Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_19-cv-00307/USCOURTS-caed-2_19-cv-00307-8/pdf.json

Nature of Suit Code: 550
Nature of Suit: Prisoner - Civil Rights (U.S. defendant)
Cause of Action: 42:1983 Prisoner Civil Rights

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UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF CALIFORNIA 

SHELDON RAY NEWSOME, 

Plaintiff, 

v. 

LOTERZSTAIN, et al., 

Defendants. 

No. 2:19-cv-0307-JAM-EFB P 

FINDINGS AND RECOMMENDATIONS 

 Plaintiff is a state prisoner proceeding without counsel in this action brought under 42 

U.S.C. § 1983. Plaintiff’s motion to proceed in forma pauperis (“IFP”) under 28 U.S.C. § 1915 

was granted on August 8, 2019. ECF No. 14. Defendants now seek dismissal of the action, 

arguing that plaintiff’s allegation of poverty was false. ECF No. 30. For the reasons that follow, 

the motion must be denied. 

I. Background 

In this district, plaintiffs generally seek IFP status by submitting a form application. E.D. 

Cal. Website, http://www.caed.uscourts.gov/caednew/index.cfm/forms/civil/ (last checked July 

24, 2020). Relevant to this case, the form asks the applicant to list all income from the prior 12 

months, any money in a bank account, and any other assets of value. The form concludes with 

the following declaration, above the applicant’s signature: “I declare under penalty of perjury that 

the above information is true and understand that a false statement may result in a dismissal of my 

claims.” 

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Plaintiff completed and signed this application on February 18, 2019. ECF No. 2. He 

averred that, in the past 12 months, he had not received any money from any source except for 

$200 from home. Id. at 1. He further averred that he had no money in any bank account and 

owned no other valuable property or assets. Id. at 2. 

On February 21, 2019, CDCR’s trust office submitted plaintiff’s trust account statement 

for the six months preceding the filing of this case. ECF No. 6. That statement revealed that, 

contrary to his representations in his IFP application, plaintiff had received two monetary 

settlements during that period (or one settlement that posted to the account in two chunks), 

posting to the account on September 11, 2018. Id. The first amount, for $2069, was entirely used 

up to pay a restitution fine and other fees owed by plaintiff. Id. The second amount was for 

$4,931. Id. Over the next several months, plaintiff used this money to purchase unknown items1, 

pay phone bills2, and make substantial withdrawals. Significantly, on October 31, 2018, plaintiff 

withdrew $1500 from the trust account. Id. This withdrawal is labeled “phone and legal” on the 

trust account statement, but plaintiff has not provided any further information about it. And, on 

November 15, 2018, plaintiff withdrew $1000 from the account, which the statement labels as 

“attorney.” Id. Again, plaintiff has not elaborated on these withdrawals or any of the other 

expenditures. 

Defendants seek judicial notice of documents from other cases in which plaintiff sought 

IFP status or fee waiver. That request is granted. Fed. R. Evid. 201. The court also grants 

defendants’ request for judicial notice of the inmate trust account statement filed for plaintiff in 

Newsome v. Innis-Burton, et al., E.D. Cal. Case No. 2:19-cv-01862-JAM-DMC, which reveals 

1

 Plaintiff paid the following nontrivial sums for “sales” or to Walkenhorst’s (a company 

that sells products to inmates): (1) $101.30 (sales, September 17, 2018), (2) $118.30 (sales, 

September 17, 2018), (3) $288.79 (Walkenhorst’s, October 10, 2018), (4) $114.40 (sales, October 

16, 2018), (5) $105.45 (sales, October 22, 2018), (6) $194.45 (sales, November 14, 2018), (7) 

71.95 (“SPO withdrawal,” November 15, 2018), (8) $92.80 (sales, November 26, 2018), (9) 

$71.95 (sales, November 27, 2018), (10) $198.75 (sales, December 17, 2018), (11) $219.30 

(sales, January 22, 2019), and (11) $127.90 (sales, February 19, 2019). 

2

 Plaintiff made three payments of $150 for telephone bills during the six months 

preceding the filing of this action. 

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that plaintiff received various payments totaling $810 between April 6, 2019 and August 23, 

2019. ECF No. 30-1 at 97 (showing seven payments ranging from $25 to $220). 

II. The Motion to Dismiss 

Defendants seek dismissal of the case with prejudice under 28 U.S.C. § 1915(e)(2)(A), 

which provides: “Notwithstanding any filing fee, or any portion thereof, that may have been paid, 

the court shall dismiss the case at any time if the court determines that the allegation of poverty is 

untrue[.]” The statute was amended in April of 1996; it had previously provided that the court 

“may dismiss the case if the allegation of poverty is untrue[.]” 28 U.S.C. § 1915(e) (1996) 

(emphasis added). 

