United States District Court, W.D. Michigan, Southern Division
Honorable Paul L. Maloney Judge.
REPORT AND RECOMMENDATION
PHILLIP J. GREEN UNITED STATES MAGISTRATE JUDGE.
United States brought this action seeking to reduce to
judgment unpaid tax liabilities owed by Tammy Church and her
company, R&R Utilities, LLC, and to enforce its liens on
Ms. Church's home. Ms. Church retained the services of
Attorney Thomas J. Gezon to represent her and her company in
this case. After reaching a settlement, the parties moved
this Court on April 1, 2016, to approve an Agreed Final
Judgment. (ECF No. 50). The Court entered the Agreed Final
Judgment on April 8, 2016. (ECF No. 51).
months later, on March 9, 2017, Ms. Church sought to
terminate Mr. Gezon as her counsel. (ECF No. 52). On the same
day, she filed a motion to set aside the Agreed Final
Judgment (ECF No. 53), which is being treated as a motion
under Federal Rule of Civil Procedure 60(b)(1). Pursuant to
that rule, Ms. Church is entitled to relief only if she
establishes that the judgment resulted from “mistake,
inadvertence, surprise, or excusable neglect.” In her
Rule 60(b)(1) motion, Ms. Church raised with the Court for
the first time her contention that she had not consented to
the settlement. She offered no explanation in the motion for
the significant delay in bringing it.
matter has been referred to me to conduct an evidentiary
hearing on the disputed factual issue of whether Mr. Gezon
had Ms. Church's authority to settle this case and to
agree to the entry of final judgment. (Oct. 19, 2018, Order
of Reference, ECF No. 75). I have been directed to file a
report and recommendation pursuant to 28 U.S.C. §
636(b)(1)(B) regarding my findings. (Id.). I
conducted an evidentiary hearing on November 27, 2018, at
which Ms. Church and Mr. Gezon testified. (Minutes, ECF No.
82). I have also considered pre-hearing declarations and
exhibits filed by Ms. Church and Mr. Gezon.
Standard and Burden of Proof
attorney may not agree to a final resolution of his
client's case without express authority from the client.
Bradford Exchange v. Trein's Exchange, 600 F.2d
99, 102 (7th Cir. 1979) (citing Associates Discount Corp.
v. Goldman, 524 F.2d 1051 (3d Cir. 1975); Thomas v.
Colorado Trust Deed Funds, Inc., 366 F.2d 136 (10th Cir.
1966)). An attorney is presumed to act with such authority,
however, and that presumption may be overcome only by
“affirmative proof that the attorney had no right to
consent.” Bradford Exchange, 600 F.2d at 102 (citing
United States v. Beebe, 180 U.S. 343 (1901)). Ms.
Church, then, bears the burden of proving that Mr. Gezon did
not have her authorization to settle this case and to consent
to the entry of judgment.
the following relevant factual findings by preponderant
Gezon came to represent Ms. Church through his volunteer work
with West Michigan Legal Aid Group (Legal Aid). Ms. Church
contacted Legal Aid seeking representation in this case, and
Legal Aid referred her to Mr. Gezon. Mr. Gezon discussed the
case with Ms. Church, including her interest in resolving her
tax liability and getting some money to move on with her
life. Mr. Gezon then prepared a retainer agreement reflecting
the goals they had discussed. (Gezon, Hrg Tr. at 47- 51, ECF
No. 83, PageID.518-22; see Retainer Agreement, ECF
Church reviewed and signed the retainer agreement on February
27, 2015. (Church Decl., ¶ 2, ECF No. 61, PageID.315;
Church, Hrg Tr. at 16, 28, PageID.487, 499). She acknowledges
that she hired Mr. Gezon to help her negotiate a settlement
with the government and Old Republic National Title Insurance
Company (Old Republic). (Church, Hrg Tr. at 18, PageID.489).
By signing the agreement, Ms. Church agreed that the goals of
a negotiated resolution would include the following:
• an agreement to allow time for [Ms. Church] to list
and sell [her] home, with the net proceeds going to the IRS;
• to excuse or reduce [Ms. Church's] remaining
obligation to the IRS, based on the sale; [and]
• to ask for permission to stay in the home while it is
listed and to receive an amount of the net proceeds to assist
[Ms. Church] in relocating after the sale.
(Retainer Agreement, ¶ 1, PageID.324).
signing the retainer agreement, Ms. Church conceded her tax
liability and the fact that there was “little to no
likelihood” of defeating the IRS tax lien. She also
acknowledged that the interests of creditors would have to be
satisfied before she could retain her home. (Id.).
Gezon began his investigation of the tax liabilities at issue
in this case through discussions with government counsel. Mr.
Gezon obtained and reviewed tax transcripts for the relevant
years; he asked a retired IRS agent to review the tax
transcripts; and he consulted a retired Assistant U.S.
Attorney (AUSA) who had significant experience in tax cases.
The retired agent advised Mr. Gezon that there were no viable
defenses or challenges to the tax computations in the
government's complaint. The former AUSA confirmed that
there was no viable defense to the IRS's tax claim. Mr.
Gezon discussed with Ms. Church the results of his
investigation. (Gezon Decl., ¶ 5, ECF No. 58-1,
PageID.278; Gezon, Hrg Tr. at 51-53, PageID.522-24).
liabilities resulted from a combination of Ms. Church's
failure to forward to the IRS the tax withholdings from her
employees' wages, as well as her failure to timely file
1040 tax returns and pay the taxes due. (Gezon Decl., ¶
3, PageID.277). The ...