United States v. Michael L. Hawk, DMD, PC et al

Filing 14

OPINION entered by Judge Richard Mills on 10/27/2015. The Motion of Plaintiff United States of America to hold Defendants Michael L Hawk, DMD, PC and Michael L Hawk in Civil Contempt, d/e 12 is ALLOWED. (SEE WRITTEN OPINION) (MAS, ilcd)

E-FILED

Tuesday, 27 October, 2015 02:31:22 PM
Clerk, U.S. District Court, ILCD

IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
MICHAEL L. HAWK, DMD, PC,
MICHAEL L. HAWK,
Defendants.

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NO. 12-3311

OPINION
RICHARD MILLS, U.S. District Judge:
On July 31, 2013, the Parties stipulated and agreed to the entry of a
Preliminary Injunction and a Permanent Injunction Ordering Michael L.
Hawk, individually, to comply with a number of requirements. The Parties
also stipulated and consented to the entry of Judgment in favor of the
United States and against Michael L. Hawk. The agreed-upon terms were
formalized and an Order and Judgment was entered on December 9, 2013.
Pending is the Plaintiff’s Motion to hold the Defendants in Civil Contempt.
The Defendants have not responded to the motion.

I.
On December 9, 2013, the Court entered an Order and Judgment
requiring Defendant Michael L. Hawk, individually, to timely file all
employment and unemployment tax returns and pay all tax liabilities as
they became due and to provide proof to the Internal Revenue Service
(“IRS”) that such payments were made. See Doc. No. 10. Although the
Order and Judgment provided that Michael L. Hawk DMD, PC, would be
dismissed from the action, the actions were to be completed on behalf of
Hawk, individually, as well as his professional corporation, and/or any other
new or then presently unknown entity in which Hawk may later obtain an
interest. Additionally, the Order required Hawk, inter alia, to sign and
deliver affidavits to the revenue officer (presently Alexis Porrata), or such
other person as the IRS may deem appropriate, on the first day of each
month, stating that the requisite withheld income, and FICA tax deposits
were timely made. See id.
The United States alleges that since the entry of the Court’s Order,
Hawk has failed to satisfy any of the requirements set forth therein.

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According to the affidavit of Revenue Officer Alexis Porrata, which is
attached as an exhibit to the motion, Hawk has not made all of the required
payroll tax deposits and he failed to pay any outstanding liabilities due on
each return described in the Complaint within 30 days of the Court’s Order
as required. Accordingly, the United States alleges the Court should hold
Hawk in contempt and, as appropriate sanction, order the incarceration of
Hawk to coerce him to comply with the Order and Judgment.
Hawk did not respond to the Plaintiff’s Motion.
II.
A court may exercise its civil contempt power in order to enforce
compliance with court orders and judicial proceedings. See Jones v. Lincoln
Elec. Co., 188 F.3d 709, 737 (7th Cir. 1999). “To hold a party or witness
in civil contempt, the district court must be able to point to a decree from
the court which sets forth in specific detail an unequivocal command which
the party in contempt violated.” Id. at 738 (internal quotation marks and
citations omitted).

The evidence must show by clear and convincing

evidence that (1) the order set forth an unambiguous command; (2) the

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command was violated; (3) the violation was significant; and (4) the party
did not take steps reasonably and diligently to comply with the order. See
Lightspeed Media Corp. v. Smith, 761 F.3d 699, 711 (7th Cir. 2014).
A review of the Court’s Order of December 9, 2013 shows that it was
clear and unambiguous. Based on Hawk’s signature on the Stipulation for
Entry of Judgment, see Doc. No. 9, there is no question that he had
knowledge of the Order. Despite Hawk’s stipulation to the terms of the
injunction Order, he did not comply with its terms. Hawk has failed to
make all of the required payroll tax deposits and to pay any outstanding
liabilities within 30 days of the Court’s Order. Additionally, there is no
justification for Hawk’s failure to timely file all quarterly employment and
annual unemployment tax returns with the IRS. Based on the information
in Alexis Porrata’s affidavit, the Court finds that Hawk has demonstrated
total noncompliance with the Order.
Accordingly, the Court concludes that the Government has
established Hawk’s contempt of the Order of December 9, 2013.
III.

