MBC Ventures, LLC v. Miniventures of NY, Inc.

MBC VENTURES, LLC D/B/A ACQUISITION MANAGEMENT GROUP, Plaintiff, v. MINIVENTURES OF NY, INC. and SHAYLA M. WILLIAMS a/k/a SHAYLA MONET WILLIAMS, Defendants.

No. 3:20-CV-762 (CSH)

United States District Court, D. Connecticut

August 20, 2021

ORDER RE: PLAINTIFF'S MOTIONS FOR JUDGMENT BY DEFAULT AGAINST MINIVENTURES OF NY, INC. and SHAYLA M WILLIAMS [Doc. 23 and Doc. 24]

CHARLES S. HAIGHT, JR. Senior United States District Judge

I. INTRODUCTION

In this diversity action, Plaintiff MBC Ventures, LLC (d/b/a Acquisition Management Group) (herein "Plaintiff" or "MBC") seeks to recover amounts owed under a loan agreement for $100, 000 (dated May 14, 2013, and modified April 14, 2015) entered into between the Bank of America ("Bank") and Miniventures of NY, Inc., as "Borrower," and guaranteed by Shayla M. Williams.^[1]Doc. 1, ¶¶ 5, 8; Ex. 1, 2. According to Plaintiff, Miniventures defaulted on the loan and Williams failed to perform as guarantor.^[2] Id. ¶¶ 12, 23, 27. See also Ex. 6 (“Continuing and Unconditional Guaranty” of Guarantor Shayla M. Williams).

On or about September 5, 2018, Bank of America assigned the loan to Plaintiff MBC Ventures, who initiated this action to recover the remaining amounts owed on the loan plus attorneys' fees, which were explicitly included in the original agreement at § 9.6 and the "Loan Agreement Modification" at §3.1.5. Id. ¶¶ 7, 10, 14 and Ex. 4 ("Bill of Sale" between Bank of America and MBC Ventures).^[3] Defendant Williams has allegedly "failed to pay her guaranty," id. ¶ 27, and owes Plaintiff attorneys' fees under the "Continuing and Unconditional Guaranty" (herein "Guaranty") (Ex. 6) at § 23 of the "Loan Modification Agreement." Id. at 44-45 ("Guarantor agrees to pay all reasonable attorneys' fees . . . and all other costs and expenses that may be incurred by Bank (a) in the enforcement of this Guaranty").^[4]

On September 16, 2020, Plaintiff moved for entry of default pursuant to Federal Rule of Civil Procedure 55(a). Doc. 15, 16. As of that date, Defendants had been served with the summons and Complaint, the period within which to respond to the Complaint expired, and neither Defendant appeared or otherwise defended in the action. Rule 55(a) provides that "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Accordingly, the Clerk entered default against each Defendant. Doc. 19, 20.

Plaintiff MBC now moves for entry of default judgment against both Defendants under Rule 55(b), Fed.R.Civ.P. In particular, Plaintiff requests that the Clerk enter final judgment against each Defendant in the amount specified in the September 17, 2020, affidavits of debt and attorneys' fees "because the amount due is a sum certain that can easily be calculated." Doc. 23, at 1; Doc. 24, at 1. Plaintiff thereafter updated the amount of debt sought in a filing dated March 30, 2021. Doc. 27, at 1 (asserting that Defendants owed Plaintiff $124, 748.38 in principal and interest as of that date).

II. DISCUSSION

A. Legal Standard Governing Default Judgment

Pursuant to Federal Rule of Civil Procedure 55, the process of obtaining a default judgment in a federal civil action involves two distinct steps. As the Second Circuit summarized in New York v. Green, 420 F.3d 99 (2d Cir. 2005):

The first step is to obtain a default. When a party against whom affirmative relief is sought has failed to plead or otherwise defend, a plaintiff may bring that fact to the court's attention, and Rule 55(a) empowers the clerk of the court to enter a default against a party that has not appeared or defended. Having obtained a default, a plaintiff must next seek a judgment by default under Rule 55(b). Rule 55(b)(1) allows the clerk to enter a default judgment if the plaintiff's claim is for a sum certain and the defendant has failed to appear and is not an infant or incompetent person. See Fed. R. Civ. P. 55(b)(1). "In all other cases," Rule 55(b)(2) governs, and it requires a party seeking a judgment by default to apply to the court for entry of a default judgment.

420 F.3d at 104.

Moreover, "[i]t is well established that a party is not entitled to a default judgment as of right; rather the entry of a default judgment is entrusted to the 'sound judicial discretion' of the court." Cablevision of S. Conn. Ltd. Partnership v. Smith, 141 F.Supp.2d 277, 281 (D. Conn. 2001) (quoting Shah v. N.Y. State Dep't of Civil Serv., 168 F.3d 610, 615 (2d Cir.1999)). See also World Wrestling Entertainment, Inc. v. Ausbert De Arce, No. 3:03-CV-1568 (DJS), 2006 WL 236752, at * 1 (D. Conn. Jan. 27, 2006) (same). Generally, in civil cases, "where a party fails to respond, after notice the court is ordinarily justified in entering a judgment against the defaulting party." Bermudez v. Reid, 733 F.2d 18, 21 (2d Cir.1984).

