United States of America v. RAJMP, Inc. et al
Filing
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ORDER denying Defendant Joan M. Politte's Motion to Certify Order Denying Motion for Summary Judgment for Interlocutory Review (Doc. No. 148 ). Signed by Judge Anthony J. Battaglia on 8/12/2019. (jrm)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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UNITED STATES OF AMERICA,
Case No.: 17-cv-00515-AJB-WVG
Plaintiff,
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RAJMP, INC.; JOAN M. POLITTE;
MERRILL LYNCH BUSINESS
FINANCIAL SERVICES, INC.;
CHICAGO TITLE COMPANY; TBC
CORPORATION; SC TELECOM, LLC;
WELLS FARGO BANK, N.A.; PACIFIC
WESTERN BANK; OUTFRONT
MEDIA, INC.; HALLE PROPERTIES,
L.L.C.; POFACO, INC.; COUNTY OF
SAN DIEGO; MIDAS REALTY
CORPORATION; KELLY M. POLITTE
as the Personal Representative of the
ESTATE OF ROBERT A. POLITTE;
TED R. POLITTE as the Personal
Representative of the ESTATE OF
ROBERT A. POLITTE,
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ORDER DENYING DEFENDANT
JOAN M. POLITTE’S MOTION TO
CERTIFY ORDER DENYING
MOTION FOR SUMMARY
JUDGMENT FOR
INTERLOCUTORY REVIEW
v.
Defendants.
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(Doc. No. 148)
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Pending before the Court is Defendant Joan M. Politte’s motion to certify order
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denying motion for summary judgment for interlocutory review. (Doc. No. 148.) As will
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be explained in greater detail below, the Court DENIES Joan M. Politte’s motion to certify.
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BACKGROUND
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This action is brought by the United States to (1) reduce to judgment certain
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outstanding federal tax assessments against Defendant RAJMP; (2) collect RAJMP’s
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federal tax liabilities from property of Defendants the Estate of Robert A. Politte and Joan
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M. Politte as RAJMP’s past and/or present alter egos; (3) adjudicate that POFACO is
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Robert A. Politte and/or Joan M. Politte’s nominee; and (4) foreclose federal tax liens on
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several real properties at issue. (Doc. No. 79 ¶ 1.) The United States alleges that RAJMP
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has failed to pay federal employment taxes for 29 consecutive tax periods and has failed to
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pay federal unemployment taxes since 1998. (Id. ¶ 69.)
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On or about May 23 and May 24, 2007, the Internal Revenue Service (“IRS”)
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recorded Notices of Federal Tax Lien identifying Robert A. Politte and Joan M. Politte as
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alter egos of RAJMP with respect to RAJMP’s unpaid federal tax liabilities. (Doc. No. 122
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at 7.) Thereafter, the Polittes sold two residential condominiums to which the tax liens
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applied and, accordingly, the net proceeds of the sales were paid to the IRS. (Id.) On
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October 4, 2007, the Polittes filed a complaint with this Court against the United States
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requesting a refund for the net proceeds of the sales of the condominiums. (Id.) The United
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States did not assert a claim or counterclaim in the Polittes’ action. (Doc. No. 115-1 at 9.)
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This Court held in favor of the United States and determined that the Polittes were alter
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egos of RAJMP. (Doc. No. 122 at 8.) The Polittes appealed this Court’s decision. (Doc.
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No. 119-1 at 6.) The Ninth Circuit affirmed this Court’s decision in full. (Id.) The Supreme
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Court denied certiorari. (Doc. No. 125 at 29.)
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On March 15, 2017, the United States filed a complaint against Defendants. (See
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generally Doc. No. 1.) Thereafter, several joint motions to dismiss parties were filed and
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granted. (Doc. Nos. 24, 50, 58, 61, 63, 64, 75.) On August 9, 2017, the United States filed
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an amended complaint against Defendants. (See generally Doc. No. 79.) Mrs. Politte filed
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an answer to the amended complaint on August 30, 2017. (Doc. No. 86.) RAJMP filed an
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answer to the amended complaint on August 31, 2017. (Doc. No. 89.) Thereafter, several
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motions for summary judgment were filed on February 28, 2018. (Doc. Nos. 115, 116,
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119.) The Court denied Defendants Mrs. Politte’s and RAJMP’s motions for summary
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judgment and granted Plaintiff’s partial motion for summary judgment. (Doc. No. 142.)
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Defendants then filed an ex parte motion for reconsideration. (Doc. No. 144.) The Court
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granted in part and denied in part Defendants’ motion for reconsideration and issued an
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amended order denying Defendants’ motions for summary judgment and granting
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Plaintiff’s motion for partial summary judgment. (Doc. Nos. 145, 146.)
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LEGAL STANDARD
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Under 28 U.S.C. § 1292(b), a party may move a district court to certify an order “not
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otherwise appealable” for interlocutory review. In order to certify the order, the Court must
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find that “such order involves a controlling question of law as to which there is substantial
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ground for difference of opinion and that an immediate appeal from the order may
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materially advance the ultimate termination of the litigation[.]” Id.; In re Cement Antitrust
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Litig., 673 F.2d 1020, 1026 (9th Cir. 1982). The moving party bears the burden of
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demonstrating these prerequisites. Couch v. Telescope Inc., 611 F.3d 629, 633 (9th Cir.
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2010). “[§] 1292(b) is a departure from the normal rule that only final judgments are
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appealable[;] therefore [it] must be construed narrowly,” James v. Price Stern Sloan, Inc.,
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283 F.3d 1064, 1067 n.6 (9th Cir. 2002). However, in making this determination, “[a]
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district court has substantial discretion.” Hardt v. Direct Invest LLC, No. 11-cv-1191-
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L(WVG), 2013 WL 494088, at *2 (S.D. Cal. Feb. 7, 2013).
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DISCUSSION
A.
There is Controlling Question of Law
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The first criterion is whether the order involves a “controlling question of law.” 28
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U.S.C. § 1292(b). A question is controlling if its resolution on appeal could have a material
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effect on the outcome of the case in the district court. In re Cement Antitrust Litig., 673
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F.2d at 1026. The Ninth Circuit has stated that fundamental questions of law, appropriate
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for interlocutory appeal, include “the determination of who are necessary and proper
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parties, whether a court to which a cause has been transferred has jurisdiction, or whether
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state or federal law should be applied.” Id. at 1026–27 (quoting United States v. Woodbury,
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263 F.2d 784, 787–88 (1959)).
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Defendant asserts a controlling question of law exists as to “[w]hether the
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Government’s claims against Joan Politte in this case were compulsory counterclaims in
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the Refund Action?” (Doc. No. 148 at 9.) Plaintiff claims that Defendant has not presented
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a controlling question of law as Defendant’s controlling question is not a pure legal
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question. (Doc. No. 153 at 13.) However, the Order that Defendant is seeking to appeal
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held as a matter of law that Rule 13(a) did not apply in this instant litigation. (Doc. No. 146
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at 6.) Accordingly, the Court finds there is a controlling question of law.
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B.
Immediate Appeal Would Not Materially Advance the Litigation’s End
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The next criterion is whether “an immediate appeal from the order may materially
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advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b). An interlocutory
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appeal should be certified only when doing so “would avoid protracted and expensive
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litigation.” In re Cement Antitrust Litig., 673 F.2d at 1026. If, by contrast, an interlocutory
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appeal would delay resolution of the litigation, it should not be certified. See Shurance v.
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Planning Control Int’l, Inc., 839 F.2d 1347, 1348 (9th Cir. 1988).
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Defendant asserts that appellate approval of Defendant’s position that Rule 13(a)
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does apply to the Government would be dispositive of this entire matter with respect to her
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and the Estate of Robert A. Politte. (Doc. No. 148 at 11.) However, this would not resolve
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Plaintiff’s claims against RAJMP. RAJMP has asserted that it will challenge the amount
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of liabilities assessed against it based on the fact that the IRS allegedly misallocated the
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payments received. RAJMP also claims that the IRS did not properly reject an offer in
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compromise. Further, since the filing of this instant motion, the Court has acquired a related
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case regarding RAJMP’s claims based on the offer in compromise issue. Accordingly,
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there will be a handful of issues still remaining. Defendant does not dispute this, but rather
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contends that there is no requirement that the appeal must terminate all claims. However,
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the several issues that would still remain coupled with the fact that after appellate review
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the Court would still have to make factual determinations indicate that immediate appeal
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would not materially advance the litigation’s end.
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C.
There is No Substantial Ground for Difference of Opinion
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The last criterion is whether there is a “substantial ground for difference of opinion.”
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28 U.S.C. § 1292(b). A substantial ground for difference of opinion may exist when “the
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controlling law is unclear.” Couch v. Telescope Inc., 611 F.3d 629, 633 (9th Cir. 2010).
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“Courts traditionally will find that a substantial ground for difference of opinion exists
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where the circuits are in dispute on the question and the court of appeals of the circuit has
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not spoken on the point, if complicated questions arise under foreign law, or if novel and
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difficult questions of first impression are presented.” Id. (citations and internal quotation
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marks omitted.) “A substantial ground for difference of opinion exists where reasonable
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jurists might disagree on an issue’s resolution, not merely where they have already
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disagreed.” Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 688 (9th Cir. 2011).
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Here, Defendant asserts that there is a difference in opinion because the Ninth Circuit
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has not directly answered this question. (Doc. No. 148 at 12.) However, there is not a
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dispute between circuits. Moreover, Defendant does not assert there is a circuit split. As
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this Court has previously found, the Eighth Circuit supports this Court’s position in its
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order denying motion for summary judgment. See Caleshu v. United States, 570 F.2d 711,
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714 (8th Cir. 1978).
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Defendant asserts that McLain v. McLain, No. 16-36-BLG-SPW-TJC, 2018 WL
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4963182 (D. Mon., Oct. 15, 2018), a district court order in the Ninth Circuit, disagrees with
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this Court’s decision and thus there is substantial grounds for dispute. (Doc. No. 148 at 13.)
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However, Defendant relied upon this case in its motion for reconsideration and the Court
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has previously held that this case is factually different in several ways from the instant case.
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(Doc. No. 145 at 5.) In McLain, the United States filed suit against the McLain defendants
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for failure to pay payroll taxes and the McLain defendants counterclaimed for a refund. Id.
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at *1. The McLain defendants then sought severance of their counterclaim. Id. The court
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in McLain analyzed the severance issue under Federal Civil Procedure Rule 21 not Rule
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13(a). Id. at *2. Further, there are several district courts within the Ninth Circuit that have
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found that Rule 13(a) does not apply to federal tax collection claims. See United States v.
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Gonzales for Estates of Gonzales, 323 F. Supp. 3d 1119, 1126 n.3 (N.D. Cal. June 20,
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2018); Sequoia Prop. & Equip. Ltd. P’ship v. United States, No. CV-F-97-5044-LJO, 2000
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WL 1728117, at *9 (E.D. Cal. Oct. 4, 2000).
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Defendant further asserts that there is a difference in opinion because of the several
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cases she relied upon in arguing her motion for summary judgment. (Doc. No. 148 at 12.)
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Defendant relies upon district court cases from Texas, Ohio, Mississippi, and New York.
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See e.g., Hemmings v. United States, 842 F. Supp. 935 (S.D. Tex. 1993); United States v.
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Arthur L. Evans Trust, 30 A.F.T.R. 2d 72-5647 (S.D. Ohio 1972); Crocker v. United States,
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323 F. Supp. 718 (N.D. Miss. 1971); Dowie v. United States, 37 F.R.D. 229 (N.D.N.Y.
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1964). However, four of these cases were decided prior to Caleshu and these cases are
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factually different from the instant case. Defendant again relies upon the Supreme Court
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case of C.I.R. v. Sunnen, 333 U.S. 591 (1948) to establish a difference in opinion. However,
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the Court has previously held that Sunnen is inapplicable to this case. (Doc. No. 142 at 6.)
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The Court finds that there is not substantial ground for difference of opinion on the
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question of whether the Government’s claims against Mrs. Politte were compulsory
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counterclaims in the previous action.
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D.
Prejudice Against Plaintiff
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Plaintiff asserts that it will be prejudiced by the delay of the appeal because it is
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unclear now whether the sale of the real properties will satisfy RAJMP’s unpaid tax
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liabilities. (Doc. No. 153 at 25.) Further, evidentiary concerns become more apparent the
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longer the litigation is pending. (Id. at 26.) Defendant simply responds that Plaintiff’s
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arguments should be rejected because Plaintiff is assuming that it will prevail in this action.
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(Doc. No. 154 at 12.) However, Plaintiff’s concerns regarding prejudice are justified.
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Accordingly, the Court finds Plaintiff will suffer prejudice if the Order is certified for
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interlocutory appeal.
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CONCLUSION
Based on the foregoing, the Court DENIES Defendant Joan M. Politte’s motion to
certify order denying motion for summary judgment for interlocutory review.
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IT IS SO ORDERED.
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Dated: August 12, 2019
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