United States Department of Justice, Tax Division v. Pflum et al

MOTION for SUMMARY JUDGMENT

E.D. Cal.June 9, 2017

- 1 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 DAVID A. HUBBERT Acting Assistant Attorney General HERBERT W. LINDER U.S. Department of Justice 717 N. Harwood, Suite 400 Dallas, Texas 75201 (214) 880-9754 or 880-9721 (214) 880-9741 [fax] Herbert.W.Linder@USDOJ.gov Attorney for the United States Of Counsel PHILLIP A. TALBERT United States Attorney Attorneys for the United States of America IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA UNITED STATES OF AMERICA, Plaintiff, v. DAVID PFLUM PILOT ENTERPRISE, LLC, FRIDAY HARBOR WY, LLC, STATE OF CALIFORNIA FRANCHISE TAX BOARD, and EL DORADO COUNTY, Defendants. Case No. 2:15-CV-02659-MCE-CKD UNITED STATES’ NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AND BRIEF IN SUPPORT Hearing Date: July 13, 2017 Time: 2:00 p.m. Courtroom: 7 NOTICE OF MOTION, MOTION FOR SUMMARY JUDGMENT AND BRIEF IN SUPPORT, TABLES OF CONTENTS AND AUTHORITIES Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 1 of 24 - i - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 TABLE OF CONTENTS Notice of Motion .……………………………………………………………...……........………..2 Motion for Summary Judgment and Brief in Support .…................................................................2 I. Statement of the Case.....................................................................................................2 II. Standard for Granting Summary Judgment....................................................................3 III. Issues Presented .............................................................................................................4 A. Whether Pilot Enterprise LLC and Friday Harbor LLC are nominees of David Pflum merely holding title to the Dedi Properties for him? B. Whether the transfer of the Dedi Properties from Pilot Enterprise LLC to Friday Harbor LLC was subject to the filed federal tax liens? C. Whether the transfer of the Dedi Properties to Pilot Enterprise LLC and then subsequent transfer to Friday Harbor LLC were fraudulent transfers? D. Whether the Court should order the sale of the Dedi Properties? IV. Statement of Undisputed Facts ......................................................................................4 Criminal Convictions and Opening of Tax Liability Examination ................................4 Dedi Property Purchase and Fraudulent Conveyance to Pilot Enterprise ......................5 Taxes Assessed and NTFLs Filed ..................................................................................6 Pflum Rented Out the Dedi Properties...........................................................................7 $6.4 Million Judgment and Attempted Fraudulent Conveyance to Friday Harbor .......8 Current Suit and Attempt to Collect ..............................................................................9 Priority of Lienholders ................................................................................................10 V. Argument .....................................................................................................................11 A. David Pflum is the true and beneficial owner of the Dedi Properties and Pilot Enterprise and Friday Harbor are merely nominees holding title for him .............11 B. The federal tax liens attached to the Dedi Properties and Friday Harbor took the property subject to the federal tax liens ...........................................................14 C. Pflum’s transfers of the Dedi Properties to Pilot Enterprise and then to Friday Harbor were fraudulent and void under California law .............................15 D. The Court should order the Dedi Properties sold...................................................18 VI. Conclusion ...................................................................................................................19 TABLE OF AUTHORITIES Cases Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) .................................................................................................................... 3 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .................................................................................................................... 3 Fourth Inv. LP v. United States, 720 F.3d 1058 (9th Cir. 2013) ............................................................................................ 11, 12 Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 2 of 24 - ii - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 G.M. Leasing Corp. v. United States, 429 U.S. 338, (1977) ........................................................................................................... 11, 14 In re SCI Real Estate Investments, LLC, 2:11–bk–15975, 2013 WL 1829648 (C.D.Cal. May 1, 2013) .................................................. 16 Towe Antique Ford Foundation v. Internal Revenue Service, 791 F.Supp. 1450 (D.Mont.1992) ............................................................................................. 12 United States v. Bess, 357 U.S. 51 (1958) .................................................................................................................... 14 United States v. Boyce, 38 F. Supp.3d 1135 (C.D. Cal. 2014) ................................................................................. 15, 16 United States v. Branch Coal Corp., 390 F.2d 7 (3d Cir. 1968) ......................................................................................................... 18 United States v. Braquet, 316 Fed. Appx. 345 (5th Cir. 2009) .......................................................................................... 18 United States v. Cache Valley Bank, 866 F.2d 1242 (10th Cir. 1989) ................................................................................................ 14 United States v. Davenport, 106 F.3d 1333 (7th Cir. 1997) .................................................................................................. 