United States of America v. Schwarzbaum

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

Case No. 18-cv-81147-BLOOM/Reinhart

UNITED STATES OF AMERICA,

Plaintiff,

v.

ISAC SCHWARZBAUM,

Defendant.
_____________________________/

ORDER ON MOTION FOR STAY PENDING APPEAL
THIS CAUSE is before the Court upon Defendant Isac Schwarzbaum’s (“Schwarzbaum”)
Motion to Stay, ECF No. [178] (“Motion”), filed on April 27, 2023. Plaintiff the United States of
America (“United States”) filed a Response, ECF No. [179], to which Schwarzbaum filed a Reply,
ECF No. [180]. The Court has carefully considered the Motion, the Response and Reply, the record
in this case, the applicable law, and is otherwise fully advised. For the reasons set forth below,
Schwarzbaum’s Motion is denied.
I. BACKGROUND
On November 1, 2022, the Court entered Final Judgment After Remand for the United
States and against Schwarzbaum in the amount of $12,555,813.00, plus further accruals of late
payment penalties and interest. ECF No. [162]. On January 6, 2023, the United States filed a
Renewed Motion for Order to Repatriate Foreign Assets. ECF No. [169]. Over Schwarzbaum’s
objection, the Court granted that motion and ordered Schwarzbaum to repatriate his assets held
overseas into a United States bank account. ECF No. [176] (“Order to Repatriate”).
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In the Motion, Schwarzbaum requests that this Court stay the Order to Repatriate. ECF No.
[178]. Schwarzbaum asserts that a stay is appropriate because, if he is forced to liquidate his
foreign investment accounts before the appeal is concluded, he will face significant and irreparable
harm because he “would be required to pay the transaction costs and income tax associated with
the liquidation and transfer of his assets into the United States.” Id. at 2.
The United States responds that none of the four stay factors weigh in Schwarzbaum’s
favor. See generally ECF No. [179]. It asserts that Schwarzbaum’s proper recourse in these
circumstances is to file a supersedeas bond. Id. at 2.
II. LEGAL STANDARD
To obtain a stay pending appeal, a movant bears the burden of showing that the
circumstances justify the court’s exercise of its discretion to provide that relief. Nken v. Holder,
556 U.S. 418, 433-34 (2009). The four relevant factors are: “(1) whether the stay applicant has
made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be
irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other
parties interested in the proceeding; and (4) where the public interest lies.” Id. at 434 (quotation
marks omitted). “The first two factors . . . are the most critical.” Id. The last two factors “merge
when the Government is the opposing party.” Id. at 435.
III. DISCUSSION
Schwarzbaum has failed to show that any of the four relevant factors favor a stay of the
Court’s Order to Repatriate.
A. Success on the Merits

The Eleventh Circuit has said that the first stay factor – likelihood of success on appeal – is
ordinarily “the most important.” Garcia-Mir v. Meese, 781 F.2d 1450, 1453 (11th Cir. 1986). As
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to this factor, Schwarzbaum asserts that he “has raised a number of issues on appeal, any of which
is likely to result in a reversal.” ECF No. [178] at 5. However, he only specifies one such issue –
that the Court erred by entering final judgment in favor of the United States “in the exact amount
already deemed to violate the FBAR penalty statute[.]” Id.
Schwarzbaum is referring to the first time that the Eleventh Circuit considered the judgment
against him in this case. See United States v. Schwarzbaum, 24 F.4th 1355, 1366-67 (11th Cir.
2022). In its Response, the United States persuasively argues that Schwarzbaum’s argument is
flawed because it conflates the erroneous process of the IRS’s penalty calculation with the amount
of that penalty. ECF No. [179] at 5. The Eleventh Circuit rejected the former but expressed no
opinion regarding the latter. 24 F.4th 1366. Because the IRS’s calculation was based on an
incorrect procedure, remand was necessary because “the IRS may reach a different result when it
recalculates Schwarzbaum’s penalties in accordance with the FBAR civil penalty statute and
regulations[.]” Id. at 1366 (emphasis in the original). But the Eleventh Circuit explicitly recognized
that, following recalculation, the penalties will not necessarily be lower. Id. (“That is not to say
the penalties will be lower. We do not presume to guess what the IRS will do.”).
Accordingly, the Court rejects Schwarzbaum’s only argument regarding success on the
merits. Contrary to his argument, the Eleventh Circuit expressed no opinion regarding the amount
of the IRS’s penalty, and it explicitly recognized the possibility that, upon remand, the IRS’s
penalty assessment might not be any lower. Id. at 1365-66. Thus, Schwarzbaum has failed to make
“a strong showing that he is likely to succeed on the merits[.]” Nken, 556 U.S. at 434 (quotation
marks omitted).