Section 1915(e)(2)(A) regards procedures to be followed after an individual has applied 

for, and been granted, permission to proceed IFP under 28 U.S.C. § 1915(a). Section 1915(a) 

allows a person to proceed IFP after he submits to the court an affidavit that includes a statement 

of all of the person’s assets and a statement that the person cannot pay the filing fee. 

Additionally, a prisoner seeking to proceed IFP must also submit a certified copy of their prison 

trust account statement for the six months prior to the filing of the complaint. 28 U.S.C. 

§ 1915(a)(2). An IFP affidavit “is sufficient where it alleges that the affiant cannot pay the court 

costs and still afford the necessities of life.” Escobedo v. Applebees, 787 F.3d 1226, 1234 (9th 

Cir. 2015) (considering the impact of the filing fee on the budget of the applicant in determining 

that she should have been granted IFP status). Where the IFP applicant is a prisoner, however, 

courts recognize that most necessary life expenses are covered by the government. Kennedy v. 

Huibregtse, 831 F.3d 441, 443 (7th Cir. 2016) (noting that plaintiff’s entire $2000 in assets were 

available to him to pay for his lawsuit because the prison paid for his food, clothing, shelter, and 

medical care). 

Defendants argue that plaintiff’s IFP application was deliberately inaccurate, warranting 

dismissal under § 1915(e)(2)(A). Plaintiff acknowledges that he left the settlement amounts out 

of his IFP application, but states this was merely because he believed “the inquiry was into his 

present state of finances and not on past income.” ECF No. 33. 

///// 

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This court recently had occasion to discuss § 1915(e)(2)(A): 

Courts have not been totally uniform in their application of § 1915(e)(2)(A), but a 

close reading of the cases applying the statute reveals consistent considerations 

guiding the courts’ analyses. The U.S. Court of Appeals for the Ninth Circuit 

provided a starting point in Escobedo, 787 F.3d at 1234 n.8, stating that, to 

dismiss a complaint under § 1915(e)(2)(A), the court must find that the allegation 

of poverty was not just inaccurate, but made in bad faith. Consistent with that 

approach, other courts have concluded that, where the allegation of poverty is 

untrue but there is no showing of bad faith, the court should impose a lesser 

sanction than outright dismissal with prejudice, for example, revoking IFP and 

provide a window for the plaintiff to pay the filing fee, or dismissing without 

prejudice. Camp v. Oliver, 798 F.2d 434, 438 (11th Cir. 1986); Mahone v. Pierce 

Cnty., No. C14-5665 BHS-KLS, 2014 U.S. Dist. LEXIS 170997, at *7-8 (W.D. 

Wash. Oct. 21, 2014); Jacobson v. Am. Honda Motor Co., No. CV 10-134-PK, 

2010 U.S. Dist. LEXIS 80060, at *4-9 (D. Or. April 29, 2010) (recommending 

dismissal without prejudice where plaintiff failed to disclose income on IFP 

application but the evidence did not conclusively show intentional 

misrepresentation). 

Courts that have declined to dismiss an action under § 1915(e)(2)(A) have 

generally based their decisions on the actual poverty of the plaintiff, despite a 

technical inaccuracy in the IFP application, and the absence of a showing of bad 

faith. Escobedo, 787 F.3d at 1234 n.8 (dismissal not warranted where plaintiff 

claimed to be paying a certain amount in "rent" despite actually owning her home, 

because her mortgage payment was equivalent to a payment of rent and plaintiff 

owned no equity in the home); Camp, 798 F.2d at 438-39 (reversing district 

court's dismissal where there was no finding that plaintiff's inaccuracy foreclosed 

IFP eligibility); Hammler v. Alvarez, No. 18-CV-326-AJB(WVG), 2019 U.S. 

Dist. LEXIS 22837, at *2-5 (S.D. Cal. Feb. 13, 2019) (dismissal not warranted 

where plaintiff failed to reveal over $1,000 in settlement funds because such 

funds were immediately and entirely used to pay plaintiff's restitution 

fines); Ruffin v. Baldwin, No. 18-cv-1774-NJR, 2018 U.S. Dist. LEXIS 203411, at 

*7-10 (S.D. Ill. Nov. 30, 2018) (dismissal not warranted where plaintiff did not 

list over $4,000 in settlement funds received in the six months preceding the 

application because the funds were revealed on the accompanying trust account 

statement (indicating no intent to conceal them) and because, by the date of the 

application, plaintiff had spent the money and was thus eligible for IFP); Griffin v. 

