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Puongpun Sananikone v. United States of America

March 1, 2013

PUONGPUN SANANIKONE, PLAINTIFF,
v.
UNITED STATES OF AMERICA, FINDINGS AND RECOMMENDATIONS DEFENDANT. UNITED STATES OF AMERICA, COUNTERCLAIM PLAINTIFF,
v.
PUONGPUN SANANIKONE, COUNTERCLAIM DEFENDANT,
AND
PAUL TA; JACOB INTVELD; MICHAEL GOODMAN; NGUYEN VO, ADDITIONAL DEFENDANTS ON COUNTERCLAIM.



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

Presently before the court is defendant/counterclaim plaintiff United States of America's ("United States") renewed motion for default judgment against counterclaim defendant Paul Ta ("Ta").*fn1 (Dkt. No. 260.) Ta has not filed a response to the United States's motion for default judgment. At the February 28, 2013 hearing on the motion, Colin Sampson appeared telephonically on behalf of the United States and no appearance was made by Ta. After considering the briefing in support of the motion, counsel's oral argument at the hearing, and appropriate portions of the record, the undersigned recommends that the United States's motion for default judgment be granted.

I. RELEVANT FACTUAL BACKGROUND

Plaintiff Puongpun Sananikone ("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 recovery penalty that he alleges was illegally imposed by the United States pursuant to 26 U.S.C. § 6672. (Dkt. No. 1, ¶ 3.) The United States subsequently filed an answer to plaintiff's complaint and filed counterclaims against plaintiff and four other counterclaim defendants: Ta; Jacob Intveld ("Intveld"); Michael Goodman ("Goodman"); and Nguyen Vo ("Vo"). (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 made 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. (Id. at 4-13.)

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 (Dkt. No. 9 at 10-11.) Although not identical, 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 other counterclaim defendants. Stated differently, the counterclaims seek to reduce to judgment against multiple counterclaim defendants the same taxes owed by ASFI relating to certain tax periods. (See id. at 4-13.)

All of the counterclaim defendants except for Ta appeared and filed answers to the counterclaims.*fn4 (See Dkt. Nos. 13, 21, 22, 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. Nos. 25, 25-1.) Although Ta has not appeared, he was deposed on September 25, 2009, in connection with this action. (Declaration of Colin C. Sampson in support of the United States's Renewed Motion for Default Judgment, Dkt. No. 260-2 ["Sampson Decl."], ¶ 5, Ex. 2.)

On February 25, 2008, the Clerk of Court entered a certificate of entry of default against Ta. (Dkt. No. 29.) Thereafter, on May 4, 2010, the United States moved for the entry of a default judgment against Ta. (Dkt. No. 75.) On August 6, 2010, the court denied the United States's motion for default judgment against Ta without prejudice. (Dkt. No. 81, 83.) The court reasoned that, given the overlapping nature of the then-pending counterclaims as to the similarly situated counterclaim defendants, and the relatively early stage of proceedings at that time, the court could not find that there was "no just reason for delay" within the meaning of Rule 54(b) of the Federal Rules of Civil Procedure.*fn5 (Id.)

Since that order, the United States has resolved its claims against counterclaim defendants Vo, Intveld, and Goodman. (Dkt. Nos. 111, 205, 211, 237.) Specifically, on November 5, 2010, the court entered a stipulated judgment in favor of the United States and against Vo in the sum of $656,141.63 (less any credits/payments, plus interest). (Dkt. No. 111.) The judgment amount represented "the balance of federal tax assessments against Nguyen Vo of a trust fund recovery penalty pursuant to 26 U.S.C. Section 6672 for the unpaid withholding taxes of American Steel Frame, Inc. for periods ending June 30, 2000, September 30, 2000, December 31, 2000, June 30, 2001, September 30, 2001, and December 31, 2001...." (Id.) On October 18, 2011, the court also granted a joint motion to dismiss filed by the United States and Goodman, which disposed of their respective counterclaims. (Dkt. No. 205, 211.) Thereafter, on December 14, 2011, the court entered a stipulated judgment in favor of the United States and against Intveld in the sum of $437,474.14 (less any credits/payments, plus interest) on the United States's counterclaim against Intveld, and dismissed Intveld's counterclaim against the United States with prejudice. (Dkt. No. 237.) The judgment amount represented "the balance of the federal tax assessments against Jacob Intveld of a trust fund recovery penalty pursuant to 26 U.S.C. § 6672 for the unpaid withholding taxes of American Steel Frame, Inc., for periods ending June 30, 2000, September 30, 2000, December 31, 2000, and June 30, 2001...." (Id.)

Additionally, on October 27, 2011, the United States obtained a jury verdict against plaintiff and counterclaim defendant Sananikone. (Dkt. No. 226.) The jury verdict only related to Sananikone's liability under 26 U.S.C. § 6672, because, as counsel for the United States explained at the hearing on the instant motion for default judgment, the parties had agreed that the amount of the judgment would be determined by the parties and the court after any jury verdict in favor of the United States. Thereafter, on November 28, 2011, Sananikone filed a motion for judgment as a matter of law under Rule 50(b), or alternatively, for a new trial under Rule 59. (Dkt. No. 232.) That motion remains pending before the district judge.

Subsequently, on January 23, 2013, the United States filed the instant renewed motion for default judgment against Ta. (Dkt. No. 260.) Ta was served with the motion via U.S. mail, but did not file any response to the motion. (Id. at 3.)

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)); see Fed. R. Civ. P. 55(b) (governing the entry of a default judgment). 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 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 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)); accord Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). In addition, 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. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (stating that a defendant does not admit facts that are not well-pled or conclusions of law); Abney v. Alameida, 334 F. Supp. 2d 1221, 1235 (S.D. Cal. 2004) ("[A] default judgment may not be entered on a legally insufficient claim"). A party's default conclusively establishes that party's liability, but it does not establish the amount of damages. Geddes, 559 F.2d at 560.

III. DISCUSSION

A. Appropriateness of the Entry of Default Judgment Under the Eitel Factors

1. Factor One: Possibility of Prejudice to Plaintiff The first Eitel factor considers whether the plaintiff would suffer prejudice if default judgment is not entered, and such potential prejudice to the plaintiff militates in favor of granting a default judgment. See PepsiCo, Inc., 238 F. Supp. 2d at 1177. Here, the United States, the counterclaim plaintiff with respect to the counterclaim against Ta, would face prejudice if the court did not enter a default judgment. Absent entry of a default judgment, the United States would be without another recourse for recovering the federal tax liabilities at issue from Ta. The ...


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