(PS) United States of America v. Wanland ( 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. 2:13-cv-02343-KJM-KJN 12 Plaintiff, 13 v. ORDER 14 DONALD M. WANLAND, JR., 15 Defendant. 16 17 On September 26, 2013, in criminal case 2:09-cr-0008-LKK, a jury in this district 18 found Donald Wanland guilty of twenty-eight counts of tax-related offenses. See ECF No. 90 at 19 2 (citing United States of America v. Donald M. Wanland, Jr., 2:09-cr-8-LKK, ECF Nos. 263, 20 266, 301–03, 335–37). In this related civil action, the United States sought a determination that 21 defendant’s federal tax liabilities for certain tax years were not discharged in bankruptcy and also 22 sought to reduce the tax assessments to judgment. See Compl., ECF No. 1. This court granted 23 summary judgment for the United States and entered judgment against Wanland for 24 $1,065,493.30, plus any statutory interest. See ECF Nos. 121, 122. Defendant Wanland has now 25 filed his second motion to alter or amend the judgment, under Rule 59(e), or vacate the judgment 26 under Rule 60(b), in this case. For the reasons explained below, the court GRANTS defendant’s 27 motion in part, under Rule 59(e). 28 1 I. BACKGROUND 2 The United States commenced this civil action against defendant, seeking a 3 determination under 11 U.S.C. § 523(a)(1)(C) that assessments for defendant’s federal tax 4 liabilities for tax years 1996 to 1998 and 2000 to 2003 were not discharged in bankruptcy. See 5 Compl. ¶¶ 11, 19. The United States also sought to reduce the tax assessments to judgment. Id. 6 at 5–6. After the court adopted the magistrate judge’s findings and recommendations and denied 7 defendant’s motion to dismiss, ECF No. 27, the United States filed a motion for summary 8 judgment, ECF No. 76. On December 5, 2016, the magistrate judge filed findings and 9 recommendations recommending this court grant the United States’ motion for summary 10 judgment. ECF No. 90 (referring to motion as “renewed motion for summary judgment,” because 11 the motion had previously been stayed pending ultimately unsuccessful settlement negotiations). 12 On March 28, 2017, this court adopted the findings and recommendations, ordered defendant to 13 pay the United States “$1,065,493.30, plus any statutory interest accruing after May 1, 2016,” and 14 closed the case. ECF No. 97. On April 25, 2017, defendant moved to amend, alter, or vacate this 15 judgment under Rules 59(e) and 60(b)(1) and (4). First Mot. to Amend (“First Mot.”), ECF No. 16 99. The court granted the motion in part and denied it in part, and referred the United States’ 17 motion for summary judgment back to the magistrate judge for reconsideration in light of 18 defendant’s previously unconsidered declaration in opposition. Order on First Mot. to Amend 19 (“Order on First Mot.”), ECF No. 106. 20 The magistrate judge then directed the United States to respond to defendant’s 21 declaration, specifically to address whether summary judgment remained appropriate with respect 22 to tax years 1996 to 1998, ECF No. 108, and the United States submitted its response, ECF No. 23 109. The magistrate judge submitted the motion without oral argument. ECF No. 108. 24 Defendant requested supplemental briefing, ECF No. 115, which the magistrate judge denied 25 contemporaneously with the issuance of his amended findings and recommendations. ECF No. 26 118 at 3. The amended findings and recommendations again recommended granting the United 27 States’ summary judgment motion. Id. at 2 (re-issuing original findings and recommendations 28 with certain amendments). Defendant filed objections to the findings and recommendations, ECF 1 No. 119, and the United States responded to the objections, ECF No. 120. The court adopted the 2 amended findings and recommendations in full and granted the United States’ renewed motion 3 for summary judgment. Order Adopting Am. Findings, ECF No. 121. 4 Defendant has again filed a motion to amend, alter or vacate the judgment. 5 Second Mot. to Am. (“Mot.”), ECF No. 123. The United States opposes, Opp’n, ECF No. 126, 6 and defendant has replied, Reply, ECF No. 127. The court submitted the motion without oral 7 argument, ECF No. 125, and resolves it here. 8 II. RULE 59(e) ARGUMENTS 9 A. Legal Standard 10 A Rule 59(e) motion is an “extraordinary remedy, to be used sparingly in the 11 interests of finality and conservation of judicial resources.” Kona Enters., Inc. v. Estate of 12 Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (citation omitted). A district court may grant a Rule 13 59(e) motion if it “is presented with newly discovered evidence, committed clear error, or if there 14 is an intervening change in the controlling law.” McDowell v. Calderon, 197 F.3d 1253, 1255 15 (9th Cir. 1999) (per curiam) (emphasis in original) (quoting 389 Orange St. Partners v. Arnold, 16 179 F.3d 656, 665 (9th Cir. 1999)). A Rule 59(e) motion may not be used to raise arguments or 17 present evidence for the first time when they could reasonably have been raised earlier in the 18 litigation. Kona, 229 F.3d at 890. 