Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02457/USCOURTS-caed-2_05-cv-02457-2/pdf.json

Parties Involved:
James L. Franklin
Defendant
United States of America
Plaintiff

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UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF CALIFORNIA 

UNITED STATES OF AMERICA, 

Plaintiff, 

v. 

JAMES L. FRANKLIN, 

Defendant. 

No. 2:05-cv-02457-MCE-EFB 

MEMORANDUM AND ORDER 

Currently before the Court is Plaintiff United States of America’s (“Plaintiff”) 

Motion for Entry of Amended Judgment against Defendant James L. Franklin 

(“Defendant”) pursuant to Rule 60(b)(6) of the Federal Rules of Civil Procedure. ECF 

No. 14. Defendant formerly stipulated to a judgment for a reduced federal tax penalty 

and entered into an agreement to pay the penalty within a specified time period. J. 1, 

ECF No. 13. The judgment noted that an amended judgment would be filed for the full 

liability amount if Defendant did not pay in accordance with the parties’ agreement. J. 2. 

Plaintiff contends that Defendant has defaulted on the agreement and seeks an 

amended judgment for the full Trust Fund Recovery Penalties of $545,680.991

 (after 

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 Because there were prior payments not applied to Defendant’s original judgment, Plaintiff 

recalculated the total current liability amount based on these credits and more recent payments. Decl. of 

Revenue Officer Carol Leibrand ¶¶ 15-17, ECF No. 22-1. 

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credits and with accrued interest).2 Pl.’s Mem. P. & A. 3, ECF No. 14-1. For the 

following reasons, the Motion is GRANTED.3

BACKGROUND 

Between 1991 and 1999, Defendant failed to pay withheld income and Federal 

Insurance Contributions Act (FICA) taxes for his four construction companies: 

JL Construction Company, The Stratus Group, Stratus Development, Inc., and Marina 

Group, LLC. Compl. ¶¶ 5-13, ECF No. 1. He was criminally charged in connection with 

Marina Group, LLC and pled guilty to one count of willfully failing to pay federal 

employment taxes of $63,925.80. United States v. James L. Franklin, No. 2:05-CR00192, ECF No. 4 (E.D. Cal. June 20, 2005). After the criminal disposition, Plaintiff 

brought a civil action against Defendant seeking a total of $504,418.06 in tax 

assessments, accrued interest, and statutory additions for the unpaid employment taxes 

at all four of Defendant’s construction companies. Compl. at 4. Plaintiff agreed to lower 

the penalty to $294,000.00 on the condition that Defendant paid $50,000 every six (6) 

months until payment was complete. Settlement Agreement Ex. C, at 2-3, ECF 

No. 14-5. Additionally, the settlement agreement required Defendant to sign an 

amended judgment in the amount of $504,418.08 plus interest. Id. at 3. In the event 

Defendant materially defaulted in making payments, the parties agreed that the 

/// 

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 Defendant seeks an opportunity to file a response to Plaintiff’s Reply and Supplemental Reply, 

arguing that the declarations attached therein constitute new evidence and new arguments. Generally, a 

court should not consider new evidence offered in reply without giving the non-moving party an opportunity 

to respond to the new evidence. Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir.1996). However, the 

Court finds that the declarations were not offered as new evidence, but rather provided to rebut factual 

assertions submitted by Defendant in his Opposition (regarding the remaining balance and alleged 

modification of the original judgment). See Alvarez v. T-Mobile USA, Inc., No. 2:10-cv-2373, 2011 WL 

6702424, at *1 n.1 (E.D. Cal.). Furthermore, the Court relies on these declarations in its holding only to 

the extent it reduces the total penalties owed by Defendant. Accordingly, Defendant's request is DENIED. 

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 Because oral argument would not be of material assistance, the Court resolves this matter on 

Plaintiff’s brief. E.D. Cal. Local R. 230(g); ECF No. 20. 

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amended judgment would be filed with the Court. Id. On October 24, 2006, this Court 

entered a judgment confirming the settlement agreement. J. at 2. 

