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Settlement Reached in Music Company’s Wrongful Levy Suit

APR. 21, 2020

Gold Forever Music Inc. v. United States

DATED APR. 21, 2020
DOCUMENT ATTRIBUTES

Gold Forever Music Inc. v. United States

GOLD FOREVER MUSIC, INC.
Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant.

UNITED STAES OF AMERICA,
Counterclaimant,
v.
EDWARD J. HOLLAND, JR.,
Counterclaim Defendant. 

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN

Hon. George Caram Steeh

ORDER OF DISMISSAL

Upon the joint motion of the parties to this action, and the Court having considered the premises, the Court hereby orders as follows:

1) This action, including the counterclaim, is dismissed with prejudice except it is without prejudice insofar as the Settlement Agreement reserves certain rights of the parties in respect to the claims, defenses, and counterclaims heretofore pled in this action.

2) The Court retains jurisdiction to enforce the Settlement Agreement and/or or resolve any future dispute that arises regarding the implementation of that agreement, provided that nothing herein shall be construed to grant jurisdiction over any claims by or against any person that is not already a party to this action or to expand the jurisdiction of this Court beyond matters related to the implementation of the terms of the Settlement Agreement. Any motion made pursuant to this Court's retained jurisdiction shall, if made by the United States, be served on GFM and Holland by emailing a copy of the motion to attorney Neal Nusholtz, nusholtz@nnlaw.net, who shall acknowledge receipt by reply promptly but, if such receipt is not acknowledged by reply, then the motion shall be mailed to Mr. Nusholtz and to Holland and GFM at the current addresses or any updated addresses supplied to counsel for the United States. Any motion made by GFM and/or Holland shall be emailed and mailed as follows: (1) emailed both to Edward.J.Murphy@usdoj.gov and northern.taxcivil@usdoj.gov; and (2) mailed to DOJ Tax Division, P.O. Box 55, Washington, D.C. 20044. If Mr. Murphy receives such an email, he shall acknowledge receipt of the same by reply promptly. Any such motion shall attach a copy of the Settlement Agreement as an exhibit (but may omit the exhibit to the agreement) and shall describe in sufficient detail the nature of the alleged violation or dispute and the efforts made to resolve it without court intervention.

3) The parties are ordered to comply in good faith with the terms of the Settlement Agreement, but this directive is limited to implementing the jurisdiction retained in the preceding paragraph and shall not be understood to justify any motion for contempt sanctions for violating any of the terms of the agreement.

SO ORDERED:

Dated: April 21, 2020

GEORGE CARAM STEEH
United States District Judge


NOTICE OF SETTLEMENT AND JOINT MOTION TO DISMISS WITH LEAVE TO REOPEN TO RESOLVE ANY DISPUTE UNDER AND/OR TO ENFORCE SETTLEMENT AGREEMENT

The parties (including the plaintiff, Gold Forever Music, Inc., the defendant/counterclaimant, United States of America, and the counterclaim defendant, Edward J. Holland, Jr.), by their undersigned counsel, hereby notify the court that they have reached a Settlement Agreement pursuant to which the parties jointly move to dismiss with prejudice, except to the extent provided under the terms of their Settlement Agreement, and request that the Court retain jurisdiction to address any disputes among the parties arising in respect to the Settlement Agreement or to enforce the same if necessary, as described in and for the reasons recited in the accompanying memorandum of law. A proposed final order is also submitted herewith, granting the relief herein sought, and allowing the case to be closed with leave to reinstate on motion of a party.

WHEREFORE, the parties jointly request that the Court enter an Order of Dismissal of this action, retaining jurisdiction to enforce the Settlement Agreement and determine any dispute over its terms.

Dated: April 21, 2020

For the plaintiff, Gold Forever Music, Inc., and the counterclaim defendant, Edward Holland, Jr.

Neal Nusholtz P-30223
2855 Coolidge Hwy., Ste. 210
Troy, Michigan
Ph. 248-646-0123/Fax 248-530-9801
Nusholtz@nnlaw.net

For the defendant/counterclaimant, United States of America

Edward J. Murphy
Trial Attorney
U.S. Dept. of Justice, Tax Division
P.O. Box 55
Washington, DC 20044
Ph. 202-307-6064/Fax 202-514-5238
Edward.J.Murphy@usdoj.gov


BRIEF IN SUPPORT OF JOINT MOTION TO DISMISS WITH LEAVE TO REOPEN TO RESOLVE ANY DISPUTE UNDER AND/OR TO ENFORCE SETTLEMENT AGREEMENT

The amended complaint in this action is by the plaintiff, Gold Forever Music, Inc. (“GFM”), against the United States under 26 U.S.C. § 7426 for alleged wrongful levy against the royalty receivables of GFM, which levy was based on the IRS's contention that GFM is an alter ego of taxpayer Edward J. Holland, Jr. The amended complaint seeks approximately $1.6 million. The United States' answer to the amended complaint includes, among other defenses, a partial defense based upon the right, if plaintiff were to prevail, to offset various tax liabilities of GFM. The United States has also counterclaimed to enforce its tax liens for Holland's liabilities against his 100% ownership interest in GFM. GFM, the United States, and Holland are referred to collectively herein as “the Parties.”

