FHL, Inc. et al v. Walker et al

Filing 45

OPINION. An appropriate judgment will be entered. Signed by Honorable Judge Myron H. Thompson on 6/9/2016. (dmn, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

FHL, INC. and CHRISTOPHER
YANNON,

)
)
)
)
)
)
)
)
)
)

Plaintiffs,
v.
HARRY JAMES WALKER,
Defendant.

CIVIL ACTION NO.
2:13cv555--MHT
(WO)

OPINION
Plaintiffs FHL, Inc. (“FHL”) and Christopher Yannon
filed this case against defendant Harry James Walker
seeking injunctive relief, a declaratory judgment, and
an

accounting

to

address

Walker’s

alleged

misappropriation of money Yannon and others invested in
FHL.

Jurisdiction is proper under 28 U.S.C. § 1332

(diversity).
against

Walker

The
at

court
the

previously

request

of

entered

plaintiffs.

default
This

cause is now before the court on plaintiffs’ motion for
entry of default judgment, in which they seek judgment
on their accounting claim in the amount of $ 100,000

for Yannon and $ 350,000 for FHL.

For the following

reasons, the motion will be granted.

I. DEFAULT-JUDGMENT STANDARD
“[A]

defendant's

default

alone

entry of a default judgment.”

does

not

warrant

Nyesa Costa Rica v.

Wilson Cap. Group Holdings, LLC, No. 11–22036–CIV, 2012
WL 1492344, at *3 (S.D. Fla. Apr. 27, 2012) (Seitz, J.)
(citing Tyco Fire & Sec. LLC v. Alcocer, 218 F. App'x
860, 863 (11th Cir. 2007)). “[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

sufficient

to

by

themselves

establish

a

may

or

defendant's

may

not

be

liability.’”

Capitol Records v. Rita Carmichael, 508 F. Supp. 2d
1079,

1083

omitted).
admit

facts

(S.D.

Ala.

2007)

(Steele,

J.)

(citations

However, “[t]he defendant is not held to
that

are

conclusions of law.”

not

well-pleaded

or

to

admit

Nishimatsu Constr. Co., Ltd. v.

2

Houston

Nat'l

Bank,

515

F.2d

1200,

1206

(5th

Cir.

1975).1
A default judgment, including the specific nature
and extent of the relief sought, must be adequately
supported

in

the

record.

See,

e.g.,

Boswell

v.

Gumbaytay, No. 2:07-CV-135-WKW, 2009 WL 1515912, at *8
(M.D. Ala. June 1, 2009) (Watkins, J.) (in entering a
default judgment, the court's “core duty is ‘to assure
[itself]

that

there

is

a

legitimate

basis

for

any

damage award it enters’”) (quoting Anheuser–Busch, Inc.
v.

Philpot,

317

F.3d

“Besides

the

evidence

presented

declaration.”
Inc.,

767

F.

1264,

pleadings,
in

a

the

1266

(11th

court

may

form

of

an

Cir.
also

2003)).
consider

affidavit

or

Frazier v. Absolute Collection Serv.,
Supp.

2d

1354,

1362

(N.D.

Ga.

2011)

(Thrash, J.) (citing Antoine v. Atlas Turner, Inc., 66
F.3d 105, 111 (6th Cir. 1995) (“Use of affidavits in

1. See Bonner v. City of Pritchard, 661 F.2d 1206,
1209 (11th Cir. 1981) (en banc) (holding all decisions
of the former Fifth Circuit rendered prior to close of
business on September 30, 1981, binding in the Eleventh
Circuit).
3

granting

default

judgments

does

not

violate

...

due

process[.]”); Super Stop No. 701, Inc. v. BP Prods. N.
Am. Inc., No. 08-61389-CIV, 2009 WL 5068532, at *2 n.
4. (S.D. Fla. Dec. 17, 2009) (Cohn, J.)).

II.

FACTUAL BACKGROUND

Based on the well-pleaded factual allegations of
the complaint and the affidavit submitted by Yannon in
support of the motion for default judgment (doc. no.
38-1), the court finds the following facts.
Yannon and Walker each held 50 % of the shares in a
company called Global First, Inc.

