KeyBank, National Association v. Clarke County Healthcare LLC et al

Filing 35

Order granting in part 33 MOTION for Default Judgment as to Resurgence Health Group LLC filed by KeyBank, National Association insofar as default judgment is entered in its favor and against Resurgence as to the breach of guaranty clai m in the amount of $98,487.08; and ruling is reserved in part as to specific amount of accrued interest and the request of fees and costs/expenses. Plaintiff is ordered to file by 12/31/15 a supplement to its motion and costs/expenses as set out. Signed by Judge Kristi K. DuBose on 12/10/2015. (cmj)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
KEY BANK, NATIONAL ASSOCIATION,
Plaintiff,

)
)
)
v.
)
)
CLARKE COUNTY HEALTHCARE, LLC, )
et al.,
)
Defendants.
)

CIVIL ACTION 15-00151-KD-B

ORDER
This matter is before the Court on Plaintiff’s Motion for Default Judgment against Defendant
Resurgence Health Group, LLC.

(Doc. 33). Plaintiff seeks entry of a default judgment against

Defendant Resurgence because it has failed to plead, answer or otherwise defend in this case.
I.

Background
On June 5, 2006, Resurgence Health Group, LLC (a Georgia LLC) (Resurgence) executed a

Guaranty, covering a Master Lease Agreement (agreement) simultaneously executed between
General Electric Capital Corporation (GE) and Clarke County Hospital (Clarke) for the lease of a
Philips 16-slice CT Scanner with Bone Density Package and Medrad Injector (equipment). (Doc. 1-1;
Doc. 33-1 (Aff. Barnes)1).

On August 16, 2006, the equipment was accepted by Clarke and

certified as properly delivered and installed.

(Doc. 33-1 (Aff. Barnes)).

Pursuant to the agreement, Clarke agreed to make monthly payments of $9,538.92 for 60
months, starting on May 15, 2006.

(Doc. 1-1).

Additionally, GE could assign the Guaranty

without the Guarantor’s consent as well as proceed against the Guarantor by suit or otherwise collect
monies due/guaranteed with or without notice/demand, with or without joinder of Clarke.

(Id.)

On February 1, 2009, Clarke defaulted on the Agreement by failing to make payments as required
1 Litigation Coordinator for Plaintiff.

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and further failed to make payments as scheduled on January 1, 2010, May 1, 2010, June 1, 2010 and
July 1, 2010.

(Doc. 1-4 at 2).

On July 27, 2010 GE assigned its interest in the agreement to Plaintiff.
Barnes)).

(Doc. 33-1 (Aff.

On July 29, 2010, Plaintiff sent Clarke a Notice of Right to Cure Default by paying the

amount due of $37,821.48 within 21 days, or all remaining payments would be accelerated and the
process of repossession of the equipment may be initiated.

(Id.)

Plaintiff also informed Clarke

that it would be responsible for any collection fee costs, repossession fees, costs and reasonable
attorneys’ fees/costs.

(Id.)

Clarke did not cure the default within the timeframe allotted.

On

September 21, 2010, Plaintiff accelerated the debt, declared the agreement to be in default, and
demanded $237,784.94 as due and owing within 10 days.
repossessed the equipment.

(Doc. 33-1 (Aff. Barnes)).

(Id.; Doc. 1-5).

Plaintiff then

On April 8, 2011, Plaintiff sent Clarke

notice of intent to sell the equipment it had repossessed, by private sale, notifying Clarke of a right to
redeem via payment of $211,885.94 plus costs.
redeem the equipment before it was sold.

(Id.; Doc. 1-6).

Clarke did not exercise its right to

(Doc. 33-1 (Aff. Barnes)).

On January 8, 2015, Plaintiff

issued a Notice of Deficiency to Clarke, demanding payment of $98,487.08 within ten days (the
amounts due after the equipment had been sold – an offset).

payments.

(Doc. 1-7).

Clarke made no

(Doc. 33-1 (Aff. Barnes)).

Under the terms of the Guaranty associated with the agreement, Plaintiff (as GE’s assignee)
may proceed against the Guarantor – Resurgence – to collect the amounts due from Clarke.
33-1 (Aff. Barnes); Doc. 33-2).

(Doc.

Plaintiff contends that based on the Guaranty, Resurgence

guaranteed payment to GE and its assignees without set-off or counterclaim, as well as waived notice
of Acceptance of Guaranty and any notice of default on behalf of Clarke.

