REPORT AND RECOMMENDATION ECF No. 137
LISA PUPO LENIHAN, Magistrate Judge.
I. RECOMMENDATION
It is respectfully recommended that the Motion for Partial Summary Judgement filed by Plaintiff Washington County Family Entertainment, LLC (ECF No. 137) be denied.
II. REPORT
Pending before the Court is a Motion for Partial Summary Judgment against Defendant Rick Ross Touring, LLC ("Ross Touring") and Defendant William Leonard Roberts II p/k/a/ Rick Ross ("Ross"), filed by Plaintiff Washington County Family Entertainment ("WCFE"). (ECF No. 137.) In the motion, WCFE seeks an order pursuant to Federal Rule of Civil Procedure 56 and LCvR 56 granting partial summary judgment against Ross Touring and Ross for a final judgment in the amount of $296,458.82.
A. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
The facts of this action have been previously presented in the Court's Report and Recommendation on Plaintiff's Motions to Dismiss. (ECF No. 94.) The action concerns a dispute arising from Ross's last-minute cancellation of a scheduled headlining concert performance at Wild Things Park in Washington, Pennsylvania (the "Park") on June 10, 2017 in alleged breach of a Talent Engagement Agreement ("Agreement") dated May 8, 2017 and Defendants' alleged conversion of monies wired by WCFE to secure Ross's appearance and performance at the Park. WCFE entered into the agreement with Defendants Goodlife Entertainment LLC ("Goodlife") and John Wardlow ("Wardlow"), who had warranted that they had the authority to bind Ross to the Agreement and the ability to deliver the performance services of Ross. Second Am. Compl. ¶ 20-21 (ECF No. 67.) WCFE duly wired payments to secure Ross's appearance at the concert, made preparations and incured expenses for the concert. Id. ¶¶ 22-26.
On June 8, 2017, Wardlow contacted WCFE and advised that Ross would not be performing at the Park on June 10, 2017. Id. ¶ 28. Defendants have refused to return all the tendered deposit monies to WCFE or to reimburse WCFE for its alleged damages, costs, expenses, and fees, despite WCFE's demand. Id. ¶¶ 29, 30.
On July 5, 2017, WCFE instituted this action by way of a Complaint that alleged claims against Ross for breach of contract and unjust enrichment, and against Ross and four other Defendants (All Axxess Entertainment, LLC, Anthony Miller, Goodlife, and Wardlow) for conversion. (ECF No. 1.) WCFE filed a First Amended Complaint as of right asserting the same claims against those same Defendants on July 19, 2017. (ECF No. 5.) Ross filed an Answer to the First Amended Complaint and Affirmative Defenses on September 5, 2017. (ECF No. 11.) WCFE filed a Second Amended Complaint on March 12, 2018 and added Defendants Ross Touring, Symere Woods ("Lil Uzi"), Uzivert, LLC, Paradigm Talent Agency, and Erin Larsen. (ECF No. 67.) WCFE's claims arise out of Ross's alleged material breach of the Agreement in connection with his last-minute cancellation of the scheduled June 10, 2017 concert and Defendants' alleged conversion of monies wired by WCFE to secure Ross's appearance and performance at the Park. Id.
In March and April 2018, Ross Touring and Ross each filed a Motion to Dismiss for lack of personal jurisdiction and failure to state a claim. (ECF Nos. 70, 72.) The Court denied both of those Motions in a Report and Recommendation dated July 9, 2018, which was subsequently adopted by the District Court on August 8, 2018. (ECF No. 97.)
All Axxess was properly served with the issued summons and the Second Amended Complaint filed by WCFE in this action. Pl's Statement of Material Facts. ¶ 7 (ECF No. 138.) On June 19, 2018, a default was entered by the Clerk of Court against All Axxess for failure to plead or otherwise defend. Id. ¶ 8.
On March 6, 2019, WCFE filed a Motion for Entry of Default Judgment ("Motion for Default") against several Defendants, including All Axxess, and supporting papers. Id. ¶ 9. On March 27, 2019, the Court entered an Order granting the Motion for Default and entering a final judgment in favor of WCFE and against All Axxess, Anthony Miller, Goodlife Entertainment L.L.C., and John Wardlow, Jr., jointly and severally, in the amount of $296,458.82 (plus post-judgment interest). (ECF No. 126.)
WCFE has filed the instant Motion for Partial Summary Judgment asking the Court to hold Defendants Ross and Ross Touring liable for the default judgment against the other Defendants. (ECF No. 137.) Defendants Ross and Ross Touring jointly filed a Brief in Opposition on June 27, 2019 (ECF No. 144.) WCFE filed its Reply on July 12, 2019. (ECF No. 146.) This Motion is now ripe for review.
