J-A19003-15

                            2015 PA Super 215

LISA MARTINEZ, ELIZABETH SIEBER,          IN THE SUPERIOR COURT OF
JENNIFER DARAZIO AND DEBRA TINKEY,              PENNSYLVANIA
ON BEHALF OF THEMSELVES AND ON
BEHALF OF ALL OTHERS SIMILARLY
SITUATED

                v.

CHRISTIAN FINANCIAL MANAGEMENT
CORP., INDIA CHRISTIAN AND COREY
CHRISTIAN

                v.

ACCESSABILITIES, INC. AND
COMMUNITY RESOURCES FOR
INDEPENDENCE

APPEAL OF: CHRISTIAN FINANCIAL
MANAGEMENT CORP., INDIA CHRISTIAN               No. 766 WDA 2014
AND COREY CHRISTIAN


             Appeal from the Order Entered April 30, 2014
          In the Court of Common Pleas of Allegheny County
                 Civil Division at No(s): GD-12-018763


LISA MARTINEZ, ELIZABETH SIEBER,          IN THE SUPERIOR COURT OF
JENNIFER DARAZIO AND DEBRA TINKEY,              PENNSYLVANIA
ON BEHALF OF THEMSELVES AND ON
BEHALF OF ALL OTHERS SIMILARLY
SITUATED

                v.

CHRISTIAN FINANCIAL MANAGEMENT
CORP., INDIA CHRISTIAN AND COREY
CHRISTIAN

                v.

ACCESSABILITIES, INC. AND
COMMUNITY RESOURCES FOR
J-A19003-15


INDEPENDENCE

APPEAL OF: CHRISTIAN FINANCIAL
MANAGEMENT CORP., INDIA CHRISTIAN                    No. 1445 WDA 2014
AND COREY CHRISTIAN


                Appeal from the Order Entered August 20, 2014
               In the Court of Common Pleas of Allegheny County
                      Civil Division at No(s): GD-12-018763


BEFORE: BENDER, P.J.E., JENKINS, J., and MUSMANNO, J.

OPINION BY BENDER, P.J.E.:                        FILED OCTOBER 07, 2015

       Christian Financial Management Corp. (CFM), India Christian, and

Corey Christian (collectively, Appellants) appeal from the orders entered

April 30, 2014, and August 20, 2014, which granted the class action

plaintiffs’ motion for preliminary injunction, enjoining Appellants from issuing

amended W-2 statements for Tax Year 2012 until further order of the trial

court.1 We affirm.

       CFM provided payroll services for attendant caregivers, who provided

care to disabled persons receiving Medicaid benefits administered by the

Pennsylvania Department of Public Welfare.        Its responsibilities included

withholding payroll taxes, making tax payments to the appropriate taxing

authorities, and issuing paychecks to the caregivers.      Sometime in 2012,

following an influx of several thousand new accounts, discrepancies began to
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1
 An appeal may be taken as of right from an order that grants an injunction.
See Pa.R.A.P. 311(a)(4). The above-listed dockets were consolidated sua
sponte by this Court on October 30, 2014. See infra at n.4.



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appear in CFM payroll services.                 Thereafter, caregivers Lisa Martinez,

Elizabeth Sieber, Jennifer Darazio, and Debra Tinkey, on behalf of

themselves      and     others      similarly     situated    (collectively,   Appellees),

commenced this class action in October 2012, alleging violations of the

Pennsylvania Wage Payment and Collections Law,2 unjust enrichment,

breach of contract – third party beneficiary, and breach of fiduciary duty.

        In December 2012, the trial court appointed a receiver to protect and

administer the records and assets of CFM, including the accurate reporting

and payment of tax obligations.3                 See Trial Court Order, 12/13/2012

(appointing receiver); Trial Court Order, 01/10/2013 (regarding 2012 W-2

statements).      In February 2013, the receiver issued W-2 statements to

former CFM caregivers, thus reporting estimated 2012 gross earnings and

tax    obligations    for   those   caregivers.        See    Receiver’s   Final   Report,

08/22/2013.       However, according to the receiver, CFM records were in

disarray, and complete, accurate payment records could not be re-

assembled. Id. Regarding tax obligations, the receiver paid approximately

$4.5 million in pre-receivership federal, state, and local taxes, but estimated

CFM     owed    approximately          $2   million   in   additional,   pre-receivership,

employee-related taxes.          Id.    According to the receiver, this discrepancy
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2
    43 P.S. §§ 260.1 – 260.9a.
3
 Incidentally, in January 2013, the Pennsylvania Department of Public
Welfare transferred CFM caregivers to another financial services company.



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arose due to CFM’s failure to withhold properly the tax obligations incurred

by its caregivers. Id. Following submission of the receiver’s final report, the

trial court terminated the receivership. See Order of Court, 08/26/2013. At

no point prior to the termination of the receivership did CFM object to the

receiver-issued W-2 statements.

