Free Response to Motion - District Court of California - California

Case 3:08-cv-00301-JLS-JMA

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KAREN P. HEWITT United States Attorney TOM STAHL, California State Bar No. 78291 Assistant United States Attorney Chief, Civil Division LAUREN M. CASTALDI JUSTIN S. KIM Trial Attorneys, Tax Division U.S. Department of Justice P.O. Box 683, Ben Franklin Station Washington, D.C. 20044-0683 Telephone: (202) 514-9668 Facsimile: (202) 307-0054 E-mail: [email protected] E-mail: [email protected] Attorneys for the United States of America IN THE UNITED STATES DISTRICT COURT

12 FOR THE SOUTHERN DISTRICT OF CALIFORNIA 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -13380523.1 LAUREL HILL ESCROW SERVICES, INC., a) California corporation, ) ) Plaintiff, ) ) v. ) ) IDEVELOPMENT, INC., a California ) corporation dba A&M TOWING; ) ADVANTAGE TOWING COMPANY, INC., ) a California corporation; MICHAEL ) BRANDEN, an individual; RE/MAX; ) COMMUNITY BANK; JIMMY JOHNSON'S ) KEARNY MESA CHEVROLET; LOMA ) RIVIERA 76; NCO FINANCIAL SYSTEMS, ) INC.; BRIDGET LEGGERRETTE; GEORGE ) PONCE; THE HOSE PROS; VOIT ) COMMERCIAL BROKERAGE; WELCH'S ) TIRES, INC.; AT&T; and CALIFORNIA ) DEPARTMENT OF MOTOR VEHICLES, ) ) ) Defendants, ) ) v. ) ) Case No. 08-CV-0301-H-JMA

UNITED STATES' OPPOSITION TO PLAINTIFF'S MOTION FOR DISCHARGE OF STAKEHOLDER IN INTERPLEADER ACTION Hearing Date: July 17, 2008 Time: 1:30 p.m. Court: 6

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1 THE UNITED STATES OF AMERICA, 2 Defendant. 3 4 The United States of America ("United States") by and through its undersigned counsel, hereby 5 submits the following Opposition to Plaintiff's Motion for Discharge of Stakeholder in Interpleader 6 Action. 7 Plaintiff moves this Court for attorneys fees amounting to $2,575.00 for its involvement in this 8 action. The United States opposes this motion because Plaintiff is not entitled to fees as the United 9 States' claim to the limited interpled funds has priority over a claim for attorney's fees. 10 The United States' interest takes priority over any claim for attorney's fees by Plaintiff's 11 attorney. While the court may generally grant attorney's fees in an interpleader action, the Ninth Circuit 12 has recognized that United States' federal tax liens take priority over attorney's fees claims to interpled 13 funds. See Abex Corp. v. Ski's Enters., Inc., 748 F.2d 513, 516-17 (9th Cir. 1984) ("[T]he existence of 14 prior federal tax liens gives the government a statutory priority over the interpleader plaintiff's ability to 15 diminish the fund by an award of fees."); see also United States v. Liverpool & London & Globe Ins. 16 Co., 348 U.S. 215, 217 (1955); Seaboard Sur. Co. v. Unite States, 306 F.2d 855, 860 (9th Cir. 1962); 17 Bank of America Nat. Trust and Sav. Ass'n v. Mamakos, 509 F.2d 1217, 1219 (9th Cir. 1975). As the 18 Court notes in Abex Corp., 26 U.S.C. § 6322 states that a lien "shall continue until the liability for the 19 amount so assessed . . . is satisfied or becomes enforceable by reason of lapse of time." 26 U.S.C. § 6322. 20 Therefore, the Court held that, the interpled fund is protected from attorney's fee reductions prior to 21 satisfaction of the federal tax lien. See Abex Corp., 748 F.2d at 517. In the present action, the interpled 22 funds are insufficient to satisfy the United States' liens and any award of attorney's fees would only 23 further reduce any recovery by the United States. As such, Plaintiff is not entitled to attorney's fees 24 absent the satisfaction of the liabilities owed to the United States. 25 26 27 28 -23380523.1 ) ) ) ) )

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CONCLUSION For the foregoing reasons, Plaintiff's Motion for Discharge of Stakeholder in Interpleader Action should be denied.

Respectfully submitted this 2nd day of July, 2008.

KAREN P. HEWITT United States Attorney TOM STAHL Assistant United States Attorney Chief, Civil Division /s/ Lauren Castaldi JUSTIN S. KIM LAUREN M. CASTALDI Trial Attorneys, Tax Division U.S. Department of Justice Attorneys for the United States of America

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