Opinion
Case No. 3:19-cv-01161-SB
07-09-2020
UNITED STATES OF AMERICA, Plaintiff, v. THOMAS T. STUCK, Defendant.
FINDINGS AND RECOMMENDATION
BECKERMAN, U.S. Magistrate Judge.
The United States of America ("United States") filed this action against defendant Thomas T. Stuck ("Stuck") to reduce his outstanding federal tax assessments to judgment under 26 U.S.C. § 7401. The United States now moves for entry of default judgment pursuant to FED. R. CIV. P. 55(b). (ECF No. 12.) The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1340 and 1345, and 26 U.S.C. § 7402, and has personal jurisdiction over Stuck, an Oregon resident. For the reasons that follow, the district judge should grant the United States' default judgment motion. ///
BACKGROUND
Stuck is an Oregon resident, and the tax liabilities at issue accrued in Oregon. (Compl. ¶ 4, ECF No. 1.) The United States alleges that Stuck currently owes $290,410.10 in past due federal income taxes for tax years 2003 through 2006, 2010, and 2011. (Decl. of Revenue Officer Denise L. Armstrong ("Armstrong Decl.") ¶ 17, ECF No. 13.)
The United States filed this action on July 26, 2019, and a process server served Stuck at his home address in McMinnville, Oregon on August 6, 2019. (ECF No. 4.) The United States also sent Stuck a letter on August 28, 2019, informing him that the United States would seek entry of default if he failed to appear. (Decl. of Yael Bortnick ("Bortnick Decl.") ¶¶ 2, 5, ECF No. 6.) Stuck did not timely file an answer as required by FED. R. CIV. P. 12(a)(1)(A)(i) and the United States moved for entry of default, which the Clerk of Court entered on September 27, 2019. (ECF No. 8.)
The United States now moves for default judgment under FED. R. CIV. P. 55(b), seeking judgment in the amount of $290,410.10, plus interest and other statutory additions, and less any payments made against the liabilities, accruing from February 15, 2020. (Pl.'s Mot. at 8.)
DISCUSSION
I. STANDARD OF REVIEW
Pursuant to FED. R. CIV. P. 55(a), the Clerk of Court is required to enter an order of default if a party against whom affirmative relief is sought has failed timely to plead or otherwise defend an action. See FED. R. CIV. P. 55(a) ("When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default."). "The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true." Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (citations omitted); see also City of N.Y. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011) ("The entry of a default, while establishing liability, 'is not an admission of damages.'") (citation omitted).
After default is entered, the party "may move the court for an order of judgment by default." FED. R. CIV. P. 55(b)(2). "The district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The Ninth Circuit instructs courts to consider the factors articulated in Eitel v. McCool, 782 F.2d 1470 (9th Cir.1986). See J&J Sport Prods., Inc. v. Salas, No. 13-cv-05553, 2015 WL 3429153, at *2 (N.D. Cal. May 27, 2015). The Eitel factors are:
(1) the possibility of prejudice to the plaintiff;Eitel, 782 F.2d at 1471-72. The "starting point" of the district court's analysis, however, "is the general rule that default judgments are ordinarily disfavored." Id. at 1472. /// /// ///
(2) the merits of the plaintiff's substantive claims;
(3) the sufficiency of the operative complaint;
(4) the sum of money at stake in the litigation;
(5) the possibility of dispute concerning material facts;
(6) whether the default was due to excusable neglect; and
(7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.
II. ANALYSIS
A. Default Judgment
The Court finds that the Eitel factors weigh in favor of entering default judgment here.
First, the United States will suffer prejudice without a default judgment. Stuck owes a substantial tax liability to the United States and has not appeared to defend this action. As such, a default judgment is the only practical means for recovery. See United States v. Wiley, No. 2:17-cv-00426-SU, 2017 WL 4769122 at *2 (D. Or. Sept. 7, 2017) (finding that "this factor favors default judgment when plaintiff's only available legal remedy is default judgment, and where, without such judgment, plaintiff would be left without any recourse for recovery") (citations omitted).
