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Pursuant to Rule 55, the District Court, in Its Discretion, Granted Plaintiff’s Motion for Default Judgment, and Engaged in a Independent Determination As to Damages

Bay State Precast, Inc. v. Royal Tractor Co., Inc.
No. DKC— 13—3371 (S. D. Md. December 10, 2014)
by Sarah M. Grago, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://cases.justia.com/federal/district-courts/maryland/mddce/8:2013cv03371/258610/11/0.pdf?ts=1418327950

In Bay State Precast, Inc. v. Royal Tractor Co., Inc., the United States District Court for the Southern District of Maryland reinforced the parameters of relief permitted by default judgment. Plaintiff, Bay State (“Bay State”), filed a complaint against Defendant, Royal Tractor (“Royal Tractor”), for breach of contract and unjust enrichment. When Defendant failed to respond, Plaintiff moved for an entry of default judgment outlining several sources of damages. While the court ultimately granted the Plaintiff’s motion for default and most of the damages, in its discretion, it limited the award of attorneys’ fees.

By way of background, the Plaintiff, a manufacturer of precast concrete tunnel liner segments, contracted with Defendant, a manufacturer of mobile equipment for industrial material handling, to purchase a forklift from Defendant for an ongoing project. The parties entered into a Purchase Order agreement on September 5, 2012 pursuant to which Defendant promised to deliver a “Royal Rig-N-Lift” Model forklift within two hundred and forty (240) days, by May 3, 2013. The Purchase Order agreement specified that “time [wa]s of the essence.”

Plaintiff agreed to pay a total amount of $241,632.00 for the forklift with partial payment of $72,488.00 before delivery. While waiting for delivery of the forklift, Plaintiff rented a comparable forklift at the rate of $6,500.00 a month with intentions to return same upon receipt of Defendant’s delivery.

The Defendant, however, never delivered the forklift. Plaintiff made multiple inquiries as to the estimated delivery date both before, and after, the projected delivery date of May 3, 2013 yet each time the Defendant continued to make assurances that the forklift would be delivered. Defendants delayed the delivery date to June 10, 2013, and later to November 22, 2013. In response to the delays, Plaintiff made efforts to contact Defendant to terminate the Purchase Order. On more than five (5) occasions, Plaintiff attempted to contact Defendant to terminate the contract and request a refund of the initial deposit, but Defendant refused to return the payment. Plaintiff continued to rent the forklift from May 2013 to October 2013 while it waited for delivery from Defendant.

On November 12, 2013, Plaintiff filed a complaint against Defendant asserting breach of contract and an alternative claim for unjust enrichment. Default was entered by the clerk on March 26, 2014 after Defendant failed to respond within the requisite time period. On March 6, 2014, Plaintiff filed the pending motion for default judgment.

The court began its analysis by teasing out the standard that the Fourth Circuit has adopted to assess whether a default judgment is appropriate pursuant to Federal Rule of Civil Procedure 55 (“Rule 55”). It noted that the mere fact that a defendant defaults does not automatically warrant an entry of judgment in the plaintiff’s favor. Rather, the court observed, the decision whether to grant the judgment is left to the discretion of the court. Here, the court deferred to the Fourth Circuit’s strong policy that “cases be decided on their merits,” yet ultimately conceded that default judgments may be appropriate where a party is unresponsive. Dow v. Jones, 232 F.Supp.2d 491, 494 (D.Md. 2002).

The court explained that an order of default takes all allegations as to liability as true, yet, not allegations as to damages. Specifically, Federal Rule of Civil Procedure 54 (“Rule 54”) limits the type of judgment that may be entered based on a party’s default. Rule 54 provides that the default judgment entered “must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” The court explained the basis for the rule by noting that the defendant could not reasonably anticipate that the damages would exceed the amount in the complaint, even where he defaults in reply. Further, where a complaint is silent as to an amount, a court may hold a hearing to make an independent determination of the amount. The court is also permitted to rely on affidavits or documentary evidence to assess what sum is appropriate.

In the case at bar, the court, in its discretion, took the liability allegations in the complaint, as true. In support, the court cited to the Terms & Conditions of the parties’ Purchase Order that provided that the vendor shall indemnify the buyer for damages sustained due to the vendor’s failure to perform promptly.

With regard to damages in the complaint, the court parsed through the allegations. Plaintiff sought an award of $124,536.35, plus pre- and post- judgment interest on the $72,466.00 deposit, and $15,090.00 in attorneys’ fees and expenses. In assessing whether the alleged damages were appropriate, the court itemized the alleged damages. It concluded that the $124,536.35 amount was comprised of: (1) the $72,488.00 deposit; (2) $35,984.00 for the rental forklift from May 2013 – October 2013; and (3) $16,064.35 which reflected the difference between the total purchase price and the total cost of having to purchase new equipment as a result of the failed delivery. The court found it persuasive that Plaintiff submitted a declaration, checks, copies of invoices, and other documentation to confirm the above amounts. The court approved the above damage amounts with the exception of the request for pre-judgment interest.

The court used its discretion and independent judgment to determine an appropriate award for attorneys’ fees as it concluded the alleged amount was “rather high.” Plaintiff requested $14,690.00 and $400.00 in costs with supporting documentation reflecting thirty-three (33) hours of work at either $450.00 or $4690.00 an hour. The court, however, rejected this number and decreased it to $13,200.00 which amounted to thirty-three (33) hours at $400.00/hour.

The court granted the Plaintiff’s motion for default judgment, and, used its discretion to evaluate what damages award was appropriate.