United States of America v. Dental Care Associates of Spokane Valley, P.S. et al

Filing 177

ORDER REGARDING CONTEMPT signed by Judge Rosanna Malouf Peterson. (CC, Case Administrator)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF WASHINGTON

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UNITED STATES OF AMERICA,
NO: 2:15-CV-23-RMP
Plaintiff,

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ORDER REGARDING CONTEMPT
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v.
DENTAL CARE ASSOCIATES OF
SPOKANE VALLEY, P.S., et al,

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Defendants.
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BEFORE THE COURT are the parties’ responses to the Court’s February

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21, 2017, Order requiring the parties to provide evidence either of the Hoods’

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adherence to the terms of the previously-imposed injunction, ECF No. 107, or of

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their failure to comply with the same. See ECF No. 170. The Court has

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considered both parties’ submissions, the record, and is fully informed.

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As set forth in the Court’s previous Show Cause Order, Defendants were on

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notice as early as October 24, 2016, and November 15, 2016, of the ways in which

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the Government alleged that Defendants failed to comply with this Court’s

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injunction. See ECF No. 170 at 2 (citing ECF Nos. 153 and 157). Through

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hearings and written Orders, the Court required Defendants to demonstrate their

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adherence to the Court’s injunction, see e.g., ECF Nos. 161 and 170, but

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Defendants failed to do so. Throughout this litigation, Defendants alleged personal

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hardships that were irrelevant to their tax obligations and failed to provide

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competent evidence of their adherence to the Court’s injunction.

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Despite significant evidence of Defendants’ longstanding failure to adhere to

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their tax obligations, the Government agreed to only seek compliance moving

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forward. In light of that concession, the Court focused on tax liabilities that were

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due on January 31, 2017, and required Defendants to demonstrate that they

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complied with the Court’s Order by timely paying all current taxes that were due

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on January 31, 2017. See ECF No. 170.

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During the January 24, 2017, hearing the Court discussed setting a deadline

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of February 15, 2017, for Defendants to show compliance, but the Court extended

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that deadline to February 28, 2017, by way of an Order issued on February 21,

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2017. See id. The Court stated plainly: “Defendants shall demonstrate that they

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are in compliance with the Court’s injunction by demonstrating that they have paid

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all relevant new tax amounts that were due on January 31, 2017. They shall do so

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with competent evidence on or before February 28, 2017.” Id. at 5 (emphasis in

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original). Therefore, the Court clarified that it would not require Defendants to

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prove that they had fulfilled obligations from previous years, but instead, the Court

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only sought proof that Defendants had met their current tax obligations by the

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January 31, 2017 tax deadline.

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Through documents submitted on February 28, 2017, the Government has

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established that Defendants did not meet their fourth quarter 2016 obligations by

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that deadline. See generally ECF Nos. 171-172. Furthermore, the Government

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argues that even if Defendants’ late payments were credited as being in full

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compliance with the Court’s Orders, the payments still fall short of Defendants’

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full fourth quarter 2016 tax liability due January 31, 2017. See ECF No. 171 at 5.

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Additionally, the Government argues that Defendants will have to pay penalties for

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various late payments and dishonored payments. See id. at 5-6.

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On and after the February 28, 2017, deadline for proving compliance with

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the Court’s previous orders, Defendants submitted additional pleadings, with

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exhibits, and argue that they have made additional payments to the IRS, some

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within days of the February 28, 2017 deadline for proving compliance. See e.g.,

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ECF No. 173, filed February 28, 2017; ECF No. 174, filed March 6, 2017; ECF

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No. 175, filed March 7, 2017; ECF No. 176, filed March 7, 2017. Defendants’

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evidence, including Defendants’ late filed pleadings as of this date, demonstrate

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that Defendants failed to make fourth quarter 2016 payments by the January 31,

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2017, deadline.

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Defendants have demonstrated a consistent pattern of disregarding their tax

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obligations by making incomplete payments, making dishonored payments,

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missing deadlines, etc. The Court has given Defendants numerous chances to

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comply with the injunction, ECF No. 107, entered more than a year ago, and even

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limited their duty to prove compliance by having Defendants demonstrate that they

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could move forward in a positive direction and comply with meeting one deadline

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on January 31, 2017. See ECF No. 170. Defendants failed to meet that limited

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obligation, and have demonstrated their contempt for both this Court’s Order and

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their obligations under the tax code.

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Based on the foregoing, the Court finds Defendants, Dr. James G. Hood, and

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Karen J. Hood, in contempt of Court. The Court, therefore, permanently enjoins

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Defendants from continuing their current businesses or starting any new businesses

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that would require employing any employees. Within thirty (30) days of this

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Order, Defendants shall cease operating their dental care businesses where they

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serve as employers.

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Accordingly, IT IS HEREBY ORDERED:

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1. Defendants, Dr. James G. Hood, and Karen J. Hood, are found in

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contempt of Court.

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ORDER REGARDING CONTEMPT ~ 4

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2. Dr. James G. Hood and Karen J. Hood shall close their dental care

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businesses, cease operation as employers, and not open any new businesses in

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which either Dr. James G. Hood or Karen J. Hood serve as employers.

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The District Court Clerk is directed to enter this Order and provide copies to
counsel and pro se Defendants.
DATED this March 8, 2017.

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s/ Rosanna Malouf Peterson
ROSANNA MALOUF PETERSON
United States District Judge

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