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United States v. Harding

United States District Court, N.D. California

November 12, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
ALFRED HARDING, et al., Defendants.

          ORDER GRANTING UNITED STATES' MOTION FOR DEFAULT JUDGMENT AGAINST ALFRED HARDING AND THE CALIFORNIA FRANCHISE TAX BOARD Re: Dkt. No. 48

          Susan Illston United States District Judge.

         On September 18, 2019, plaintiff United States filed the instant motion, seeking entry of default judgment against defendants Alfred Harding and the California Franchise Tax Board. On November 8, 2019, the Court held a hearing on the motion. Although plaintiff's counsel attended telephonically, defendants failed to appear and the matter was submitted on the papers. For the reasons set forth below, the Court GRANTS plaintiff United States' motion for entry of default judgment against defendants Alfred Harding and the California Franchise Tax Board.

         BACKGROUND

         On March 15, 2008, the government filed the instant action against defendants Alfred Harding, Cheryl Harding, and the California Franchise Tax Board (“Board”). Dkt. No. 1 (Compl.). The government seeks $5, 402, 042.51, [1] plus interest, penalties, and statutory additions, in unpaid joint federal income taxes. Id. at 9:14-17. In the compliant, the government sought to foreclose tax liens on two parcels of real property owned by Cheryl Harding. Id. at 10:12-17. However, the United States no longer seeks to foreclose on the tax liens, since it settled those claims with Ms. Harding, who owns the attached property. Mot. Default J. at 2:23-24. The government named the Board as a defendant out of an abundance of caution, to prevent the Board from claiming an interest in the attached property. Id. at 3:2-4.

         The government alleges Mr. Harding failed to timely file income tax returns and to pay income taxes for the years 2002 through 2013, inclusive, as follows:

KIND OF TAX

TAX PERIOD

FIRST ASSESSMENT DATE

LIEN RECORDING DATE(S)

UNPAID BALANCE OF ASSESSMENTS AS OF 7/31/2019

Separate Income (1040)

2002

3/16/2009

01/05/2010 (Humboldt County)

$556, 302.67

Separate Income (1040)

2003

3/17/2008

01/05/2010 (Humboldt County)

$679, 186.22

Separate Income (1040)

2004

3/17/2008

01/05/2010 (Humboldt County)

$860, 316.08

Separate Income (1040)

2005

3/16/2009

01/05/2010 (Humboldt County)

$486, 179.83

Separate Income (1040)

2006

9/14/2009

01/05/2010 (Humboldt County)

$401, 361.50

Separate Income (1040)

2007

3/14/2016

04/19/2016 (Humboldt County)

$162, 006.58

Separate Income (1040)

2008

3/14/2016

04/19/2016 (Humboldt County)

$989, 845.80

Separate Income (1040)

2009

3/14/2016

04/19/2016 (Humboldt County)

$260, 466.59

Separate Income (1040)

2010

3/14/2016

04/19/2016 (Humboldt County)

$467, 360.48

Separate Income (1040)

2011

3/14/2016

04/19/2016 (Humboldt County)

$394, 105.79

Separate Income (1040)

2012

3/14/2016

04/19/2016 (Humboldt County)

$144, 167.13

Separate Income (1040)

2013

3/14/2016

04/19/2016 (Humboldt County)

$743.84

Total

$5, 402, 042.51

Id. at 6:3-20; Dkt. No. 48-1 (Decl. Revenue Officer Adam Morgan ¶ 22). The government alleges that despite timely assessment and demand for payment, Mr. Harding failed to pay $5, 402, 042.51 in outstanding tax liability. Id. at 5:27-6:2, 6:18-19.

         On March 22, 2018, the government served Mr. Harding with the summons and complaint, Dkt. No. 12. The deadline for Mr. Harding to file an answer was April 12, 2018; he failed to do so. Id. On April 16, 2018, then again on April 17, 2018, the government moved for entry of default judgment. Dkt. Nos. 11, 16. On April 18, 2018, the Clerk entered default judgment in response to the government's second request. Dkt. Nos. 15, 17.

         On May 20, 2019, after entry of default judgment, the government deposed Mr. Harding. Dkt. No. 48-2 (Decl. Rika Valdman at Ex. B). At the deposition, Mr. Harding refused to swear in or affirm his testimony would be truthful. Id. Mr. Harding also invoked his Fifth Amendment right throughout the deposition and refused to answer almost every question. Id. On July 1, 2019, Mr. Harding moved to set aside the entry of default against him, Dkt. No. 44, and on July 17, 2019, the Court denied his motion. Dkt. No. 46.

         On March 27, 2019, the Board waived service of the summons and complaint. Dkt. No. 24- 2 (Ex. Waiver Service Summons). The deadline for the Board to file an answer was May 25, 2018. Id. On July 27, 2018, after the Board failed to file an answer, the government moved for entry of default judgment against the Board. Dkt. No. 24. On July 30, 2018, the Clerk entered default judgment. Dkt. No. 25. The Board has not appeared or otherwise defended itself since the start of proceedings.

         Now, the government moves this Court to enter default judgment against Mr. Harding and the Board. Dkt. No. 48 (Mot. Default J. at 1:23-2:2).

         LEGAL STANDARD

         Following the Clerk's entry of default, the Court may grant a motion for default judgment. Fed.R.Civ.P. 55(b)(2). It is within the district court's discretion to grant or deny a motion for default judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). However, when determining whether to enter default judgment, a district court must consider the following: (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).

         After the Clerk enters default, all factual allegations pertaining to liability in the plaintiff's complaint are generally taken as true. Tele Video Systems, Inc. v. Heidenthal, 826 F.2d 915, 917- 18 (9th Cir. 1987). However, the factual allegations that pertain to damages are ...


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