236 F. Supp. 3d 702
E.D.N.Y2017Background
- The Government sued Daniel Myers under 26 U.S.C. §§ 7401, 7402 to collect unpaid federal income taxes for tax years 1999–2013 (Amended Complaint), seeking roughly $2.82M in assessments as of Jan. 11, 2016.
- Myers was served but never answered or otherwise appeared; the Clerk entered default on Feb. 24, 2016.
- The Government moved for default judgment seeking $2,841,219.80 (including assessments, penalties, and interest through Mar. 23, 2016) plus prejudgment interest thereafter.
- Magistrate Judge Locke reviewed the motion, supporting IRS declarations (showing assessments and account calculations), and recommended entry of default judgment and prejudgment interest; District Judge Spatt adopted the R&R.
- The court treated the Amended Complaint’s factual allegations as admitted, found the Government established a valid statutory basis for recovery, and directed the Clerk to enter judgment and close the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether default judgment should be entered | Myers defaulted; Government served and seeks recovery under §§7401/7402 | No response or defense from Myers | Default judgment granted (default was willful; no meritorious defense; denial would prejudice Government) |
| Whether the Amended Complaint states a valid claim for tax collection | Government alleges proper assessments, notices, and authorization to sue | No response | Complaint states valid claim under §§7401/7402; allegations deemed admitted |
| Whether damages amount is supported | IRS declaration and account records detail assessments, penalties, interest through Mar. 23, 2016 totaling $2,841,219.80 | No contest from Myers | Damages awarded as requested; plaintiff met proof burden for liquidated/algorithmic amount |
| Whether prejudgment interest should be awarded and how computed | Requests interest from Mar. 23, 2016 compounded daily, per 26 U.S.C. §§6601, 6621, 6622 | No contest from Myers | Prejudgment interest awarded from Mar. 23, 2016 at underpayment rate (short-term rate plus 3%) compounded daily; Clerk to calculate |
Key Cases Cited
- Enron Oil Corp. v. Diakuhara, 10 F.3d 90 (2d Cir.) (standard for default-judgment procedure)
- Shah v. N.Y. State Dep’t of Civil Serv., 168 F.3d 610 (2d Cir.) (district court discretion in default-judgment decisions)
- Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167 (2d Cir.) (factors guiding default-judgment decision)
- Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155 (2d Cir.) (effect of default: admission of well-pleaded allegations)
- Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105 (2d Cir.) (basis for damages inquest by affidavit without in-person hearing)
- Flaks v. Koegel, 504 F.2d 702 (2d Cir.) (default establishes liability but damages must be proven)
- Moretti v. Commissioner, 77 F.3d 637 (2d Cir.) (presumption of correctness for IRS deficiency notices)