SE Property Holdings, LLC v. Sweet Creams, LLC et al

Filing 27

ORDER granting 23 Motion for Default Judgment against defendant Sweet Creams, LLC in the amount of $122,108.57 and that interest shall continue to accrue on this judgment at the statutory rate equal to the weekly average 1-year constant mat urity Treasury yield for the week ending 8/3/12, which is 0.17. Signed by Magistrate Judge Katherine P. Nelson on 8/8/2012. copy to Sweet Creams (regular & certified mail) (srr) (Additional attachment(s) added on 8/8/2012: # 1 certified mail receipt) (srr).

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
SE PROPERTY HOLDINGS, LLC,
Plaintiff,
v.
SWEET CREAMS, LLC, ROBERT R.
REYNOLDS, JR., and MARIAN C.
REYNOLDS,
Defendants.

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CIVIL ACTION NO. 12-0165-N

ORDER
This action comes before the court on plaintiff’s Second Motion for Default Judgment
(doc. 23) and Affidavit in Support (doc. 25).1 In light of the documentary evidence provided in
connection with the Second Motion for Default Judgment, the court cancelled (doc. 24) the
evidentiary hearing which had been set to allow plaintiff to submit evidence to support the
requested judgment.
Background
Plaintiff filed this action on March 1, 2012. Doc. 1. Proofs of service (docs. 7, 8, 9)
show service on all defendants was completed on March 8, 2012. Defendants did not thereafter
file an Answer or otherwise appear or defend this action. Plaintiff filed an Application for
Clerk’s Entry of Default (doc. 10) and, after the default was entered (doc. 12), filed the first
Motion for Default Judgment (doc. 11) on April 10, 2012. Certificates of Service attached to the

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The filing of the Second Motion (doc. 23) supercedes the First Motion for Default
Judgment (doc. 11) against all parties, including those against whom this action is stayed.

Application and the Motion show that the defendants were served with these documents as well.
Doc. 13.
Thereafter, individual defendants Robert R. Reynolds, Jr. and Marian C. Reynolds filed a
document entitled Limited Appearance to File Notice of Stay (doc. 19), informing the court that
those two individual defendants had filed a petition for bankruptcy pursuant to Chapter 11 of the
Bankruptcy Code, and that the bankruptcy court had entered an automatic stay of claims against
them. The court entered an order (doc. 20) on June 4, 2012, noting several cases providing that
bankruptcy of individuals did not stay proceedings against the limited liability company of which
they were principals, and requesting briefing from the parties on the propriety of proceeding with
the plaintiff’s claims against Sweet Creams, LLC. Plaintiff filed a response (doc. 21) and
defendants did not reply.2 Based upon the plaintiff’s brief and the court’s own research, the
court determined that the action could proceed against the limited liability company, but stayed
the action as to the individual defendants (doc. 22).
Plaintiff filed its Second Motion for Default Judgment (doc. 23) on August 2, 2012, and
attached extensive documentary evidence, and supplemented that submission with an affidavit
(doc. 25) setting forth the experience of each of the attorneys for whom an award of fees was
sought. Defendant Sweet Creams, LLC, has not answered or otherwise appeared in this action.3
Upon review of the record presented, it appears that plaintiff is entitled to entry of judgment by
default against defendant Sweet Creams, LLC.
Analysis

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The deadline for defendants to reply was June 22, 2012.

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The individual defendants made their limited appearance to file the Notice of Stay, but
the LLC did not join in that motion.

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Entitlement to Default Judgment
In this Circuit, “there is a strong policy of determining cases on their merits and we
therefore view defaults with disfavor.” In re Worldwide Web Systems, Inc., 328 F.3d 1291, 1295
(11th Cir. 2003); see also Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S. and Canada,
674 F.2d 1365, 1369 (11th Cir. 1982) (“Since this case involves a default judgment there must be
strict compliance with the legal prerequisites establishing the court’s power to render the
judgment.”). Nonetheless, it is well established that a “district court has the authority to enter
default judgment for failure ... to comply with its orders or rules of procedure.” Wahl v. McIver,
773 F.2d 1169, 1174 (11th Cir. 1985).
Where, as here, one or more defendants have failed to appear or otherwise acknowledge
the pendency of a lawsuit for two months after being served, entry of default judgment is
appropriate. Indeed, Rule 55 itself provides for entry of default and default judgment where a
defendant “has failed to plead or otherwise defend.” Fed.R.Civ.P. 55(a). In a variety of contexts,
courts have entered default judgments against defendants who have failed to appear and defend
in a timely manner following proper service of process.4 In short, then, “[w]hile modern courts
do not favor default judgments, they are certainly appropriate when the adversary process has
been halted because of an essentially unresponsive party.” Flynn v. Angelucci Bros. & Sons,

