United States of America v. Simon

Filing 11

OPINION & ORDER granting 9 Motion for Default Judgment. Plaintiff is awarded $82,083.16 in damages; statutory fees, penalties, and interest that accrue on the tax debts at issue after September 22, 2017; and costs, subject to the Government's submission of a proper Bill of Costs. Signed by District Judge Henry C. Morgan, Jr on 10/31/17. (bpet, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGI

F LED

Newport News Division

OCT 3 1 2017
UNITED STATES OF AMERICA,
CLERK. U.S. DISTRICT COURT
NORFOLK. VA

Plaintiff,

Civil Action No. 4:17cv27

V.

GREGORY A. SIMON,
Defendant.

OPINION & ORDER

This matter is before the Court pursuant to the United States of America's (the

"Government's") second Motion for Default Judgment ("Motion"). Doc. 9. For the reasons
stated herein, the Court GRANTS the Motion.
I.

A.

BACKGROUND

Facts^

Defendant Gregory A. Simon ("Defendant") is a resident of Toano, Virginia, who filed
tax returns for seven (7) years that reported tax deficiencies. Doc. 1. ("Compl.") fl 4-5. In
accordance v^ith his returns, the Government made the following assessments:
Tax Period Ending

Assessment Date

Amount of Assessment

12/31/2004

08/01/2005

$13,597.00

12/31/2005

11/06/2006

$33,588.00

12/31/2006

11/26/2007

$8,314.00

12/31/2011

10/22/2012

$2,181.00

' "[Djefendant, by his default, admits the plaintiffs well-pleaded allegations of fact[.]" Rvan v. Homecomings FinNetwork. 253 F.3d 778, 780 {4th Cir. 2001) (quoting Nishimatsu Constr. Co.. Ltd. v. Houston Nat'l Bank. 515 F.2d
1200, 1206 (5th Cir. 1975)).

12/31/2012

09/14/2015

$3,101.00

12/31/2013

09/14/2015

$4,170.00

12/31/2014

11/16/2015

$4,299.00

Id H5. The Government also sent Defendant notices and demands for payment for those

assessments. Id. H6. Defendant has failed to pay the balance on any of those assessments. Id

^ 7. As of February 27, 2017, his pending balance for all assessments was $80,362.25. Id. ^ 9.
B.

Procedural History

The Government filed its Complaint in this Court on March 28, 2017. Compl. It

requested the entry of default on June 2, 2017, and the Clerk entered default that same day. Doc.
4. The Government filed its Motion for Default Judgment on June 28, 2017. Doc. 5. On August

14, 2017, the Court DENIED the Motion under Federal Rule of Civil Procedure 55(b)(1) without

prejudice to renewing it under Rule 55(b)(2). Doc. 7. The Government filed a renewed Motion
for Default Judgment on September 26, 2017. Doc. 9.
II.

LEGAL STANDARD

Federal Rule of Civil Procedure 55 sets forth a two-step process for obtaining a default

judgment. Subsection (a) calls for an entry of default when a party has failed to file a responsive
pleading "or otherwise defend" the action within the applicable time limit. Fed. R. Civ. P. 55(a).

The entry of default does not automatically entitle a party to a default judgement; rather,
subsection (b) requires the Court take final action following entry of default by the Clerk. Fed.
R. Civ. P. 55(b). The decision whether or not to grant a motion for default judgment rests with
the sound discretion of the court. S^ Curtiss-Wright Corp. v. General Elec. Co., 446 U.S. 1, 8

(1980). Further, "[D]efendant, by his default, admits the plaintiffs well-pleaded allegations of
fact[.]" Rvan. 253 F.3d at 780 (quoting Nishimatsu Constr. Co.. 515 F.2d at 1206). However,

the Court is still required to "determine whether the well-pleaded allegations in [the] complaint
support the relief sought in this action." Id
III.
A.

