(PS) United States of America v. Torrance ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, No. 2:18-cv-1631-JAM-EFB-PS 12 Petitioner, 13 v. ORDER, FINDINGS,AND CERTIFICATION RE: CIVIL CONTEMPT 14 BRIAN TORRANCE, ECF No. 51 15 Respondent. 16 17 Petitioner United States of America filed this action seeking to enforce an Internal 18 Revenue Service (“IRS”) summons served on respondent Brian Torrance (“Torrance”). ECF No. 19 1. The government has filed a motion to hold Torrance in civil contempt.1 ECF No. 51. I held a 20 hearing on the motion on October 8, 2020. Assistant United States Attorney Steven Tennyson 21 appeared on behalf of the government; Torrance appeared pro se. 22 As detailed below, Torrance has willfully violated two court orders requiring him to 23 produce documents demanded byan IRS summons. Accordingly, he is ordered to appear before 24 the assigned district judge to show cause why coercive sanctions should not be imposed for civil 25 contempt. 26 ///// 27 1 This case is before mepursuant to Eastern District of California Local Rule 302(c)(9). 28 See28 U.S.C. § 636(b)(1). 1 I. Background 2 On June 5, 2018, thegovernment filed a petition to enforce an IRS summons. ECF No. 1. 3 According to the petition, Revenue Agent David Palmer is assigned to collect the assessed federal 4 income tax (Form 1040) liabilities for Torrance for tax years 2006, 2008, 2009, 2010,and 2011; 5 and Trust Fund Recovery Penalty for years 2006, 2007, and 2008. Id. at ¶ 4. Agent Palmer 6 issued an IRS summons directing Torrance to appear before the agent on May 2, 2017 to give 7 testimony and produce for examination books, papers, records,or other data relevant to the 8 collection of Torrance’s assessed tax liabilities. Id. at ¶¶ 6, 12. 9 After Torrance failed to appear at the summons hearing, the government commenced this 10 action andfiled an application for an order to show cause why Torranceshould not be ordered to 11 comply with the summons. Judge Brennan, themagistrate judge previously assigned to this case, 12 recommended that the IRS summons be enforced. ECF No. 20. On October 4, 2019, the court 13 adopted Judge Brennan’s findings and recommendations and ordered that the IRS summons be 14 enforced. ECF No. 25. Thecourt also ordered Torrance to appear before Agent Palmer on either 15 November 1, 2019, or on a later date to be set in writing by Agent Palmer, to give testimony and 16 produce documents and other informationdemanded by the summons. Id. at 2. 17 Torrance subsequently moved to alter or amend the October 4, 2019 order, arguing that 18 the court lacked jurisdiction toenforce the IRS summons. ECF No. 26. On December 18, 2019, 19 after the court deniedthat motion,Torrance appeared before Officer Palmer. ECF No. 31-2 ¶ 2. 20 Torrance, however, refused to provide testimony or produce documents demanded by the 21 summons, claiming that the information sought was privileged under the Fifth Amendment. Id. 22 ¶¶ 5,6. 23 The government thenmoved to compel Torrance’s compliance with the court’s October 4, 24 2019 order, arguingthat Torrance’s blanket privilege assertion was improper. ECF No. 31. The 25 government also askedthat Torrance be required to produce a privilege logidentifying each 26 document overwhich he was asserting privilege. ECF No. 31-1 at 5. On April 22, 2020, Judge 27 Brennan granted the government’s motion to compel and ordered Torrance to produce, by no later 28 than May 14, 2020,the documents and data demanded by the summons. ECF No. 37 at 3. The 1 order further provided that if Torrance believed any documents contain privileged information, he 2 was required to produce, by May 14, 2020, a privilege log describing the nature of each withheld 3 document. Id. 4 In violation of the court’s October 4, 2019 and April 22, 2020 orders, Torrance has 5 refused to provide the informationdemanded by the IRS summons. This is not in dispute; at the 6 October 8 hearing, Torrance confirmed that he has not produced any of the documents demanded 7 by the summons. The government now asks the court to find Torrance in civil contempt and to 8 impose coercive sanctions to secure his compliance with the October 4, 2019 and April 22, 2020 9 orders. ECF No. 51. 