UNITED STATES OF AMERICA V. SHOALEH YERMIAN

Case No. SACV 15-0820-DOC (RAOx)

UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA

2016 U.S. Dist. LEXIS 49992; 117 A.F.T.R.2d (RIA) 1064

March 18, 2016, Decided

March 18, 2016, Filed

CORE TERMS: default judgment, default, entry of default, clerk, weigh, foreign bank, material facts, excusable neglect, well-pleaded, declaration, foreign country, financial interest, failure to file, procedural requirements, sum of money, properly served, disputed facts, documentation, calculations, signature, aggregate, notice, willful, bank account, favoring, minute, unpaid

COUNSEL: [*1] For United States of America, Plaintiff: Benjamin L Tompkins, Office of US Attorney, Los Angeles, CA.

JUDGES: THE HONORABLE DAVID O. CARTER, JUDGE.

OPINION BY: DAVID O. CARTER

OPINION

CIVIL MINUTES -- GENERAL

PROCEEDINGS (IN CHAMBERS): ORDER GRANTING DEFENDANT'S APPLICATION FOR DEFAULT JUDGMENT [16]

Before the Court is Plaintiff United States of America's ("Plaintiff") Application for Entry of Default Judgment ("Application") (Dkt. 16). The Court finds this matter appropriate for resolution without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. Having reviewed the moving papers and considered the parties' arguments, the Court hereby GRANTS the Motion.

I. Background

On May 27, 2015, Plaintiff commenced an action against Defendant Shoaleh Yermian ("Defendant" or "Yermian") to collect unpaid federal penalty assessments and interest. See Complaint ("Compl.") (Dkt. 1).

Plaintiff states that Defendant had a Swiss Bank account from 2006 to 2008. Compl. ∂ 9. Plaintiff alleges that Defendant violated the law by failing to report this bank account by failing to file Treasury Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts ("FBAR") with the Internal Revenue Service. Id. ∂ 7, 10. Plaintiff further alleges that Defendant failed to timely report [*2] the interest or capital gains she earned from this foreign bank account. Id. ∂ 11.

On June 4, 2013, the IRS assessed Defendant with three $10,000 penalties for her failure to file an FBAR for tax years 2006 through 2008. Id. ∂ 13. Notice and a demand for payment of the penalty was sent to Defendant on that same day. Id. Interest has accrued on the penalty and remains unpaid. See id. ∂ 14.

On November 9, 2015, the Court granted Plaintiff's Renewed Ex Parte Application for Service by Publication ("Renewed Application") (Dkt. 12). The United States subsequently served Defendant via publication in accordance with California Government Code ß 6064. See Proof of Publication (Dkt. 13-1) at 1. Further, on December 3, 2015, the United States emailed Defendant the summons and complaint, and served the same documents via registered mail and first class to Defendant's last known address, Defendant's nephew, and to Daniel Yermian's Beverly Hill address. See Declaration of Benjamin L. Tompkins ("Tompkins Decl.") (Dkt. 13) ∂∂ 5-7.

Plaintiff requested an entry of default against Defendants on February 2, 2016 (Dkt. 14), which was entered by the Clerk the following day (Dkt. 15). Plaintiff then filed the present Application on March [*3] 7, 2016.

II. Legal Standard

Federal Rule of Civil Procedure 55(b) provides that the Court may, in its discretion, order default judgment following the entry of default by the Clerk. Local Rule 55 sets forth procedural requirements that must be satisfied by a party moving for default judgment. Upon entry of default, the well-pleaded allegations of the complaint are taken as true, with the exception of allegations concerning the amount of damages. See, e.g., Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). However, "necessary facts not contained in the pleading, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). Where the pleadings are insufficient, the Court may require the moving party to produce evidence in support of the motion for default judgment. See TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987).

When deciding whether to enter default judgment, courts consider seven 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).

If a plaintiff seeks [*4] money damages, "[t]he plaintiff is required to provide evidence of its damages, and the damages sought must not be different in kind or amount from those set forth in the complaint." Fed. R. Civ. P. 54(c). "When 'proving-up' damages, admissible evidence (including witness testimony) supporting . . . damage calculations is usually required." Amini Innovation Corp. v. KTY Int'l Mktg., 768 F. Supp. 2d 1049, 1054 (C.D. Cal. 2011).