The Parties have executed a three-way Settlement Agreement that addresses all of the issues raised in this matter as well as certain issues they anticipate could arise in carrying out the terms of the Settlement Agreement. The terms, as further outlined below, include provisions not only addressing the funds previously received by the IRS pursuant to its levy, but also provisions governing the disposition of the royalties that GFM anticipates continuing to earn in the future, including not only royalties earned in respect to compositions by Holland but also the publisher's share of royalties earned by GFM in respect to compositions by other individuals. Given the nature of those provisions, the agreement includes a provision under which the Parties agreed to ask this Court to retain jurisdiction to resolve any dispute regarding the terms of the agreement and to enforce the same or grant related relief if necessary, upon the filing of an appropriate motion.

A court must expressly retain jurisdiction over a settlement agreement in order to enforce the agreement. See SmallBizPros, Inc. v. MacDonald, 618 F.3d 458, 463-64 (5th Cir. 2010); Hehl v. City of Avon Lake, 90 F. App'x 797, 801 (6th Cir. 2004) (“a district court retains jurisdiction to enforce a settlement agreement if it either (1) has language in the dismissal order indicating its retention of jurisdiction, or (2) incorporates the terms of the settlement agreement into the dismissal order”).

The parties would prefer not to file, and submit that it is not necessary to file, the Settlement Agreement with the Court unless and until any party seeks enforcement of a provision thereof or to resolve a related dispute. Instead, the terms are summarized below, we believe sufficiently to enable the Court to understand what it would be retaining jurisdiction over.1 If the Court believes it necessary that the Settlement Agreement be filed, then the Parties ask to be allowed to file the agreement without including an exhibit that lists the names of all composers and certain other persons to whom GFM is indebted and the amounts they may claim, and that may include other minor redactions in the main agreement as agreed upon by the parties that GFM believes may hamper its business, the earnings of which will be shared to an extent by the United States as described below.

The Settlement Agreement resolves GFM's claim for wrongful levy through payment from the United States to GFM of $800,000 less an offset for GFM's 2011-year corporate income tax liability of approximately $192,000. It includes allowing GFM to file amended income tax returns for years after 2011 to remove funds that the IRS levied and applied to Holland's tax liabilities, with the understanding that the $800,000 will be gross income to GFM in 2020 (subject to deductions for expenses paid as allowed in the agreement to the extent permitted by the Internal Revenue Code). It includes certain limitations on the disposition of said funds by requiring that the funds left after payment of a 45% contingent fee for GFM's counsel be used primarily to pay part of GFM's past debts to composers and certain others.

It then provides terms for the disposition of royalties earned by GFM going forward. Specifically, when a composition is used for which a composer has assigned the copyright to GFM, the entity that is permitted by GFM to use the composition is required to pay 50% of the royalties directly to the composer in the future and 50% to GFM (the “publisher's share”). The Settlement Agreement provides for the IRS to collect a stated percentage of the publisher's share to apply to Holland's tax liabilities, which settles both the alter-ego issue and the government's counterclaim regarding Holland's ownership of GFM. For business reasons, GFM would prefer not to put that percentage on the public record. Additionally, for any compositions written by Holland, GFM will be required to pay the United States one half of the composer's share otherwise due Holland.

There are also similar provisions governing any advances to GFM of the publisher's share of future royalties that it may be entitled to in negotiating future contracts for the use of compositions in its portfolio, allocating the same percentage to the United States for Holland's taxes. For the same reason, GFM prefers not to place on the public record the details of those terms.

As a related matter, there are provisions governing a possible future sale of GFM's assets or Holland's 100% stock ownership of GFM and, similarly, GFM prefers not to put the details of those terms on the public record.

Importantly, an exhibit to the Settlement Agreement lists the identities of over 100 individuals whose copyrighted compositions are under the contractual control of GFM and the amounts of royalties previously owed to those individuals, as well as identifying certain other individuals who are owed money for services rendered to GFM. While the agreement provides that GFM would comply with any levy by the IRS for any tax that might be owed by any of the composers, the agreement does not attempt to accord jurisdiction in this Court in this case over any dispute between the IRS and any individual to whom GFM is obligated, and the proposed dismissal order is not intended to imply any such jurisdiction. To the contrary, it is limited to resolving disputes among, or enforcing the terms with regard to, the parties to this action.

