Deloney et al v. Chase et al
ORDER granting in part and denying in part 24 Motion for Default Judgment; granting in part and denying in part 30 Supplemental Motion for Default Judgment. (Damages Hearing set for 5/26/2017 09:00 AM in Texarkana -- 3rd flr (AR side) before Honorable Susan O. Hickey.) Signed by Honorable Susan O. Hickey on February 1, 2017. (mll)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
JERRY DELONEY and
CASE NO. 4:15-CV-4104
DENNIS CHASE; and
Before the Court are Plaintiffs’ (1) Motion for Default Judgment as to Defendants Dennis
Chase and Chasemaster Corporation and (2) Supplemental Motion for Default Judgment as to
Defendants Dennis Chase and Chasemaster Corporation. ECF Nos. 24, 30. The Court finds this
matter ripe for consideration.
In Plaintiffs’ Complaint, they assert that they are African-American poultry farmers. ECF
No. 1. They claim that the Farm Service Agency (“FSA”), “an arm of the United States
Department of Agriculture (“USDA”)” failed to timely process their loan applications and later
denied their applications because they are African-American, in violation of the Equal Credit
Opportunity Act, 15 U.S.C. §§ 1691, et seq. ECF No. 1, ¶ 12. “On July 24, 2008, and as a result
of the FSA’s discrimination, [Plaintiffs] filed a pro se civil rights complaint with the Office of
Adjudication of the USDA.” ECF No. 1, ¶ 13. Defendant Dennis Chase, holding himself out as
an expert on FSA procedure and protocol, subsequently contacted Plaintiffs and began “advising
them regarding the FSA and how to proceed before the Office of Adjudication.” ECF No. 1, ¶
14. Plaintiffs later hired Defendant Chase, acting both individually and through Defendant
Chasemaster Corporation, to represent them before the USDA. ECF No. 1, ¶¶ 15, 16. The USDA
subsequently ruled in Plaintiffs’ favor and awarded them $460,738 in damages. ECF No. 1, ¶ 17.
Plaintiffs gave Defendants Chase and Chasemaster Corporation a 40% fee of $184,295. ECF No.
1, ¶ 19.
Defendant Chase also convinced Plaintiffs to allow him to invest, on their behalf,
$110,000 of their award at 7.25% interest. ECF No. 1, ¶ 20. Defendant Chase “also indicated that
he would assign [Plaintiffs] a $200,000 mortgage as collateral to secure their investment.” ECF
No. 1, ¶ 20. Plaintiffs and Defendant Chase entered an agreement in August of 2011 whereby
Defendant Chase would invest Plaintiffs’ $110,000 at 7.25% interest on their behalf and would
make monthly payments to Plaintiffs of $1,000. ECF No. 1, ¶ 20. From September of 2011 to
August of 2012, Plaintiffs received monthly payments of $1,000. ECF No. 1, ¶ 22. Defendant
Chase held a mortgage on property owned by his daughter and son-in-law and assigned that
mortgage to Plaintiffs as collateral. ECF No. 1, ¶ 24. Plaintiffs state that they have never seen the
property and do not know the value of the property. ECF No. 1, ¶ 25.
After the agreed upon monthly payments stopped, Plaintiffs demanded the return of their
$110,000. ECF No. 1, ¶ 25. In lieu of returning the $110,000, Defendant Chase offered to deed
the property owned by his daughter and son-in-law to Plaintiffs. ECF No. 1, ¶ 25. A Deed in
Lieu of Foreclosure was drafted and sent to Plaintiffs. ECF No. 1, ¶ 26.
Plaintiffs filed their Complaint on November 3, 2015. ECF No. 1. As to Defendants
Dennis Chase and Chasemaster Corporation, Plaintiffs alleged causes of action for: (1) breach of
contract; (2) promissory estoppel; (3) unjust enrichment/assumpsit; (4) conversion; (5) breach of
fiduciary duty; and (6) fraud. ECF No. 1. Defendant Dennis Chase was served on February 4,
2016, but failed to respond or enter an appearance. ECF No. 6. Defendant Chasemaster
Corporation was served through its registered agent on February 8, 2016, but failed to respond or
enter an appearance. ECF No. 7. On June 15, 2016, the Court issued a Notice of Default
Procedure Under Federal Rule of Civil Procedure 55 in regard to Defendants Dennis Chase and
Chasemaster Corporation. ECF No. 21. On June 28, 2016, Plaintiffs filed affidavits in support of
default for Defendants Dennis Chase and Chasemaster Corporation. ECF Nos. 22, 23. Plaintiffs
filed the present Motion for Default Judgment that same day. ECF No. 24. On September 26,
2016, the Clerk of Court entered a Default as to Defendants Dennis Chase and Chasemaster
Corporation. ECF No. 29.