10 II. Legal Standards 11 “A court has the inherent power to punish for civil or criminal contempt any obstruction 12 of justice relating to any judicial proceedings.” Lambert v. Montana, 545 F.2d 87, 88 (9th Cir. 13 1976). Civil contempt “consists of a party’s disobedience to a specific and definite court order by 14 failure to take all reasonable steps within the party’s power to comply.” Reno Air Racing Ass’n, 15 Inc. v. McCord, 452 F.3d 1126, 1130 (9th Cir. 2006). The purpose of a civil contempt sanction is 16 to coerce the party in contempt to comply with the court’s order in the future, with the sanction 17 conditioned on continued noncompliance. Richmark Corp. v. Timber Falling Consultants, 959 18 F.2d 1468, 1481 (9th Cir. 1992). Thus, a party imprisoned for contempt “carries the keys of his 19 prison in his own pocket because civil contempt is intended to be remedial by coercing the 20 defendant to do what he had refused to do.” Lasar v. Ford Motor Co., 399 F.3d 1101, 1110 (9th 21 Cir. 2005); see Shell Offshore Inc. v. Greenpeace, Inc., 815 F.3d 623, 629 (9th Cir. 2016) (“[T]he 22 ability to purge is perhaps the most definitive characteristic of coercive civil contempt.”). 23 “The moving party has the burden of showing by clear and convincing evidence that the 24 contemnors violated a specific and definite order of the court.” Federal Trade Comm’n v. 25 Affordable Media, 179 F.3d 1228, 1239 (9th Cir. 1999). To establish that civil contempt is 26 appropriate, the government must demonstrate “(1) that [Torrance] violated the court order, 27 (2)beyond substantial compliance, (3) not based on a good faith and reasonable interpretation of 28 the order, (4) by clear and convincing evidence.” United States v. Bright, 596 F.3d 683, 694 (9th 1 Cir. 2010). Once the government has madethis showing, the burden shifts to Torrance to 2 demonstrate that he “took all reasonable steps within his power to insure compliance with” the 3 court’s orders. Hook v. Arizona Dept. of Corrections, 107 F.3d 1397, 1403 (9th Cir. 1997). 4 The district court has considerable discretion in fashioning the appropriate sanction to 5 address the contemptuous conduct. See United States v. Sumitomo Marine & Fire Ins. Co., 617 6 F.2d 1364, 1369 (9th Cir. 1980) (“The choice among the various sanctions rests within the 7 discretion of the district court.”); United States v. Flores, 628 F.2d 521, 527 (9th Cir. 1980) (The 8 Ninth Circuit “defer[s] considerably to the judgment of the district court in fashioning the 9 appropriate sentence because of its proximity to the events out of which contempt springs.”). In 10 exercising its discretion, a “district court should apply the least coercive sanction (e.g.,a 11 monetary penalty) reasonably calculated to win compliance with its orders.” Flores, 628 F.2d at 12 527(quotation omitted). 13 Pursuant to 28 U.S.C. § 636(e)(6)(B)(iii), whena party’s conduct “constitutes a civil 14 contempt, the magistrate judge shall forthwith certify the facts to a district judge and may serve or 15 cause to be served, upon any person whose behavior is brought into question under this 16 paragraph, an order requiring such person to appear before a district judge upon a day certain to 17 show cause why that person should not be adjudged in contempt by reason of the facts so 18 certified.” At the hearing, “[t]he district judge shall . . . hear the evidence as to the act or conduct 19 complained of and, if it is such as to warrant punishment, punish such person in the same manner 20 and to the same extent as for a contempt committed before the district judge.” Id. 21 III. Discussion 22 The record shows that Torrance has willfully disobeyed two separate orders. On October 23 4, 2019, the court ordered the IRS summons enforced. ECF No. 25. That order directed Torrance 24 to appear before Agent Palmer either on November 1,2019orona later date to be set by Agent 25 Palmer, to give testimony and produce documents and other data demanded by the summons. Id. 26 at 2. While Torrance