United States District Court, W.D. Washington, Seattle
ORDER GRANTING MOTION FOR DEFAULT JUDGMENT
Honorable Richard A. Jones, United States District Judge
matter is before the Court on the United States' motion
for entry of default judgment. Dkt. # 53. For the reasons
below, the motion is GRANTED.
United States seeks to collect outstanding federal income tax
assessments against Clarence Jess Groesbeck and in the
process foreclose on related federal tax liens against three
parcels of property in Skagit County, Washington
(collectively, the “Subject Properties”)
belonging to Groesbeck. Dkt. # 1. The United States has
assessed Groesbeck with income tax liabilities for the 1998
through 2003 tax years. Id. Because Groesbeck passed
away in 2009, the Estate of Clarence Jess Groesbeck
(“Groesbeck Estate”) is responsible for these
complaint alleges that Groesbeck participated in an abusive
trust scheme with the intent to avoid paying federal tax.
Id., ¶ 28. He is alleged to have placed untaxed
funds from his wholly owned corporation's profit sharing
plan into offshore trusts and bank accounts, and then used
the mortgages on his properties in the western United States
to repatriate these funds, free of tax. Id.
Groesbeck did not report this income on his federal tax
returns and fraudulently computed the income he did report.
Id. With respect to the 1998, 2000, 2001, 2002, and
2003 tax years, the IRS has assessed Groesbeck civil fraud
penalties totaling $4, 947, 779.33. Id.,
¶¶ 27, 28. Despite timely notice and demand for
payment, Groesbeck neglected or refused to pay the full
assessments, which remain outstanding. Id., ¶
30. Pursuant to 26 U.S.C. §§ 6321 and 6322, liens
arose in favor of the United States and attached to
Groesbeck's property and rights to property, including
the Subject Properties. Id., ¶ 31.
Subject Properties are continuous parcels of property located
at “1224 East Blackburn Road, Mt. Vernon, Washington
98274” (“1224 East Blackburn”); “1418
East Blackburn Road, Mt. Vernon, Washington 98274”
(“1418 East Blackburn”); and “1308 East
Blackburn Road, Mt. Vernon, Washington 98274”
(“1308 East Blackburn”). Id.,
¶¶ 11, 16, 22. The complaint alleges that Groesbeck
owned, and now the Groesbeck Estate owns, the Subject
Properties through the C. Jess Groesbeck M.D., A.P.C., Profit
Sharing Plan (“Profit Sharing Plan”); the
Groesbeck Family Trust (“Family Trust”); and
Genesis Ltd. Id., ¶¶ 12-24. Multiple
transfers of the Subject Properties between Clarence
Groesbeck and the entities involved no consideration or, in
one case, $1. Id., ¶¶ 12-14, 17-20, 23-24.
Since at least 2000, none of the entities has paid any
expenses associated with the Subject Properties. Dkt. # 53-3,
¶ 14. Rather, Groesbeck and, following his death, his
surviving spouse, Silvia Lee, exercised active and
substantial control over the Subject Properties.
Id., ¶¶ 5-10. For example, they rented out
one of the properties for their own benefit and have allowed
family members to live at one of the Subject Properties.
Id., ¶¶ 5-6. They also maintaining the
Subject Properties and paid all mortgages, utility bills, and
other bills associated with them. Id., ¶¶
United States named the Profit Sharing Plan, the Family
Trust, Genesis Ltd, and Silvia Lee as defendants in this
lawsuit because they may claim an interest in at least one of
the Subject Properties under 26 U.S.C. § 7403(b). Dkt. #
1. On January 11, 2017, the United States served the summons
and Complaint on the Profit Sharing Plan, the Family Trust,
and Genesis Ltd. See Dkt. ## 9-11. Neither the
Profit Sharing Plan, the Family Trust, nor Genesis Ltd.
appeared or pleaded by the date required, November 13, 2017,
or at any other point. Accordingly, on March 8, 2018, the
United States requested entry of default against these
entities. Dkt. # 29. On March 15, 2018, the clerk entered
default against the Profit Sharing Plan, Family Trust, and
Genesis Ltd. Dkt. # 30. On August 12, 2019, the United States
moved for entry of default judgment. Dkt. # 53. Concurrently,
with the motion for entry of default judgment, the United
States, the Groesbeck Estate, and Silvia Lee filed a
stipulation in which the Groesbeck Estate and Silvia Lee
concede that (i) the Groesbeck Estate is liable for the
federal tax assessments against Clarence Groesbeck for the
1998 through 2003 years; (ii) the United States has valid and
subsisting federal tax liens on all property and rights to
property belonging to Clarence Groesbeck and the Groesbeck
Estate; and (iii) Clarence Groesbeck fraudulently transferred
title to 1224 East Blackburn and 1308 East Blackburn to his
nominees. Dkt. # 54.
default judgment stage, the court presumes all well-pleaded
factual allegations are true, except those related to
damages. TeleVideo Sys., Inc. v. Heidenthal, 826
F.2d 915, 917-18 (9th Cir.1987); see also Fair House. of
Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002).
Although the entry of default judgment under Rule 55(b) is
“an extreme measure, ” disfavored cases should be
decided upon their merits whenever reasonably possible.
Cmty. Dental Servs. v. Tani, 282 F.3d 1164, 1170
(9th Cir. 2002); also see Westchester Fire Ins. Co. v.
Mendez, 585 F.3d 1183, 1189 (9th Cir. 2009).
addition, Federal Rule of Civil Procedure 55(b)(1) permits
the court to enter default judgment when the plaintiff's
claim “is for a sum certain or a sum that can be made
certain by computation.” Fed.R.Civ.P. 55(b)(1). In
moving the court for default judgment, a plaintiff must
submit evidence supporting the claims for a particular sum of
damages. Fed.R.Civ.P. 55(b)(2)(B). If the plaintiff cannot
prove that the sum it seeks is “a liquidated sum or
capable of mathematical calculation, ” the court must
hold a hearing or otherwise ensure that the damage award is
appropriate, reasonable and demonstrated by evidence.
Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir.
1981); see also Getty Images (US), Inc. v. Virtual
Clinics, 2014 WL 358412 (W.D. Wash. 2014). In
determining damages, a court can rely on the declarations
submitted by the plaintiff. Dr. JKL Ltd. v. HPC IT Educ.
Ctr., 749 F.Supp.2d 1046 (N.D. Cal. 2010). Where there
is evidence establishing a defendant's liability, the
court has discretion, not an obligation, to enter a default
judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th
Cir. 1980); see also Alan Neuman Productions, Inc. v.
Albright, 862 F.2d 1388, 1392 (9th Cir. 1988). Since
deciding for or against default judgment is within the
court's discretion, a defendant's default does not de
facto entitle a plaintiff to a court-ordered judgment.
Curtis v. Illumination Arts, Inc., 33 F.Supp.3d
1200, 1210-11 (W.D. Wash. 2014).
exercising its discretion, the Court considers the
“Eitel” factors: (1) the substantive
merits of plaintiff's claims, (2) the sufficiency of the
claims raised in the complaint, (3) the possibility of
prejudice to the plaintiff if relief is denied, (4) the sum
of money at stake, (5) the possibility of a dispute
concerning material facts, (6) whether the default was due to
excusable neglect, and (7) the strong policy favoring
decisions on the merits when reasonably possible. Eitel
v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).
discussed below, the Court has considered each of the
Eitel factors and finds they weigh in ...