UNITED STATES OF AMERICA, Appellee, v. MONICA TOTH, Defendant, Appellant.
No. 21-1009
United States Court of Appeals For the First Circuit
April 29, 2022
Before Barron, Chief Judge, Lynch and Lipez, Circuit Judges.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Allison D. Burroughs, U.S. District Judge]
Jeffrey P. Wiesner, with whom Jennifer McKinnon and Wiesner McKinnon LLP were on brief, for appellant.
Jennifer M. Rubin, Tax Division, Department of Justice, with whom David A. Hubbert, Acting Assistant Attorney General, Francesca Ugolini, Tax Division, Department of Justice, and Bruce R. Ellisen, Tax Division, Department of Justice, were on brief, for appellee.
I.
Congress passed the Act in 1970 to curb the use of foreign bank accounts to evade taxes. See Cal. Bankers Ass‘n v. Shultz, 416 U.S. 21, 28-30 (1974). The Act requires U.S. residents and citizens to file reports and keep records of certain relationships with foreign financial agencies.
U.S. Department of Treasury (“Treasury“) regulations promulgated to implement the Act require an individual to file a Report of Foreign Bank and Financial Accounts (“FBAR“) with the IRS for each calendar year that individual has more than $10,000 in a foreign bank account.
Toth is a U.S. citizen who, since 1999, has had a foreign bank account with the Union Bank of Switzerland (“UBS“). Toth was subject to the Act‘s special reporting requirements for that account for at least the years 2005-2009, as in each of those years the account had at least $10,000 in it.
Toth first filed an FBAR disclosing her Swiss UBS account to the IRS in 2010. The next year, the IRS audited Toth. The audit revealed that Toth had failed to comply
Toth did not pay this penalty. The government then filed a civil suit against Toth in the District of Massachusetts on September 16, 2015, for a judgment imposing the full penalty that the IRS had assessed against her, as well as interest and late fees. Two different process servers attempted unsuccessfully to serve Toth personally. The government completed service by leaving a copy of the complaint at her residence on January 11, 2016, as permitted by Massachusetts Rule of Civil Procedure 4(d)(1) and Federal Rule of Civil Procedure (“Rule“) 4(e)(1).3
A couple of weeks later, on February 5, 2016, the government moved for a default judgment against Toth on the ground that she had failed timely to answer the complaint.4 The District Court granted the government‘s motion and issued a notice of default on February 9, 2016.
Shortly thereafter, Toth began to respond to the government‘s filings. She opposed the government‘s motion for default judgment on April 28, 2016, and the following day the District Court held a hearing to discuss Toth‘s opposition to the government‘s already granted motion.
At that hearing, the District Court made clear that it was willing to reconsider the default but only if Toth either “g[o]t a lawyer or . . . start[ed] showing up in court to defend it.” And, when Toth explained that she had not responded to the government‘s complaint because she “didn‘t know what it was” and that the law is “a world that . . . [she] d[oes]n‘t know about,” the District Court strongly encouraged Toth to hire a lawyer, worked with the government to provide Toth with a non-compulsory list of lawyers she could hire, and granted Toth a 30-day continuance to retain counsel. Following the hearing, Toth moved to set aside the default judgment, but she did not hire a lawyer.
The District Court granted Toth‘s motion to set aside the default judgment on August 17, 2016. The District Court ruled that “this action should proceed on the merits” due to “the circumstances, which include a pro se plaintiff, a potential judgment of over $2 million and a dispute about service and actual notice of the case.”
A little less than two months later, on October 13, 2016, Toth moved to dismiss the complaint under Rules 12(b)(4) and 12(b)(5) for untimely service of process, Rule 12(b)(2) for lack of personal jurisdiction, and Rule 12(b)(6) for failure to state a claim. The District Court denied Toth‘s motion on all three grounds. United States v. Toth (Toth I), No. 15-CV-13367, 2017 WL 1703936, at *1 (D. Mass. May 2, 2017).
Toth filed her answer to the complaint after the District Court denied Toth‘s motion to dismiss. The case then proceeded to discovery.
