Adams, et al v. USA, et al, No. 2:2004cv00979 - Document 199 (E.D. Cal. 2009)
Court Description: FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Craig M. Kellison on 2/17/09 RECOMMENDING that the Ohm pltf's 187 , 188 amended motion for default judgment be granted in part and denied in part; the Thompson pltf's 187 , 188 a mended motion for default judgment be denied w/out prejudice; and the Hammond pltf's 187 , 188 amended motion for default judmment be granted in part and denied in part. Motion referred to Judge Ralph R. Beistline, Objections to F&R due w/in 10 days. (Yin, K)
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Adams, et al v. USA, et al Doc. 199 1 2 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 ANDY ADAMS, et al., Plaintiffs, 12 vs. 13 14 No. CIV S-04-0979-RRB-CMK FINDINGS AND RECOMMENDATIONS UNITED STATES OF AMERICA, et al., 15 Defendants. 16 / 17 Pending before the court are separate renewed motions1 for default judgment (Docs. 187 18 19 and 188) filed by plaintiffs Ohm Ranch, Charles T. Ohm, Barbara A Ohm, John C. Ohm, 20 and Susan L. Ohm (“Ohm plaintiffs”), Melvin Thompson and Mary Thompson (“Thompson 21 plaintiffs”), and Douglas Hammond and Rhonda Hammond (“Hammond plaintiffs”), against 22 defendant Donna Gordy (“Gordy”). These motions are before the undersigned pursuant to 23 Eastern District of California Local Rule 72-302(c)(19). 24 /// 25 1 26 Plaintiffs’ previous motions for default judgment (Docs. 179 and 180) were denied without prejudice primarily based on lack of supporting information. (Doc. 181). 1 Dockets.Justia.com 1 Plaintiffs’ action proceeds on the amended complaint (Doc. 14) filed on September 3, 2 2004. Plaintiffs assert civil rights claims against defendant Gordy, who at the times relevant to 3 this action was a Credit Manager at the Farm Service Agency (“FSA”) of the United States 4 Department of Agriculture, pursuant to Bivens v. Six Unknown Named Agents, 403 U.S. 388 5 (1971). Plaintiffs’ claims are based on an alleged pattern of fraud, misrepresentation, failure to 6 act, failure to follow published regulations, and breach of fiduciary duty, all done in defendant’s 7 capacity as a federal employee. Defendant Gordy was personally served on October 14, 2004 8 (see Doc. 19). After defendant Gordy failed to respond to the amended complaint, plaintiffs 9 requested entry of default by the Clerk of the Court on December 27, 2004 (Docs. 21 and 22). 10 The Clerk of the Court entered defendant Gordy’s default on the same day (Doc. 23). Almost 11 four years later, Gordy filed a motion to be relieved from default (Doc. 183). Following hearing, 12 the court concluded that Gordy had not established Rule 60(b) F.R.C.P grounds for relief and 13 denied said motion (Doc. 198 ). 14 In the present case, the court has reviewed and considered the Amended Complaint (Doc. 15 14); plaintiffs’ points and authorities in support of their motion (Docs. 187 and 188); the 16 declarations of David C. Nicholson, James D. Van Ness, Kathryn York, Mary Thompson, Julie 17 Sutterfield, John Ohm, Douglas Hammond, Brian Russell (Docs. 187 and 188) and the 18 declaration of Nels Christiansen (Doc. 128) in support of FSA’s Motion for Summary 19 Judgment (Doc. 126) which sets forth the long and rather complex loan history of the plaintiffs 20 with FSA. 21 22 23 I. BACKGROUND The FSA is authorized to make various kinds of loans, including farm loans, to farmers 24 and rural residents. A primary purpose of FSA, and its predecessor FmHA, is to function as a 25 "form of social welfare ... primarily designed to assist farmers ... [who] cannot obtain funds from 26 private lenders on reasonable terms." United States v. Kimbell Foods. Inc., 440 U.S. 715, 735 2 1 (1979). FSA also exercises wide authority to compromise or adjust loans. See Coleman v. 2 Block, 562 F. Supp. 1353, 1364 (D.N.D. 1983). 7 U.S.C. § 1981a provides authority for FSA to 3 compromise, adjust, or reduce claims, to adjust and modify the terms of mortgages, to defer 4 principal and interest and to forego foreclosure for such periods as the Secretary deems 5 necessary. See Cuny v. Block, 541 F. Supp. 506, 512 (S.D. Ga. 1982). 