Opinion ID: 762111
Heading Depth: 2
Heading Rank: 1

Heading: The Ten Percent Surcharge

Text: 8 The FDCP Act provides that the United States is entitled to recover a surcharge of 10 percent of the amount of the debt ... to cover the cost of processing and handling the litigation and enforcement ... of the claim for such debt. 28 U.S.C. § 3011(a). To be entitled to the surcharge, the United States, or its agency, must have initiated an action or proceeding under subchapter B or C of the FDCP Act. 1 Id. Subchapter B, at issue in this case, provides for prejudgment remedies, which are defined to include attachment, receivership, garnishment, or sequestration. 28 U.S.C. § 3002(11). 9 The Board sought such a prejudgment remedy against Pharaon in 1991. See Complaint at 7-9. Nevertheless, Pharaon contends that the imposition of a surcharge is not proper because the prejudgment remedy that the Board obtained was granted pursuant to the FDI Act, 12 U.S.C. § 1818(i)(4), not the FDCP Act. In addition, Pharaon asserts that even if the prejudgment remedy was granted pursuant to the FDCP Act, the Board was not entitled to such a remedy under that Act and, therefore, is not entitled to the surcharge. 10 Pharaon's contention that the Board was not granted a prejudgment remedy pursuant to the FDCP Act ignores the plain language of the District Court's order granting that remedy. Acting upon the Board's request for relief pursuant to the FDCP Act, see Complaint at 1, 7-9, the District Court explicitly cited the Act as authority for the issuance of its order restraining Pharaon from removing or dissipating his assets in the United States pending resolution of the Board's proceeding, see TRO at 1. Furthermore, in summarizing the procedural history of this case in a subsequent opinion, the District Court noted, The TRO froze Pharaon's assets in the United States, pursuant to Section 8(i) of the [FDI Act] and the Debt Collection Act, 28 U.S.C. §§ 3001-3015. Pharaon, 140 F.R.D. at 635 (emphasis added). The fact that the District Court might have relied principally on the FDI Act, as suggested by the Court's recitation of the history of this case in another opinion, see Board of Governors of the Federal Reserve System v. Pharaon, 140 F.R.D. 642, 643-44 & n.2 (S.D.N.Y.1991), does not mean that the prejudgment attachment was not obtained, at least in part, pursuant to the FDCP Act. Since the prejudgment remedy was sufficiently grounded on subchapter B of the FDCP Act, the issue becomes whether such a remedy was properly ordered under that Act. 11 Subchapter B of the FDCP Act provides that [t]he United States may, in a proceeding in conjunction with the complaint or at any time after the filing of a civil action on a claim for a debt, make application ... to a court to issue any prejudgment remedy. 28 U.S.C. § 3101(a) (emphasis added). Pharaon contends that because the assessment was not due and payable until March 31, 1997, the date by which the Board's Final Order required payment, the action commenced against him in 1991 was not one on a claim for a debt and, therefore, at that time the Board was not entitled to a prejudgment remedy under the FDCP Act. 12 Pharaon's argument is unpersuasive. The FDCP Act does not define the term debt as only an amount that is due and payable. Rather, it defines the term as including an amount that is owing to the United States on account of a[n] ... assessment. 28 U.S.C. § 3002(3)(B). The penalty levied against Pharaon in 1991 was indisputably an assessment. Furthermore, it was an amount owing to the United States within the meaning of the FDCP Act. 13 The Board has the authority to assess[ ] and collect[ ] penalties by issuing a notice of assessment. 12 U.S.C. § 1818(i)(2)(E) (1994). Typically, the recipient of a notice of assessment has sixty days from the date of the notice's issuance to pay the penalty, though the Board may make a penalty payable immediately upon receipt of a notice of assessment under certain circumstances. See 12 C.F.R. § 263.64(a) (1998). Although Pharaon's request for an administrative hearing suspended the Board's authority to require payment of the assessment until the issuance of a final order, see id. (If a timely request for a formal hearing to challenge an assessment of civil penalty is filed, payment of the penalty shall not be required unless and until the Board issues a final order of assessment following the hearing.), it did not affect the existence of Pharaon's liability for the $37 million penalty. 14 By authorizing prejudgment remedies in an action asserting a claim for an amount owing to the United States, Congress clearly intended to authorize the use of such remedies prior to a formal determination that such amount must be paid to the United States by a certain date. The contrary view not only ignores the clear implication of the term a claim, but also is at odds with the intent of Congress in enacting the FDCP Act, i.e., to create a comprehensive statutory framework for the collection of debts owed to the United States government in order to improve the efficiency and speed in collecting those debts. H.R.Rep. No. 101-736 (1990), reprinted in, 1990 U.S.C.C.A.N. 6630, 6631. Prejudgment remedies are powerful devices for the speedy and efficient collection of debts, and we see no indication that Congress did not intend to afford agencies such as the Board the opportunity to use them, prior to the issuance of a final agency order, in aid of the assessment and ultimate collection of administrative penalties. 15 The assessment against Pharaon became an amount owing to the United States when the Board issued its Notice of Assessment. Accordingly, the action commenced by the Board in 1991 was one on a claim for a debt. Thus, because the Board sought a prejudgment remedy that was authorized by subchapter B of the FDCP Act and was issued under that Act, it is entitled to recover a ten percent surcharge.