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See, e.g., Matter of Dierschke, 975 F.2d 181, 184 (5th Cir. 1992) (“when the court finds
an intentional failure of responsive pleadings there need be no other finding” to justify default
judgment); PNCEF, LLC v. Hendricks Bldg. Supply LLC, 740 F. Supp .2d 1287 (S.D.Ala. 2010)
(“Where, as here, a defendant has failed to appear or otherwise acknowledge the pendency of a
lawsuit for more than three months after being served, entry of default judgment is
appropriate.”); Kidd v. Andrews, 340 F.Supp.2d 333, 338 (W.D.N.Y. 2004) (entering default
judgment against defendant who failed to answer or move against complaint for nearly three
months); Viveros v. Nationwide Janitorial Ass'n, Inc., 200 F.R.D. 681, 684 (N.D.Ga. 2000)
(entering default judgment against counterclaim defendant who had failed to answer or otherwise
respond within time provided by Rule 12(a)(2)).
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Inc., 448 F.Supp.2d 193, 195 (D.D.C. 2006) (citation omitted).
The law is clear, however, that defendants’ failure to appear and the Clerk's Entry of
Default do not automatically entitle plaintiff to a default judgment in the requested (or any)
amount. Indeed, 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 by themselves may or may not be sufficient to establish a defendant’s
liability.” Pitts ex rel. Pitts v. Seneca Sports, Inc., 321 F.Supp.2d 1353, 1357 (S.D.Ga. 2004); see
also Nishimatsu Const. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1204 (5th Cir. 1975) (similar);
Descent v. Kolitsidas, 396 F.Supp.2d 1315, 1316 (M.D.Fla. 2005) (“the defendants’ default
notwithstanding, the plaintiff is entitled to a default judgment only if the complaint states a claim
for relief”). Stated differently, “a default judgment cannot stand on a complaint that fails to state
a claim.” Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1370 n. 41 (11th Cir. 1997); see also
Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009) (“A
default defendant may, on appeal, challenge the sufficiency of the complaint, even if he may not
challenge the sufficiency of the proof.”)
The complaint contains detailed allegations and documentary exhibits in support of its
claims for breach of the note and guaranty agreement. The court finds that plaintiff has stated a
valid claim against defendant Sweet Creams, LLC under Alabama law for recovery of the
deficiency remaining on the note and line of credit. Because all of these particularized
allegations are admitted by virtue of the default, and because they are sufficient to state claims
under Alabama law, the court finds that the defendant is liable to plaintiff SE Property Holdings,
LLC.
Proof of Damages

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Notwithstanding the propriety of default judgment against defendant Sweet Creams,
LLC, it remains incumbent on plaintiff to prove the amount of damages to which it is entitled.
“While well-pleaded facts in the complaint are deemed admitted, plaintiff’s allegations relating
to the amount of damages are not admitted by virtue of default; rather, the court must determine
both the amount and character of damages.” Virgin Records America, Inc. v. Lacey, 510
F.Supp.2d 588, 593 n. 5 (S.D.Ala. 2007); see also Eastern Elec. Corp. of New Jersey v.
Shoemaker Const. Co., 652 F.Supp.2d 599, 605 (E.D.Pa. 2009) (“A party’s default does not
suggest that the party has admitted the amount of damages that the moving party seeks.”).
Even in the default judgment context, “[a] court has an obligation to assure that there is a
legitimate basis for any damage award it enters.” Anheuser Busch, Inc. v. Philpot, 317 F.3d
1264, 1266 (11th Cir. 2003); see also Adolph Coors Co. v. Movement Against Racism and the
Klan, 777 F.2d 1538, 1544 (11th Cir. 1985) (explaining that damages may be awarded on default
judgment only if the record adequately reflects the basis for award); Everyday Learning Corp. v.
Larson, 242 F.3d 815, 818 (8th Cir. 2001) (affirming lower court's decision not to award damages
on default judgment, where requested damages were “speculative and not proven by a fair
preponderance of the evidence”); Natures Way Marine, LLC v. North America Materials, Inc.,
2008 WL 1776946, *1 (S.D.Ala. Apr. 16, 2008) (in default judgment setting, district court has
obligation “not to award damages that are uncertain or speculative”).
In that regard, the Eleventh Circuit has explained that “[f]ederal law similarly requires a
judicial determination of damages absent a factual basis in the record,” even where the defendant
is in default. Anheuser Busch, 317 F.3d at 1266. Ordinarily, unless a plaintiff's claim against a
defaulting defendant is for a sum certain, the law “requires the district court to hold an
evidentiary hearing” to fix the amount of damages. S.E.C. v. Smyth, 420 F.3d 1225, 1231 (11th