At a scheduling conference to set deadlines for discovery, the District Court noted that Toth had failed to confer with the government‘s counsel as required by
By January 2018, Toth had missed two deadlines for responding to discovery requests and amending her initial disclosures set by the District Court. By that time, the government also had both moved to compel discovery twice and sought sanctions pursuant to
The government then again moved for sanctions against Toth on March 9, 2018, on the ground that, as of February 9th, Toth had failed to respond to the government‘s discovery requests. The District Court refrained from ruling on the motion until it heard from the parties at a hearing scheduled for March 12th.
At that hearing, Toth provided the government with her amended initial disclosures as well as her responses to the government‘s discovery requests. The government in July nonetheless moved once more for sanctions against Toth on the ground that her responses were inadequate and noncompliant with the District Court‘s prior order imposing sanctions.
Toth did not oppose the government‘s motion, and the District Court ordered Toth to “show cause as to why these sanctions should not be imposed.” The District Court noted “the gravity of the proposed sanctions,” which included a finding of fact necessary for the government to impose the more than $2 million penalty against Toth — namely, that Toth had violated the Act‘s reporting requirements willfully in 2007. See
Toth then filed four responses on September 10, 2018, September 14, 2018, September 25, 2018, and October 12, 2018. One of the responses disputed the government‘s characterization of her conduct during discovery. The three other responses disputed that she had willfully violated the Act.
On October 15, 2018, the District Court granted the government‘s motion for sanctions under
Discovery continued, and Toth — after having then hired a lawyer — produced documents that she had not previously disclosed. Toth moved to vacate the sanctions order on March 15, 2019. The District Court refused to do so. United States v. Toth (Toth III), No. 15-CV-13367, 2019 WL 7039627, at *1, *2 (D. Mass. Dec. 20, 2019).
The District Court then turned to the defenses that Toth had raised in response to the motion for summary judgment with respect to the size of the penalty that the IRS sought to impose through the suit. These defenses were based on a Treasury regulation and the U.S. Constitution‘s Excessive Fines and Due Process Clauses. Id. at *6-9. The District Court rejected each contention, and, having found as a matter of law that Toth had willfully failed to report her Swiss UBS account in 2007 and that the IRS did not err in assessing a penalty equal to the statutory maximum in this case, entered a judgment against Toth for $2,173,703.00 for Toth‘s willful failure to timely file an FBAR for the 2007 calendar year, $826,469.56 in late fees, and $137,925.92 in interest. Id. at *9. Toth filed this timely appeal.
II.
We first consider Toth‘s challenge to the District Court‘s denial of her motion to dismiss the government‘s suit for lack of personal jurisdiction based on Rules 12(b)(4) and 12(b)(5). See Precision Etchings & Findings, Inc. v. LGP Gem, Ltd., 953 F.2d 21, 23 (1st Cir. 1992). We conclude that the challenge is without merit.
The government filed the complaint in this case on September 16, 2015.
The parties agree that the government served Toth 118 days after it filed its complaint. They thus agree that the government served her with process within the 120-day deadline set by the old version of
The parties agree that our review is de novo. See United States v. Mojica-Rivera, 435 F.3d 28, 31-32 (1st Cir. 2006). Assuming that is the case, we discern no error by the District Court, even under that standard of review.
The District Court made no explicit finding as to whether it would be “just and practicable” to apply the 90-day deadline (instead of the 120-day deadline) to this case. But, the District Court did find that Toth “knew [the government‘s process server] was attempting to serve her with legal process and . . . made a deliberate effort to avoid service.” Toth II, 2018 WL 4963172 at *1;5 cf. Ruiz Varela v. Sanchez Velez, 814 F.2d 821, 823 (1st Cir. 1987) (holding, in a case concerning
Thus, the record leads us to conclude that the District Court premised its decision not to apply the 90-day deadline on the implicit determination that it would not be “just and practicable” to apply that deadline in this case because doing so would reward deliberate attempts to evade earlier service. Cf. United States v. Rodriguez, 14 F.3d 45 (1st Cir. 1993) (unpublished table decision) (affirming the district court‘s “implicit finding that [the] appellant‘s son [in that case] was ‘residing’ in her house for the purposes of” determining whether service of process satisfied Rule 4(d)‘s requirements). And, we see no basis for concluding that the District Court erred in making that determination. See Hinton v. Va. Union Univ., 185 F. Supp. 3d 807, 843 (E.D. Va. 2016) (“As a general matter, . . . it is unjust to expect parties to abide by deadline-setting rules that were not in effect when the clock began ticking on a particular activity.“); Freeman v. United States, 166 F. Supp. 3d 215, 218 (D. Conn. 2016) (applying the 120-day version of
III.