The provisions of the Settlement Agreement are to be subject to monitoring by a certified public accountant acceptable to the United States and other conditions. The accountant is to be required to disclose to the United States any non-compliance with the terms of the agreement.

The agreement also settled the Sixth Circuit appeal from this Court's order dismissing for lack of jurisdiction Holland's complaint in Civil No. 17-13926 regarding the IRS levy of his social security benefits. Jurisdiction is specifically not preserved for that provision, as the appeal has already been dismissed with prejudice, but without prejudice to a separate new action by Holland depending upon future events, and without prejudice to any defense the government may have in any such action.

GFM posits to the court that the details of the terms of the settlement beyond their summary above has any public benefit and is all it of a private business or financial nature. Moreover, it is not hard to imagine circumstances where the provisions, if not redacted, could be used to gain financial advantage over GFM and/or the individuals involved or to embarrass them.

The agreement provides for it to be “so ordered” but, by that, the parties did not intend to convert the terms of the agreement into an injunction in advance of any need to ask the Court to enforce the terms (and the accompanying proposed order makes that clear). Rather, the parties agree that the Court should order them at this time to comply in good faith with their understandings of the terms of the Settlement Agreement and further agree that the Court may subsequently issue any orders necessary or appropriate to enforce the agreement in response to a motion.

If the Court has any questions about terms of the Settlement Agreement, the Parties invite the Court to schedule a telephone conference.

Conclusion

For reasons stated above, the parties request that the Court enter the proposed order or one to similar effect, dismissing this action with prejudice except insofar as the Settlement Agreement reserves certain rights of the parties in respect to the claims, defenses, and counterclaims, and reserving jurisdiction to enforce or resolve any dispute regarding the terms of the Settlement Agreement.

Dated: April 21, 2020

For the plaintiff, Gold Forever Music, Inc., and the counterclaim defendant, Edward Holland, Jr.

Neal Nusholtz P-30223
2855 Coolidge Hwy., Ste. 210
Troy, Michigan
Ph. 248-646-0123/Fax 248-530-9801
Nusholtz@nnlaw.net

For the defendant/counterclaimant, United States of America

Edward J. Murphy
Trial Attorney
U.S. Dept. of Justice, Tax Division
P.O. Box 55
Washington, DC 20044
Ph. 202-307-6064/Fax 202-514-5238
Edward.J.Murphy@usdoj.gov


ORDER OF DISMISSAL

Upon the joint motion of the parties to this action, and the Court having considered the premises, the Court hereby orders as follows:

1) This action, including the counterclaim, is dismissed with prejudice except it is without prejudice insofar as the Settlement Agreement reserves certain rights of the parties in respect to the claims, defenses, and counterclaims heretofore pled in this action.

2) The Court retains jurisdiction to enforce the Settlement Agreement and/or or resolve any future dispute that arises regarding the implementation of that agreement, provided that nothing herein shall be construed to grant jurisdiction over any claims by or against any person that is not already a party to this action or to expand the jurisdiction of this Court beyond matters related to the implementation of the terms of the Settlement Agreement. Any motion made pursuant to this Court's retained jurisdiction shall, if made by the United States, be served on GFM and Holland by emailing a copy of the motion to attorney Neal Nusholtz, nusholtz@nnlaw.net, who shall acknowledge receipt by reply promptly but, if such receipt is not acknowledged by reply, then the motion shall be mailed to Mr. Nusholtz and to Holland and GFM at the current addresses or any updated addresses supplied to counsel for the United States. Any motion made by GFM and/or Holland shall be emailed and mailed as follows: (1) emailed both to Edward.J.Murphy@usdoj.gov and northern.taxcivil@usdoj.gov; and (2) mailed to DOJ Tax Division, P.O. Box 55, Washington, D.C. 20044. If Mr. Murphy receives such an email, he shall acknowledge receipt of the same by reply promptly. Any such motion shall attach a copy of the Settlement Agreement as an exhibit (but may omit the exhibit to the agreement) and shall describe in sufficient detail the nature of the alleged violation or dispute and the efforts made to resolve it without court intervention.

3) The parties are ordered to comply in good faith with the terms of the Settlement Agreement, but this directive is limited to implementing the jurisdiction retained in the preceding paragraph and shall not be understood to justify any motion for contempt sanctions for violating any of the terms of the agreement.

SO ORDERED:

Dated: _______________

George Caram Steeh
U.S. District Judge

FOOTNOTES

1The parties agree that nothing in the summary of terms below is intended to vary the terms of the agreement.

END FOOTNOTES

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