KATHERINE P. NELSON, Magistrate Judge.
This action is before the Court on the Motion for Default Judgment under Federal Rule of Civil Procedure 55(b) (Doc. 14) filed by Plaintiff Michael Zucaro. Upon consideration, the Court finds that the motion is due to be
"When a defendant has failed to plead or defend, a district court may enter judgment by default. Fed. R. Civ. P. 55(b)(2). Because of [this Circuit's] strong policy of determining cases on their merits, however, default judgments are generally disfavored. While a defaulted defendant is deemed to admit the plaintiff's well-pleaded allegations of fact, he is not held to admit facts that are not well-pleaded or to admit conclusions of law. Entry of default judgment is only warranted when there is a sufficient basis in the pleadings for the judgment entered." Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1244-45 (11th Cir. 2015) (per curiam) (quotations, footnote, and some citations omitted). See also Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009) ("`A default judgment is unassailable on the merits, but only so far as it is supported by well-pleaded allegations.'" (quoting Nishimatsu Const. Co. v. Houston Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975))).
Surtain, 789 F.3d at 1245.
Moreover, in cases involving a default judgment, "there must be strict compliance with the legal prerequisites establishing the court's power to render the judgment." Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S. & Canada, 674 F.2d 1365, 1369 (11th Cir. 1982).
On February 29, 2016, Zucaro commenced this civil action by filing a Complaint (Doc. 1) against Defendants Anand Patel, Raman Patel, and Gulf Coast Management Company, LLC ("GCMC") (collectively, "the Defendants"). In response to an order of the Court finding deficient certain allegations in the initial Complaint supporting subject matter jurisdiction (see Doc. 4), Zucaro subsequently filed his two-count First Amended Complaint ("FAC"), the operative pleading in this action.
On March 5, 2016, the Patels were each personally served with a summons and the FAC by private process server. (See Docs. 7, 8). On March 8, 2016, the process server also delivered a summons and the FAC to GCMC at its Saraland, Alabama address, leaving a copy of those documents with "Zakiah (last name not given), Hotel Clerk." (Doc. 9). To date, none of the Defendants has filed a responsive pleading or otherwise appeared in this action.
Upon Zucaro's application (Doc. 10), the Clerk of Court entered default against the Defendants under Federal Rule of Civil Procedure 55(a) on April 5, 2016. (Doc. 11). Notice of entry of default was sent to the Defendants by certified mail. The notice sent to GCMC was accepted at GCMC's primary address by "Sherri Jacobi" on April 7, 2016. (Doc. 12). The notices sent to the Patels were returned to the Court as "unclaimed." (Docs. 14, 15).
"It is . . . axiomatic that the inferior federal courts are courts of limited jurisdiction. They are `empowered to hear only those cases within the judicial power of the United States as defined by Article III of the Constitution,' and which have been entrusted to them by a jurisdictional grant authorized by Congress." Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994)). Accordingly, "it is well settled that a federal court is obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking." Id.
The FAC alleges diversity of citizenship under 28 U.S.C. § 1332(a) as the sole basis for subject matter jurisdiction. Section 1332(a)(1) grants district courts "original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different States." Zucaro, a natural person, is alleged to be a citizen of the state of Nevada, while natural person Defendants Raman and Anand Patel are both alleged to be citizens of the state of Alabama. (See Doc. 6 at 3, ¶¶ 10 - 12).
However, the FAC is inconsistent regarding the citizenship of GCMC, a limited liability company. In the "Jurisdiction and Venue" section, Raman Patel is alleged to be the sole member of GCMC, a limited liability company. See (id., ¶ 13); Rolling Greens, MHP, L.P. v. Comcast SCH Holdings, L.L.C., 374 F.3d 1020, 1021 (11th Cir. 2004) (per curiam) (for purposes of diversity jurisdiction, "a limited liability company is a citizen of any state of which a member of the company is a citizen").
Generally, "if a complaint's factual allegations do not assure the court it has subject matter jurisdiction, then the court is without power to do anything in the case." Travaglio v. Am. Exp. Co., 735 F.3d 1266, 1269 (11th Cir. 2013). However, a district court may proceed "if the evidence submitted during the course of the proceedings cures any jurisdictional pleading deficiency by convincing [it] of the parties' citizenship." Id. Considering the allegations in the FAC together with the attached exhibits,
Because no Defendant is a citizen of the same state as Zucaro, complete diversity exists among the parties. Moreover, § 1332(a)(1)'s requisite amount in controversy is satisfied because Zucaro expressly seeks damages of "$650,000 in principal, plus interest, costs, and fees." (See Doc. 6). Thus, the Court is satisfied that subject matter jurisdiction exists in this action.
