'
summary judgment pleadings that it has gathered evidence on
the willfulness issue independently of the admission.
upon the foregoing, the Court HEREBY GRANTS Plaintiffs
Request to Amend Admission No. 23 under Rule 36(b) (Dkt. No.
42), to change the response to the request to
“Deny.” Because the Court is permitting Quigley
to amend the response to Request No. 23, should the United
States wish to supplement its Reply related to the ...