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United States v. Harvey

United States District Court, D. Idaho

September 22, 2017

UNITED STATES OF AMERICA Plaintiff,
v.
GARY R. HARVEY; BERNICE C. HARVEY; LHS TRUST; and ORGANIC ASSEMBLY OF CIRCLE JB, Defendants.

          MEMORANDUM DECISION AND ORDER

          Edward J. Lodge United States District Judge

         Pending before the Court are: (1) Plaintiff's Motion for Summary Judgment (Dkt. 45) and (2) the Harvey Defendants' Motion to Stay Proceedings pending an appeal of the Court's January 17, 2017 Order to the Ninth Circuit (Dkt. 50). For the reasons set forth below, the Court adopts the Report and Recommendation of the United States Magistrate Judge (Dkt. 57), grants Plaintiff's Motion for Summary Judgment (Dkt. 45), and denies the Harvey Defendants' Motion to Stay Proceedings (Dkt. 50).

         INTRODUCTION

         On June 6, 2017, United States Magistrate Candy W. Dale issued a Report and Recommendation, recommending that Plaintiff's Motion for Summary Judgment (Dkt. 45) be granted. (Dkt. 57.) The Harvey Defendants filed objections to the Report and Recommendation arguing it erred in its conclusions and findings. (Dkt. 60.) Plaintiff filed a response (Dkt. 62) and the Harvey Defendants filed a reply (Dkt. 63). The matter is ripe for this Court's consideration. Fed.R.Civ.P. 72; Local Civ. R. 72.1(b).

         STANDARD OF REVIEW

         Pursuant to 28 U.S.C. § 636(b)(1)(C), this Court “may accept, reject, or modify, in whole or in part, the findings and recommendations made by the magistrate judge.” Where the parties object to a report and recommendation, this Court “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” Id. Where, however, no objections are filed the district court need not conduct a de novo review. To the extent that no objections are made, arguments to the contrary are waived. See Fed. R. Civ. P. 72; 28 U.S.C. § 636(b)(1) (objections are waived if they are not filed within fourteen days of service of the Report and Recommendation). “When no timely objection is filed, the Court need only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.” Advisory Committee Notes to Fed.R.Civ.P. 72 (citing Campbell v. United States Dist. Court, 501 F.2d 196, 206 (9th Cir.1974)).

         In this case, the Harvey Defendants filed objections and the Court has conducted a de novo review of those portions of the Report and Recommendation as well as the record in this matter. The Court has also reviewed the entire Report and Recommendation and record for clear error. The Court finds as follows.

         BACKGROUND

         The factual and procedural background of this case are correctly stated in the Report and Recommendation and this Court adopts the same. (Dkt. 57.) In general, the United States brings this action to: (1) reduce to judgment outstanding federal tax assessments against Defendants Gary R. Harvey and Bernice C. Harvey (collectively, the “Harvey Defendants” or “Harveys”); (2) ask the Court to find that a parcel of real property located in Nez Perce County (“Subject Property”) is held by a nominee/alter ego/constructive trust of the Harveys; (3) foreclose federal tax liens on the Subject Property; (4) sell the Subject Property; and (5) distribute the proceeds from such sale in accordance with the Court's findings as to the validity and priority of the liens and claims of all parties. (Dkt. 1.) The claims are based on 26 U.S.C. §§ 7401, 7402, and 7403.

         The named Defendants are the Harveys as well as the LHS Trust and Organic Assembly of Circle JB. The federal tax assessments are against the Harveys. (Dkt. 1.) LHS Trust and Organic Assembly of Circle JB were named as Defendants because the United States believed that they might claim an interest in the Subject Property. (Dkts. 1, 44.) Neither the LHS Trust nor the Organic Assembly of Circle JB has appeared in this matter, though they both were served. (Dkts. 7, 10.)

         On January 13, 2017, the United States filed a Motion for Summary Judgment on all of its claims against Gary and Bernice Harvey. (Dkt. 45.) On that same date, the United States also filed a Motion for Default Judgment against Defendants LHS Trust and Organic Assembly of Circle JB. (Dkt. 44.)

         On January 17, 2017, the Court issued an Order and Default Judgment as to the claims against LHS Trust and Organic Assembly of Circle JB. (Dkt. 47.) This Order extinguished any claims these Defendants might have held in the Subject Property.

