United States v. Chesir , 526 F. App'x 60 ( 2013 )

12-2531-cv
United States v. Chesir
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 6th day of June, two thousand thirteen.
PRESENT: CHESTER J. STRAUB,
REENA RAGGI,
CHRISTOPHER F. DRONEY,
Circuit Judges.
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UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 12-2531-cv
PACE CHESIR,
Defendant-Appellant.
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APPEARING FOR APPELLANT: ROGER BENNET ADLER, Esq., New York,
New York.
APPEARING FOR APPELLEE: ROBERT J. BRANMAN (Loretta Lynch, United
States Attorney for the Eastern District of New
York, of Counsel, Jonathan S. Cohen, Attorney,
on the brief), Attorney, Tax Division, for Kathryn
Keneally, Assistant Attorney General, U.S.
Department of Justice, Washington, D.C.
Appeal from a judgment of the United States District Court for the Eastern District
of New York (Eric N. Vitaliano, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment entered on August 3, 2011, is AFFIRMED.
Defendant Pace Chesir, a certified public accountant, appeals from the denial of his
motion to vacate a default judgment entered against him, see Fed. R. Civ. P. 60(b), which in
turn led to an order authorizing the sale of his primary residence to satisfy a lien arising from
his alleged underpayment of income taxes from 1990 to 1994 and from 1996 to 1997.1 We
review the contested denial for abuse of discretion, and we will uphold the denial unless it
is based on an error of law or clearly erroneous factfinding. See Johnson v. Univ. of
Rochester Med. Ctr., 642 F.3d 121, 125 (2d Cir. 2011). In evaluating the refusal to vacate
a default judgment, we look to the same criteria that guided the district court’s determination:
“(1) whether the default was willful, (2) whether the defendant demonstrates the existence
of a meritorious defense, and (3) whether, and to what extent, vacating the default will cause
the nondefaulting party prejudice.” SEC v. McNulty, 137 F.3d 732, 738 (2d Cir. 1998); see
also State St. Bank & Trust Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 168 (2d Cir.
2004) (reiterating that these criteria “should be construed generously” in favor of party
1
Although the operative Notice of Appeal lists the order approving the property sale
among the rulings from which Chesir appeals, he offers no argument as to why that particular
ruling is wrong. Thus, we deem abandoned any independent challenge to the sale
authorization, see Jackler v. Byrne, 658 F.3d 225, 233 (2d Cir. 2011), and address only
Chesir’s appeal from the denial of his motion to vacate the default judgment.
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seeking relief from judgment (internal quotation marks omitted)). We assume the parties’
familiarity with the facts and record of prior proceedings, which we reference only as
necessary to explain our decision to affirm.
1. Willfulness
Chesir maintains that the district court erred in finding that his default was willful.
He contends that, since the death of his wife over a decade ago, he has been “enmeshed in
the throes of a deep ‘emotional fog’” that has prevented him from “address[ing] his tax issues
in a straightforward manner.” Appellant’s Br. 12. In support, Chesir submitted an affidavit
from a psychiatrist, whom Chesir first consulted after the challenged default judgment was
entered and only weeks before he requested vacatur. The psychiatrist tentatively diagnosed
Chesir with dysthymic disorder, a mild form of depression, based on Chesir’s complaints of
a “long-standing problem of severe and persistent procrastination.” Singer Aff. ¶¶ 2–3, J.A.
142–43. Giving due weight to this tentative diagnosis, the district court nevertheless found
Chesir’s default to have been deliberate based on evidence of his meeting other life demands
during the pendency of the litigation. Far from being clearly erroneous, this finding is
persuasively supported by the record, which shows, inter alia, Chesir’s ability to file timely
tax returns for his accounting clients, to comply with an Internal Revenue Service (“IRS”)
subpoena in time to avoid a civil contempt fine, to send a letter request for leniency to
opposing counsel on the day before his answer to the complaint was due,2 and to commence
2
In this letter, Chesir conceded that he did not file the required tax returns for most
of the period from 1990 through 1997, attributed any underpayments to unreported gains
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a Chapter 13 bankruptcy case after the district court approved the sale of his residence in an
effort (ultimately unsuccessful) to have the bankruptcy automatic stay halt the foreclosure.
