Fun Charters, Inc. v. The Vessel Shady Lady

Filing 36

ORDER granting in part and denying in part 34 Motion for Default Judgment. Signed by Chief Judge William H. Steele on 2/25/2015. (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
FUN CHARTERS, INC.,
Plaintiff,
v.
The Vessel SHADY LADY,
Official No. 681969, her engines, etc.,
in rem,
Defendant.

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CIVIL ACTION 14-0263-WS-M

ORDER
This matter comes before the Court on plaintiff’s Motion for Default Judgment (doc. 34).
After receiving notice of the Motion (see doc. 35), potential claimants Adrenaline Charters, LLC
and Edward Sims have elected to remain silent. The Motion, as to which no opposition has been
filed, is now ripe.
I.

Procedural History.
Plaintiff, Fun Charters, Inc., filed its Complaint (doc. 1) against the Vessel SHADY

LADY, U.S. Official Number 681969, her engines, etc., in rem (the “Vessel”), on June 9, 2014.
Well-pleaded factual allegations of the Complaint reflect that the Vessel’s owner, nonparty
Adrenaline Charters, LLC, became indebted to Fun Charters in December 2012 pursuant to a
Promissory Note secured by a First Preferred Ship Mortgage on the Vessel. The Complaint
further alleged that Adrenaline defaulted on its indebtedness to Fun Charters, and that it also
breached its obligations as to the Vessel pursuant to the Preferred Ship Mortgage. On the
strength of these allegations, Fun Charters requested that the Vessel be condemned and sold in
these proceedings to pay off the Note’s unpaid balance (which totaled $129,195.20 in principal
and interest as of the filing of the Complaint); plus an additional $25,762.66 in expenditures
incurred by Fun Charters upon Adrenaline’s failure to fulfill Vessel-related obligations under the
Preferred Ship Mortgage; plus interest accruing at a per diem rate of $21.23; plus expenses and
attorney’s fees.

The Clerk’s Office issued a Warrant for Arrest in Rem (doc. 7), after which the U.S.
Marshals Service arrested the Vessel on June 12, 2014 and placed it in possession of a substitute
custodian. (See doc. 11.) Actual notice of this action was given to Adrenaline and all lien
claimants who had filed notices of lien; moreover, public notice was published in The PressRegister. (See doc. 16.) Neither Adrenaline nor any other claimant filed a verified statement of
claim pursuant to Supplemental Rule C(6)(A), or otherwise took meaningful action to defend
against Fun Charters’ in rem claims against the Vessel. On September 16, 2014, the Court
entered a Decree Ordering Sale of Vessel (doc. 24) providing for the sale of the Vessel at public
auction by the U.S. Marshals Service. Such auction took place on October 22, 2014, with Fun
Charters submitting the highest (and only) bid in the sum of $70,000. (See doc. 28.) Pursuant to
the Order of Sale, Fun Charters was authorized to credit bid for the Vessel, up to a maximum
amount of $184,631.50, without being required to deliver cash or earnest money to the Marshal.
On December 19, 2014, the undersigned entered an Order (doc. 31) granting plaintiff’s
Motion for Default and directing the Clerk of Court to enter a Clerk’s Entry of Default against
the Vessel pursuant to Rule 55(a), Fed.R.Civ.P., for failure to appear or otherwise defend. A
copy of the December 19 Order was served on Adrenaline Charters, LLC; however, despite a full
and fair opportunity, that entity has not come forward to oppose or object to these default
proceedings against the Vessel. Accordingly, on January 30, 2015, Fun Charters filed its Motion
for Default Judgment (doc. 34), seeking entry of default judgment against the Vessel in the
amount of $188,954.48. Fun Charters furnished notice of its Motion to Adrenaline Charters, but
that entity has neither appeared nor contested entry of default judgment against the Vessel in the
specified amount.
II.

Propriety of Entry of 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).

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Where, as here, defendant and putative claimants have failed to appear or otherwise
respond to a pending lawsuit for more than eight months, 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.” Rule 55(a), Fed.R.Civ.P. 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.1 In short, “[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,
Inc., 448 F. Supp.2d 193, 195 (D.D.C. 2006) (citation omitted). That is precisely what has
happened here. Despite service of process on the Vessel (and notice to all known claimants,
including Adrenaline Charters) in June 2014, no claims were made and no entity or person
stepped forward to defend against this action.
That said, a defendant’s failure to appear and a Clerk’s Entry of Default do not
automatically entitle a plaintiff to a default judgment in the requested (or any) amount. After all,
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); Cotton States
Mut. Ins. Co. v. Sellars, 2008 WL 4601015, *5 (M.D. Ala. Oct. 15, 2008) (“the failure to defend
does not automatically entitle a plaintiff to recover”); Descent v. Kolitsidas, 396 F. Supp.2d
1