6 Each of the plaintiffs established a lending relationship with FSA as direct loan 7 borrowers. The term "borrower" is defined in each of the loan programs' section entitled 8 definitions. See 7 CFR § 1941.4 (1988) and 7 CFR § 1943.4 (1988). 9 In the landmark decision, Coleman v. Block, supra, the court enjoined the United States 10 from foreclosing on farm program loans prior to giving personal notice of the borrower’s rights 11 to apply for deferral relief under § 1981a and the opportunity for a hearing. The court 12 characterized the agency's actions as involving more than borrowing on the part off farmers, and 13 found that 7 U.S.C. §1981a imposed procedural duties on the United States, namely preventing 14 the United States from terminating a farmer's living and operating allowance, accelerating 15 indebtedness and instituting foreclosure proceedings until borrowers were given prior notice of 16 the reasons for the proposed action, an explanation of the eligibility for loan deferral options 17 under § 1981a, and of their right to a hearing. Coleman v. Block, 562 F. Supp. at 1367. 18 The Agricultural Credit Act allows FSA to use several loan servicing options to 19 restructure or reduce debts of farmer program borrowers who were 180 days or more delinquent. 20 FSA could restructure a delinquent borrower's debt, including writing down debt, to an adjusted 21 value of the collateral securing the debt (net recovery value). Borrowers who were unable to 22 develop a feasible plan of operations with restructuring could pay FSA the net recovery value 23 buy-out amount and end their FSA debt obligation. 24 /// 25 /// 26 /// 3 1 The FSA in the present case was mandated to take specific precautions when plaintiffs 2 became 180 days delinquent on their debt. The first step was for FSA to provide a notice, via 3 certified mail, of the availability of loan servicing options. See 7 CFR § 1951.907(c) (1988)12; 4 Moseanko v. Yeutter, 944 F.2d 418,423-24 (8th Cir.1991); Coleman v. Lyng, 864 F.2d 604,608- 5 09 (8th Cir.1988), cert. denied, 493 U.S. 953 (1989). 6 This initial notice became know as the "1951-S loan servicing package." Chamblee v. 7 Espy. 100 F.3d 15, 16 (4th Cir. 1996). Following receipt of this notice, plaintiffs would then 8 have had 60 days to return the completed package of forms and supporting data to FSA. See 9 7 CFR § 1951.907 (e) (1988). From the date the completed package was returned, FSA would 10 then have 90 days to complete their review, and thereafter inform plaintiffs of the results. FSA 11 had absolute control of the 1951-S servicing process. 12 Absent the initial 1951-S loan servicing package being sent by FSA, the plaintiffs herein 13 were prevented from initiating the loan servicing process. During the loan restructuring process, 14 FSA also prepares a computer printout depicting each borrower’s history which is then used to 15 process his or her 1951-S package to determine loan servicing alternatives. In the present case, 16 none of the plaintiffs received this information from Gordy. 17 If a borrower's farming operation indicated that, with restructuring and/or debt write- 18 down, a positive financial margin resulted, than said servicing would then be offered to the 19 borrower. See 7 CFR § 1951.907 (d) (1988). When a loan is restructured (consolidated or 20 reamortized), the borrower would then be provided the choice between the original loan interest 21 rate or the rate in existence at the time of the restructure, whichever is lower. See 7 CFR 22 § 1951.909 (e)(I)(xii) (1988). 23 Key to that lender borrower relationship was the County Supervisor. At all relevant 24 times, Defendant Gordy was the FSA County Supervisor with respect to plaintiffs’ loans. The 25 County Supervisor is the highest level employee of the FSA in that County and charged with the 26 responsibility of carrying out all FSA programs. 4 1 Plaintiffs’ Bivens allegations against Gordy in her official capacity include that she: 2 (1) failed to perform the duties mandated by and incumbent upon her position as the FSA County 3 Supervisor; (2) knowingly made false representations regarding her actions and conduct; and 4 (3) concealed her improper actions, by removing documents from Plaintiffs’ loan portfolios. 