(Id.)

Plaintiff adds that

Resurgence also irrevocably and unconditionally waived all statutory, contractual, common law,

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equitable and other claims against Clarke or its assets by reason of any amounts paid or collected or
due.

(Id.)

Plaintiff asserts that Resurgence guaranteed payment of all losses, costs, reasonable

attorneys’ fees and expenses arising due to Clarke’s default or its own default.

(Id.)

As such,

Plaintiff demanded payment of Clarke’s debt as guaranteed by Resurgence; Resurgence refused to
pay.

(Doc. 33-1 (Aff. Barnes)).

On March 20, 2015, Plaintiff sued Resurgence for breach of

guaranty. (Doc. 1). Plaintiff seeks recovery of $98,487.08 plus accruing interest.
Resurgence was served on June 25, 2015 via service on CT Corporation System, 1201
Peachtree Street NE, Atlanta, GA, 30361, its registered agent.
Resurgence has failed to timely plead or otherwise defend.
33).

(Docs. 19, 24).

Plaintiff asserts that

(Docs. 24-1 (Decltn. Fleming), 24-2,

Plaintiff adds that the State of Georgia has not administratively dissolved Resurgence and it

remains listed on the Georgia Secretary of State corporate database as an “Active/noncompliance”
business.

(Docs. 24-1 at 2, 24-2, 24-3).

On July 17, 2015, Plaintiff requested entry of a Clerk’s

default against Resurgence for its failure to plead or defend.
Clerk entered a Rule 55(a) Default against Resurgence.
moved for a default judgment against Resurgence.

II.

(Doc. 24).

(Doc. 25).

On July 21, 2015, the

On August 25, 2015, Plaintiff

(Doc. 33).

Standard of Review
The Federal Rules of Civil Procedure establish a two-part process for obtaining a default

judgment. Fed.R.Civ.P. 55.

If “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.” Fed.R.Civ.P. 55(a).

After default has

been entered, if the “claim is for a sum certain or a sum that can be made certain by
computation” the clerk must enter default judgment.

Fed.R.Civ.P. 55(b)(1).

In all other

circumstances, such as here, “the party must apply to the court for a default judgment.”
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Fed.R.Civ.P. 55(b)(2).
Rule 55(b)(2) of the Federal Rules of Civil Procedure provides, in relevant part, as
follows with regard to entering a default judgment:
(b) Entering a Default Judgment.
***
(2) By the Court. In all other cases, the party must apply to the court for a default
judgment. A default judgment may be entered against a minor or incompetent
person only if represented by a general guardian, conservator, or other like
fiduciary who has appeared. If the party against whom a default judgment is
sought has appeared personally or by a representative, that party or its
representative must be served with written notice of the application at least 7 days
before the hearing. The court may conduct hearings or make referrals--preserving
any federal statutory right to a jury trial--when, to enter or effectuate judgment, it
needs to:
(A) conduct an accounting;
(B) determine the amount of damages;
(C) establish the truth of any allegation by evidence; or
(D) investigate any other matter.
FED.R.CIV.P. 55(b)(2).
The Eleventh Circuit has held that although “a default is not treated as an absolute
confession by the defendant of his liability and of the plaintiff's right to recover, a defaulted
defendant is deemed to admit the plaintiff's well-pleaded allegations of fact. The defendant,
however, is not held to admit facts that are not well-pleaded or to admit conclusions of law.”
Tyco Fire & Sec., LLC v. Alcocer, 218 Fed. Appx. 860, 863 (11th Cir. 2007) (per curiam)
(citations and internal quotations omitted).

Moreover, “before entering a default judgment for

damages, the district court must ensure that the well-pleaded allegations of the complaint ...
actually state a cause of action and that there is a substantive, sufficient basis in the pleadings for
the particular relief sought.” Id. (emphasis omitted).
“prima facie liability case” against the defendant.
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Therefore, Plaintiff must establish a

Pitts ex rel. Pitts v. Seneca Sports, Inc., 321

F. Supp. 2d 1353, 1357 (S.D. Ga. 2004) (citations omitted). Further, when assessing damages,
the 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).

Overall, “there

is a strong policy of determining cases on their merits” and therefore defaults are viewed “with
disfavor.” In re Worldwide Web Sys., Inc., 328 F.3d 1291, 1295 (11th Cir. 2003).

“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.”

