United States District Court, D. Maryland, Southern Division
J. HAZEL United States District Judge.
United States of America (the “Government”)
brought this action to enjoin Defendants Ulysses S. Martin,
Jr., DDS, PC and Ulysses S. Martin, Jr. (collectively
“Defendants”) from continuing to operate a
business without paying the associated federal employment and
unemployment taxes on employees' wages and from further
violating and interfering with the administration of the
internal revenue laws. ECF No. 1. Pending before the Court is
the Government's Motion for Default Judgment, Permanent
Injunction, and Other Equitable Relief (“Motion for
Default Judgment”). ECF No. 9. No. hearing is
necessary. See Loc. R. 105.6 (D. Md. 2016). For the
following reasons, the Government's Motion for Default
Judgment is granted.
Ulysses S. Martin, Jr. has owned and operated a dental
practice since at least 2004. ECF No. 1 ¶ 6; ECF No. 9-2
¶ 5. His practice is sometimes called Ulysses S. Martin,
Jr., DDS, PC. Id. Employers such as Defendants are
required to withhold federal income and Federal Insurance
Contributions Act (“FICA”) taxes from their
employees' wages and to pay those withholdings, along
with the employer's own FICA and Federal Unemployment Tax
Act (“FUTA”) taxes, to the Internal Revenue
Service (“IRS”). See 26 U.S.C.
§§ 3102, 3111, 3301, 3402. Employers must make
periodic payments of the withheld taxes and their share of
employment taxes in an appropriate federal depository bank.
See 26 U.S.C. §§ 6302, 6157; 26 C.F.R.
§§ 31.6302-1, 31.6302(c)-3. Employers are also
required to file an employment tax return (Form 941) each
quarter and an unemployment tax return (Form 940) annually.
See 26 C.F.R. §§ 6011, 6071; 26 C.F.R.
§§ 31.6011(a), 31.6071(a)-1.
have had employees who were paid wages subject to federal
withholding from at least 2004 through 2018. ECF No. 1 ¶
7; ECF No. 9-2 ¶ 6. Defendants failed to file the
unemployment tax return with the IRS for 2004 and 2009, ECF
No. 1 ¶ 15; ECF No. 9-2 ¶ 7, and for 2005, 2013,
2015, 2016, and 2017, they filed the unemployment tax return
after the due date, ECF No. 1 ¶ 16; ECF No. 9-2 ¶
7. Since 2007, Defendants have also filed almost all of their
quarterly employment tax returns after the due dates, ECF No.
1 ¶ 17; ECF No. 9-2 ¶ 8, and in 2015 and 2016, they
filed all of their quarterly employment tax returns after the
due dates. Id.
past nine years, Defendants rarely made any tax deposits and
the deposits that they did make were insufficient to pay the
employment taxes. ECF No. 1 ¶ 12; ECF No. 9-2 ¶ 9.
As a result of Defendants' failure to honor their tax
liabilities, the dental practice has accrued over $110, 000
in unpaid employment and unemployment taxes. ECF No. 1
¶¶ 13, 14; ECF No. 9-2 ¶ 10. As early as 2010,
the IRS assigned a revenue officer to collect Defendants'
unpaid tax liabilities, obtain unfiled returns, and encourage
them to meet their tax obligations in the future. ECF No. 1
¶ 18; ECF No. 9-2 ¶ 1. Defendants were dilatory in
responding to requests for financial information, which led
to the issuance of at least one third-party summons, and they
would not enter a satisfactory payment agreement. ECF No. 1
¶ 19; ECF No. 9-2 ¶¶ 11, 12.
has taken various actions to collect Defendants' unpaid
tax liabilities, such as sending demands for payment, levying
on Defendants' bank accounts, recording Notices of
Federal Tax Lien, and determining that seizing their business
assets would result in minimal funds. ECF No. 1 ¶¶
20, 21, 22, 23; ECF No. 9-2 ¶ 13. These actions were
unsuccessful in collecting Defendants' unpaid employment
tax liabilities, and the IRS could not locate any other
assets. ECF No. 1 ¶ 24; ECF No. 9-2 ¶¶ 14, 15.
The IRS provided notice to Defendants that a civil injunction
might be pursued. ECF No. 1 ¶ 25; ECF No. 9-2 ¶ 16.
All of the IRS's administrative efforts have failed to
convince Defendants to comply with their tax obligations. ECF
No. 1 ¶ 26; ECF No. 9-2 ¶ 17.
