United States District Court, D. Maryland
K. NEAL IDEALEASE INC., Plaintiff,
WTC 2 INC., Trading as World Trade Company, Defendant.
THEODORE D. CHUANG UNITED STATES DISTRICT JUDGE.
On July 21, 2015, Plaintiff K. Neal Idealease Inc. ("K. Neal") filed a complaint alleging breach of contract and conversion by Defendant WTC 2 Inc. ("WTC"). The Clerk entered WTC's default on October 8, 2015. Pending before the Court is K. Neal's Motion for Entry of Default Judgment. Having reviewed the pleadings, briefs, and supporting documents, the Court finds no hearing necessary. See D. Md. Local R. 105.6. For the reasons set forth below, the Motion is GRANTED IN PART and DENIED IN PART.
I. Legal Standard
Pursuant to Federal Rule of Civil Procedure 55(a), "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Under Rule 55(b)(2), after a default has been entered by the clerk, the court may, upon the plaintiffs application and notice to the defaulting party, enter a default judgment. Fed R. Civ. P. 55(b)(2). A defendant's default does not, however, automatically entitle the plaintiff to entry of a default judgment; rather, that decision is left to the discretion of the court. United States v. Moradi, 673 F.2d 725, 727 (4th Cir. 1982) ("[T]rial judges are vested with discretion, which must be liberally exercised, in entering [default] judgments and in providing relief therefrom."); Dow v. Jones, 232 F.Supp.2d 491, 494 (D. Md. 2002). The United States Court of Appeals for the Fourth Circuit has a "strong policy that cases be decided on their merits, " United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993), but default judgment may be appropriate "when the adversary process has been halted because of an essentially unresponsive party, " S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005); see H. F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir. 1970) ("[T]he default judgment must normally be viewed as available only when the adversary process has been halted because of an essentially unresponsive party. In that instance, the diligent party must be protected lest he be faced with interminable delay and continued uncertainty as to his rights.").
In reviewing a Motion for Default Judgment, the court accepts as true the well-pleaded factual allegations in the complaint relating to liability. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780-81 (4th Cir. 2001). However, it remains for the court to determine whether these unchallenged factual allegations constitute a legitimate cause of action. Id; see also 10A Charles Allan Wright & Arthur R. Miller, Federal Practice & Procedure § 2688 (3d ed. 2010) ("[Liability 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 liability is established, the court must then determine the appropriate amount of damages. See Ryan, 253 F.3d at 780-81.
As to damages, the court cannot accept as true the factual allegations of the plaintiff, but must instead make an independent determination. See Dundee Cement Co. v. Howard Pipe & Concrete Prods., Inc., 722 F.2d 1319, 1323 (7th Cir. 1983); Lawbaugh, 359 F.Supp.2d at 422. To do so, the court may conduct an evidentiary hearing, see Fed. R. Civ. P. 55(b)(2), or may dispense with a hearing if there is an adequate evidentiary basis in the record from which to calculate an award. See Pope v. United States, 323 U.S. 1, 12 (1944) ("It is a 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.").
II. Breach of Contract
In 2006, WTC leased three commercial trucks from K. Neal pursuant to a Vehicle Lease and Service Agreement ("Lease Agreement"). Between July 2014 and January 2015, WTC failed to make several payments required by the Lease Agreement. K. Neal declared a default under the Lease Agreement and provided WTC with an opportunity to cure that default. When WTC did not do so, K. Neal terminated the Lease Agreement and invoked a provision obligating WTC to purchase the trucks within 10 days. WTC did not purchase the trucks.
The Lease Agreement contains a choice-of-law clause providing that the law of the state of the lessor's domicile governs the interpretation of the contract. Because K. Neal is domiciled in Maryland, the Court will apply Maryland law to the breach of contract claim. See Cunningham v. Feinberg, 107 A.3d 1194, 1204 (Md. 2015) (stating that Maryland courts generally follow choice-of-law clauses in contracts). A review of the Complaint reveals that K. Neal has alleged that WTC breached a valid contract and has set forth sufficient facts to establish its entitlement to a default judgment on its breach of contract claim. See Taylor v. NationsBank, N.A., 776 A.2d 645, 651 (Md. 2001).
Because K. Neal acknowledges that WTC's initial possession of the trucks was lawful, K. Neal can only recover under a theory of constructive conversion. See K & KMgmt, Inc. v. Lee, 557 A.2d 965, 982-83 (Md. 1989). A constructive conversion does not occur unless the plaintiff demands that the defendant return the unlawfully retained property. Mattingly v. Mattingly, 133 A. 625, 626 (1926). Here, after WTC failed to make required payments, K. Neal invoked a contractual provision requiring that WTC purchase the trucks. The Complaint, however, does not allege that K. Neal at any point demanded that WTC return the trucks. Therefore, the facts in the Complaint do not establish a claim for constructive conversion. The Motion for Default Judgment on this claim is denied. The Court notes, however, that the alleged damages for conversion are fully encompassed by the damages for breach of contract, such that the damages award would not be higher even if the Motion were granted as to the conversion claim.
K. Neal's Motion seeks $214, 818.56 in damages and costs, as well as post-judgment interest. K. Neal claims that, pursuant to the Lease Agreement, WTC owes $154, 998 for the purchase of the three trucks, $41, 789 for missed monthly lease payments, $5, 624 for unpaid service and repair invoices, $2, 283 for 2015 Personal Property taxes on the vehicles, $3, 232.06 in pre-judgment late charges on invoices unpaid as of August 31, 2015 at the rate set in the Lease Agreement, and $6, 892.50 for attorney's fees, costs, and expenses related to this action. K. Neal supports its damages request with an affidavit from Sharon Richard, its Senior ...