United States v. Meyer

• Decision Date: 19 April 2019
• Docket Number: Case No. 18-cv-60704-BLOOM/VALLE
• Citation: 376 F.Supp.3d 1290
• Parties: UNITED STATES of America, Plaintiff, v. Michael L. MEYER, Defendant.
• Court: U.S. District Court — Southern District of Florida

376 F.Supp.3d 1290

UNITED STATES of America, Plaintiff,

v.Michael L. MEYER, Defendant.

Case No. 18-cv-60704-BLOOM/VALLE

United States District Court, S.D. Florida.

Signed April 19, 2019

Entered April 22, 2019

ORDER ADOPTING MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

BETH BLOOM, UNITED STATES DISTRICT JUDGE

THIS CAUSE is before the Court upon Plaintiff United States of America's ("Plaintiff") Motion to Strike Defendant's Jury Demand, ECF No. [33], and Plaintiff's Motion to Strike Defendant's Affirmative Defenses, ECF No. [34], (collectively, the "Motions"). On October 10, 2018, the Motions were referred to the Honorable Alicia O. Valle, United States Magistrate Judge, for Report and Recommendation, ECF No. [38]. On March 21, 2019, Judge Valle issued a Report and Recommendation (the "Report"), recommending that the Motions be granted. See Report, ECF No. [88]. The Report advised the parties that objections to the Report must be filed within fourteen days. Id. at 11. Thus, any objections were required on or before April 4, 2019. On April 3, 2019, Defendant Michael L. Meyer ("Defendant") filed an unopposed motion for extension of time to file objections by April 18, 2019. ECF No. [91]. The Court granted the Defendant' motion that same day. ECF No. [92].

To date, neither party has filed any objections, nor have they sought any further extension of time to do so. The Court has, nonetheless, conducted a de novo review of Judge Valle's Report, the record, and is otherwise fully advised. See Williams v. McNeil , 557 F.3d 1287, 1291 (11th Cir. 2009) (citing 28 U.S.C. § 636(b)(1) ).

Upon review, the Court finds Judge Valle's Report and Recommendation to be well reasoned and correct. The Court agrees with the analysis in Judge Valle's Report and Recommendation, and it is accordingly ORDERED AND ADJUDGED as follows:

1. The Report and Recommendation, ECF No. [88] , is ADOPTED ;

2. The Motion to Strike Defendant's Jury Demand, ECF No. [33] , is GRANTED .

3. Defendant's Jury Demand asserted in his Answer, ECF No. [32] , is STRICKEN .

4. The Motion to Strike Affirmative Defenses, ECF No. [34] , is GRANTED .

5. The Affirmative Defenses asserted by Defendant in his Answer, ECF No. [32] , are STRICKEN .

DONE AND ORDERED in Chambers at Miami, Florida, this 19th day of April, 2019.

REPORT AND RECOMMENDATION TO DISTRICT JUDGE

ALICIA O. VALLE, UNITED STATES MAGISTRATE JUDGE

THIS CAUSE is before the Court upon the United States' Motion to Strike Defendant's Jury Demand (ECF No. 33) and the United States' Motion to Strike Affirmative Defenses (ECF No. 34) (together, the "Motions"). U.S. District Judge Beth Bloom has referred the Motions to the undersigned for appropriate disposition. See (ECF No. 38). Accordingly, having reviewed the Motions, Defendant's Omnibus Response in Opposition to the Motions (ECF No. 36), and the United States' Reply (ECF No. 39), and being otherwise duly advised in the matter, the undersigned recommends that the Motions be GRANTED for the reasons stated below.

I. BACKGROUND

On August 17, 2018, the United States filed a First Amended Complaint for Permanent Injunction and other Relief against Defendant Michael Meyer. See (ECF No. 29) (the "First Amended Complaint"). The First Amended Complaint generally alleges that, from 1999 to the present, Defendant has "promoted an abusive tax scheme that results in scheme participants claiming unwarranted federal income tax deductions for bogus charitable contributions." Id. ¶ 10. According to the First Amended Complaint, Defendant's actions have caused "at least $ 35 million in harm to the United States." (ECF No. 29 ¶¶ 4, 259, 275). The United States seeks to enjoin Defendant from taking certain action and to affirmatively take other action, pursuant to 26 U.S.C. §§ 7402, 7407, and 7408. See generally (ECF No. 29 ¶¶ 5-6, 197-282). The United States also seeks disgorgement of Defendant's "ill-gotten gains" derived from the alleged charitable giving tax scheme described in the First Amended Complaint. Id.

On September 1, 2018, Defendant filed his Answer to Complaint, Affirmative Defenses, and Jury Trial Demand. See generally (ECF No. 32). Defendant asserted four affirmative defenses, including laches, estoppel, release, and statute of limitations. (ECF No. 32 at 22). Defendant also demanded "trial by jury of all claims and defenses ... so triable." Id. On September 24, 2018, the United States filed a Motion to Strike Defendant's Jury Demand and a Motion to Strike Affirmative Defenses. (ECF Nos. 33 and 34, respectively). The Motions are ripe for adjudication.

II. MOTION TO STRIKE JURY DEMAND

A. The Parties' Arguments and Legal Standard

The United States seeks to strike Defendant's demand for a jury trial, arguing that the Complaint seeks only equitable relief. See generally (ECF Nos. 33, 39 at 2-7). The parties agree that the United States' claim for an injunction is equitable in nature and is not triable before a jury. (ECF No. 33 at 2) (noting that injunctive relief is an equitable remedy, not triable by a jury); (ECF No. 36 at 4) (noting that "Defendant does not object to a bench trial of the Government's claims for a prospective injunction"). Defendant argues, however, that the United States' disgorgement claim is "in the nature of a legal penalty and should accordingly be tried by a jury." (ECF No. 36 at 4).

Injunctive relief is governed by 26 U.S.C. § 7402(a), which provides in relevant part:

The district courts of the United States ... shall have such jurisdiction to make and issue in civil actions, writs and orders of injunction ... and such other orders and processes, and to render such judgments and decrees as may be necessary or appropriate for the enforcement of the internal revenue laws. The remedies ... provided are in addition to and not exclusive of any and all other remedies of the United States in such courts or otherwise to enforce such laws.

26 U.S.C § 7402(a).

As the parties correctly note, injunctive relief is an equitable remedy not triable by a jury. Weinberger v. Romero-Barcelo , 456 U.S. 305, 311, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982) ; United States v. State of La. , 339 U.S. 699, 706, 70 S.Ct. 914, 94 L.Ed. 1216, (1950) (denying demand for jury trial where relief requested was equitable injunction and accounting); CBS Broad., Inc. v. EchoStar Commc'ns Corp. , 450 F.3d 505, 518 n.25 (11th Cir. 2006) (noting that there is no right to a jury trial when plaintiff seeks purely equitable relief such as an injunction). Therefore, the only question before the undersigned is whether the disgorgement claim requires a trial by jury. In this context, Defendant argues that the Government's claim for disgorgement is akin to a penalty under 28 U.S.C. § 2462. For the reasons set forth below, the undersigned disagrees.

B. Disgorgement is an Equitable Remedy

According to Defendant, although § 7402 has been in existence for 65 years, Defendant has found only 11 relevant cases (from 2015-2018) in which the United States has sought disgorgement in tax cases. See (ECF No. 36 at 2 n.2). Defendant fails to mention, however, that disgorgement was found to be an equitable remedy in several of those cases. See United States v. Stinson , 729 F. App'x 891, 899 (11th Cir. 2018) ("Disgorgement is an equitable remedy intended to prevent unjust enrichment." (quoting S.E.C. v. Levin , 849 F.3d 995, 1006 (11th Cir. 2017) ) ); United States v. Barwick , No. 6:17-CV-35-ORL-18TBS, 2017 WL 5514257, at *4 (M.D. Fla. Oct. 13, 2017) ("Disgorgement in the amount of a defendant's ‘ill-gotten gains’ constitutes a ‘fair and equitable’ remedy as it reminds the defendant of its legal obligations, serves to deter future violations of the Internal Revenue Code, and promotes successful administration of the tax laws." (quoting United States v. Stinson , 239 F.Supp.3d 1299, 1326 (M.D. Fla. 2017) ) ), report and recommendation adopted , No. 6:17-CV-35-ORL-18TBS, 2017 WL 5513632 (M.D. Fla. Nov. 16, 2017) ; United States v. Demesmin , 87 F.Supp.3d 1293, 1298 (M.D. Fla. 2015) ; United States v. Scott , 88 F. Supp. 3d 1278, 1298 (M.D. Fla. 2015) ; United States v. Rapower-3, LLC , 294 F.Supp.3d 1238, 1240 (D. Utah 2018) ("[D]isgorgement is equitable and is not tried by a jury."); see also United States v. Lawrence , No. 15-CV-62233, 2016 WL 7409772, at *3 (S.D. Fla. Sept. 7, 2016) (entering a judgment that included disgorgement of gains); United States v. Antoine , No. 14-81199-CV, 2016 WL 617125, at *3 (S.D. Fla. Jan. 22, 2016) (entering stipulated judgment that included disgorgement of proceeds); United States v. Chipungu , No. 6:18-CV-982-ORL-18GJK, 2019 WL 885667, at *5-6 (M.D. Fla. Jan. 25, 2019), report and recommendation adopted , No. 6:18-CV-982-ORL-18GJK, 2019 WL 858164 (M.D. Fla. Feb. 22, 2019) (compelling disgorgement under § 7402 ); United States v. Demesmin , No. 6:17-CV-36-ORL-31KRS, 2019 WL 343722, at *13 (M.D. Fla. Jan. 10, 2019), report and recommendation adopted , No. 6:17-CV-36-ORL-31KRS, 2019 WL 338943 (M.D. Fla. Jan. 28, 2019) (ordering disgorgement under § 7402 ); United States v. Clarke , No. 616CV639ORL41DCI, 2017 WL 6947414, at *4 (M.D. Fla. Mar. 27, 2017) (finding disgorgement appropriate as a retrospective remedy); United States v. Mesadieu , No. 6:14-CV-1538-ORL-22TBS, 2015 WL 13357962, at *1 (M.D. Fla. Jan. 15, 2015) (denying motion to dismiss claims that sought, among other things, disgorgement under § 7402 ); United States v. Edmond , No. 2:13-CV-02938-STA-TMP, 2016 WL 3963218 (W.D. Tenn. July 21, 2016) (finding defendants in civil contempt for, among other things, failing to disgorge fees as ordered by the court).

In the absence of binding precedent to the contrary, these cases support the conclusion that disgorgement, in the context of § 7402, is an equitable remedy not be triable by a jury.

C. Kokesh is Inapposite

In demanding a jury trial, Defendant relies on the Supreme Court decision in Kokesh v. Securities and Exchange Commission , ––– U.S. ––––, 137 S.Ct. 1635, 198 L.Ed.2d 86 (2017...