Toth‘s next challenge is to the grant of summary judgment against her and depends on her contention that the District Court‘s order sanctioning her under
1. Defendant had legal control over, and the legal authority to direct the disposition of the funds in, the Account (and any sub-accounts), by investing the funds, withdrawing the funds, and/or transferring the funds to third-parties, between the date the Account was opened and at least December 31, 2008.
2. Should the United States establish that Defendant is liable for the penalty alleged in the complaint, for the purposes of calculating the amount of such penalty, the Account (and any sub-accounts) contained $4,347,407 as of the penalty-calculation date.
3. Defendant had a legal obligation to timely file an FBAR regarding the Account in each calendar year that the Account was open, including with regard to calendar year 2007. 4. Defendant willfully failed to file an FBAR regarding the Account with respect to calendar year 2007.
Toth II, 2018 WL 4963172 at *5-6.6
In entering summary judgment against Toth, the District Court relied on the facts — including the fact that Toth “willfully failed to file an FBAR regarding the [Swiss UBS] account with respect to calendar year 2007” — that the sanctions order required to be taken as having been established. Thus, the summary judgment ruling against her cannot stand if the sanctions order cannot. But, as we will explain, we do not agree with Toth that the District Court abused its discretion in imposing the sanction — severe though it was.
A.
Toth focuses in challenging the sanctions order on the District Court‘s decision to require that it be taken as an established fact that she “willfully failed to file an FBAR” for the 2007 calendar year. She argues that this requirement was a particularly harsh sanction because, she contends, it “was tantamount to a default judgment,” in that it precluded her from denying that she willfully failed to file an FBAR for the 2007 calendar year. She then argues that the sanction, given that feature of it, was “extreme [and] unwarranted” because her conduct was far less “severe, repeated and deliberate” than the District Court found.
We review the District Court‘s “choice of sanction” under
B.
The District Court based the sanction on the finding that Toth‘s “persistent violations of the Court‘s discovery orders” were “severe, repeated, and deliberate.” Toth II, 2018 WL 4963172 at *4. The District Court acknowledged that Toth was proceeding pro se but explained that it “ha[d] been very accommodating to [Toth], affording her numerous extensions, ample notice, and many opportunities to explain herself.” Id. The District Court emphasized that it had “attempted warnings and lesser sanctions
The record supportably shows that Toth failed from the outset to respond to the government‘s discovery requests and repeatedly missed deadlines for doing so set by the District Court.7 Hooper-Haas v. Ziegler Holdings, LLC, 690 F.3d 34, 37 (1st Cir. 2012) (“We have said . . . that a party who flouts a court order does so at its own peril.“). Specifically, Toth did not respond to the government‘s discovery requests until March 12, 2018 — just nine days before discovery overall was scheduled to end and three months after the District Court had ordered Toth to respond to the government‘s discovery requests. Moreover, Toth did not amend her initial disclosures to conform with the Federal Rules until March 12, 2018, even though the District Court set October 6, 2017, as the deadline by which Toth was required to serve the government with her initial disclosures and had ordered Toth to amend her initial disclosures one month later.8 Toth II, 2018 WL 4963172, at *3-4.
The record also supportably shows that the District Court repeatedly gave Toth second chances. For example, the District Court extended the deadline by which she was ordered to provide discovery and even cautioned the government “to remember that [Toth] currently represents herself and that her efforts will be held to a less demanding standard.”