III. Discussion

A. Procedural Requirements

Plaintiff has satisfied the requirements of Local Rules 55-1 and 55-2 and Federal Rule of Civil Procedure 55(b). Plaintiff has requested and received an entry of default against Defendants. Plaintiff has stated, by declaration, that the individual Defendant is not an infant or incompetent person and that the Servicemembers Civil Relief Act, 50 U.S.C. ß 521, is not implicated here. Tompkins Decl. ∂ 5. Having determined Plaintiff's procedural compliance, the Court turns to the substance of Plaintiff's Application.

B. Eitel Factors

The Court will now consider each Eitel factor in turn.

1. Possibility of Prejudice to Plaintiff

The first Eitel factor requires the Court to consider the harm to Plaintiff if a default judgment is not granted. See PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). Absent default judgment, Plaintiff would lack any other recourse for recovery since Defendant had failed to appear or defend this suit. Id.; Philip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 499 (C.D. Cal. 2003). Therefore, the first factor [*5] supports granting default judgment against Defendant.

2. Merits of Plaintiff's Claim and Sufficiency of the Complaint

Courts often consider the second and third Eitel factors together. See PepsiCo, 238 F. Supp. 2d at 1175; see also HTS, Inc. v. Boley, 954 F. Supp. 2d 927, 941 (D. Ariz. 2013). The second and third Eitel factors look to whether Plaintiff's complaint has sufficiently stated a claim for relief. In its analysis of the second and third Eitel factors, the Court will accept as true all well-pleaded allegations regarding liability. See Fair Hous. of Marin, 285 F.3d at 906. The Court will therefore consider the merits of Plaintiffs' claim, and the sufficiency of its pleadings together.

Here, the United States asserts claims for willful failure to file Reports of Foreign Bank and Financial Accounts in violation of 31 U.S.C. ß 5314. Section 5314 of Title 31 of the United States Code authorizes the Secretary of the Treasury to require United States citizens to report certain transactions with foreign financial agencies. 31 U.S.C. ß 5314. Under the implementing regulations of ß 5314, "[e]ach United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship" to the IRS for each year in which such relationship exists, and shall provide such information on the FBAR Form. 31 C.F.R. ß 1010.350(a). United [*6] States citizens who have an interest in a foreign bank, securities, or other financial account must report that interest to the IRS by June 30 of the year following any calendar year in which the aggregate balance of such account exceeded, at any time during the year, $10,000. 31 C.F.R. ß 1010.306(c). If any person willfully fails to timely report interest in a foreign bank, securities, or other financial account to the IRS, then the maximum penalty shall be increased to the greater of either (1) $100,000, or (2) fifty percent of the balance in the account at the time of the violation. 31 U.S.C. ß 5321(a)(5)(C)--(D).

As summarized by a court in this Circuit, a FBAR claim consists of four elements: (1) an individual "is a United States person; (2) he or she has a financial interest in, or signature or other authority over, a bank, securities, or other financial account; (3) the bank, securities, or other financial account is in a foreign country; and (4) the aggregate amount in the accounts exceeds $10,000 in U.S. currency at any time during the year." U.S. v. Hom, 45 F. Supp. 3d 1175, 1178 (N.D. Cal. 2014). Here, the United States has sufficiently alleged all of these elements. See Compl. ∂∂ 9-11. The United States has supplemented its allegations with supporting documentation. See generally [*7] Renewed Application Exs. A-C; Application Ex. 1. The second and third Eitel factors thus weigh in favor of granting default judgment.

3. Sum of Money at Stake

The fourth Eitel factor requires the Court to weigh the amount of money at stake against the seriousness of Defendants' conduct. "Default judgment is disfavored where the sum of money at stake is too large or unreasonable in relation to defendant's conduct." Vogel v. Rite Aid Corp., 992 F. Supp. 2d 998, 1012 (C.D. Cal. 2014).

Plaintiff seeks $440,860.22 in damages against Defendant and $12,817 in attorney's fees and costs. App. at 6. While the amount Plaintiff seeks is significant, the Court finds that in light of Plaintiff's serious allegations, the amount is reasonable. Thus, the factor weighs slightly in favor of default.