Walker suggested to

Yannon that he form a corporation in Panama to buy the
Autauga Water Bottling Company, Inc., which is located
in Alabama.

Walker told Yannon he had contacts in

Panama who would finance the purchase of the bottling
company,

that

he

had

contacts

in

the

“Trump

organization” there, and that the water could be sold
in Panama at a Trump Hotel there.
Following Walker’s suggestion, Yannon incorporated
FHL in Panama, with Yannon serving as President and
4

owning 80 % of the company’s stock and Walker owning
20 % and serving as FHL’s “‘on site’ Manager.”

Walker

was responsible for “manag[ing] and operat[ing] [FHL’s]
acquisition

of”

the

bottling

(doc. no. 38-1) at 2-3.

company.

Yannon

Aff.

Global First was FHL’s parent

company, and registered the brand name “Atagi” as a
trademark for the water-bottling company.
Walker
companies

showed

the

claimed

Walker

Yannon

to

bank

statements

control,

of

reflecting

millions of dollars on deposit overseas, and encouraged
him to select a few friends and family to invest in
FHL.

Yannon’s

loaned

$ 100,000

parents,
to

the

Samuel
company

and
in

Dorinda
exchange

Yannon,
for

a

promissory note; three friends of Yannon loaned a total
of $ 250,000 in exchange for promissory notes as well.2
Yannon also paid $ 100,000 of his own funds into FHL.
In

April

2012,

FHL

entered

into

a

contract

to

purchase the Autauga Water Bottling Company and related
2. Other investments in the company were made in
exchange for stock certificates, which were never
issued.
Plaintiffs do not seek relief with regard to
these investments at this time.
5

property

from

its

owner,

Clifford

Davis.

Davis’s

company issued stock certificates to FHL, which were
held in escrow pending satisfaction of a $ 2,000,000
note for the purchase.

The contract specified that FHL

would pay $ 20,000 up front, $ 4,000 per month, a lump
payment of $ 1,250,000 after 12 months, and the final
payment by the end of 18 months.

The shareholders of

FHL, Inc.--that is, Yannon and Walker--agreed that all
stock and assets of FHL would be transferred to Global
First

and

that

the

stock

of

Global

First

would

be

reissued proportionately.
However,

things

did

not

go

as

Yannon

planned.

Without Yannon’s knowledge, Walker took control of FHL
and

refused

to

respond

business affairs.

to

Yannon

regarding

FHL’s

Walker failed to pay FHL’s notes and

perform other obligations of the company.

Walker also

diverted or directed the diversion of the money Yannon
and others had invested in FHL, taking it for his own
purposes

or

incorporated

those

of

without

a

competitor

Yannon’s

6

company

knowledge.

Walker
(Walker

called

this

company

Atagi,

Inc.,

copying

the

name

Global First had trademarked for the bottling company.)
On September 12, 2013, an injunction was entered by
the Circuit Court for Autauga County, Alabama, in favor
of Davis and against FHL, requiring that FHL’s trustee
return

all

purchase

of

stock

certificates

associated

the

water-bottling

facility,

with
and

the
this

decision was upheld by the Alabama Supreme Court.
The notes FHL issued to its investors have come
due, and FHL has not paid them.
Plaintiffs filed the complaint in this case against
Walker and others on August 5, 2013, alleging that he
had illegally usurped Yannon’s authority over FHL and
was

refusing

to

respond

to

Yannon’s

requests

for

information about the business.3

The following month,

after

to

unsuccessfully

attempting

serve

Walker

by

other methods, plaintiffs had Walker personally served
with a summons and copy of the complaint.

See Return

3. Ten days later, Walker filed articles of
incorporation in Alabama for Atagi, Inc., using the
name Global First had trademarked for the bottling
company.
7

of Service (doc. no. 15).

Walker then filed a pro se

answer to the complaint, in which he generally denied
all but the most minor allegations, and included his
(presumably then-current) address under his signature
line.