14 United States v. Garcia, 474 F.2d 1202 (5th Cir. 1973) .................................................................................................. 18 United States v. Heasley, 283 F.2d 422 (8th Cir. 1960) .................................................................................................... 18 United States v. National Bank of Commerce, 472 U.S. 713 (1985) .................................................................................................................. 14 Statutes 26 U.S.C. § 6321 ........................................................................................................................... 14 26 U.S.C. § 6322 ........................................................................................................................... 14 26 U.S.C. §§ 7201 ........................................................................................................................... 4 26 U.S.C. §§ 7202 ........................................................................................................................... 4 26 U.S.C. §§ 7203 ........................................................................................................................... 4 26 U.S.C. §§7403(c)&(d).............................................................................................................. 18 28 U.S.C. § 2001 ........................................................................................................................... 18 Cal. Civ .Code § 3439.04(a)(1) ..................................................................................................... 15 Cal. Civ.Code § 3439.04(b) .......................................................................................................... 16 I.R.C. § 6323(a) ............................................................................................................................ 15 I.R.C. § 6323(h)(6) ........................................................................................................................ 15 Rules Fed. R.Civ.Pro. 56(c) ...................................................................................................................... 3 Fed. R.Civ.Pro. 56(e) ...................................................................................................................... 3 Miscellaneous California’s Uniform Fraudulent Transfer Act (UFTA) ..........................................................15, 16 Internal Revenue Manual, §5.10.8 .................................................................................................18 Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 3 of 24 - 1 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 DAVID A. HUBBERT Acting Assistant Attorney General HERBERT W. LINDER U.S. Department of Justice 717 N. Harwood, Suite 400 Dallas, Texas 75201 (214) 880-9754 or 880-9721 (214) 880-9741 [fax] Herbert.W.Linder@USDOJ.gov Attorney for the United States Of Counsel PHILLIP A. TALBERT United States Attorney Attorneys for the United States of America IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA UNITED STATES OF AMERICA, Plaintiff, v. DAVID PFLUM PILOT ENTERPRISE, LLC, FRIDAY HARBOR WY, LLC, STATE OF CALIFORNIA FRANCHISE TAX BOARD, and EL DORADO COUNTY, Defendants. Case No. 2:15-CV-02659-MCE-CKD UNITED STATES’ NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AND BRIEF IN SUPPORT Hearing Date: July13, 2017 Time: 2:00 p.m. Courtroom: 7 NOTICE OF MOTION Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 4 of 24 - 2 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Please take notice that Plaintiff, United States of America, has moved the Court to grant summary judgment in favor of the United States against David Pflum, Pilot Enterprise LLC, and Friday Harbor WY LLC. The United States seeks to submit this Motion for Summary Judgment and Brief in Support for hearing before the Honorable Morrison C. England, Jr., Chief United States District Judge in Courtroom 7, 14th floor of the United States Courthouse located at 501 I Street, Suite 4- 200, Sacramento, California, on June 15, 2017 at 2:00 p.m. MOTION FOR SUMMARY JUDGMENT AND BRIEF IN SUPPORT The United States of America, by its undersigned counsel, files this Motion for Summary judgment and alleges as follows: I. STATEMENT OF THE CASE David Pflum has a long history of non-payment of his federal income taxes and attempting to place his assets beyond the reach of the IRS. Pflum was convicted twice of federal tax crimes. The IRS has filed numerous suit against Pflum to collect his unpaid tax liabilities. In 2007, Pflum acquired the properties located at 1274 and 1278 Dedi Avenue, South Lake, Tahoe, Eldorado County, CA. (collectively “Dedi Properties”). Aware of his pending significant tax liabilities, Pflum fraudulently transferred the Dedi Properties to his nominee Pilot Enterprise LLC for no consideration. In 2008, the IRS filed federal tax liens against Pflum in Eldorado County. In 2008 and 2009, the IRS efiled nominee notices of federal tax liens against Pilot Enterprise LLC as a nominee of David Pflum. In May of 2013, the IRS obtained a judgment exceeding six million dollars against Pflum for unpaid federal income taxes relating to the 1997- 2007 tax years and unpaid employment tax liabilities. Shortly thereafter, in a further effort to Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 5 of 24 - 3 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 keep the Dedi Properties from the IRS, Pflum transferred the Dedi Properties from Pilot Enterprise LLC to his other nominee Friday Harbor, LLC for no consideration. Despite these transfers, the rent for the Dedi Properties was always paid to David Pflum. Pflum always controlled the Dedi Properties. David Pflum is the true owner of the Dedi Properties. Accordingly, the federal tax liens attached to the Dedi Properties. And the Court should order the sale of the Dedi Properties. II. STANDARD FOR GRANTING SUMMARY JUDGMENT A motion for summary judgment must be granted when evidence on in the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Where the moving party will have the burden of proof on an issue at trial, the movant must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. On an issue as to which the nonmoving party will have the burden of proof, however, the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party's case. Id. If the moving party meets its initial burden, the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, “specific facts showing that there is a genuine issue for trial.” See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Fed. R. Civ. P. 56(e). Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 6 of 24 - 4 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 III. ISSUES PRESENTED A. Whether Pilot Enterprise LLC and Friday Harbor LLC are nominees of David Pflum merely holding title to the Dedi Properties for him? B. Whether the transfer of the Dedi Properties from Pilot Enterprise LLC to Friday Harbor LLC was subject to the filed federal tax liens? C. Whether the transfer of the Dedi Properties to Pilot Enterprise LLC and then subsequent transfer to Friday Harbor LLC were fraudulent transfers? D. Whether the Court should order the sale of the Dedi Properties? IV. STATEMENT OF UNDISPUTED FACTS Criminal Convictions and Opening of Tax Liability Examination 1. On August 30, 2004, David Pflum was found guilty on numerous criminal tax counts for violations of 26 U.S.C. §§ 7202 (failure to pay over employment taxes) and 7203 (failure to file tax returns). See United States v. David Pflum, Case No.5:04-cr-40008 (USDC Kansas). Recently, David Pflum was again found guilty on criminal tax counts 26 U.S.C. § 7201 (attempting to evade or defeat tax) and 7212 (interfering with tax laws). See United States v. David Pflum, Case No.5:14-cr-40062 (USDC Kansas). 2. On November 9, 2006, the IRS opened an examination regarding David Pflum’s 1997 tax year. See Attached as exhibit 14 is the Declaration of Revenue Officer Larry Inman and exhibit 3 to that declaration which was filed as Docket #19, in the case of United States v. David G. Pflum et al, Case No. CV-12-541 (USDC ED Wash.). Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 7 of 24 - 5 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Dedi Property Purchase and Fraudulent Conveyance to Pilot Enterprise 3. The property located at 1274 Dedi Avenue, South Lake Tahoe (“1274 Dedi Property”), APN 032-282-34-100 is fully described as follows: The land referred to herein below is situated in the City of South Lake Tahoe, County of El Dorado, State of California, and described as follows: Lot 85, Block 3, as shown on the Map of “Armstrong Subdivision No. 7” filed for record June 29, 1954 in Block “B” of Maps, Page 39, El Dorado County Records. See exhibit 4. 4. The property located at 1278 Dedi Avenue, South Lake Tahoe (“1278 Dedi Property”), APN 032-282-33-100 is fully described as follows: The land referred to herein below is situated in the City of South Lake Tahoe, County of El Dorado, State of California, and described as follows: Lot 84, Block 3, as shown on the Map of “Armstrong Subdivision No. 7” filed for record June 29, 1954 in Block “B” of Maps, Page 39, El Dorado County. See exhibit 3. 5. On August 8, 2007, Pflum acquired the 1274 Dedi Property and 1278 Dedi Property. See Exhibits 4 and 3, respectively. The deeds for the Dedi Properties were recorded with the El Dorado County, California Recorder of Deeds on August 10, 2007. Id. 6. On August 13, 2007, Pflum conveyed title to the 1278 Dedi Property to his nominee Pilot Enterprise for no consideration. See Exhibit 5. The deed specifically stated that the grantor and grantees in the conveyance were the same parties. See Exhibit 5. The deed for the 1278 Dedi Property was recorded with the El Dorado County, California Recorder of Deeds on August 29, 2007. See Exhibit 5. 7. On August 14, 2007, Pflum conveyed title to the 1274 Dedi Property to his nominee Pilot Enterprise for no consideration. See Exhibit 6. The deed specifically stated that the grantor and grantees in the conveyance were the same parties. See Exhibit 6 and Docket #9 Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 8 of 24 - 6 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 at p. 12. The deed was recorded with the El Dorado County, California Recorder of Deeds on August 29, 2007. See Exhibit 6 8. There was no documentary transfer tax paid on the transfers of the Dedi Properties from Pflum to Pilot Enterprises. See Exhibits 5 and 6. Taxes Assessed and NFTLs Filed 9. Beginning November 12, 2007, a delegate of the Secretary of the Treasury made assessments against Pflum for his unpaid income tax liabilities and Form 941 tax liabilities as set forth below: Type of Tax Tax Period Assessment Dates Income 1997 09/25/2008 Income 1998 09/25/2008 Income 1999 09/25/2008 Income 2000 05/25/2009 Income 2001 05/25/2009 Income 2002 05/25/2009 Income 2003 05/25/2009 Income 2004 05/25/2009 Income 2005 05/25/2009 Income 2006 12/11/2008 Income 2007 03/30/2009 Form 941 4th Qtr. 1999 11/12/2007 See exhibit 1, pgs. 3 and 4 10. On October 7, 2008, Notices of Federal Tax Liens for Pflum’s outstanding employment tax liabilities were filed in the Eldorado County records. See Exhibit 7. Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 9 of 24 - 7 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 11. On December 19, 2008, a nominee Notices of Federal Tax lien were filed in the El Dorado County, CA property records against Pilot Enterprise, LLC, as nominee of Pflum for his employment tax liabilities. See Exhibit 8. 12. On June 26, 2009, a Notice of Federal Tax Lien for Pflum’s 1997 through 2007 federal income tax liabilities was filed in the El Dorado County, CA Recorder’s Office. See Exhibit 9. 