CMH Mfg. v. Neil

CMH MANUFACTURING, Plaintiff, v. SERVAIS EVRARD NEIL, et al., Defendants.

CIVIL No. JKB-21-0674

United States District Court, D. Maryland

September 21, 2021

MEMORANDUM

JAMES K. BREDAR, CHIEF JUDGE

Currently pending before the Court is Plaintiffs Motion to Alter or Amend (ECF No. 31) the Default Judgment entered by this Court on July 1, 2021 (ECF No. 24). Defendants oppose this Motion and seek to preserve the Default Judgment in its present form. (ECF No. 32.) Also pending is Plaintiffs Motion for Attorney's Fees (ECF No. 27). On reconsideration, the Court concludes that it will alter its previously-entered judgment to permit Plaintiff to seek punitive damages for its claim of fraudulent misrepresentation. In order to effectuate this amendment, the Court will implement a schedule for limited discovery and additional briefing regarding the appropriate sum of punitive damages. Because this case is set for further proceedings, awarding attorney's fees at this juncture would be premature. Accordingly, the Court will grant in part Plaintiffs Motion to Alter or Amend the Court's Default Judgment (ECF No. 31), and deny without prejudice Plaintiffs Motion for Attorney's Fees (ECF No 27).

I. Factual and Procedural Background

The factual background of this case is more fully set out in this Court's prior Memorandum granting default judgment. (See ECF No. 23 at 2-4.) As explained there, the gravamen of Plaintiffs Complaint is that it overpaid Defendants Servais Evrard Neil and BPN Partners, LLC ("BPN" and collectively with Neil, the "Contractors") by $1, 123, 077.07 (the "Overpayment"), based on misrepresentations made by the Contractors regarding work performed under a Subcontract Agreement. (Id. at 2.) Plaintiff also alleged though only on information and belief, that much of the Overpayment had been used by Neil to purchase a home in Baltimore (the "Baltimore Property"), which Neil and his wife, Defendant Layne Hockaday own in fee simple as tenants by the entirety. (Id. at 3.) Plaintiff further alleged that, because much of the Overpayment was spent purchasing the Baltimore Property, Neil was unable to immediately refund the Overpayment when Plaintiff uncovered that the invoices submitted by the Contractors were fraudulent. (Id.) Rather, Plaintiff and Neil entered into a Settlement and Forbearance Agreement (the "Settlement Agreement") wherein Neil would pay back the Overpayment, with interest, on a fixed schedule through a promissory note. (Id; see also Settlement Agreement, ECF No. 1-4.) After Neil failed to timely make payments on the note, Plaintiff brought the instant lawsuit seeking compensatory, punitive, and treble damages, as well as a number of equitable remedies against Neil, BPN, and Hockaday. (See Compl. at 16.)

After Defendants failed to respond to the Complaint, the Court entered a default judgment wherein it granted Plaintiff full compensatory relief, but denied Plaintiffs requests for punitive damages, treble damages, and various equitable remedies. (ECF No. 24.) Plaintiff then moved to alter or amend that Default Judgment, requesting that the Court grant punitive damages and equitable relief, or that the Court permit Plaintiff to pursue its claims on the merits, either in this Court or elsewhere.^[1] (See Mot. Amend, ECF No. 31.) Defendants, who had entered an appearance following Plaintiffs Motion for Attorney's Fees (ECF Nos. 27, 30), oppose amendment of the Default Judgment. (See Opp'n Mot. Amend, ECF No. 32.)

II. Legal Standard

"Federal Rule of Civil Procedure 59(e) permits the district court to reconsider a decision in certain circumstances." Hughley v. Matthew Carpenter, P.A., Civ. No. JKB-19-1950, 2020 WL 6703717, at *1 (D. Md. Nov. 13, 2020) (quoting Ross v. Early, 899 F.Supp.2d 415, 420 (D. Md. 2012)). In the Fourth Circuit, "Rule 59(e) motions can be successful in only three situations: (1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or prevent manifest injustice." Zinkand v. Brown, 478 F.3d 634, 637 (4th Cir. 2007) (internal quotation marks omitted). "Clear error or manifest injustice occurs where a court has patently misunderstood a party or has made a decision outside the adversarial issues present to the Court by the parties, or has made an error not of reasoning but of apprehension." Wagner v. Warden, Civ No. ELH-14-791, 2016 WL 1169937, at *3 (D. Md. Mar. 24, 2016) (internal citations and quotation marks omitted).

