Cong. Hunger Ctr. v. Gurey

308 F.Supp.3d 223

CONGRESSIONAL HUNGER CENTER, Plaintiff,

v.Mohamed H. GUREY, Defendant.

Case No. 17–cv–02356 (APM)

United States District Court, District of Columbia.

Signed April 5, 2018

Stewart A. Inman, Gordon D. Todd, Sidley Austin LLP, Washington, DC, for Plaintiff.

MEMORANDUM OPINION

Amit P. Mehta, United States District Judge

Before the court is Plaintiff Congressional Hunger Center's Motion for Default Judgment against its former employee, Defendant Mohamed H. Gurey. Plaintiff brought this suit after discovering what it alleges was Defendant's years-long embezzlement scheme. Defendant was properly served but failed to respond to Plaintiff's three-count complaint. In response, Plaintiff obtained an entry of default and filed this Motion for Default Judgment, seeking damages in the amount of $1,202,334.00. See Clerk's Entry of Default as to Mohamed H. Gurey, Dec. 8, 2017; Mot. for Default J., ECF No. 10. The court now enters judgment in favor of Plaintiff.

I. BACKGROUND

A. Factual History

Defendant Mohamed H. Gurey worked for Plaintiff Congressional Hunger Center for 15 years, most recently as Plaintiff's Director of Finance. Compl. ¶ 4. His job duties included preparing Plaintiff's financial statements, monitoring payroll, preparing records for Plaintiff's annual audits, and overseeing Plaintiff's cash disbursements. Id. ¶¶ 15–16. In addition, Defendant gave information to Plaintiff's executive director about the organization's finances, which, in turn, were used by Plaintiff's Board of Directors. Id. ¶ 17.

After an organizational restructuring in 2012, Plaintiff's executive director was responsible for supervising Defendant. See id. ¶¶ 18–19. Beginning in September 2015, that position was held by Shannon Maynard. Id. ¶ 19. Soon after the start of her tenure, Maynard slimmed the organization's budget, including by eliminating the position of Payroll & Benefits Coordinator and outsourcing financial duties to an outside vendor. Id. ¶¶ 20–21. Defendant "vocally opposed" the outsourcing of Plaintiff's payroll operations and offered to perform those tasks himself. See id. ¶ 22. Maynard agreed to assign these tasks to Plaintiff. Id. ¶ 22.

Maynard took leave from work from June 2016 to September 2016, during which time Defendant was supervised by Plaintiff's Chief Operating Officer, Kristin Anderson. Id. ¶ 23. When Maynard returned, she noticed problems with Defendant's work, including that he was failing to meet deadlines and had multiple, unexplained absences. Id. ¶ 24. When she met with Defendant on November 2, 2016, to discuss the organization's upcoming audit, Defendant told Maynard that he had not yet completed the necessary reports. Id. ¶ 26. After learning this, Maynard pushed back the audit to the second week of December. Id. ¶ 27.

At this same meeting, Defendant asked Maynard for 17 days of paid time off during the month of November—time off, he said, that he needed in order to complete courses that would allow him to maintain his Certified Public Accountant license. Id. ¶ 26. Maynard refused his request, explaining that the time off was too close to the audit and because Defendant had not given advance notice. See id. ¶ 28. Undeterred, Defendant called the Treasurer of the Board of Directors, Wolfgang von Maack, and asked permission to take leave. Id. ¶ 29. Plaintiff did not receive approval for his request. Id.

About a week after Maynard's meeting with Defendant, on November 10, 2016, she met with Defendant for his annual performance review, in which she gave Defendant a critical evaluation. Id. ¶ 30. In the review, Maynard identified as areas of improvement the timeliness of Defendant's quarterly and monthly financial reports. Id. On November 14, 2016, Maynard gave Defendant a "Warning and Performance Improvement Plan," which reflected those deficiencies and contained a list of key tasks to be performed. Id. ¶ 31.

Defendant failed to show up for work on December 7, 2016. Id. ¶ 32. Later that day, Maynard found in her company mailbox a letter from Defendant in which he "requested" vacation time from December 7 to December 15. Id. ¶ 33. In the letter, Defendant said he planned to return on December 16 to assist with the audit. Id. Maynard decided to fire Defendant for taking leave without permission. Id. ¶ 34.

Plaintiff discovered Defendant's theft of organization funds when cutting off Defendant's access to its bank accounts. See id. ¶ 36. When Maynard logged into the accounts to deactivate Defendant, she discovered that the balances were "dramatically lower" than that reported on a financial statement Defendant had prepared. Id. Per Defendant's report to Maynard, Plaintiff, as of November 23, 2016, had $715,252 on hand. Id. In actuality, the accounts contained only $137,526—not even enough money to cover the organization's expenses for December. Id.