"Service of process is a jurisdictional requirement: a court lacks jurisdiction over the person of a defendant when that defendant has not been served." Pardazi v. Cullman Med. Ctr., 896 F.2d 1313, 1317 (11th Cir. 1990). The record reflects that the Patels were each personally served with the summons and First Amended Complaint on March 5, 2016. See (Docs. 7, 8); Fed. R. Civ. P. 4(e)(2)(A) & (l)(1). Zucaro does not explain how "Zakiah (last name not given), Hotel Clerk," is an agent "designated by law to accept service of process on behalf of" GCMC. (Doc. 9). However, records from the Alabama Secretary of State, accessed through its online "Business Entity Search" system,
The Amended Complaint (Doc. 6) also alleges sufficient facts, deemed admitted by the Defendants' default, establishing that personal jurisdiction and venue in this Court are proper.
"An allegation — other than one relating to the amount of damages — is admitted if a responsive pleading is required and the allegation is not denied." Fed. R. Civ. P. 8(b)(6).
On July 11, 2014, the Defendants each executed a Promissory Note (hereinafter the "July 11, 2014 Note") with Zucaro in the principal amount of $200,000. A "true and correct copy of" the July 11, 2014 Note is attached to the FAC as "Exhibit A" (Doc. 6-1). (See Doc. 6 at 4, ¶ 18). It is signed by GCMC as "Borrower" and by each of the Patels as "Borrower and Personal Guarantor" and states, in relevant part:
The July 11, 2014 Note fully matured on July 11, 2015. The Defendants defaulted on the July 11, 2014 Note on July 11, 2015, by failing to make payment when due and owing.
Shaffer v. Regions Fin. Corp., 29 So.3d 872, 880 (Ala. 2009) (per curiam).
Similarly, "`[e]very suit on a guaranty agreement requires proof of the existence of the guaranty contract, default on the underlying contract by the debtor, and nonpayment of the amount due from the guarantor under the terms of the guaranty.'" Sharer v. Bend Millwork Sys., Inc., 600 So.2d 223, 225-26 (Ala. 1992) (quoting Delro Indus., Inc. v. Evans, 514 So.2d 976, 979 (Ala. 1987)). "`Rules governing the interpretation and construction of contracts are applicable in resolving a question as to the interpretation or construction of a guaranty contract.'" Eagerton v. Vision Bank, 99 So.3d 299, 304 (Ala. 2012) (quoting Gov't St. Lumber Co. v. AmSouth Bank, 553 So.2d 68, 75 (Ala. 1989)).
The Court finds that the FAC sufficiently alleges facts, deemed admitted by the Defendants' default, establishing the Defendants' breach of the promissory note and guaranties attached to the FAC (Doc. 6-1).
The terms of the promissory note sufficiently evidence that Zucaro is entitled to $650,000 in principal from the Defendants, jointly and severally.
In addition to the $650,000 in principal, the motion for default judgment requests damages of $89,050 in accrued interest "[a]s of May 3, 2016. . ." The motion further asserts that "[i]nterest continues to accrue on the unpaid principal at the rate of 18% per annum (or $325 per diem)" and requests the Court also award interest on the unpaid principal "[f]or every day past May 3, 2016, upon which judgment is not entered against Defendants, . . . calculated at the per diem rate of 18%" (i.e. "$325 per diem"). (Doc. 13 at 4, ¶¶ 15 - 17). It appears, then, that Zucaro claims entitlement to an 18% per annum interest rate on the full principal amount of the indebtedness, $650,000.00. The FAC and the evidence of record, however, do not support such an interest award on the full principal amount. Rather, sections 1 and 2 of the promissory note indicate that the 18% per annum interest rate applies only to the $200,000 loaned under the note. See supra. Though the promissory note also indicates the Defendants reaffirmed a total debt of $650,000 in principal, "plus interest and fees thereon," see supra, the promissory note does not indicate what interest rate applies to the remaining $450,000 in principal. Accordingly, the Court will only award 18% per annum interest on $200,000 of the principal amount, running from the execution of the July 11, 2014 Note to entry of judgment.
