United States District Court, D. Maryland
REPORT AND RECOMMENDATION
SUSAN K. GAUVEY, Magistrate Judge.
This matter comes before the court upon motion by the United States of America ("United States" or "Government") for entry of default judgment against Patrick J. Belzner ("Defendant"), pursuant to Fed.R.Civ.P. 55(b)(2), for failure to appear or otherwise defend in this matter. (ECF No. 7). Defendant has not filed a response and the time for doing so has passed. Local Rule 105.2a (D. Md. 2011). No hearing is necessary. Fed.R.Civ.P. 55(b)(2); Local Rule 105.6 (D. Md. 2011). The Honorable William D. Quarles, Jr. referred the matter to the undersigned magistrate judge to review the default judgment and make recommendations concerning damages. (ECF NO. 10). For the reasons set forth herein, I recommend that the United States' motion (ECF No. 7) be GRANTED and that damages be AWARDED as set forth herein.
On August 19, 2013, the Government filed a complaint alleging that Defendant is liable for additional federal income taxes and statutory additions to tax for the 1995 and 1996 tax years. (ECF No. 1, ¶ 7). The Government alleges that Defendant is liable to the United States for $2, 017, 626.40, as of May 28, 2013, in federal income taxes, penalties, and accrued interest, plus interest and costs that have accrued since that date and continue to accrue according to law until fully paid. (Id. at ¶ 15). The present motion seeks to reduce to judgment the aforementioned claims for damages. (ECF No. 7).
II. Standard for Default under Rule 55(b)(2)
Federal Rule of Civil Procedure 55(b)(2) authorizes courts to enter a default judgment against a properly served defendant who fails to file a timely responsive pleading.
In deciding whether to grant a motion for default judgment, the Court must first consider the following three factors: (1) whether the plaintiff will be prejudiced if default is not granted, (2) whether the defendant has a meritorious defense, and (3) whether the defendant's delay was the result of culpable misconduct. Emcasco Ins. Co. v. Sambrick , 834 F.2d 71, 73 (3rd Cir. 1987), see also Smith v. Bounds , 813 F.2d 1299 (4th Cir. 1987) (relying on these factors in determining whether a default judgment merited reconsideration).
The Court must also determine whether the plaintiff has alleged a legitimate cause of action. In reviewing a plaintiff's motion for entry of default judgment, the Court accepts as true the well-pleaded factual allegations in the complaint as to liability. Ryan v. Homecomings Fin. Network , 253 F.3d 778, 780-81 (4th Cir. 2001). It, however, remains for the Court to determine whether these unchallenged factual allegations constitute a legitimate cause of action. Id., see also 10A WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND PROCEDURE § 2688 (3rd ed. Supp. 2010) ("[L]iability is not deemed established simply because of the default... and the Court, in its discretion, may require some proof of the facts that must be established in order to determine liability.").
If the Court determines that liability is established, it must then determine the appropriate amount of damages. Ryan , 253 F.3d at 780-81. Unlike allegations of fact establishing liability, the Court does not accept factual allegations regarding damages as true, but rather must make an independent determination regarding such allegations. See Credit Lyonnais Secs. (USA), Inc. v. Alcantara , 183 F.3d 151, 154 (2nd Cir. 1999). In so doing, the Court may conduct an evidentiary hearing. Fed.R.Civ.P. 55(b)(2). The Court may also make a determination of damages without a hearing as long as there is an adequate evidentiary basis in the record for the award. See, e.g., Stephenson v. El-Batrawi , 524 F.3d 907, 917 n.11 (8th Cir. 2008) ("Foregoing an evidentiary hearing may constitute an abuse of discretion when the existing record is insufficient to make the necessary findings in support of a default judgment."); Adkins v. Teseo , 180 F.Supp.2d 15, 17 (D.D.C. 2001) (finding that a court need not make determination of damages following entry of default through hearing, but rather may rely on detailed affidavits or documentary evidence to determine the appropriate sum).
III. Preliminary Factors
The Clerk of court having filed entry of default on November 15, 2013 (ECF No. 5), the undersigned concludes that the procedural requirements for entry of default judgment have been met. Moreover, because Defendant has failed to file any responsive pleadings or otherwise show cause as to why default should not be granted, the Court is "not in a position to judge whether any delay was the result of culpable misconduct." Sambrick , 834 F.2d at 73. Further, Defendant's failure to appear deprived the Government of any other means of vindicating their claim and the Government would be prejudiced if default is not granted.
A. Default Judgment
The Government's complaint alleges that on August 25, 2003, for the 1995 tax year, the IRS assessed federal income tax ____ $11, 483.00, penalties ____ $8, 612.25, and interest ____ $15, 410.14, against Defendant; and on October 15, 2007, also assessed a late payment penalty ____ $2, 870.74. (Id. at ¶ 8). Similarly, the complaint alleges that on August 25, 2003, for the 1996 tax year, the IRS assessed federal income tax ____ $393, 832.00, penalties ____ $295, 374.00, and interest ____ $426, 223.86, against Defendant; and on October 15, 2007, also assessed a late payment penalty ____ $98, 458.00. (Id. at ¶ 9). As such, the Government's complaint alleges that, as of May 28, 2013, Defendant owes $61, 523.45 (1995 tax assessment) plus $1, 956, 103.00 (1996 tax assessment), making Defendant liable to the ...