Although Rule 59(e) "permits a district court to correct its own errors," it "may not be used [] to raise arguments which could have been raised prior to the issuance of the judgment, nor may [it] be used to argue a case under a novel legal theory that the party had the ability to address in the first instance." Pac. Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998) (citing Russell v. Delco Remy Div. of Gen. Motors Corp., 51 F.3d 746, 749 (7th Cir. 1995)). The court should also keep in mind that "reconsideration of a judgment after its entry is an extraordinary remedy which should be used sparingly." Id.

III. Analysis

While Plaintiffs Motion to Alter or Amend requests significant modifications to the default judgment, it breaks down into two key inquiries. First, whether the Court correctly rejected Plaintiffs various claims for equitable relief where the core predicates for those claims were based solely on information and belief. Second, whether the Court correctly declined to grant punitive damages where Plaintiffs Motion for Default Judgment only requested punitive damages pursuant to the Tennessee Consumer Protection Act (the "TCPA"). The Court concludes that it correctly denied Plaintiffs speculative claims for equitable relief, but that Plaintiff adequately plead and may pursue punitive damages on its claim of fraudulent misrepresentation.

A. Equitable Remedies

In its Complaint, Plaintiff requested three forms of equitable relief related to the Baltimore Property: (1) that this Court enter judgment against Hockaday for $425, 000, representing her interest in the Baltimore Property;^[2] (2) that the Court impose a constructive trust, in favor of Plaintiff and up to the amount of the Overpayment, in the Baltimore Property; and (3) that the Court permit Plaintiff to levy upon Hockaday's interest in the Baltimore Property as if Neil's conveyance had not been made. (Compl. at 16.) The Court declined to take these remedial steps at the default judgment stage, and Plaintiff now avers that was error. It urges the Court to grant all three remedies in the conjunctive and in addition to the grant of compensatory damages.

1. Duplicative Relief

Taken at face value, Plaintiffs motions seek full compensatory damages against the Contractors, an additional $425, 000 from Hockaday, and a "constructive trust on the Baltimore Property... up to the amount of the Overpayment" independent of compensatory relief. (See ECF No. 22 at 2 (emphasis added) (requesting, inter alia, "judgment against the Contractors, jointly and severally, for compensatory damages in the amount of the Debt, "^[3] "judgment against Ms. Hockady [sic] in the amount of $425, 000 for compensatory damages[, ]" "imposi[tion of] a constructive trust on the Baltimore Property in favor of Clayton up to the amount of the Overpayment[, ]" "and [g]ranting such further and related relief as is just and proper.").) Such a windfall judgment would depart from the "fundamental purpose of equitable jurisdiction," which is "to grant relief when, and only when, the law courts could not, or would not, render a complete and adequate remedy for the wrong done." Manning v, Potomac Elec. Power Co., 187 A.2d 468, 472 (Md. 1963) (emphasis added). To the extent Plaintiff wishes to use equity as a vehicle to seek multiplicative damages, this request must be flatly rejected. See J. Aron and Co., Inc. v. Serv. Tramp. Co., 515 F.Supp. 428, 443 n. 19 (D. Md. 1981) (citation omitted) ("[A] plaintiff could pursue both a damage remedy and a remedy in quantum meruit or unjust enrichment- Of course, in the example[] just given the plaintiff could not prevail in both actions because of the prohibition against double recovery."); see also Teel v. Rogers, Civ. No. LMB/JFA-10-0303, 2010 WL 2679755, at *4 (E.D. Va. June 4, 2010) (finding that plaintiff on default judgment was "entitled to only one recovery for the amount sought" by breach of contract and unjust enrichment claims), report and recommendation adopted by Teel v. Rogers, 2010 WL 2679756 (E.D. Va. July 2, 2010).

Plaintiffs briefing, however, appears to inartfully suggest an alternative rationale for its request of broad equitable relief. Plaintiffs Complaint alleges, on information and belief, that the Overpayment was used to purchase the Baltimore Property. (Compl. ¶ 27.) It also alleges again on information and belief, that the purchase of this property rendered Neil insolvent, and was done for the purpose of impairing Plaintiff's ability to recover the Overpayment. (Id. ¶¶ 87, 93.) Thus, the thrust of Plaintiff s motions appear to be that, while a money judgment may be sufficient at law, it is insufficient in fact because Defendants are judgment-proof absent a judgment that provides Plaintiff recovery against the Baltimore Property. (Mot. Amend Mem. Supp. at 3 (arguing that "debtors need only use fraudulently obtained funds to purchase a property as tenants by the entirety ... to place such ill-gotten gains forever beyond the reach of creditors").) Accordingly, Plaintiff asks this Court to enter multiplicative judgments not to provide multiplicative relief, but rather to provide multiple avenues through which Plaintiff may piece together complete relief. The windfall...