Wells Fargo Bank, NA v. Gateway Int'l Logistics, Inc.

REPORT AND RECOMMENDATIONS

J. MARK COULSON, UNITED STATES MAGISTRATE JUDGE

This Report and Recommendations addresses Plaintiff Wells Fargo Bank, N.A.'s Motion for Entry of Default Judgment Pursuant to Rule 55(b)(2)) (ECF No. 10). On February 27, 2023, in accordance with 28 U.S.C. § 636 and Local Rules 301-02, Judge Rubin referred this breach of contract case to the undersigned to review Plaintiff's Motion and to “mak[e] recommendations concerning damages.” (ECF No. 13). The undersigned has reviewed Plaintiff's Motion, the accompanying attachments, and the supplemental filings to the Motion (ECF Nos. 11 & 12)^[1]. No hearing is necessary. See Loc. R. 105.6 (D. Md. 2021). For the reasons set forth below, I respectfully recommend that Plaintiff's Motion for Default Judgment be GRANTED in part and that damages be awarded as set forth herein.

I. BACKGROUND

On October 4, 2022, Plaintiff filed its Complaint for breach of contract or, in the alternative, unjust enrichment against Defendant Gateway International Logistics, Inc. (ECF No. 1). The Complaint alleges that Defendant “is a Maryland corporation with its principal place of business in Columbia, Maryland.” Id. at p. 1, ¶ 2.^[2] On October 5, 2022, the Clerk of this Court issued summons as to Defendant (ECF No. 3), and Plaintiff filed a return of summons on October 19, 2022 (ECF No. 4). The return of summons indicated that on October 12, 2022, summons was executed through personal service on Defendant's registered agent, Fabion Harris. Id. at p. 2. Therefore, Defendant's response to the Complaint was due on November 2, 2022. See Fed.R.Civ.P. 12(a)(1)(A)(i) (“In General . . . [a] defendant must serve an answer . . . within 21 days after being served with the summons and complaint ....”) (emphasis in original). However, Defendant failed to respond to the Complaint by November 2, 2022. Based on Defendants' failure to plead or otherwise defend, Plaintiff filed a Request for Entry of Default (ECF No. 5) on November 11, 2022. On November 18, 2022, the Clerk entered “default for want of answer or other defense by Defendant ....” (ECF No. 6). Accordingly, on November 18, 2022, the Clerk mailed Defendant a Notice of Default^[3](ECF No. 7) indicating that Defendant had thirty (30) days to file a motion to vacate the Clerk's Order of Default. In the Notice of Default, Defendant was warned that if it failed to file such a motion, “the Court will act promptly on any pending motions for entry of default judgment, which may result in a monetary judgment against you.” Id.

As of February 2023, despite service of summons and the Clerk's Order of Default, Defendant still had not responded to the Complaint. Therefore, on February 3, 2023, Plaintiff filed its Motion for Default Judgment (ECF No. 10), and Plaintiff filed supplements (ECF Nos. 11 & 12) to its Motion on February 6, 2023. As of the filing of this Report and Recommendations, Defendant has not filed a response to the Complaint.

Regarding the allegations in Plaintiff's Complaint, the case sub judice presents as a straightforward breach of contract case. At all times relevant to this case, Defendant maintained a Wells Fargo Business Choice Checking account (“the Account”) with Plaintiff. (ECF No. 1 at p. 2, ¶ 5). The Account ended in numbers 2328. Id. Rodney Armstrong and Fabion Harris were the only authorized signers for the Account. Id. at p. 2, ¶ 6. On August 13, 2021, a check for $390,000.00 (“the check”) was deposited into the Account at an ATM in Columbia, Maryland. Id. at p. 2, ¶ 7. The check was issued by Williams Brian. (ECF No. 1 at p. 2, ¶ 7; ECF No. 1-1, Copy of Check, at p. 2). Upon the deposit of the check into the Account, Plaintiff provided Defendant with provisional access to the proceeds of the check, and Defendant wired the majority of those proceeds out of the Account on August 16, 2021. Id. at p. 2, ¶ 8. Following Defendant's transfer of the proceeds out of the Account, Plaintiff discovered that the check was counterfeit. Id. at p. 2, ¶ 9. Therefore, the check was not paid by the U.S. Bank, and Plaintiff debited the funds from the Account. Id. Debiting the funds resulted in an overdraft of the Account. Id. Plaintiff measures its principal loss as the negative balance of the Account, inclusive of all fees and credits. Id. at p. 2, ¶ 10. Plaintiff has calculated its total principal loss to be $330,768.21 (the “Overdraft Loss”). Id. Despite Plaintiff's demands, Defendant has refused to reimburse Plaintiff for the Overdraft Loss. Id. at p. 2, ¶ 11.

