United States v. Nipper

Background

Celia Nipper acquired the property at 1965 Keswick Lane in Concord, California, in 2009. She was later arrested on federal wire-fraud, bank-fraud, and false-tax-return charges. In the earlier criminal case, the court sentenced her to 51 months in prison and ordered her to pay $2,362,469 in restitution to Marketlinx, Inc. and the Internal Revenue Service.

The United States alleged that, between Nipper’s arrest and sentencing, she transferred her interest in the property in two transactions involving her daughter, Kasey Nipper, and Peace House, Inc., which the complaint described as Kasey Nipper’s alter ego. The United States sued under 28 U.S.C. § 3304(b), seeking to undo transfers made with the intent to hinder, delay, or defraud a creditor, or made without reasonably equivalent value.

Default and Service

The United States personally served Celia Nipper with the summons and complaint on February 12, 2020. She did not respond by the deadline, and the clerk entered default on March 12, 2020. The United States served its default-judgment motion by mail at the correctional facility where Nipper was incarcerated. After requesting additional information about service and jurisdiction, the court received supplemental briefing, which was personally served on Nipper.

Before entering default judgment, the court confirmed that it had subject-matter jurisdiction, personal jurisdiction over Nipper, and adequate service. It concluded that federal law gave it authority over the United States’ action to recover property allegedly transferred to avoid restitution. It also found general personal jurisdiction because Nipper had resided in California before incarceration, intended to remain in California, was incarcerated in California, and the property was located there.

The court found that the complaint and motion were served in ways reasonably calculated to notify Nipper. A Bureau of Prisons lieutenant stated that he personally delivered the summons and complaint to Nipper. The United States mailed the motion to her last known address using the facility’s mail procedures, including her name and register number. The court concluded that these steps satisfied the service rules and due process.

Default-Judgment Analysis

After a clerk enters default, a court may enter default judgment, which is a judgment based on a party’s failure to respond. The court applied the seven factors used in the Ninth Circuit: possible prejudice to the plaintiff, the merits and sufficiency of the claims, the amount at stake, the possibility of a factual dispute, excusable neglect, and the federal preference for decisions on the merits.

The court found that the first six factors favored default judgment. Without judgment, the United States would have no way to recover the property and apply its proceeds to the outstanding restitution judgment. The court also found that the complaint adequately alleged that the transfers were intended to hinder, delay, or defraud a creditor, involved concealment, and lacked reasonably equivalent value. Nipper had not raised a factual dispute, and the court found no evidence that her failure to respond resulted from excusable neglect.

The seventh factor weighed against default judgment because federal procedure generally favors decisions on the merits. The court concluded, however, that this preference did not prevent judgment because Nipper had not participated in the case. The court also noted that the United States was not seeking a monetary judgment in this action.

Ruling

Judge Haywood S. Gilliam, Jr. granted the United States’ motion for default judgment against Celia Nipper. The judgment declared fraudulent and void the March 8, 2017 deed of trust benefiting Peace House, Inc., and the March 14, 2018 transfer of the property’s title from Celia Nipper to Peace House, Inc. The court vested title to the property in Celia Nipper’s sole name and directed the clerk to close the case.