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B. Irreparable Injury
Turning to the second factor – irreparable injury – Schwarzbaum argues that requiring him
to pay the penalty pending appeal will force him to liquidate his “portfolio of securities,” which
“could result in significant transaction costs and potential capital gain.” ECF No. [178] at 6.
Schwarzbaum has provided no authority for the proposition that the mere possibility of
“transaction costs” and “potential capital gain” constitute irreparable harm. Rather, as the United
States points out, “[c]ourts have recognized that potential monetary loss is insufficient to establish
irreparable harm.” Lustig v. Stone, No. 15-cv-20150, 2016 WL 8983414, at *2 (S.D. Fla. Mar. 7,
2016) (citation omitted). Moreover, Schwarzbaum has neglected to support his Motion with an
affidavit in support of his factual assertions regarding costs he may incur.
Accordingly, Schwarzbaum has failed to show that he “will be irreparably injured absent a
stay[.]” Nken, 556 U.S. at 434 (quotation marks omitted).
C. The Remaining Factors

“Normally, a failure to satisfy the first factor in a motion for stay pending appeal dooms
the motion.” In re Freedom Unlimited, 489 F. Supp. 3d 1328, 1338 (S.D. Fla. 2020) (citation
omitted). However, a “movant may also have his motion granted upon a lesser showing of a
substantial case on the merits when the balance of the equities [identified in factors 2, 3, and 4]
weighs heavily in favor of granting the stay.” Garcia-Mir v. Meese, 781 F.2d at 1453 (alteration
in original) (quotation marks omitted). Here, as explained above, the first two factors are decisively
in the United States’ favor, so the Court’s analysis could end here. Nonetheless, the Court will
briefly address Schwarzbaum’s remaining arguments.
First, Schwarzbaum argues that a stay will not substantially injure the United States. ECF
No. [178] at 7. He argues that the stay would be brief in duration, and there is no risk of the assets
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becoming lost. Id. In response, the United States argues that “[a] stay without a bond leaves the
United States exposed to a complete and irreparable loss.” United States v. O’Callaghan, 805 F.
Supp. 2d 1321, 1328 (M.D. Fla. 2011). It additionally asserts that Schwarzbaum’s foreign holdings
have decreased by $12 million since 2019. Id. at 8 n.4. In reply, Schwarzbaum asserts that the
decrease in the value of his portfolio is due to the pandemic’s negative effects on the global
economy. ECF No. [180] at 4.
Second, Schwarzbaum argues that the Court should grant Schwarzbaum’s Motion “to
avoid judicial inconsistency.” ECF No. [178] at 7 (citing O’Boyle v. Town of Gulf Stream, No. 19-
cv-80196, 2020 WL 3067660, at *2 (S.D. Fla. Mar. 27, 2020)). However, as Schwarzbaum himself
recognizes, the cases he has cited in support of his “judicial inconsistency” argument bear little
relevance to the present circumstances. Id. at 7-8. In response, the United States correctly points
out that “judicial inconsistency” would not result even if the Eleventh Circuit vacates the Court’s
Final Judgment. ECF No. [179] at 9.
Having considered the parties’ arguments, the Court concludes that the final two stay
factors – “harm to the opposing party” and the “public interest” – are not in Schwarzbaum’s favor.
Nken, 556 U.S. at 435. Although the United States has not made a strong showing that
Schwarzbaum is currently disposing his assets, it is still true that “[a] stay without a bond leaves
the United States exposed” to that possibility. O’Callaghan, 805 F. Supp. 1328.
In sum, Schwarzbaum has failed to show that any of the four stay factors are in his favor.
The Court agrees with the United States that there are no extraordinary circumstances in this case
that justify an exception from the normal post-judgment procedure of the judgment-debtor either
paying the judgment entered against him, or posting a supersedeas bond. ECF No. [179] at 9.

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IV. CONCLUSION
Accordingly, it is ORDERED AND ADJUDGED that Schwarzbaum’s Motion, ECF No.
[178], is DENIED.
DONE AND ORDERED in Chambers at Miami, Florida, on June 8, 2023.

_________________________________
BETH BLOOM
UNITED STATES DISTRICT JUDGE
Copies to:

Counsel of Record
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