UNITED STATES OF AMERICA
Filing
43
MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 10/27/11. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
UNITED STATES OF AMERICA
:
v.
:
Civil Action No. DKC 10-2962
:
CHRISTOPHER T. NAZARIAN, et al.
:
MEMORANDUM OPINION
Presently pending and ready for review are two motions for
default
judgment
America.
filed
by
Plaintiff,
(ECF Nos. 36, 37).
the
United
States
of
The issues are briefed, and the
court now rules pursuant to Local Rule 105.6, no hearing being
deemed
necessary.
For
the
reasons
that
follow,
Plaintiff’s
motions for default judgment will be denied without prejudice to
renewal.
I.
Background
Plaintiff,
the
United
States
of
America,
filed
its
complaint on October 20, 2010, against Defendants Christopher T.
Nazarian as Personal Representative of the Estate of Sarkis K.
Nazarian,
Hermine
H.
(ECF No. 1).1
Doll.
1
Nazarian,
Citibank
F.S.B.,
and
Joan
C.
In the complaint, Plaintiff seeks to do the
The complaint also initially listed S. Freedmand & Sons,
Inc. as a Defendant, but Plaintiff voluntarily dismissed the
following:
(1) convert trust fund recovery penalties in the
amount of $444,085.85, assessed against the now deceased Sarkis
Nazarian (“Decedent”) and against Doll, to judgment;2 (2) set
aside
an
alleged
fraudulent
conveyance
from
Decedent
to
his
wife, Defendant Hermine Nazarian; and (3) foreclose federal tax
liens against real property owned by Decedent.
(Id.).
According to Plaintiff, these claims arise from Decedent’s
and Doll’s violations of 26 U.S.C. § 6672.
Decedent
and
Doll
were
previously
(Id. ¶¶ 13, 35).3
employed,
in
unspecified
positions, by Catonsville Eldercare, Inc. (“Eldercare”).
¶¶ 13, 34).4
(Id.
While in those positions, they were required to
collect, account for, and pay to the Internal Revenue Service
(“IRS”)
federal
employees.
withholding
(Id. ¶¶ 13, 35).
and
FICA
taxes
for
Eldercare’s
Plaintiff alleges that Decedent
and Doll failed to do so for the tax periods ending September
30, 1998, through June 30, 2000.
(Id. ¶¶ 14, 36).
In March
2002, pursuant to 26 U.S.C. § 6672, a delegate of the Secretary
complaint as to this Defendant on February 7, 2011.
10, 11).
2
Decedent passed away on January 5, 2009.
(ECF Nos.
(Id. ¶ 6).
3
The complaint cites Title 28, rather than Title 26 of the
United States Code, an obvious typographical error.
4
According to the complaint,
Baltimore, Maryland. (Id. ¶ 34).
2
Eldercare
is
located
in
of the United States assessed trust fund recovery penalties of
nearly $281,000 against both Decedent and Doll.
37).
(Id. ¶¶ 15,
When Decedent – and his estate – and Doll had failed to
pay these penalties as of October 2010, Plaintiff brought the
present action against Defendants.
Hermine
Nazarian
and
Citibank
(ECF Nos. 8, 14).5
complaint.
subsequently
answered
the
Christopher Nazarian filed an
answer on behalf of the Decedent’s estate on January 18, 2011,
(ECF
No.
7),
but
Plaintiff
moved
to
strike
the
answer
on
February 16, 2011, contending that Christopher Nazarian was not
an attorney authorized to practice in the United States District
Court
for
Nazarian
the
then
District
filed
of
a
Maryland
motion
to
(ECF
stay
No.
13).
Hermine
consideration
of
Plaintiff’s motion to strike and requested that the court delay
ruling on Plaintiff’s motion until the conclusion of state court
proceedings
5
to
remove
Christopher
Nazarian
as
personal
Christopher Nazarian, as personal representative of
Decedent’s estate, and Hermine Nazarian were served personally,
and Citibank waived service of process.
(ECF Nos. 3, 4, 9).
Process servers were unable to locate Doll, who is allegedly a
resident of Myrtle Beach, South Carolina, and, Plaintiff moved
for service by publication on February 15, 2011. (ECF No. 12).
This request was granted on March 8, 2011 (ECF No. 18), and
Plaintiff placed an advertisement in the Sun News, a Myrtle
Beach newspaper, on March 25, April 1, and April 8, 2011,
notifying Doll of Plaintiff’s suit against her (ECF No. 24).
3
representative of Decedent’s estate.