      In January 2014, Appellants submitted an expert report (Krieger

Report), challenging the methodology applied by the receiver to generate

2012 W-2 statements. See Krieger Report, 01/16/2014. Based upon the

Krieger Report, CFM filed amended IRS Forms 940 (regarding federal

unemployment tax) and 941 (regarding employer’s federal tax return). CFM

also informed the trial court of its intention to issue amended 2012 W-2

statements. Nevertheless, Appellants acknowledged that the amended W-2

statements remained inaccurate. See Krieger Report at 32 (acknowledging

that its analysis did not consider potential tax exemptions based on family

relationship).

      In April 2014, Appellees filed a motion for preliminary and permanent

injunctive relief, seeking to enjoin CFM from issuing amended 2012 W-2

statements. The trial court conducted a hearing on April 30, 2014, at the

conclusion of which, the court granted Appellees’ motion for a preliminary

injunction.




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       Appellants timely appealed, and filed two, court-ordered Pa.R.A.P.

1925(b) statements. The trial court issued responsive opinions.4

       Appellants raise the following issues:

       1. Does federal law preempt a state court from enjoining [CFM]
       from issuing amended W-2 tax statements?

       2. Did sufficient evidence exist to support the trial court’s entry
       of an injunction preventing [CFM] from issuing amended W-2 tax
       statements?

Appellants’ Brief at 4.

       Initially, Appellants contend that federal law preempts the trial court

from enjoining CFM from issuing amended W-2 tax statements, thus

depriving the court of subject matter jurisdiction.     See, e.g., Werner v.

Plater-Zyberk, 799 A.2d 776, 787 (Pa. Super. 2001) (“Federal preemption

is a jurisdictional matter for a state court because it challenges subject

matter jurisdiction and the competence of the court to reach the merits of
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4
  The trial court issued its order granting Appellees’ motion from the bench
on April 30, 2014. Appellants timely appealed on May 9, 2014, docketed in
this Court at No. 766 WDA 2014. The trial court entered a written order,
again granting Appellees’ motion, on May 21, 2014. On June 4, 2014,
Appellants filed a court-ordered Rule 1925(b) statement. The trial court
issued a responsive opinion on August 20, 2014. However, following its
opinion, the trial court entered another order. The new order again granted
Appellees’ motion for preliminary injunctive relief, but clarified its previous
ruling, enjoining Appellants from issuing amended W-2 statements “until
further order on this matter.” Trial Court Order, 08/20/2014. The modified
order prompted Appellants to file a second notice of appeal on September 5,
2014, docketed here at No. 1445 WDA 2014, and a second, court-ordered
Rule 1925(b) statement. The trial court re-issued its opinion on December
10, 2014. This Court sua sponte consolidated these appeals. See Order of
Court, 10/30/2014.



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J-A19003-15


the claims raised.”).       Appellants raise two arguments in support of this

contention.

        First, Appellants suggest that the federal Anti-Injunction Act, 26 U.S.C.

§ 7421(a), expressly preempts the trial court from enjoining CFM from

issuing amended W-2 tax statements.              See Werner, 799 A.2d at 787

(“Express preemption arises when there is an explicit statutory command

that state law be displaced.”). As noted by Appellants, the Anti-Injunction

Act (AIA) prohibits any court from entertaining an action filed with “the

purpose of restraining the assessment or collection of any tax.” 26 U.S.C. §

7421(a). According to Appellants, this prohibition extends to those activities

that may culminate in the assessment or collection of taxes, citing in support

Blech v. United States, 595 F.2d 462, 466 (9th Cir. 1979).5

        Second, Appellants also contend that the injunction is preempted

because it conflicts with Congressional objectives, manifest in the Internal

Revenue Code.         See Werner, 799 A.2d at 787 (noting that conflict

preemption occurs when it is impossible to comply with both state and

federal law or when state law “stands as an obstacle to the accomplishment

and execution of the full purposes and objectives of Congress”). Appellants

note CFM’s obligation to report accurately federal withholding taxes and to

correct perceived errors in its reporting.        See Appellants’ Brief at 24-30

____________________________________________


5
    Appellant also cites to several, sister-state court decisions.



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(citing federal statutes and case law, detailing its obligations under the

Internal Revenue Code).

        Here, Appellants seek to issue amended, 2012 W-2 statements that

comport with the tax analysis set forth in its expert report but are contrary

to the tax analysis previously adopted by the receiver. Appellants suggest

that amended W-2 statements would more accurately report caregivers’

wages and the taxes withheld from them.                  Moreover, according to

Appellants, the issuance of amended W-2 statements would facilitate the

“assessment” and “collection” of federal taxes. Thus, Appellants conclude,

we should vacate the injunction.

        We disagree.        Recently, the United States Supreme Court has

addressed the proper interpretation of the terms “assessment” and

“collection,” relevant to the Federal Tax Code. See Direct Mktg. Ass’n v.

Brohl, 135 S. Ct. 1124 (2015).6           In Brohl, a trade association brought a

federal suit against the Colorado Department of Revenue, asserting that

certain notice and reporting requirements were unconstitutional.          Id. at

1128.     The federal district court enjoined the requirements, pending

____________________________________________


6
  At issue in Brohl was the Tax Injunction Act (TIA), not the AIA. See 28
U.S.C. § 1341 (depriving federal courts of jurisdiction to “enjoin, suspend or
restrain the assessment, levy or collection of any tax under State law”).
However, the Supreme Court “assume[-d] that words used in both Acts are
generally used in the same way” and “discern[-ed] the meaning of the terms
in the AIA by reference to the broader Tax Code.” Brohl, 135 S. Ct. at
1129. Thus, the Supreme Court’s interpretation is instructive.



