United States v. Schwarzbaum

1

UNITED STATES OF AMERICA, Plaintiff, v. ISAC SCHWARZBAUM, Defendant.

No. 18-cv-81147-BLOOM/Reinhart

United States District Court, S.D. Florida

March 29, 2023

ORDER ON UNITED STATES' RENEWED MOTION FOR ORDER TO REPATRIATE FOREIGN ASSETS

BETH BLOOM UNITED STATES DISTRICT JUDGE

THIS CAUSE is before the Court on Plaintiff's Renewed Motion for Order to Repatriate Foreign Assets. ECF No. [169] (“Motion”). Defendant Isac Schwarzbaum filed a Response in Opposition to the Motion, ECF No. [170], to which Plaintiff filed a Reply, ECF No. [171].^[1]The Court has carefully reviewed the Motion, the Response, the Reply, the record in this case, the applicable law, and is otherwise fully advised. For the reasons that follow, the Motion is granted.

I. Background

The Court summarized the factual background in its Order Adopting Report and Recommendations, ECF No. [127] (“October 25 2021 Order”), and assumes the parties' familiarity with that background. On August 27, 2018, Plaintiff initiated this case against Schwarzbaum for willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) as required by 31 U.S.C. § 5314 due to his interest in several foreign bank accounts. ECF No. [1]. The case proceeded to a five-day bench trial after which the Court found in favor of the United States and issued an Amended Final Judgment for $12,555,813.00, plus accruals of late payment penalties and interest. ECF No. [105]. Defendant appealed. ECF Nos. [100] and [106].

On June 3, 2021, the Plaintiff filed a Motion to Repatriate Foreign Assets where it sought an order requiring Defendant to repatriate funds from overseas to satisfy the amounts due under the Amended Final Judgment, all prejudgment interest, penalty accruals, a 10% surcharge under 28 U.S.C. § 3011, and post-judgment interest under 28 U.S.C. § 1961. ECF No. [115] at 13-14. The Court granted Plaintiff's Motion to Repatriate Foreign Assets on October 25, 2021. ECF No. [127] at 12. Defendant obtained a stay of the repatriation order pending the outcome of his appeal on December 30, 2021. ECF No. [133]. The Eleventh Circuit vacated the Amended Final Judgment and remanded the case, directing the Court to further remand to the IRS to recalculate the penalties. United States v. Schwarzbaum, 24 F.4th 1355, 1367 (11th Cir. 2022) (“The remand we now direct is not for the IRS to issue new penalties, but for it to recalculate the penalties it has already assessed.”). The Court did so on May 16, 2022, ECF No. [147], and Plaintiff moved for entry of a second amended judgment after the IRS recalculated the penalties on September 15, 2022, ECF No. [152].^[2]

On November 1, 2022, the Court entered a Final Judgment After Remand, ECF No. [162], which Defendant appealed on December 2, 2022, ECF No. [164]. Plaintiff represents that Defendant has not posted a bond. ECF No. [169] at 3.

On January 6, 2023, Plaintiff filed the instant Motion, contending that the FDCPA^[3]authorizes execution against a US-based bank account to satisfy a judgment on a debt owed to the United States. ECF No. [169] at 5-8. The Motion further argues the Court has inherent powers to order Defendant to repatriate assets to satisfy the Final Judgment After Remand and is authorized to do so by the FDCPA and the All Writs Act.^[4] Id. at 8-11.

In his Response, Defendant raises two primary arguments. First, Defendant argues his Notice of Appeal of the Final Judgment After Remand divests this Court of jurisdiction. See generally ECF No. [170]. Second, for that reason, Defendant contends he is not required to post an appeal bond. Id. Defendant raises several other arguments, including that orders to repatriate assets are appropriate only in cases involving an outstanding tax liability or ill-gotten gains obtained through fraudulent and deceptive conduct; that the funds sought after were never originally in the United States; that repatriation is an extraordinary remedy that should not be used on the facts of this case; and that there is no express repatriation remedy in the FDCPA. Id.

On February 10, 2023, Defendant filed his Appellant's Brief. Initial Br. of Appellant, United States v. Schwarzbaum, No. 22-14058 (11th Cir. Feb. 10, 2023). In the Appellant's Brief, Defendant argues this Court erred by entering a judgment, in violation of the Administrative Procedure Act (5 U.S.C. §§ 551-559), the Eleventh Circuit's 2022 decision in this matter, and the Eighth Amendment of the U.S. Constitution, for “new penalty assessments” that also violate the FBA and are barred by the six-year statute of limitations on assessments. Initial Br. of Appellant at 3-8.

