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United States v. Halajian

United States District Court, E.D. California

September 29, 2014



SHEILA K. OBERTO, Magistrate Judge.


On February 19, 2014, the United States ("Plaintiff" or the "Government") filed a complaint alleging that Defendants Barry Halajian and "Barry Halajian SS Municiple Corporation" (collectively, "Defendants") filed a false UCC-1 Financing Statement with the California Secretary of State naming Wayne Blackwelder, Clerk of Court for the United States Bankruptcy Court for the Eastern District of California, as a debtor. (Doc. 1.) Plaintiff seeks a judicial declaration that the UCC-1 Financing Statement is null and void, an order directing that the false lien be expunged, and injunctive relief enjoining Defendants from filing any other similar false documents in the future. (Doc. 1.)

On April 21, 2014, Barry Halajian and Barry Halajian Municiple Corporation filed a motion for an extension of time to answer the complaint. (Doc. 11.) The Court granted an extension of time, but cautioned Defendants that the Barry Halajian Municple Corporation was an artificial entity that must be represented by counsel to proceed on its claims in federal court. The Court instructed Defendants that the entity was to retain counsel within 60 days. Further, both Defendants were to file a response to the complaint within 60 days. (Doc. 12.)

No response to the complaint was filed, and on June 30, 2014, Plaintiff requested that Defendants' defaults be entered. (Doc. 14.) The Court issued an order directing the Clerk of Court to enter Defendants' defaults for failing to respond to the complaint. (Doc. 17.) On August 4, 2014, Defendants' defaults were entered. (Docs. 18, 19.)

On August 25, 2014, Plaintiff filed a motion for default judgment. (Doc. 12.) No opposition to the motion was filed. Having found the matter suitable for decision without argument pursuant to Local Rule 230(g), the hearing set for October 1, 2014, is VACATED. For the reasons set forth below, it is RECOMMENDED that Plaintiff's motion for default judgment be GRANTED.


Plaintiff alleges that Defendants filed a false Uniform Commercial Code Financing Statement with the State of California against Wayne Blackwelder.[1] A Uniform Commercial Code Financing Statement ("UCC-1 Statement") is a legal form that a creditor files to give notice that the creditor has a security interest in the personal property of a debtor. (Doc. 1, ¶ 6.) The UCC-1 Statement is generally filed with the Secretary of State in a state where the debtor resides to "perfect" the creditor's security interest in the debtor's property. (Doc. 1, ¶ 7.) The filing of a UCC-1 Statement creates a lien against the debtor's property and also establishes priority in case of debtor default or bankruptcy. (Doc. 1, ¶ 8.) To file a UCC-1 Statement, a debt must be owed to the filer and the debtor must authorize the filing of the UCC-1 Statement. (Doc. 1, ¶ 9.) The office of the California Secretary of State where the UCC-1 Statements are filed is located in Sacramento, California. (Doc. 1, ¶ 10.)

In its motion, Plaintiff maintains that Defendant Barry Halajian was a debtor in a Chapter 7 case in the United States Bankruptcy Court in the Eastern District of California, Fresno division captioned In re Barry S. Halajian, Case No. 10-60304-A-7, which is now closed. (Doc. 20-1, 3:21-25.) Defendant Barry Halajian SS Municiple Corporation (also known as Barry Stuart Halajian) was the debtor in a Chapter 9 case, In re Barry Halajian SS Municiple Corporation (aka Barry Stuart Halajian), No. 12-bk-15132-A-9, which is now closed. Barry Halajian has also been a plaintiff in a number of cases in the U.S. District Court for the Eastern District of California. The Government asserts that Defendants have filed the false lien described below because they are dissatisfied with events or outcomes related to their bankruptcy or district court proceedings. (Doc. 20-1, 3:25-26.)

Plaintiff alleges that Defendants caused to be filed with the California Secretary of State a UCC-1 Statement falsely identifying Wayne Blackwelder as a debtor. (Doc. 1, ¶ 14.) Specifically, Defendants filed a UCC-1 Statement on July 13, 2012, bearing document number XXXXXXXXXXX and filing number XX-XXXXXXXXXX, describing Wayne Blackwelder as a "Debtor." (Doc. 1, ¶ 11.)

Plaintiff alleges that Mr. Blackwelder has never been indebted to Defendants for payment or other performance; given Defendants any security interest in his assets or otherwise entered into any security agreement with Defendants; dealt with or otherwise interacted with Defendants or, if any interaction ever occurred, it was solely in his official capacity; or authorized the filing of UCC-1 Statements against him by Defendants. (Doc. 1, ¶ 15.) Plaintiff also contends that the false UCC-1 Statement is specifically designed to molest, interrupt, hinder, intimidate or impede Mr. Blackwelder in the good faith performance of his official duties. (Doc. 1, ¶ 16.) Plaintiff contends that Mr. Blackwelder faces substantial hardship and costs associated with false information in the public record that may impede or impair his personal credit and detract from performance of his official duties. (Doc. 1, ¶ 18.) Plaintiff further alleges that the UCC-1 Statement poses an immediate and irreparable injury upon the United States of America by impeding, obstructing, and impairing the execution of the official duties of its employees or officers. (Doc. 1, ¶ 19.)

Plaintiff seeks a declaration pursuant to 28 U.S.C. § 2201 that the UCC-1 Statement filed by Defendants is null, void, and of no legal effect and requests that the Court order the California Secretary of State to remove and expunge the false UCC-1 Statement from the official record of the California Secretary of State. Plaintiff also seeks injunctive relief pursuant to 18 U.S.C. § 1345, permanently enjoining Defendants from filing or recording any document which purports to create any nonconsensual lien or encumbrance against the person or property of any employee or officer of the United States. (Doc. 1, ¶¶ 26-30.)


A. Legal Standard

Federal Rule of Civil Procedure 55(b) permits a court-ordered default judgment following the entry of default by the clerk of the court under Rule 55(a). It is within the sole discretion of the court as to whether default judgment should be entered. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). A defendant's default by itself does not entitle a plaintiff to a court-ordered judgment. See id. Instead, the Ninth Circuit has determined that a court should consider seven discretionary factors, often referred to as the " Eitel factors, " before rendering a decision on default judgment. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The Eitel factors include the following: (1) the possibility of prejudice to the plaintiff, (2) the merits of the 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. See id.

A plaintiff is required to prove all damages sought in the complaint. See Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1992). In addition, any relief sought may not be different in kind from, or exceed in amount, what is demanded in the complaint. Fed.R.Civ.P. 54(c). If the facts necessary to determine the damages are not contained in the complaint, or are legally insufficient, they will not be established by default. See Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992).

Finally, once the court clerk enters a default, the well-pleaded factual allegations of the complaint are taken as true, except for those allegations relating to damages. ...

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