19 B. Discussion 20 Defendant raises several arguments for relief under Rule 59(e): (1) the magistrate 21 judge denied defendant due process by not allowing him to present oral argument before the 22 judge issued the amended findings and recommendations, Mot. at 4;1 (2) the magistrate judge 23 denied defendant due process by not allowing him to submit supplemental briefing on his 24 declaration in opposition to the United States’ motion for summary judgment, id. at 6–7; (3) the 25 court committed clear error by applying the improper legal standard on summary judgment, id. at 26 5–6; (4) the court committed clear error in incorrectly applying the doctrine of offensive collateral 27 1 Citations to page numbers refer to ECF pagination, not the document’s internal pagination. 28 1 estoppel, id. at 8–13; (5) the court committed clear error by granting summary judgment on the 2 basis of the United States’ insufficient evidence, despite triable issues of fact regarding amounts 3 claimed, id. at 13–19; and (6) the court committed clear error by denying defendant’s request to 4 stay proceedings pending the outcome of the criminal case and to allow for additional discovery, 5 id. at 20–23. 6 In response to defendant’s first argument, the United States contends the court 7 already decided defendant was not entitled to oral argument in the context of an earlier motion, 8 Opp’n at 7 (citing Order on First Mot. at 5), and defendant has not shown prejudice, id. 9 Regarding defendant’s second argument, the United States argues the denial of supplemental 10 briefing was within the magistrate judge’s “sound discretion.” Id. (citing S.E.C. v. Seaboard 11 Corp., 677 F.2d 1301, 1314 (9th Cir. 1982) (“[A]cceptance or rejection of argumentative briefs, 12 memoranda, and other supplementary material is within the sound discretion of the court.”)). As 13 to defendant’s remaining arguments, the United States argues the court already rejected them in 14 its order resolving the first motion to amend, and defendant has not raised any new reason why 15 the court’s decision should be reconsidered now. Id. at 4, 6 (citing Order on First Mot.). In 16 addressing each of defendant’s arguments for reconsideration, the court applies the standard for 17 “clear error,” as set forth in its prior order. See Order on First Mot. at 4–5 (“‘Clear error’ occurs 18 when ‘the reviewing court on the entire record is left with the definite and firm conviction that a 19 mistake has been committed.’” (quoting Smith v. Clark Cty. Sch. Dist., 727 F.3d 950, 955 (9th 20 Cir. 2013))); see also McDowell, 197 F.3d at 1255 n.4 (“[A] refusal to reconsider is [not] an 21 abuse of discretion merely because the underlying order is ‘erroneous,’ rather than ‘clearly 22 erroneous.’”). 23 1. Due Process Arguments 24 a. Denial of Oral Argument 25 As the United States argues, the court previously found defendant was not entitled 26 to oral argument in opposition to the United States’ motion for summary judgment. Order on 27 First Mot. at 5–6. The court explained in that order that an opportunity to be heard orally on 28 questions of law “is not an inherent element of procedural due process, even where substantial 1 questions of law are involved.” Id. (quoting Dredge Corp. v. Penny, 338 F.2d 456, 462 n.14 (9th 2 Cir. 1964); see also Burchett v. Cardwell, 493 F.2d 492, 494–95 (9th Cir. 1974) (same). 3 Regardless, “the right of oral argument as a matter of procedural due process . . . varies from case 4 to case in accordance with differing circumstances.” Dredge Corp., 338 F.2d at 462 n.14. 5 In this motion, defendant argues he was again denied due process, because the 6 amended findings and recommendations were issued without the chance to make oral argument, 7 “[d]espite Defendant’s previous requests for oral argument on the [motion for summary 8 judgment].” Mot. at 4; see also Def.’s Opp’n to Renewed Mot. for Summ. J., ECF No. 83, at 9 9 (requesting oral argument on the original motion for summary judgment). More specifically, 10 defendant challenges the magistrate judge’s latest decision to issue his findings and 11 recommendations without allowing for oral argument on the renewed motion for summary 12 judgment after the first summary judgment motion was vacated. See Mot. at 4. For the same 13 reasons the court rejected this argument in resolving defendant’s first motion to amend, it rejects 14 it here as well. See Order on First Mot. at 5–6 (finding United States’ claims were inherently 15 legal in nature with no oral argument required); cf. Mahon v. Credit Bureau of Placer Cty. Inc., 16 171 F.3d 1197, 1200–01 (9th Cir. 1999) (no oral argument warranted where “[b]oth parties 17 provided the district court with complete memoranda of the law and evidence in support of their 18 respective positions,” and “[t]he only prejudice [defendants] contend they suffered was the 19 district court’s adverse ruling on the motion”). 