5 Subsequent to Gordy's termination from the FSA, each of the plaintiffs were notified by 6 FSA of loan servicing and thereafter successfully availed themselves to the 1951-S servicing 7 options. The Hammonds' loans were restructured on August 19, 2004; the Thompsons on June 8 23, 2004; the Ohms filed the completed application on July 26, 2005, and deferred restructuring 9 pending settlement of this case with counterclaimant FSA, which occurred November 5, 2007 10 11 (Doc. 153). In the present case, none of the plaintiffs were provided the required notification of loan 12 servicing by Defendant Gordy. Had notification been properly given, plaintiffs contend that they 13 would then have had 60 days to return the completed package of forms and supporting data to 14 FSA, and FSA would then have had 90 days to complete its review, and thereafter inform 15 plaintiffs of the results. But for Gordys failure to provide notice, each of the plaintiffs would 16 have been able to apply for loan servicing. Said servicing would have including rewriting their 17 loans to take advantage of debt forgiveness and/or lower interest rates. 18 19 FSA offered a number of type of loans, three of which are common to each of the plaintiffs, herein. These categories of loans are farm ownership, operating and emergency. 20 The purpose of the Farm Ownership (“FO”) loan program (fund code 41) is to acquire or 21 enlarge a farm or ranch. 7CFR § 1943.66 (2007). The basic objective of the FO loan program is 22 to provide credit and management assistance to eligible farmers and ranchers to become owners- 23 operators of family-sized farms or to continue such operations when credit is not available 24 elsewhere, and to enable family-farm operators to use their land, labor and other resources, and to 25 improve their living and financial conditions so that they can obtain credit elsewhere. See 7 CFR 26 § 1943.2 (2007). 5 1 The purpose of the Operating Loan (“OL”) loan program (fund code 44) is to acquire 2 livestock and equipment, provide for annual farm operating and family living expenses, and 3 refinancing debts. 7 CFR § 1941. 16 (2007). The basic objective of the OL loan program is to 4 provide credit and management assistance to farmers and ranchers to become operators of 5 family-sized farms or continue such operations when credit is not available elsewhere. 7 CFR § 6 1941.2 (2007). 7 There are two types of Emergency Loans (“EL”) – natural disaster (fund code 43) and 8 economic emergency (fund code 29). The purpose of the EM Loan program is to provide 9 emergency financial assistance to borrowers. 10 11 II. STANDARDS FOR DEFAULT JUDGMENT 12 Whether to grant or deny default judgment is within the discretion of the court. See 13 Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising this discretion, the court 14 considers the following factors: (1) the possibility of prejudice to the plaintiff if relief is denied; 15 (2) the substantive merits of plaintiff’s claims; (3) the sufficiency of the claims raised in the 16 complaint; (4) the sum of money at stake; (5) the possibility of a dispute concerning material 17 facts; (6) whether the default was due to excusable neglect; and (7) the strong policy favoring 18 decisions on the merits when reasonably possible. See Eitel v. McCool, 782 F.2d 1470, 1471-72 19 impossible, where defendants refuse to defend. See Pepsico, Inc. v. Cal. Sec. Cans, 238 F. Supp. 20 2d 1172, 1177 (C.D. Cal. 2002). 21 Where a defendant has failed to respond to the complaint, the court presumes that all 22 well-pleaded factual allegations relating to liability are true. See Geddes v. United Financial 23 Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam); Danning v. Lavine, 572 F.2d 1386 (9th 24 Cir. 1978); Televideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per 25 curiam); see also Discovery Communications, Inc. v. Animal Planet, Inc., 172 F. Supp. 2d 1282, 26 1288 (C.D. Cal. 2001). Therefore, when determining liability, a defendant's default functions as 6 1 an admission of the plaintiff's well-pleaded allegations of fact. See Panning v. Lavine, 572 F.2d 2 1386 (9th Cir. 1978). However, the court has the responsibility of determining whether the facts 3 alleged in the complaint state a claim which can support the judgment. See Danning v. Lavine, 4 572 F.2d 1386, 1388 (9th Cir. 1978). For this reason, the district court does not abuse its 5 discretion in denying default judgment where the factual allegations as to liability lack merit. 