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Cir. 2005). However, no hearing is needed “when the district court already has a wealth of
evidence from the party requesting the hearing, such that any additional evidence would be truly
unnecessary to a fully informed determination of damages.” Id. at 1232 n. 13; see also Flynn v.
Extreme Granite, Inc., 671 F.Supp.2d 157, 160 (D.D.C. 2009) (district court is not required to
hold hearing to fix damages in default judgment context as long as it ensures there is a basis for
damages specified); Eastern Elec. Corp., 652 F.Supp.2d at 605 (“In considering the amount of
damages ..., the Court may make its determination by conducting a hearing or by receiving
detailed affidavits from the claimant.”); Virgin Records, 510 F.Supp.2d at 593–94 (“Where the
amount of damages sought is a sum certain, or where an adequate record has been made via
affidavits and documentary evidence to show ... damages, no evidentiary hearing is required.”);
Natures Way Marine, LLC v. North American Materials, Inc., 2008 WL 801702, *3 (S.D.Ala.
Mar. 24, 2008) (“Although the trial court must make determinations as to the amount and
character of damages, it is not necessary to conduct an evidentiary hearing to fix damages if the
amounts sought by plaintiff are adequately supported by supporting affidavits and other
documentation.”)
Plaintiff offers the following exhibits to its Second Motion for Default Judgment as proof
of its damages: the Affidavit of Karen Harmon, assistant secretary for SE Property Holdings,
LLC (Ex. A); the Affidavit of Bradley E. Dean (Ex. B); the Affidavit of Charles Fleming (Ex.
C); and the supplemental Affidavit of Bradley E. Dean (doc. 25). The Harmon Affidavit
includes a copy of the Loan Payment History applicable to the Sweet Creams LLC loan; the
Dean Affidavit includes a copy of the itemized attorney time records for work on this case; the
Fleming Affidavit provides the affiant’s opinion on the reasonableness of the attorneys’ fees; and

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the supplemental Dean Affidavit sets out how many years of experience each of the attorneys
has.
Review of the record, including the Affidavit of Karen Harmon and the attached payment
history, demonstrates that defendant owed a principal balance of $105,815.47 and accrued
interest of $2,596.56 on the defaulted loan as of July 25, 2012. The evidence further supports the
per diem figure of $ 13.96 in interest claimed for each additional day beyond July 25, 2012; the
court finds that, as of the date of this order and the resulting judgment, defendant Sweet Creams
LLC owes plaintiff the amount of $ 108,607.47 in principal and accrued interest on the defaulted
loan.
In addition, the plaintiff is entitled to an award of reasonable attorneys’ fees and costs
under the terms of the note. As the party requesting an award of attorneys’ fees, plaintiff has the
burden of supplying the Court with specific and detailed evidence from which the Court can
determine the reasonable hourly rate for the work performed by its attorneys and paralegals. Am.
Civil Liberties Union of Ga. v. Barnes, 168 F.3d 423, 427 (11th Cir. 1999). The Eleventh Circuit
has instructed that a reasonable hourly rate is “the prevailing market rate in the relevant legal
community for similar services by lawyers of reasonably comparable skills, experience, and
reputation.” Norman v. Housing Auth. Of City of Montgomery, 836 F.2d 1292, 1299 (11th Cir.
1988). This court has recently addressed the rates which are reasonable for practitioners in this
market. See BP Products North America, Inc. v. Merritt Oil Co., Inc., 2011 WL 4899908, at *3
(S.D.Ala. October 14, 2011); see also Denny Mfg. Co. v. Drops & Props, Inc., 2011 WL
2180358, at *3-5 (S.D.Ala. June 1, 2011); Vision Bank v. Anderson, 2011 WL 2142786, at *3
(S.D. Ala. May 31, 2011); Gulf Coast Asphalt Co. v. Chevron U.S.A., Inc., 2011 WL 612737, at

