UNITED STATES OF AMERICA v. RAMSEY
ORDER granting 6 Motion for Default Judgment; granting 6 Motion for Permanent Injunction. Ordered by Judge Hugh Lawson on 8/21/2013. (nbp)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
UNITED STATES OF AMERICA,
Civil Action No. 7:13-CV-34 (HL)
SUSAN A. RAMSEY a/k/a SUSAN A.
HUNTER d/b/a LITTLE RASCALS
EARLY CARE AND EDUCATION,
This case is before the Court on the United States’ Motion for Permanent
Injunction by Default (Doc. 6). On March 21, 2013, the United States filed a
complaint against Defendant Susan A. Ramsey a/k/a Susan A. Hunter d/b/a Little
Rascals Early Care and Education, alleging violations of internal revenue laws
and seeking to permanently enjoin Defendant from violating these laws.
Defendant was personally served with summons and a copy of the complaint on
March 26, 2013. After Defendant failed to answer or otherwise respond to the
complaint, the Clerk of Court entered default on June 24, 2013. Upon
consideration of the complaint, the motion, and the relevant legal authorities, the
Motion for Permanent Injunction by Default (Doc. 6) is granted.
Prior to obtaining a default judgment, the party seeking judgment must first
seek an entry of default. See Fed.R.Civ.P. 55(a). The United States has satisfied
this requirement. After entry of default, the United States is required to seek
default judgment from the Court. Fed.R.Civ.P. 55(b)(2). (“[T]he party entitled to a
judgment by default shall apply to the court therefor.”)
The mere entry of default by the Clerk does not in itself warrant default
judgment by the Court. Nishimatsu Constr. Co., Ltd. V. Houston Nat’l Bank, 515
F.2d 1200, 1206 (5th Cir. 1975). Rather, the Court must find that there is a
“sufficient basis in the pleadings for the judgment to be entered.” Id. The
defendant is not held to admit facts that are not well-pleaded or to admit
conclusions of law. Id. The Clerk’s entry of default causes all well-pleaded
allegations of facts to be deemed admitted. See Buchanan v. Bowman, 820 F.2d
359, 361 (11th Cir. 1987). The Court must accept these facts as true and
determine whether they state a claim upon which relief may be granted. See
Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1370 n. 41 (citing
Nishimatsu, 515 F.2d at 1206). In considering any default judgment, the Court
must examine (1) jurisdiction, (2) liability, and (3) damages. See Pitts v. Seneca
Sports, Inc., 321 F.Supp.2d 1353 (S.D. Ga. 2004). This Court has jurisdiction
pursuant to 26 U.S.C. § 7402(a) and 28 U.S.C. §§ 1340 and 1345.
Employers are required by law to withhold federal income taxes and
Federal Insurance Contributions Act (“FICA”) taxes from their employees’ wages
and pay those withholdings to the IRS, in addition to paying their own FICA taxes
and Federal Unemployment Tax Act (“FUTA”) taxes (collectively referred to as
“employment taxes”). 26 U.S.C. §§ 3102, 3111, 3301, and 3402. (Compl. ¶ 8;
Doc. 1, p. 2). Employers are required by law to periodically deposit these
employment taxes in an appropriate federal deposit bank in accordance with
federal regulations. 26 U.S.C. §§ 6302, 6157; 26 C.F.R. §§ 31.6302-1,
31.6302(c)-1, 31.6302(c)-3. (Compl. ¶ 9; Doc. 1, p. 2). Employers are also
required to file Employer’s Quarterly Federal Tax Returns (“IRS Forms 941”) and
annual FUTA Tax Returns (“IRS Forms 940”) (collectively referred to a
“employment tax returns”) reporting such taxes to the IRS. 26 U.S.C. § 6011; 26
C.F.R. § 31.6071(a)-1. (Compl. ¶ 10; Doc. 1, p. 3).
Defendant, as an employer, must comply with these requirements. (Compl.