6 See Aldabe, 616 F.2d at 1092-93. 7 8 III. DISCUSSION Plaintiffs, Douglas L. Hammond and Rhonda L. Hammond, had six loans with FSA, one 9 10 was a farm ownership loan, fund code/loan number 41-09; and two were operating loans fund 11 code/loan numbers 44-08,44-12; and three were actual loss emergency loans, fund code/loan 12 numbers 43-05,43-06,43-07. The balances and interest accrual are set forth in Exhibit 1 to the 13 Declaration of Brian Russell (Doc. 187.12) and loans are detailed in the Declaration of Nels 14 Christiansen (Doc. 146) in Support of FSA 's Motion for Summary Judgment. The Hammonds 15 were damaged due to Gordy's misfeasance, nonfeasance and malfeasance when she did not 16 comply with FSA published regulations by failing to initiate loan servicing. The Hammonds’ 17 loans fell delinquent on December 31, 1999. The notice of loan servicing should have been sent 18 out by July I, 2000, which would have resulted in a completed restructure within five months, no 19 later than December 1, 2000. The time line is clearly set forth in 7 CFR § 1951.907(c) (1988). 20 Instead of dealing with the existing loans, Gordy made new loans. By ignoring the interest 21 accrual on the delinquent loans, Gordy deprived the Hammonds of the ability to have the accrued 22 interest written off and then reset at lower rates. Damages to the Hammonds resulting from 23 Gordy’s failure to timely restructure their loans amount to $143,701.65, which represents accrued 24 interest that should not have been incurred and the difference between the original loan interest 25 rate and the rate in existence at the time of the restructure. See 7 CFR § 1951.909 (e)(I)(xii) 26 (1988). 7 1 Plaintiff, Ohm Ranch, had two loans with FSA, both actual loss emergency loans, fund 2 code/loan numbers 43-01 and 43-02. Charles T. Ohm and Barbara A. Ohm, had three loans with 3 FSA, two economic emergency loans, fund code/loan numbers 29-99 and 29-03; and one 4 operating loan, fund code/loan number 44-02. Plaintiffs, John C. Ohm and Susan L. Ohm, had 5 four loans with FSA: an actual loss emergency loan, fund code/loan number 43-16; two operating 6 loans, fund code/loan numbers 44-18 and 44-19; and a farm ownership loan 41-20. Of the Ohm 7 plaintiffs, Charles and Barbara Ohm were the initial FSA borrowers. During the economic 8 downturn of the early 1980's, John and Sue Ohm (John is Charles' son) purchased a portion of 9 Charles and Barbara's real property. Charles and Barbara Ohm, and John and Sue Ohm formed 10 the partnership Ohm Ranch. It was formed as an eligible entity, separate and apart from their 11 individual farm operations. As with the Hammonds, the Ohms were damaged by Gordy's 12 misfeasance, nonfeasance and malfeasance when she did not comply with FSA published 13 regulations by failing to initiate loan servicing. Instead of dealing with the existing loans, Gordy 14 made new loans. By ignoring the interest accrual on the delinquent loans, Gordy deprived the 15 Ohms of the ability to have the accrued interest written off and then reset at lower rates. 16 Damages to the Olms resulting from Gordy’s failure to timely restructure their loans amount to 17 $223,132.28, which includes accrued interest that should not have been incurred and the sum 18 representing the difference between the original loan interest rate and the rate in existence at the 19 time of the restructure. See 7 CFR § 1951.909 (e)(I)(xii) (1988); see also, Declaration of Julie 20 Sutterfield. (Doc. 187.9) 21 Plaintiffs, Melvin A. Thompson and Mary A. Thompson had fourteen loans with FSA: 22 eight were operating loans, fund code/loan numbers 44-01,44-02,44-05,44-06,44-07,44-14 08,44- 23 11,44-15; four farm ownership loans, fund code/loan numbers 