Zucaro has also requested an award of $26,126.00 in attorneys' fees and $638.74 in costs incurred as of May 3, 2016, in enforcing the promissory note and guaranties against the Defendants. "It is beyond dispute that in this diversity action, the substantive law to be applied is the []law of [Alabama], while federal law governs the procedure. See Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L. Ed. 1188 (1938). [Alabama] law controls both the questions of the availability of attorneys' fees and the standards to determine when the attorneys' fees should be awarded." Columbus Mills, Inc. v. Freeland, 918 F.2d 1575, 1577 (11th Cir. 1990). See also Trans Coastal Roofing Co. v. David Boland, Inc., 309 F.3d 758, 760 (11th Cir. 2002) ("Since Boland's claim for attorneys' fees sounds in state law and reaches us by way of federal diversity jurisdiction, we apply the substantive law of Florida, the forum state. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L. Ed. 1188 (1938)."); Smith v. GTE Corp., 236 F.3d 1292, 1305 n.13 (11th Cir. 2001) ("`In an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving a right thereto . . . should be followed.'" (quoting Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 259 n.31 (1975) (citations and quotations omitted))); Perkins State Bank v. Connolly, 632 F.2d 1306, 1310 (5th Cir. 1980)
Alabama follows the "American rule," whereby attorney fees may be recovered if they are provided for by statute or by contract. E.g., Jones v. Regions Bank, 25 So.3d 427, 441 (Ala. 2009). Here, by executing the promissory note, the Defendants agreed to "pay all costs of collection, replevin or any other or similar type of cost if . . . in default." The Defendants also agreed that, if Zucaro "retains an attorney to collect upon th[e] Promissory Note, the [Defendants would] pay any fee [Zucaro] incurs with such attorney plus court costs (except as prohibited by law)." See supra. Although the contract does not specifically limit the award of attorney fees to a "reasonable" amount, "`Alabama law reads into every agreement allowing for the recovery of attorney's fees a reasonableness limitation.'" Gore v. White, 96 So.3d 834, 846 n.3 (Ala. Civ. App. 2012) (quoting Willow Lake Residential Ass'n, Inc. v. Juliano, 80 So.3d 226, 241 (Ala. Civ. App. 2010)).
Where, as here, attorneys' fees and costs are provided for by promissory note, "[i]n determining the fees to which the payees are entitled, we look to the law of the state in which the security instruments were executed." Resolution Trust Corp. v. Hallmark Builders, Inc., 996 F.2d 1144, 1148 (11th Cir. 1993) (per curiam) (citing McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 894 F.2d 1482, 1487 (5th Cir. 1990)) (applying "federal loadstar approach as developed by federal case law" as to reasonableness of fees after finding that Florida follows that approach, but also noting that Florida law permitted a "reasonable fee" in excess of a limitation in the attorney-client contract). See also Symetra Life Ins. Co. v. Rapid Settlements, Ltd., 775 F.3d 242, 248 (5th Cir. 2014) ("State law controls both the award of and the reasonableness of fees awarded where state law supplies the rule of decision." (quotations omitted));
Regarding the inquiry into "reasonableness," the Supreme Court of Alabama has held:
Kiker v. Prob. Court of Mobile Cty., 67 So.3d 865, 867-68 (Ala. 2010) (citations and quotations omitted). Accord, e.g., Regions Bank v. Lowrey, 154 So.3d 101, 109 (Ala. 2014). A "fee is clearly excessive when after review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee." Peebles v. Miley, 439 So.2d 137, 143 (Ala. 1983) (quotation omitted).
