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United States of America v. Penny Lea Jones

July 7, 2011


The opinion of the court was delivered by: U. S. District Judge Honorable Edward J. Lodge


Before the Court is the United States' Motion for Summary Judgment against Defendant, Penny Lea Jones, formerly known as Penny Lea Wardrop. (Dkt. No. 17). The time for filing a response has passed with no response being filed. As such the Motion is now ripe for the Court's review. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this Motion shall be decided on the record before this Court without oral argument. The Court finds as follows.


On October 27, 2009, the United States filed a Complaint in this action against the Defendant, Penny Lea Jones. (Dkt. No. 1.) The United States alleges Ms. Jones has been running a fraudulent tax return preparation business in Shelley, Idaho whereby she filed frivolous tax returns, amended tax returns, and other frivolous documents on behalf of others in exchange for compensation. (Dkt. No. 1.) This scheme, the United States argues, has defrauded the government of millions of dollars. (Dkt. No. 18.) The Complaint raises claims under 26 U.S.C. §§ 7402(a), 7407, and 7408 seeking a permanent injunction and other equitable relief to prohibit Ms. Jones from continuing her fraudulent tax return scheme. (Dkt. No. 1.)

In response, Ms. Jones has filed a "Truth Affidavit" which generally denies the allegations in the Complaint. (Dkt. No. 3.) The United States then filed a Motion for Preliminary Injunction which, on January 15, 2010, this Court granted. (Dkt. Nos. 4, 8.) On February 3, 2010, Ms. Jones filed a "Notice of Contract and Notice of Default and Notice of Summary Judgment" ("Notice") essentially arguing jurisdiction is lacking and the case should be dismissed due to the United States "failure to respond." (Dkt. No. 13.) On September 22, 2010, the United States filed its own Motion for Summary Judgment seeking entry of the requested permanent injunction against Ms. Jones. (Dkt. No. 18.) The Court now takes up these matters below.


Motions for summary judgment are governed by Rule 56 of the Federal Rules of Civil Procedure. Rule 56 provides, in pertinent part, that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The court should state on the record the reasons for granting or denying the motion." Fed. R. Civ. P. 56(a).*fn1 "A party asserting that a fact cannot be or is genuinely disputed must support the assertion by: (A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1).

The party moving for summary judgment has the initial burden of showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, 477 U.S. 242, 247-48 (1986). Once the moving party has met this initial burden, the nonmoving party has the subsequent burden of presenting evidence to show that a genuine issue of fact remains. The party opposing the motion for summary judgment may not rest upon the mere allegations or denials of her pleading, but must set forth specific facts showing that there is a genuine issue for trial. Id. at 248. If the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial" then summary judgment is proper as "there can be no 'genuine issue of material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).*fn2

Moreover, under Rule 56, it is clear that an issue, in order to preclude entry of summary judgment, must be both "material" and "genuine." An issue is "material" if it affects the outcome of the litigation. An issue, before it may be considered "genuine," must be established by "sufficient evidence supporting the claimed factual dispute . . . to require a jury or judge to resolve the parties' differing versions of the truth at trial." Hahn v. Sargent, 523 F.3d 461, 464 (1st Cir. 1975) (quoting First Nat'l Bank v. Cities Serv. Co. Inc., 391 U.S. 253, 289 (1968)). The Ninth Circuit cases are in accord. See, e.g., British Motor Car Distrib. V. San Francisco Automotive Indus. Welfare Fund, 883 F.2d 371 (9th Cir. 1989).

According to the Ninth Circuit, in order to withstand a motion for summary judgment, a party (1) must make a showing sufficient to establish a genuine issue of fact with respect to any element for which it bears the burden of proof; (2) must show that there is an issue that may reasonably be resolved in favor of either party; and (3) must come forward with more persuasive evidence than would otherwise be necessary when the factual context makes the non-moving party's claim implausible.

Id. at 374 (citation omitted). Of course, when applying the above standard, the Court must view all of the evidence in the light most favorable to the non-moving party. Anderson, 477 U.S. at 255; Hughes v. United States, 953 F.2d 531, 541 (9th Cir. 1992).


1. Jurisdiction

Ms. Jones' filings challenge this Court's jurisdiction in this matter on the ground that there is no statute or Act of Congress making her liable for income taxes which the Court has jurisdiction to enforce. (Dkt. No. 3.) The United States asserts jurisdiction is proper here under 28 U.S.C. §§ 1340 and 1345 as well as 26 U.S.C. §§ 7402(a), 7407, 7408. (Dkt. No. 1.)

Federal courts have original jurisdiction over civil actions 1) arising under federal revenue laws and/or 2) commenced by the United States, or by any agency or officer thereof expressly authorized to sue by an Act of Congress. 28 U.S.C. §§ 1340, 1345. Sections 7402, 7407, and 7408 are Acts of Congress expressly authorizing the United States to bring civil actions in the district in which the subject individual resides. 26 U.S.C. §§ 7402(a), 7407, 7408. Here, Ms. Jones resides in Idaho and operates a tax return preparation business using a post office box in Shelley, Idaho. As such, the Court finds jurisdiction and venue are proper.

2. Ms. Jones' Notice

Ms. Jones' filed her "Notice" alleging this matter should be dismissed because the United States failed to respond to her "Truth Affidavit" within ten business days. (Dkt. No. 13.) As such, she argues, the United States is in default and has accepted the truth of the facts as stated in her "Truth Affidavit." (Dkt. No. 3, p. 6 and Dkt. No. 13.) Ms. Jones contends that her "Notice" is her formal acceptance to a binding contract, purportedly based on the United States' failure to respond, to award her summary judgment in this matter and nullifying this case. (Dkt. No. 13, p. 2.) The United States has not responded to these filings but instead filed its own Motion for Summary Judgment.

The Court concludes the United States is under no obligation to respond as demanded in Ms. Jones "Truth Affidavit" and "Notice." (Dkt. Nos. 3, 13.) The Federal Rules of Civil Procedure instead require that Ms. Jones file an answer to the United States' Complaint. See Fed. R. Civ. P. 8, 12(a)(1). As such, the Court finds no "binding contract" or "private settlement" was formed here and the United States is not in default.

3. United States' Motion for Summary Judgment

The United States has filed its Motion for Summary Judgment along with supporting materials. (Dkt. Nos. 17-19.) The Motion seeks entry of a permanent injunction pursuant to 26 U.S.C. ยงยง 7402, ...

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