20 Moreover, defendant has not shown any prejudice flowing from the court’s second 21 denial. See Houston v. Bryan, 725 F.2d 516, 518 (9th Cir. 1984) (holding relief from oral 22 argument denial unwarranted absent showing of prejudice). The Ninth Circuit clarified what 23 constitutes prejudice flowing from the denial of oral argument in Jasinski v. Showboat Operating 24 Co., 644 F.2d 1277 (9th Cir. 1981). There, the court observed, “We cannot know what effect oral 25 argument would have had upon the district court, or what new arguments and emphases might 26 have emerged from the colloquy between court and counsel . . . .” Id. at 1281. At the same time, 27 the court found appellant had suffered prejudice because the district court had “expressed its 28 uncertainty” about the proper interpretation of the relevant statute, and “[t]he district court’s 1 struggle with a close and critical question, evident on the face of the court’s opinion is enough to 2 establish prejudice to the losing party.” Id. 1280–91. By contrast, an adverse ruling alone is 3 generally not sufficient evidence of prejudice. See Augustine v. FIA Card Servs., N.A., No. 2:06- 4 CV-2013-GEB-EFB, 2007 WL 2492679, at *2 (E.D. Cal. Aug. 30, 2007) (“If mere dismissal of a 5 case were sufficient prejudice to warrant a motion for reconsideration, then every dismissal 6 granted without oral argument would be subject to a motion for reconsideration.”). 7 Here, neither the magistrate judge nor the undersigned expressed doubt regarding 8 any aspect of the case, with the exception of whether offensive collateral estoppel applies to 9 defendant’s 1996 to 1998 tax liabilities. In his discussion of this issue, the magistrate judge 10 explained it was a “closer question.” Amended Findings and Recommendations (“Am. 11 Findings”), ECF No. 117, at 12. However, in the court’s order adopting the amended findings 12 and recommendations, the court conducted its own de novo review of the case and defendant’s 13 objections, in which defendant again argued that the magistrate should have allowed him oral 14 argument. See Objs., ECF No. 119, at 8. The court found the recommendations were supported 15 by the record and proper analysis. Order Adopting Am. Findings, ECF No. 121 (adopting 16 findings and recommendations without writing separately). Even if oral argument could have 17 potentially swayed the magistrate judge on this issue, in adopting the findings and 18 recommendations the undersigned did not express any “uncertainty.” Therefore, this case is 19 unlike Jasinski v. Showboat Operating Co, and defendant has not met his burden of showing 20 prejudice from the denial of oral argument. 21 The latter conclusion is further bolstered by the fact defendant did not renew his 22 request for oral argument after his first motion to amend was granted in part and the magistrate 23 judge reconsidered the motion for summary judgment in light of defendant’s declaration in 24 opposition.2 See Order on First Mot. Defendant instead filed a request for supplemental briefing 25 26 2 Defendant last affirmatively requested oral argument in his opposition to the government’s renewed motion for summary judgment, see ECF No. 83 at 9, and again in his reply 27 in support of his first motion to amend, see ECF No. 104 at 13 (including in his request “[o]ral argument . . . shall be allowed . . . .”). 28 1 after the remand, but he did not request oral argument, suggesting defendant himself did not 2 consider it necessary. See Req. for Suppl. Briefing, ECF No. 115. 3 For these reasons, defendant’s first argument is unavailing. 4 b. Denial of Supplementary Briefing 5 As noted, after the court referred the summary judgment motion back to the 6 magistrate judge to consider defendant’s declaration in opposition, the magistrate judge directed 7 the United States to respond to defendant’s declaration, on the narrow issue of whether “the entry 8 of summary judgment with respect to the tax years 1996–1998 remains appropriate.” ECF No. 9 108 at 1. Defendant requested supplemental briefing “regarding his Declaration.” Req. for 10 Suppl. Briefing. The magistrate judge denied the request, saying, “[b]ecause the court 11 recommends a grant of summary judgment solely based on offensive collateral estoppel, which 12 has been extensively briefed and argued by the parties, and not on any of the new evidence 13 submitted by the United States, the court finds further supplemental briefing to be unnecessary.” 14 ECF No. 118 at 3. Defendant argues the magistrate judge committed clear error in denying the 15 defendant’s request for supplemental briefing. Second Mot. at 6–7. 16 The magistrate judge’s conclusion and the undersigned’s adoption of his 17 recommendations were not clearly erroneous. Defendant initially was afforded an opportunity to 18 oppose the renewed summary judgment motion, and he did so, though without relying on his own 19 testimony as evidence. See Def.’s Opp’n to Renewed Mot. for Summ. J. (opposing United States’ 20 motion for summary judgment).3 When the magistrate judge recommended granting summary 21 judgment, defendant was afforded extra time to file objections, ECF No. 92 and he did so, ECF 22 No. 93. Once summary judgment was granted and judgment entered, ECF Nos. 97–98, 23 defendant moved to amend that judgment. See generally First Mot. There, defendant argued he 24 was denied due process because he “could not present opposing evidence without compromising 25 his Fifth Amendment right against self-incrimination” at the time of summary judgment briefing; 26 3 As noted above, the parties refer to this motion for summary judgment as a “renewed 27 motion for summary judgment,” because the motion was previously stayed pending ultimately unsuccessful settlement negotiations. See ECF No. 87. 