United States v. Baisden

• Decision Date: 25 March 2013
• Docket Number: CASE No. 1:06-cv-01368-AWI-MJS
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. LOWELL BAISDEN. Defendant.
• Court: U.S. District Court — Eastern District of California

UNITED STATES OF AMERICA, Plaintiff,

v.LOWELL BAISDEN. Defendant.

CASE No. 1:06-cv-01368-AWI-MJS

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

Dated: March 25, 2013

FINDINGS AND RECOMMENDATIONS,

INCLUDING FINDINGS OF FACT AND

CONCLUSIONS OF LAW, (1) DENYING

DEFENDANT'S MOTION TO STRIKE

PLAINTIFF'S MOTION FOR SUMMARY

JUDGMENT, (2) GRANTING IN PART AND

DENYING IN PART PLAINTIFF'S MOTION

FOR SUMMARY JUDGMENT (3) DENYING

DEFENDANT'S MOTION FOR SUMMARY

JUDGMENT

(ECF Nos. 209, 217, 220)

FOURTEEN-DAY OBJECTION DEADLINE

I. PROCEDURAL HISTORY

Plaintiff, United States of America, initiated this action by filing a Complaint for Permanent Injunction (Compl., ECF No. 1) on September 29, 2006 pursuant to §§ 7402, 7407, and 7408 of the Internal Revenue Code (26 U.S.C. or I.R.C.). In the Complaint, Plaintiff seeks to permanently bar Defendant Lowell Baisden ("Defendant" or"Baisden") from: (a) promoting any investment, business venture, or other plan or arrangement and in connection therewith making false or fraudulent representations about federal tax benefits or treatment, (b) engaging in any other activity subject to penalty under I.R.C. §§ 6700 and 6701, or any other penalty provision in the Internal Revenue Code, (c) preparing, assisting, or filing federal income tax returns, amended returns, and other related documents and forms for others, (d) causing other persons or entities to understate their federal tax liabilities and avoid paying federal taxes, (e) engaging in any other activity subject to penalty under I.R.C. §§ 6694 and 6695, (f) representing anyone before the Internal Revenue Service ("IRS"), and (g) engaging in any other conduct that interferes with the administration or enforcement of the internal revenue laws. (Compl. at 14-15.)

On March 15, 2007, this Court issued an order enjoining Defendant and those acting with him, pending trial and final judgment in this case or further order of the Court, from:

1. Advising or facilitating current [clients], prospective clients, or any other persons, not to file tax returns, or that Federal Income Tax Returns are not required to be filed;

2. Advising or facilitating or assisting clients in engaging in activity for which clients claim or report nondeductible personal expenses as valid business expense deductions;

3. Knowingly misrepresenting or omitting to disclose on any tax return or in any communication to the United States or its IRS any material fact concerning the income, lawfully deductible expenses, or other condition orevent that concern the preparation of accurate tax returns;

4. Advising or facilitating the knowing misstatement or omission to disclose by any client to the United States or its IRS of the business activity, income, expense, net worth, or any other material fact that is necessary to the accurate preparation of Federal tax returns;

5. Advising or assisting clients to not report income of any kind or nature required by the law to be reported on tax returns;

6. Advising or assisting any client to claim or overstate any improper deduction in violation of law;

7. Making any statement to clients or prospective clients that the United States and/or its IRS endorses, agrees with [Baisden's practices], or that Baisden's past practices have been endorsed, approved, or that his clients' audits will be successful by virtue of any matter that has occurred in this case; and

8. Knowingly engaging in any other conduct that wrongfully interferes with the administration or enforcement of the Internal Revenue laws of the United States.

On April 10, 2007, the Court issued related Findings of Fact and Conclusions of Law arising out of the hearing on Motion for Preliminary Injunction. (Findings and Conclusions, ECF No. 80.)¹

On May 22, 2008, the Court issued an order staying this civil case pendingconclusion of criminal proceedings against the Defendant and notification from Plaintiff of intention to proceed with prosecution of this case. (Order re Stay, ECF No. 178.) Much later, on October 3, 2011, Defendant pled guilty to aiding and abetting the commission of tax evasion as set forth in Count IV of the Indictment in United States v. Lowell Baisden, Case No. 4:09-cr-3031 (D. Neb.). On January 26, 2012, he was sentenced to 37 months in the custody of the U.S. Bureau of Prisons. He remains incarcerated in Taft, California, at this time. On February 2, 2012, Plaintiff notified the Court of conclusion of criminal proceedings and its intention to proceed and requested the stay be lifted. (Notice Intent Proceed, ECF No. 187.) The case was reopened and a trial date set.² (ECF Nos. 183, 194.)