did appear before Agent Palmer on December 18, 2019, he refused to 27 comply with the court’s order requiring him to give testimony and produce documents demanded 28 by the IRS summons. ECF No. 31-2 ¶ 2; see ECF No. 25. Instead, he improperly asserteda 1 blanket claim that all information sought is protected by the Fifth Amendment’s privilege against 2 self-incrimination. ECF No. 31-2¶¶ 4-7; see United States v. Christensen, 825 F.3d 763, 803 3 (9th Cir. 2015) (“The claim of privilege must be made and sustained on a question-by-question or 4 document-by-document basis; a blanket claim of privilege is unacceptable.”); United States v. 5 Brown, 918 F.2d 82, 84 (9th Cir. 1990) (“[W]hile the assertion of the Fifth Amendment privilege 6 against compulsory self-incrimination may be a valid ground upon which a witness . . . declines 7 to answer questions, it has never been thought to be in itself a substitute for evidence that would 8 assist in meeting a burden of production.”). 9 Torrance’s refusal to provide testimony and produce documents on December 18, 2019 10 was a direct violation of the October 4, 2019 order. Although that violation alone was sufficient 11 to support afinding of civil contempt, the government initially opted to file a motion seeking 12 Torrance’s compliance withthe October 4, 2019order. ECF No. 31. By proceeding in this 13 fashion, the government afforded Torrance an opportunity to properly assert any privilege claim 14 that he might have under the Fifth Amendment—an opportunity Torrance squandered. 15 As previously noted,on April 22, 2020, Magistrate JudgeBrennan granted the 16 government’s motion to compel and ordered Torrance, by May 14, 2020, to produce for 17 examination books, papers, records, or other data demanded by the summons. ECF No. 37. 18 Torrance was further ordered to produce,by May 14, 2020, a privilege log describing the nature 19 of each document purportedly containing privileged information. Id. at 2. Torrance conceded at 20 the October 9 hearing that he has neither produced any documents nor provided the government 21 with a privilege log. 22 Furthermore, Torrance has made no attempt to show that he was unable, despite efforts, to 23 comply with the October 4, 2019 and April 22, 2020orders. SeeHook, 107 F.3d at 1403. 24 Instead, he has repeated advanced frivolous arguments challenging the court’s jurisdiction to 25 enforce the IRS summons. See ECF Nos. 9, 21, 24, 26,29,34,44, 50. Thus,clear and 26 convincing evidence demonstrates that Torrance, without legal justification, has willfully violated 27 the court’s October 4, 2019 and April 22, 2020 orders. 28 The government asks that the court impose a $350 daily fine while Torrance remains in 1 contempt. ECF No. 51-1 at 6. It further requests that fines not commence until seven days after a 2 finding of civil contempt so as to provide Torrance an opportunity to comply with the October 4, 3 2019 and April 22, 2020 orders. Id. In assessing the appropriate amount of a coercive fine, 4 courts “consider the ‘character and magnitude of the harm threatened by continued contumacy, 5 and the probable effectiveness of any suggested sanctions.’” General Signal Corp. v. Donallco, 6 Inc., 787 F.2d 1376, 1380 (9th Cir. 1986) (citing United States v. United Mine Workers, 330 U.S. 7 258, 304 (1947)). 8 After the October 8 hearing, I ordered the government to submit informationregarding 9 Torrance’s assessed tax liabilities and to share with the court any readily available information 10 bearing on his ability to pay. ECF No. 68. In response, the government submitted a declaration 11 reflecting that Torrance’s assessed tax liabilities, including interest and penalties, total more than 12 $944,000. ECF No. 72-1.2 The government’s evidence also shows that Torrance has received 13 annual payments ranging between thirty and forty thousand dollars. Id. at ¶ 11. However, the 14 government notes that because Torrance has repeatedly failed to comply with his federal tax 15 responsibilities, information regarding his current financial resources is limited. Id. at ¶¶ 8-12. 