The discovery spurred a review of Plaintiff's financial records. When reviewing the organization's transactions in 2015 and 2016, Maynard discovered "a number of suspicious checks," made out to Defendant, of amounts of more than $1,000. Id. ¶ 37. At the time, the Plaintiff's accounting policies required that any check for more than $1,000 be signed by two members of the organization, either Anderson and Defendant or Anderson and Maynard. Id. ¶ 38. The checks to Defendant all bore Defendant's signature and Anderson's signature. Id. ¶ 39. Anderson's signature, however, was determined to be forged. Id. The checks were dated on days when Anderson was on leave, and Anderson confirmed that she had not signed them. Id. ¶¶ 40–41. In an investigation that followed, Plaintiff discovered Defendant had been writing unauthorized checks to himself since 2010 by forging the signature of other organization signatories. Id. ¶ 46.

Ultimately, Plaintiff's investigation revealed that Defendant had stolen more than $1,100,000 from the organization. Id. In addition to forging checks, Defendant also had made repeated withdrawals of organization funds at a Maryland casino, using his company debit card. See id. ¶¶ 42–43. To cover his tracks, Defendant falsified entries in documents and failed to record transactions. See id. ¶¶ 54, 56. Defendant's theft also jeopardized Plaintiff's financial standing with lenders. The organization was unable to repay a line of credit it had previously opened by the maturity date of February 1, 2017. Id. ¶ 49–53. To avoid default, Defendant had to renegotiate the terms of the line of credit, resulting in additional costs to Plaintiff. Id. ¶¶ 48–53.

B. Procedural History

This action followed. On November 8, 2017, Plaintiff filed a three-count complaint against Defendant alleging: (1) breach of fiduciary duty; (2) conversion; and (3) fraud. Id. ¶¶ 57–74. Plaintiff claimed that it had lost more than $1.1 million as a result of Defendant's actions. Id. ¶¶ 62, 67, 74. Plaintiff served Defendant with the Complaint on November 14, 2017, but he never filed a responsive pleading. See Return of Service/Affidavit of Summons &Complaint Executed, ECF No. 4; see also Fed. R. Civ. P. 12(a)(1)(A)(i). In turn, Plaintiff sought and received from the Clerk of the Court an entry of default against Defendant. See Clerk's Entry of Default, ECF No. 8.

On January 19, 2018, Plaintiff filed the Motion for Default Judgment that is now before the court. See Pl.'s Mot. for Default J., ECF No. 10. Defendant has not responded to the Motion.

II. LEGAL STANDARD

Rule 55 of the Federal Rules of Civil Procedure sets forth the two-step process by which a party can secure a default judgment. See Fed. R. Civ. P. 55(a). First, the plaintiff must ask the Clerk of the Court to enter a default against a party who has "failed to plead or otherwise defend" itself against the action. Fed. R. Civ. P. 55(a). After the entry of default has been entered on the docket, the plaintiff must move for an entry of default judgment. Fed. R. Civ. P. 55(b). District courts have discretion to enter a default judgment upon a party's motion. See Fed. R. Civ. P. 55(b)(2). Such motions may be granted "only when the adversary process has been halted because of an essentially unresponsive party." Boland v. Elite Terrazzo Flooring, Inc. , 763 F.Supp.2d 64, 67 (D.D.C. 2011) (quoting Jackson v. Beech , 636 F.2d 831, 835 (D.C. Cir. 1980) ). A default judgment establishes the defendant's liability for every well-pleaded allegation in the complaint. Carpenters Labor–Mgmt. Pension Fund v. Freeman–Carder LLC , 498 F.Supp.2d 237, 240 (D.D.C. 2007) ; cf. Carazani v. Zegarra , 972 F.Supp.2d 1, 12, 15 (D.D.C. 2013). "Even after default, however, it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law."

10A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2688.1 (4th ed.).

If the court determines that a defendant is liable, it then proceeds to the damages phase. The finding of defendant's liability cannot by itself establish liability for the amount of damages claimed by the plaintiff. See Carpenters Labor–Mgmt. Pension Fund , 498 F.Supp.2d at 240. Rather, the Court "must make an independent determination of the sum to be awarded," "unless the amount of damages is certain." Serv. Emps. Int'l Union Nat. Indus. Pension Fund v. Liberty House Nursing Home of Jersey City, Inc. , 232 F.Supp.3d 69, 75 (D.D.C. 2017) (citation omitted). In doing so, the court may hold a hearing or may rely on affidavits and documentary evidence submitted by the plaintiff. Bricklayers & Trowel Trades Int'l Pension Fund v. KAFKA Constr., Inc. , 273 F.Supp.3d 177, 179 (D.D.C. 2017) ; see also Fed. R. Civ. P. 55(b)(2)(B).

III. DISCUSSION

A. Whether an Entry of Default Judgment is Appropriate

The court begins with examining whether Defendant is liable to Plaintiff and, thus, whether an entry of default judgment is appropriate.¹ For the reasons that follow, the Court finds that the facts alleged in Plaintiff's Complaint, when taken as...