Moreover, the record shows that the District Court repeatedly warned Toth that she could face sanctions if she continued to fail to meet the court‘s deadlines, and that the District Court did not act on those warnings until three months had passed in which Toth had failed to amend her initial disclosures or respond to the government‘s discovery requests. On January 19, 2017, for example, the District Court imposed its first set of sanctions against Toth, “prohibiting her from withholding documents or information based on non-privilege objections.” Toth II, 2018 WL 4963172, at *4. Toth was also warned that “[i]f [she] fail[ed] to comply,” the District Court “may enter strong sanctions against her, including, but not limited to, . . . accepting certain facts as established, including that [she] acted ‘willfully’ when she failed to file an FBAR” and “entering a default against [her].”
Nevertheless, the record shows, Toth continued to fail to meet the District Court‘s deadlines. It further shows that when she did eventually serve her initial discovery responses on March 12, 2017, her production consisted of just three single-page documents — a copy of her college transcript, a copy of an envelope mailed to her by the District Court, and a Notice of Electronic Filing generated in this case — and were replete with non-privilege-based objections in direct violation of the District
Thus, we cannot say that the District Court was mistaken in its characterization of Toth‘s discovery violations as “persistent.” Toth II, 2018 WL 4963172 at *4. Nor can we say that the District Court abused its discretion in selecting the sanction it chose. Hooper-Haas, 690 F.3d at 37 (“A court faced with a disobedient litigant has wide latitude to choose from among an armamentarium of available sanctions.“). The record shows that the discovery violations continued despite the District Court‘s imposition of lesser sanctions against Toth and warnings that if Toth continued to fail to comply with its discovery orders, she could be sanctioned severely, including by requiring that it be taken as established that she willfully failed to file her 2007 FBAR. See Remexcel Managerial Consultants, Inc. v. Arlequin, 583 F.3d 45, 51 (1st Cir. 2009) (noting that a severe discovery sanction “provides a useful remedy when a litigant is confronted by an obstructionist adversary and plays a constructive role in maintaining the orderly and efficient administration of justice.” (quoting KPS & Assocs., Inc. v. Designs by FMC, Inc., 318 F.3d 1, 13 (1st Cir. 2003))).
The sanction did take one of Toth‘s primary defenses off the table — that she did not willfully violate the Act. But, she still had her other arguments, which she advances on appeal, including her regulatory and constitutional challenges. Thus, we agree with the District Court that the sanction at issue does not rise to the level of a default judgment. Toth II, 2018 WL 4963172, at *5; cf. Chilcutt v. United States, 4 F.3d 1313, 1320 (5th Cir. 1993) (finding that a sanction “was a far cry from a default judgment” when the defendant was still able to present the affirmative defense of comparative negligence).
Moreover, the District Court gave Toth an opportunity to explain why this sanction was inappropriate. In fact, the District Court gave Toth an extended deadline to do so after Toth initially failed to timely respond to the government‘s motion seeking the imposition of the sanctions at issue here.
For these reasons, we reject Toth‘s contention that the District Court abused its discretion when it ordered that it was established for the purposes of this litigation that Toth‘s failure to file an FBAR in 2007 was willful. And, in consequence, we conclude, reviewing de novo, that there is “no genuine issue as to any material fact” with respect to whether Toth willfully failed to
IV.
Toth also challenges the District Court‘s grant of summary judgment to the government with respect to the amount of the penalty that was imposed against her. Toth first points to a Treasury regulation that she contends precludes a penalty of that amount from having been imposed. Finding no merit to that
contention, we then also address her constitutionally based challenges to the amount of the penalty that was imposed.
A.
Toth contends that, even though the more than $2 million penalty that the IRS assessed against her for her willful failure to file an FBAR for the year 2007 is permitted by statute, see
The regulation in question is
Toth contends that the 1987 regulation does remain operative and that it therefore places a ceiling on the penalty that may be imposed that is much lower than the statutory maximum that Congress set by statute after the regulation was promulgated. For that reason, she contends, the penalty at issue is unauthorized because an agency is required to follow its own regulations, see Accardi v. Shaughnessy, 347 U.S. 260, 267 (1954).