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When a court finds that a defendant has not complied with an order,
the court may employ both coercive and compensatory sanctions. See
United States v. United Mine Workers of America, 330 U.S. 258, 303-04
(1947). A court has significant discretion to determine an appropriate
sanction to coerce compliance with its order, though the court must
“consider the character and magnitude of the harm threatened by
continued contumacy, and the probable effectiveness of any suggested
sanction in bringing about the result desired.” Id. at 304. A court has the
inherent power “to coerce obedience to its orders by summarily holding a
recalcitrant person . . . in civil contempt and then imprisoning him until he
complied.” In re Credidio, 759 F.2d 589, 590 (7th Cir. 1985) (quoting In
re Grand Jury Investigation (Braun), 600 F.2d 420, 422 (3d Cir. 1979)).
The rationale for this sanction is that contemnors hold “the keys of their
own prison in their own pockets.” Id. If incarceration for civil contempt
becomes punitive rather than coercive, then due process concerns require
the release of the contemnor from civil contempt. See id.
When the contemnor is a corporation, the court’s power to sanction

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the corporation for contempt includes the power to sanction officers who
have the power to cause the corporation to comply. See Wilson v. United
States, 221 U.S. 361, 376 (1911).
Although a party’s inability to comply with an order to pay is a
defense to civil contempt, the alleged contemnor has the burden of
producing evidence of his inability to comply.

See United States v.

Rylander, 460 U.S. 752, 757 (1983); United States ex rel. Thom v. Jenkins,
760 F.2d 736 (7th Cir. 1985).
The Court agrees that Hawk’s refusal to obey the Court’s Order and
Judgment warrants a coercive sanction which is sufficient to compel him to
pay the Defendants’ employment and unemployment tax obligations.
Hawk has provided no justification for his non-compliance. The Court
concludes that the harm inflicted by Hawk’s contempt is substantial and,
based on the history of the case, not likely to cease absent a major coercive
sanction. Additionally, Hawk’s failure to pay the Defendant’s payroll taxes
makes the United States an involuntary creditor, and the business’s failure
to turn over funds that it withholds from its employees’ paychecks is

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especially nefarious.

It amounts to conversion of the United States’

property.
The Court believes that Hawk’s incarceration may be the only
sanction that has any likelihood of compelling him to comply with the
Court’s Order.

A monetary fine is unlikely to succeed, given that

Defendants continue to accrue liabilities for taxes, penalties and interest
without any attempt to pay them. The Court agrees with the Government’s
assertion that an incarceration order might be the only sanction that will
convince Hawk that he cannot simply ignore with impunity a lawful Court
Order.
As the Court earlier noted, Defendant Michael L. Hawk did not
respond to the Plaintiff’s Motion to hold the Defendants in Civil
Contempt.
Ergo, the Motion of Plaintiff United States of America to hold
Defendants Michael L. Hawk, DMD, PC AND Michael L. Hawk in Civil
Contempt [d/e 12] is ALLOWED.
The Court will ORDER the immediate incarceration of Defendant

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Michael L. Hawk for his failure to comply with the Order and Judgment of
December 9, 2013, if any of the following conditions arise:
(1)

Hawk fails to timely make an employment-tax deposit in respect

of any payroll distribution made after the entry of the Court’s contempt
Order;
(2)

Hawk fails to turn over to the United States the portion of the

Defendants’ outstanding employment-tax liability that he holds in trust
within seven (7) business days of the date of entry of the Court’s contempt
Order;
(3)

Within twenty-one (21) days of the contempt Order, Hawk fails

to pay all employment taxes (including penalties and interest) that have
accrued since the issuance of the Court’s December 9, 2013 Order.
The Court will further Order Defendant Hawk’s incarceration if, after
bringing himself into compliance with the Court’s December 9, 2013 Order
and Judgment, Hawk further violates that Order and Judgment within the
six months that follow. A bench warrant would then issue upon Plaintiff
United States of America submitting a declaration of an IRS revenue

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officer, certifying under penalty of perjury that Hawk has failed to timely
file the Defendants’ Forms 940 or 941, or pay any employment or
unemployment tax obligation that becomes due after the issuance of the
Court’s contempt Order.
The Clerk will send a copy of this Opinion and Order to Michael L.
Hawk, 9405 Boyd Farm Road, Rochester, IL 62563.
ENTER: October 27, 2015
FOR THE COURT:
/s/ Richard Mills
Richard Mills
United States District Judge

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