13. On July 28, 2009, a nominee Notice of Federal Tax lien was filed in the El Dorado County, CA property records against Pilot Enterprise, LLC, as nominee of Pflum for his 1997 through 2007 federal income tax liabilities. See Exhibit 10. 14. On April 9, 2010, the State of California, Franchise Tax Board filed a notice of State Tax Lien against Pflum in the El Dorado County, CA Recorder’s Office. See Docket #31. Pflum Rented Out the Dedi Properties 15. In February of 2008, Wendy Pierson rented the 1274 Dedi property from David Pflum, individually. See Exhibit 13 Declaration of Wendy Pierson.at paragraphs 3, 4 and exhibit A to the declaration. Ms. Pierson has rented the 1274 Dedi property from February 2008 to the present date from David Pflum. Id. Ms. Pierson’s rental for the 1274 Dedi Avenue Property with David Pflum included full access and use of both the 1274 Dedi and 1278 Dedi properties. See Exhibit 13 Declaration of Wendy Pierson.at paragraph 14. 16. Ms. Pierson made all of the monthly rental payments for the property located at 1274 Dedi Avenue by check directly payable to Dave Pflum. The rental agreement specifically stated the rent be paid to Dave Pflum. See Exhibit 5 Declaration of Wendy Pierson.at paragraphs 5, 6 and exhibits A and B to the declaration. Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 10 of 24 - 8 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 17. Ms. Pierson never wrote a check or made a payment to Pilot Enterprises LLC or Friday Harbor for the rental of the property located 1274 Dedi Property. See Exhibit 5 Declaration of Wendy Pierson.at paragraph 10. 18. It was Ms. Pierson’s understanding that at all times during her rental period from 2008 to present, David Pflum was the owner of the 1274 Dedi Avenue and 1278 Dedi Avenue Properties. See Exhibit 5 Declaration of Wendy Pierson.at paragraphs 11 and 17. 19. Pflum never represented to Ms. Pierson that the 1274 Dedi and 1278 Dedi properties were owned by Pilot Enterprises LLC or Friday Harbor. See Exhibit 5 Declaration of Wendy Pierson.at paragraphs 8, 9, 15 and 16. 20. David Pflum admitted that the rental payments from Ms. Pierson were his property. See Exhibit 5 Declaration of Wendy Pierson.at page 13 of exhibit C to the declaration. 21. When the IRS levied upon the rental payments, David Pflum demanded that Wendy Pierson pay him the back due rent and the levying of the Dedi Property rent was a conversion of his property. Id. Pflum threatened legal action against Pierson if the rent was not paid to him. Id. $6.4 Million Judgment and Attempted Fraudulent Conveyance to Friday Harbor 22. On September 21, 2012, the United States filed suit against David Pflum (“Pflum”) to reduce his 1997 through 2007 income tax assessments and Form 941 tax assessment for the period ending 12/31/1999 to judgment. See United States v. David G. Pflum, Case No. 5:12-CV-04115 (D. Kansas) Attached as exhibit 1, complaint. 23. On May 16, 2013, the United States District Court for the District of Kansas entered a default judgment in favor of the United States against Pflum in the amount of $6,408,357.25 as of March 14, 2013, plus interest and statutory additions for his 1997 - 2007 Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 11 of 24 - 9 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 federal income tax liabilities and his Form 941 tax liability for the fourth quarter of 1999. See Exhibit 2, and Docket #31. 24. On September 27, 2013, Pflum attempted to transfer the 1274 Dedi Property and 1278 Dedi Property from his nominee Pilot Enterprise to his nominee Friday Harbor for no consideration. See Exhibits 11 and 12, respectively. The deeds specifically stated that the grantor and grantees, Pilot Enterprise and Friday Harbor in the conveyance were the same parties. However, Pflum listed the wrong address with each APN on these deeds. The 1274 Dedit Property is Lot 85 with an APN: 032-282-34-100. The 1278 Dedi Property is Lot 84 with an APN: 032-282-33-100. See Exhibits 3, 4, 5, 6, and Docket #9. Current Suit and Attempt to Collect 25. On December 23, 2015, the United States filed its Complaint to recover the unpaid federal taxes, penalties and interest assessed against David Pflum by foreclosing the federal tax liens on parcels of real property located in San Joaquin County, El Dorado County and Plumas County California. 26. The United States specifically seeks to foreclose upon two parcels of real property in El Dorado County, CA, owned by David Pflum specifically located at 1274 Dedi Avenue, South Lake Tahoe, CA, and 1278 Dedi Avenue, South Lake Tahoe CA. (Collectively, the Dedi Properties). 27. This suit is one of a series of suits filed against David Pflum to collect his taxes. See United States v. David G. Pflum, et al, CV-12-541 in the United States District Court for the Eastern District of Washington (complaint to foreclose tax liens on property in Washington State). See also United States v. David Pflum et al, 5:16-CV-0416 in the United States District Court for the District of Kansas (complaint to foreclose tax liens against property in Kansas). Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 12 of 24 - 10 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 28. On March 14, 2016, the United States served Defendant Pilot Enterprise, LLC, (“Pilot Enterprise”), with the summons and complaint. See Docket #14. To date, Pilot Enterprise has not filed an answer or other responsive pleading. On June 23, 2016, the United States filed a request for Clerk’s Entry of Default against Pilot Enterprise, which is still pending. See Dkt. #24. 29. David Pflum is the manager of Pilot Enterprise. See Exhibit 7. 30. On March 14, 2016, Defendant Friday Harbor WY, LLC, (“Friday Harbor”), was served with the summons and complaint. See Docket #13. To date, Friday Harbor WY, LLC, has not filed an answer or other responsive pleading. On June 23, 2016, the United States filed a request for Clerk’s Entry of Default against Friday Harbor, which is still pending. See Dkt. #24. 31. David Pflum is the manager of Friday Harbor. See Exhibit 7. 