ANALYSIS

Jurisdiction

In order for the Court to enter judgment, it must have subject matterjurisdiction. Federal

courts have original jurisdiction over civil actions arising under federal laws providing for
internal revenue and civil actions where the Government is the Plaintiff. 28 U.S.C. §§ 1340,

1345 (2017). The Government filed this suit, and it alleges failure to pay federal tax liabilities.
Compl.

4-9. Accordingly, the Court FINDS that it has subject matter jurisdiction over the

matter.

The Court must also have personal jurisdiction over the Defendants to enter judgment.

Courts have personal jurisdiction over defendants who have "minimum contacts with [the forum
state] such that the maintenance of the suit does not offend 'traditional notions of fair play and
substantial justice,'" Int'l Shoe Co. v. State of Wash.. 326 U.S. 310, 316 (1945), and who are

subject to general jurisdiction in the courts of the forum state, s^ Fed. R. Civ. P. 4(k)(l)(a). In
this suit. Defendant is a resident of Virginia who incurred the unpaid tax liabilities while living

in Virginia. Compl.

2, 4. He was also served within Virginia. ^

Doc. 3. Thus, the Court

FINDS that it has personal jurisdiction over Defendant because he is a resident of Virginia who
incurred tax liabilities in Virginia.

Because Defendant resides in Toano, Virginia, and Toano is within the Eastern District,

venue is also appropriate in this District. S^ 28 U.S.C. §§ 1391, 1396. Thus, the Court FINDS
that it can properly enter judgment in this case because all jurisdictional requirements are
satisfied.

B.

Violations

The one (1) count Complaint alleges a failure to fully pay individual income taxes for
seven (7) years: 2004, 2005, 2006, 2011, 2012, 2013, and 2014. Compl. ^ 7. Assessments from
the Internal Revenue Service ("IRS") are entitled to "a legal presumption of correctness."
United States v. Fior D'ltalia. Inc.. 536 U.S. 238, 242 (2002); see also, e.g.. United States v.

Register. 717 F. Supp. 2d 517, 522 (E.D. Va. 2010). Despite that presumption, such assessments

are unenforceable in court after ten (10) years. S^ 26 U.S.C. § 6502(a)(1) (setting a ten (10)

year statute of limitations). The statute of limitations is subject to tolling when the Secretary of

the Treasury is prevented from recovering the amount owed through levy or court proceedings.
See id. g 6503(a¥n.

The Government submitted the relevant assessment records along with a declaration from

IRS Revenue Officer Valerie Watts ("Watts") certifying their accuracy and explaining their

timeliness. See Docs 9-3 ("Watts, Decl."), 9-4 ("Assessment Tr."). Watts confirmed that two
(2) tolling exceptions are applicable to the assessments for 2004, 2005, and 2006. S^ Watts
Decl. fU 11-12. First, all three (3) were tolled while a request for an installment agreement was

pending from September 12, 2008 through September 21, 2009. 14. HlU see also Assessment

Tr. at 2, 5, 7. Such tolling also extends by law for thirty (30) days after the pendency of the
installment agreement. S^ 26 U.S.C. § 6331(k)(2). Second, the 2004 assessment was tolled by
a bankruptcy action pending between October 14, 2005 and January 16, 2006. Watts. Decl.

^ 12;^ see also Assessment Tr. at2. Such tolling also extends by law for six (6) months after the
pendency of the bankruptcy proceeding. S^ 26 U.S.C. 6503(h). As the Government correctly
calculates, the tolling extends the statute of limitations for the 2004 assessment until June 9,

^Watts curiously states thatthe bankruptcy action is listed for all three (3) years, but the records do notconfirm that
statement. It appears to be simply an error in the declaration.

2017; for the 2005 assessment until December 15, 2017; and for the 2006 assessment until

January 4, 2019.
2017.