B. LEGAL STANDARD — MOTION FOR SUMMARY JUDGMENT
Summary judgment is appropriate if, drawing all inferences in favor of the nonmoving party, the pleadings, documents, electronically stored information, depositions, answers to interrogatories and admissions on file, together with any affidavits or declarations, show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) & (c). Summary judgment may be granted against a party who fails to adduce facts sufficient to establish the existence of any element essential to that party's case, and for which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial burden of identifying evidence which demonstrates the absence of a genuine issue of material fact; that is, the movant must show that the evidence of record is insufficient to carry the non-movant's burden of proof. Id. Once that burden has been met, the non-moving party must set forth "specific facts showing that there is a genuine issue for trial" or the factual record will be taken as presented by the moving party and judgment will be entered as a matter of law. Matsushita Elec. Indus. Corp. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P. 56(e)) (emphasis added by Matsushita Court). An issue is genuine only "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty-Lobby, Inc., 477 U.S. 242, 248 (1986). In Anderson, the United States Supreme Court noted the following:
[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.. . . [T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.
Id. at 249-50 (internal citations omitted).
C. ANALYSIS
WCFE asserts that the default judgment entered against the non-answering defendants should also bind Ross and Ross Touring. WCFE offers several theories: privity between principal and agent, joint and several liability, and res judicata. Pl's Br. in Supp. pp. 4-6, 7-8 (ECF No. 139.)
WCFE relies on this Court's previous reasoning in the Report and Recommendation on Defendant's Motion to Dismiss, when it stated, "principals generally are responsible for the acts of their agents committed within the scope of the agents' actual or apparent authority." Id. at p. 4. WCFE cites to Belmont v. MB Inv. Partners, Inc., 708 F.3d 470, 494, 496 (3d Cir. 2013) in support, along with other cases cited by the Court in the Report and Recommendation. WCFE states that Ross and Ross Touring did not object when the Clerk of Court entered a default against All Axxess, nor did it oppose WCFE's Motion for Default filed against All Axxess. Id. at p. 5. In addition, neither Ross or Ross Touring filed an appeal from the Court's Order entering a final judgment against All Axxess. Id. at p. 6. Therefore, since the principal is bound to the actions of its agent, Ross and Ross Touring should be bound to the defaults of the other defendants. Id. Moreover, the theory of joint and several liability holds Ross and Ross Touring to the default judgment. Id. Finally, WCFE asserts that Ross and Ross Touring is precluded from challenging the default judgment because the judgment constitutes a final judgment on the merits for the purposes of res judicata, and the parties are the same because of the privity Ross and Ross Touring have with the other defendants as their principal. Id. at pp. 7-8. WCFE summarizes its position in its Reply brief as follows:
Essentially, Ross and Ross Touring rely upon supposed artist performance agreements facilitated through their agents in an attempt to shield him from liability...for a last-minute cancellation. Then, when a claim from the venue ensued, the facilitating agents...disappear and refused to participate in any attendant litigation arising from the cancellation, and Ross and Ross Touring disclaim any knowledge of and/or responsibility for their agents' conduct and liability.
Def's Reply Br. p. 5 (ECF No. 146.)
Ross and Ross Touring oppose the motion and respond that no motions or judgments were filed or entered against either of them, and thus they had no obligation or right to respond, especially since they filed their own answer and dispositive motion. Def's Br. in Opp, p. 4 (ECF No. 144.) To sanction Ross and Ross Touring for actions of another defendant over whom they had no control, would be highly prejudicial. Id. at p. 8. Ross and Ross Touring also assert that the default judgment in question does not mention them as being among the defendants who are "jointly and severally" liable. Id. Most importantly, Ross and Ross Touring argue, penalizing answering defendants for the decision of the other defendants to ignore this action would result in a due process problem, especially since WCFE never moved for default against Ross and Ross Touring in the first place. Id. at p. 10.
First and foremost, WCFE's position that Ross and Ross Touring would be evading responsibility altogether in this case if the Court does not grant summary judgment is misleading. Ross and Ross Touring have answered the Complaint, and have presented themselves as being willing to litigate this matter on the merits. This Court previously denied Ross and Ross Touring's Motions to Dismiss partly based upon the finding that Ross and Ross Touring can be held accountable for the actions of their agents via the Agreement. Report and Recommendation p. 16 (ECF No. 94.) The Court stated that although the Second Amended Complaint does not mention any interaction with Ross or Ross Touring, and Ross and Ross Touring were not parties to the Agreement, it contains numerous provisions throughout emphasizing the agency relationship. Id. In such a context, the Court found it appropriate to apply the well-established rule that principals generally are responsible for the acts of their agents committed within the scope of the agents' actual or apparent authority. Id.
The cases that both this Court and WCFE cite in support of this assertion are inapplicable to the circumstances in this instance. Those cases made no findings on any failure by the agents to answer the lawsuit itself. WCFE does not provide any authority to support its assertion that the same privity that binds principals to the actions of their agents should extend to a default on the part of the agents, especially when the principal is not in default. Ross and Ross Touring's authority is persuasive on the issue of why a party in privity with a defaulting party should not be penalized for its default. In declining to hold the defendant employer responsible for the default of its employee, the Pennsylvania Court of Common Pleas reasoned in Bearden v. Kauffman:
To allow a default judgment against a disobedient party to be used against another party would be to punish one for the contempt of another, analogous to allowing a default to be entered against an innocent party...To hold otherwise would be to impose an extreme penalty without an opportunity to be heard.