32. Defendant Plumas County, California, was dismissed with prejudice from this suit. See Docket # 17. 33. The United States has filed a motion to dismiss defendants Amir Ahmed, City of Stockton and San Joaquin County from this suit, which is pending. See Docket #35 Priority of Lienholders 34. Pflum owes unpaid property taxes to El Dorado County, California related to the Dedi Properties. See Docket #25. 35. The United States, defendant El Dorado County, and defendant State of California Franchise Tax Board have stipulated to their respective lien priorities and Eldorado County’s property taxes as they relate to real properties located at 1274 and 1278 Dedi Avenue, South Lake Tahoe, CA. See Docket #25. 36. The United States, El Dorado County and State of California Franchise Tax Board stipulated that El Dorado County’s claims for past due property taxes on the Dedi Properties are Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 13 of 24 - 11 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 superior to the United States’ federal tax liens and State of California Franchise Tax Board’s state tax lien. See Docket #25 at paragraphs 2 and 3. 37. State of California Franchise Tax Board and the United States have stipulated to their respective lien priorities and distribution of sales proceeds as their liens relate to the Dedi Properties. See Docket #31. 38. The United States and the State of California Franchise Tax Board hereby stipulated and agree that the sales proceeds of the 1274 Dedi Property, and 1278 Dedi Property shall be paid first to the United States in the amount of $509,920.95 plus interest and accruals from 8/14/2016, then to the State of California Franchise Tax Board in the amount of $68,322.57 plus interest and accruals from 10/21/2016, and then any remaining excess proceeds to the United States. See Docket #31, at paragraphs 10 and 11. V. ARGUMENT A. David Pflum is the true and beneficial owner of the Dedi Properties and Pilot Enterprise and Friday Harbor are merely nominees holding title for him. The United States’ federal tax liens attached to Pflum’s interest in the Dedi Properties because Pilot Enterprise and Friday Harbor are nominees merely holding title to the Dedi Properties for Pflum. A federal tax lien attaches to all property and rights to property, whether real or personal, belonging to such person, including property held by the taxpayer's nominees— someone who has legal title when, in substance, the taxpayer enjoys the benefits of ownership. G. M. Leasing Corp. v. United States, 429 U.S. 338, 350–51, 97 S. Ct. 619, 50 L. Ed. 2d 530 (1977). California law recognizes nominee lien theory of ownership and the Courts have applied it in the federal tax lien context. Fourth Inv. LP v. United States, 720 F.3d 1058, 1068 (9th Cir. 2013). Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 14 of 24 - 12 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 The Court in Fourth Inv. LP v. United States outlined a six factor test to determine nominee ownership set forth as follows: (1) No consideration or inadequate consideration paid by the nominee; (2) Property placed in the name of the nominee in anticipation of a suit or occurrence of liabilities while the transferor continues to exercise control over the property; (3) Close relationship between transferor and the nominee; (4) Failure to record conveyance; (5) Retention of possession by the transferor; and (6) Continued enjoyment by the transferor of benefits of the transferred property.” Id. at 1070. See also, Towe Antique Ford Found. v. I.R.S., Dep't of Treasury, U.S., 791 F. Supp. 1450, 1454 (D. Mont. 1992), aff'd sub nom. Towe Antique Ford Found. v. I.R.S., 999 F.2d 1387 (9th Cir. 1993). No single factor is dispositive but it is the totality of the circumstances that must be considered to determine whether the taxpayer exercised active or substantial control over the property. Fourth Inv, LP, 720 F.3d. at 720. The Pilot Enterprise and Friday Harbor are nominees of Pflum merely holding title to the 1274 and 1278 Dedi properties because almost all of the nominee elements are present. (Factor 1) Neither Pilot Enterprise nor Friday Harbor paid any consideration for the Dedi Properties. There is no stated consideration on the Deeds. There was no documentary transfer tax paid on the transfers of the Dedi Properties from Pflum to Pilot Enterprises LLC and then to Friday Harbor. (Factor 2) Pflum placed the Dedi Properties in the name of Pilot Enterprise to hide and protect these properties from the IRS. Pflum had been convicted of criminal tax violations, the IRS was auditing and significant tax liabilities were to be assessed against him. In May 2013, the United States obtained a judgment against Pflum and began filing suits around the country to foreclose the federal tax liens against his properties. Shortly thereafter, in September 2013, Pflum transferred the Dedi Properties from Pilot Enterprise to Friday Harbor for no consideration. (Factor 3) There is a close relationship because Pflum admitted on the deed that he and Pilot Enterprises was the same party. He further admitted that Pilot Enterprises and Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 15 of 24 - 13 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Friday Harbor are the same party. It was Wendy Pierson ‘s understand that at all times Pflum was the owner of the Dedi Properties. Pflum is the manager of both Pilot Enterprises and Friday Harbor. (Factors 5 and 6) Pflum retained possession and continued to receive the benefits of the Dedi Properties. In February 2008, after the Dedi Properties were titled to Pilot Enterprise, Pflum rented the property to Wendy Pierson. Plfum, individually, executed the rental agreement. Plfum stated the rental contract was between him and Wendy Pierson. All the rent for the Dedi Properties was paid to Pflum and not Pilot Enterprises or Friday Harbor. At all times during the rental periods, Pflum received the rent paid by Pierson from Debi properties regardless of how the properties were titled. When the IRS levied upon the rental payments, Pflum demanded that Wendy Pierson pay him the back due rent. Pflum further admitted that the levying of the Dedi Property rent was a conversion of his property. Every factor other than the weighs heavily in favor of the United States. Moreover, although Pflum did not maintain possession of the Dedi Properties, he exercised substantial control over them, entering into rental agreements, collecting rent and threatening legal action when the rent was not paid to him. Based on the foregoing, it is clear that Pflum is the actual owner of the 1274 and 1278 Dedi Properties. Pilot Enterprises LLC and Friday Harbor are mere nominees holding title for Pflum in an attempt to keep the properties from the United States. Thus, the United States’ federal tax liens filed against Pflum attached to the Dedi Properties. Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 16 of 24 - 14 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 B. The federal tax liens attached to the Dedi Properties and Friday Harbor took the property subject to the federal tax liens. A federal tax lien is created pursuant to 26 U.S.C.A. § 6321 (West) when a taxpayer either refuses or neglects to pay a tax upon demand. The lien imposed under Section 6321 arises automatically at the time that the tax assessment is made and continues until the liability is satisfied or becomes unenforceable by reason of lapse of time. 26 U.S.C. § 6322; United States v. National Bank of Commerce, 472 U.S. 713, 719-720 (1985). This federal tax lien attaches to "all property and rights to property, whether real or personal, belonging to such person." 26 U.S.C. § 6321; United States v. Bess, 357 U.S. 51 (1958). Federal tax liens also attach to property held by the taxpayer's nominees—someone who has legal title when, in substance, the taxpayer enjoys the benefits of ownership. G.M. Leasing Corp. v. United States, 429 U.S. 338, 350–51 (1977). Subsequent transfer of that property does not affect the lien because no matter into whose hands the property goes, the property passes with the lien attached. United States v. Cache Valley Bank, 866 F.2d 1242, 1245 (10th Cir. 1989); United States v. Davenport, 106 F.3d 1333, 1335 (7th Cir. 1997) (quoting United States v. Bess, 357 U.S. 51, 57 (1958)). As shown above, Pilot Enterprise was a nominee/alter ego of Pflum, merely holding title to the 1274 Dedi Property and 1278 Dedi Property for the real owner, Pflum. The federal tax liens attached to the Dedi Properties. The IRS, on December 19, 2008 and July 28, 2009, filed nominee Notices of Federal Tax liens in the El Dorado County, CA property records against Pilot Enterprise as nominee of Pflum for his Form 941 tax liabilities and 1997 through 2007 federal income tax liabilities, respectively. The Dedi Properties are located in El Dorado County. Therefore, the nominee liens filed against Pilot Enterprise attaches to the Dedi Properties. On September 27, 2013, Pflum transferred the 1274 Dedi Property and 1278 Dedi Property from his nominee Pilot Enterprise to his nominee Friday Harbor for no consideration. Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 17 of 24 - 15 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Thus, the federal tax liens attached to and followed the Dedi Properties into the hand of Friday Harbor. Furthermore, Pilot Enterprise and Friday Harbor are not purchasers, holders of a security interest, mechanic’s lien holders, or judgment lien creditors in regards to either the 1274 or 1278 Dedi Properties in accordance with I.R.C. § 6323(a). Pilot Enterprise and Friday Harbor were not bona fide purchasers of the Dedi Properties as set forth in I.R.C. § 6323(h)(6) because the purported transfer of the Dedi Properties to Pilot Enterprise and Friday Harbor, LLC was for no consideration, Based on the foregoing, it is clear that Pflum is the actual owner of the 1274 and 1278 Dedi Properties. Friday Harbor is a mere nominee holding title for him. Friday Harbor obtained the Dedi Properties subject to the United States’ federal tax liens. Thus, the United States federal tax liens filed against Pflum attached to the Dedi Properties. C. Pflum’s transfers of the Dedi Properties to Pilot Enterprise and then to Friday Harbor were fraudulent and void under California law. Pflum’s' transfers of the Dedi Properties to Pilot Enterprise and then to Friday Harbor were also fraudulent as defined in California's Uniform Fraudulent Transfer Act (UFTA) because the transfers were made with the actual intent to hinder, delay, or defraud the United States. Cal. Civ. Code § 3439.04(a)(1) which provides as follows: (a) transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with the actual intent to hinder, delay, or defraud any creditor of the debtor. The determination of whether there is actual intent to hinder, delay, or defraud under the UFTA is a question of fact. Because a defendant rarely admits that a transfer was fraudulent, the evidence of intent “must of necessity consist of inferences drawn from the circumstances surrounding the transaction and the relationship and interests of the parties.” See United States v. Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 18 of 24 - 16 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Boyce, 38 F. Supp.3d 1135, 1156 (C.D. Cal. 2014), aff'd, No. 14-56610, 2017 WL 1055599 (9th Cir. Mar. 21, 2017). UFTA’s eleven “badges of fraud” used to determine fraudulent intent are as follows: (1) whether the transfer was to an insider; (2) whether the debtor retained possession or control of the property after the transfer; (3) whether the transfer was disclosed or concealed; (4) whether before the transfer was made, the debtor had been sued or threatened with suit; (5) whether the transfer was of substantially all the debtor's assets; (6) whether the debtor absconded; (7) whether the debtor removed or concealed assets; (8) whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred; (9) whether the debtor was insolvent or became insolvent shortly after the transfer was made; (10) whether the transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) whether the debtor transferred the essential assets of a business to a lienholder that then transferred them to an insider of the debtor. See Cal. Civ. Code § 3439.04(b). There are no minimum number of factors, mathematical formulas or counting rules from the UFTA list of badges that determines fraudulent intent but it is a totality of evidence in the case. See Boyce, 38 F. Supp.3d. at 1156-57. See also In re SCI Real Estate Investments, LLC, 2:11– bk–15975, 2013 WL 1829648, *4 (C.D. Cal. May 1, 2013). In the present case, at least four badges of fraud exist to evidence that Pflum had the fraudulent intent to transfer the Dedi Properties. (Badge 1) The transfers of the Dedi Properties were to insiders. Pflum admitted that he and Pilot Enterprises were the same party. He further admitted that Pilot Enterprises and Friday Harbor were the same party. Pflum is the manager of both Pilot Enterprise and Friday Harbor. Badge 1 favors the government. (Badge 2) Pflum retained possession and continued to receive the benefits of the Dedi Properties. In February 2008, after the Dedi Properties were titled to Pilot Enterprise, Pflum individually rented the property to Wendy Pierson. Plfum stated the rental contract was between him and Wendy Pierson. All the rent for the Dedi Properties was paid to Pflum and not Pilot Enterprises or Friday Harbor regardless of how the properties were deeded. When the IRS levied upon the Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 19 of 24 - 17 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 rental payments, Pflum demanded that Wendy Pierson pay him the back due rent. Pflum further admitted that the levying of the Dedi Property rent was a conversion of his property. Badge 2 favors the government. (Badge 8) Neither Pilot Enterprise nor Friday Harbor paid any consideration for the Dedi Properties. There was no stated consideration on the Deeds. There was no documentary transfer tax paid on the transfers of the Dedi Properties from Pflum to Pilot Enterprise or to Friday Harbor. All the rent by from 2008 to the present for the Dedi Properties was paid to Pflum. Badge 8 favors the government. (Badge 10) Pflum’s transfer of the Dedi Properties to Pilot Enterprise occurred when Pflum knew he had a substantial tax debt due and owing to the United States. In November of 2006, the IRS opened an examination of Pflum’s 1997 tax year. Pflum’s tax returns for the 1998 through 2006 were all due by April 15, 2007. As of April 15, 2007, Pflum knew he owed a substantial amount of taxes to the government. On August 8, 2007, Pflum acquired the Dedi Properties. On August 13 and 14, 2007, Pflum deeded the 1278 Dedi Property and 1274 Dedi Property to Pilot Enterprise, respectively. Thus, at the time of the transfer, Pflum knew he owed significant federal taxes. On December 19, 2008 and July 28, 2009, nominee Notices of Federal Tax liens were filed in the El Dorado County, CA property records against Pilot Enterprise as nominee of Pflum for his Form 941 tax liabilities and 1997 through 2007 federal income tax liabilities, respectively. On May 16, 2013, the U.S. District Court in Kansas entered a $6,408,357.25 judgment against Pflum in favor of the United States. On September 27, 2013, Pflum transferred the Dedi Properties from Pilot Enterprise to Friday Harbor. Accordingly, Pflum transferred the Dedi Properties to Friday Harbor shortly after the judgment was entered against him. Badge 10 favors the government. Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 20 of 24 - 18 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Based on the foregoing, Pflum’s transfer of the Dedi Properties to Pilot Enterprise was fraudulent and should be voided. Likewise, Pflum’s transfer of the Debi Properties from Pilot Enterprise to Friday Harbor was fraudulent and should be voided. D. The Court should order the Dedi Properties sold. Pursuant to 26 U.S.C. §§7403(c) and (d), the Court has the authority to order a sale of property to satisfy the federal tax liens and do so through the use of a receiver. Additionally, section 2001(a), 28 U.S.C., empowers the Court to set the terms and conditions of a sale of real property that is sold under any decree or order of the Court. Section 2001 provides a rigorous procedure for the public sale of real property, including a requirement that the sale take place in the county in which the property is located. The Court has broad discretion in setting the terms and conditions of a sale under 28 U.S.C. § 2001. United States v. Braquet, 316 Fed. Appx. 345, 347 (5th Cir. 2009); United States v. Garcia, 474 F.2d 1202, 1206 (5th Cir. 1973); United States v. Branch Coal Corp., 390 F.2d 7, 10 (3d Cir. 1968); United States v. Heasley, 283 F.2d 422 (8th Cir. 1960). The United States requests that the Court allow the IRS to sell the Dedi Properties described above. The IRS has created a unit that specializes in selling real and personal property, according to Internal Revenue Manual Section 5.10.8. This section authorizes an employee (Property Appraisal and Liquidation Specialist, or PALS) of the IRS to sell property in which the United States has brought an action to foreclose a lien on a taxpayer’s property or right to the property. The PALS unit has experience in efficiently selling property across the country and its members receive extensive training on the appraisal and sale of property. The United States, Eldorado County and the State of California Franchise Tax Board have entered stipulations that resolve any priority disputes in regard to their respective lien Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 21 of 24 - 19 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 interests in the Dedi properties and the proceeds of the sale thereof. Furthermore, a separate motion and order for distribution would be filed