28 1 he attached a declaration to the motion to amend containing this opposing evidence, in light of the 2 fact his criminal case had concluded. Order on First Mot. at 9; see also First Mot. at 19–20; 3 Wanland Decl. in Opp’n to Summary J., ECF No. 99, at 26–27. It was at this point the court 4 afforded him the requested relief and remanded the case back to the magistrate judge to consider 5 defendant’s declaration. See Order on First Mot. 6 Even with the record supplemented, having unsuccessfully opposed summary 7 judgment once again, defendant now argues he was denied due process by not being permitted to 8 file additional briefing to explain the “significance” of his declaration. Mot. at 7. This argument 9 is unavailing for two reasons. First, defendant does not explain what arguments he would have 10 been able to make in supplemental briefing that he was not able to raise in his opposition brief, 11 and therefore has not shown how the denial was prejudicial. Second, defendant has had ample 12 opportunity to explain the significance of the declaration both to the magistrate judge and to this 13 court. Defendant did, in fact, explain the significance of his declaration in his first motion to 14 amend: 15 [The] declaration establishes that Defendant did not willfully attempt to evade 1996–1998 taxes. This evidence creates further triable issue 16 [sic] in regard to application of the offensive collateral estoppel. 17 The Findings also stated that Defendant had failed to present evidence of his lack of receipt of demands for payment by the IRS. 18 Findings (ECF No. 90) 15:14–17. However, Defendant’s new declaration below, in paragraph 3, provides that missing evidence 19 which raises additional triable issues concerning proper notices by the IRS. Defendant’s declaration also raises further triable issues, 20 overlooked in the Findings, that Defendant did not receive notices of claimed tax deficiencies. Id. 21 22 First Mot. at 20. Defendant then explained the declaration’s significance for a second time in his 23 objections to the amended findings and recommendations, arguing, for example: 24 [The] Declaration specifically states in para. 1 that Defendant did not willfully intend to unlawfully evade the payment of his 1996–1998 25 claimed taxes. (ECF No. 99, Declaration.) It also states in para. 2 that Mr. Campbell advised Defendant that he did not have to comply 26 with the levy, but to get another tax opinion as well. Id. That Declaration also states that Defendant did not fire Mr. Campbell for 27 his advice. Id. 28 1 Thus, the very facts which the Magistrate originally found were not then disputed are now, in fact, controverted with evidence . . . . 2 3 ECF No. 119 at 5. This court considered these arguments, but ultimately adopted the amended 4 findings and recommendations in full. See Order Adopting Am. Findings. Because defendant 5 was not deprived of the opportunity to explain the significance of his declaration, his argument 6 that the magistrate judge committed clear error in denying his request for supplemental briefing is 7 without merit. 8 Moreover, it was not clearly erroneous for the magistrate judge to allow only the 9 United States to respond to defendant’s declaration. It is standard procedure for a movant, such 10 as the United States here, to be afforded the opportunity to respond to the non-movant’s 11 opposition to a motion. See E.D. Cal. L.R. 230 (providing procedure for filing motions, 12 oppositions and replies). To the extent defendant’s request was for supplemental briefing to 13 respond to the United States’ response, it was essentially a request for a sur-reply. See Req. for 14 Suppl. Briefing at 2 (“Defendant should be permitted to brief the effect of his Declaration 15 including the new arguments and evidence submitted by Plaintiff.”). Courts “have the discretion 16 to either permit or preclude a surreply,” Garcia v. Biter, 195 F. Supp. 3d 1131, 1134 (E.D. Cal. 17 2016) (citations omitted), as long as a surreply is addressing new arguments or evidence raised 18 for the first time in the reply, see Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir. 1996) (finding 19 district court erred in not considering supplemental declaration where defendants’ reply brief 20 contained new evidence). 21 In his motion to amend, defendant does not point to new arguments or evidence 22 the United States included for the first time in its response to defendants’ declaration. Defendant 23 states only that the response “raised a number of issues that Defendant had not been given the 24 right to address in detail.” Mot. at 7. Defendant also argues he was prejudiced by this denial 25 because he was not given the opportunity to explain the “significance” of his declaration, id.; but, 26 again, as reviewed above, defendant did have multiple prior opportunities to explain the 27 significance of his averments. Defendant’s vague arguments do not leave the court with “the 28 definite and firm conviction that a mistake has been committed.” Smith v. Clark Cty. Sch. Dist., 1 727 F.3d at 955 (citation omitted). Rather, the magistrate judge acted within his sound discretion 2 in rejecting defendant’s request for supplemental briefing. See S.E.C. v. Seaboard Corp., 3 677 F.2d at 1314. 