Plaintiffs

later

filed

an

amended

complaint,

which was properly served on Walker by mailing to this
address.

Walker never answered the amended complaint,

and has not contacted the court to provide an updated
address.

Mail sent to the address provided by Walker

has repeatedly been returned by the post office with
notations that the addressee had moved and the mail
could not be forwarded or was undeliverable.
On December 16, 2015, plaintiffs filed a request
that, pursuant to Rule 55(b)(1), the clerk of court
enter default and a default judgment against Walker in
the amount of $ 100,000 for Yannon and $ 350,000 for
FHL--the amount FHL owed to its investors on promissory
notes.

The clerk declined to enter the default because

Walker

had

appeared

in

the

case.

This

court

then

construed plaintiffs’ request as motions for entry of
default and default judgment and ordered Walker to show
8

cause why the motions should not be granted.
(doc. no. 41).
respond.

See Order

The deadline passed, and Walker did not

This

court

against Walker.

then

ordered

entry

of

default

See Opinion and Order (doc. no. 42).

The court has not heard from Walker in the several
months since then.

III. DISCUSSION
In their motion for default judgment, plaintiffs
seek judgment on only their claim for an accounting,
not their claims for declaratory and injunctive relief.
Further,

they

seek

only

a

limited

judgment

on

the

accounting claim: the return of the $ 350,000 loaned to
FHL by Yannon’s friends and family and the $ 100,000 he
put into the company.
only

whether

Thus, the court will determine

plaintiffs

have

established

their

entitlement to that limited remedy.
As

an

initial

hearing

is

not

default

judgment.

matter,

required

the

on

While

court

finds

plaintiffs’

“[t]he

court

that

motion
may

a

for

conduct

hearings ... when, to enter or effectuate judgment, it
9

needs to: ... conduct an accounting,” Fed. R. Civ. P.
55(b)(2), “Rule 55 does not require that testimony be
presented as a prerequisite to the entry of a default
judgment....”

10A Fed. Prac. & Proc. Civ. § 2688 (3d

ed. 1998 (April 2016)).
their

request

invested

in

for

FHL

As plaintiffs have limited

default

that

are

judgment
clearly

to

the

supported

amounts
in

the

record, and have chosen not to seek damages that would
require expert evidence and complex calculations, there
is no need for a hearing here.
Rule

55(b)(2)

also

states

that

a

“party

or

its

representative must be served with written notice of
the application at least 7 days before the hearing.”
Plaintiffs’ request for entry of default judgment and
the court’s order to show cause on the motion for entry
of default and default judgment were served by mailing
to Walker at his last known address months ago.
Fed.

R.

“mailing

Civ.
it

to

P.

5(b)(2)(C)

the

person's

(permitting

service

last

address--in

known

which event service is complete upon mailing”).

by

Walker

has received sufficient notice under Rule 55(b)(2).
10

See

Plaintiffs

have

shown

their

entitlement

to

a

default judgment in the amount of $ 350,000 for FHL and
$ 100,000 for Yannon.

This is a classic case of a

corporate manager violating his fiduciary duty through
self-dealing.

Plaintiffs have sufficiently established

based on the allegations of the complaint and Yannon’s
affidavit

that

authority

and

Walker
did

had

not

not

have

been

implied

given

actual

authority

to

transfer the assets of FHL to himself or to a company
he had incorporated for his own purposes.
of

FHL,

Walker

was

authorized

only

to

As manager
manage

and

operate its acquisition of the bottling company; he was
not authorized to take the money invested in FHL for
his

own

purposes,

or

to

use

it

for

a

competitor

company.4

4. While “Alabama courts have held uniformly that
a general manager has implied authority to take action
customary or usual in a particular business,” it is
safe to assume that managers in the water-bottling
business do not customarily appropriate corporate funds
for non-corporation purposes.
Richard A. Thigpen,
Alabama Practice Series: Alabama Corporation Law (4th
ed. 2012) § 5:43.
11

An appropriate judgment will be entered.
DONE, this the 9th day of June, 2016.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE