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United States v. Reeves

United States District Court, D. Nevada

January 21, 2015

UNITED STATES OF AMERICA, Plaintiff,
v.
WAYNE REEVES, DIANE VAOGA, and JAMES STOLL, Defendants.

ORDER DENYING MOTION TO SET ASIDE AND ADOPTING REPORT & RECOMMENDATION OF MAGISTRATE JUDGE GEORGE W. FOLEY

RICHARD F. BOULWARE, II, District Judge.

I. INTRODUCTION

Before the Court for consideration are (1) Defendants Wayne Reeves and Diane Vaoga's Motion To Set Aside this Court's Order Denying Defendants' Motions to Dismiss, ECF No. 40, and (2) the Report and Recommendation of the Honorable George W. Foley, United States Magistrate Judge, entered June 16, 2014, recommending that Plaintiff United States of America's Motion for Sanctions and for Entry of Default Judgments Against Defendants (ECF No. 78) be granted, that Defendant Reeves's Answer (ECF No. 61) be stricken, that Defendants Reeves and Vaoga's defaults be entered, and that a default judgment be entered against them. ECF No. 90. Defendants Reeves and Vaoga filed a written objection (ECF No. 91), and Plaintiff filed a response (ECF No. 92). For the reasons discussed below, the Motion to Set Aside is denied and the Report and Recommendation is adopted in full.

II. BACKGROUND

In this action, the United States seeks to enjoin Defendants from promoting an allegedly fraudulent tax scheme and from preparing tax returns for others. Compl. at 1-2, ECF No. 1. Defendant Reeves filed a Motion to Dismiss for lack of subject matter jurisdiction on January 16, 2013, and Defendant Vaoga filed a virtually identical motion on February 19, 2013. ECF Nos. 15, 21. In their motions, Defendants argued that the United States of America is not the same entity as the United States and that therefore Plaintiff lacks standing to sue, that the Internal Revenue Service (IRS) is not an actual agency of the United States government, and that the provisions of the Internal Revenue Code through which Plaintiff seeks a permanent injunction are unenforceable.

On March 25, 2013, this Court issued an Order denying both of Defendants' motions to dismiss. Order, ECF No. 31. The Court dismissed Defendants' contention that the IRS is not a governmental agency as frivolous, and found that Plaintiff had standing to bring this action and that this Court had subject matter jurisdiction over this action pursuant to section 7402(a) of the Internal Revenue Code. Id. at 4-5. The Court also rejected Defendant Reeves's motion to strike Plaintiff's response to his motion to dismiss. Id. at 5-6. Defendants Reeves and Vaoga have contested this Court's denial of their motions to dismiss. On May 28, 2013, they filed a motion to set aside the Court's Order denying their motions to dismiss and motions to strike. ECF No. 40. The motion to set aside raises many of the same arguments the Court addressed in its Order and fails to present any new evidence or intervening legal authority that would warrant renewed consideration. Defendants have also filed three additional motions to dismiss in which they make similar arguments to those already decided by this Court's initial Order on their motions to dismiss, such as the argument that the United States is not the same entity as the United States of America and the argument that the IRS is not a governmental agency created by law. See Mot. Dismiss, Nov. 27, 2013, ECF No. 62; Mot. Dismiss, Feb. 24, 2014, ECF No. 74; Mot. Dismiss, Sept. 10, 2014, ECF No. 97.

Following this Court's Order denying Defendants Reeves and Vaoga's motions to dismiss, Reeves and Vaoga have refused to participate in discovery, arguing that they have no obligation to do so until the Court enters a proper order regarding their challenges to standing and subject matter jurisdiction. On August 27, 2013, Plaintiff filed a motion to compel discovery requesting an order compelling Defendant Reeves to serve responses to Plaintiff's interrogatories and requests for production of documents. Mot Compel, ECF No. 48. In his response, Reeves argued that he was refusing to respond to Plaintiff's discovery requests because Plaintiff had failed to establish that it has standing to represent the "unidentified entity, United States of America." Resp. Mot. Compel at 2, ECF No. 52. The Court granted Plaintiff's motion to compel on October 3, 2013, and gave Defendant Reeves until October 21, 2013 to respond to Plaintiff's interrogatories and requests for production of documents. Order, ECF No. 59. The Court also cautioned Defendant Reeves that failure to comply with the Order may result in the imposition of sanctions. Id.