¶¶ 8-10; Doc. 1, pp. 2-3). Defendant owns and operates Little Rascals Early Care
and Education as a sole proprietorship. (Compl. ¶ 7; Doc. 1, p. 2). In January of
2008, IRS Revenue Officer C. Kincaid contacted Defendant because no
employment tax returns for the years 2005, 2006, and 2007 had been filed.
The Court finds that the following allegations in the complaint have been admitted by
(Compl. ¶ 11; Doc. 1, p. 3; Declaration of Debra Christmas, ¶ 3). Between
January and April of 2008, Defendant provided the IRS Revenue Officer with
some of the delinquent returns. For the fourth quarter of 2005 and the first two
quarters of 2006, Defendant did not file a voluntary return until after Revenue
Officer Kincaid calculated Defendant’s Form 941 liabilities pursuant to 26 U.S.C.
§ 6020(b). Defendant did not remit full payment of any of these tax liabilities.
(Christmas Decl. ¶ 4).
On April 1, 2008, Revenue Officer Kincaid provided Defendant with a
Notice of Intent to Levy, which informed Defendant that the IRS intended to
collect her outstanding liability for employment taxes for the first quarter of 2005
by an administrative seizure. (Compl. ¶ 13; Doc. 1, p. 3).
Through levies issued from 2008 through 2010, the IRS fully collected
Defendant’s Form 941 liabilities for the first and second quarters of 2005.
(Compl. ¶ 14; Doc. 1, p. 3). Defendant has not, however, satisfied her
employment tax liabilities for the third and fourth quarters of 2005 and all quarters
of 2006 and 2007, in addition to later periods discussed infra. (Compl. ¶ 15; Doc.
1, p. 3).
Defendant made some deposits and/or payments of her employment tax
liability for the first quarter of 2009, but did not fully pay the liability until
November 11, 2010. That was the only quarter out of the 28 completed quarters
from 2005 through the fourth quarter of 2011 in which Defendant properly fulfilled
her legal tax obligations as an employer. (Compl. ¶ 17; Doc. 1, p. 4; Christmas
Decl. ¶¶ 10, 20).
In May of 2009, Defendant’s outstanding employment tax liabilities were
placed in “currently not collectible” status, which prevents collection on the
liabilities. That was done to allow Defendant to comply with her ongoing
obligations to file and pay her accruing employment tax liabilities. (Compl. ¶ 16;
Doc. 1, p. 4; Christmas Decl. ¶ 11).
Defendant has not filed a Form 941 for any quarter from the second
quarter of 2009 to the date the complaint was filed. (Compl. ¶ 18; Doc. 1, p. 4).
As a result of Defendant’s failure to file Forms 941, the IRS determined
Defendant’s liability for the last three quarters of 2009 and all periods of 2010
and 2011 under the procedures provided for by 26 U.S.C. § 6020(b). (Compl. ¶
19; Doc. 1, p. 4).2 Defendant also failed to file a Form 940 or pay the balance due
for the years 2005, 2007, 2008, 2009, 2010, and 2011. (Compl. ¶ 20; Doc. 1, p.
4; Christmas Decl. ¶ 15).3
The total amount of Defendant’s delinquent Form 941 tax liabilities as of March 14,
2013 is $336,634.56, including penalties and interest. (App. to Compl.; Doc. 1, p. 9).
The total amount of Defendant’s delinquent Form 940 tax liabilities as of March 14,
2013 is $22,276.10, including penalties and interest. (App. to Compl.; Doc. 1, p. 9).
The last payment applied to Defendant’s account resulted from an
administrative seizure on or about February 14, 2011. (Compl. ¶ 21; Doc. 1, p. 4).
Defendant has not made any voluntary tax payments in the two years preceding
the filing of the complaint. (Compl. ¶ 22; Doc. 1, p. 4).
Defendant did not timely file W-2 forms for her employees in 2007, 2008,
and 2009. Monetary penalties were assessed against her as a result. (Compl. ¶
23; Doc. 1, pp. 4-5).4
As of March 14, 2013, the total amount of Defendant’s delinquent tax
liabilities is $403,301.25, including penalties and interest. (App. to Compl.; Doc.