         On February 16, 2017, the Harveys filed a Motion to Stay Proceedings pending an appeal of the Court's January 17, 2017 Order to the Ninth Circuit. (Dkt. 50.) For the reasons set forth below, the Court will treat this Motion as a request to certify an interlocutory appeal and addresses that Motion herein.

         DISCUSSION

         1. The Harvey Defendants' Motion to Stay (Dkt. 50) Is Denied.

         After this Court entered a Default Judgment against Defendants LHS Trust and Organic Assembly of Circle JB, the Harvey Defendants filed a document titled “Reply to This Court's Order Dated 01/17/17, Document #46, Motion to Stay Proceedings in This Court.” (Dkt. 50). The Motion to Stay reflects that the Harvey Defendants intend to pursue “remedies in the Ninth Circuit.” Id.

         The Court interprets this motion to constitute a request for interlocutory appeal, which it denies as explained more fully below. After this case has proceeded to a final judgment, then the Harvey Defendants may seek relief from the Ninth Circuit without permission from this Court. However, the Harvey Defendants must receive permission to appeal an order issued before all claims have been resolved and a final judgment has been entered. Such permission is not typically granted absent exceptional circumstances.

         The general rule is that an appellate court should not review a district court ruling until after entry of a final judgment. In re Cement Antitrust Litig. (MDL No. 296), 673 F.2d 1020, 1026 (9th Cir.1982); 28 U.S.C. § 1291. There is an exception to this general rule set forth in 28 U.S.C. § 1292(b), which states:

When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order: Provided, however, That application for an appeal hereunder shall not stay proceedings in the district court unless the district judge or the Court of Appeals or a judge thereof shall so order.

(Emphasis in original.)

         A movant seeking an interlocutory appeal has a heavy burden to show that “exceptional circumstances justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.” Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978); see also James v. Price Stern Sloan, Inc., 283 F.3d 1064, 1067 n. 6 (9th Cir.2002) (“Section 1292(b) is a departure from the normal rule that only final judgments are appealable, and therefore must be construed narrowly.”); Pac. Union Conference of Seventh-Day Adventists v. Marshall, 434 U.S. 1305, 1309 (1977) (“The policy against piecemeal interlocutory review other than as provided for by statutorily authorized appeals is a strong one.” (citations omitted)). Indeed, Section 1292(b) is used “only in exceptional situations in which allowing an interlocutory appeal would avoid protracted and expensive litigation.” In re Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1982) (citing U.S. Rubber Co. v. Wright, 359 F.2d 784, 785 (9th Cir. 1966) (per curiam)).

         In this case, an interlocutory appeal is not appropriate. The LHS Trust and Organic Assembly of Circle JB Defendants were named in this lawsuit given their potential interests in the Subject Property. Neither Defendant appeared in this action and Mr.

         Harvey, who is appearing pro se, may represent himself but may not represent either of these entities in this litigation.

         Moreover, the Order and Default Judgment Harvey Defendants seeks to appeal does not “involve[] a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation” as required pursuant to 28 U.S.C. § 1292. Rather, the Order and Default Judgment was entered based on a Clerk's Entry of Default against each of the Defendants, LHS Trust and Organic Assembly of Circle JB. (Dkts. 32, 33.) These Defaults were entered pursuant to Federal Rule of Civil Procedure 55(a) and are based on the facts that these Defendants were served and failed to appear.

         Assuming the Harvey Defendants want to appeal the January 17, 2017 Order, they may do so after the Court enters a final judgment in this case. However, the Court will neither stay these proceedings nor grant the Harvey Defendants permission to file an interlocutory appeal with the Ninth Circuit before a final order has been issued.

         2. The Court Adopts the Report and Recommendation (Dkt. 57) and Grants Plaintiff's Motion for Summary Judgment (Dkt. 45).

         The Court has conducted a de novo review of the record in light of the Harvey Defendants' Objections and finds the Report and Recommendation is well-reasoned, based on a correct interpretation of the law, and reflects the facts in the record.

         A. Summary Judgment Standard

         Summary judgment is appropriate if the moving party can show that, as to any claim or defense, “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A fact is “material” if it “might affect the outcome of the suit under the governing ...


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