Government filed a Complaint for Permanent Injunction and
Other Equitable Relief (“Complaint”) in this
Court on June 4, 2019. ECF No. 1. Defendants were served on
June 13, 2019, and proofs of service were filed on June 19,
2019. ECF No. 6. Defendants failed to file an answer or
otherwise respond to the Complaint. The Government
subsequently filed a Motion for Clerk's Entry Default on
July 11, 2019, ECF No. 7, and the Clerk entered a default
against Defendants on August 8, 2019, ECF No. 8. The
Government filed its Motion for Default Judgment on August
13, 2019. ECF No. 9.
STANDARD OF REVIEW
a party against whom a judgment for affirmative relief is
sought has failed to plead or otherwise defend, and that
failure is shown by affidavit or otherwise, the clerk must
enter the party's default.” Fed.R.Civ.P. 55(a).
“A defendant's default does not automatically
entitle the plaintiff to entry of a default judgment; rather,
that decision is left to the discretion of the court.”
Educ. Credit Mgmt. Corp. v. Optimum
Welding, 285 F.R.D. 371, 373 (D. Md. 2012). Although
“[t]he Fourth Circuit has a ‘strong policy'
that ‘cases be decided on their merits, '”
Choice Hotels Intern., Inc. v. Savannah Shakti
Carp., No. DKC-11-0438, 2011 WL 5118328, at *2 (D. Md.
Oct. 25, 2011) (citing United States v. Shaffer Equip.
Co., 11 F.3d 450, 453 (4th Cir. 1993)), “default
judgment may be appropriate when the adversary process has
been halted because of an essentially unresponsive
party[.]” Id. (citing S.E.C. v.
Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005)).
default, the well-pled allegations in a complaint as to
liability are taken as true, although the allegations as to
damages are not.” Lawbaugh, 359 F.Supp.2d at
422. Thus, the court first determines whether the
unchallenged factual allegations constitute a legitimate
cause of action. Agora Fin., LLC v. Samler, 725
F.Supp.2d 491, 494 (D. Md. 2010). In determining whether the
factual allegations constitute a legitimate cause of action,
courts typically apply the Iqbal/Twombly pleading
standard. See Baltimore Line Handling Co. v. Brophy,
771 F.Supp.2d 531, 544 (D. Md. 2011) (finding Iqbal
“relevant to the default judgment inquiry”).
Under Iqbal, a complaint fails to state a claim
entitling the pleader to relief if the complaint offers only
“‘labels and conclusions'” or
“‘naked assertion[s]' devoid of
‘further factual enhancement.'” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555-57 (2007)).
As the Fourth Circuit has recognized, “‘the court
need not accept the legal conclusions drawn from the facts,
and [ ] need not accept as true unwarranted inferences,
unreasonable conclusions, or arguments.'”
Monroe v. City of Charlottesville, 579 F.3d 380,
385- 86 (4th Cir.2009) (citation omitted), cert.
denied, 559 U.S. 992 (2010); accord Simmons v.
United Mortg. & Loan Investment, LLC, 634 F.3d 754,
768 (4th Cir. 2011). Indeed, “where the well-pleaded
facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged-but it
has not ‘show[n]'-‘that the pleader is
entitled to relief.'” Iqbal, 556 U.S. at
679 (quoting Fed.R.Civ.P. 8(a)(2)).
liability is established, the court then makes an independent
determination of damages. Agora Financial, LLC, 725
F.Supp.2d at 494. Fed.R.Civ.P. 54(c) limits the type of
judgment that may be entered based on a party's default:
“A default judgment must not differ in kind from, or
exceed in amount, what is demanded in the pleadings.”
In entering default judgment, a court cannot, therefore,
award additional damages “because the defendant could
not reasonably have expected that his damages would exceed
th[e] amount [pled in the complaint].” In re
Genesys Data Techs., Inc., 204 F.3d 124, 132 (4th Cir.
2000). While the Court may hold a hearing to prove damages,
it is not required to do so; it may rely instead on
“detailed affidavits or documentary evidence to
determine the appropriate sum.” Adkins v.
Teseo, 180 F.Supp.2d 15, 17 (D.D.C. 2001)) (citing
United Artists Corp. v. Freeman, 605 F.2d 854, 857
(5th Cir. 1979)); see also Laborers' District Council
Pension, et al. v. E.G.S., Inc., No. WDQ-09-3174, 2010
WL 1568595, at *3 (D. Md. Apr. 16, 2010) (“[O]n default
judgment, the Court may only award damages without a hearing
if the record supports the damages requested.”).
Government seeks default judgment on its request for a
permanent injunction requiring Defendants to honor their
federal tax obligations. Thus, the Court must determine whether
the well-pled allegations in the Complaint, accepted as true,