4 2. Improper Legal Standard on Summary Judgment 5 Defendant previously raised his third argument, that the magistrate judge 6 committed clear error by applying the improper legal standard on summary judgment, Mot. at 5– 7 6, in defendant’s first motion to amend, First Mot. at 5. Because the court did not expressly 8 address the argument previously, it does so here. Defendant argues the magistrate judge 9 committed clear error by not applying the “fundamental rule of law” that “summary judgment is 10 an extreme remedy which should be used sparingly and cautiously, and granted only reluctantly.” 11 Mot. at 6. However, there is nothing in the magistrate judge’s findings and recommendations to 12 suggest the correct summary judgment standard was not applied. See Am. Findings at 4 (“In 13 resolving a motion for summary judgment, the evidence of the opposing party is to be believed. 14 Moreover, all reasonable inferences that may be drawn from the facts placed before the court 15 must be viewed in a light most favorable to the opposing party.” (internal citations omitted)). 16 Moreover, as noted, this court conducted a de novo review of the magistrate judge’s 17 recommendations and found they were supported by the proper legal analysis. Order Adopting 18 Am. Findings. The court finds no reason to revisit that determination here. Therefore, 19 defendant’s third argument does not afford relief. 20 3. Sufficiency of the United States’ Evidence and Triable Issues of Fact 21 Defendant also challenges the sufficiency of the United States’ evidence offered in 22 support of summary judgment. Mot. at 13–19. Defendant previously made all of the arguments 23 he makes in his second motion in his first motion to amend. See First Mot. at 9–15. While the 24 court did not expressly address these arguments in its order, it considered them in ruling on the 25 first motion. See Ray v. United States, No. 91-35423, 1992 WL 8239, at *1 (9th Cir. Jan. 21, 26 1992) (unpublished) (rejecting appellant’s argument that, because order did not mention the 27 arguments made in his supplemental brief, the district court did not consider them, because “[t]he 28 district court was not under an obligation to discuss in its written opinion every ground advanced 1 in [the] briefs”). Moreover, the same arguments were also raised in defendant’s opposition to the 2 United States’ motion for summary judgment, Def.’s Opp’n to Renewed Mot. for Summ. J. at 25– 3 32, and the magistrate judge analyzed them in his amended findings and recommendations, Am. 4 Findings at 14–16, which the court adopted in full, Order Adopting Am. Findings. Defendant has 5 not shown the court committed clear error in doing so nor has he raised any new evidence or 6 change in law that causes the court to reconsider its decision. 7 4. Collateral Estoppel 8 The court addressed defendant’s argument, that the magistrate judge committed 9 clear error in incorrectly applying the doctrine of offensive collateral estoppel with respect to tax 10 years 2000 to 2003, in the order on the first motion to amend. Order on First Mot. at 6–7. 11 However, the amended findings and recommendations, and by extension the court’s order 12 adopting them, also applied the doctrine of collateral estoppel to tax years 1996 to 1998. Am. 13 Findings at 12–13. After considering defendant’s declaration, the magistrate judge concluded: 14 The issue of whether offensive collateral estoppel applies to defendant’s 1996–1998 tax liabilities is a closer question, because 15 the criminal charge for tax evasion in count one of the superseding indictment, on its face, only appears to have charged defendant with 16 respect to his 2000-2003 tax liabilities. However, as the United States has shown, the IRS was actually attempting to collect all of 17 defendant’s tax liabilities simultaneously by virtue of an April 14, 2005 Notice of Levy, which pertained to defendant’s tax liabilities 18 for 1996–1998 and 2000–2003. (See ECF No. 67-1, Ex. 18.) That levy was the same levy that defendant was charged and convicted 19 with defying in the tax evasion charge, as well as the vast majority of the removal, deposit, and concealment of property subject to levy 20 charges in the superseding indictment. (ECF No. 57, Exs. Q, R.) Because the jury found that defendant had defied that levy, and the 21 levy covered 1996-1998 and 2000-2003, the court is persuaded that offensive collateral estoppel also applies to defendant’s 1996-1998 22 tax liabilities. 23 In light of that conclusion, it is unnecessary to consider any other evidence offered by the United States in support of its motion for 24 summary judgment, nor can defendant’s declaration at ECF No. 99 be used to defeat summary judgment. Indeed, that declaration 25 reveals that, even if he could, defendant is not attempting to raise any factual issue specific to the 1996–1998 tax years; he is again 26 claiming, as he did in the criminal case, that he did not actually defy 27 ///// 28 ///// 1 the tax levy with respect to any tax period. That contention is plainly foreclosed by his criminal convictions. 