Doc. 9-1 at 6-7. The Government filed the instant case on March 28,

Compl. Accordingly, the Court FINDS that Defendant failed to pay all seven (7) of

the tax assessments outlined in the Complaint and that all seven (7) assessments are timely
brought for collection in this Court.

Despite setting forth a proper claim, the moving party is not entitled to default judgment
as a matter of right.

EMI April Music. Inc. v. White. 618 F. Supp. 2d 497, 505 (E.D. Va.

2009). When determining whether to grant a motion for default judgment, courts may consider
the following:

the amount of money potentially involved; whether material issues of fact or
issues of substantial public importance are at issue; whether the default is largely
technical; whether plaintiff has been substantially prejudiced by the delay
involved; . . . whether the grounds for default are clearly established or are in
doubt...[;] how harsh an effect a default judgment might have; or whether the
default was caused by a good-faith mistake or by excusable or inexcusable neglect
on the part of the defendant.

Id. at 506 (quoting lOA Charles A. Wright & Arthur R. Miller, ^

Fed. Prac. & Proc. Civ

§ 3685 (3d ed.)) (internal quotations omitted).

The Complaint originally sought $80,362.25, and the Government now asks for
$82,083.15 with the further accrued interest and penalties. Compare Compl. H9 with Doc. 9 at

2.

The potential maximum award in this case is thus a significant amount of money.

Nevertheless, other factors weigh in favor of default judgment: the default is not technical, as
Defendant completely ignored the proceedings, and default is clearly established by his complete

disregard of the case after service. Accordingly, the Court FINDS that the factors favor entry of
default judgment here. Thus, the Court GRANTS Plaintiffs Motion, Doc. 9.

C.

Relief

The Government seeks three forms of reUef: (1) $82,083.16 in damages for the liability

as of September 22, 2017; (2) statutory fees, penalties, and interest that have accrued or will
accrue on the tax debts at issue; and (3) the costs of this action.

Doc. 9-1 at 8-9; see also

Compl. at 3. It also reargues the issue of whether the Clerk or the Court can enterthisjudgment.
See Doc. 9-1 at 2-5.

This Motion is pursuant to Rule 55(b)(2), ^

Doc. 9, and the Court has only denied the

Clerk's ability to enter judgments with statutory additions, not its own authority to enter such

judgments, ^

Doc. 7. Furthermore, the Government only demonstrates how it would apply

statutory additions, and nothing in the briefing changes the conclusion that "Rule 55(b)(1) is

proper when the amount owed is calculable on the face of the documents presented to the Clerk
such that no doubt remains as to the amount owed" but that Rule 55(b)(2) is otherwise the proper

vehicle. S^ id (citing Franchise Holding II. LLC, v. Huntington Restaurants Grp., Inc., 375
F.3d 922, 928 (9th Cir. 2004) (citing KPS & Assocs.. Inc. v. Designs Bv FMC. Inc.. 318 F.3d 1,

19 n. 7 (1st Cir. 2003))). Because the Government asks for a Court finding despite its procedural
protests and because the Court has authority to enter judgment in this case, the Court GRANTS
$82,083.16 in damages, GRANTS statutory fees, penalties, and interest that accrue on the tax
debts at issue after September 22, 2017; and GRANTS costs, subject to the Government's
submission of a proper Bill of Costs.
IV.

CONCLUSION

For the reasons stated herein, the Court GRANTS Plaintiff s Motion, Doc. 9,

AWARDING $82,083.16 in damages; statutory fees, penahies, and interest that accrue on the

tax debts at issue after September 22, 2017; and costs, subject to the Government's submission
of a proper Bill of Costs.

The Clerk is REQUESTED to send a copy of this Opinion & Order to all counsel of
record.
It is so ORDERED.

/s/

Henry Coke Morgan, Jr.

Senior United States District Judge-y / ,
HENRY COKE MORGAN, JR. /
SENIOR UNITED STATES DISTRICT JUDGE

Norfolk. Virginia
October _W, 2017