We do not agree. Rather, reviewing de novo, see Rideout v. Gardner, 838 F.3d 65, 71 (1st Cir. 2016), we conclude, like every other circuit to have considered this issue, see United States v. Kahn, 5 F.4th 167, 175 (2d Cir. 2021); United States v. Horowitz, 978 F.3d 80, 90-91 (4th Cir. 2020); United States v. Rum, 995 F.3d 882, 892 (11th Cir. 2021); Norman v. United States, 942 F.3d 1111, 1117 (Fed. Cir. 2019), that the regulation in question does not limit the IRS‘s ability to impose the statutory maximum penalty against Toth because the statutory amendments that increased the maximum amount for a civil penalty for a willful failure to file an FBAR from the $100,000 amount to the present one superseded the regulation.
At the time that the regulation was promulgated, in 1987, the maximum penalty under the statute for a willful failure to file an FBAR was $100,000.
In addition, the regulation was promulgated pursuant to a grant of statutory authority that did not -- at least in any clear way -- confer the power on the Treasury to establish a ceiling on the maximum penalty that would be lower than the
Indeed, there is no statutory provision that expressly confers on the Treasury the authority to impose a maximum penalty by regulation that is lower than the one set by statute. By contrast, there is a provision --
Finally, and as we have noted, the regulation was promulgated as an interpretive rule. Compare Amendments to Implementing Regulations; the Bank Secrecy Act, 51 Fed. Reg. 30233, 30236 (proposed Aug. 25, 1986) (proposing § 103.47(a)-(b), which caps the maximum penalty for a willful violation of
In sum, neither the amount of the maximum penalty identified in the regulation, nor the statute authorizing the promulgation of the regulation, nor the means of its promulgation suggests that the Treasury intended the regulation to set a ceiling on the penalty that would apply even if the statute that set the maximum penalty at the time of the regulation‘s issuance was amended to raise it. Rather, the text of the regulation, the statute authorizing its promulgation, and the means of its promulgation each accords with an understanding that the Treasury intended the regulation merely to parrot the maximum amount for the penalty that Congress had set at the time that the regulation was promulgated. See also Kahn, 5 F.4th at 177 (characterizing the 1987 regulation as a “parroting regulation“); cf. United States v. Vogel Fertilizer Co., 455 U.S. 16, 26 (1982) (noting that the Supreme Court “has firmly rejected the suggestion that a regulation is to be sustained simply because it is not ‘technically inconsistent’ with the statutory language, when that regulation is fundamentally at odds with the manifest congressional design” (quoting United States v. Cartwright, 411 U.S. 546, 557 (1973))); Norman, 942 F.3d at 1118 (“It is well settled that subsequently enacted or amended statutes supersede prior inconsistent regulations.“).
Moreover, the regulation‘s history supports the same conclusion. See also Kahn, 5 F.4th at 176-77 (reviewing the history of the 1987 regulation at issue here). In 1986, the Treasury initiated rulemaking to update the regulations implementing the Act. See Amendments to Implementing Regulations, 51 Fed. Reg. at 30233. Two years earlier, Congress had increased the civil penalties that applied to violations of recordkeeping requirements of the Act committed by financial institutions from $1,000 to $10,000, see Pub. L. 98-473 § 901(a), 98 Stat. 1837, 2135 (1984), and the proposed rules contained a regulation that reflected that change, see Amendments to Implementing Regulations, 51 Fed. Reg. at 30236.
But, before the Treasury published the final rule responding to those statutory developments, Congress amended
Thus, when Congress amended
Toth nonetheless contends that there are reasons to construe the regulation‘s
Toth first points out that the Treasury did not withdraw or amend the regulation for twelve years after Congress increased the maximum penalty to exceed the cap set forth in the regulation -- a period that included the years she failed to report her Swiss UBS account as well as the IRS‘s audit of her. But, the Supreme Court explained when presented with a similar argument regarding a failure by the Treasury to amend a prior regulation that the failure “is more likely a reflection of [its] inattention than any affirmative intention on its part to say anything at all” -- especially in light of the Treasury‘s “relaxed approach to amending its regulations to track [legislative] changes.” United Dominion Indus., 532 U.S. at 836; cf. Garrity, 2019 WL 1004584, at *3 (“[The Treasury] could not override Congress‘s clear directive to raise the maximum willful FBAR penalty by declining to act and relying on a regulation parroting an obsolete version of the statute.“). And, we conclude that, in light of the reasons just recounted that support an understanding of the 1987 regulation to have merely parroted the then-operative statutory maximum, this same logic applies equally here.
