Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_03-cv-01531/USCOURTS-caed-2_03-cv-01531-2/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7402 IRS: Petition to Enforce IRS Summons

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26 ORDER HOLDING DEFENDANTS IN CONTEMPT - 1

2:03-CV-01531-RRB-GGH

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

No. 2:03-CV-01531-RRB-GGH PS

ORDER HOLDING DEFENDANTS

IN CONTEMPT

I. Introduction

This matter is before the Court on the motion of the

United States to hold Defendants James O. Molen and Sandra L. Molen

(“Defendants”) in civil contempt for their willful failure to

comply with several terms of the permanent injunction entered by

the Court on October 12, 2006 (Docket 121).

II. FINDINGS OF FACT

1. On July 21, 2003, the United States filed suit

seeking entry of a permanent injunction against Defendants for

their failure to comply with the internal revenue laws (Docket 1).

UNITED STATES OF AMERICA,

Plaintiff,

vs.

JAMES O. MOLEN, and SANDRA L.

MOLEN, d/b/a TOUCH OF CLASS,

FLORIST,

Defendants.

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2:03-CV-01531-RRB-GGH

2. On December 12, 2003, the Court issued a preliminary

injunction requiring Defendants to comply with certain provisions

of the internal revenue laws (Docket 42).

3. On June 29, 2006, the United States moved for

summary judgment, arguing that Defendants were continuing to file

false employment tax returns, despite the preliminary injunction,

and requested entry of a permanent injunction (Docket 94). The

Court held a hearing on August 10, 2006, on the matter and entered

a Permanent Injunction on October 12, 2006 (Docket 121).

4. In entering the injunction, the Court found that

Defendants had accrued a tax debt of $142,458.96 since 1997,

including interest accruing through September 4, 2006. The Court

ordered Defendants to fully comply with the tax payment and

withholding requirements of Internal Revenue Code §§ 3101, 3102,

3111, 3301, 3402, 6011, and 6041.

5. The Court also ordered that:

E. Defendants for a period of two years, send

copies of their IRS Forms 940 and 941 to counsel for the United

States at the same time that they file the originals.

F. along with their quarterly Forms 941,

Defendants send an updated list of current employees to the IRS

office at 1395 Ridgewood Drive, Suite 200, Chico, California 95973.

If there is no change in the identity of their employees in any

quarter, Defendants shall submit a statement so stating.

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26 ORDER HOLDING DEFENDANTS IN CONTEMPT - 3

2:03-CV-01531-RRB-GGH

I. Defendants comply with the IRS summons issued

to them on June 27, 2005, and otherwise provide all requested

documents and testimony regarding their current income, assets, and

liabilities for the IRS to prepare a collection information

statement. Defendants are specifically ordered to provide

documents and testimony regarding James Orbin Molen LTD., James

Orbin Molen Limited Partnership, or any other entity in which they

have any interest.

J. Defendants meet with IRS revenue officer

Charles Delao, or another designated representative of the IRS,

within thirty (30) days of this order to produce the documents and

testimony described above.

6. Defendants have failed to comply with several

provisions of the Permanent Injunction. Defendants have not sent

copies of their employment tax returns to counsel for the United

States, they have not sent lists of their employees to the IRS on

a quarterly basis, they have not complied with the IRS summons

issued to them on June 27, 2005, and they have not met with the IRS

to produce the required documents and testimony, including

documents and testimony regarding James Orbin Molen LTD., James

Orbin Molen Limited Partnership, or any other entity in which they

have any interest.

/ / /

/ / /

/ / /

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Balla v. Idaho State Bd. of Corrections, 869 F.2d 461, 1

466 (9th Cir. 1989); Peterson v. Highland Music, Inc., 140 F.3d

1313, 1323 (9th Cir. 1998); Stone v. City and County of San

Francisco, 968 F.2d 850, 856 n.9 (9th Cir. 1992).

U.S. v. United Mine Workers of America, 330 U.S. 258, 304 2

(1947). 

