UNITED STATES OF AMERICA et al v. Canul

Filing 27

ORDER by Judge Lucy Koh granting 25 Motion (lhklc2, COURT STAFF) (Filed on 1/6/2014)

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United States District Court
For the Northern District of California

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
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UNITED STATES OF AMERICA AND
EMMANUEL E. OROSA, REVENUE AGENT, )
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Petitioners,
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v.
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MICHAEL CANUL,
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Respondent.
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Civil Case No.: 11-CV-01658-LHK
ORDER GRANTING PETITIONERS’
APPLICATION FOR ENTRY OF
JUDGMENT

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Petitioners, the United States of America and IRS agent Emmanuel Orosa, request, see ECF
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No. 25, that the Court enter judgment in the amount of $62,750, which consists of a monetary civil
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contempt fine of $250 per day imposed by this Court in its December 2, 2011 Order Finding
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Respondent in Contempt, see ECF No. 21. This fine is calculated from December 2, 2011 until
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August 10, 2012, the date on which Respondent, Michael Canul, finally complied with the Court’s
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July 26, 2011 Order Enforcing the IRS Summons. See ECF No. 11 (“Order Enforcing Summons”).
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Respondent has not filed an opposition to Petitioners’ application for entry of judgment. Pursuant
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to Civil Local Rule 7–1(b), the Court finds this matter appropriate for resolution without oral
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argument and hereby VACATES the hearing on Petitioners’ motion scheduled for February 20,
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2014, at 1:30 p.m. Having considered Petitioners’ application for entry of judgment, the record in
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Case No.:11-CV-01658-LHK
ORDER GRANTING PETITIONERS’ APPLICATION FOR ENTRY OF JUDGMENT

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this case, and Respondent’s compliance with the Court’s Order Enforcing the Summons on August

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10, 2012, the Court hereby ENTERS JUDGMENT against Respondent in the amount of $62,750.

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I.

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BACKGROUND AND PROCEDURAL HISTORY
Discounttaxnet failed to file timely tax returns for various time periods in 2008 and 2009.

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ECF No. 1 at ¶ 4. Accordingly, in order to obtain information to prepare tax returns for

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Discounttaxnet, on December 14, 2010, Petitioner Emmanuel Orosa personally served Respondent,

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the President of Discounttaxnet, with an IRS summons, requiring Respondent to appear before

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Petitioner Emmanuel Orosa on January 10, 2011 to produce certain testimony and documents

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required by the summons. Id. ¶ 7. Respondent did not appear on January 10, 2011, as required by

United States District Court
For the Northern District of California

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the summons. Id. ¶ 9. Due to the Respondent’s failure to comply with the summons, Petitioners

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filed a Verified Petition to Enforce an Internal Revenue Service Summons in this Court. Id. On

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April 18, 2011, this Court entered its Order To Show Cause Regarding Enforcement Of IRS

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Summons and required Respondent to appear before this Court on June 28, 2011. ECF No. 5.

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Respondent failed to appear at the June 28, 2011 Order to Show Cause Hearing. ECF No. 7.

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On July 26, 2011, this Court adopted Magistrate Judge Lloyd’s Report and

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Recommendation to enforce the IRS Summons, and ordered Respondent to appear before

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Petitioner Emmanuel Orosa on August 8, 2011 to produce the testimony and documents

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requested in the IRS summons. ECF No. 11 (“Order Enforcing Summons”). Respondent failed to

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appear before Petitioner Emmanuel Orosa on August 8, 2011. ECF No. 14 ¶ 2. On August 30,

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2011, Petitioners applied for an Order to Show Cause Regarding Contempt. ECF No. 13. On

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September 6, 2011, this Court issued an Order to Show Cause Regarding Contempt, ordering the

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Respondent to appear on December 1, 2011, and to show cause, if any, why he should not be held

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in contempt for his failure to comply with this Court’s Order to Show Cause Regarding

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Enforcement of IRS Summons filed July 26, 2011. ECF No. 17. On September 6, 2011, pursuant to

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Rule 4(e)(2), Respondent was served with the Order to Show Cause Regarding Contempt. Id.

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On December 2, 2011, this Court held that Respondent had not complied with the summons

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because Respondent failed to provide Petitioners with the summoned records or testimony. ECF

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No. 21 (“Order Finding Respondent in Contempt”). The Court held that Respondent was in
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Case No.:11-CV-01658-LHK
ORDER GRANTING PETITIONERS’ APPLICATION FOR ENTRY OF JUDGMENT

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contempt of this Court’s Order Enforcing Summons, and ordered that Respondent be fined $250

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per day from the date of the Order Finding Respondent in Contempt until the date that Respondent

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complied with the July 26, 2011 Order Enforcing Summons. Id. The Court further ordered that if

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Respondent complied with the Order Enforcing Summons within thirty days of the Order Finding

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Respondent in Contempt, Respondent would be purged of any $250 per day fine that might have

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accrued against him for his failure to comply with the Order Enforcing Summons. Id.