See, e.g., In re Knight, 833 F.2d 1515, 1516 (11th Cir. 1987) (“Where a party
offers no good reason for the late filing of its answer, entry of default judgment against that party
is appropriate.”); 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, 1290 (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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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 threshold question, then, is whether the Complaint states a viable claim for relief.
The Court readily concludes that it does. After all, the well-pleaded factual allegations of the
Complaint (which are deemed admitted pursuant to Rule 55) identify in extensive detail the
subject Promissory Note, Adrenaline’s default of same, plaintiff’s security interest in the Vessel
pursuant to the First Preferred Ship Mortgage, Adrenaline’s breach of its obligations under said
Preferred Ship Mortgage, and plaintiff’s contractual right to recover against the Vessel, in rem,
pursuant to the express terms of the Promissory Note and the Preferred Ship Mortgage.
Because the Complaint is sufficient to state a claim against the Vessel, the Court finds
that entry of default judgment is appropriate pursuant to Rule 55, given the failure to appear after
service of process and the sufficiency of the well-pleaded factual allegations of the Complaint
(which are now deemed admitted) to establish liability of the defendant Vessel to plaintiff.
III.

Amount of Damages.
Notwithstanding the propriety of default judgment, it remains incumbent on Fun Charters

to prove damages. “While well-pleaded facts in the complaint are deemed admitted, plaintiffs’
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.

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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”).2
Fun Charters requests that the default judgment entered against the Vessel include the
following elements of damages: (i) court costs and expenses of $3,953.80; (ii) unpaid principal
debt and 5% interest on the note through August 10, 2014, totaling $130,787.45; (iii) plaintiff’s
advances for Vessel insurance, repairs, and the like, pursuant to the Preferred Ship Mortgage, in
the amount of $25,762.26; and (iv) legal fees and costs through August 10, 2014, in the amount
of $28,450.97. Analysis of these claimed components of damages requires both examination of
whether the subject agreements imposed a contractual obligation on Adrenaline (secured by the
Preferred Ship Mortgage and hence recoverable against the Vessel) to pay same, and scrutiny of
Fun Charters’ proof that such damages were actually incurred.

2

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
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.”). Because the requisite “wealth of evidence” has been presented here, no
damages hearing need be convened.

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As an initial matter, the Preferred Ship Mortgage provides that “[a]ny advances and
expenditures which Lender, in Lender’s discretion, may make for repairs, insurance, payment of
liens or other claims, defense of suit or for any purposes whatsoever related hereto, shall be
repaid by Mortgagor on demand, with interest at the rate provided for in the note that this
mortgage secures, and until so paid, shall be a debt due from Mortgagor to Lender secured by the
lien hereof.” (Doc. 1, Exh. B, at 8.) Plaintiff has adequately shown that it advanced the total
sum of $25,762.26 for insurance, repairs and other owner-related obligations relating to the
Vessel. (Fitzsimmons Aff. (doc. 17, Exh. A), ¶ 6.) Because these advances are recoverable
against the Vessel under the applicable contract language, and because the record shows that
such expenditures were actually made by Fun Charters, the default judgment properly should
include the sum of $25,762.26, for Vessel-related advances for insurance, repairs and the like, all
secured by the Preferred Ship Mortgage. That figure will also be subject to interest accrual at the
rate specified in the Promissory Note.
Next, the Court finds that the principal and accrued interest charges claimed by Fun
Charters are properly included as part of the default judgment award. Indeed, the First Extended
and Amended Promissory Note and the First Supplement to First Preferred Ship Mortgage work
hand in hand to establish an indebtedness (later assumed by Adrenaline) to Fun Charters for a
principal amount of $142,792.09, as of December 3, 2012, plus “[i]nterest on the unpaid
principal balance from time to time outstanding, at the rate of five percent (5%) per annum.”
(Doc. 1, Exh. C, at 1.) The First Supplement to First Preferred Ship Mortgage provided that the
Vessel would secure this indebtedness, and reiterated both the principal amount owed and the
5% interest clause. (Doc. 1, Exh. D, at 2.) Plaintiff’s evidence is that the unpaid principal and
interest owed on the Amended Promissory Note (as well as the interest on the above-specified
advances), calculated at 5% per annum through August 10, 2014, equals $130,787.45.
(Fitzsimmons Aff., ¶ 6; doc. 34, ¶ 7.)3 That sum will be included in the default judgment award.
Plaintiff also seeks recovery of certain expenses incurred in connection with the arrest
and sale of the Vessel. As discussed infra, both the Mortgage and the Assumption Agreement
3

The Fitzsimmons Affidavit includes interest calculations only through June 6,
2014, but accurately reflects a per diem accrual of $21.23 (which is 5% per annum on the
$154,957.86 in total unpaid sums due under the Note and advances secured by the Mortgage).

