The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge
FINDINGS AND RECOMMENDATIONS
Presently before the court is defendant/counterclaim plaintiff United States of America's ("United States") application for default judgment against counterclaim defendant Paul Ta ("Ta").*fn1 (Dkt. Nos. 75, 77.) Having concluded that oral argument would not assist the court, the undersigned hereby takes under submission the application before the court on the briefs and record on file. The undersigned has fully considered the briefs and record in this case and, for the reasons stated below, will recommend that the United States's application for default judgment against Ta be denied without prejudice.
I. RELEVANT FACTUAL BACKGROUND
Plaintiff Puongpun Sananikone filed a complaint against the United States seeking, generally stated, the refund of taxes that he alleges were illegally assessed and the abatement of a trust fund penalty that he alleges was illegally imposed by the United States pursuant to 26 U.S.C. § 6672. (Pl.'s Compl. ¶ 3, Dkt. No. 1.) The United States subsequently filed an answer to plaintiff's complaint and filed counterclaims against plaintiff and four other counterclaim defendants: Paul Ta; Jacob Intveld; Michael Goodman; and Nguyen Vo (collectively, "counterclaim defendants"). (Answer & Counterclaims of the United States, Dkt. No. 9.) The United States's counterclaim against Ta seeks "to reduce to judgment certain outstanding tax assessments made against additional counterclaim defendant Paul Ta pursuant to 26 U.S.C. § 6672."*fn2 (Id. at 10.) These assessments, and those sought to be enforced against the other counterclaim defendants, relate to certain taxes withheld from the wages paid to employees of American Steel Frame, Inc. ("ASFI"), which the United States contends the counterclaim defendants were responsible for paying, but failed to pay, to the United States on behalf of ASFI.
As with the other counterclaim defendants, the counterclaim against Ta sets forth a table that includes information related to the type of tax or penalty sought, the associated tax period, the assessment date, and the amount assessed.*fn3 (Id.) There is significant overlap between tax periods and related assessments that form the basis for the United States's counterclaim against Ta and those that form the basis of the counterclaims against the remaining counterclaim defendants. For example, the United States seeks to reduce to judgment against multiple counterclaim defendants the same assessments of taxes owed by ASFI that were assessed on February 8, 2006, and March 6, 2006, which relate to the tax period of "12-31-2001." (See id. at 5:6-7 (counterclaim against Sananikone), 7:3-4 (counterclaim against Vo), 10:26-27 (counterclaim against Ta), and 12:20-21 (counterclaim against Goodman).) This example is indicative of the overlap inherent in the United States's counterclaims against Ta and the other counterclaim defendants.
All of the counterclaim defendants except for Ta have appeared in this action and filed answers to the counterclaim.*fn4 (See Dkt. Nos. 13, 21, 22, and 63.) A declaration of service filed with the court demonstrates that the United States, through a process server, personally served Ta with the summons and complaint on December 18, 2007, at 651 Bering Drive, Apartment 1904, in Houston, Texas. (Dkt. No. 25, Doc. 25-2.) Although Ta has not yet appeared in this action, he was deposed on September 25, 2009, in connection with this action. (Pitman Decl. ¶ 5 & Ex. 2, Dkt. No. 75, Doc. 75-3.)
On February 25, 2008, the Clerk of this Court entered a certificate of entry of default against Ta. (Dkt. No. 29.) In doing so, the Clerk of Court stated that it appeared from the record and papers on file that Ta was duly served with process yet failed to appear, plead, or answer the counterclaim within the time allowed by law. (See id.)
On May 4, 2010, the United States filed an application for default judgment, which was procedurally deficient. (See Dkt. Nos. 75, 76.) On June 2, 2010, the United States filed a proper amended notice of its application for default judgment. (Dkt. No. 77.) It also filed certificates of service indicating that it served Ta with its amended notice of the application for default judgment and all of the associated moving documents by mail at 651 Bering Drive, Unit 1904, in Houston, Texas. (Dkt. No. 75, Doc. No. 75-5; Dkt. No. 77, Doc. No. 77-2.) No response to the application is reflected on the court's docket.
Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend against the action. See Fed. R. Civ. P. 55(a). However, "[a] defendant's default does not automatically entitle the plaintiff to a court-ordered judgment." PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)); see Fed. R. Civ. P. 55(b) (governing the entry of default judgments). Instead, the decision to grant or deny an application for default judgment lies within the district court's sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court may consider the following factors:
(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily disfavored. Id. at 1472.
As a general rule, once default is entered, well-pleaded factual allegations in the operative complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); see also Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). Although well-pleaded allegations in the complaint are admitted by a defendant's failure to respond, "necessary facts not contained in the pleadings, and claims which are legally insufficient, are notestablished by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)); accord DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) ("[A] defendant is not held to admit facts that are not ...