The Superior Court Of Pennsylvania

HARRISBURG – On Wednesday, the Superior Court of Pennsylvania affirmed a judgment of the Allegheny County Court of Common Pleas, denying an appeal made by a Pittsburgh finance firm in a tax records analysis case.

Judge John Bender wrote the three-judge panel's opinion upholding the granting of a preliminary injunction for the plaintiffs in a class action suit.

The injunction enjoined appellants Christian Financial Management Corp. (CFM), India Christian and Corey Christian from issuing amended W-2 statements for Tax Year 2012, until further order of the trial court.

CFM provided payroll services for caregivers attending to disabled persons receiving Medicaid benefits, as administered by the Pennsylvania Department of Public Welfare. Its duties included withholding payroll taxes, making tax payments to the proper authorities and issuing paychecks to the caregivers. 

After thousands of new accounts were opened in 2012, discrepancies allegedly began to appear in CFM’s payroll services.

As a result, caregivers Lisa Martinez, Elizabeth Sieber, Jennifer Darazio and Debra Tinkey initiated a class action suit in October 2012.

The lawsuit alleged CFM violated the Pennsylvania Wage Payment and Collections Law and engaged in unjust enrichment, breach of contract and breach of fiduciary duty.

In December 2012, the trial court appointed a receiver to oversee the records and assets of CFM, including the reporting and payment of tax obligations. The receiver issued the W-2 reports two months later, which estimated 2012 gross earnings and tax obligations for those caregivers.

In the receiver’s view, CFM’s financial records were incomplete, which made accurate records impossible to issue. The receiver also believed the company had an outstanding balance of $2 million in employee-related taxes, yet CFM did not object to these W-2 statement at the time.

In January 2014, CFM submitted an expert report (the Krieger Report), which challenged the receiver’s methodology used to create its 2012 W-2 statements.

Subsequent to submitting the Krieger Report, CFM filed amended forms for federal unemployment tax and employer’s federal tax return, while informing the trial court of its intention to issue amended 2012 W-2 statements – though they still remained inaccurate, since CFM conceded it did not consider potential tax exemptions based on family relationship.

In April 2014, the plaintiffs filed a motion for preliminary and permanent injunctive relief, seeking to prevent CFM from issuing amended 2012 W-2 statements.

The trial court conducted a hearing on April 30, 2014, and then granted appellees’ motion for a preliminary injunction. CFM appealed the decision, positing federal law could preempt the state trial court’s preliminary injunction.

CFM believed the federal Anti-Injunction Act (AIA) “prohibits any court from entertaining an action filed with the purpose of restraining the assessment or collection of any tax," and the injunction directly conflicted with “Congressional objectives” in the Internal Revenue Code.

The Superior Court did not concur with CFM’s rationale for vacating the injunction and concluded the trial court’s granting of that same injunction was correct.

“A W-2 statement, issued by an employer, merely reports an employee’s wages and those taxes withheld by the employer over the course of the preceding year. Thus…the trial court’s injunction merely postpones or inhibits the assessment and collection of the caregivers’ taxes, it does not restrain assessment or collection,” Bender said.

Bender said the Superior Court reviewed the trial court’s analysis, and took note of its reliance upon evidence that the appellants conceded their revised W-2 statements would remain inaccurate. 

“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. Accordingly, we discern no abuse of discretion and affirm,” Bender said.

The appellants were represented by Michael S. Garrison, Carl H. Hellerstedt Jr., Rolf Louis Patberg and Homer L. Walton, in Pittsburgh.

The appellees were represented by Evalynn Welling, also in Pittsburgh.

The Superior Court of Pennsylvania case 766 WDA 2014

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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