With respect to the second, third, and fifth Eitel factors (the merits of the claims, the sufficiency of the complaint, and the possibility of a dispute concerning material facts), upon entry of default the Court must accept all well-pleaded allegations in the complaint as true. See United States v. Panter, No. 1:11-cv-03052-CL, 2012 WL 2367369, at *4 (D. Or. May 24, 2012) ("In this case, default was entered against Panter on April 12, 2012, therefore the court will accept as true all well-pleaded allegations regarding liability."). In any event, the United States has also provided sufficient evidence to support its allegations that Stuck failed to pay federal income taxes due and owing for tax years 2003 through 2006, 2010, and 2011, and to support a conclusion that the government properly assessed Stuck's tax liability. See id. ("[T]he Certificates of Assessments and Payments submitted by the United States establish that assessments were properly made, notice and demand for payment were sent, and that Panter is presumptively liable for the unpaid taxes, penalties, and interest reflected on the Certificates. Thus, the merits of the United States' claims are deemed valid.").
The fourth Eitel factor balances the sum of money at stake against the seriousness of the defendant's conduct. Although the money at stake here is substantial, which would typically weigh against entry of default judgment, it is the amount that Stuck owes and he should not be allowed to evade judgment as a result of failing to appear. See United States v. Kelton, No. 1:15-CV-197-AA, 2015 WL 9809799, at *2 (D. Or. Dec. 19, 2015) ("The amount of damages at issue is substantial, so this Eitel factor slightly favors the Kelton Defendants. But the United States has submitted a declaration and supporting exhibits verifying the assessments due from the Kelton Defendants.").
The sixth Eitel factor considers whether the default may be due to the defendant's excusable neglect, but here the United States properly served Stuck at his address and followed up with a letter informing Stuck of its intent to request entry of default. Given these efforts and the subsequent passage of time, it is unlikely that Stuck's failure to appear is the result of excusable neglect. See Kelton, 2015 WL 9809799, at *2 ("The non-appearing Defendants were properly served, and have had ample time to respond but failed to do so. There is no evidence of excusable neglect.").
The final Eitel factor considers the strong policy of the Federal Rules of Civil Procedure favoring a decision on the merits. However, "the mere existence of FED. R. CIV. P. 55(b) indicates that 'this preference, standing alone, is not dispositive.'" Garcia v. Pacwest Contracting LLC, 3:12-cv-01930-SI, 2016 WL 526236, at *4 (D. Or. Feb. 9, 2016) (citations and internal quotations omitted). "'Thus, the preference to decide cases on the merits does not preclude a court from granting default judgment.'" Garcia, 2016 WL 526236, at *4 (quoting Kloepping v. Fireman's Fund, No. C 94-2684 THE, 1996 WL 75314, at *3 (N.D. Cal. Feb. 13, 1996)). Stuck's failure to defend here "makes a decision on the merits impossible[,]" and therefore "the policy favoring decision on the merits does not preclude the Court from entering a default judgment[.]" Garcia, 2016 WL 526236, at *4 (citing PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002)).
The Court finds that the Eitel factors, on balance, weigh in favor of entry of default judgment here, and the Court recommends that the district judge grant the United States' motion.
B. Relief
The government bears the initial burden of proof "[i]n an action to collect tax," and may satisfy its burden "introducing into evidence its assessment of taxes due[,]" and then the burden shifts to the taxpayer to show that he is not liable for the assessment. Oliver v. United States, 921 F.2d 916, 919-20 (9th Cir. 1990) (citing United States v. Stonehill, 702 F.2d 1288, 1293 (9th Cir. 1983)). The Court finds that the United States has submitted sufficient evidence to satisfy its burden here. See Armstrong Decl. ¶ 17 (citing Exhibits B, C, and D); see also Panter, 2012 WL 2367369, at *4 (accepting the government's Certificates of Assessments and Payments as the valid tax due for the entry of default judgment where the defendant "has made no attempt to rebut the tax assessments against him").
The United States also requests payment of its costs, but has not submitted any documentation of costs incurred. The United States may file a cost bill (with receipts) for the district judge to consider in connection with the review of this opinion.
CONCLUSION
For the reasons stated above, the Court recommends that the district judge GRANT the United States' Motion for Default Judgment (ECF No. 12), enter default judgment against defendant Stuck for unpaid federal tax liabilities in the amount of $290,410.10 (plus interest and other statutory additions, and less any payments made against the liabilities, accruing under 26 U.S.C. §§ 6601, 6621, and 6622, and 28 U.S.C. § 1961(c), from February 15, 2020), and award any properly-documented costs.
SCHEDULING ORDER
The Court will refer its Findings and Recommendation to a district judge. Objections, if any, are due within fourteen (14) days. If no objections are filed, the Findings and Recommendation will go under advisement on that date. If objections are filed, a response is due within fourteen (14) days. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement.
DATED this 9th day of July, 2020.
/s/_________
STACIE F. BECKERMAN
United States Magistrate Judge