Moon, No. 1:12-cv-02034-LJO-BAM (PC), 2016 U.S. Dist. LEXIS 130812, at *7 

(E.D. Cal. Sept. 23, 2016) (dismissal not warranted where plaintiff had received 

funds between 8 and 20 years prior to his IFP application and there was no 

evidence that he currently had such funds). 

On the flip side, courts routinely dismiss with prejudice cases upon finding that 

the plaintiff has intentionally withheld information that may have disqualified 

plaintiff from obtaining IFP status or has otherwise manipulated his finances to 

make it appear that a plaintiff is poorer than he actually is; i.e., where the facts 

show that the inaccuracy on the IFP application resulted from the plaintiff's bad 

faith. Thus, in Kennedy v. Huibregtse, 831 F.3d 441, 442-44 (7th Cir. 2016), the 

Seventh Circuit affirmed the district court's dismissal with prejudice of a 

complaint pursuant to § 1915(e)(2)(A) where the plaintiff failed to reveal that he 

had a trust account outside of prison, managed by a friend, containing about 

$1400 at the time of the plaintiff's IFP application. The court rejected plaintiff's 

claim that he did not know the balance of the account at that time and thought it 

had only about $10, because he spent over $600 from it just before and after the 

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application. Id. at 444. Importantly, the court found that, even if the district court 

would have granted the plaintiff IFP status if it had known about the trust account, 

hiding assets is not a permissible alternative to seeking the judge's 

assistance. An applicant has to tell the truth, then argue to the judge why 

seemingly adverse facts (such as the trust fund in this case) are not 

dispositive. A litigant can't say, "I know how the judge should rule, so I'm 

entitled to conceal material information from him." 

Id. at 443 (emphasis in original). 

Similarly, the Seventh Circuit affirmed a dismissal with prejudice under § 

1915(e)(2)(A) where the plaintiff had not disclosed a savings account he 

controlled with a balance of over $32,000 at the time of his IFP application. David 

v. Wal-Mart Stores, Inc., 669 F. App’x 793 (7th Cir. 2016). The court rejected the 

plaintiff's explanation that he regarded the account as off-limits because he kept 

that money for his family in case of financial hardship. Id. at 794. The plaintiff 

had used funds from the account to pay $600 for a seminar and thus his claim that 

he could not have used the money for the filing fee was disingenuous. Id. And, as 

in Kennedy, the court emphasized that the plaintiff must disclose assets to the 

court and allow the court to assess their availability to him. Id. at 794. 

The Second Circuit reached the same conclusion in Vann v. Comm'r of the N.Y.C. 

Dep't of Corr., 496 F. App'x 113 (2d Cir. 2012), affirming dismissal with 

prejudice where the plaintiff made false statements and intentionally concealed 

income on his IFP application. Id. at 114. Plaintiff had omitted about $2,000 of 

income from the application. Id. at 115-16. The court found irrelevant whether the 

plaintiff had spent the money before submitting his IFP application, because the 

statute required him "to accurately and truthfully state his financial history and 

assets," and he had not done so. Id. at 116. Moreover, the plaintiff was "an 

experienced litigator with extensive knowledge and familiarity with the in forma 

pauperis system." Id. This fact supported a finding of bad faith. Id. at 115 ("To 

determine whether a plaintiff has acted in bad faith a court may consider a 

plaintiff's familiarity with the in forma pauperis system and history of litigation.") 

In a good number of cases finding bad faith, prisoner-plaintiffs have diverted 

funds in the period leading up to their IFP application to others, usually family 

members. In Roberts v. Beard, No. 15cv1044-WQH-RBM, 2019 U.S. Dist. 

LEXIS 129744 (S.D. Cal. Aug. 2, 2019), the plaintiff had received a $3,000 

settlement on October 21, 2014, transferred $2,000 to his sister on the same day, 

and used the remainder to pay outstanding court filing fees. Id. at *3-12. On April 

14, 2015, the plaintiff submitted an IFP application indicating that he had not 

received any money from any other sources in the prior twelve months. Id. When 

the defendants sought dismissal under § 1915(e)(2)(A), the plaintiff claimed he 

had forgotten about the $3,000 settlement, had not benefitted from it, and no 

longer had the money at the time of his application. Id. at *10. The court rejected 

these claims as not credible based on the plaintiff's extensive litigation history and 

familiarity with the IFP process. Id. at *7-11 (quoting Vann). 

