United States District Court, S.D. Mississippi, Western Division
ORDER AND OPINION
BRAMLETTE UNITED STATES DISTRICT JUDGE
the Court is the United States of America's Motion for
Entry of Default Final Judgment and Permanent Injunction
[Doc. 9] against Shameka N. Wells,
individually and doing business as S&D Tax Service, LLC,
and Elizabeth Stephens.
dispute arises from an IRS investigation of Wells, Stephens,
and S&D Tax Service, LLC for preparing thousands of
federal income tax returns that falsified business losses and
profits to boost the Earned Income Tax Credits customers
could claim. These tax scams, the Government estimates,
deprived the United States Treasury of millions of dollars in
Government sued to permanently enjoin Wells and Stephens from
preparing federal tax returns for others. In support of its
proposed permanent injunction, the Government's Complaint
cites three Internal Revenue Code injunctive-relief
provisions, 26 U.S.C. §§ 7402(a), 7407, and 7408.
and Stephens live and work in McComb, Mississippi. Wells
formed S&D in 2010 and continues to use S&D's
Electronic Filing Identification Number, even though the
company was dissolved in 2011.
Government complains that Wells and Stephens “prepare
false and fraudulent federal income tax returns that
understate their customers' federal income tax
liabilities and overstate refunds to which they are
entitled.” Doc. 1, ¶8. They do so, the Government
alleges, by preparing returns claiming Earned Income Tax
Credits “based on fabricated business losses or
profits.” Doc. 1, ¶13. These fabricated losses or
profits are reported on “Schedule C” forms linked
to bogus businesses. Doc. 1, ¶¶18-19.
Defendant has appeared. Both, however, were served: Stephens
by personal service on December 13, 2017, Wells by personal
service on January 2, 2018. Docs. 4, 5. Citing
Defendants' failure to plead or otherwise defend, the
Government moved for entry of default on January 26, 2018.
Docs. 6, 7. Three days later, the Clerk of Court entered a
Federal Rule of Civil Procedure 55(a) default against Wells
and Stephens. Doc. 8.
Government now moves the Court to enter a default judgment
permanently enjoining Wells and Stephens from preparing
federal tax returns for others.
the Clerk of Court enters a defendant's default, the
plaintiff may apply to the Court for entry of a default
judgment. Fed.R.Civ.P. 55(b)(1). The Government applied for
and obtained an entry of default against Wells and Stephens,
who have to date failed to plead or otherwise defend. Doc. 8.
default judgment does not automatically follow an entry of
default. 10A Charles Alan Wright, Arthur R. Miller, and Mary
Kay Kane, Federal Practice & Procedure § 2688.1 (4th
ed., Supp. 2018). That is because Wells and Stephens, as the
defaulting defendants, admit only those allegations that are
well-pleaded; they do not admit conclusions. Nishimatsu
Const. Co. v. Houston Nat. Bank, 515 F.2d 1200, 1206
(5th Cir. 1976) (Wisdom, J.).
default judgment is a “drastic remedy” reserved
for “extreme situations.” Sun Bank of Ocala
v. Pelican Homestead and Sav. Ass'n, 874 F.2d 274,
276 (5th Cir. 1989). In other words, the serious consequences
that attend default judgments demand that they not be
blithely entered. Lindsey v. Prive Corp., 161 F.3d
886, 893 (5th Cir. 1998). A default judgment is improper, for
example, when material fact-issues remain or a
complaint's allegations are indefinite. Id. at
decide if the allegations of the Government's Complaint
are well-pleaded, the Court looks to Federal Rule of Civil
Procedure 8 and the “plausibility” standard.
Wooten v. McDonald Transit Assocs., Inc., 788 F.3d
490, 498 (5th Cir. 2015) (citing Ashcroft v. Iqbal,556 ...