(ECF No. 17).6
On April
25, 2011, the court granted Plaintiff’s motion to strike, denied
Hermine Nazarian’s motion to stay, and ordered Decedent’s estate
to retain counsel and file a proper answer within twenty-one
days.
(ECF Nos. 21, 22).
Christopher Nazarian thereafter filed
an “emergency motion” to have counsel appointed to represent
Decedent’s estate (ECF No. 25), but this motion was denied on
May 16, 2011 (ECF No. 26).
Plaintiff moved for entry of default against Doll on May
18, 2011, and against Decedent’s estate on May 24, 2011.
Nos.
27,
31).
The
clerk
entered
default
against
Doll
(ECF
and
Decedent’s estate “for want of answer or other defense” on May
19, and June 14, 2011, respectively.
(ECF Nos. 29, 33).
On
July 12, 2011, Plaintiff moved for judgment by default against
Doll and Decedent’s estate as to the counts that seek to reduce
the tax assessments against them to judgment.
(ECF Nos. 36,
37).
II.
Motions for Default Judgment
Where
a
default
has
been
previously
entered
and
the
complaint does not specify a certain amount of damages, the
court
may
6
enter
a
default
judgment,
upon
the
plaintiff’s
As a result of these proceedings, the state court “reduced
the [personal representative] to a special Administrator” of
Decedent’s estate. (ECF No. 25, at 2).
4
application
and
notice
to
the
defaulting
party,
pursuant
to
Fed.R.Civ.P. 55(b)(2).
A defendant’s default, however, does not
automatically
the
entitle
plaintiff
to
entry
of
a
default
judgment; rather, that decision is left to the discretion of the
court.
See Dow v. Jones, 232 F.Supp.2d 491, 494 (D.Md. 2002).
The United States Court of Appeals for the Fourth Circuit has a
“strong policy” that “cases be decided on their merits,” id.
(citing United States v. Shaffer Equip. Co., 11 F.3d 450, 453
(4th Cir. 1993)), but default judgment may be appropriate where a
party
is
essentially
unresponsive,
SEC
v.
Lawbaugh,
359
F.Supp.2d 418, 421 (D.Md. 2005) (citing Jackson v. Beech, 636
F.2d 831, 836 (D.C.Cir. 1980)).
Here, more than ten months have passed since Decedent’s
estate was served with Plaintiff’s complaint, with six months
elapsing since the court ordered the estate to retain counsel
and file a proper answer – which it never did.
Similarly,
nearly seven months have passed since Plaintiff served Doll by
publication, and Doll has neither pled nor asserted a defense in
response.
As the “adversary process has been halted because of
[these]
essentially
judgment
is
warranted
unresponsive
against
part[ies],”
Decedent’s
Plaintiff can establish their liability.
5
estate
id.,
and
default
Doll
if
When considering a motion for default judgment, the court
takes all well-pleaded factual allegations in the complaint as
Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th
true.
Cir. 2001).
confession
A default, however, is not “treated as an absolute
by
the
defendant
of
his
liability
and
of
the
plaintiff’s right to recover,” and the defendant is not held to
“admit conclusions of law.”
10A
Charles
Alan
Wright,
Id. (citation omitted); see also
Arthur
R.
Miller
&
Mary
Kay
Kane,
Federal Practice & Procedure § 2688, at 60-61 (3d ed. 1998)
(“[L]iability is not deemed established simply because of the
default, and the court, in its discretion, may require some
proof
of
the
facts
that
must
be
established
determine liability.” (footnotes omitted)).
in
order
to
For that reason,
the court must evaluate whether the plaintiff has alleged a
legitimate cause of action before awarding default judgment in
the plaintiff’s favor.
In
opinions
the
Fourth
analyzing
Wright et al., supra, § 2688, at 63.
Circuit,
default
several
judgments
recent
have
district
applied
the
court
United
States Supreme Court’s opinions in Ashcroft v. Iqbal, 129 S.Ct.
1937 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544
(2007),
when
determining
complaint are “well-pleaded.”
whether
allegations
within
the
E.g., Balt. Line Handling Co. v.
Brophy, 771 F.Supp.2d 531, 544 (D.Md. 2011); Bogopa Serv. Corp.
6
v. Shulga, No. 3:08cv365, 2009 WL 1628881, at *1-2 (W.D.N.C.
June 10, 2009).
Twombly,
offers
those
only
Using the principles articulated in Iqbal and
cases
“labels
have
and
concluded
that
conclusions”
or
where
a
“naked
complaint
assertion[s]
devoid of further factual enhancement,” the allegations therein
are
not
well-pleaded
should be denied.
and,
even
on
default
judgment,
relief
See Balt. Line Handling Co., 771 F.Supp.2d at
544 (internal quotation marks omitted) (“The record lacks any
specific allegations of fact that ‘show’ why those conclusions
are warranted.”).