4. Possibility of a Dispute Concerning Material Facts

The fifth Eitel factor requires the Court to consider whether it is likely that there would be a dispute as to material facts. Where a plaintiff's complaint is well-pleaded and the defendant makes no effort to properly respond, the likelihood of disputed facts is very low. See Landstar Ranger, Inc. v. Parth Enterprises, Inc., 725 F. Supp. 2d 916, 921 (C.D. Cal. 2010). "Because all allegations in a well-pleaded complaint are taken as true after the court clerk enters default judgment, there is no likelihood that any genuine [*8] issue of material fact exists." Elektra Entm't Grp. Inc. v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005). As discussed above, Plaintiff has pleaded the necessary elements of its claims. Therefore, the risk of disputed facts is minimal, and therefore this factor weighs in favor of default.

5. Possibility of Excusable Neglect

While there is always a possibility that a defendant might show up claiming excusable neglect, where a defendant "[was] properly served with the Complaint, the notice of entry of default, as well as the papers in support of the instant motion," this factor favors entry of default judgment. Shanghai Automation Instrument Co. Ltd. v. Kuei, 194 F. Supp. 2d 995, 1005 (N.D. Cal. 2001). Despite being properly served with Plaintiff's Complaint, Defendant has has made no effort to defend this suit. Furthermore, it has been over one month since the Clerk entered default as to the Defendant. The likelihood of excusable neglect is low, and this factor favors default judgment.

6. Policy Favoring Decision on the Merits

Although decisions on the merits are preferred, this does not prevent a court from entering judgment where the defendants refuse to respond. PepsiCo, 238 F. Supp. 2d at 1177. Here, because Defendant has failed to respond to Plaintiff's Complaint, the Court is unable to make a decision on the merits. This failure to appear does not preclude the entry of default [*9] judgment.

7. Conclusion

Taken together, the Eitel factors weigh in favor of granting default judgment against the Defendant.

C. Damages

Plaintiffs requesting default judgment "must also prove all damages sought in the complaint." Dr. JKL Ltd. v. HPC IT Educ. Ctr., 749 F. Supp. 2d 1038, 1046 (N.D. Cal. 2010) (citing Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003)). Rule 55 does not require the court to conduct a hearing on damages, so long as it ensures there is an adequate basis for the damages awarded in the default judgment. Action S.A. v. Marc Rich & Co. Inc., 951 F.2d 504, 508 (2d Cir. 1991). "The Court considers Plaintiff's declarations, calculations, and other documentation of damages in determining if the amount at stake is reasonable." Truong Giang Corp. v. Twinstar Tea Corp., No. 06-CV-03594, 2007 U.S. Dist. LEXIS 100237, 2007 WL 1545173, at *12 (N.D. Cal. May 29, 2007).

A person who fails to file a required FBAR may be assessed a civil monetary penalty. See 31 U.S.C. ß 5321(a)(5)(A). The amount of the penalty is capped at $10,000 unless the failure was willful. See 31 U.S.C. ß 5321(a)(5)(B)(i), (C).

Here, the United States seeks a total of $32,142.79. App. at 8. The United States' records indicate the requested amount consists of a principal amount of $29,459.18, a late-payment payment as authorized by 31 U.S.C. ß 3717 and 31 CFR ß 5.5(a) in the amount of $2,300.23, and interest as authorized by 31 U.S.C. ß 3717 in the amount of $383.38. See App. Ex. 1 at 2. Based on the Court's review of the relevant statutes and the government's records, the Court finds the amount requested in reasonable.

IV. Disposition

In light of the above, the [*10] Court GRANTS Plaintiff's Application. Judgment shall be entered in favor of Plaintiff against Defendant in the amount of $32,142.79. An order entering final judgment will be filed concurrently with this Order.

The Clerk shall serve this minute order on the parties.

DEFAULT JUDGMENT AGAINST SHOALEH YERMIAN

Pursuant to Federal Rule of Civil Procedure 55(b)(2) and Local Rule 55-1, it is:

ORDERED and ADJUDGED that the United States of America's Application for Default Judgment is GRANTED, and Final Default Judgment is entered against Defendant Shoaleh Yermian as follows:

ORDERED and ADJUDGED that Plaintiff, United States of America, shall have and recover judgment against Defendant Shoaleh Yermian in the amount of $32,142.79, as of March 1, 2016 and plus statutory interest and statutory additions continuing to accrue in accordance with the applicable statutes.

IT IS SO ORDERED.

/s/ David O. Carter

DAVID O. CARTER

United States District Judge

Dated: March 18, 2016