II. DEFAULT JUDGMENT
The district court may enter a default judgment when a party fails to appropriately
respond in a timely manner. See, e.g., Inman v. Am. Home Furniture Placement, Inc., 120 F.3d
117, 119 (8th Cir. 1997). The Federal Rules of Civil Procedure leave the determination of
whether to enter a default judgment to the sound discretion of the trial court. Belcourt Pub. Sch.
Dist. v. Davis, 786 F.3d 653, 661 (8th Cir. 2015). However, the United States Court of Appeals
for the Eighth Circuit has recognized that default judgments are not favored by the law and
should be rarely used, as there is a preference for adjudication on the merits. Id. If the court
determines that defendant is in default, the factual allegations of the complaint, except those
relating to the amount of damages, will be taken as true. Am. Red Cross v. Cmty. Blood Ctr., 257
F.3d 859, 864 (8th Cir. 2001). Furthermore, the court must ensure that “the unchallenged facts
constitute a legitimate cause of action” prior to entering final judgment. See Murray v. Lene, 595
F.3d 868, 871 (8th Cir. 2010). Courts may consider various factors when determining whether to
enter a default judgment. Those factors include: (1) the amount of money that may be involved;
(2) whether material issues of fact or issues of substantial public importance are at issue; (3)
whether the default is largely technical; (4) whether the plaintiff has been substantially
prejudiced by the delay involved; (5) whether the grounds for default are clearly established or
are in doubt; (6) whether the default was caused by a good-faith mistake or by excusable or
inexcusable neglect; and (7) harshness of the effect of default judgment. Belcourt Pub. Sch.
Dist., 786 F.3d at 661.
In the present motion, Plaintiffs only appear to argue that they have stated a claim for
breach of contract. Although Plaintiffs initially also sought relief under theories of promissory
estoppel, unjust enrichment/assumpsit, conversion, breach of fiduciary duty, and fraud, they have
failed to discuss any of these causes of action in the present motion or otherwise argue that
judgment pursuant to these theories is warranted. As such, the Court will only address Plaintiffs’
contention that judgment is appropriate under a breach of contract cause of action.
As to the issue of whether “the unchallenged facts constitute a legitimate cause of
action,” the Supreme Court of Arkansas has found that “[i]n order to state a cause of action for
breach of contract, ‘the complaint need only assert  the existence of a valid and enforceable
contract between the plaintiff and defendant,  the obligation of defendant thereunder,  a
violation by defendant, and  damages resulting to plaintiff from the breach.’” Rabalaias v.
Barnett, 683 S.W.2d 919, 921 (Ark. 1985) (citing Williams v. Black Lumber Co., 628 S.W.2d 13,
14 (Ark. 1982)). Plaintiffs explicitly assert that they entered into a valid and enforceable
agreement with Defendants Chase and Chasemaster Corporation. ECF No. 1, ¶ 29. Plaintiffs
further assert that, under that contract, Defendants had the obligations to (1) invest $110,000 of
Plaintiffs’ money, (2) at 7.25% interest, and (3) to make monthly payments to Plaintiffs of
$1,000. 1 ECF No. 1, ¶¶ 29, 31. Plaintiffs also claim that Defendants failed to invest their
$110,000 at 7.25% interest and, after making twelve monthly payments, stopped making the
required monthly payments. ECF No. 1, ¶¶ 22, 23, 24. Finally, Plaintiffs argue that “Defendants’
Defendants may have also been obligated to assign Plaintiffs a $200,000 mortgage as collateral to secure their
investment, but the Complaint fails to make clear whether this was part of the agreement or merely a gratuitous offer
made by Defendant Chase. Regardless, Plaintiffs assert that Defendant Chase failed to assign them a $200,000
mortgage, but did assign them a mortgage on property Defendant Chase’s daughter and son-in-law purchased.
Plaintiffs state they have no knowledge of the property’s value. ECF No. 1, ¶¶ 24, 25.
breach of the investment agreement caused Plaintiffs’ injury, in that Plaintiffs have suffered
monetary loss as a direct result” of Defendants’ conduct. ECF No. 1, ¶ 32. Taking these factual
allegations as true, it is clear that Plaintiffs have asserted a legitimate cause of action against
Defendants Chase and Chasemaster Corporation.