As of July 2008, Defendant had paid approximately $138,735.10 towards the 

settlement amount. Pl.’s Mem. P. & A. at 3. However, at some point in 2008, Defendant 

lost his job and stopped making payments. Opp’n 3, ECF No. 18. In 2008, 2010, and 

2012, Defendant or his attorney sent three letters to the Tax Division of the U.S. 

Department of Justice (“DOJ”) seeking modification of the settlement agreement due to 

the changed circumstances in Defendant’s finances. Id. at 3. On January 17, 2012, the 

DOJ responded to Defendant’s 2012 letter and stated that the government would not 

consider a modification until Defendant sent copies of his three most recent federal 

individual income tax returns to prove compliance with his federal tax obligations. DOJ 

Letter Ex. 6, at 20, ECF No. 18-1. The DOJ’s response further stated that final action on 

the offer would only “be taken by the Attorney General, or an official designated by him 

for this purpose.” Id. at 21. Defendant failed to provide his three most recent federal tax 

returns as requested, and the DOJ deemed Defendant’s request for modification 

withdrawn on April 3, 2012. DOJ Letter Ex. A, at 2, ECF No. 19-3; Franklin Letter Ex. 7, 

at 24, ECF No. 18-1. 

In 2013, in an unrelated case, the Internal Revenue Service (“IRS”) assigned 

Revenue Officer Carol Leibrand (“Officer Leibrand”) to collect unpaid income tax 

liabilities from Defendant. Leibrand Decl. at 2, ECF No. 19-1. Officer Leibrand then 

discovered that in addition to federal income taxes, Defendant also owed payments on 

the 2006 judgment. Id. at 2. Unsure how to proceed, Officer Leibrand informed 

Defendant that she would be working with the DOJ to determine what actions should be 

taken in connection with payments for the 2006 judgment. Id. Subsequently, Officer 

Leibrand and Defendant arranged for Defendant to pay $800.00 per month to the DOJ 

for the 2006 judgment and $400.00 per month to the IRS for the new income tax 

liabilities. Opp’n at 4; Pl.’s Reply to Opp’n 3, ECF No. 19. Since November 2013, 

/// 

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Defendant has consistently made the $800 monthly payments to the DOJ for the 2006 

judgment. Opp’n at 5; Pl.’s Reply to Opp’n at 2. 

On October 17, 2014, Plaintiff filed this motion under Rule 60(b) requesting that 

the Court amend the 2006 judgment to make Defendant liable for the total unpaid 

employment tax penalties (after credits and with accrued interest). Pl.’s Mem. P. & A. at 

1. 

STANDARD 

Under Rule 60(b)(6), a judgment may be set aside for “any other reason justifying 

relief from the operation of a judgment.” As such, district courts have the authority to 

vacate judgments “whenever such action is appropriate to accomplish justice.” 

Klapprott v. United States, 335 U.S. 601, 615 (1949). However, there must be a 

showing of “extraordinary circumstances” to justify relief. Ackerman v. United States, 

340 U.S. 193, 199 (1950); United States v. Sparks, 685 F.2d 1128, 1129 (9th Cir. 1982). 

Repudiation of a settlement agreement that terminated litigation pending before a court 

has been found to constitute an extraordinary circumstance justifying relief from a prior 

judgment. Keeling v. Sheet Metal Workers Int’l Ass'n, Local Union 162, 937 F.2d 408, 

410 (9th Cir. 1991). 

ANALYSIS 

The parties’ 2006 settlement agreement provided that a payment by Defendant 

that was more than thirty (30) days late would constitute a material default. Settlement 

Agreement Ex. C, at 3. It is undisputed that, after July 2008, Defendant failed to make 

the agreed upon $50,000 payments and thus failed to comply with the original terms of 

the agreement. However, Defendant contends that the installment agreement he made 

with IRS Officer Leibrand modified the 2006 settlement agreement, and that Officer 

Leibrand had the implied authority to modify the agreement on behalf of the DOJ. Opp’n 

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at 5. To support his argument, Defendant points to two documents that he contends 

modified the original settlement agreement: (1) a DOJ online payment authorization form 

that he signed to authorize the $800 payments from his bank account, DOJ Online Form 

Ex. 8, at 26, ECF 18-1; and (2) an IRS installment agreement signed by Defendant and 

an IRS manager. IRS Installment Agreement Ex. 9, at 28, ECF 18-1. Defendant’s 

argument is unconvincing. 

