REPORT AND RECOMMENDATION
MARTIN C. CARLSON, Magistrate Judge.
I. Factual Background
We are now called upon to write the first draft of the final chapter in this litigation and recommend the proper scope of a liquidated damages order in this lawsuit, following the corporate defendants' failure to respond to this complaint in a meaningful fashion or otherwise litigate this case.1
This is a breach of contract and fraud action brought by a Pennsylvania company against various Cayman island business entities, and the principal behind these businesses, Mark Brooke. The plaintiff commenced this action on November 1, 2017, in order to collect on a $200,000 promissory note allegedly executed by Brooke on behalf of these Cayman island companies in order to secure financing from the plaintiff.
The plaintiff filed proof of service upon the following named corporate defendants in March of 2018: HILTS GLOBAL US, HILTS GLOBAL CAYMAN, and HILTS GLOBAL UK. (Doc. 7.) Despite the passage of many months, none of these defendants ever answered or otherwise appeared in this action. Accordingly, on December 17, 2018, we directed the plaintiff to either seek entry of default judgments against these previously served corporate defendants who have failed to respond to this complaint, or provide the court with a status report regarding the plaintiff's proposed course of action with respect to these other defendants. (Doc. 13.) The plaintiff then moved for entry of default against these defendants. (Doc. 15.) When the time for responding to this motion passed without any response from the defendants, we recommended that the motion be granted, but that this case be remanded to us in order to liquidate the amount of damages owed in this case. (Doc. 17.) The district court adopted this recommendation, (Doc. 18), and on March 19, 2019, the plaintiff filed a motion to liquidate its damages as to these corporate defendants. (Docs. 22 and 23.) Once again, the defendants have failed to respond to this motion, and the time for responding has passed. Therefore, this motion is now ripe for resolution.
For the reasons set forth below, it is recommended that the court enter a default judgment in favor of the plaintiff in the amount of $238,723.07.
II. Discussion
We have previously determined that the entry of judgment in favor of the plaintiff is appropriate given the corporate defendants' on-going defaults in this litigation. However, "[w]hen a plaintiff prevails by default, he or she is not automatically entitled to the damages they originally demanded. Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). Rather, defaults are treated as admissions of the facts alleged, but a plaintiff may still be required to prove that he or she is entitled to the damages sought. Id.; DIRECTV Inc. v. Pepe, 431 F.3d 162, 165 (3d Cir. 2005)." Rainey v. Diamond State Port Corp., 354 F. App'x 722, 724 (3d Cir. 2009). In performing this task:
The district court has considerable latitude in determining the amount of damages. Jones v. Winnepesaukee Realty, 990 F.2d 1, 4 (1st Cir. 1993). In determining the amount, the district court may conduct a hearing. Fed. R. Civ. P. 55(b)(2). The court is not required to do so, however, "as long as it ensure[s] that there [is] a basis for the damages specified in the default judgment." Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., Div. of Ace Young Inc., 109 F.3d 105, 111 (2d Cir. 1997). "It is familiar practice and an exercise of judicial power for a court upon default, by taking evidence when necessary or by computation from facts of record, to fix the amount which the plaintiff is lawfully entitled to recover and to give judgment accordingly." Pope v. United States, 323 U.S. 1, 12, 65 S.Ct. 16, 89 S.Ct. 3 (1944). IBEW Local Union No. 102 v. Dane Const. Co., LLC, No. 08B907, 2009 WL 87`, at *2 (D.N.J. Mar. 30, 2009).
Malik v. Hannah, 661 F.Supp.2d 485, 493 (D.N.J. 2009). As part of this process, "the defaulting party is entitled to be heard on the amount of damages." Tristrata Tech., Inc. v. Med. Skin Therapy Research, Inc., 270 F.R.D. 161, 164-65 (D. Del. 2010) (citing 5 James Wm. Moore et al., Moore's Federal Practice § 55.32[1][c], [f]).
Here we have provided these corporate defendants an opportunity to be heard on the amount of damages, but they have elected to forego this opportunity. Therefore, we will assess the plaintiff's right to recover damages based upon the information that is presently before us.
Turning first to the plaintiff's request for principal damages of $200,000 and accrued interest of $38, 203.20, we recognize that "defaults are treated as admissions of the facts alleged, but a plaintiff may still be required to prove that he or she is entitled to the damages sought." Rainey v. Diamond State Port Corp., 354 F. App'x 722, 724 (3d Cir. 2009). In this case, UM plainly alleges a breach of contract claim against these defendants relating to a $200,000 note memorializing a loan made by UM to the defendants, a loan that has not been repaid. The corporate defendants' default is an admission to these facts, establishing principal liability of $200,000 that is due and owing in this case.
The plaintiff has also tendered to the court an authentic copy of this written note, which provides as follows:
INTEREST. If the loan is repaid on or before the due date, interest will accrue and will pass through at UM Tech's daily borrowing bank rate with no mark up, from the date of the transfer to the date of repayment. In event payment is not received by the due date, Borrower shall be considered in default and interest shall accrue at the rate of 6% (six percent) per annum, or the maximum rate allowable by law, calculated retroactively from the effective date of this Agreement.
(Doc. 22-1, Exhibit A.) The terms of this note, therefore, also entitle UM to recover the agreed upon interests, which is calculated at $38,203.20.
UM's remaining claims for liquidated damages fall into two categories: (1) $519.87 in costs of litigation, and (2) attorney's fees totaling $4,200. (Doc. 22-1.) As to these additional categories of damages, we find that UM is entitled by law to recover its costs as the prevailing party in this lawsuit. See 28 U.S.C. § 1920. Accordingly, UM's costs of $519.87 are properly awarded to the plaintiff in this case upon the default of these defendants.
UM's legal entitlement to $4,200 in attorney's fees is less clear, however. This final claim for liquidated damages is problematic because Pennsylvania Courts generally adhere to the "American rule" regarding recovery of legal fees. As the Pennsylvania Supreme Court has explained:
The American Rule states that a litigant cannot recover counsel fees from an adverse party unless there is express statutory authorization, a clear agreement of the parties or some other established exception. Lavelle v. Koch, 532 Pa. 631, 617 A.2d 319, 323 (1992). In Pennsylvania, the American Rule is embodied in 42 Pa.C.S. § 1726(a)(1), which provides that attorneys' fees are not an item of taxable costs except as permitted by 42 Pa.C.S. § 2503 (relating to right of participants to receive counsel fees), which is not at issue here.
Mosaica Acad. Charter Sch. v. Com. Dep't of Educ., 572 Pa. 191, 206-07, 813 A.2d 813, 822 (2002).
In this case, UM's agreement with the defendants contains no clear fee-shifting provisions, UM cites to no statutory entitlement to attorney's fees, and we can discern no other applicable exception to the American rule as embraced by the Pennsylvania courts. Therefore, it is recommended that the court decline to award this final category of liquidated damages, without prejudice to UM attempting to make a more fulsome showing of its entitlement to such fees under prevailing state practice.
In conclusion, it is recommended that the district court grant this motion to liquidate, (Doc. 22) and award the following damages in this case:
Principal $200,000.00
Interest $38,203.20
Costs $519.87
TOTAL $238,723.07
III. Recommendation
Accordingly, for the foregoing reasons, IT IS RECOMMENDED that the Plaintiff's motion to liquidate default be GRANTED (Doc. 22), and judgment be entered in favor of the plaintiffs in the amount of $238,723.07.
The Parties are further placed on notice that pursuant to Local Rule 72.3:
Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses or recommit the matter to the magistrate judge with instructions.