2 3 Id. The court adopted this recommendation in full. Order Adopting Am. Findings. Defendant 4 argues this conclusion was clearly erroneous because: (a) the issues litigated in the criminal case 5 were not sufficiently identical, and (b) it is “[u]nfair to apply collateral estoppel doctrine” because 6 defendant’s “opportunities to conduct meaningful discovery” were limited in the criminal case. 7 Mot. a 9–12. 8 a. Identical Issues Litigated 9 Defendant argues collateral estoppel should not have been applied to the United 10 States’ civil claim for tax years 1996 to 1998, because the issues litigated in the criminal case are 11 not sufficiently identical to the issues here. Mot. at 9. For collateral estoppel to apply, the 12 government had the burden to show, as a matter of law, the issue of the early tax years was 13 “identical” to the issue litigated in the criminal trial. See Haung Tang v. Aetna Life Ins. Co., 523 14 F.2d 811, 813 (9th Cir. 1975) (“The burden of pleading and proving identity of issue rests on . . . 15 the party asserting the estoppel.” (citations omitted)); see also Parklane Hosiery Co. v. Shore, 439 16 U.S. 322, 326 (1979) (“Collateral estoppel . . . the dual purpose of protecting litigants from the 17 burden of relitigating an identical issue with the same party[.]”). 18 Defendant argues specifically that the verdict offered by the United States as 19 evidence of his conviction shows only that he was convicted of “attempting to evade and defeat 20 the payment of tax,” but “does not state how or in what amounts or for what tax years,” and 21 therefore the verdict cannot support the application of collateral estoppel here. Mot. at 10–11. 22 However, the court previously determined collateral estoppel applied to resolution of the 23 government’s civil claims relating to the 1996 to 1998 tax years, only to preclude defendant from 24 challenging the criminal jury’s finding of fact that defendant defied the April 14, 2005 Notice of 25 Levy, which covered tax years 1996 to 1998. Am. Finding at 12–13. The court did not apply 26 collateral estoppel to prevent defendant’s challenging the amount of his tax liabilities; rather, the 27 United States provided evidence to support the claimed amounts in the civil case. See id. at 12– 28 16. Furthermore, determining the method of evasion is unnecessary to resolve the factual 1 question at issue in this litigation: whether the defendant “willfully attempted to evade or defeat 2 payment of his federal tax liabilities” in tax years 1996 to 1998. Compl. ¶ 15. 3 Regarding the different sets of tax years, in applying collateral estoppel to 4 resolution of the 1996 to 1998 tax year claims, the magistrate judge relied in part on the fact 5 defendant was found guilty under 26 U.S.C. § 7206(4), by virtue of his violation of a tax levy 6 pertaining to his taxes owed from 1996 to 1998 and 2000 to 2003. Am. Findings at 12 (citing, 7 inter alia, ECF No. 57-17 (jury verdict)). Because the levy pertained to defendant’s liability for 8 1996 to 1998 and 2000 to 2003, when defendant defied the levy in violation of 26 U.S.C. 9 § 7206(4), the magistrate judge concluded that defendant necessarily evaded his tax liability for 10 1996 to 1998 as well as his liability for 2000 to 2003. Id. Therefore, the court impliedly 11 concluded, the factual question decided in the criminal case is sufficiently identical to the factual 12 question in this case. Am. Findings at 12–13 (“Because the jury found that defendant had defied 13 that levy, and the levy covered 1996–1998 and 2000–2003, the court is persuaded that offensive 14 collateral estoppel also applies to defendant’s 1996–1998 tax liabilities.”). 15 However, the fact defendant violated the levy covering tax years 1996 to 1998 and 16 2000 to 2003 is clearly not identical to the issue being litigated here: whether defendant evaded 17 taxes in the years 1996 to 1998. The jury’s guilty verdict could have been based solely on finding 18 a violation of the levy in the period 2000 to 2003, especially because the superseding indictment 19 on which the criminal case was based covered only tax evasion from 2000 to 2003. See ECF No. 20 57-16 (superseding indictment); see also Neman Fin., L.P. v. Citigroup Glob. Markets, Inc., No. 21 CV1402499BROPLAX, 2015 WL 12765636, at *5 (C.D. Cal. Feb. 12, 2015) (finding only 22 “issues which were essential to the verdict” are regarded as having been determined by jury 23 verdict for purposes of collateral estoppel in a subsequent civil case) (quoting Emich Motors 24 Corp. v. Gen. Motors Corp., 340 U.S. 558, 569 (1951)). Therefore, the fact that the jury, in 25 rendering its verdict, concluded defendant violated the levy should not preclude defendant from 26 litigating the specific issue of whether he evaded taxes from 1996 to 1998. 27 Furthermore, the government also did not meet its burden to show the issue of the 28 early tax years was “fully litigated” in the criminal case. See In re Watson, 192 B.R. 739, 747 1 (B.A.P. 9th Cir. 1996), (“[T]he party asserting collateral estoppel has the burden of establishing 2 all the requisites for its application” including that the issue was “fully litigated” (citation 3 omitted)), aff’d, 116 F.3d 488 (9th Cir. 1997). The Ninth Circuit has explained that, in order for a 4 criminal conviction to have a preclusive effect on a later civil proceeding, “the prior conviction 5 must have been for a serious offense so that the defendant was motivated to fully litigate the 6 charges.” Ayers v. City of Richmond, 895 F.2d 1267, 1271 (9th Cir. 1990). In the underlying 7 criminal case, defendant was not even charged with evading taxes for 1996 to 1998 in the 8 superseding indictment, which applies only to the 2000 to 2003 tax years. Am. Findings at 12. 