"Parties seeking `an attorney fee bear the burden of proving their entitlement to an award and documenting their appropriately expended hours.'" Major Millworks, Inc. v. MAE Hardwoods, Inc., 187 So.3d 714, 723 (Ala. Civ. App. 2015) (quoting Beal Bank, SSB v. Schilleci, 896 So.2d 395, 408 (Ala. 2004)). "`[A] trial court may not order one party to pay another party's attorney's fees without first receiving evidence of the amount of those fees and then determining the reasonableness of that amount.'" Id. (quoting A.B. v. J.B., 40 So.3d 723, 735 (Ala. Civ. App. 2009)). "`When an applicant for attorney fees "has carried his burden of showing that the claimed rate and number of hours are reasonable, the resulting product is presumed to be the reasonable fee to which counsel is entitled."'" Beal Bank, 896 So. 2d at 408 (quoting Ex parte Edwards, 601 So.2d 82, 85 (Ala. 1992) (quoting Blum v. Stenson, 465 U.S. 886, 888, 104 S.Ct. 1541, 79 L. Ed. 2d 891 (1984)))
"`The trial court, in connection with a consideration of the opinion evidence proffered by qualified experts, may call to his aid his own estimate of the value of such legal services after considering the aforementioned elements and, generally speaking, the allowance rests within the sound judicial discretion of the trial court.'" Beal Bank, 896 So. 2d at 404 (quoting Ingalls v. Hare, 96 So.2d 266, 274 (Ala. 1957)). The trial court also has the right "`to look to the whole record on the question of the value of attorneys' services, and may treat opinions of witnesses as advisory and may render such decree fixing attorneys' fees as it deems right and proper under all the circumstances.'" Id. (quoting Ingalls, 96 So. 2d at 274). See also Rice v. Grove Hill Homeowners' Ass'n, Inc., 113 So.3d 659, 663 (Ala. Civ. App. 2012) ("The trial court may rely on its own knowledge and experience in determining the value of the legal services performed and in setting the fee without entertaining evidence of the reasonableness of the fee."). "[I]f after considering the appropriate factors, a trial court concludes that the billed attorney's fees are unreasonable in amount, the appropriate action is not to deny the claim altogether but to enter a judgment for a reasonable amount of attorney's fees." Willow Lake Residential Ass'n, Inc. v. Juliano, 80 So.3d 226, 242-43 (Ala. Civ. App. 2010) (citing Beal Bank, 896 So.2d 395)). Accord SE Prop. Holdings, LLC v. Sandy Creek II, LLC, Civil Action No. 12-00303-KD-M, 2014 WL 47330, at *6 (S.D. Ala. Jan. 7, 2014) (DuBose, J.) (same).
In support of both the amount and reasonableness of his requested attorneys' fees and costs, Zucaro has presented three affidavits (Docs. 13-3, 13-4, 13-5). The first affidavit, from Zucaro himself, attests that his attorneys have charged him $26,126 in attorneys' fees and $638,74 in costs in connection with collecting on the subject indebtedness from the Defendants and that he is of the opinion "this is a reasonable fee for the work performed to date." (Doc. 13-5).
The second affidavit is from Barry W. Andrews, an attorney and partner with Phelps Dunbar, LLP, the law firm providing Zucaro's counsel of record. (Doc. 13-3). Andrews verifies the amount of costs and attorneys' fees requested by Zucaro, explains the work he and four other Phelps Dunbar employees (attorneys and non-attorney) staff have performed since July 2015 in representing Zucaro to collect on the Defendants' indebtedness,
The third affidavit is from Charles J. Fleming, an attorney not with Phelps Dunbar who has practiced law in this judicial district since 1971. (Doc. 13-4). Fleming avers that he is familiar with the attorneys who have worked on this matter, and with Phelps Dunbar in general, and that he has reviewed the pleadings in this action and Phelps Dunbar's billing statements related to this matter. Based on his knowledge and experience, Fleming opines that Zucaro's requested fees and costs "were reasonable expenditures[,] appear to be necessarily incurred[, and] are comparable to those charged by similar firms for performing similar work.
"Although all of the criteria set forth must be taken into consideration (though all criteria need not be met) it has been generally recognized that the amount of time consumed should be the first yardstick used by the trial court." Clement v. Merchants Nat. Bank of Mobile, 493 So.2d 1350, 1355 (Ala. 1986). Here, Zucaro has not provided any information as to how many total hours underlie the fees charged by Phelps Dunbar, how many hours of work were performed by each Phelps Dunbar employee who participated in this matter, or the billing rates of the various Phelps Dunbar employees. Similarly, there is no evidence indicating what specific expenses underlie the requested award of costs. Accordingly, the Court is unable to make a "reasonableness" determination as to the requested attorneys' fees and expenses based on the current record.
Upon consideration, Zucaro's request for attorneys' fees and costs made in his motion for default judgment will
In accordance with the foregoing analysis, it is
Final judgment in accordance with this Order shall issue by separate document, in accordance with Federal Rule of Civil Procedure 58.