Varnes v. Local 91, Glass Bottle

Blowers Ass'n of U.S. and Canada, 674 F.2d 1365, 1369 (11th Cir. 1982).

Finally, “allegations

relating to the amount of damages are not admitted by virtue of default. Rather, the Court
determines the amount and character of damages to be awarded.” Miller v. Paradise of Port
Richey, Inc., 75 F.Supp.2d 1342, 1346 (M.D. Fla. 1999).
III.

Discussion
A.

Liability

The Court is satisfied that Resurgence has notice of the default proceedings against it.
Additionally, a Clerk’s Rule 55(a) default was entered against Resurgence in accordance with
Rule 55(a) for failure to plead, answer or otherwise defend this case.

Moreover, there is a sum

certain which can be made ascertainable before the Court, from which a default judgment can be
entered without a hearing.

Securities and Exchange Commission v. Smyth, 420 F.3d 1225,

1231-1232 (11th Cir. 2005) (“Judgment of default awarding cash damages could not properly be
entered without a hearing unless the amount claimed is a liquidated sum or one capable of
mathematical calculation) (internal quotes and citations omitted); Id. at n.13 (noting that an
“evidentiary hearing is not a per se requirement; indeed, Rule 55(b)(2) speaks of evidentiary
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hearings in a permissive tone....We have held that no such hearing is required where all essential
evidence is already of record[]”).
Further, as to the merits of Plaintiff’s complaint, a court may enter a default judgment
only if the factual allegations of the complaint, which are assumed to be true, provide a sufficient
legal basis for such entry.

Nishimatsu Const. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206

(5th Cir. 1975) (“The defendant is not held to admit facts that are not well-pleaded or to admit
conclusions of law[]”).

In considering a motion for default judgment, a court must “examine

the sufficiency of plaintiff's allegations to determine whether the plaintiff is entitled to” a default
judgment.

Fidelity & Deposit Co. v. Williams, 699 F. Supp. 897, 899 (N.D. Ga. 1988).

The

Court is satisfied that the well-pleaded allegations of the Complaint state a basis for relief as to
the claims asserted and that there is a substantive, sufficient basis for the relief Plaintiff seeks.
Specifically, Plaintiff asserts a breach of guaranty claim against Resurgence, as Clarke’s
guarantor, for Clarke’s failure to comply with the terms of the agreement.

The agreement and

Guaranty are governed by the laws of the State of Wisconsin. (Doc. 1-1 at 7 at Section 23(e);
Doc. 1-8).

Upon consideration of the evidence submitted by Plaintiff and the well-pleaded

allegations of the Complaint, default judgment is due to be entered against Resurgence.
As set forth in Miller Brewing Intern., Inc. v. Importbeer Distribuidora de Bebidas
LTDA, 2015 WL 2168879, *5 (E.D. Wis. May 8, 2015):
“A guaranty is a contract,” and “[t]he rules governing the construction of contracts
apply.” Harris v. Metropolitan Mall, 334 N.W.2d 519, 527 (Wis.1983). In order to
enforce a guaranty, the plaintiff must “bring a breach of contract claim, which requires a
showing of three elements: (1) the existence of a contract creating obligations flowing
from defendant to plaintiff; (2) a breach of those obligations; and (3) damages from the
breach.” FirstMerit Bank N.A. v. Koenig, No. 13–CV–534, 2014 WL 2743190 at *4
(W.D. Wis. June 17, 2014) (internal citations omitted).
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As to the elements for breach of guaranty, the Court finds that the well-pleaded
allegations and evidence submitted establish: 1) the existence of a contract creating obligations
flowing from Resurgence to Plaintiff (the Guaranty); 2) a breach of those obligations
(Resurgence’s failure to pay amounts due and owing under the Guaranty); and 3) damages from
the breach (including non-payment of the amounts due under the Lease (and Guaranty), accruing
interest, remarketing expenses (after repossession and resale of equipment) etc.).
the evidence shows execution of the Guaranty by Resurgence.

Specifically,

The Guaranty explains

Resurgence’s principal obligation and terms of the Guaranty itself, including that it guaranteed
payment without set-off or counterclaim and guaranteed payment of all losses, costs, reasonable
attorneys’ fees and expenses due to Clarke’s default (or its own).
Guaranty.

