Case: 11-31076 Document: 00511896726 Page: 1 Date Filed: 06/22/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 22, 2012
No. 11-31076 Lyle W. Cayce
Summary Calendar Clerk
S.P. DAVIS, SR.
Plaintiff-Appellant
v.
UNITED STATES OF AMERICA
Defendant-Appellee
Appeal from the United States District Court
for the Western District of Louisiana
5:06-CV-158
Before KING, JOLLY, and GRAVES, Circuit Judges.
PER CURIAM:*
Plaintiff originally filed an action to challenge assessments against him
for failing to remit to the government taxes withheld from employees’ wages, and
the government counterclaimed. The district court granted summary judgment
for the government, and our court affirmed. Plaintiff now appeals the district
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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No. 11-31076
court’s order requiring him to make monthly installment payments in
satisfaction of that judgment. For the following reasons, we AFFIRM.
I. Facts and Procedural History
Plaintiff S.P. Davis, Sr. (Davis), along with three other individuals, was
an equal owner and director of Winward Institute (d/b/a Winward Hospital),
Winward Health Care Center, and Mynex, which together were in the business
of providing medical services to Louisiana patients. In 1997, the owners became
aware that the companies were delinquent in the payment of federal payroll
taxes, and they directed Mynex’s vice president of finance, Samuel Stevens, III
(Stevens), to negotiate a payment agreement with the Internal Revenue Service
(IRS). The tax deficiencies, however, were not corrected.
In 2002, pursuant to 26 U.S.C. § 6672(a), the IRS issued assessments
against the owners and Stevens for the companies’ unpaid payroll taxes.
Stevens was assessed $2,210,937.53, while each owner was assessed
$2,233,514.43. Davis paid a divisible portion of the assessment against him and
filed for a refund with the IRS. When his claim was denied, Davis filed suit in
district court to recover the amount paid. The government counterclaimed and
added the other owners and Stevens as counter-defendants. The district court
granted summary judgment for the government, ruling that the owners and
Stevens were “responsible persons” who had willfully failed to remit the taxes
and were thus jointly and severally liable for the unpaid amount. A panel of our
court affirmed. Davis v. United States, 402 F. App’x 915 (5th Cir. 2010).
The government subsequently moved in the district court for installment-
payment orders against the counter-defendants pursuant to 28 U.S.C. § 3204.
Only Davis opposed that motion, and he twice moved for oral argument to
present evidence of his inability to pay the amounts sought. The court denied
Davis’s requests and, after briefing, granted the government’s motion, ordering
Davis to pay $3,327 per month until the judgment was satisfied.
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Davis timely appealed. He first challenges the amount of the payments.
He maintains the district court erred by relying on his income from past years,
by considering income from sources other than self-employment, and by not
subtracting all deductions required by law. He also contends he was entitled to
oral argument prior to the court’s determination.
II. Standard of Review
Because the Federal Debt Collection Procedures Act (FDCPA) accords
district courts broad discretion in issuing installment-payment orders, we review
for abuse of that discretion. See FTC v. Nat’l Bus. Consultants, Inc., 376 F.3d
317, 321 (5th Cir. 2004) (reviewing for abuse of discretion under discretionary
provision of FDCPA).
III. Discussion
The FDCPA, 28 U.S.C. § 3001 et seq., establishes procedures whereby the
government may recover on a judgment. Post-judgment remedies include
garnishment of a debtor’s wages. Id. § 3205. If, however, a judgment debtor “is
receiving or will receive substantial nonexempt disposable earnings from self
employment that are not subject to garnishment,” a district court may “order
that the judgment debtor make specified installment payments to the United
States.” Id. § 3204(a). “Earnings” are “compensation paid or payable for
personal services.” Id. § 3002(6). “Disposable earnings” are “that part of
earnings remaining after all deductions required by law have been withheld.”
Id. § 3002(5). Finally, “nonexempt disposable earnings” means “25 percent of
disposable earnings.” Id. § 3002(9).
Davis’s arguments rest entirely on the statutory language at issue.
Section 3204, which governs installment-payment orders, provides:
(a) Authority to issue order.– . . . [I]f it is shown that the
judgment debtor–
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(1) is receiving or will receive substantial nonexempt
disposable earnings from self employment that are not subject
to garnishment; . . .
then upon motion of the United States and notice to the judgment
debtor, the court may, if appropriate, order that the judgment
debtor make specified installment payments to the United States.
. . . In fixing the amount of the payments, the court shall take into
consideration after a hearing, the income, resources, and reasonable
requirements of the judgment debtor and the judgment debtor’s
dependents, any other payments to be made in satisfaction of
judgments against the judgment debtor, and the amount due on the
judgment in favor of the United States.
Davis reads that provision to dictate that a court (1) determine the debtor’s
“earnings from self employment”; (2) subtract all deductions allowed by law (to
reach “disposable earnings from self employment”); (3) take 25% of that sum (to
reach “nonexempt disposable earnings from self employment”); and (4) divide by
12 (to reach a monthly payment). Davis thus contends the district court erred
by considering income other than earnings from his law practice, such as rental
income and oil royalties, and by not first subtracting all federal income taxes
paid. He further contends the court erred by averaging his taxable income from
2008 to 2010, rather than determining his current income (during 2011).
Those claims of error are likely forfeited, as Davis did not object
specifically on those grounds in the district court. Rather, he opposed the use of
his 2009 tax return for estimating his income because his 2009 income was
abnormally high. Indeed, he proposed the court account for that abnormality by
averaging his adjusted gross income–not his earnings from self-employment
after taxes, as he would now have it calculated–from the previous six years.
In any event, Davis’s arguments are premised on an incorrect reading of
the statute. The requirement that a judgment debtor have “substantial
nonexempt disposable earnings” merely preconditions the district court’s
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authority to issue an installment-payment order; it does not delimit that
authority. In this case, Davis clearly had “substantial nonexempt disposable
earnings” from his law practice that were not subject to garnishment.
Accordingly, the district court was within its authority to order Davis to make
installment payments to the government.
Nor did the district court abuse its discretion in issuing that order.
Consistent with the statute, the court considered Davis’s decreasing income, his
wife’s poor health, an outstanding personal loan, and the amount owed to the
government. It settled on the approach of taking 25% of Davis’s average taxable
income from 2008 to 2010 and requiring monthly payments of one-twelfth of that
sum, with the caveat that Davis could request a modification of that schedule
“[i]f 2011 brings a substantive change to Davis’ financial circumstances.”
Although, as noted above, the court was not required to use 25% of Davis’s
income–or earnings–as its basis, to do so was not unreasonable.
Last, we see no merit in Davis’s contention that he was entitled to oral
argument “[i]n satisfaction of [his] right to due process.” In its order denying
Davis’s first motion for oral argument, the district court explained it would set
argument, if needed, after the briefing was complete. The court then heard from
both parties and considered the factors enumerated by § 3204(a) in fixing the
payment amounts. Davis thus received all the process he was due under the
statute, and the district court did not abuse the discretion accorded it.
IV. Conclusion
For the foregoing reasons, we AFFIRM the district court’s order.
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