United States v. Shearer et al

Filing 150

ORDER signed by District Judge Daniel J. Calabretta on 7/20/23 DENYING 148 defendant's Motion for Reconsideration. No further motions for reconsideration will be entertained by the Court. (Kastilahn, A)

Case 2:12-cv-02334-DJC-DB Document 150 Filed 07/21/23 Page 1 of 6
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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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UNITED STATES OF AMERICA,

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No. 2:12-cv-02334-DJC-DB

Plaintiff,

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v.

ORDER

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L. RICHARD SHEARER, et al.,

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Defendants.

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Defendant Diane Shearer is seeking reconsideration of the Court’s denial of her

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prior Motion to Set Aside Partial Summary Judgement (“Motion to Set Aside”), which

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alleged that newly discovered evidence showed that the amount of judgement was

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erroneous, and that the Government had committed fraud and/or misconduct.

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Defendant Shearer now brings the present motion contending that this Court

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committed error in denying the Motion to Set Aside. (ECF No. 148.)
For the reasons below, Defendant’s Motion for Reconsideration is DENIED.

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I.

Background

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On September 11, 2012, Plaintiff brought this suit following the disposition of a

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criminal matter which determined that Defendant Richard L. Shearer had engaged in a

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scheme to conceal income from the Internal Revenue Service (“IRS”) through a series

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of sham trusts. See United States v. Bullock, No. 2:00-cr-00345-KJM-4 (E. D. Cal.). This
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suit was brought by Plaintiff to assess the federal tax liability against Defendants L.

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Richard Shearer and Diane Shearer, to adjudicate the legal status of alleged trusts

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used by the Shearers, and to foreclose tax liens against certain properties. (First Am.

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Compl. (ECF No. 4) ¶ 1.)

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The Court previously granted Partial Summary Judgement to Plaintiff on the

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basis that the Shearers owed unpaid taxes and acted with intent to defraud the

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Government, making them liable for fraud penalties. (See generally ECF No. 86.) The

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Court entered judgement based on the balances calculated by the IRS and presented

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to the Court by Plaintiff. (Id. at 11–12.) At the time, Defendants did not challenge the

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calculations. (Id.) Judgement was entered August 7, 2018. (ECF No. 87.)
In early 2022, the U.S. Attorney’s Financial Litigation Unit found that a restitution

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check which L. Shearer had been ordered to pay in his criminal case had been

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erroneously made out to the unit instead of being paid to the IRS. (ECF No. 141 at 31–

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32.) Because this payment was not received, it had not been credited to the Shearers’

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tax liability at the time of the August 7, 2018 judgement. (Id. at 31–34.) The U.S.

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Attorney notified the Court, and the funds were release to the IRS. See United States

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v. Bullock, No. 2:00-cr-00345-KJM-4 (E.D. Cal. Feb. 2, 2022). The IRS then credited the

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Shearers’ account with the payment. (ECF No. 141 at 31–32.)

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On May 12, 2023, Defendant brought the Motion to Set Aside, arguing that the

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evidence presented to the Court at summary judgement was erroneous. (ECF No.

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141 at 1–4.) Defendant argued that a $5,000 restitution payment made by L. Richard

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Shearer in the criminal matter, which had been made out to the incorrect party and

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was therefore not deducted from the Shearers’ tax liability until it was discovered by

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the U.S. Attorney’s Office in 2022, was newly discovered evidence which warranted

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setting aside the judgement. Defendant also argued that the Government had

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engaged misconduct by not discovering the error sooner, and submitting an

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inaccurate accounting with the Motion for Summary Judgement. (Id.) Defendant

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further alleged that the interest payments had been incorrectly calculated, and that a
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levy against the Regency Trust, a separate defendant in this case, had not been

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applied to the Shearers’ account. (Id.) Throughout her Motion to Set Aside, as well as

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her Brief in Support of her Motion for Reconsideration, (ECF No. 149,) Defendant

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listed a host of other allegations and arguments, including personal attacks on the

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Chief Judge of the Eastern District of California and this Court, and allegations that the

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U.S. Attorney’s Office knowingly engaged in misconduct. (ECF No. 141 at 33–42; see

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generally ECF No. 149.)

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On June 15, 2023, the Court denied Defendant’s Motion to Set Aside, but
modified and reduced the judgement against Defendant to correct the oversight or

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omission which led to the $5,000 restitution payment not being applied to

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Defendants’ liability. (ECF No. 146.) On June 30, 2023, Defendant brought the

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present motion asking the Court to reconsider setting aside summary judgement.

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(Mot. (ECF No. 148).)

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II.

Legal Standard for Motion for Reconsideration

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A motion for reconsideration may be granted if the district court is presented

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with “newly discovered evidence, committed clear error, or if there is an intervening

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change in the controlling law.” Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th

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Cir.1999). “[T]he rule offers an ‘extraordinary remedy, to be used sparingly in the

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interests of finality and conservation of judicial resources.’” Kona Enters., Inc. v. Estate

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of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (quoting Moore's Federal Practice

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§ 54.78[1] (3d ed. 2000)). A motion for reconsideration “may not be used to raise

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arguments or present evidence for the first time when they could reasonably have

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been raised earlier in the litigation.” Id.; see also Marlyn Nutraceuticals, Inc. v. Mucos

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Pharma GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009).

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III.