9 Therefore, defendant would not have necessarily been “motivated to fully litigate” the ancillary 10 issue of the early tax years. Ayers, 895 F.2d at 1271 . 11 Given the heavy burden on the proponent of offensive collateral estoppel, the 12 court’s decision to apply the doctrine to the early tax years was clearly erroneous, such that the 13 judgment must be vacated in relevant part. 14 b. Fairness of Applying Doctrine Given Discovery Limitations 15 Defendant also argues that collateral estoppel should not apply to either the 1996 16 to 1998 years or to 2000 to 2003, because defendant was prevented from conducting meaningful 17 discovery in the earlier criminal action. Second Mot. at 12. Defendant cites to Parklane Hosiery 18 Co. v. Shore, which cautions against relying on offensive collateral estoppel in situations where 19 discovery is limited: 20 Still another situation where it might be unfair to apply offensive estoppel is where the second action affords the defendant procedural 21 opportunities unavailable in the first action that could readily cause 22 a different result. . . . . 23 If, for example, the defendant in the first action was forced to defend 24 in an inconvenient forum and therefore was unable to engage in full scale discovery or call witnesses, application of offensive collateral 25 estoppel may be unwarranted. Indeed, differences in available 26 procedures may sometimes justify not allowing a prior judgment to have estoppel effect in a subsequent action even between the same 27 parties . . . . The problem of unfairness is particularly acute in cases of offensive estoppel, however, because the defendant against whom 28 1 estoppel is asserted typically will not have chosen the forum in the first action. 2 3 Parklane Hosiery Co., 439 U.S. at 331 & n.15; see Mot. at 12. Defendant raised an identical 4 argument in his first motion to amend, First Mot. at 8–9, and in his opposition to the United 5 States’ original summary judgment motion, Def.’s Opp’n to Renewed Mot. for Summ. J. at 35– 6 36. He argues the court committed clear error by rejecting this argument on the basis that 7 defendant “‘was represented in the criminal case by competent counsel, who vigorously defended 8 Defendant’s interest at trial and on appeal before the Ninth Circuit . . . ,’ and a higher burden of 9 proof applied in the criminal case.” Mot. at 12 (quoting Am. Findings at 12). 10 Defendant’s argument ignores the established precedent that a judgment in a 11 criminal case may serve to collaterally estop civil claims, despite the fact that most criminal 12 defendants historically have been afforded only limited discovery compared to what is available 13 in the civil context. See Fireman’s Fund Ins. Co. v. Stites, 258 F.3d 1016, 1021 (9th Cir. 2001) 14 (affirming district court’s application of offensive non-mutual collateral estoppel against civil 15 defendant where facts were found by jury in criminal case against same defendant). In Fireman’s 16 Fund, the Ninth Circuit addressed the application of Parklane to the context of a criminal 17 judgment used to invoke civil collateral estoppel: 18 The policy considerations discussed by the Supreme Court in Parklane Hosiery all cut in favor of applying offensive non- 19 mutual collateral estoppel in this case. First, the [plaintiffs] could not have joined the criminal case. Second, because [defendant] faced 20 a lengthy prison sentence, he had an incentive to litigate vigorously in his criminal trial. Third, [plaintiffs’] civil suit was not only 21 foreseeable, but had already been filed. Fourth, there are no inconsistent judgments concluding that [defendant] was not guilty of 22 a criminal RICO violation. Finally, the facts necessary to establish a criminal RICO violation were submitted to a jury, which found 23 [defendant] guilty beyond a reasonable doubt. [¶] Moreover, . . . the guilty verdicts establish that [defendant] caused the [plaintiffs’] 24 injury. 25 Fireman’s Fund Ins. Co. v. Stites, 258 F.3d 1016, 1021 (9th Cir. 2001) (citing Parklane, 439 U.S. 26 at 331–32, 351). Many of the same factors apply here: defendant faced a prison sentence on the 27 tax evasion charge, suggesting he had an “incentive to litigate vigorously in his criminal trial”; 28 1 the civil suit for the unpaid taxes was likely foreseeable; defendant does not claim there are any 2 inconsistent judgments; the jury found defendant guilty of tax evasion, and that tax evasion 3 presumably caused the damages sought by the government. See id. Therefore, in applying 4 collateral estoppel here to the claim for tax years 2000 to 2003, the court followed the authority in 5 Fireman’s Fund and Parklane, and therefore the decision was not clearly erroneous. 