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provided that all costs of collection and enforcement were recoverable by Fun Charters. The
collection costs claimed by Fun Charters include the $400 federal court filing fee, U.S. Marshals
Service expenses and sale commission totaling $2,452.84, and newspaper advertising/publication
fees of $1,100.96. Payment of the civil filing fee is a matter of record. (See doc. 1.) Likewise,
the Marshals Service expenses are appropriately documented. (Doc. 34, Exh. A.) However,
plaintiff has presented no information, evidence or exhibits to document the newspaper
advertising fees; therefore, those expenses are disallowed for want of adequate substantiation.
As such, the default judgment award will include the sum of $2,852.84 for court filing fee and
U.S. Marshals’ expenses incurred by Fun Charters in enforcing its rights under the Preferred
Ship Mortgage vis a vis the Vessel.
Finally, plaintiff asks that the default judgment award include damages for legal fees and
costs of enforcing the Mortgage. There is ample contractual support for that argument. After all,
the Preferred Ship Mortgage expressly provided that “Mortgagor agrees to pay all costs of
collecting, or attempting to collect, the indebtedness secured by this mortgage, including a
reasonable attorney’s fee.” (Doc. 1, Exh. B, at 7.) Likewise, in an Assumption Agreement
entered into between Adrenaline and Fun Charters in December 2012, Adrenaline assumed
responsibility for the Promissory Note and the Preferred Ship Mortgage, both as amended and
supplemented, and agreed that all such terms and provisions were binding on it. As part and
parcel of that Assumption Agreement, Adrenaline expressly agreed that “if this Agreement is
placed in the hands of an attorney for the purpose of enforcing the same,” then Adrenaline would
“pay all costs of collecting or enforcing this Agreement, including a reasonable attorney’s fee.”
(Doc. 1, Exh. E, at 3.) It is thus appropriate to make allowance for reasonable attorney’s fees
and costs in the default judgment.
Billing summaries filed by plaintiff reflect that Fun Charters was billed $27,197.50 in
legal fees and $1,253.47 in unspecified “expense advances.” (Fitzsimmons Aff., at Exh. A.)
Although it would have been vastly preferable (and is typically required) for plaintiff to submit
itemized invoices to prove up those fees, the Court is satisfied on this record of the
reasonableness of the attorney’s fees incurred by Fun Charters in enforcing the Preferred Ship
Mortgage in this case, as well as related bankruptcy proceedings in which Adrenaline’s owner,
Eddie Sims, unsuccessfully attempted to bring the Vessel within the ambit of Chapter 13
protection. (See Sharp Aff. (doc. 17, Exh. B).) The default judgment award will, therefore,

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include $27,197.50 in attorney’s fees. The request for expenses advanced by counsel in the
amount of $1,253.47 is disallowed. The record contains no information as to what those costs
and expenses might be, much less whether they were reasonably incurred. More importantly, the
Court cannot discern on the facts and exhibits provided whether the legal costs figure touted by
Fun Charters double-counts expenses already awarded for filing fee and U.S. Marshals’ expenses
(i.e., the $2,852.84 sum referenced supra). Plaintiff has not satisfied its burden as to this element
of damages.
In short, then, plaintiff is entitled to a damages award against defendant in the total
amount of $186,600.05, consisting of $25,762.26 for advances for Vessel-related insurance,
repairs and so on; $130,787.45 in due and owing principal and interest under the promissory note
secured by the Mortgage; $2,852.84 for court-related costs and expenses; and $27,197.50 for
reasonable attorney’s fees incurred by Fun Charters in enforcing the Note and Preferred Ship
Mortgage.
IV.

Conclusion.
For all of the foregoing reasons, it is ordered as follows:
1.

Plaintiff’s Motion for Default Judgment (doc. 34) is granted in part, and denied
in part;

2.

A default judgment will be entered in favor of plaintiff, Fun Charters, Inc., and
against defendant, the Vessel SHADY LADY, Official No. 681969, her engines,
etc., in rem, upon plaintiff’s claim on the First Preferred Ship Mortgage held by
plaintiff on the Vessel in the amount of $186,600.05, all being secured by said
Mortgage; and

3.

Inasmuch as this Order and the accompanying Default Judgment fully and finally
adjudicate all claims and issues joined in this action, the Clerk of Court is directed
to close this civil case file for statistical and administrative purposes.

DONE and ORDERED this 25th day of February, 2015.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

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