MARK S. DAVIS, District Judge.
This matter is before the Court on an unopposed Motion for Default Judgment filed by Plaintiff, JTH Tax, Inc., d/b/a Liberty Tax Service ("Liberty"). Defendant Trisha Grabert ("Grabert" or "Defendant") has not filed a response in opposition to the instant motion, and the time for doing so has long since passed. For the reasons set forth below, Liberty's Motion for Default Judgment is
Liberty is engaged in the business of advertising, promoting, and licensing a system of tax preparation centers throughout the United States. Compl. ¶ 6, ECF No. 1. Between 2008 and 2012, Grabert signed four franchise agreements with Liberty for four separate "Liberty Tax" franchise locations and executed four
On April 20, 2012, Liberty terminated all four of Grabert's franchise agreements due to her failure to submit contractually required reports and failure to pay monies owed to Liberty. Compl. ¶ 13. The promissory notes associated with the terminated franchises expressly provide that failure to timely pay the amounts due constitutes a default and authorizes Liberty to accelerate the entire outstanding debt. Aff. of Danilo Jose, Exs. 1-4, ECF No. 4. Each promissory note also requires payment of all attorney's fees, costs, or expenses that Liberty may incur in enforcing the notes. Id.
On January 28, 2013, Liberty filed a complaint in this Court against Grabert alleging breach of the promissory notes, breach of the franchise agreements, and defamation per se. Compl. ¶¶ 6-12. Liberty's complaint seeks monetary damages and equitable relief in the form of a permanent injunction. Liberty's claimed damages result from Grabert's failure to make timely payments, refusal to abide by her post-termination obligations, and defamatory postings on the internet.
On April 8, 2013, Grabert was properly served with a copy of the summons and complaint. Summons, ECF No. 8. However, Grabert failed to file a responsive pleading. On May 6, 2013, Liberty requested Entry of Default, and the Clerk entered default on May 7, 2013. ECF No. 10. Liberty, thereafter, filed the instant motion for default judgment, and the time for Grabert's response has long since passed. Liberty's motion for default judgment is therefore ripe for review.
"A court confronted with a motion for default judgment is required to exercise sound judicial discretion in determining whether the judgment should be entered, and the moving party is not entitled to default judgment as a matter of right." EMI April Music, Inc. v. White, 618 F.Supp.2d 497, 505 (E.D.Va.2009). When a defendant defaults he admits "the plaintiff's well-pleaded allegations of fact." Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir.2001) (internal quotation marks and citations omitted); see also Fed.R.Civ.P. 8(b)(6). In determining whether a plaintiff has presented well-pled allegations of fact, the Supreme Court of the United States has interpreted the Federal Rules of Civil Procedure as requiring that a complaint "contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Accordingly, in the default judgment context, factual allegations in the complaint are deemed admitted and the "appropriate inquiry is whether or not the face of the pleadings supports the default judgment and the causes of action therein." Anderson v. Found, for Advancement, Educ. & Employment of Am. Indians, 187 F.3d 628 (4th Cir.1999) (unpublished table opinion) (citing Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir.1975)).
Liberty's instant motion for default judgment seeks an award of: (1) all amounts due on the promissory notes and the attorney's fees incurred in conjunction with enforcement of such notes; (2) a permanent injunction to enforce the post-termination obligations of the franchise agreements; and (3) compensatory damages, punitive damages, and a permanent injunction based on Defendant's defamation of Liberty.
First, Liberty asserts a claim against Grabert based on the four unpaid promissory notes, seeking damages in the aggregate amount of $170,814.77. Pl's Mem. in Supp. of Mot. for Default J. ("Pl's Mem.") at 3-4, ECF No. 12; Aff. of Danilo Jose, Ex. 5. As set forth in Liberty's complaint, Liberty and Grabert entered into four enforceable written franchise agreements and four associated promissory notes. Aff. of Danilo Jose, Exs. 1-4. Under Virginia law, a breach of contract occurs if a party "without legal excuse fails to perform an obligation in a timely manner." Va.Code Ann. § 59.1-507.1(a).