Discussion
Defendant is effectively arguing that this Court committed clear error in

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denying the Motion to Set Aside Partial Summary Judgement. A motion to set aside a

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judgement may be granted by a Court for, inter alia:
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(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence, could not have
been discovered in time to move for a new trial under Rule 59(b);
(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or
misconduct by an opposing party . . . .

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Fed. R. Civ. P. 60(b). “A party making a Rule 60 motion must show the evidence (1)

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existed at the time of trial or when the order was entered; (2) could not have been

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discovered through the exercise of due diligence; and (3) was of such magnitude that

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the production of it would have been likely to change the disposition of the case.”

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Hollis-Arrington v. Cendant Mortg. Corp., No. CV-015658-CBM-AJW, 2003 WL

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27376890, at *2 (C.D. Cal. Aug. 29, 2003). In addition, a motion based on the above-

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listed reasons must be made within one year of the date of judgement. Fed. R. Civ. P.

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60(c)(1).

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Defendant’s initial motion was brought on the basis that the IRS’s failure to

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apply the $5,000 restitution payment, which had been made out to the incorrect party

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and was therefore not deducted from Defendant’s tax liability until it was discovered

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by the U.S. Attorney’s Office in 2022, constituted newly discovered evidence, and

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represents misconduct and fraud on the part of the U.S. Attorney. Defendant also

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raised arguments contesting the IRS’s calculation of the Shearers’ tax liability which

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had been presented with Plaintiff’s Motion for Summary Judgement. In her Motion for

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Reconsideration, Defendant asserts for the first time that the IRS had incorrectly

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calculated the fraud penalty. Plaintiff likewise argues that these calculation errors are

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newly discovered evidence.

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Setting aside the issue that Defendant Shearer’s request was made nearly four

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years too late, the Court had determined that the evidence Defendant presented was

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not “newly discovered evidence” for the purpose of a Motion to Set Aside. (ECF No.

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146.) The alleged errors in calculating the tax liability, including whether certain

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payments were properly applied to Defendants’ accounts “could have been

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discovered through the exercise of diligence prior to the entry of judgment.” Hollis-

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Arrington v. Cendant Mortg. Corp., No. CV015658CBMAJWX, 2003 WL 27376890, at
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*3 (C.D. Cal. Aug. 29, 2003). Plaintiff submitted the full IRS accounting with its Motion

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for Summary Judgement, and Defendant had an opportunity to contest the

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accounting either on the basis that payments were missing, or that the interest or

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fraud penalty were miscalculated, but failed to do so. As the Court stated, “[t]he

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Shearers have not identified any facts to cast doubt on the accuracy of the

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government’s data, calculations, or application of applicable percentages, such as

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which interest rate or fraud penalty percentage apply.” (ECF No. 86 at 12.) Defendant

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may not now come to the Court nearly five years later and present expert testimony

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that she could have secured at the time of the Motion for Summary Judgement.

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Moreover, the alleged discrepancy in calculations would not have affected the

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underlying determination that Plaintiff was entitled to summary judgement against

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Defendants as a matter of law, it would only marginally alter the judgement amount.

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This circumstance would therefore not have warranted setting aside the finding of

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partial summary judgement. Hollis-Arrington v. Cendant Mortg. Corp., 2003 WL

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27376890, at *3 (finding that the evidence was not “of such magnitude as to change

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the outcome of the case” and therefore did not warrant setting aside the judgement);

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accord Coastal Transfer Co. v. Toyota Motor Sales, U.S.A., 833 F.2d 208, 211 (9th Cir.

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1987).

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Despite Defendant’s Motion to Set Aside being time barred and failing as a

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matter of law, the Court sua sponte corrected the accounting error pursuant to the

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Court’s authority under Federal Rule of Civil Procedure 60(a) by reducing the amount

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of judgement. Defendant now asserts that the true amount of the restitution was

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$5,178.16, despite having stated numerous times in her Motion to Set Aside that it

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was $5,000. If this was the amount that Defendant believed should have been

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credited to her account, she should have stated that. In any event, the IRS has

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credited the full amount of the restitution check to the Shearers’ account. (See ECF

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No. 144 at 2–3.)

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Defendant’s additional argument that the IRS failed to apply a levy against the
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Regency Trust to the Shearers’ tax liability is irrelevant, unsupported by the evidence,

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and again, not newly discovered evidence which would support setting aside the

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judgement. The Regency Trust is a separate defendant in this case and there has

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been no ruling on the tax liability of the Regency Trust at this stage. To the extent the

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Regency Trust is found to be liable, Defendant may contest the amount of liability or

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the Plaintiff’s accounting at that stage. Further, Defendant does not present evidence

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of such a payment ever having been made, stating that “the levy does not show on the

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Shearer’s personal tax transcript or the Regency Trust transcript as credit.” (ECF No.

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148 at 2.) Finally, similar to the above contested calculations, the levy payment is not

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newly discovered evidence, nor would it warrant setting aside the summary

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judgement ruling.

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The other arguments made by Defendant, including that the U.S. Attorney’s

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Office conspired against Defendant, violated service of process in the separate

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criminal case, and violated the rules of professional conduct, and that this Court

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engaged in misconduct and denied Defendant due process, are wholly without merit.

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IV.

Conclusion

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For the above reasons, IT IS HEREBY ORDERED that Defendant’s Motion for

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Reconsideration is DENIED. No further motions for reconsideration will be

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entertained by the Court.

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IT IS SO ORDERED.

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Dated:

July 20, 2023
Hon. Daniel J. Calabretta
UNITED STATES DISTRICT JUDGE

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DJC2 — 12cv02334.mfr2

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