Free Motion for Default Judgment - District Court of Colorado - Colorado

Case 1:04-cv-00437-WYD-CBS

Document 48

Filed 05/09/2007

Page 1 of 5

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

CIVIL ACTION NO. 04-D-0437 (CBS) JAMES K. CASART Plaintiff vs. THE UNITED STATES OF AMERICA, Defendant _____________________________________________________________________ UNITED STATES OF AMERICA, Counterclaim Plaintiff vs. JAMES K. CASART; SCOTT CONNORS; TERRY A. FICKEN; TODD E. FICKEN; and FREDERICK J. KLODT, Counterclaim Defendants.

MOTION FOR DEFAULT JUDGMENT

The United States of America, through its undersigned counsel, hereby moves this Court to enter default judgment against Frederick J. Klodt. The United States is entitled to default judgment against defendant Frederick J. Klodt because he has failed to respond to the United States' complaint after proper service, default has been entered against him, and the documents submitted with this memorandum demonstrate that the tax assessments against him are valid.
2406890.11

Case 1:04-cv-00437-WYD-CBS

Document 48

Filed 05/09/2007

Page 2 of 5

STATEMENT OF FACTS This action began as a refund suit against the United States, filed on March 10, 2004. On June 14, 2004, the United States filed a counterclaim against five individuals, including Klodt, asserting they were jointly and severally liable for unpaid employment taxes of an entity known as Bailco, Inc. Personal service of process was effected on Klodt on August 21, 2004. See Civil Docket for Civil Action No. 1:04-cv-0437-WYDCBS, entry 21. Klodt has not filed an Answer or otherwise responded to the United States' Counterclaim Complaint, or appeared in any other manner before the Court in this case. Pursuant to Federal Rule of Civil Procedure 55(a), default has been entered against Klodt. See Civil Docket for Civil Action No. 1:04-cv-0437-WYD-CBS, entry 24. On December 24, 2001, a delegate of the Secretary of the Treasury assessed against Klodt a trust fund recovery penalty pursuant to 26 U.S.C. § 6672 for unpaid employment taxes. See Exhibit A, Declaration of Rickey Watson (hereinafter "Watson declaration"), at paragraph 2. Despite timely notice and demand for payment, Klodt has neglected or refused to pay the assessment, and there remains due and owing on that assessment the amount of $600,853.41 as of March 14, 2007, plus interest and penalties accrued thereafter as provided by law. See Exhibit B, Declaration of Kay Moncla (hereinafter "Moncla Declaration") at paragraph 4. ARGUMENT I. Default Judgment May Be Entered Against Klodt Under Rule 12(a)of Federal Rules of Civil Procedure, a defendant has twenty (20) days after being served with the summons and complaint to serve an answer. See

2

2406890.11

Case 1:04-cv-00437-WYD-CBS

Document 48

Filed 05/09/2007

Page 3 of 5

Fed. R. Civ. P. 12 (a)(1)(a). Klodt has failed to comply with this requirement. Rule 55(a) of the Federal Rules of Civil Procedure provides that "when a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend," the party may be defaulted. As noted above, default has been entered against Klodt in this case. Once default has been entered, the party seeking affirmative relief may move for default judgment. Fed. R. Civ. P. 55(b). As the Ninth Circuit observed in H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689 (9th Cir. 1970), default judgments are appropriate when the adversary process has been halted because of an essentially unresponsive party. In that instance, the diligent party must be protected lest he be faced with an interminable delay and continued uncertainty as to his rights. The default judgment remedy serves as such a protection. Furthermore, the possibility of a default is a deterrent to those parties who choose delay as part of their litigative strategy. H.F. Livermore Corp., 432 F.2d at 691. See also Cessna Finance Corp. v. Bielenberg Masonry Contracting, Inc., 715 F.2d 1442, 1444 (10th Cir. 1983) ("a workable system of justice requires that litigants not be free to appear at their pleasure."). In this matter, service of process was properly effected on Klodt. After such service, Klodt failed to respond to the Complaint, and default was entered against him. Based on the above, entry of default judgment against Klodt is proper. II. The Assessment Against Klodt Should Be Reduced to Judgment The United States has presented sufficient evidence to entitle it to judgment in its favor on its claim to reduce assessments to judgment. Specifically, the United States has submitted a Certificate of Assessments and Payments (Form 4340) that reflect the 3

2406890.11

Case 1:04-cv-00437-WYD-CBS

Document 48

Filed 05/09/2007

Page 4 of 5

assessments made against Klodt, and subsequent additions and credits to that assessment. See Watson Declaration at paragraph 2. Certificates of Assessments and Payments (Forms 4340) "are presumptive proof of a valid assessment." See March v. Internal Revenue Service, 335 F.3d 1186, 1188 (10th Cir. 2003), and cases cited therein. The Certificate of Assessments and Payments submitted by the United States in this case establishes the following with respect to Klodt's tax liabilities: (1) that they were properly assessed (26 U.S.C. §§ 6201-6203); (2) that notices and demand for payment of the liabilities were properly sent (26 U.S.C. §§ 6303(a) and 6321); and (3) that Klodt is presumptively liable for the unpaid taxes, penalties and interest shown on the respective Certificates. Huff v. United States, 10 F.3d 1440, 1445-47 (9th Cir. 1993), cert. denied, 512 U.S. 1219 (1994). As there is nothing in the record to rebut these presumptions, the United States is entitled to judgment in its favor reducing the tax assessment to judgment. See Guthrie v. Sawyer, 970 F.2d 733, 737 (10th Cir. 1992), and cases cited therein. Defendant is not incompetent or an infant and, to the knowledge of the United States, is not in the military service of the United States of America within the purview of the Soldiers' and Sailors' Civil Relief Act of 2003, Pub.L.No. 108-189, 117 Stat. 2835. See United States Motion for Entry of Default, Exhibit B, Civil Docket for Civil Action No. 1:04-cv-0437-WYD-CBS, entry 22. WHEREFORE the United States requests that this Court:

4

2406890.11

Case 1:04-cv-00437-WYD-CBS

Document 48

Filed 05/09/2007

Page 5 of 5

1) Enter default judgment against Frederick J. Klodt as to all claims to relief in the Complaint; and 2) Grant the United States such other relief as is just and proper in this case. A proposed Judgment is submitted herewith. DATED this 8th day of May, 2007. Respectfully submitted, TROY A. EID United States Attorney MARK S. PESTAL Assistant United States Attorney

s/Rickey Watson RICKEY WATSON Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 683 Ben Franklin Station Washington, D.C. 20044-0683 Telephone: (202) 353-0300 Facsimile: (202) 307-0054 Attorneys for the United States

5

2406890.11