Because the Court previously granted Plaintiff's first motion for an order to repatriate Defendant's assets in the Court's October 25, 2021 Order, it addresses only those arguments now raised and not already addressed in the Court's Order.

II. Discussion

A. The Court's Jurisdiction

Defendant contends Defendant's Notice of Appeal divests this Court of jurisdiction. Specifically, Defendant argues that only the appellate court has jurisdiction once a defendant appeals a final judgment, except that a district court regains jurisdiction only if a post judgment motion renders the appeal dormant. ECF No. [170] at 2-3. Defendant further argues that Rule 4(a)(4) of the Federal Rules of Appellate Procedure enumerates those motions which render appeals dormant, the Motion is not one of these motions, so therefore the Court lacks jurisdiction to entertain the Motion. Id. at 3-4.^[5]

Plaintiff replies that, absent the entry of a stay, a district court retains jurisdiction to enforce its judgment during the pendency of an appeal. ECF No. [171] at 2. Plaintiff further replies that Rule 4(a)(4) is irrelevant to the Motion because that provision provides for the tolling of the appeal clock while a district court decides one of the enumerated motions. Id. at 3.

The Eleventh Circuit has explained that the filing of a Notice of Appeal “generally divests a district court of jurisdiction as to those issues involved in the appeal.” U.S. Commodity Futures Trading Comm'n v. Escobio, 946 F.3d 1242, 1251 (11th Cir. 2020) (citing RES-GA Cobblestone, LLC v. Blake Const. & Dev., LLC, 718 F.3d 1308, 1314 (11th Cir. 2013)). However, an appeal does not automatically stay the enforcement of a judgment, and absent the entry of a stay, a district court retains jurisdiction-via contempt or other means-to enforce its judgment during the pendency of an appeal. Id. (holding that district court had jurisdiction to issue contempt order for defendant's failure to satisfy judgment awarding restitution).

Here, Defendant has not moved for the entry of a stay, and plaintiffs have moved to repatriate Defendant's assets to satisfy the Final Judgment After Remand. Accordingly, the Court has jurisdiction to issue an order requiring repatriation of Defendant's foreign assets.

Defendant's reliance on Stansell and Transtexas Gas Corp. is misplaced. Stansell held the district court's denial of a motion to alter or amend a judgment in a garnishment proceeding under Rule 59(e) of the Federal Rules of Civil Procedure-on the ground that the notice of appeal divested the district court of jurisdiction-was erroneous. Stansell, 771 F.3d at 746. Stansell explained that the district court had jurisdiction to consider the Rule 59 motion because that motion suspended a notice of appeal that was pending in that case. Id. (citing Fed. R. Civ. App. 4(a)). Accordingly, Stansell instructs that a district court has jurisdiction “over those aspects of the case involved in the appeal” only when a party files any of the motions listed in Rule 4(a)(4)(A). The Eleventh Circuit did not hold in Stansell that a district court has jurisdiction only when a party files the motions listed in Rule 4(a)(4)(A) pertaining to those aspects of the case not involved in the appeal. Defendant raises several issues on appeal, including whether this Court erred by entering a final judgment that was barred by the statute of limitations and in violation of the Administrative Procedure Act, the Eleventh Circuit's 2022 decision in this matter, the Eighth Amendment of the U.S. Constitution, and the FBAR. However, the issue here is whether to grant the United States' Renewed Motion and issue an Order requiring Defendant to repatriate foreign assets in support of the Final Judgment After Remand-an aspect of the case not involved in the appeal. As such, Stansell does not support Defendant's argument.

Defendant's reliance on In re Transtexas Gas is also misplaced. The Fifth Circuit held that a bankruptcy court lacked jurisdiction to enter an order reiterating the interest rate due to satisfy state taxing authorities' unsecured priority tax claims under an earlier order confirming a Chapter 11 reorganization plan. In re Transtexas Gas Corp., 303 F.3d 571, 580-81 (5th Cir. 2002). That was because the state taxing authorities had filed a notice of appeal that raised the set interest rate as an issue on appeal, divesting the bankruptcy court of jurisdiction. Id. at 574-75. As such, In re Transtexas Gas provides no guidance where, as here, the issues on appeal do not concern repatriation.

B. Appeal Bond

Defendant contends he is not required to post an appeal bond because the Court lacks jurisdiction to issue an order to repatriate foreign assets. ECF No. [170] at 4-5. Defendant reasons that Rule 62 of the Federal Rules of Civil Procedure recognizes the risk of “conflict between the district and appellate court's authority when issuing a stay of proceedings”-particularly when a party has not moved to stay proceedings to enforce a judgment by posting a bond or other security. Defendant concludes that the Tenth Circuit's decision in Garrick v. Weaver eliminates...