In addition to seeking the balance due on the promissory notes, Liberty seeks attorney's fees incurred in order to enforce such notes. Pi's Mem. at 4-5. In each of the four promissory notes signed by Grabert, there is a provision stating "[t]he undersigned agrees to pay all attorneys' fees and other costs and expenses that Liberty may incur in connection with the collection or enforcement of this Note." Aff. of Danilo Jose, Exs. 1-4.
Despite Grabert's failure to appear to contest an attorney's fee award, "the Court is nevertheless obligated to review the fee award request independently for reasonableness." Kennedy v. A Touch
Id. at 243-44 (quoting Barber v. Kimbrell's Inc., 577 F.2d 216, 226 n. 28 (4th Cir. 1978)). In determining the lodestar figure, "the court need not address in detail every single one of these factors." Dollar Tree Stores, Inc. v. Norcor Bolingbrook Associates, LLC, 699 F.Supp.2d 766, 768 (E.D.Va.2009).
Here, Liberty is represented by David Lindley, a fifth year associate acting as lead counsel in this case. Mr. Lindley asserts that he spent 17.7 compensable hours on this matter, consisting of drafting Liberty's complaint, drafting and assembling associated exhibits, pursuing entry of default, and pursuing default judgment. Aff. of David Lindley, ECF No. 13. To support such assertion, Mr. Lindley submitted an affidavit and exhibit containing detailed time entries for his work on this matter. Mr. Lindley's affidavit also sets forth his credentials in an effort to justify the requested rate of $225 per hour. Id. Having reviewed such submission, the Court finds that the number of hours billed by Liberty's counsel is reasonable based on the work performed. Further, the hourly rates claimed are reasonable and consistent with recent fee awards in the Norfolk Division of the Eastern District of Virginia, including: (1) a recent fee award of $225 per hour to another fifth year associate representing Liberty in a case before another judge of this Court, JTH Tax, Inc. v. Cochise Potts, No. 2:09-cv-108 (E.D.Va. Jan. 11, 2013); and (2) a recent fee award of $225 per hour to Mr. Lindley himself in a case before the undersigned judge, JTH Tax, Inc. v. Callahan, No. 2:12-cv-691 (E.D.Va. July 8, 2013).
Multiplying the number of reasonable hours (17.7) by the reasonable rate
Here, even though three claims are asserted, it appears that Liberty may have been able to recover fees for the majority of the 17.7 hours requested had Liberty more effectively documented the division of its counsel's time and/or presented evidence demonstrating that many of the hours claimed (such as time spent drafting affidavits and reviewing the contracts) would have been expended regardless of whether Liberty also pursued injunctive relief and relief for defamation. However, because it is improper for the Court to speculate on such matters, and in light of the lack of such detail regarding division of time, the fee award will be reduced to
Liberty's second claim asserts that Grabert failed to comply with the contractual post-termination obligations set forth in each of the four franchise agreements. Pi's Mem. at 6. Based on such failure, Liberty seeks a permanent injunction enforcing the written post-termination obligations. Id. In determining whether a permanent injunction is appropriate, the Court must evaluate whether Liberty pled facts sufficient to demonstrate the following four factors:
Legend Night Club v. Miller, 637 F.3d 291, 297 (4th Cir.2011) (quoting eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006)).