In Cuoco v. U.S. Bureau of Prisons, 328 F. Supp. 2d 463 (S.D.N.Y. 2004), the 

plaintiff sought IFP status on October 27, 1998, despite accepting settlement 

offers in two other cases totaling $13,500 in the prior three weeks. Id. at 464-65. 

She stated on her IFP application that she had enough money in an account in the 

community to pay the fee, but could not access the money because prison officials 

were not allowing her to receive checks. Id. at 464. She did not disclose the 

settlements. While her IFP application was pending, she asked that the settlement 

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checks be sent to her mother, and they were. Id. at 465. At the same time, the 

plaintiff prohibited prison officials from receiving checks on her behalf. Id. She 

did not disclose to the court that she had herself created the barrier keeping checks 

out of her prison account. Id. at 466. The court found that plaintiff, who had 

obtained IFP status in 15 other suits, had diverted the funds to her mother's 

address to perpetuate a negative balance in her prison account while 

misrepresenting to the court that circumstances beyond her control made it 

unfeasible to have money deposited there. Id. at 468-69. This manipulation of the 

IFP system, especially in combination with similar conduct by the plaintiff in 

other cases, justified dismissal of her case with prejudice. Id. at 468-69. 

In Richmond v. Housewright, 101 F.R.D. 758 (D. Nev. 1984), the plaintiff did not 

reveal $2,100 in income he had received during the 12 months preceding his IFP 

application for work performed as an inmate law clerk and paid directly to the 

plaintiff's fiancée. Finding that the plaintiff had "deliberately lied," the court 

dismissed the case. Id. at 759. 

Witkin v. Lee, No. 2:17-cv-0232-JAM-EFB P, 2020 U.S. Dist. LEXIS 86104, at *6-13 (E.D. Cal. 

May 15, 2020). “These cases reveal that the essential questions before the court are: (1) was 

plaintiff's allegation of poverty untrue and, if so, (2) did plaintiff submit the untrue IFP 

application in bad faith?” Id. at 13. 

A. Was plaintiff’s allegation of poverty untrue? 

Defendants argue that plaintiff’s allegation of poverty was untrue because “he falsely 

claimed that he received almost no income when, in reality, he received a $7,000 settlement, 

nearly $5,000 of which was available to him just four months before filing this case.” ECF No. 

30 at 5. Plaintiff does not dispute that he did not disclose this income on his IFP application. 

While the income is displayed on plaintiff’s trust account statement, which correctional officials 

submitted to the court shortly after the filing of the application, plaintiff’s response on the 

application that “[i]n the past 12 months I have received income from the following sources” was 

untrue. 

Nevertheless, plaintiff had $136.46 in his prison trust account on the day he filed his IFP 

application. (Plaintiff spent $127.90 that same day, reducing his account to $8.56.) While he 

failed to disclose the settlement as required by the IFP application form, by the time he filed his 

case, he was “unable to pay” the filing fee. This is important, because indigent status is assessed 

at the time the IFP affidavit is filed. 28 U.S.C. § 1915(a)(1) (authorizing in forma pauperis status 

for persons who attest that they are “unable to pay such fees or give security therefore.”); 

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Agyeman v. I.N.S., 296 F.3d 871, 886 (9th Cir. 2002) (“If the prisoner lacks the means to pay the 

fee at the time of filing, the PLRA provides for assessment and subsequent collection of the fees 

as funds become available to him.”); see also Robertson v. French, 949 F.3d 347, 352 (7th Cir. 

2020) (“[T]he PLRA calls only for disclosure of current income that can be used to defray the 

filing costs.”); Miller v. Hardy, 497 F. App’x 618, 620-21 (7th Cir. 2012) (poverty for purposes 

of the IFP statute is measured at the time that the IFP application is filed, even if the plaintiff has 

been profligate with income in the months preceding filing). 

Defendants point out that, after he filed this case, plaintiff began receiving payments into 

his prison trust account. A trust account statement filed in a subsequent case reveals that plaintiff 

received $810 between April 6, 2019 and August 23, 2019. ECF No. 30-1 at 97. These payments 

came in increments of $165, $50, $50, $220, $20, $150, and $150. Id. While defendants may 

imply that plaintiff sent his settlement money to someone outside of the prison, filed for IFP 

status, and then started receiving the money back, there is nothing to establish this beyond 

speculation. Plaintiff’s IFP application in this case indicated that he sometimes received “200 

from home.” ECF No. 2. It is equally plausible that plaintiff used his settlement money to pay 

legitimate expenses and, when it ran out, continued receiving money from home. 