On such a record, the district court acted within its discretion in finding that Chesir’s
four-year delay in defending against the instant suit, despite repeated notice of court
deadlines and conferences, was tactical and not excusable. See American Alliance Ins. Co.
v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996) (noting default judgment’s primary goal of
shielding parties from “harassment” and “undue delay” (internal quotation marks omitted)).
Accordingly, we identify no error in the district court’s willfulness finding.
2. Meritorious Defense
While the district court’s identification of willfulness would, by itself, support its
refusal to vacate the challenged default judgment, see Bobrow Greenapple & Skolnik v.
Woods, 865 F.2d 43, 44 (2d Cir. 1989), we identify no abuse of discretion in its
determination that Chesir also failed to satisfy the other two criteria for vacatur.
As the district court correctly observed, Chesir’s partial tax payments in April 2012,
based on his own revised calculations of his income during the relevant period, do little to
rebut the “presumption of correctness” afforded IRS deficiency calculations. Moretti v.
from stock transactions by his wife, and promised to begin filing the delinquent returns by
the next month’s end. Upon the letter’s receipt, Chesir was called by IRS counsel, who later
testified, based on his contemporaneous notes, that he advised Chesir to file an answer or to
seek an extension and recommended that Chesir retain an attorney, even though one was not
required. The district court acted well within its discretion in crediting this testimony and
rejecting Chesir’s effort to claim that the conversation led him to conclude that any response
to the complaint “would be futile.” Chesir Aff. ¶ 6, J.A. 546.
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Comm’r, 77 F.3d 637, 643 (2d Cir. 1996) (internal quotation marks omitted). Nor are they
“evidence of facts that, if proven at trial, would constitute a complete defense” to the claimed
underpayments. State St. Bank & Trust Co. v. Inversiones Errazuriz Limitada, 374 F.3d at
167 (emphasis added); see also American Alliance Ins. Co. v. Eagle Ins. Co., 92 F.3d at 61(defining meritorious defense to defaulted suit as one that, at a minimum, “give[s] the
factfinder some determination to make” (internal quotation marks omitted)). While Chesir
disputes that bank deposits during the taxable period establish hidden income, he neither
denies that the deposited sums far exceeded his contemporaneously declared income nor
attempts to explain from where the funds in the challenged deposits derived or why they are
not taxable.3
On this record, the district court did not clearly err in concluding that Chesir failed to
present a meritorious defense to the alleged tax delinquencies.
3. Prejudice
The district court similarly did not abuse its discretion in finding that vacatur would
prejudice the United States. In addition to failing for decades to declare and pay taxes,
Chesir indisputably waited to appear in these proceedings until 42 months after service of the
complaint, 26 months after the clerk entered his default, and 8 months after entry of the
default judgment. See Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993) (noting
3
Insofar as Chesir takes issue with opening and closing stock prices submitted by the
United States pertaining to certain securities trades referenced in Chesir’s updated tax
returns, those transactions formed no basis of the challenged denial of vacatur and thus are
irrelevant for purposes of this appeal.
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that “equitable factors” may be considered in deciding whether to vacate default judgment);
see also United States ex rel. Drake v. Norden Sys., Inc., 375 F.3d 248, 256 (2d Cir. 2004)
(holding in another context that prejudice may be presumed from “lengthy and inexcusable”
delay). Such delay made it more difficult for the United States to reconstruct financial
transactions occurring decades earlier. Insofar as Chesir notes that pertinent “bank deposit
records became unavailable years prior to the filing of the complaint,” Appellant’s Br. 21
(emphasis in original), that fact only underscores, rather than undermines, how Chesir’s own
dilatory conduct would prejudice the United States if vacatur were granted. Chesir’s
complaint that the United States waited over 10 years to institute this action rings hollow in
light of his persistent stonewalling of the IRS’s attempts, beginning in 1997, to ascertain his
tax liability.
The judgment of the district court is AFFIRMED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
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