Toth next argues that the Treasury can be understood to have reaffirmed its commitment to the $100,000 ceiling based on other regulations that she purports implement the amended version of
Finally, Toth relies on two interpretive rules that she contends are applicable: (1) the rule of lenity, which is a “longstanding principle” of statutory construction that “demand[s] resolution of ambiguities in criminal statutes in favor of the defendant,” Hughey v. United States, 495 U.S. 411, 422 (1990); and (2) the canon that “[i]f the words [of a tax statute] are doubtful, the doubt must be resolved against the government and in favor of the taxpayer,” United States v. Merriam, 263 U.S. 179, 188 (1923). But, even if we were to assume (contrary to the government‘s position) that these canons apply to a regulation implementing
B.
We turn, then, to Toth‘s two federal constitutional grounds for overturning the grant of summary judgment against her, each of which take aim solely at the amount of the penalty. Reviewing de novo, Rideout, 838 F.3d at 71, we find neither ground for so ruling persuasive.
1.
Toth first contends that the more than $2 million penalty that she faces for willfully failing to file an FBAR for the 2007 calendar year violates the Excessive Fines Clause of the Eighth Amendment to the U.S. Constitution. See
The Supreme Court explained in Austin v. United States, 509 U.S. 602, 607 (1993), that there is no per se rule that the Excessive Fines Clause only applies to criminal proceedings. What matters is whether that penalty, even if only a civil one, “is punishment.” Id. at 610. The Court has also explained that “a civil sanction that cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retributive or deterrent purposes, is punishment.” Id. (quoting United States v. Halper, 490 U.S. 435, 448 (1989)).
The Court then applied that logic in Austin to hold that an in rem civil forfeiture under
The Court applied that same logic in a subsequent case, United States v. Bajakajian, 524 U.S. 321 (1998), to find that a civil forfeiture under a different statutory scheme,
But, unlike the civil forfeitures held to constitute “punishment” in both Austin and Bajakajian, this civil penalty is not tied to any criminal sanction. Rather, it was imposed following an administrative tax audit in which the IRS determined that Toth had failed to report a foreign bank account. Nor has the government conceded any punitive purpose.
Moreover, we conclude that, even if those points of distinction are not themselves dispositive, the civil penalty here is like the civil forfeitures in One Lot Emerald Cut Stones and One Ring v. United States, 409 U.S. 232 (1972), Stockwell v. United States, 80 U.S. 531 (1871), and the other early customs laws that Bajakajian itself recognized did not constitute punishment for purposes of the Excessive Fines Clause, 524 U.S. at 342-43 (explaining that the “early monetary forfeitures,” such as the ones discussed Stockwell and One Lot Emerald Cut Stones, “were considered not as punishment for an offense, but rather as serving the remedial purpose of reimbursing the [g]overnment for the losses accruing from the evasion of customs duties“).