63 Pa. D. & C. 2d 418, 425 (Pa. Com. Pl. 1973). This is different from the principal and agent theory which considers any action performed by an agent within the scope of the principal's authority to be binding upon the principal. In such a circumstance, the principal is assumed to have control over the agent, and any action by the agent could be imputed to the principal. "`This rule of liability is not based on any presumed authority in the agent to do the acts, but on the ground of public policy ... that the principal who has placed the agent in the position of trust and confidence should suffer, rather than an innocent stranger." Belmont v. MB Inv. Partners, Inc., 708 F.3d 470, 494-95 (3d Cir. 2013) (citing Aiello v. Ed Saxe Real Estate, Inc., 508 Pa. 553, 499 A.2d 282, 285 (1985).) The incentive behind such a rule is to protect the general public from the actions of principals who rely on bad agents. Here, the principals are answering the claims made against them, while the agents have vanished. The alleged tortfeasor is present to be held accountable if need be. Holding them accountable to their agents' default, when they are willing to mount a defense on the merits, would not serve the public policy behind this rule. Denying WCFE's motion simply means that Ross and Ross Touring would be answering to the claims in their capacity as principals to the Agreement, not that they would evade any responsibility. As such, if the principals should not be bound to the defaults of their agents, then the theory of joint and several liability also does not apply to the principals.
Similarly, it makes little sense to apply the doctrine of res judicata to defendants who have answered the lawsuit but whose co-defendants have defaulted. WCFE cites Wilson v. Reliance Ins. Co., 138 F. App'x 457, 459 (3d Cir. 2005) for the proposition that "a default judgment can support a claim of res judicata." Pl's Br. in Supp. p. 7 (ECF No. 139.) However, Wilson dealt with two separate actions, and ultimately decided that the second action does not have res judicata effect on the first action, which had resulted in the defendant defaulting. Wilson at 460. Wilson also relies on other cases involving two separate lawsuits, where the issue is whether the result of the first lawsuit could be considered to preclude the second lawsuit. Here, the issue is whether the answering defendants should be precluded from defending themselves when their co-defendants have defaulted—within the same action.
Res judicata, or claim preclusion, is a doctrine by which a former adjudication bars a later action on all or part of the claim which was the subject of the first action. Any final, valid judgment on the merits by a court of competent jurisdiction precludes any future suit between the parties or their privies on the same cause of action.
Balent v. City of Wilkes-Barre, 669 A.2d 309, 313 (1995) (emphasis added). The doctrine of res judicata prevents a plaintiff from getting a second bite at the apple if the claim has already been decided on the merits.
In its Reply, WCFE cites to Taylor v. Sturgell, 553 U.S. 880, 906 (2008) to support the argument that the agency relationship between Ross, Ross Touring, and All Axxess should preclude Ross and Ross Touring from litigating the lawsuit. Taylor states that agency laws "indicate that preclusion is appropriate only if the putative agent's conduct of the suit is subject to the control of the party who is bound by the prior adjudication." Taylor at 906 (emphasis added). Here, WCFE wants to use res judicata to prevent two of the defendants from defending themselves on the merits in the same action as the defendants who have defaulted. Furthermore, there is no indication that Defendants are in control of the co-defendants' decision to default. WCFE's assertion is entirely contrary to the purpose of the res judicata doctrine. Nothing is served by preventing answering defendants from presenting valid defenses simply because there were other defaulting defendants.
In addition, the Court agrees with Ross and Ross Touring that it would be a violation of their right to due process if the Court were to grant summary judgment and preclude them from defending themselves on the merits. "The imposition of monetary sanctions by a court implicates fundamental notions of due process and thus requires fair notice and an opportunity for a hearing on the record." Rogal v. Am. Broad. Companies, Inc., 74 F.3d 40, 44 (3d Cir. 1996) (citing Roadway Express, Inc. v. Piper, 447 U.S. 752, 767 (1980))(internal quotations omitted). In an instance such as this, where Ross and Ross Touring have not had an opportunity for a hearing on the record despite being represented by counsel and exhibiting a willingness to proceed, it would be a serious breach of due process to prevent them from doing so. Accordingly, the Court respectfully recommends that WCFE's Motion for Summary Judgment be denied.
II. CONCLUSION
For the aforementioned reasons, after due consideration of WCFE's Motion for Partial Summary Judgment (ECF No. 137), Defendants Ross and Ross Touring's Brief in Opposition (ECF No. 144), and WCFE's Reply thereto (ECF No. 146), it is respectfully recommended that the Motion be denied.
In accordance with the Magistrate Judges Act, 28 U.S.C. § 636(b)(1)(B) and (C), and Rule 72.D.2 of the Local Rules of Court, the parties are allowed fourteen (14) days from the date of service of a copy of this Report and Recommendation to file objections. Any party opposing the objections shall have fourteen (14) days from the date of service of objections to respond thereto. Failure to file timely objections will constitute a waiver of any appellate rights.