ORDER HOLDING DEFENDANTS IN CONTEMPT - 4

2:03-CV-01531-RRB-GGH

III. CONCLUSIONS OF LAW

The Court can hold a party in civil contempt upon a

finding by clear and convincing evidence that the contemnor has

violated a specific and definite court order.1

The United States has shown by clear and convincing

evidence that Defendants are in civil contempt. Defendants were

served with the permanent injunction which sets forth specific

terms with which they are required to comply. Defendants have

failed to comply with paragraphs E, F, I, and J of the permanent

injunction by failing to send copies of their employment tax

returns to counsel for the United States, failing to send lists of

their employees to the IRS on a quarterly basis, failing to comply

with the IRS summons issued to them on June 27, 2005, and failing

to meet with the IRS to produce the required documents and

testimony, including documents and testimony regarding James Orbin

Molen LTD., James Orbin Molen Limited Partnership, or any other

businesses they own.

The district courts have broad discretion to fashion a

remedy for civil contempt. The Court finds that the remedy 2

requested by the United States is appropriate and warranted based

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26 ORDER HOLDING DEFENDANTS IN CONTEMPT - 5

2:03-CV-01531-RRB-GGH

on Defendants’ continued contempt. Further, the Court finds that

because Defendants already have significant outstanding federal tax

liabilities that they have refused to pay, it is unlikely that

monetary sanctions would coerce their compliance with the Permanent

Injunction.

IV. CONCLUSION

Accordingly, the Court ORDERS as follows:

1. Defendants will appear at the Robert T. Matsui

United States Courthouse, 501 I Street, Sacramento, CA 95814 on

January 10, 2008 at 10:00 a.m. before the Hon. Gregory G. Hollows,

Magistrate Judge in Courtroom #24, 8 Floor., to provide documents th

and testimony to a representative of the Internal Revenue Service

and/or United States as set forth below.

2. Defendants shall produce all documents necessary to

complete the attached IRS Form 433 (Collection Information

Statement), including the following documents concerning either

Defendant individually, Touch of Class Florist, James Orbin Molen

LTD., James Orbin Molen Limited Partnership:

a. records of any bank accounts they hold on

behalf of themselves individually or any entities in which they

have held an interest since the issuance of the permanent

injunction; and

b. records of any interests they hold in any

vehicles, real estate, or other tangible assets; and

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26 ORDER HOLDING DEFENDANTS IN CONTEMPT - 6

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c. records of any interests they hold in any

stocks, bonds, funds, certificates, pensions, retirement accounts,

annuities, or any other intangible assets; and

d. records of any mortgages, loans, encumbrances,

or any other liabilities; and

e. checks, bills, invoices, or any other documents

received by Defendants since the issuance of the permanent

injunction; and

f. the general ledger, check registry, accounting

statements, or any other records regarding the income and expenses

of Touch of Class, or any other business or entity in which

Defendants own an interest; and

g. pay stubs, checks, IOUs, accounts receivable,

or any other records of payments made to, or owed to Defendants

since the issuance of the permanent injunction; and

h. credit card and/or debit card statements for

any account for which Defendants have had access, since the

issuance of the permanent injunction; and

i. all of the above-listed documents as they

relate to Touch of Class Florist, James Orbin Molen LTD., James

Orbin Molen Limited Partnership, or any other entity in which

Defendants hold any interest.

3. Defendants shall produce a list of all employees or

persons who have provided any service to Touch of Class Florists,

or any other business or entity they operate or own, since the

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26 ORDER HOLDING DEFENDANTS IN CONTEMPT - 7

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entry of the Permanent Injunction. Such list shall include the

names, social security numbers, and addresses of all persons.

4. Defendants shall produce detailed testimony of all

of their sources of current and future income not encompassed in

paragraph 2 above, including any sources of income for which they

have provided no record.

5. Defendants shall provide testimony to a

representative of the Internal Revenue Service or the United States

on all matters relevant to the collection of their outstanding tax

liabilities.

6. If Defendants fail to comply with any of the

above-listed provisions, the Court will immediately issue a bench

warrant for the arrest of Defendant James O. Molen, and order that

he be immediately remitted to the custody of the United States

Marshals Service pending his compliance with the provisions above.

The United States will immediately notify the Court of any

noncompliance with the above provisions.

7. Defendants are dutifully reminded that they have the

right to retain counsel; and, given the severity of the issues

before the Court, that it may be in their best interests to do so.

IT IS SO ORDERED.

ENTERED this 4th day of December, 2007.

S/RALPH R. BEISTLINE

UNITED STATES DISTRICT JUDGE

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