United States District Court, E.D. Michigan, Northern Division
ORDER REJECTING DAVID RAUB'S NOTICE OF
DISCLAIMER, GRANTING DEFENDANTS' MOTION TO ALLOW PAYMENT
OF JUDGMENT, AND DIRECTING PLAINTIFFS TO FURNISH COUNSEL FOR
DEFENDANTS OSCODA COUNTY AND TIM WHITING WITH COMPLETED W-9
L. LUDINGTON, United States District Judge
October 12, 2016 Plaintiffs David and William Raub filed
notice that they had accepted Defendant Oscoda County and Tim
Whiting's offer of judgment pursuant to Federal Rule of
Civil Procedure 68(a). Pursuant to that rule, “[i]f,
within 14 days after being served [with an offer of
judgment], the opposing party serves written notice accepting
the offer, either party may then file the offer and notice of
acceptance, plus proof of service. The clerk must
then enter judgment.” Id. (emphasis added).
Judgment was therefore entered against Defendants Oscoda
County and Tim Whiting in the amount of $5, 000 on October
21, 2016. See ECF No. 54
November 2, 2016 Defendants Oscoda County and Tim Whiting
filed a motion to allow for the payment of judgment.
See ECF No. 58. Defendants argue that they and their
insurance company have attempted to obtain a W-9 and
Plaintiffs' social security numbers from Plaintiffs and
Plaintiffs' counsel in order to comply with IRS and
Medicare reporting requirements, but that Plaintiffs are
refusing to provide the information. Defendants further
allege that Plaintiffs are requesting that the judgment be
paid directly to certain venders for certain litigation
services instead of to Plaintiffs directly. In response,
Plaintiffs filed a purported disclaimer of interest in the
judgement proceeds on behalf of David Raub. See ECF
No. 60. Plaintiffs then filed a response, arguing that they
had submitted the W-9 for William Raub, but believed that
David Raub could disclaim interest in the judgment proceeds
pursuant to 15 U.S.C. § 2518. See ECF No. 67.
15 U.S.C. § 2518 is not a valid citation as it does not
correspond to any existing federal statute.
also argue that they are able to disclaim their interest in
the judgment under Michigan law pursuant to M.C.L.
§§ 700.2901 and 700.2909. Disclaimer of interest
generally arises in cases where one party rejects another
party's attempt to confer property, the right to receive
and control property, or the power of appointment upon that
party. A party cannot disclaim property that he has bargained
for and contractually obligated himself to receive. As
explained in § 700.2901(b), “[d]isclaimable
interest does not include an interest retained by or
conferred upon the disclaimant by the disclaimant at the
creation of the interest.” Here, by filing suit against
Defendants and then accepting Defendants' offer of
judgment, David Raub contractually committed to accepting the
funds, and conferred upon himself an interest in the $5, 000
judgment at the time the interest was created along with all
of the associated obligations under the Internal Revenue
Code. His interest in the judgment proceeds is therefore not
disclaimable under the plain terms of the Michigan statute.
Raub's attempt to disclaim the judgment proceeds also
creates a basic problem of contract law. Defendant's
offer of judgment constituted a valid offer. The Raubs'
acceptance of that offer was a valid acceptance, and thus a
contract was created whereby Defendants paid $5, 000 in
consideration for Plaintiffs' dismissal of the lawsuit
against them. Allowing Plaintiff David Raub to disclaim
consideration for the entry of judgment would render the
agreement illusory as against David Raub. An entry of
judgment is not just for the benefit of the prevailing party.
It also benefits the party against whom judgment is entered
in that it provides that party with an assurance that the
matter has come to a conclusion and that it will not be sued
again for the same alleged conduct. Allowing Plaintiffs to
prevail in their lawsuit as against Defendants Oscoda County
and Tim Whiting while leaving the door open for William Raub
to challenge the finality of that judgment would be an
impermissible result. William Raub's attempt to disclaim
the judgment proceeds for which he bargained will therefore
David and William Raub ultimately decide to allocate the $5,
000 judgment amongst themselves is a different matter that
should not involve Defendants or this Court. If David Raub
wishes to gift his portion of the judgment to his brother
William after his receipt of the income, he presumably may.
However, it is noted that a party's attempt to allocate
funds in a certain way is not binding upon the Internal
Revenue Service. If the Internal Revenue Service determines
that the purported allocation of funds does not reflect the
economic realities of the transaction, then the Internal
Revenue Service may reallocate the funds. See Patterson
v. C.I.R., 810 F.2d 562, 570 (6th Cir. 1987) (noting the
“Commissioner's ability, and indeed his duty, to
look beyond the form of a transaction to its economic
substance when there is reason to suspect either collusion or
overreaching between the parties in order to improperly avoid
the tax consequences of their actions.”).
it is ORDERED that Plaintiff David Raub's notice of
disclaimer, ECF No. 60, is REJECTED.
further ORDERED that Defendants Oscoda County and Tim
Whiting's motion to allow for the payment of judgment,
ECF No. 58, is GRANTED.
further ORDERED that Plaintiffs are DIRECTED to provide
counsel for Defendants Oscoda County and Tim Whiting with
completed W-9 forms for Plaintiff William Raub, Plaintiff
David Raub, and Plaintiffs' counsel's law firm on or
before December 9, 2016. ...