Considering whether Liberty has demonstrated irreparable harm, the Court finds that Liberty's complaint and supporting materials include limited facts, are somewhat conclusory, and therefore are not sufficient to support entry of an injunction. See Ryan, 253 F.3d at 780 (explaining that while well-pleaded allegations of fact in a complaint are accepted as true for the purposes of default judgment, a party's failure to defend does not constitute an admission of conclusions of law). Similarly, Liberty's brief in support of default judgment relies on little more than the citation to prior Liberty cases, heard by other judges of this Court, where the Court granted Liberty a permanent injunction
In contrast, here, Liberty's complaint states that Grabert failed to turn over customer files, phones numbers of her previous offices, and her copy of the Liberty "operations manual." Compl. ¶¶ 41-43. Liberty further offers the conclusion of law that: "Liberty suffered damages and irreparable harm and will continue to suffer damages and irreparable harm because of [Grabert's] breaches." Compl. ¶ 46. Notably, Liberty does not include facts asserting that Grabert has improperly used any of such retained materials to compete with Liberty, nor does Liberty reveal the number of customers Grabert served at the former franchises, whether the phone lines remain active or disconnected, or whether Liberty has reopened franchises in the locations (or near the locations) of Grabert's former tax preparation businesses.
Although the Court does not question the potential for irreparable harm on the instant facts, it is improper for the Court to award the extraordinary equitable remedy of a permanent injunction based on speculation as to the possibility of irreparable injury. See Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 130 S.Ct. 2743, 2761, 177 L.Ed.2d 461 (2010) ("An injunction is a drastic and extraordinary remedy, which should not be granted as a matter of course."). Because facts relevant to the injunction determination remain undeveloped, the Court concludes that an evidentiary hearing is warranted on this issue pursuant to Fed.R.Civ.P. 55(b)(2). The Court therefore
Third, Liberty seeks damages for defamation per se based on Grabert's posting of defamatory statements on the internet. Whether a statement contains or infers "provably false" facts, and thus is capable of being defamatory, or whether it is a non-actionable "statement[] of opinion," is a question of law for the Court. Hyland v. Raytheon Technical Services Co., 277 Va. 40, 46-47, 670 S.E.2d 746, 750-51 (2009). Moreover, if a statement is actionable, there are several ways to establish that it constitutes "defamation per se," including if the challenged statements: "[1] impute[] the commission of a criminal offense involving moral turpitude for which a party may be convicted; . . . [2] impute [] an unfitness to perform the duties of a job or a lack of integrity in the performance of the duties; or [3] prejudice[ ] the party in her profession or trade." Yeagle v. Collegiate Times, 255 Va. 293, 297 n. 2, 497 S.E.2d 136, 138 (1998) (citing Fleming v. Moore, 221 Va. 884, 889, 275 S.E.2d 632, 635 (1981)). To prejudice a plaintiff in its profession or trade, "the statements must relate to `the skills or character required to carry out the particular occupation of the plaintiff.'" Swengler v. ITT Corp. Electro-Optical
Corporations, as well as individuals, can be defamed per se by statements that cast aspersions on the target's "`honesty, credit, efficiency or its prestige or standing in its field of business.'" Id. at 1071 (quoting General Products Co., Inc. v. Meredith Corp., 526 F.Supp. 546, 549-50 (E.D.Va.1981)). Once a plaintiff proves defamation per se, "Virginia law presumes that the plaintiff suffered actual damage to its reputation and, therefore, [the plaintiff] does not have to present proof of such damages." Id. (citing Fleming, 221 Va. at 889-90, 275 S.E.2d at 636).
In addition to damages compensating a plaintiff for defamation per se, "`punitive damages may be awarded even though actual damages are neither found nor shown.'" Id. (quoting Newspaper Publishing Corp. v. Burke, 216 Va. 800, 805, 224 S.E.2d 132, 136 (1976)). To recover punitive damages, a plaintiff must demonstrate through "clear and convincing proof that the defendant made the statements with `actual malice.'" Id. (citations omitted). "Actual malice" is defined under Virginia law to include "a statement made with `knowledge that it was false or with reckless disregard of whether or not it was false.'" Id. (quoting Burke, 216 Va. at 805, 224 S.E.2d at 136). "[A] plaintiff is entitled to prove the defendant's state of mind through circumstantial evidence, and it cannot be said that evidence concerning motive or care never bears any relation to the actual malice inquiry." Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. 657, 668, 109 S.Ct. 2678, 105 L.Ed.2d 562 (1989) (internal citations omitted).