16 In light of the government’s submission, imposition of a $350 daily fine is appropriate. 17 Torrance’s indebtedness tothegovernment currentlytotals nearly one million dollars. Given the 18 scale of this debt,a lesser sanction might not motivate Torrance to complywith the court’s 19 2 Torrance has since moved to strike the government’s declaration, essentially arguing 20 that it falsely claims that he owes taxes. ECF No. 74. Although Torrance has consistently maintained that his assessed tax liabilities are inaccurate, that issue is beyondthe scope of this 21 action. The government filed this action to obtain judicial enforcement of an IRS summons, not to litigate Torrance’s tax liability. ECF No. 1; see 26 U.S.C. §§ 7402(b),7604(a). More 22 significantly, except under limited circumstances, the Anti-Injunction Act precludes district 23 courts from entertaining challenges to tax assessment or the collection of taxes. 26 U.S.C. §7421(a); Elias v. Connett, 908 F.2d 521, 523 (9th Cir. 1990) (“Actions to enjoin the assessment 24 of taxes by the IRS are narrowly limited by the Anti-Injunction Act.”); see also 28 U.S.C. §7422(a) (“No suit or proceeding shall be maintained in any court for the recovery of any 25 internal revenue tax alleged to have been erroneously or illegally assessed or collected . . . until a claim for refund or credit has been duly filed with the Secretary.”); Reynoso v. United States, 692 26 F.3d 973, 981 (9th Cir. 2012) (noting that to bring a civil action for a tax refund, a taxpayer must 27 have paid in full his assessed taxes). Consequently, Torrance’s contention that the government’s declaration incorrectly reflects his actual tax liabilities does not providea basis for striking the 28 declaration. His motion to strike will be denied. 1 October 4, 2019 and April 22, 2020 orders. Furthermore, a $350 daily fine is not disproportionate 2 to sanctions imposed by other district court’s in similar cases. SeeUnited States v. Bright, 596 3 F.3d 683, 696 (9th Cir. 2010) (“The district court’s imposition of a $500 daily fine and payment 4 of the government’s costs was well within the range of appropriate sanctions to secure 5 compliance with a tax summons.”);United States v. Gillies, No. CV-11-3623 CW MEJ, 2013 WL 6 968244, at *2 (N.D. Cal. Feb. 22, 2013), report and recommendation adopted, No. C 11-03623 7 CW, 2013 WL 968231 (N.D. Cal. Mar. 12, 2013) (recommending coercive sanction of 8 imprisonment after daily fine of $250.00failed to gain compliance with court’s order); United 9 States v. Parker, No. 2:08-cv-01200-LDG-VCF, 2011 WL 5325475, at *3 (D. Nev. Nov. 3, 2011) 10 (ordering defendant to show cause why he should not be found in civil contempt and subjected to 11 $500 daily fine until he provides responses to discovery requests); see also United States v. 12 Canul, No.: 11-CV-01658-LHK, 2014 WL 46771 (N.D. Cal. Jan. 6, 2014) (entering judgment 13 against respondent “in the amount of $62,750, which consists of a monetary civil contempt fine of 14 $250 per day . . . .”). 15 Based on the forgoing, Torrance is directed to appear before Judge Mendez to show cause 16 why he should not be found in civil contempt and subjected to a fine of $350 each dayuntil he 17 complies with the court’s October 4, 2019 and April 22, 2020 orders. 18 IV. Conclusion 19 For the reasons state above, it is hereby ORDERED that: 20 1. Respondent Brian Torrance’s motion to strike the government’s declaration, ECF No. 21 74, is denied. 22 2. Torrance is ordered to appear before Judge Mendez on November 24, 2020 at 1:30 23 p.m. in Courtroom No. 6, to show cause why coercive monetary sanctions should not be imposed 24 for civil contempt until he fully complies with the courts’ October 4, 2019 and April 22, 2020 25 orders. 26 3. Torrance shall file, by no later than November 10, 2020, any evidence he may have to 27 demonstrate that he has purged himself of contempt. 28 4. The government may file a response to Torrance’s evidence, if any, by November 17, 1 || 2020. 2 || Dated: October 29, 2020 () aN BREMY D. PETERSON 4 UNITED STATES MAGISTRATE JUDGE 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28