WILLIAM H. STEELE, District Judge.
This matter comes before the Court on Plaintiff's Motion for Default Judgment (doc. 15). The Motion is ripe for disposition.
Plaintiff, The Cincinnati Insurance Company, brought this action against defendants, Case Construction, LLC, Stephen G. Case and Tracey Case, asserting claims against the individual defendants for breach of indemnity agreement and against the business entity defendant for equitable indemnity, reimbursement and exoneration.
In issuing the surety bonds for both the South Alabama and AltaPointe projects, Cincinnati alleges that it relied on the covenants and conditions contained in a certain Agreement of Indemnity executed by defendants Stephen G. Case and Tracey Case in Cincinnati's favor. (Doc. 1, ¶¶ 8, 12.) By its express terms, the Agreement reflected that Stephen G. Case and Tracey Case were obligated to
(Doc. 1, Exh. 1, at 1.) The Agreement authorized Cincinnati to "pay or compromise any claim, demand, suit, judgment or expense arising out of any Bond or Bonds and any such payment or compromise shall be binding upon [Case Construction, Stephen Case and Tracey Case] and included as a liability, loss or expense covered by this Indemnity Agreement," so long as Cincinnati made such payment "in the reasonable belief that it was liable for the amount disbursed, or that such payment or compromise was reasonable under all circumstances." (Id., at 1, 4.) On its face, the Agreement appears to have been signed by Stephen Case and Tracey Case, as indemnitors, in the presence of a witness and a notary public, on July 20, 2007. (Id. at 7.)
The well-pleaded factual allegations of the Complaint reflect that after execution of the Agreement, Cincinnati incurred considerable losses and expense, including fees and disbursements of counsel, as a result of having issued bonds on behalf of Case Construction for the South Alabama and AltaPointe projects. (Doc. 1, ¶ 15.) In that regard, the Complaint recites factual allegations itemizing these losses and expenses as follows: (i) Cincinnati received and paid a claim submitted by Metropolitan Glass Co., Inc. in the amount of $40,181 under the South Alabama Payment Bond, as a result of Case Construction's failure to pay subcontractors and suppliers on the South Alabama project; (ii) Cincinnati sustained net losses of $353,387.32 to arrange for completion of work on the AltaPointe project and payment of subcontractors and suppliers after Case Construction's general contracting license expired on January 31, 2015, causing AltaPointe to suspend Case Construction's performance of work on that project; and (iii) Cincinnati incurred expenses, including counsel fees, in the amount of $51,669.56 at the time of filing the Complaint, as a result of having issued the bonds and pursuing the indemnitors under the Indemnity Agreement. (Doc. 1, ¶¶ 16-19.) The Complaint alleged that Stephen Case and Tracey Case were obligated to indemnify and reimburse Cincinnati in the amount of $449,546.52, pursuant to the Indemnity Agreement, with that amount being subject to increase going forward. (Id., ¶¶ 20-21.)
On the strength of these and other related factual allegations, Cincinnati's Complaint asserted a claim against Stephen Case and Tracey Case for breach of the indemnity agreement, and a claim against Case Construction for equitable indemnity, reimbursement and exoneration under the common law. The Complaint confirmed that Cincinnati sought recovery of all losses and expenses incurred under the Case Construction surety bonds, as enumerated in the pleading.
The court file reflects that all three defendants were properly served with process several months ago. In particular, returns of service demonstrate that a private process server personally served the Summons and Complaint on Stephen Case and Case Construction at an address in Mobile, Alabama on March 29, 2019. (Docs. 7 & 8.) Another return of service shows that a private process server personally served the Summons and Complaint on Tracey Case at a different address in Mobile, Alabama on April 7, 2019. (Doc. 12.) When defendants failed to appear or file a responsive pleading within the time prescribed by Rule 12(a), Fed.R.Civ.P., Cincinnati applied to the Clerk of Court for entry of default. (Doc. 13.) On May 13, 2019, a Clerk's Entry of Default was entered against all three defendants pursuant to Rule 55(a), Fed.R.Civ.P., for failure to plead or otherwise defend within the time provided by the rules. (Doc. 14.) Copies of both plaintiff's application for default and the Clerk's Entry of Default were served on defendants by mail at the same addresses where they were served with process. On June 24, 2019, Cincinnati filed its Motion for Default Judgment, and served notice of that motion on each defendant via U.S. mail addressed to his, her or its address where service of process was perfected. (Doc. 15.) Despite entry of default against them and repeated notification of these ongoing default proceedings, defendants have neither appeared nor defended in this action, much less undertaken to set aside the entry of default or forestall entry of default judgment against them.
In this Circuit, "there is a strong policy of determining cases on their merits and we therefore view defaults with disfavor." In re Worldwide Web Systems, Inc., 328 F.3d 1291, 1295 (11
Where, as here, defendants have failed to appear or otherwise acknowledge the pendency of a lawsuit for more than three months after being served, entry of default judgment is appropriate. Indeed, Rule 55 itself provides for entry of default and default judgment where a defendant "has failed to plead or otherwise defend." Rule 55(a), Fed.R.Civ.P. In a variety of contexts, courts have entered default judgments against defendants who have failed to appear and defend in a timely manner following proper service of process. In short, "[w]hile modern courts do not favor default judgments, they are certainly appropriate when the adversary process has been halted because of an essentially unresponsive party." Flynn v. Angelucci Bros. & Sons, Inc., 448 F.Supp.2d 193, 195 (D.D.C. 2006) (citation omitted). That is precisely what defendants have done here. Despite being served with process back in late March and early April, 2019, Case Construction, Stephen Case and Tracey Case have declined to appear or defend, and have thereby stopped the progress of this litigation dead in its tracks.
