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American Home Assurance Co. v. Sui Enterprise Co.

United States District Court, D. Maryland

May 5, 2014

AMERICAN HOME ASSURANCE CO., et al.
v.
SUI ENTERPRISE CO., Ltd.

REPORT AND RECOMMENDATION

JILLYN K. SCHULZE, Magistrate Judge.

This case was referred to me pursuant to 28 U.S.C. § 636(b) and Local Rule 301.6 for review of Plaintiffs' motion for default judgment and supplemental motion for damages. ECF Nos. 34, 35, 37. For the following reasons, I recommend that Plaintiffs' motion for default judgment be granted.

I. Introduction.

This case arises out of an industrial accident that caused the death of Marcelo Alvarez. On November 26, 2008, his wife Jeanna Silva, individually, as personal representative of his estate, and on behalf of his two minor children, filed a wrongful death and products liability action against The Victaulic Company (Victaulic) in the Circuit Court for Prince George's County. ECF No. 37-9, Ex. I. On April 8, 2009, the parties settled that lawsuit for $3 million. ECF No. 37-11, Ex. K. Plaintiff Victaulic paid $500, 000 towards the settlement (the amount of its deductible), and its insurance company, Plaintiff American Home Assurance Company (AHAC), paid the remaining $2.5 million. Id.

Victaulic and AHAC filed this action on March 15, 2012, asserting that the underlying industrial accident was caused solely by Defendant, SUI Enterprise Company, Ltd. (SUI), a Korean company that allegedly manufactured and distributed faulty suction diffusers, including end caps, for certain commercial hot water piping systems. ECF Nos. 1, 4. SUI filed an unsigned answer that failed to indicate whether SUI was represented by counsel. ECF No. 22. On April 2, 2013, the court ordered SUI to show cause why the answer should not be stricken for non-compliance with Federal Rule of Civil Procedure 11(a) and Local Rule 101.1a. ECF No. 23. On April 29, 2013, the court concluded that SUI had been properly served "[b]ecause Plaintiffs made a good faith effort to serve Defendant in accordance with the Hague Convention and through a private process server, and Defendant received actual notice" as evidenced by SUI's filing of its answer on March 25, 2013.[1] ECF No. 26. The court again ordered SUI to show cause why its answer should not be stricken for non-compliance with the Rules. Id. SUI failed to respond to the court's orders or file a proper answer, and on June 18, 2013, the court struck SUI's deficient answer.[2] ECF No. 30. On October 17, 2013, the Clerk entered an Order of Default, ECF No. 33, which SUI has made no effort to set aside.

II. Factual Background.

The following facts are taken from Plaintiffs' complaint, ECF No. 4, and affidavits and other documentary evidence attached to Plaintiffs' supplemental motion for default damages. ECF No. 37.

Victaulic provided SUI with material specifications for the design and manufacture of the Series 731-G suction diffusers, requiring SUI to use ductile iron to manufacture the products. ECF No. 4 at ¶¶ 13, 15; ECF No. 37-5, Ex. E at ¶¶ 6-7. However, instead of using ductile iron, SUI used gray iron-a more brittle iron with a greater tendency to fracture-without Victaulic's knowledge. ECF No. 4 at ¶¶ 13-17; ECF No. 37-5, Ex. E at ¶¶ 10-11. In October 2007, SUI sent a shipment of the Series 731-G suction diffusers, including end caps, to Victaulic for distribution and use in a hot-water piping system in the mechanical equipment room of the Gaylord Hotel located in National Harbor, Maryland. ECF No. 4 at ¶¶ 9, 10. On November 1, 2007, Marcelo Alvarez was working as a pipe insulator in the equipment room and, at approximately 6:30 a.m., one of the suction diffusers fractured, releasing a powerful stream of 185 degree water. Id. at ¶ 11. Mr. Alvarez suffered severe burns from the accident and, on November 6, 2007, died from his injuries. Id. at ¶ 12. Following the accident Victaulic ascertained that the end caps were manufactured with improperly processed iron, and issued a recall bulletin. ECF No. 37, Ex. A at ¶¶ 9, 10.

Plaintiffs paid $3 million to settle the underlying lawsuit. ECF No. 37-1, Ex. A at ¶ 12; ECF No. 37-11, Ex. K. To justify this amount, Plaintiffs submit Mr. Alvarez's medical records, death certificate, and an expert economic loss report from Thomas Borzilleri, Ph.D. Ex. J, Ex. M. The medical records indicate that Mr. Alvarez experienced extreme pain and suffering. His "pain rating" on the EMS report from approximately 20 minutes after the accident was a level 10, which is equivalent to the "worst pain possible." ECF No. 37-10, Ex. J. He experienced burns from head to toe and remained hospitalized in a conscious state for six days following his injury. Id. The death certificate records the cause of death as "thermal burns over approximately 97% of the body surface." Id. Mr. Alvarez died at the age of 33, leaving behind a wife, a three-year old child and a two-year old child. ECF No. 37-10 at 8, Ex. J.

III. Standard for Entry of Default Judgment.

In reviewing a motion for default judgment, 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 remains for the court, however, to determine whether these unchallenged factual allegations constitute a legitimate cause of action. Id.

If the court determines that liability is established, the court must then determine the appropriate amount of damages. Id. "The court does not accept factual allegations regarding damages as true, but rather must make an independent determination regarding such allegations." Agora Fin., LLC v. Samler, 725 F.Supp.2d 491, 494 (D. Md. 2010) (citation omitted). In so doing, the court may conduct an evidentiary hearing, Fed.R.Civ.P. 55(b)(2), or determine damages without a hearing, relying "on affidavits or documentary evidence in the record to determine the appropriate sum." Entrepreneur Media, Inc. v. JMD Entm't Grp., LLC, 958 F.Supp.2d 588, 593 (D. Md. 2013) (citations omitted). "In sum, the court must (1) determine whether the unchallenged facts in plaintiffs' complaint constitute a legitimate cause of action, and, if they do, (2) make an independent determination regarding the appropriate amount of damages." Agora, 725 F.Supp.2d at 494.

IV. Discussion.

The amended complaint claims contribution (Count I), indemnification (Count II), products liability (Count V), a breach of an implied warranty of merchantability (Count III), a breach of an implied warranty of fitness ...


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