We make that assessment because -- unlike the forfeiture at issue in Bajakajian, which was ordered notwithstanding that there “was no fraud on the United States, and [the subject of the forfeiture] caused no loss to the public fisc,” id. at 329, 339 -- here there was such a fraud and loss. Indeed, Congress authorized the imposition of a penalty of this size for willfully failing to comply with the Act‘s reporting requirements to address the fact that “[i]t has been estimated that hundreds of millions in tax revenues [were] lost” due to the secret use of foreign financial accounts -- which Congress characterized as the “largest single tax loophole permitted by American law,” H.R. Rep. No. 91-975, at 4397-98 (1970), and that it was very difficult for law enforcement to police the use of these accounts, causing costly investigations to stretch on for years, id. at 4397.15 Cf. Bajakajian, 524 U.S. at 343 (explaining that the monetary penalty at issue in One Lot Emerald Cut Stones was remedial in part because the penalty was proportioned on the value of the non-reported goods); One Lot Emerald Cut Stones, 409 U.S. at 237 (holding that the forfeiture of goods for a failure to pay import duties on them is a “reasonable form of liquidated damages,” as the more expensive the illegally imported good, the more the government has likely missed out on revenue); Stockwell, 80 U.S. at 533, 546-47 (finding that a statutory scheme that permitted the government to impose on an individual who deals in illegally imported goods a penalty equal to double the value of those goods was “remedial” because “[t]he act of abstracting goods illegally imported, receiving,
Of course, the government does have means for recouping tax losses from undisclosed foreign assets other than imposing a penalty for a failure to comply with a reporting requirement about the existence of those assets. But, the fact that Congress may tax a foreign account once it learns of it does not prevent a penalty assessed under
Nor are we persuaded by Toth‘s argument that the fact that
We also do not see why the existence of a lower penalty for the same violation when it is not committed willfully in and of itself makes the higher penalty “punishment.” After all, Congress could choose to permit the government to only recover a portion of its losses or investigatory costs and the scheme would be no less remedial. Moreover, the tax scheme at issue in McNichols provided for a lower 5 percent penalty for a negligent or intentional, non-fraudulent failure to pay certain taxes, and the gradient nature of that scheme did not prevent this circuit from concluding that the 50 percent penalty for tax fraud was remedial in nature. See McNichols, 13 F.3d at 433-35 (discussing the penalty assessed against McNichols for tax fraud);
Thus, for all these reasons, we conclude that a civil penalty imposed under
2.
Toth bases her final federal constitutional ground for contending that the grant of summary judgment against her must be reversed due to the amount of the penalty on the Due Process Clause of the Fifth Amendment. But, in support of this contention, Toth cites in her opening brief only to BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), which is a case that involves a punitive penalty imposed by a jury. That choice of argument presents a problem for Toth because in Sony BMG Music Entertainment v. Tenenbaum, 719 F.3d 67 (1st Cir. 2013), we held that BMW does not apply to cases like this one that involve a penalty set by statute. Id. at 70-71. Moreover, even though the government contends in its brief to us that the Sony standard and not the BMW standard applies, Toth in her reply brief does not attempt to show that her Fifth Amendment rights were violated under the Sony framework. Rather, she contends only that Sony is distinguishable, such that BMW applies here, because a penalty imposed pursuant to
New arguments, however, may not be made in reply briefs. See Villoldo, 821 F.3d at 206 n.5. In addition, for reasons that we have explained, the statute does not conflict with the regulation. We thus conclude that Toth has waived any argument as to whether the penalty that the IRS assessed against her violates the Due Process Clause of the Fifth Amendment. See Zannino, 895 F.2d at 17.
V.
For these reasons, we affirm the judgment of the District Court.
42
Notes
On appeal, Toth disputes the District Court‘s characterization of her initial response to the government‘s discovery requests as “facially deficient.” She points out that in total, “her responses comprised 28 single-spaced pages and included a one-and-a-half-page table of contents with a key to identify the documents referenced in her responses.”
But, the District Court‘s conclusion that she withheld documents and produced a facially deficient response was premised primarily on the fact that “[h]er document production consisted of just three single-page documents, her responses to the [g]overnment‘s requests for production and interrogatories disregarded the [District] Court‘s sanction precluding [Toth] from withholding documents based on non-privilege objections, and her amended initial disclosures failed to comply with
Toth herself does not dispute the District Court‘s finding that her amended initial disclosures were non-compliant. Further, she admits that her interrogatories contained objections. And, finally, she does not dispute that her document production consisted of just three single-page documents; rather she seeks to excuse this by insisting that she did not withhold documents because “the government‘s document requests sought documents that had been either destroyed or lost over the years.” (quotation omitted). But, after the “willfulness” sanction was imposed, Toth produced documents that had previously not been disclosed.