prior to the distribution of any sales proceeds. The sales proceeds from the Dedi Properties shall be paid: -First to the Eldorado County for property taxes; -Second to United States in the amount of $509,920.95 plus interest and accruals from 8/14/2016; -Third to the State of California Franchise Tax Board in the amount of $68,322.57 plus interest and accruals from 10/21/2016; and -Fourth, any remaining excess proceeds to the United States. Based on the foregoing, the Court should order the Dedi Properties sold to satisfy Pflum’s outstanding tax liabilities. VI. CONCLUSION Pflum is the real owner of the Dedi Properties and Friday Harbor is a mere nominee holding title to the properties for him. Pilot Enterprise and Friday Harbor are Pflum’s nominees as they relate to the Dedi Properties. The transfer of the Dedi Properties from Pilot Enterprise to Friday Harbor was subject to the federal tax liens. The transfer of the Dedi Properties from Pflum to Pilot Enterprises was fraudulent and that transfer is void. The subsequent transfer of the Dedi Properties from Pilot Enterprise to Friday Harbor was also fraudulent and void. Accordingly, the Court should order the foreclosure of federal tax liens and order that the Dedi Properties be sold in accordance with the law and practices of this Court with the proceeds of such sales be distributed, after costs to parties as stipulated in this case. WHEREFORE, the United States respectfully requests that the Court to grant its motion for summary judgment. Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 22 of 24 - 20 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Dated this 9th day of June, 2017. DAVID A. HUBBERT Acting Assistant Attorney General /s/ Herbert W. Linder HERBERT W. LINDER Ohio Bar No. 0065446 Attorney, Tax Division U.S. Department of Justice 717 N. Harwood St., Suite 400 Dallas, Texas 75201 Phone: (214) 880-9754 Fax: (214) 880-9741 herbert.w.linder@usdoj.gov ATTORNEYS FOR UNITED STATES Of Counsel PHILLIP A. TALBERT United States Attorney CERTIFICATE OF SERVICE IT IS HEREBY CERTIFIED that service of the foregoing UNITED STATES OF AMERICA’S MOTION FOR SUMMARY JUDGMENT and BRIEF IN SUPPORT has been made on June 9, 2017, by electronic notification or by mail to: JILL BOWERS 1300 I Street, Suite 125 P.O. Box 944255 Sacramento, CA 94244-2550 Attorneys for Defendant State of California Franchise Tax Board Judith Kerr County of El Dorado 330 Fair Lane Placerville, CA. 95667 Attorney for Defendant Eldorado County. By mail to: Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 23 of 24 - 21 - MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 David Pflum 110 West Bertrand Saint Marys, KS 66536 /s/Herbert W. Linder HERBERT W. LINDER Case 2:15-cv-02659-MCE-CKD Document 43 Filed 06/09/17 Page 24 of 24 - 1 - ORDER GRANTING THE UNITED STATES’ MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 DAVID A. HUBBERT Acting Assistant Attorney General HERBERT W. LINDER U.S. Department of Justice 717 N. Harwood, Suite 400 Dallas, Texas 75201 (214) 880-9754 or 880-9721 (214) 880-9741 [fax] Herbert.W.Linder@USDOJ.gov Attorney for the United States Of Counsel PHILLIP A. TALBERT Acting United States Attorney Attorneys for the United States of America IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA UNITED STATES OF AMERICA, Plaintiff, v. DAVID PFLUM PILOT ENTERPRISE, LLC, FRIDAY HARBOR WY, LLC, STATE OF CALIFORNIA FRANCHISE TAX BOARD, EL DORADO COUNTY, SAN JOAQUIN COUNTY, and CITY OF STOCKTON. Defendants. Case No. 2:15-CV-02659-MCE-CKD Order Granting the United States’ Motion for Summary Judgment ORDER GRANTING THE UNITED STATES’ MOTION FOR SUMMARY JUDGMENT Case 2:15-cv-02659-MCE-CKD Document 43-1 Filed 06/09/17 Page 1 of 2 - 2 - ORDER GRANTING THE UNITED STATES’ MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 The Court having considered the United States’ Motion for Summary Judgment and Brief in Support and the evidence submitted by the United States, and any opposition thereto, finds that the Motion should be GRANTED. ORDERED and DECREED that: 1. David Pflum is the true owner of the real properties located at 1274 Dedi Avenue, South Lake, Tahoe, Eldorado County, CA and 1278 Dedi Avenue, South Lake, Tahoe, Eldorado County, CA (collectively “Dedi Properties”); 2. Pilot Enterprise LLC and Friday Harbor LLC are nominees of David Pflum holding title to the Dedi Properties for him. 3. The transfers of the Dedi Properties to Pilot Enterprise LLC and then to Friday Harbor WY LLC were fraudulent, and are therefore void; 4. The United States has valid and enforceable federal tax liens that are attached to the Dedi Properties; 5. The United States is entitled to foreclose its tax liens against the Dedi Properties and the properties will be sold at public sale through the Internal Revenue Service’s Property Appraisal & Liquidation Specialist (“PALS”) as authorized and directed under 26 U.S.C. §§7403(c) and (d), 28 U.S.C. §§ 2001, 2002 and 2004; and 6. The proceeds from the Dedi Properties’ sale shall be distributed upon further motion and order from the Court, as follows: SIGNED this ______ day of__________________, 2017. __________________________________ UNITED STATES DISTRICT JUDGE Case 2:15-cv-02659-MCE-CKD Document 43-1 Filed 06/09/17 Page 2 of 2 Case 2:15-cv-02659-MCE-CKD Document 43-2 Filed 06/09/17 Page 1 of 4 Case 2:15-cv-02659-MCE-CKD Document 43-2 Filed 06/09/17 Page 2 of 4 Case 2:15-cv-02659-MCE-CKD Document 43-2 Filed 06/09/17 Page 3 of 4 Case 2:15-cv-02659-MCE-CKD Document 43-2 Filed 06/09/17 Page 4 of 4 Case 2:15-cv-02659-MCE-CKD Document 43-3 Filed 06/09/17 Page 1 of 6 Case 2:15-cv-02659-MCE-CKD Document 43-3 Filed 06/09/17 Page 2 of 6 Case 2:15-cv-02659-MCE-CKD Document 43-3 Filed 06/09/17 Page 3 of 6 Case 2:15-cv-02659-MCE-CKD Document 43-3 Filed 06/09/17 Page 4 of 6 Case 2:15-cv-02659-MCE-CKD Document 43-3 Filed 06/09/17 Page 5 of 6 Case 2:15-cv-02659-MCE-CKD Document 43-3 Filed 06/09/17 Page 6 of 6 Case 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