41-03,41-04,41-12,41-13; and two 24 actual loss emergency loans, fund code/loan numbers 43-09,43-14. Although Gordy apparently 25 made numerous improper loans to the Thompsons over an extended period of time, defining 26 Thompsons’ damages is problematic. In reviewing the declarations of Katherine York (Doc. 8 1 187.7), and Mary Thompson (Doc. 187.8), the court is simply left without sufficient information 2 to properly assess damages. As stated above, while factual allegations concerning liability are 3 deemed admitted upon a defendant’s default, the court does not presume that any factual 4 allegations relating to the amount of damages suffered are true. See Geddes, 559 F.2d at 560. 5 The court must ensure that the amount of damages awarded is reasonable and demonstrated by 6 the evidence. See id. In discharging its responsibilities, the court may conduct such hearings and 7 make such orders as it deems necessary. See Fed. R. Civ. P. 55(b)(2). In assessing damages, the 8 court must review the facts of record, requesting more information if necessary, to establish the 9 amount to which plaintiff is lawfully entitled. See Pope v. United States, 323 U.S. 1 (1944). 10 Here, very little of the supporting information referenced by plaintiffs’ counsel assists the court 11 as to Thompsons’ alleged damages. (Docs. 14, 128, 187.7 and 187.8). This is troublesome to the 12 court since plaintiffs’ counsel has been admonished in earlier filings of these deficiencies. 13 (Docs. 176 and 181). Since the court is unable at this time to properly assess damages due the 14 Thompsons from Gordy, it is also unable to pass on Thompsons’ FSA attorneys fees for the same 15 reasons set forth above, with respect to Olms and Hammonds loans. 16 Defendant FSA ultimately filed counterclaims against all plaintiffs resulting in successful 17 stipulated judgments including unpaid principal and interest, prejudgment interest, and attorneys 18 fees, which were entered on November 7, 2007 (Doc. 153), December 10, 2007 (Doc. 159) and 19 December 11, 2007 (Doc. 160). FSA was awarded attorneys fees from plaintiffs Olms in the 20 sum of $236,139.12 (Doc. 187.6 and 153) and $70,570.95 from Hammonds. (Doc. 187.6 and 21 159). In addition to damages relating to the difference in interest charges, plaintiffs also request 22 the sum of $ 136,097.08 as damages which apparently represents a portion of the attorneys fees 23 awarded to FSA in the stipulated judgments. (Doc. 153, 159 and 160). In comparing this 24 requested sum with the total amount of attorneys fees awarded to FSA from plaintiffs Olms, 25 Hammonds and Thompsons ($349,000) (Docs. 153, 159 and 160), the court is unable to make 26 sense of the amount requested herein. Certainly, Gordy should not be responsible for plaintiffs’ 9 1 total FSA attorneys’ fee obligation, but plaintiffs offer no explanation or formula to what would 2 be reasonable under the facts set forth. Quantifying this amount becomes even more difficult, 3 since Thompsons’ stipulated attorneys’ fees are not subject to consideration at this time. 4 Both the Hammonds and Olms stipulated FSA judgments also contain provisions 5 allowing for the reduction of awarded attorneys fees in the event that these plaintiffs successfully 6 complete their respective loan workouts. (Docs. 153.38 and 159.22). The court is not informed 7 of the success, if any, of these workouts. 8 9 10 11 For these reasons, it is not possible to compute what portion of plaintiffs FSA attorneys fees should be attributable to Gordy’s acts or omissions. This court recommends denial of the stipulated FSA fees as damages. Plaintiffs also seek an award of prejudgment interest and attorneys fees incurred in the 12 present action. As with plaintiffs previous motion for default judgment, the point and authorities 13 and supporting declarations are woefully inadequate to support such awards. 14 With respect to prejudgment interest, plaintiffs note that “[P]rejudgment Interest is 15 calculated at the IRS underpayment rate (Internal Revenue Code Section 15 6621), (IR-2008-76, 16 June 2, 2008) is 5%, for the period from December 27, 2004 through” the date of judgment. 