"It is an ancient common law axiom that a defendant who defaults thereby admits all well-pleaded factual allegations contained in the complaint." City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (citation and internal quotation marks omitted). Once a district court determines that a defendant is in default, all reasonable inferences should be drawn in favor of the prevailing party. Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981). However, "[a] court's decision to enter a default against defendants does not by definition entitle plaintiffs to an entry of a default judgment." Bricklayers and Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Constr., LLC, 779 F.3d 182, 188 (2d Cir. 2015). "Rather, the court may, on plaintiffs' motion, enter a default judgment if liability is established as a matter of law when the factual allegations of the complaint are taken as true." Id. (emphasis added) (citing Mickalis Pawn Shop, 645 F.3d at 137).

Therefore, to insure proper entry of default judgment, it is incumbent on the Court to review whether the allegations of the complaint state a legal claim. Au Bon Pain Corp., 653 F.2d at 65; see also TAGC Mgmt., LLC v. Lehman, Lee & Xu Ltd., 536 Fed.Appx. 45, 46 (2d Cir. 2013) ("Indeed, we have recently suggested that, prior to entering default judgment, a district court is 'required to determine whether the plaintiff's allegations establish the defendant's liability as a matter of law.'") (quoting Mickalis Pawn Shop, 645 F.3d at 137) (internal quotation marks omitted).^[5] See Priestley v. Headminder, Inc., 647 F.3d 497, 506 (2d Cir.2011) (remanding case, reversing district court's entry of default judgment against defendant, because complaint's well-pleaded allegations, accepted as true, failed to adequately support the application of the de facto merger doctrine, which was the alleged basis for defendant's liability); Evanauskas v. Strumpf, No. 3:00-CV-1106 (JCH), 2001 WL 777477, at *1 (D. Conn. June 27, 2001) ("[B]efore [default] judgment can be entered, the court must determine whether plaintiff's factual allegations are sufficient to state a claim for relief on each of the causes of action for which the plaintiff seeks judgment by default.") (citing Au Bon Pain Corp., 653 F.2d at 65); LaBarbera v. Interstate Payroll Co., No. 07-CV-1183 (FB)(MDG), 2008 WL 766982, at *1 (E.D.N.Y. Mar. 20, 2008) (Upon default, "[a] district court must nevertheless determine whether the allegations state a claim upon which relief may be granted . . . .") (citing Au Bon Pain Corp., 653 F.2d at 65); Leider v. Ralfe, No. 01-CV-3137 (HB)(FM), 2004 WL 1773330, at *7 (S.D.N.Y. July 30, 2004) ("[E]ven after [a] default, . . . 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.") (citation and internal quotation marks omitted).

Furthermore, "it is well established that '[w]hile a party's default is deemed to constitute a concession of all well pleaded allegations of liability, it is not considered an admission of damages.'" Cement and Concrete Workers Dist. Council Welfare Fund v. Metro Foundation Contractors, Inc., 699 F.3d 230, 234 (2d Cir. 2012) (quoting Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir.1992)). Thus, upon default a district court should accept "as true all of the factual allegations of the complaint, except those relating to damages." Au Bon Pain Corp., 653 F.2d at 65 (emphasis added) (citations omitted).

With respect to damages, under Federal Rule of Civil Procedure 55(b)(1), "[i]f the plaintiff's claim is for a sum certain or a sum that can be made certain by computation, the clerk - on the plaintiff's request, with an affidavit showing the amount due - must enter judgment for that amount and costs against a defendant who has been defaulted for not appearing and who is neither a minor nor an incompetent person." Fed.R.Civ.P. 55(b)(1).

However, unlike damages, attorneys' fees are not "sums certain" under Rule 55(b)(1) in that they require a judicial determination as to what constitutes reasonable fees. Nat'l Automatic Sprinkler Indus. Apprentice and Training Fund v. H.G. Sprinklers, Inc., No. 3:10-CV-252-CSH, 2011 WL 773444, at * 1 (D. Conn. Feb. 25, 2011). See also 451 Mktg., LLC v. Namco, LLC, No. 3:17-CV-01927(MPS), 2019 WL 11894409, at *3 (D. Conn. Sept. 30, 2019); Ace Grain Co. v. Am. Eagle Fire Ins. Co. of N.Y., 11 F.R.D. 364, 366 (S.D.N.Y. 1951). Therefore, under Rule 55(b)(1), the Clerk cannot, as in this case, enter judgment with respect to an award that includes attorneys' fees.

"If a claim is not for a sum certain, the amount of damages must be ascertained by the District Court under Rule 55(b)(2)." 451 Mktg., 2019 WL 11894409,...