Attached to and incorporated in the Complaint is a copy of the Deposit Account Agreement (“the Agreement”) that established the Account. (ECF No. 1 at p. 3, ¶ 15; ECF No. 1-2, the Agreement). Plaintiff has also included a copy of the check. (ECF No. 1-1). At all times relevant to the Complaint, Defendant was governed by the Agreement. (ECF No. 1 at p. 3, ¶ 15). Pursuant to the terms of the Agreement, Defendant is required to deposit sufficient funds to cover any overdraft and any service charges in the Account. Id. at p. 3, ¶ 16. Furthermore, pursuant to the terms of the Agreement, Plaintiff is entitled to recover attorney's fees and costs against Defendant incurred in connection with this action. (ECF No. 1 at p. 3, ¶ 20).^[4] Plaintiff contends that it has suffered monetary damages as a result of Defendant's failure to return the Account to a positive balance. Id. at p. 3, ¶¶ 17 & 19. Plaintiff avers that such a failure by Defendant amounts to a breach of the Agreement. Id. at p. 3, ¶ 17.

II. LEGAL STANDARD

A. Default Judgment

“When 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.” Fed.R.Civ.P. 55(a). “Rule 55 of the Federal rules of Civil Procedure establishes a two-step process for obtaining a default judgment.” ME2 Prods., Inc. v. Ahmed, 289 F.Supp.3d 760, 762 (W.D. Va. 2018) (other citation omitted). First, “the [C]lerk must enter the party's default.” Fed.R.Civ.P. 55(a). Second, a party may move the Court for default judgment under Rule 55(b).

Thereafter, “the court may enter default judgment at the plaintiff's request and with notice to the defaulting party.” Basba v. Liu Xuegie, No. 8:19-cv-380-PX, 2021 WL 242495, at *2 (D. Md. Jan. 25, 2021) (citing Fed.R.Civ.P. 55(b)(2)). “Entry of default judgment is left to the discretion of the court.” S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005) (other citation omitted). Although the Fourth Circuit has a strong policy that cases be decided on their merits, “default judgment may be appropriate when the adversary process has been halted because of an essentially unresponsive party.” Id. (other citations omitted).

“A plaintiff, however, is not automatically entitled to default judgment simply because the defendant has not responded.” Basba, 2021 WL 242495, at *2. Rather, “when considering a motion for default judgment, the Court takes as true all well-pleaded factual allegations in the complaint, other than those pertaining to damages.” Id. at *3 (citing Fed.R.Civ.P. 8(b)(6); Ryan Homecomings Fin. Network, 253 F.3d 778, 780 (4^th Cir. 2001) (“The defendant, by his default, admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established.”) (citation and internal quotation marks omitted)). “District courts analyzing default judgments have applied the standards articulated by the United States Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), to determine whether allegations within the complaint are ‘well-pleaded.'” Basba, 2021 WL 242495, at *3 (citing Balt. Line Handling Co. v. Brophy, 771 F.Supp.2d 531, 544 (D. Md. 2011); Russell v. Railey, No. DKC-08-2468, 2012 WL 1190972, at *2-3 (D. Md. Apr. 9, 2012); U.S. v. Nazarian, No. DKC-10-2962, 2011 WL 5149832, at *2-3 (D. Md. Oct. 27, 2011)). “Where a complaint offers only labels and conclusions[,] or naked assertion[s] devoid of further factual enhancement, the allegations therein are not well-

pleaded and, consistent with the Court's discretion to grant default judgment, relief should be denied.” Basba, 2021 WL 242495, at *3 (other citation and internal quotation marks omitted).

If liability is established, the Court proceeds to assess damages. However, the Court cannot solely rely on a complaint to assess damages. See Trs. Of the Elec. Welfare Trust Fund v. MH Passa Elec. Contracting, Inc., No. DKC-08-2805, 2009 WL 2982951, at *1 (D. Md. Sept. 14, 2009) (“Upon default, the well-pled allegations in a complaint as to liability are taken as true, although the allegations as to damages are not.”). A Court may only award damages without a hearing if the record supports the damages Plaintiff requests. See Pentech Fin. Servs., Inc. v. Old Dominion Saw Works, Inc., No. 6:09-cv-00004, 2009 WL 1872535, at *2 (W.D. Va. June 30, 2009) (concluding that there was “no need to convene a formal evidentiary hearing on the issue of damages . . .” after default judgment was entered because the plaintiff submitted affidavits and printouts of electronic records establishing the amount of damages plaintiff sought).

B. Jurisdiction and Venue

As a preliminary matter, the undersigned finds that jurisdiction and venue are proper. The Court has “an independent obligation to determine whether subject-matter jurisdiction exists, even when no party challenges it.” Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010); see Fed.R.Civ.P. 12(h)(3) (“If the court determines at any time that it lacks subject-matter jurisdiction, the court...