17 (Doc. 187.3 [page 22]). Reference to these provisions appears inapposite, however, since 28 18 U.S.C. § 1961 appears to govern interest rates on civil money judgments, when applicable. 19 Similarly, plaintiffs provide no authority for the award of prejudgment interest under the 20 circumstances of this case. Since neither 42 U.S.C. § 1983, nor 42 U.S.C. § 1988 mention the 21 award of prejudgment interest, and there is no general federal statute governing the award of 22 prejudgment interest, this court has little motivation to research such authority, in light of 23 plaintiffs’ failure to properly brief this issue. The court cannot determine whether prejudgment 24 interest can or should be awarded, and if so, at the appropriate rate under 28 U.S.C. § 1961. For 25 these reasons, the court recommends denial of prejudgment interest without further briefing from 26 plaintiffs. 10 1 As a final request, plaintiffs’ counsel seeks an award of attorneys fees for his work in 2 representing plaintiffs in the present action. Again, he provides no authority for such requests. 3 Similarly, he does not provide any billing records and claims that to do so would create undue 4 hardship and allow for the release of work product material. The court is not persuaded that 5 providing accurate billing records supporting work performed in this action amounts to an 6 insurmountable hurdle. As discussed below, such information can and should be provided for in 7 an appropriate post-judgment motion. 8 The Civil Rights Attorney's Fees Awards Act of 1976, as codified at 42 U.S.C. § 1988 , 9 permits the district court, in its discretion, to award attorneys' fees to a “prevailing party” as part 10 of the costs of the suit in actions brought pursuant to 42 U.S.C. §§ 1981, 1982, 1983, 1985, or 11 1986. See Hutto v. Finney, 437 U.S. 678 (1978) Curry v. Block, supra at 1410. 12 Although, plaintiffs may be entitled to an award of attorneys fees upon providing 13 sufficient information to the court, such a request and information is anticipated to be made 14 following entry of judgment. 28 U.S.C. § 2410. Curry v. Block, at 1412-13. 15 16 For the reasons, above mentioned, the court recommends denial of attorneys fees without prejudice, subject to plaintiffs’ motion under 28 U.S.C. § 2412(d)(1). 17 18 IV. CONCLUSION 19 Based on the foregoing, the undersigned recommends that: 20 1. The Ohm plaintiffs’ amended motion for default judgment (Doc. 187) be granted 21 in part, and they be awarded the sum of $223,132.28, as compensable damages representing the 22 accrued interest that would have been written off and the reset at lower rates if statutory loan 23 servicing had been performed by Gordy. Plaintiffs Olms’ request for reimbursement of the FSA 24 stipulated attorneys fees; prejudgment interest and attorneys’ fees be denied, without prejudice; 25 26 2. The Thompson plaintiffs’ amended motion for default judgment (Doc. 187) be denied without prejudice; and 11 1 3. The Hammond plaintiffs’ amended motion for default judgment (Doc. 187) be 2 granted in part, and that they be awarded the sum of $143,701.65, as compensable damages 3 representing the accrued interest that would have been written off and the reset at lower rates if 4 statutory loan servicing had been performed by Gordy. Plaintiffs Hammonds’ request for 5 reimbursement of the FSA stipulated attorneys fees, prejudgment interest and attorneys’ fees be 6 denied, without prejudice. 7 These findings and recommendations are submitted to the United States District 8 Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within ten days 9 after being served with these findings and recommendations, any party may file written 10 objections with the court. The document should be captioned “Objections to Magistrate Judge's 11 Findings and Recommendations.” Failure to file objections within the specified time may waive 12 the right to appeal. See Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991). 13 14 15 16 DATED: February 17, 2009 ______________________________________ CRAIG M. KELLISON UNITED STATES MAGISTRATE JUDGE 17 18 19 20 21 22 23 24 25 26 12
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