Having found that Plaintiffs have successfully stated a cause of action against
Defendants, the Court must determine whether to grant a default judgment. As noted above, the
Court has discretion in determining whether to enter a default judgment, taking into account
various factors. The grounds for default in the present case have been clearly established, as
Defendants Chase and Chasemaster Corporation have failed to respond or defend in this action.
Further, there appear to be no material facts in dispute. Plaintiffs claim they had a contract with
Defendants, Defendants appear to have partially performed under some contractual agreement,
and Defendants attempted to resolve the breach by deeding property over to Plaintiffs. All of
these facts tend to indicate that Defendants were contractually bound, though the Court notes that
Plaintiffs have failed to provide the Court with a written contract or other evidence to establish
the exact contractual provisions. 2
Another factor courts may take into consideration is the amount of money involved.
Here, Plaintiffs seek recovery of more than $100,000, a fairly large sum. Further, looking at the
issues of whether Defendants may have acted in good-faith or may be able to show excusable
neglect, the Court finds that the record indicates Defendants have not acted in good-faith and
would be unlikely to establish excusable neglect. Defendants acted as non-attorney advocates for
Plaintiffs in Plaintiffs’ civil rights action before the USDA and received a large fee for this
advocacy. Defendants then “advised” Plaintiffs of an investment opportunity and persuaded them
Although it is unclear why Plaintiffs have failed to include a written contract or copies of relevant promissory
notes as attachments to their pleadings, the Court is satisfied that the factual allegations, accepted as true, indicate
that Plaintiffs and Defendants were performing under some contractual agreement. However, the exact contractual
language and provisions must be provided to the Court in order for the Court to make a determination of damages.
to transfer $110,000 to Defendants. Defendants appear to have cultivated a trusting relationship
with Plaintiffs and then used that trust as a means of obtaining more money from Plaintiffs.
Thus, it is clear Defendants have not acted in good-faith. Finally, in regard to the harshness of
the effect of default judgment, the Court finds that the effect will not be overly harsh, but instead
will simply allow Plaintiffs to recover their lost funds.
Therefore, the Court finds that Plaintiffs have alleged sufficient facts to support a
legitimate cause of action against Defendants Chase and Chasemaster Corporation and that
default judgment is proper.
After determining that a judgment by default should be entered, the Court should
determine the amount and character of the recovery. Fed. R. Civ. P. 55(b)(2)(B). “When a
default judgment is entered on a claim for an ‘indefinite or uncertain amount of damages . . .
facts relating to the amount of damages . . . must be proved in a supplemental hearing or
proceeding.’” Am. Red Cross v. Cmty. Blood Ctr., 257 F.3d 859, 864 (8th Cir. 2001) (quoting
Everyday Learning Corp. v. Larson, 242 F.3d 815, 818 (8th Cir. 2001)).
Here, Plaintiffs request a damages award in the amount of $137,875. However, as noted
above, Plaintiffs have not provided the Court with evidence establishing the terms and provisions
of the contract at issue. As such, the Court finds that a hearing to determine damages will be
necessary. That hearing will take place on May 26, 2017, at 9:00 a.m. at the United States
Courthouse, Texarkana, Arkansas. Plaintiffs are instructed to provide the Court with all relevant
documentation concerning the contract at issue including (1) the contract itself; (2) promissory
notes assigned to Plaintiffs; (3) mortgages Plaintiffs may hold as collateral for their investment
and information about the mortgaged property such as location and value; and (4) any other
documentation showing the amount of Plaintiffs’ damages.
Accordingly, Plaintiffs’ Motion for Default Judgment as to Defendants Dennis Chase and
Chasemaster Corporation (ECF No. 24) and Supplemental Motion for Default Judgment as to
Defendants Dennis Chase and Chasemaster Corporation (ECF No. 30) are hereby GRANTED
IN PART insofar as default judgment is entered against Defendants Chase and Chasemaster
Corporation. Plaintiffs’ motions are DENIED IN PART in regard to Plaintiffs’ request for an
award of damages in the amount of $137,875, as a damages hearing will be held on May 26,
2017, at 9:00 a.m. at the United States Courthouse, Texarkana, Arkansas.
IT IS SO ORDERED, this 1st day of February, 2017.
/s/ Susan O. Hickey
Susan O. Hickey
United States District Judge
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