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McLain v. McLain

United States District Court, D. Montana, Billings Division

October 15, 2018

FAITH MCLAIN, CHRISTEEN MCLAIN, JOHN MCLAIN, MOLLY MCLAIN, MIRA MCLAIN, AND MATTHEW MCLAIN, AS BENEFICIARIES OF THE ESTATE OF BERNARD MCLAIN, AND MARY MCLAIN, INDIVIDUALLY AS BENEFICIARY OF THE ESTATE OF BERNARD MCLAIN AND AS TRUSTEE OF THE E-3 RANCH TRUST, Plaintiffs,
v.
FRANCIS MCLAIN, INDIVIDUALLY AND AS CO-MANAGER OF TERA BANI RETREAT MINISTRIES, CAROLINE MCLAIN, INDIVIDUALLY AND AS MANAGING DIRECTOR OF TERA BANI RETREAT MINISTRIES, ALAKHI JOY MCLAIN, SOHNJA MAY MCLAIN, AND DANE SEHAJ MCLAIN, AS PURPORTED CERTIFICATE HOLDERS OF THE E-3 RANCH TRUST, Defendants. THE UNITED STATES OF AMERICA, Intervenor Defendant and Counter/Cross- Claimant,
v.
FAITH MCLAIN, CHRISTEEN MCLAIN, JOHN MCLAIN, MOLLY MCLAIN, MIRA MCLAIN, AND MATTHEW MCLAIN, as Beneficiaries of THE ESTATE OF BERNARD MCLAIN; and MARY MCLAIN, as Beneficiary of the ESTATE OF BERNARD MCLAIN, and as Trustee of the E-3 RANCH TRUST, Counterclaim Defendants and FRANCIS MCLAIN, individually, and as Co-Manager of TERA BANI RETREAT MINISTRIES; CAROLINE MCLAIN, individually, and as Managing Director of TERA BANI RETREAT MINISTRIES; and ALAKHI JOY MCLAIN, SOHNJA MAY MCLAIN, AND DANE SEHAJ MCLAIN, as Beneficiaries of the E-3 RANCH TRUST, Crossclaim Defendants and AMERICAN BANK OF MONTANA and BRAD D. HALL Additional Defendants on United States' claims.

          ORDER DENYING FRANCIS MCLAIN'S MOTION TO SEVER COUNTERCLAIM

          TIMOTHY J. CAVAN UNITED STATES MAGISTRATE JUDGE.

         The United States has filed an intervenor claim to foreclose federal tax liens against Defendant Francis (“Frank”) McLain's interest in a ranch located in the Paradise Valley, known as the E-3 Ranch. (Doc. 20.) The E-3 Ranch is also the subject of an ownership dispute between two factions of the McLain family.[1] In response, Frank filed a Counterclaim against the United States seeking a tax refund. (Doc. 79.) The United States moved to dismiss the counterclaim; and on March 6, 2018, United States District Judge Susan P. Watters adopted this Court's Findings and Recommendations and dismissed Frank's counterclaim with prejudice. (Doc. 131.)

         Judge Watters has referred this case to the undersigned under 28 U.S.C. § 636(b)(1)(B). (Doc. 80.) Presently before the Court is Frank's Motion to Sever the Counterclaim. (Doc. 133.) The motion is fully briefed and ripe for the Court's review. (Docs.135, 139.)

         Having considered the parties' submissions, the Court finds Frank's Motion to Sever Counterclaim should be DENIED, as set forth below.

         I. BACKGROUND

         In November of 2008, Frank was convicted of nine counts of Failure to Account for and Pay Over Employment Taxes, in violation of 26 U.S.C. § 7202, in United States v. Francis L. McLain, 08-CR-10-PJS-FLN, U.S. Dist. Court, District of Minnesota. (Doc. 79 at ¶ 11; Doc. 94-3; 94-4.) In May 2014, the United States assessed civil penalties against Frank under 26 U.S.C. § 6672, for willful failure to collect, truthfully account for, and pay over the taxes that were at issue in his criminal case. (Doc. 79 at ¶ 39; Doc. 20 at ¶ 12.)

         In July 2014, Faith McLain, Christeen McLain, John McLain, Mary McLain, Molly McLain, Mira McLain, and Matthew McLain (the “McLain Plaintiffs”) brought an action for declaratory judgement concerning the ownership of the E-3 Ranch against Frank, Caroline McLain, Alakhi Joy McLain, Sohnja May McLain, and Dane Sehaj McLain (the “McLain Defendants”). The case was originally filed in the Montana state court. (Doc. 1.) On March 11, 2016, the state court granted the United States' motion to intervene. (Doc. 1-3.) The United States seeks to foreclose federal tax liens arising from the civil tax penalties assessed against Frank through a sale of the E-3 Ranch. (Doc. 20.)

         On April 8, 2016, the United States removed, invoking the Court's jurisdiction under 28 U.S.C. § 1441. (Doc. 1.) On March 15, 2017, the McLain Defendants answered the Intervenor Complaint, and Frank filed a counterclaim against the United States. (Doc. 79.) In the counterclaim, Frank asserted a claim for tax refund under 26 U.S.C. § 7244 relating to the § 6672 assessments levied against him. (Doc. 79.)

         On March 6, 2018, Frank's counterclaim was dismissed with prejudice. (Doc. 131.) Frank now moves to sever the counterclaim so that he may appeal the Court's order dismissing the counterclaim to the Ninth Circuit. (Doc. 133.) The United States opposes, arguing the counterclaim is not discrete and separate from the United States' claim to foreclose on the E-3 Ranch, and thus severance is not appropriate.

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 21 provides that “the court may at any time, on just terms . . . sever any claim against a party.” Fed.R.Civ.P. 21. The district court has broad discretion regarding severance. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1297 (9th Cir. 2000). Courts may sever claims that are “discrete and separate, ” but Courts should not “attempt to separate an essentially unitary problem.” Anticancer, Inc. v. Pfizer Inc., 2012 WL 1019796, *1 (S.D. Cal. Mar. 26, 2012). In determining whether to sever a claim, courts consider the following factors:

(1) whether the claims arise out of the same transaction or occurrence;
(2) whether the claims present some common questions of law or fact;
(3) whether settlement of the claims or judicial economy would ...

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