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Respondent failed to comply with the Order Finding Respondent in Contempt within thirty

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days. ECF No. 25-2, ¶ 2 (Declaration of Emmanuel Orosa). Sometime before June 8, 2012,

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Respondent sent counsel for the United States, Michael Pitman, a letter stating that several tax

United States District Court
For the Northern District of California

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returns had been filed on behalf of Discounttaxnet. ECF No. 25-1 at 5.1 On June 8, 2012, Pitman

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sent Respondent a letter informing him that he remained in contempt of the Order Enforcing

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Summons. ECF No. 25-1 at 8. Having received no response, on August 6, 2012, Pitman sent

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another letter to Respondent informing him that Respondent remained in contempt of the Order

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Enforcing Summons. ECF No. 25-1 at 17. Pitman declares that on August 8, 2012, he and

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Respondent spoke over the phone at which point Pitman explained to Respondent that the filing of

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tax returns on behalf of Discounttaxnet did not excuse Respondent’s obligation to comply with the

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Summons because the Summons sought information regarding Discounttaxnet’s finances, not tax

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returns. ECF No. 25-1 at 3. On August 10, 2012, Respondent finally provided documents to the

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IRS in response to the summons which “were arguably an attempt to comply with the Summons.”

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ECF No. 25-2 at ¶2 (Orosa Declaration) (“Respondent provided books and records to me at my

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office. . . . The books and records were not a complete response to the Summonses because they

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did not cover all dates requested”).

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In the instant application for entry of judgment, Petitioners argue that because Respondent

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“arguably” complied with the Order Enforcing Summons on August 10, 2012, the Court’s civil

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contempt fines accrued from December 2, 2011 until August 10, 2012. The total monetary fine

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Petitioners claim is owed is $62,750 ($250 per day for 251 days). Accordingly, Petitioners request

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that the Court enter judgment in the amount of $62,750. ECF No. 25.

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The record is unclear regarding the date this letter was mailed or received.
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Case No.:11-CV-01658-LHK
ORDER GRANTING PETITIONERS’ APPLICATION FOR ENTRY OF JUDGMENT

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II.

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LEGAL STANDARD
Once a party has been found in contempt of an order enforcing an IRS summons, the court

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may impose criminal or civil contempt sanctions. See United States v. Asay, 614 F.2d 655, 659 (9th

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Cir. 1980). The Ninth Circuit has held that a $500 daily fine is “well within the range of

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appropriate sanctions to secure compliance with a tax summons.” U.S. v. Bright, 596 F.3d 683, 696

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(9th Cir. 2010).

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III.

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JUDGMENT AND ORDER
Having considered the Petitioners’ Application for Entry of Judgment, the record in this

case, and Respondent’s arguable compliance with the Court’s Order Enforcing Summons on

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United States District Court
For the Northern District of California

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August 2, 2010, the Court agrees with Petitioners that Respondent failed to comply with this

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Court’s Order Enforcing Summons until he sent certain documents to Petitioner Orosa on August

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10, 2012. This Court’s December 2, 2011 order gave Respondent an opportunity to purge any civil

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contempt fines if he complied with the Court’s Order Enforcing Summons within thirty days of the

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December 2, 2011 Order. The record makes clear that Respondent did not comply within that time

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frame. Nor has Petitioner filed any opposition to Petitioners’ request for entry of judgment that

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suggests otherwise. Accordingly, the Court finds that civil contempt fines must be imposed

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pursuant to this Court’s December 2, 2011 Order, which held that Respondent would be fined $250

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per day until he complied with the Order Enforcing Summons.

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The Court finds that Respondent was in contempt of this Court’s Order Enforcing

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Summons from July 26, 2011 to August 10, 2012. Pursuant to the Court’s December 2, 2011

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Order, a fine of $250 per day accrued against Respondent during the 251 days between December

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2, 2011 and August 10, 2012. Accordingly, this Court hereby ENTERS FINAL JUDGMENT

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against Respondent in the amount of $62,750. Respondent is ordered to pay to the Clerk of United

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States District Court for the Northern District of California the sum of $62,750, and to file

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confirmation that such payment has been made, no later than 30 days after the issuance of this

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Order. Failure to comply with the terms of this Order may result in the imposition of additional

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sanctions.

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Case No.:11-CV-01658-LHK
ORDER GRANTING PETITIONERS’ APPLICATION FOR ENTRY OF JUDGMENT

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IT IS SO ORDERED.

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Dated: January 6, 2014

_________________________________
LUCY H. KOH
United States District Judge

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United States District Court
For the Northern District of California

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Case No.:11-CV-01658-LHK
ORDER GRANTING PETITIONERS’ APPLICATION FOR ENTRY OF JUDGMENT