Plaintiff has moved for default judgment against Decedent’s
estate
and
Doll,
seeking
to
reduce
assessments against these Defendants.
prima facie
copies
of
to
judgment
the
tax
The government makes a
case of tax liability when it submits certified
the
certificates
of
the
assessment
to
the
court.
United States v. Pomponio, 635 F.2d 293, 296 (4th Cir. 1980).
“Such
certificates
are
presumed
provides proof to the contrary.”
correct
unless
the
defendant
United States v. Register, 717
F.Supp.2d 517, 522 (E.D.Va. 2010).
Having failed to respond to
the complaint, Decedent’s estate and Doll have offered no such
proof, and Plaintiff would be entitled to default judgment with
submission of these certificate copies.
See United States v.
Vardoulakis, No. WDQ-07-3341, 2010 WL 5137653, at *4 (D.Md. Dec.
7
9,
2010).
Here,
however,
certified
copies
of
submitting
only
the
the
Plaintiff
certificates
declaration
of
has
of
failed
to
assessment,
Suzanne
Fawley,
submit
instead
an
IRS
advisor, (“the Fawley declaration”) and printouts from the IRS
computer
system
motions.
must
relating
to
the
assessments
to
(ECF Nos. 36-1, 36-2, 37-1, 37-2).
look
to
the
complaint
and
this
support
its
Thus, the court
evidence
to
determine
whether Plaintiff has a legitimate cause of action under 26
U.S.C. § 6672 against Decedent’s estate and Doll.
Section 6672 provides as follows:
Any person required to collect, truthfully
account for, and pay over any tax imposed by
this title who willfully fails to collect
such tax, or truthfully account for and pay
over such tax, or willfully attempts in any
manner to evade or defeat any such tax or
the payment thereof, shall, in addition to
other penalties provided by law, be liable
to a penalty equal to the total amount of
the tax evaded, or not collected, or not
accounted for and paid over.
In
the
absence
of
certified
copies
of
the
certificates
of
assessment, Plaintiff makes a prima facie case of tax liability
under § 6672 by showing (1) the amount of taxes due; (2) the
defendant’s responsibility in failing to pay the taxes; and (3)
the
defendant’s
willfulness
in
failing
to
pay
the
taxes.
United States v. Frazier, No. 88-0019-C, 1989 WL 107390, at *2
(W.D.Va. 1989).
8
While Plaintiff succeeds in establishing the amount of the
assessment,7 it wholly fails to demonstrate either of the two
remaining
6672.
elements
necessary
for
imposing
liability
under
§
Indeed, the counts for which Plaintiff seeks default
judgment contain no well-pleaded factual allegations relevant to
determining
liability
under
§
6672.
Plaintiff
instead
sets
forth mere conclusions of law that recite the language of §
6672, alleging that both Decedent and Doll were “required to
collect, truthfully account for and pay over . . . taxes” and
that
these
Defendants’
“willful
failure
[them] liable for a penalty” under § 6672.
35-36).
why
[to
do
so]
rendered
(ECF No. 1 ¶¶ 13-14,
Nowhere does the complaint present any facts that show
Decedent
and
Doll
were
“responsible”
for
Eldercare
employees’ federal withholding and FICA taxes or why they acted
“willful[ly]” in failing to account for and submit those taxes
to the IRS.
At bottom, the counts against Decedent and Doll
seeking to convert the tax assessments to judgment are nothing
more
than
“labels
and
conclusions”
that
the
court
need
credit when evaluating a motion for default judgment.
Line
Handling
7
Co.,
771
F.Supp.2d
at
544
(internal
not
Balt.
quotation
The Fawley declaration and two tables within the complaint
demonstrate that the amount of the original assessment against
both Decedent and Doll was $280,893.62.
9
marks omitted).8
Accordingly, Plaintiff’s motions for default
judgment
these
against
Defendants
will
be
denied
without
prejudice.
III. Conclusion
For the foregoing reasons, Plaintiff’s motions for default
judgment will be denied without prejudice.
A separate Order
will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
8
The Fawley declaration and its attached printouts
similarly fail to show that Decedent or Doll were “responsible”
persons at Eldercare or that they acted in a “willful” manner in
not paying the taxes to the IRS.
In fact, the Fawley
declaration states only that Fawley examined the records
evidencing the tax assessments; it provides no information about
the IRS’s basis for assessing the penalties in the first
instance.
10
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