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outcome of the underlying litigation. Id. at 1128-29. On appeal, the United

States Court of Appeals for the Tenth Circuit reversed, concluding that the

district court was without jurisdiction pursuant to the TIA; however, the

Supreme Court granted certiorari and reversed the judgment of the circuit

court. Id. at 1129.

      The Court observed that “the Federal Tax Code has long treated

information gathering as a phase of tax administration procedure that occurs

before assessment, levy, or collection.”   Id. (emphasis added).      Thus, the

Court concluded, the injunction did not “restrain” the assessment or

collection of taxes.   Id. at 1132 (adopting a narrow definition of the word

“restrain,” meaning, “to prohibit from action”).    According to the Supreme

Court:

      [A]dopting a narrower definition is consistent with the rule that
      jurisdictional rules should be clear. The question—at least for
      negative injunctions—is whether the relief to some degree stops
      “assessment, levy or collection,” not whether it merely inhibits
      them. The Court of Appeals' definition of “restrain,” by contrast,
      produces a vague and obscure boundary that would result in
      both needless litigation and uncalled-for dismissal, all in the
      name of a jurisdictional statute meant to protect state resources.

      Applying the correct definition, a suit cannot be understood to
      “restrain” the “assessment, levy or collection” of a state tax if it
      merely inhibits those activities.

Id. at 1133 (internal citations and quotation marks omitted).

      In our view, W-2 statements are sufficiently similar to the notice and

reporting requirements at issue in Brohl.     A W-2 statement, issued by an

employer, merely reports an employee’s wages and those taxes withheld by

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J-A19003-15


the employer over the course of the preceding year. See 26 U.S.C. § 6051;

see also, generally, Bachner v. Comm’r, 81 F.3d 1274, 1280 (3d Cir.

1996)   (“W-2   information   is   not    independently   sufficient   for   tax-

computational purposes.”).     Thus, even were we to accept Appellants’

position, that amended statements would more accurately report its former

caregivers’ wages and taxes, the trial court’s injunction merely postpones or

inhibits the assessment and collection of the caregivers’ taxes, it does not

restrain assessment or collection.       Accordingly, pursuant to Brohl, we

conclude that the trial court was not jurisdictionally barred from enjoining

Appellants from issuing amended W-2 statements for Tax Year 2012.

      On the merits, Appellants also contend that there was insufficient

evidence to support the trial court’s injunction.    Our standard of review,

though nominally characterized as an abuse of discretion, is highly

deferential:

      We recognize that on an appeal from the grant or denial of a
      preliminary injunction, we do not inquire into the merits of the
      controversy, but only examine the record to determine if there
      were any apparently reasonable grounds for the action of the
      court below. Only if it is plain that no grounds exist to support
      the decree or that the rule of law relied upon was palpably
      erroneous or misapplied will we interfere with the decision of the
      trial court.

      This Court set out the reasons for this highly deferential
      standard of review almost a hundred years ago:

         It is somewhat embarrassing to an appellate court to
         discuss the reasons for or against a preliminary decree,
         because generally in such an issue we are not in full
         possession of the case either as to the law or testimony—

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J-A19003-15


          hence our almost invariable rule is to simply affirm the
          decree, or if we reverse it to give only a brief outline of our
          reasons, reserving further discussion until appeal, should
          there be one, from final judgment or decree in law or
          equity.

Summit Towne Centre v. Shoe Show of Rocky Mount, Inc., 828 A.2d

995 (Pa. 2003) (internal punctuation and formatting modified; internal

citations omitted) (quoting Hicks v. Am. Natural Gas Co., 57 A. 55, 55-56

(Pa. 1904)).

     We have reviewed the trial court’s analysis. Following a hearing, the

court concluded that an injunction was appropriate. See Notes of Testimony

(N.T.), 07/01/2014, at 115-18; see also Trial Court Opinion, 08/20/2014,

at 5-8 (analyzing the six prerequisites set forth in Warhime v. Warhime,

860 A.2d 41, 46-47 (Pa. 2004)); Trial Court Opinion, 12/10/2014, at 5-8

(same).    In particular, we note the court’s reliance upon evidence that

Appellants’ proposed, amended W-2 statements remain inaccurate.             See,

e.g., N.T. at 113-114 (referencing Krieger Report at 32). Based upon this,

we conclude that the court had reasonable grounds for enjoining the

issuance of amended W-2 statements, at least until the Internal Revenue

Service makes a determination as to their validity and accuracy. See Trial

Court Opinion, 08/20/2014, at 8 (noting that the IRS will ultimately resolve

this dispute). Accordingly, we discern no abuse of discretion and affirm.

     Orders affirmed.




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J-A19003-15


Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 10/7/2015




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