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United States v. Newbill

United States District Court, W.D. Virginia, Roanoke Division

July 14, 2015



GLEN E. CONRAD, Chief District Judge.

This case is presently before the court on the United States' motion for default judgment. For the reasons set forth below, the motion will be granted.


On January 9, 2015, the United States filed this action against the defendant, Robert A. Newbill, pursuant to 26 U.S.C. § 7401, seeking to reduce to judgment the unpaid assessment of trust fund recovery penalties and interest made against Newbill under 26 U.S.C. § 6672. A private process server personally served Newbill with the complaint and summons on April 10, 2015.

Newbill failed to answer or otherwise defend the action within the time period permitted by the Federal Rules of Civil Procedure. On June 10, 2015, the Clerk filed an entry of default against Newbill. Newbill has not moved to set aside the entry of default, or otherwise appeared in any manner in this case. The United States has now moved for default judgment.

Standard of Review

Rule 55 of the Federal Rules of Civil Procedure sets out a two-step procedure for obtaining a default judgment. When a defendant fails to plead or otherwise defend an action, the Clerk of Court is authorized to make an entry of default. See Fed.R.Civ.P. 55(a). After default is entered by the Clerk, a party may move for default judgment under Rule 55(b).

Upon default, all of the well-pleaded facts alleged in the complaint may be taken as true for purposes of liability. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001) ("[T]he defendant, by his default, admits plaintiff's well-pleaded allegations of fact[.]") (internal citation omitted); see also Fed.R.Civ.P. 8(b)(6). Accordingly, in the default judgment context, the "appropriate inquiry is whether or not the face of the pleadings supports the default judgment and the causes of action therein." Anderson v. Found. for Advancement, Educ. & Emp't of Am. Indians, No. 99-1508, 1999 U.S.App. LEXIS 18633, at *2 (4th Cir. Aug. 10, 1999).

If the facts alleged in the complaint are sufficient to establish liability, the court must then determine the appropriate amount of damages. Ryan, 253 F.3d at 780-81. In so doing, the court may conduct an evidentiary hearing under Rule 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 Anderson, 155 F.3d at 507 (noting that "in some circumstances a district court entering a default judgment may award damages ascertainable from the pleadings without holding a hearing").


The Internal Revenue Code requires employers to withhold income taxes and Federal Insurance Contribution Act ("FICA") taxes from their employees' wages when those wages are paid. See 26 U.S.C. §§ 3102(a) & 3402(a). Because the employer holds these taxes as "special fund[s] in trust for the United States, " 26 U.S.C. § 7501(a), the withheld amounts are commonly referred to as "trust fund taxes." Slodov v. United States, 436 U.S. 238, 243 (1978) (internal quotation marks omitted). These funds "exist for the exclusive use of the government, not the employer, " and may not be used to pay the employer's business expenses. Erwin v. United States, 591 F.3d 313, 319 (4th Cir. 2010).

"The Code assure[s] compliance by the employer with its obligation... to pay' trust fund taxes by imposing personal liability on officers or agents of the employer responsible for the employer's decisions regarding withholding and payment' of the taxes." Id . (quoting Slodov, 436 U.S. at 247. To that end, § 6672 of Title 26 provides, in pertinent part, as follows:

Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

26 U.S.C. § 6672(a). Applying this statute, the United States Court of Appeals for the Fourth Circuit has held that "[p]ersonal liability for a corporation's trust fund taxes extends to anyone who (1) is responsible for collection and payment of those taxes, and (2) willfully fail[s] to see that the taxes are ...

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