Pending before the Court are: (1) Plaintiff's Motion for Summary Judgment filed August 9, 2012 (Pl. Mot. Summ. J., ECF No. 209); (2) Defendant's Motion for Summary Judgment filed on August 9, 2012 (Def. Mot. Summ. J., ECF No. 217); and (3) Defendant's Motion to Strike Plaintiff's Motion for Summary Judgment filed on August 31, 2012 (Def. Mot. Strike, ECF No. 220.) The parties have filed their respective opposition documents. (Def. Opp'n Mot. Summ. J., ECF No. 221; Pl. Opp'n Mot. Summ. J., ECF No. 224); Pl. Opp'n Mot. Strike, ECF No. 225.) Defendant has filed reply documents. (Def. Reply Mot. Strike, ECF No. 229; Def. Reply Mot. Summ. J., ECF No. 231.)

On October 26, 2012, the District Judge assigned to this case referred the foregoing Motions, deemed submitted, to the undersigned Magistrate Judge for findingsand recommendations. (Order Ref. Mot.'s, ECF No. 240.)

For the reasons set forth below, the Court recommends that Defendant's Motion to Strike be denied; Plaintiff's Motion for Summary Judgment be granted in part and denied in part; and Defendant's Motion for Summary Judgment be denied.

II. MOTION TO STRIKE

Defendant moves to strike Plaintiff's Motion for Summary Judgment on the ground that Plaintiff did not comply with the Scheduling Order requirement that as the moving party, it "meet and confer" with the opposing party prior to filing and file a joint statement.

A. Applicable Law

Failure to comply with this Court's orders, local rules, and the Federal Rules of Civil Procedure "may be grounds for the imposition by the Court of any and all sanctions . . . within the inherent power of the Court." Local Rule 11-110. Courts have the inherent power to control their docket and in the exercise of that power, they may properly strike documents. Ready Transp., Inc. v. AAR Mfg., Inc., 627 F.3d 402, 404-05 (9th Cir. 2010).

The decision to grant or deny a motion to strike is vested in the trial judge's sound discretion. Talbot v. Robert Matthews Distrib. Co., 961 F.2d 654, 664-65 (7th Cir. 1992), citing Alvarado-Morales v. Digital Equip. Corp., 843 F.2d 613, 618 (1st Cir. 1988). Courts generally disfavor motions to strike, however, because they propose a drastic remedy and are typically a delay tactic. Mag Instrument, Inc. v. JS Prod.'s Inc., 595 F.Supp.2d 1102, 1106 (C.D. Cal. 2008); Stabilisierungsfonds Fur Wein v. Kaiser Stuhl Wine Distribs. Pty. Ltd., 647 F.2d 200, 201 (D.C. Cir. 1981).

The movant not only must demonstrate the allegedly offending material is subject to being stricken, but must also show how such material will cause prejudice. Fed. R. Civ. P. 12(f); see also Mag Instruments, Inc., 595 F.Supp.2d at 1106 ("Given their disfavored status, courts often require a showing of prejudice by the moving party before granting the requested relief."), citing Neilson v. Union Bank of Cal., N.A., 290 F.Supp.2d 1101, 1152 (C.D. Cal. 2003).

B. Defendant's Argument

Defendant, in his moving papers, argues that Plaintiff did not comply with the requirements in the Court's April 5, 2012 Amended Scheduling Order (ECF No. 194) and first meet and confer with Defendant before filing a joint statement of undisputed facts or provide good cause for failing to have done so.

C. Plaintiff's Argument

Plaintiff concedes it did not comply with the Court's Amended Scheduling Order; it did not file a joint statement of undisputed facts or provide good cause for its failure to have done so. Plaintiff asserts, however, that it did "meet and confer" with Defendant about the motion and that it made an honest, but harmless, mistake in not timely filing the joint statement. Plaintiff argues that the error was remedied with the filing of Defendant's Opposition Separate Statement and Plaintiff's admittedly belated filing of a Joint Statement of Undisputed Facts. (ECF No. 225-1.) Plaintiff argues that the sanction requested by Defendant is drastic and that granting it would serve no purpose but only unnecessarily consume time and resources and duplicate what is now before the Court.

D. Discussion

There is no good cause nor justification for striking Plaintiff's Motion.

Plaintiff failed to comply with the Scheduling Order. However, it did file a Separate Statement of Undisputed Facts and, later, a Joint Statement, and Defendant filed an Opposing Separate Statement. (ECF Nos. 210, 222 & 225-1.) Thus the parties' respective positions on the facts have been made clear to each other and to the Court. Defendant has not suffered any prejudice as a result of the matter proceeding as it did. Defendant has not even argued that he suffered any prejudice.

Defendant's Motion to Strike Plaintiff's Motion for Summary Judgment (ECF No. 220), should be denied.

III. PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

A. Applicable Law

1. Summary Judgment

Any party may move for summary judgment, and the 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. Fed. R. Civ. P. 56(a); Washington Mutual Inc. v. U.S., 636 F.3d 1207, 1216 (9th Cir. 2011). Each party's position, whether it be that a fact is disputed or undisputed, must be supported by (1) citing to particular parts of materials in the record, including but not limited to depositions, documents, declarations, or discovery; or (2) showing that the materials cited do not establish...