The law is clear, however, that defendants' failure to appear and the Clerk's Entry of Default do not automatically entitle Cincinnati to a default judgment in the requested (or any) amount. Indeed, a default is not "an absolute confession by the defendant of his liability and of the plaintiff's right to recover," but is instead merely "an admission of the facts cited in the Complaint, which by themselves may or may not be sufficient to establish a defendant's liability." Pitts ex rel. Pitts v. Seneca Sports, Inc., 321 F.Supp.2d 1353, 1357 (S.D. Ga. 2004); see also Nishimatsu Const. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1204 (5
In light of these principles, the Court has reviewed the Complaint and is satisfied that Counts I and II set forth viable causes of action against defendants under Alabama law. In particular, Count I alleges that Stephen Case and Tracey Case breached the Indemnity Agreement. Supporting well-pleaded factual allegations include the relevant provisions of the Agreement (such as the Cases' obligation to exonerate and indemnify Cincinnati for losses incurred by reason of having executed the Case Construction bonds), Cincinnati's incurrence of losses on the bonds as a result of Case Construction's failure to pay subcontractors on the South Alabama and AltaPointe projects and the expiration of its general contracting license during the AltaPointe project, and Stephen and Tracey Case's subsequent failure and refusal to exonerate and indemnify Cincinnati for these losses. Similarly, Count II sets forth a claim for equitable indemnity, reimbursement and exoneration against Case Construction based on its status as principal on the Case Bonds, for which Cincinnati incurred the above-described losses.
In sum, entry of default judgment pursuant to Rule 55 is appropriate against all defendants, given their failure to appear after service of process and the sufficiency of the well-pleaded factual allegations of the Complaint (all of which defendants have now admitted) to establish their liability to Cincinnati on the enumerated claims.
Notwithstanding the propriety of default judgment against defendants, it remains incumbent on Cincinnati to prove its damages. "While well-pleaded facts in the complaint are deemed admitted, plaintiffs' allegations relating to the amount of damages are not admitted by virtue of default; rather, the court must determine both the amount and character of damages." Virgin Records America, Inc. v. Lacey, 510 F.Supp.2d 588, 593 n.5 (S.D. Ala. 2007); see also Eastern Elec. Corp. of New Jersey v. Shoemaker Const. Co., 652 F.Supp.2d 599, 605 (E.D. Pa. 2009) ("A party's default does not suggest that the party has admitted the amount of damages that the moving party seeks."). Even in the default judgment context, "[a] court has an obligation to assure that there is a legitimate basis for any damage award it enters." Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264, 1266 (11
In support of the default judgment award it seeks, Cincinnati submits the Affidavit of Michael F. Fox, who is Cincinnati's Assistant Secretary and Manager Bond Claims. Fox professes to have personal knowledge of the amounts paid by Cincinnati pursuant to its obligations in issuing the subject bonds, and is therefore competent to quantify plaintiff's losses that are properly subject to recovery under the indemnification claims. The Fox Affidavit breaks down the losses incurred by Cincinnati by reason of having executed the Case Construction bonds on the South Alabama and AltaPointe projects as follows: (i) Cincinnati made payments to 11 Case Construction subcontractors/suppliers to compromise their claims on the AltaPointe bonds, totaling
Plaintiff has made a sufficient showing that these losses were actually incurred by reason of having executed the Case Construction bonds, and that Cincinnati paid those losses under the belief that it was liable for such payments and/or that they were reasonable under the circumstances. Thus, these itemized amounts are recoverable in indemnity under the terms of the Indemnity Agreement and the general principles of equitable indemnity, exoneration and recovery. In light of the foregoing, damages are properly awarded against Stephen Case and Tracey Case on Count One in the amount of
In addition to reimbursement for the losses incurred pursuant to the Case Construction bonds, Cincinnati seeks an award of "expenses, including fees and disbursements of counsel," totaling $62,287.10. (Doc. 15-3, at 5.) Although plaintiff has not disaggregated this figure or explained its component parts, the Court surmises that the lion's share of the amount claimed consists of attorney's fees. The trouble is that Cincinnati has presented its proposed attorney's fee/expenses award as a lump sum. No further information is provided in plaintiff's brief or evidentiary submission that might bear on the nature, specifics or reasonableness of this amount. From plaintiff's filings, it is impossible to discern the claimed rates, hours or tasks performed. There is no factual basis in the record to assess the reasonableness of these attorney's fees. Plaintiff does not identify which timekeeper worked on which tasks, what the applicable billing rates were, or how much time was spent on any task. Plaintiff offers no evidence that the subject rates (whatever they may be) are reasonable in the applicable legal market for this kind of routine collection work for non-responsive debtors. The Court has not been furnished with an evidentiary basis for making any sort of reasonableness determination here. Under well-settled law, even where (as here) a contract allows for recovery of attorney's fees, requests for contractually-authorized attorney's fees are subject to a reasonableness review and are left to the discretion of the trial court. See, e.g., Willow Lake Residential Ass'n, Inc. v. Juliano, 80 So.3d 226, 241 (Ala.Civ.App. 2010) ("Alabama law reads into every agreement allowing for the recovery of attorney's fees a reasonableness limitation."); Jones v. Sherrell, 52 So.3d 527, 531 (Ala.Civ.App. 2010) ("An award of attorney fees, where permissible, is a matter within the discretion of the trial court and will not be reversed on appeal absent a showing that the trial court abused its discretion.") (citations omitted).
Under the circumstances, and given the considerable shortcomings in plaintiff's proof, the Court exercises its discretion to
For all of the foregoing reasons, plaintiff's Motion for Default Judgment (doc. 15) is
