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United States of v. Norlin Merritt and Maria Merritt

October 20, 2011

UNITED STATES OF AMERICA, PLAINTIFF,
v.
NORLIN MERRITT AND MARIA MERRITT, DEFENDANTS.



The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge

FINDINGS AND RECOMMENDATIONS

Presently before the court is plaintiff's motion for default judgment, which seeks declaratory and injunctive relief in regards to an allegedly false lien filed by defendants with the Secretary of State for the State of California and against Internal Revenue Service Revenue Officer Nancy Wong.*fn1 (Mot. for Default J., Dkt. No. 8.) The court heard plaintiff's motion for default judgment on its law and motion calendar on October 20, 2011. Kaycee M. Sullivan appeared at the hearing via telephone on behalf of plaintiff. No appearance was made by or on behalf of either defendant. For the reasons stated below, the undersigned recommends that plaintiff's motion for default judgment be granted, that judgment be entered in plaintiff's favor, and that plaintiff be awarded the requested declaratory and injunctive relief.

I. BACKGROUND

Plaintiff alleges that at all relevant times Nancy Wong was a Revenue Officer with the Internal Revenue Service ("IRS") and was involved in the collection of unpaid federal tax liability from defendants, who are husband and wife. (Compl. ¶ 6; Wong Decl. ¶¶ 1-2, Dkt. No. 8, Doc. No. 8-2.) In connection with the IRS's collection activities, Revenue Officer Wong "issued levies on Norlin Merritt's bank accounts and accounts receivable, requested [that] notices of federal tax liens be filed against him and issued summonses to third parties to investigate his assets." (Wong Decl. ¶ 3.) On October 8, 2009, Revenue Officer Wong received from Mr. Merritt "privately issued 'money orders' to cover the tax lien amounts," but these "money orders appeared to be fictitious instruments" and thus were not processed. (Id. ¶ 4.)

On October 31, 2009, Maria Merritt, who "is authorized to act as Norlin Merritt's power of attorney with the IRS," filed a UCC Financing Statement with the California Secretary of State against Revenue Officer Wong in a total amount of $202,518.55. (Compl. ¶¶ 5, 7-8 & Ex. 1 (UCC Financing Statement, Filing No. 09-7212900898); Wong Decl. ¶¶ 2, 5.) Norlin Merritt is listed as the secured party on the UCC Financing Statement. (Compl. ¶ 5 & Ex. 1.)

Plaintiff alleges that Ms. Merritt filed the UCC Financing Statement in retaliation for acts performed by Revenue Officer Wong as part of Revenue Officer Wong's official duties on behalf of the IRS, and that the filing of the UCC Financing Statement was "specifically designed to cause substantial interference with the enforcement of the laws of the United States pertaining to the internal revenue and to molest, interrupt, hinder, intimidate or impede Revenue Officer Wong in the good faith performance of her official duties." (See Compl. ¶¶ 7-9; Wong Decl. ¶ 5.) Revenue Officer Wong further declares:

I am not personally acquainted with Maria Merritt and have not had any contact or relationship with her other than in my official capacity as a Revenue Officer. I have not engaged in any contract, security agreements, or personal transaction with Maria Merritt and do not owe money to her. There is no legitimate reason for Maria Merritt to impose such a lien on my personal property.

(Wong Decl. ¶ 6.)

Plaintiff filed its complaint on April 28, 2011 (Dkt. No. 1). Plaintiff's complaint seeks declaratory and injunctive relief. Specifically, plaintiff requests that the court:

(1) "determine, adjudge, and declare the UCC Financing Statement . . . to be null, void, and of no legal effect"; (2) "expunge and remove any record of the UCC Financing Statement . . . from the official records of the Secretary of State for the State of California"; (3) "grant [plaintiff] leave to file any Order or Judgment obtained in the present case with the Secretary of State for the State of California, and in the public records of any other jurisdiction where documents identical or similar to the UCC Financing Statement . . . may have been filed by the defendant"; and (4) "permanently enjoin defendant Norlin Merritt, his agents, employees, and all others in active concert or participation with the defendants from filing, or attempting to file, any document or instrument which purports to create any nonconsensual lien or encumbrance against the person or property of any employee of the United States." (Compl. at 3.)

One of the proofs of service filed by plaintiff reflects that on May 14, 2011, plaintiff, through a process server, effectuated personal service of process on Maria Merritt. (See Proof of Service, Dkt. No. 4.) Another proof of service filed by plaintiff reflects that plaintiff's process server attempted to effectuate personal service on Norlin Merritt on five separate occasions in May 2011, and ultimately effectuated substituted service on May 14, 2011, by leaving the summons, complaint, and related documents with Maria Merritt. (See Proof of Service, Dkt. No. 5.) Plaintiff's process server also mailed a copy of the summons, complaint, and other documents to Norlin Merritt at the following address: 540 Stone Drive, Novato, California 94947-7502. (Id.)

On August 19, 2011, plaintiff requested that the Clerk of Court enter default against defendants. (Req. for Entry of Default, Dkt. No. 6.) That same day, the Clerk of Court entered the default of both defendants. (Clerks Cert. of Entry of Default, Dkt. No. 7.) In entering default, the Clerk of Court stated that it appeared from the record and papers on file in the action that defendants were duly served with process, but failed to appear, plead, or answer plaintiff's complaint within the time allowed by law. (See id.)

On August 23, 2011, plaintiff filed a motion for default judgment against defendants and served a copy of the motion on defendants by U.S. mail. (Cert. of Serv., Aug. 23, 2011, Dkt. No. 8, Doc. No. 8-2.) A review of the court's docket reveals that defendants have not appeared in this action or filed a response to the motion for default judgment.

The undersigned notes that this is not the first case involving a false lien filed by Maria Merritt against Revenue Officer Wong. Plaintiff requests that the court take judicial notice of another action filed in this court, United States v. Merritt, 2:10-cv-00618 MCE KJN ("Merritt I"), and the undersigned grants plaintiff's request.*fn2 At issue in Merritt I was another UCC Financing Statement that Maria Merritt filed with the California Secretary of State on October 29, 2009, in regards to Revenue Officer Wong. Plaintiff was successful in Merritt I, and the "Order of Expungement and Permanent Injunction" is attached to the complaint in this action. (Compl. at 3 & Ex. 2.)

II. LEGAL STANDARDS

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)). Instead, the decision to grant or deny an application for default judgment pursuant to Federal Rule of Civil Procedure 55(b)(2) 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 considers 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 ...


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