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Lps Default Solutions, Inc. v. Friedman & MacFadyen, P.A.

United States District Court, Fourth Circuit

August 2, 2013



SUSAN K. GAUVEY, Magistrate Judge.

This matter comes before the Court upon motion by LPS Default Solutions, Inc. ("LPS" or "plaintiff") for an entry of default judgment against Friedman & MacFadyen, P.A. ("Friedman" or "defendant"), pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure, for failure to appear or otherwise defend in this matter. On March 14, 2013, plaintiff filed a complaint alleging that defendant owed sums certain to plaintiff under accounts stated (Counts One and Three) and breached their contracts with plaintiff (Counts Two and Four), by failing to pay amounts due under four separate contracts. (ECF No. 1, 4-5). For the reasons discussed herein, I recommend that plaintiff's motion (ECF No. 10) be GRANTED and that damages be awarded as set forth herein.


On or about February 3, 2004, Friedman and LPS executed two service agreements ("DC Services Agreement" and "Virginia Services Agreement") under which LPS (which was known at the time as Fidelity National Foreclosure Solutions, Inc.) would provide "certain administrative services" to Friedman in connection with Friedman's legal work in the District of Columbia and Virginia. (ECF No. 1, ¶ 7). On or about the following day, the parties entered into a similar agreement ("Maryland Services Agreement, " collectively the "Services Agreements" with the prior agreements). Id. at ¶ 8. On or about August 22, 2005, the same parties entered into a fourth agreement for payment of license fees for Friedman's use of certain computer software (the "NewTrak Agreement"). Id. at ¶ 13.

LPS invoiced Friedman for the amounts due under all four contracts for the services rendered, and Friedman did not object to the invoices nor the statements also sent by LPS. Id . According to the complaint filed by LPS, Friedman owes a total of $48, 077.50 under the Service Agreements and $501, 630.00 under the NewTrak agreement. Id. at 2-3.

Default Judgment Standard

Federal Rule of Civil Procedure 55(b)(2) authorizes courts to enter a default judgment against a properly served defendant who fails to file a timely responsive pleading. In deciding whether to grant a motion for default judgment, the Court must first consider the following three factors: (1) whether the plaintiff will be prejudiced if default is not granted, (2) whether the defendant has a meritorious defense, and (3) whether the defendant's delay was the result of culpable misconduct. Emcasco Ins. Co. v. Sambrick , 834 F.2d 71, 73 (3rd Cir. 1987), see also Smith v. Bounds , 813 F.2d 1299 (4th Cir. 1987)(relying on these factors in determining whether a default judgment merited reconsideration).

The Court must also determine whether plaintiff has alleged legitimate causes of action. In reviewing plaintiff's Motion for Entry of Money Judgment by Default, the Court accepts as true the well-pleaded factual allegations in the complaint as to liability. Ryan v. Homecomings Fin. Network , 253 F.3d 778, 780-81 (4th Cir. 2001). It, however, remains for the Court to determine whether these unchallenged factual allegations constitute a legitimate cause of action. Id., see also 10A WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND PROCEDURE § 2688 (3rd ed. Supp. 2010) ("[L]iability is not deemed established simply because of the default... and the Court, in its discretion, may require some proof of the facts that must be established in order to determine liability.").

If the Court determines that liability is established, it must then determine the appropriate amount of damages. Ryan , 253 F.3d at 780-81. Unlike allegations of fact establishing liability, the Court does not accept factual allegations regarding damages as true, but rather must make an independent determination regarding such allegations. See Credit Lyonnais Secs. (USA), Inc. v. Alcantara , 183 F.3d 151, 154 (2nd Cir. 1999). In so doing, the Court may conduct an evidentiary hearing. FED. R. CIV. P. 55(b)(2). The Court may also make a determination of damages without a hearing as long as there is an adequate evidentiary basis in the record for the award. See, e.g., Stephenson v. El-Batrawi , 524 F.3d 907, 917 n.11 (8th Cir. 2008) ("Foregoing an evidentiary hearing may constitute an abuse of discretion when the existing record is insufficient to make the necessary findings in support of a default judgment."); Adkins v. Teseo , 180 F.Supp.2d 15, 17 (D.D.C. 2001) (finding that a court need not make determination of damages following entry of default through hearing, but rather may rely on detailed affidavits or documentary evidence to determine the appropriate sum).

Preliminary Factors

The Clerk of Court having filed entry of default on April 30, 2013 (ECF No. 9), the undersigned concludes that the procedural requirements for entry of default judgment have been met. Moreover, because defendant has failed to file any responsive pleadings or otherwise show cause as to why default should not be granted, the Court is "not in a position to judge whether any delay was the result of culpable misconduct." Sambrick , 834 F.2d at 73. Further, defendant's failure to appear deprived plaintiff of any other means of vindicating their claim and plaintiff would be prejudiced if default is not granted.


A. Services Agreements

LPS and Friedman entered into the three Services Agreements on or about February 3-4, 2004. (ECF No. 1, 2). The agreements provided that LPS would provide Friedman with non-legal administrative services related to mortgage foreclosures, bankruptcies, and other loan default services, in exchange for payment of their invoices within thirty days. (ECF No. 14-16, 4).

The agreements do not state which state law governs the agreements, nor do they address which venue should be used to resolve any legal disputes arising from them. Id . When a diversity case results in a choice of law question, "a federal court must apply the choice of law rules of the state in which it sits to determine which state's substantive law applies[.]" 17A JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE - CIVIL § 124.30 (3d ed.)(citing Griffin v. McCoach , 313 U.S. 498, 503 (1941)). Accordingly, this Court must turn to the Maryland choice of law rules. In Maryland, "a contractual claim... is governed by the law of the place where the contract is made, which is the place where the last act required to make a contract binding occurs." Schwartz v. Rent A Wreck of Am., Inc., 468 Fed.Appx. 238, 256 (4th Cir. 2012)(quoting Harte-Hanks Direct Mktg./Baltimore, Inc. v. Varilease Techn. Fin. Gr., Inc. , 299 F.Supp.2d 505, 518 n.13 (D. Md. 2004)). Additionally, "Maryland has not adopted the most significant relationship' test stated in § 188 of the Restatement (Second) but has maintained its allegiance to the lex loci contractus principle." Baker's Express, LLC v. Arrowpoint Capital Corp., 2012 U.S. Dist. LEXIS 135418, at *28-30 (D. Md. 2012)(quoting Jackson v. Pasadena Receivables, Inc. , 398 Md. 611, 619 n.3 (2007)).

There is insufficient information in the complaint to determine where the "last act" to make the contract binding occurred. However, it is reasonable to assume the contract between LPS and Friedman would be governed by either Maryland law (Friedman's principal place of business) or Minnesota (LPS's principal place of business). (ECF No. 1, 1-2). The law governing simple breach of contract and account stated claims is equivalent in both ...

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