The bare facts appear to be that plaintiff received significant settlement income that he did 

not list on his IFP application, but which was listed on his trust account statement, that he was 

perhaps profligate with that income in the months after he received it, and that he did not retain 

enough money to pay the filing fee by the time he filed this case. In two similar cases, courts 

have concluded that the plaintiffs’ profligate spending prior to filing did not present a basis for 

denying IFP status absent evidence that they had acted willfully to evade the filing fee. Miller, 

497 F. App’x at 620-21; Ruffin v. Baldwin, 2018 U.S. Dist. LEXIS 203411, at *7-10. The court 

cannot make such a willfully evading finding on the record before it on this motion. 

The court finds that these facts are insufficient to show that plaintiff diverted his 

settlement funds elsewhere in an effort to deceive the court and thereby receive IFP status. While 

plaintiff may have been able to pay the filing fee if he had acted more prudently with his money 

or filed the case earlier, at the time he did file, his financial situation satisfied § 1915. 

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Accordingly, while plaintiff’s answer to a question on the IFP application regarding his 6-month 

financial history was untrue, his allegation of poverty was true. See Lee v. McDonald's Corp., 

231 F.3d 456, 459 (8th Cir. 2000) (holding that the statute “does not mandate that the district 

court dismiss [a plaintiff's] claim if it finds that certain assertions in his affidavit are untrue; 

instead, it requires the district court to dismiss the claim if it finds that [the plaintiff] is not 

sufficiently poor to qualify for in forma pauperis status given the facts that are true”). 

B. Did plaintiff act in bad faith? 

As noted above, there is minimal evidence that plaintiff manipulated how he received his 

settlement income in order to deceive the court. This places the case in stark contrast with Cuoco

and Witkin. In both of those cases, the plaintiff had ensured that income intended for them never 

posted to their inmate trust accounts and was, instead, diverted to a family member outside 

prison. In that way, the plaintiffs prevented the court from assessing the truth of their current 

financial situation. By contrast, in Ruffin and in the case at hand, the trust account statements 

revealed settlement amounts that the plaintiffs had failed to include in their applications. In such 

a situation, the court can make the IFP assessment despite the omission in the application, and 

there is less indication that the omission was willful. Ruffin, 2018 U.S. Dist. LEXIS 203411, at 

*10. 

A plaintiff’s litigation history may be probative of bad faith, particularly where it shows a 

pattern of manipulating the IFP process. Cuoco, 328 F. Supp. 2d 468-69. Here, defendants 

present the court with just three prior cases filed by plaintiff in which he sought IFP status or fee 

waiver, only two if which were filed in federal court (and thus subject to § 1915). The mere fact 

that plaintiff has sought IFP status in a few earlier cases does not show such a familiarity with the 

IFP process that the court can conclude that his omission was the result of bad faith on his part, 

however. And while the court might infer bad faith from some pattern of conduct in earlier cases 

indicating deception or an attempt to evade disclosure of income, defendants have not presented 

any evidence of such a pattern of conduct. 

 Accordingly, the court concludes that, while plaintiff failed to disclose past income on his 

IFP application, his affidavit of poverty was not untrue, nor does the evidence show that the 

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omission was made in bad faith. The facts presented do not warrant the extreme sanction of 

dismissal with prejudice. See Franklin v. Murphy, 745 F.2d 1221, 1223 (9th Cir 1984) 

(“Dismissal is a harsh penalty and should only be imposed in extreme circumstances.”) For that 

reason, the court recommends that defendants’ motion to dismiss be denied. 

III. Conclusion and Recommendation 

 For the reasons stated above, it is hereby RECOMMENDED that defendants’ June 25, 

2020 motion to dismiss (ECF No. 30) be DENIED. 

These findings and recommendations are submitted to the United States District Judge 

assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days 

after being served with these findings and recommendations, any party may file written 

objections with the court and serve a copy on all parties. Such a document should be captioned 

“Objections to Magistrate Judge’s Findings and Recommendations.” Failure to file objections 

within the specified time may waive the right to appeal the District Court’s order. Turner v. 

Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991). 

DATED: August 5, 2020. 

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