Applying these principles, and assuming as true all well-pled facts in Liberty's complaint, the Court concludes that Liberty has presented sufficient facts to demonstrate that portions of Grabert's internet postings constitute defamation per se. Grabert's defamatory statements include false factual assertions that prejudice Liberty in its profession or trade. Specifically, Grabert's internet postings include assertions that: (1) Liberty's quarterly results were "lies" and "deceptive"; (2) Liberty was engaged in "unlawful actions" that interfered with Grabert's success; (3) Liberty "encouraged/ persuaded and ordered" its franchisees to falsify their business records; (4) Liberty's system is "a scam, a scheme, a con"; and (5) Liberty's CEO "is being investigated for Racketteering [sic] and training a tax scheme" and Liberty "steal[s]" stores from franchisees and pays nothing for them. See Compl. ¶ 48; Compl. Ex. 2; Aff. of Pamela Evans Ex. 1, ECF No. 3-1.
Having found defamation per se, the Court next considers whether Liberty has demonstrated that the statements at issue were made with actual malice. Liberty alleges that Grabert wrote the above statements "with the knowledge that said statements are false and for the sole purpose to damage the good will and reputation of Liberty." Compl. ¶ 50. Liberty, however, does not rely solely on such conclusory assertion, but instead attached exhibits
Based on the complaint and exhibits thereto, and the affidavits and exhibits thereto, the Court finds that Liberty has demonstrated, by clear and convincing evidence, that Grabert acted with actual malice in that she made the defamatory statements with the knowledge that they were false or, at a minimum, with "reckless disregard for the truth." Burke, 216 Va. at 805, 224 S.E.2d at 136. In addition to the defamatory statements identified above, Grabert published lengthy non-actionable opinions regarding Liberty, as well as personal attacks on Liberty's officers, which taken together, suggest an intentional and purposeful effort to injure Liberty's reputation at any cost. Moreover, most notably, in one internet post, Grabert acknowledges: "I simply think [Liberty] corporate is incompetant [sic], unresponsive, and indifferent. I don't think for a second that they promote anything illegal. Unethical? Maybe if you interpret it that way." Compl. Ex. 2, ECF No. 1-2 at 4. Such post, which is dated after all of the posts found to be actionable defamation in this case, clearly supports Liberty's contention that Grabert's earlier defamatory posts, alleging unlawful conduct, false reporting of financial information, operating a "scam" and a "con," ordering franchisees to falsely report their business revenue, and "steal[ing]" franchisees' businesses, were made with knowledge that such statements were false. Accordingly, the Court finds that Liberty has alleged facts supporting each element of its claim for defamation per se, and further demonstrated that the disputed statements were made with actual malice. The Court therefore
Having determined liability, the Court turns to Liberty's claims for defamation damages. Although Liberty has not attempted to prove that Grabert's statements resulted in the loss of actual revenue, Liberty has linked its damages request, and punitive damages request, to the cost of a new Liberty tax franchise. As previously noted, Liberty is not obligated to prove actual damages because it has demonstrated defamation per se. Swengler, 993 F.2d at 1071 (citing Fleming, 221 Va. at 889-90, 275 S.E.2d at 636). However, in light of the fact that the Court has already determined that a hearing should be conducted to address whether Liberty is entitled to a permanent injunction based on Grabert's breach of the franchise agreements, the Court finds that the better course is to allow Liberty an opportunity to present oral argument on this issue in order to further elaborate its theory as to why an award of $120,000 for defamation is appropriate in this case. See Fed.R.Civ.P. 55(b)(2) (authorizing a district court to conduct a damages hearing in the default judgment context). The Court therefore
For the reasons discussed above, the Court GRANTS Liberty's motion for default
As to the propriety of entering a permanent injunction, and as to the damages for defamation, the Court
Liberty's counsel is
The Clerk is