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United States v. Dadurain

United States District Court, S.D. Florida

June 24, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
DANIELA DADURIAN, Defendant.

          ORDER DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

          ROBIN L. ROSENBERG UNITED STATES DISTRICT JUDGE

         This matter is before the Court on the Defendant's Motion for Partial Summary Judgment [DE 26]. The Court has carefully considered the Motion, the Plaintiff's Response in opposition thereto [DE 30], the Defendant's Reply [DE 38], and the record, and is otherwise fully advised in the premises. For the reasons set forth below, the Defendant's Motion for Partial Summary Judgment [DE 26] is DENIED.

         I. BACKGROUND

         The Plaintiff has brought this action to collect civil penalties under 31 U.S.C. § 5321. DE 1. The Plaintiff alleges that the Defendant had a financial interest in, or signature or other authority over, several foreign financial accounts during tax years 2007 through 2010. The Plaintiff further alleges that the Defendant was required to report these financial accounts on a Report of Foreign Bank and Financial Accounts (referred to as a “FBAR”) for each tax year and that she willfully failed to do so in a timely manner. Thus, the Plaintiff contends that the Defendant owes $2, 713, 692.33 in penalties and interest and seeks judgment in that amount.

         The Defendant now moves for partial summary judgment, seeking a judgment that she is not liable for penalties for her failure to report certain financial accounts for certain years. DE 26. Specifically, the Defendant argues that there is no evidence that she willfully failed to report the following accounts: (1) three accounts held by entities known as Ayaba, Shoremont, and Stiftung Lionette at VP Bank during tax year 2007; and (2) an account held by Ayaba at Rahn & Bodmer Bank and an account held by the Defendant's mother, Georgeta Dadurian, at Sparkassee Bodensee Bank during tax year 2010. The Defendant does not seek summary judgment as to the following accounts that are also at issue in this proceeding: (1) an account held by the Defendant at Frankfurter Bank and the account held by the Defendant's mother at Sparkassee Bodensee Bank during tax year 2007; (2) two accounts held by Ayaba and Stiftung Lionette at VP Bank and the account held by the Defendant's mother at Sparkassee Bodensee Bank during tax year 2008; and (3) two accounts held by Ayaba at Rahn & Bodmer Bank and VP Bank and the account held by the Defendant's mother at Sparkassee Bodensee Bank during tax year 2009. The Defendant supports her Motion for Summary Judgment with her own affidavit and her deposition testimony. See DE 26-2 and -3.

         II. SUMMARY JUDGMENT STANDARD

         Summary judgment is appropriate where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). If the movant meets this burden, the burden shifts to the non-moving party to come forward with specific facts showing that there is a genuine issue for trial. Shaw v. City of Selma, 884 F.3d 1093, 1098 (11th Cir. 2018).

         “A factual dispute is ‘material' if it would affect the outcome of the suit under the governing law, and ‘genuine' if a reasonable trier of fact could return judgment for the non-moving party.” Miccosukee Tribe of Indians of Fla. v. United States, 516 F.3d 1235, 1243 (11th Cir. 2008). When deciding a summary judgment motion, a court views the evidence in the light most favorable to the non-moving party and draws all reasonable inferences in that party's favor. Furcron v. Mail Ctrs. Plus, LLC, 843 F.3d 1295, 1304 (11th Cir. 2016); see also Schweitzer v. Comenity Bank, 866 F.3d 1273, 1278 (11th Cir. 2017) (stating that, if “reasonable minds might differ on the inferences arising from undisputed facts, then the district court should deny summary judgment” (quotation marks omitted)). The court may not weigh conflicting evidence or make credibility determinations. Furcron, 843 F.3d at 1304.

         III. ANALYSIS

         A resident or citizen of the United States having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign county must report that relationship for each year that the relationship exists by filing a FBAR by June 30 of the following year. See 31 U.S.C. § 5314(a); 31 C.F.R. §§ 1010.306(c), 1010.350(a). Failure to do so subjects the resident or citizen to a civil penalty. See 31 U.S.C. § 5321(a)(5)(A), (B). That penalty is greater if the failure to report is willful. See Id. § 5321(a)(5)(C).

         A party's state of mind generally is a question of fact for the trier of fact to determine at trial. Chanel, Inc. v. Italian Activewear of Fla., Inc., 931 F.2d 1472, 1476 (11th Cir. 1991); see also United States v. Williams, 489 Fed.Appx. 655, 658 (4th Cir. 2012) (“Whether a person has willfully failed to comply with a tax reporting requirement is a question of fact.”).

         The relevant statutes and regulations do not define willful. “‘[W]illfully' is a word of many meanings whose construction is often dependent on the context in which it appears.” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 (2007) (quotation marks omitted). “[W]here willfulness is a statutory condition of civil liability, we have generally taken it to cover not only knowing violations of a standard, but reckless ones as well.” Id. (stating that such a construction “reflects common law usage, which treated actions in ‘reckless disregard' of the law as ‘willful' violations”); see also Id. at 57 n.9 (distinguishing the use of the word “willful” in the criminal context, where it is “regularly read . . . as limiting liability to knowing violations”). Recklessness in the civil context is an objective standard that entails “an unjustifiably high risk of harm that is either known or so obvious that it should be known.” Id. at 68 (quotation marks omitted).

         Thus, in civil cases involving FBAR reporting violations, several courts have defined the willfulness requirement to include both knowing and reckless violations. See United States v. Brandt, No. 17-80671-CIV, 2018 WL 1121466, at *4 (S.D. Fla. Jan. 24, 2018) (stating, on review of a default motion in a FBAR case, that “[w]illfulness does not require actual knowledge of the duty to report interest in a foreign financial account, but merely reckless or careless disregard of that statutory duty”); see also Williams, 489 Fed.Appx. at 658; United States v. Garrity, 304 F.Supp.3d 267, 273-74 (D. Conn. 2018); United States v. McBride, 908 F.Supp.2d 1186, 1204-05 (D. Utah 2012).

         The Defendant contends that a willful FBAR reporting violation requires a showing of a “known legal duty rather than mere recklessness.” DE 26 at 12. In a criminal case involving FBAR reporting violations, the Sixth Circuit stated that “the test for statutory willfulness is voluntary, intentional violation of a known legal duty.” United States v. Sturman, 951 F.2d 1466, 1476 (6th Cir. 1991) (quotation marks omitted). As already discussed, the Supreme Court has distinguished the definitions of willful in the civil and criminal contexts. See Safeco Ins. Co., 551 U.S. at 57 n.9. Moreover, the Sturman court also stated that willfulness may be inferred “from a conscious effort to avoid learning about reporting requirements” or “from conduct meant to conceal or mislead sources of income or other financial information.” 951 F.2d at 1476; see also Williams, 489 Fed.Appx. at 658 (stating that ...


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