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*1-2 (S.D. Ala. Feb 11, 2011); Adams v. Austal, U.S.A., L.L.C., 2010 WL 2496396, at *6
(S.D.Ala. June 16, 2010).
Plaintiff submits time records for three lawyers who worked on this action: Allen
Graham, who has approximately twenty years of legal experience; Ashley Swink, who has
approximately ten years experience; and Bradley Dean, who has approximately eight years
experience; each of them has been engaged in practice during that period in business and
business litigation. Doc. 25. These attorneys claim hourly rates of $250 per hour for Mr.
Graham, $225 per hour for Ms. Swink, and $175 per hour for Mr. Dean. The affidavits of both
Attorney Dean and Attorney Charles J. Fleming, an attorney in practice in this court, state that
these rates are reasonable and customary in this district. The court finds that these hourly rates
are in line with rates allowed in other cases in this court, see e.g. BP Products North America,
Inc. v. Merritt Oil Co., Inc., 2011 WL 4899908, at *3 (S.D.Ala. October 14, 2011), and with the
court’s own knowledge of the rates charged in this district. The court finds the rates charged in
this case to be reasonable.
Plaintiff’s counsel has billed their client $12,870.00 in fees and $361.60 in costs and
expenses, and claims an additional $402.50 in fees have been earned but not yet billed; this totals
$13,634.10. In plaintiff’s first Motion for Default Judgment (doc. 11), filed April 10, 2012,
plaintiff’s counsel claimed fees and expenses totaling $5,481.20. Since that time, plaintiff’s
counsel has responded to the Notice of Stay filed by the individual defendants, and has filed
plaintiff’s Second Motion for Default Judgment, which provides substantially more complete
evidence than the previous motion. In general terms, these figures do not appear unreasonable
for the work performed.
Considering the itemized bills, the court notes the following matters:

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--An entry dated June 14, 2012, by R.Matthews, in the amount of $52.50 representing 0.3 hours
billed at $175.00. Based on the hourly rate, the court assumes that R.Matthews is an attorney,
but there is no other indication that this person worked on this file and no information concerning
this attorney has been produced. The court will remove this charge and adjust the bill by $52.50.
--six entries totaling 2.3 hours by R.DeHora, billed at a rate of $110.00 per hour. Based on the
hourly rate and the nature of the entries, the court assumes that R.DeHora is a paralegal. This
court has held that a charge of $75.00 per hour is reasonable for work done by paralegals.
Merritt Oil, at *4. Plaintiff offers no evidence that a higher rate is appropriate. The court will
discount the charges for R. DeHora to reflect a rate of $75.00 per hour. The deduction will total
$80.50.
--the itemized billing records do not clearly identify the nature of the expenses charged;
however, the court notes that the expenses claimed are minimal, other than an amount which
appears to correlate to the filing fee for this action. The court finds the amount of costs charged
to be reasonable given the nature of the suit, and thus will make no adjustment.
Other than the two adjustments set forth above, the court finds the hours and rate charged
to be reasonable and appropriate. Plaintiff sought a total of $13,634.10; deducting $133.00, the
court finds that an award of costs and fees in the amount of $13,501.10 is proper.
Conclusion
For the reasons set forth above, it is hereby ORDERED that a default judgment shall be
entered in favor of the plaintiff and against the defendant in the amount of $122,108.57, and that
interest shall continue to accrue on this judgment at the statutory rate equal to the weekly average
1-year constant maturity Treasury yield (28 U.S.C. 1961(a) for the week ending August 3, 2012,

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which is 0.17.
DONE this the 8th day of August, 2012.
/s/ Katherine P. Nelson
UNITED STATES MAGISTRATE JUDGE

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