1, p. 9). Debra Christmas, an IRS Revenue Officer, has testified that Defendant’s
known income and assets are not sufficient to satisfy the employment tax
liabilities she currently owes. (Christmas Decl. ¶ 22).
Based on the foregoing, the United States now seeks to permanently
enjoin Defendant from (1) failing to pay over to the IRS federal taxes withheld
from employee wages; (2) failing to make timely federal employment and
unemployment tax deposits and payments to the IRS; and (3) failing to timely file
federal employment and unemployment tax returns.
The total amount of the penalties assessed against Defendant for failing to file W-2
Forms as of March 14, 2013 is $44,390.59. (App. to Compl.; Doc. 1, p. 9).
26 U.S.C. § 7402(a) authorizes district courts to issue injunctions “as may
be necessary or appropriate for the enforcement of the internal revenue laws.” 26
U.S.C. § 7402(a); United States v. Ernst & Whinney, 735 F.2d 1296, 1300 (11th
Cir. 1984). In the Eleventh Circuit, “the decision to issue an injunction under §
7402(a) is governed by the traditional factors shaping the district court’s use of
the equitable remedy.” Id. at 1301. The United States contends that it has met
both the “necessary and appropriate” standard and the traditional equitable
factors necessary to obtain injunctive relief.
The Court finds that the United States has shown that a permanent
injunction is necessary or appropriate for the enforcement of internal revenue
laws. Defendant’s conduct has resulted in significant and increasing financial loss
to the United States. Defendant has a long history of failing to meet her tax
obligations as an employer. Defendant appears to not have any assets or other
source of collection which could satisfy her tax liabilities; therefore, allowing her
to continue to fail to pay her obligations will further compound the United States’
As for the traditional equitable factors, a plaintiff seeking a permanent
injunction must show the following: (1) an irreparable injury; (2) the remedies
available at law, including monetary damages, are inadequate to compensate for
that injury; (3) considering the balance of hardships between the plaintiff and
defendant, a remedy in equity is warranted; and (4) the public interest would not
be disserved by a permanent injunction. Angel Flight of Ga., Inc. v. Angel Flight
Am., Inc., 522 F.3d 1200, 1208 (citation omitted). The United States has met its
burden with respect to this test.
First, Defendant’s violation of the internal revenue laws has caused the
United States to suffer irreparable harm. When an employer fails to pay its
employment taxes, the United States loses not only the employer’s FICA and
FUTA tax contributions, but also the employees’ FICA and federal income tax
payments. The IRS must credit the funds an employer withholds against the
employees’ individual income tax liabilities, regardless of whether the employer
actually pays those funds over to the IRS. 26 U.S.C. § 31(a); Treas. Reg. § 1.311(a). Further, Defendant’s delinquent taxes continue to accrue and are currently
unknown, as she has not filed any tax returns for 2012 and no assessments have
been made. According to Revenue Officer Christmas, Defendant continues to
conduct business (Christmas Decl. ¶ 23), and unless enjoined, Defendant will
continue to deprive the United States of tax revenue.
Second, the United States lacks an adequate legal remedy to address the
injuries Defendant has caused. Since 2005, Defendant has either failed to pay
taxes altogether or failed to pay them in a timely manner, despite the IRS’s
continued efforts to bring Defendant into compliance with the law. Presently, the
IRS is unable to collect the remainder of Defendant’s outstanding tax liabilities,
and probably will never recover it. Consequently, a monetary remedy is not
In addition, without injunctive relief, the IRS must continue the neverending cycle of expending resources to determine Defendant’s tax liability and to
collect past-due taxes. An injunction would allow the IRS to compel Defendant to
satisfy her legal obligations. The United States has demonstrated that it lacks an
adequate legal remedy to address its injury.
Third, the balance of hardships undoubtedly weighs in favor of granting the
requested injunctive relief. The injunction would not impose any new or
extraordinary requirements on Defendant. Instead it would simply require her to
adhere to her existing legal obligations to pay taxes. Further, compliance with the
injunction would allow Defendant to avoid accruing penalties or interest on her
future tax liabilities. The IRS has spent years and untold resources trying to bring
Defendant into compliance and collect on the tax obligations owed. Based on the
history provided in the complaint, the Court does not doubt the United States’
belief that Defendant will continue to operate her business without paying her tax
Finally, the public interest will not be disserved by an injunction. It is in the
public’s interest that those who owe taxes are required to pay. Without an
injunction, Defendant will have an unfair advantage over her competitors who do
in fact pay their taxes. The issuance of an injunction will show that the United
States does not tolerate the sort of behavior engaged in by Defendant, and that
in turn will hopefully encourage others to abide by the law.
For the foregoing reasons, the Court finds that a permanent injunction is
warranted in this case. The United States’ Motion for Permanent Injunction by
Default (Doc. 6) is granted. The Clerk of Court is directed to send a copy of this
Order to Defendant by Certified Mail at the address where service was obtained
The following injunctive relief is ordered:
employees, attorneys, successors in interest and assigns, and anyone in active
concert or participation with her, are enjoined from failing to withhold and pay
over to the IRS all employment taxes, including federal income and FICA taxes,
required by law;
Susan Ramsey shall deposit withheld income and FICA taxes, as
well as Little Rascals’ share of FICA taxes, in an appropriate federal depository
bank in accordance with the federal deposit regulations;
Susan Ramsey shall deposit FUTA taxes in an appropriate federal
depository bank each quarter in accordance with the federal deposit regulations;
For a period of five years, Susan Ramsey and those individuals at
Little Rascals who are responsible for carrying out the duties established under
paragraphs 2 and 3, shall sign and deliver affidavits to IRS Revenue Officer
Debra Christmas, at 435 Second Street, Suite 340, Macon, Georgia 31201, or to
such other specific location as the IRS may specify, on the first day of each
month, stating that the requisite withheld income, FICA, and FUTA tax deposits
were timely made;
Susan Ramsey shall timely file all employment tax returns with IRS
Revenue Officer Debra Christmas, at 435 Second Street, Suite 340, Macon,
Georgia 31201, or to such other specific location as the IRS may specify;
Susan Ramsey shall timely pay all required outstanding liabilities
due on each tax return required to be filed;
employees, attorneys, successors in interest and assigns, and anyone in active
concert or participation with her, in the event all required outstanding liabilities
due on each tax return required to be filed going forward from the date of the
injunction are not timely paid, are enjoined from assigning any property or rights
to property or making any disbursements before paying the delinquent federal
employment and unemployment taxes due for a given payroll period;
Susan Ramsey shall notify IRS Revenue Officer Debra Christmas, or
such other person as the IRS may specify, of her future employment tax conduct
with respect to any new or presently unknown company, and Susan Ramsey
shall notify IRS Revenue Officer Debra Christmas, or such other person as the
IRS directs, in the future of any new company she may come to own, manage, or
work for in the next five years;
Susan Ramsey shall deliver to all of her current employees, and any
former employees employed at any time since January 1, 2009, a copy of this
entire Order, which encompasses the Court’s findings and the permanent
Susan Ramsey shall post and keep posted for five years in one or
more conspicuous spaces on her business premises where notices to employees
are customarily posted, a copy of this entire Order, which encompasses the
Court’s findings and the permanent injunction; and
Susan Ramsey shall provide a signed, sworn statement that she has
complied with paragraphs 9 and 10 of this Order to Gregory L. Jones, P.O. Box
14198, Ben Franklin Station, Washington, DC 20044, no later than September 6,
The Court retains jurisdiction over this case to ensure compliance with this
injunction, including authority to punish any violation as contempt of court.
SO ORDERED, this the 21st day of August, 2013.
s/ Hugh Lawson_______________
HUGH LAWSON, SENIOR JUDGE
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