The original settlement agreement made clear that its terms could only be 

modified in writing by the United States. Settlement Agreement Ex. C, at 3. The DOJ 

online payment form is clearly not a “writing” as was intended by the settlement 

agreement. The document is a standardized payment form with no information about 

Defendant’s specific case or any indication that authorizing online withdrawals modified 

Defendant’s legal obligations to the DOJ. Moreover, the form is only signed by 

Defendant, which further cuts against Defendant’s argument as Defendant’s previous 

interactions with the DOJ regarding the 2006 judgment were signed by the DOJ trial 

attorney on the case. Indeed, the original settlement agreement carried all the 

formalities of a written agreement with the DOJ: the signature of the trial attorney, the 

specific terms of the agreement, and a statement that the offer had “been accepted on 

behalf of the Attorney General.” Settlement Agreement Ex. C, at 3. In contrast, the 

payment form in question bears no resemblance to a formal agreement in writing. As 

such, there is no indication that a new agreement with new payment terms was made in 

writing, as required under the original settlement agreement. 

As to the IRS installment agreement, this payment plan addresses a separate 

liability owed by Defendant to the government for unpaid individual income taxes for 

2009, 2010, 2011 and 2012. IRS Installment Agreement Ex. 9, at 28. This separate IRS 

installment agreement has no bearing on Defendant’s obligations to the DOJ under the 

2006 judgment. 

Finally, Defendant argues that Officer Leibrand acted under the implied authority 

of the DOJ and, thus, that the installment plan she coordinated modified the prior 

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settlement agreement. Opp’n at 6. The Court does not need to consider the extent of 

Officer Leibrand’s authority, since there is no convincing evidence of a modification that 

complies with the terms of the settlement agreement. 

Based on these facts, there is insufficient evidence to show the 2006 settlement 

agreement was modified. Therefore, Defendant has repudiated the settlement 

agreement by failing to make payments within the specified time period, and the Court 

has the authority under Rule 60(b) to issue an amended judgment. See Keeling, 

937 F.2d at 410. 

CONCLUSION 

For all the foregoing reasons, Defendants’ Motion for Entry of Amended Judgment 

(ECF No. 14) is GRANTED. It is hereby ordered that: 

1. The previous Judgment (ECF No. 13) is VACATED. 

2. James L. Franklin is indebted to the United States in the amount of 

$545,680.99, plus interest pursuant to 26 U.S.C. §§ 6601(a), 6621, 6622(a) and 

28 U.S.C. §1961(c), from October 27, 2014, until the judgment is paid, for the unpaid 

balance of Trust Fund Recovery Penalties for the following: 

 (a) JL Construction Company for the calendar quarters ending 

March 31, 1991, June 30, 1991, and December 31, 1991; 

 (b) The Stratus Group for the calendar quarters ending June 30, 1992, 

and September 30, 1993; 

 (c) Stratus Development, Inc. for the calendar quarters ending June 30, 

1996, September 30, 1996,; and December 31, 1996, and 

 (d) Marina Group, LLC, for the calendar quarters ending December 31, 

1997, March 31, 1998, June 30, 1998, September 30, 1998, December 31, 1998, 

and March 31,1999. 

/// 

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3. No additional penalties will accrue or be assessed with respect to the 

periods and entities set forth above in paragraph 1. 

4. The Clerk of the Court is directed to enter an Amended Judgment 

consistent with this Memorandum and Order. 

5. Payments made on the prior Judgment are credited to the balance due set 

forth above. 

IT IS SO ORDERED. 

Dated: February 24, 2015 

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