On September 20, 2013, the Court conducted a telephonic status conference at which Defendants Reeves and Vaoga did not appear. See Minutes of Proceedings, ECF No. 56. Shortly before the status conference, Defendants Reeves and Vaoga filed a motion to cancel the status conference, arguing that their challenge regarding Plaintiff's lack of standing and the Court's lack of jurisdiction meant that they had no obligation to comply with an order requiring them to provide a status report or attend a status conference. Verified Objection to Minute Order at 2-3, Sept. 30, 2013, ECF No. 58.

On December 26, 2013, the Court granted Plaintiff's motion to compel Defendant Vaoga to answer interrogatories. Order, ECF No. 65. Vaoga served answers to the interrogatories on January 13, 2014; however, she responded "I don't know" to several interrogatories regarding matters she would presumably have some knowledge of, including questions about bank checks she allegedly signed. Mot. Sanctions, Ex. 7. Plaintiff has not moved to compel Vaoga to provide responsive answers to the interrogatories. However, Plaintiff did attempt to schedule Vaoga's deposition on multiple occasions. The deposition was rescheduled multiple times at Defendants' request and one time due to a conflict in Plaintiff's counsel's schedule. See Decl. of Mark C. Milton ΒΆΒΆ 2-13, Mot. Sanctions. However, as stated in Defendant Reeves's letters to Plaintiff's counsel, Vaoga has since refused to appear for her deposition.

On January 9, 2014, Plaintiff filed a second motion to compel against Defendant Reeves in which it asserted that, after a long period of conferring with Reeves, his discovery responses were still inadequate and that he asserted inappropriate blanket objections. Mot. Compel, ECF No. 67. Defendant Reeves did not file a response to the motion. On February 7, 2014, the Court granted Plaintiff's second motion to compel and gave Mr. Reeves until February 21, 2014 to respond to each of the subject interrogatories and requests for production of documents without objection or assertion of any privilege. Order, Feb. 7, 2014, ECF No. 72. The Court further instructed Defendant Reeves that failure to comply with the order may result in the imposition of sanctions, up to and including a recommendation to the undersigned that a default judgment be entered against him. Id. at 3. Subsequently, Defendants Reeves and Vaoga failed to appear for a hearing on Plaintiff's motion to extend the scheduling order's deadlines. See Minutes of Proceedings, ECF No. 73.

On February 25, 2014, Defendant Reeves sent a letter by email to Plaintiff's counsel in which he explained his legal position in this case and his disagreement with the Court's ruling that it has jurisdiction over the case. See Mot. Sanctions, Ex. 11, Mar. 13, 2014, ECF No. 78 ("Mot. Sanctions"). In his letter, Reeves refused to answer Plaintiff's request for documents because "the Court does not have subject matter jurisdiction to make such a request." Id . Reeves also stated that he would not be answering interrogatories, that Vaoga would not be attending her scheduled deposition, and that the case was on "hold" until this Court issued a decision on his newly filed motion to dismiss. Id . On February 26, 2014, Defendant Reeves sent another letter by email to Plaintiff's counsel in which he reiterated his refusal to participate in discovery, noting that he had raised the issue of subject matter jurisdiction and "whether this Court has Article III powers which I am sure it does not!" Id., Ex. 13.

On March 13, 2014, the Court set a hearing on Plaintiff's motion for sanctions for April 21, 2014. See Minute Order, ECF No. 79. In response, Defendants Reeves and Vaoga filed a motion to vacate the minute order on the grounds that the Court does not have the authority to act until the issue of subject matter jurisdiction is settled. Mot. Vacate Minute Order, Mar. 26, 2014, ECF No. 80. The Court denied Defendants' motion on March 31, 2014. Order, ECF No. 82. Prior to the hearing on the motion for sanctions, Defendants also filed a motion for change of venue and transfer in which they raise the same arguments regarding Plaintiff's lack of standing and this Court's lack of subject matter jurisdiction. Mot. Change Venue, Apr. 14, 2014, ECF No. 83. During the April 21, 2014 hearing on the motion for sanctions, Vaoga adopted the arguments of her husband, Defendant Reeves. The Court finds there is no reason to believe, therefore, that Defendant Vaoga will appear for a deposition if another notice of deposition is served upon her. Further, neither Reeves nor Vaoga has indicated a willingness to comply with the Court's orders regarding their discovery obligations.

In its motion for sanctions and for entry of default judgments, Plaintiff argues that Defendants' repeated refusals to comply with their discovery obligations in spite of multiple Orders from this Court warrants the imposition of the severe sanction of entry of default judgments against them. See Mot. Sanctions at 8. On June 16, 2014, the Honorable George W. Foley issued a Report and Recommendation recommending that Plaintiff's motion for sanctions be granted, that Defendant Wayne Reeves's Answer (ECF ...


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