Plaintiff relied on the

The evidence indicates that Clarke defaulted under the Lease, which was guaranteed

by Resurgence, due to its failure to pay the sums due and owing under the Lease. Upon
Plaintiff’s written demand for payment, Resurgence failed to pay the sums due and owing under
the Guaranty.
itself.

Moreover, Plaintiff’s reliance on the Guaranty is expressed in the document

As such, upon consideration, the Court finds that Plaintiff is entitled to default judgment

against Resurgence, for breach of the Guaranty, as a matter of Wisconsin law.
B.

Damages

Plaintiff requests entry of a default judgment against Resurgence in the amount of
$98,487.08 plus accruing interest. Upon review of the Guaranty, invoices, notices submitted,
Affidavit and Declaration filed in support, the Court is satisfied that the amounts requested are
due and owing to Plaintiff by Resurgence.

As such, that portion of Plaintiff’s motion for

default judgment damages, addressing the breach of guaranty claim against Resurgence, is
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GRANTED in part such that Plaintiff is awarded $98,487.08.

However, Plaintiff also seeks an

unspecified amount of accrued late charges. As such, Plaintiff shall Supplement its motion, with
the specific amount of accrued late charges sought, on or before December 31, 2015.
C.

Attorneys’ Fees & Costs/Expenses

While not specified in the motion, Plaintiff requests – via one sentence of the Affidavit of
Litigation Coordinator Barnes -- $11,787.00 in reasonable attorneys’ fees and $1,307.75 in
costs/expenses.

(Doc. 33-1 (Aff. Barnes)).

costs/expenses at this juncture.

The Court is unable to assess fees and

Plaintiff has not provided any supporting documentation

regarding its request for attorneys’ fees and costs/expenses, or referenced that portion of either
the agreement or Guaranty which provide for recovery of same.
propriety for recovery of such fees and costs under Wisconsin law.

Plaintiff has not briefed the
Likewise, Plaintiff has not

provided any attorneys’ billing records, invoices and/or itemized statements, complete
information about all of the individuals who billed for legal services or their qualifications/years
of experience, and/or whether the fees and costs were reasonably incurred under the relevant
state’s law (Wisconsin) governing such awards.

As such, Plaintiff shall Supplement its motion,

with the requisite support for this request, on or before December 31, 2015.
IV.

Conclusion
As such, it is ORDERED that Plaintiff’s motion for default judgment against Resurgence

is GRANTED in part insofar as default judgment is entered in its favor and against Resurgence
as to the breach of guaranty claim in the amount of $98,487.08; and RULING IS RESERVED
in part as to specific amount of accrued interest and the request for fees and costs/expenses.2

2 Plaintiff has filed a virtually identical motion for default judgment against Clarke County Healthcare,
LLC, the lessee, seeking the very same amount as damages. As provided in Moseley, Hallgarten, Estabrook &

8

Plaintiff is ORDERED to file, on or before December 31, 2015, a Supplement to its
motion addressing the specific amount of accrued costs sought as well as attorneys’ fees and
costs/expenses, and further: 1) citing those specific provisions in the relevant agreements which
provide for recovery of fees and costs/expenses, and assessing the propriety of recovery of same
under Wisconsin law; and 2) attaching whatever materials it deems necessary and appropriate to
support its claim for fees and costs/expenses in conjunction with Wisconsin law.
DONE and ORDERED this 10th day of December 2015.
/s/ Kristi K. DuBose
KRISTI K. DuBOSE
UNITED STATES DISTRICT JUDGE

Weeden, Inc. v. Ellis, 849 F.2d 264, 272 (7th Cir. 1988): “although [plaintiff] is now armed with two judgments [for
the same loss]…the law is clear that [plaintiff] is entitled to but one satisfaction…when [plaintiff] executes on the
judgment against [one party]…and collects…[plaintiff] will be precluded from a double recovery since [the other
party]…could seek relief for the default judgment…under Rule 60(b)(5) Fed.R.Civ.Proc., allowing for relief where
the judgment has been ‘satisfied.’” Put simply, Plaintiff may obtain two identical default judgments, one against
Resurgence and one against Clarke, but Plaintiff may only recover one satisfaction.
Additionally, Plaintiff cannot recover the attorneys’ fees and costs sought against Resurgence and then also
recover that requested sum against Clarke, as such would be yet another double recovery. As such, Plaintiff is
ORDERED to specify and delineate in the December 31, 2015 Supplement, those fees and costs incurred relative to
Resurgence, versus those incurred relative to Clarke.

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