6 Moreover, despite having had the opportunity to conduct discovery in this case, 7 defendant does not sufficiently show how any more discovery during his criminal proceedings 8 could have possibly changed the outcome in his criminal case or how any discovery he obtained 9 in this case could have altered the outcome. See Mot. at 1–13 (arguing that “needless to say, the 10 outcome would have been different” if defendant had “been permitted to propound substantial 11 written discovery and take numerous meaningful depositions of the government’s witnesses in the 12 criminal case”). 13 Accordingly, the court does not find the court’s prior application of collateral 14 estoppel to the 2000 to 2003 tax years constituted clear error. See McDowell, 197 F.3d at 1255– 15 56 (finding district court does not commit clear error warranting reconsideration when question 16 before it is “debatable”). 17 5. Improper Denial of Stay 18 The United States is correct that the court previously considered and rejected 19 defendant’s arguments that the magistrate judge committed clear error in denying defendant’s 20 request to stay proceedings pending resolution of the criminal case and to allow for additional 21 discovery. Opp’n at 6. The court rejects these renewed arguments for the reasons stated in its 22 previous order. See Order on First Mot. at 7–8. 23 6. Summary 24 Defendant has met his burden of showing clear error with respect to the court’s 25 application of offensive collateral estoppel to the government’s claim for tax payments for the 26 years 1993 to 1996. None of defendant’s other 56(e) arguments warrant relief. The court next 27 considers his Rule 60(b) contentions. 28 ///// 1 III. RULE 60(B) ARGUMENTS 2 A. Legal Standard 3 Under Rule 60(b), the court may relieve a party or its legal representative from a 4 final judgment, order, or proceeding for the following reasons: 5 (1)mistake, inadvertence, surprise, or excusable neglect; 6 (2)newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 7 59(b); 8 (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; 9 (4)the judgment is void; 10 (5) the judgment has been satisfied, released, or discharged; it is 11 based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or 12 (6)any other reason that justifies relief. 13 14 Fed. R. Civ. P. 60. Here, defendant requests relief from judgment because the judgment is void, 15 relying on the fourth reason only. Mot. at 4 (citing Rule 60(b)(4)). 16 As Rule 60(b)(4) suggests, a court can relieve a party from a final judgment if “the 17 judgment is void.” United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 270 (2010). “[A] 18 void judgment is one so affected by a fundamental infirmity that the infirmity may be raised even 19 after the judgment becomes final.” Id. Such infirmities are “rare,” as they must be “premised 20 either on a certain type of jurisdictional error or on a violation of due process that deprives a party 21 of notice or the opportunity to be heard.’” Id. “Judgments are generally considered void for 22 jurisdictional defects only when ‘the court that rendered judgment lacked even an “arguable 23 basis” for jurisdiction.’” Whitsitt v. City of Tracy, No. 2:10-CV-00528-JAM-AC, 2016 WL 24 1357566, at *4 (E.D. Cal. Apr. 6, 2016) (quoting United Student Aid Funds, Inc., 559 U.S. at 25 270), report and recommendation adopted, No. 2:10-CV-00528 JAM-AC, 2016 WL 3448163 26 (E.D. Cal. June 23, 2016) . 27 28 1 B. Discussion 2 Defendant raises two arguments for relief under Rule 60(b)(4): the magistrate 3 judge’s findings and recommendations were void given that the court lacked jurisdiction 4 (1) because the action was not properly authorized, Second Mot. at 23–25 (citing 26 U.S.C. 5 §§ 7401, 7403(a)), and (2) because the United States made a claim in defendant’s bankruptcy 6 case, which was discharged, and therefore the case is precluded by res judicata, id. at 25–28 7 (citing 11 U.S.C. § 524(a)(1), (2)). Defendant raised both of these arguments in his first motion 8 to amend, First Mot. at 20–25, and the court rejected them in its order on that motion, Order on 9 First Mot. at 12–13. Defendant has not offered any new evidence or change in law to warrant 10 reconsideration of these arguments. Accordingly, they are rejected for the same reasons stated in 11 the court’s order on the first motion to amend. 12 IV. CONCLUSION 13 For the forgoing reasons, the court GRANTS defendant’s motion for relief under 14 Rule 59(e) in part, and DENIES the motion for relief under Rule 60(b)(4). The case is 15 REOPENED, and this court’s order, ECF No. 121, adopting the magistrate judge’s amended 16 findings and recommendations, ECF No. 117, is hereby MODIFIED to reflect ADOPTION IN 17 PART based on the conclusion above with respect to the 1996 to 1998 tax years; to the extent the 18 prior order of adoption does not conflict with anything herein, the remainder of the order stands. 19 Any remaining proceedings with respect to the only remaining issues in this case, related to the 20 government’s claims against defendant with respect to the 1996 to 1998 tax years, are 21 REMANDED to the magistrate judge for reconsideration in light of this order. This order 22 resolves ECF No. 123. 23 IT IS SO ORDERED. 24 DATED: August 21, 2020. 25 26 27 28