Zucaro, through counsel, has been electronically served with the Notice of Assignment, and was required to "serve a copy of th[e] notice and attachments immediately upon all other parties that have been served with the summons and complaint pursuant to Rules 4 and 5, Federal Rules of Civil Procedure." (Doc. 2 at 1). See also S.D. Ala. GenLR 73(c)(2) ("When an action is referred to a Magistrate Judge pursuant to this Rule, the Clerk shall notify all parties who have appeared by sending a Notice of Assignment of Case to a Magistrate Judge for Trial. In accordance with Fed. R. Civ. P. 4 and 5, it shall be the responsibility of Plaintiffs to immediately serve a copy of this Notice on those parties named as Defendants but who have not appeared."). Inasmuch as no party, to date, has returned to the Clerk of Court a Request for Reassignment, there presently exists implicit consent to the undersigned conducting all proceedings in this case. See Chambless v. Louisiana-Pac. Corp., 481 F.3d 1345, 1350 (11th Cir. 2007) ("[T]he Supreme Court held in Roell v. Withrow, 538 U.S. 580, 123 S.Ct. 1696, 155 L. Ed. 2d 775 (2003), that consent to a magistrate judge's jurisdiction can be inferred from a party's conduct during litigation. Id. at 582, 123 S.Ct. 1696. The Court refused to adopt a bright-line rule requiring express consent, instead accepting implied consent `where . . . the litigant or counsel was made aware of the need for consent and the right to refuse it, and still voluntarily appeared to try the case before the Magistrate Judge.' Id. at 589-90, 123 S.Ct. 1696.").
"The appearance required by [Rule 55(b)(2)] has been broadly defined, and not limited to a formal court appearance." Charlton L. Davis & Co., P. C. v. Fedder Data Ctr., Inc., 556 F.2d 308, 309 (5th Cir. 1977) (citing cases indicating that a "letter," "letters and phone calls," and a "claim and cost bond" could constitute "appearance") ("The plaintiff knew Financial had a clear purpose to defend the suit. The knowledge came from a phone call and a letter responsive to plaintiff's formal Court action." (quotation omitted)). See also Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc) (adopting as binding precedent in this Circuit all decisions of the former Fifth Circuit handed down prior to close of business on September 30, 1981); S.E.C. v. Getanswers, Inc., 219 F.R.D. 698, 700 (S.D. Fla. 2004) (While Rule 55(b)(2)'s notice requirement "only applies when the defendant has `appeared,' the defendant does not have to make a formal appearance to trigger the notice requirement. The defendant must simply manifest a clear intention to defend."). Nevertheless, nothing in the record supports a determination that any Defendant has "appeared" in this action (e.g. filings, attempts to contact the Court).
302 F.3d at 461-62 (involving mandatory fee award under Texas statute for a prevailing party in a breach of contract suit).
Utilizing the same reasoning as Mathis, and applying the "prior panel precedent" rule, the Eleventh Circuit would arguably reach the opposite conclusion. In Columbus Mills, Inc. v. Freeland, the Eleventh Circuit determined that "Georgia law control[led] both the questions of the availability of attorneys' fees and the standards to determine when the attorneys' fees should be awarded" but then, without noting any reservation of the question, applied federal law (specifically, the seminal decision Norman v. Housing Authority of Montgomery, 836 F.2d 1292 (11th Cir. 1988)) in determining the reasonableness of the fee award. 918 F.2d at 1577, 1580 - 81. Thus, if the Eleventh Circuit were to "make explicit what was implicit" in Columbus Mills, federal law would govern the reasonableness inquiry here. However, the Eleventh Circuit has subsequently suggested, albeit in a non-binding decision, that Columbus Mills did not settle this issue. See Gowen Oil Co. v. Abraham, 511 F. App'x 930, 934 - 36 & n.5 (11th Cir. 2013) (per curiam) (unpublished) (applying Norman in analyzing the reasonableness of attorney fee awarded under Georgia statute but observing: "The district court used federal law to evaluate the reasonableness of the requested amount. Gowen did not object to that, and both parties base their arguments about the reasonableness of the fees on federal law. In any event, as the district court noted, the outcome would be the same under Georgia law. Therefore, we assume, as everyone else has, that federal standards of reasonableness apply. Cf. Columbus Mills, Inc. v. Freeland, 918 F.2d 1575, 1578, 1580 (11th Cir. 1990) (following state law in determining whether attorney's fees were available but applying, without comment, federal standards to determine reasonableness)."); 11th Cir. R. 36-2 ("Unpublished opinions are not considered binding precedent, but they may be cited as persuasive authority.").
