Recoveraid Recovery Solutions, Inc. v. Level 1 Transport, Inc. et al

Filing 69

ORDER granting 66 Plaintiff's Motion for Contempt and Sanctions; adopting 67 the Report and Recommendation as the opinion of the Court as to default judgment against Defendant Level 1 Transport, Inc.; striking 20 Defendants Warehouse H oldings, Inc., and Sean McInerney's Answer and Affirmative Defenses; granting 58 Plaintiff's Renewed Motion for Final Judgment on Default Against Level 1 Transport, Inc., to the extent default judgment will be entered against Level 1; des cribing the judgment to be entered; and directing the clerk to withhold entry of the judgment pending a decision by Plaintiff whether to file a motion for attorneys' fees against Warehouse Holdings and McInerney. Any such motion must be filed no later than 2/26/2024. Signed by Judge Timothy J. Corrigan on 2/5/2024. (VNG)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION
RECOVERAID RECOVERY
SOLUTIONS, INC., a Canadian
corporation, as assignee of Optima
Consulting Group,
Plaintiff,
Case No. 3:22-cv-731-TJC-LLL
v.
LEVEL 1 TRANSPORT, INC., a
Florida corporation, WAREHOUSE
HOLDINGS, INC., a Florida
corporation, and SEAN
MCINERNEY, an individual,
Defendants.
ORDER
This case is before the Court on Plaintiff Recoveraid Recovery Solutions,
Inc.’s Motion for Contempt and Sanctions, Doc. 66, and the Report and
Recommendation recommending granting default judgment against Defendant
Level 1 Transport, Inc., Doc. 67; see also Doc. 58 (motion for default judgment).
Background
This case arises from the attempted purchase of face masks during the
COVID-19 pandemic. See generally Doc. 1. Recoveraid alleges the following
facts. Defendant Warehouse Holdings, Inc., agreed to purchase from Recoveraid
50,000 face masks for $200,000. Id. ¶¶ 12–14. After receiving confirmation of a

wire transfer, Recoveraid shipped the masks. Id. ¶¶ 15, 16. Recoveraid stopped
shipment before delivery after being notified that the transfer had been
canceled. Id. ¶ 17. Recoveraid and Warehouse Holdings then agreed Warehouse
Holdings would submit a check to Recoveraid’s non-party business partner,
Optima Consulting Group. Id. ¶ 18. Level 1 issued the check,

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and a

representative for Warehouse Holdings, James Davis, deposited the check into
Optima’s bank account. Id. ¶ 19. Recoveraid reshipped the masks. Id. ¶ 20. The
check was dishonored, 2 and “[i]t was later discovered that the account had
actually been closed prior to the issuing of [the] check.” Id. ¶ 21. Davis
repeatedly promised Recoveraid payment, including through bank wires and
credit card. Id. ¶ 23. Recoveraid has not been paid. Id. ¶¶ 22–24.
Recoveraid filed this suit in July 2022, alleging six claims: (1) breach of
contract against Warehouse Holdings; (2) unjust enrichment against
Warehouse Holdings and its president, Sean McInerney; (3) violation of the
Florida Deceptive and Unfair Trade Practices Act against Warehouse Holdings;
(4) fraud against Davis; (5) fraud against McInerney; and (6) issuance of a
worthless check against Level 1. Id. ¶¶ 28–58. Davis was never properly served,

1Level

1’s connection to Warehouse Holdings is unclear from the record.

2Optima

has allegedly assigned its right to recovery to Recoveraid. Doc. 1

¶ 25; Doc. 1-5.
2

Doc. 64, and the Court dismissed the claim against him without prejudice, Doc.
65.
Recoveraid, Warehouse Holdings, and McInerney settled the claims
against Warehouse Holdings and McInerney, Doc. 37, and in February 2023,
Recoveraid moved to enforce the settlement agreement, Doc. 38. Warehouse
Holdings and McInerney responded that the funding they had expected never
materialized and they are unable to pay Recoveraid as agreed. Doc. 41. The
Court granted the motion to enforce the settlement agreement, directed
Warehouse Holdings and McInerney to pay the agreed amount ($112,000), and
established a July 31, 2023, deadline. Doc. 54. Warehouse Holdings and
McInerney have not paid. See Doc. 66 at 6. Recoveraid now moves for contempt
and sanctions. See generally id.
Level 1 never appeared. The clerk entered default on July 7, 2023. Doc.
62.

The

Magistrate

Judge

entered

a

Report

and

Recommendation

recommending granting default judgment. Doc. 67; see also Doc. 58 (motion for
default judgment); Doc. 60 (supplement to motion). Additional facts relevant to
default are described in the Report and Recommendation and not repeated here.
Motion for Contempt and Sanctions
Recoveraid asks the Court to find Warehouse Holdings and McInerney in
civil contempt, strike their Answer and Affirmative Defenses, and enter
judgment against them for the damages requested in the Complaint, which
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include “damages, interest, attorneys’ fees and costs.” Doc. 66 at 2, 6; see also
Doc. 1 at 5–8 (Complaint). Recoveraid represents that Warehouse Holdings and
McInerney told Recoveraid’s counsel, “We are unable to pay the settlement
funds. Whatever sanctions are appropriate, including striking of pleadings, are
appropriate if the Court says so.” Id. at 6. Warehouse Holdings and McInerney
have not responded to the motion.
A civil contempt order is appropriate “if the proof of the defendant’s
contempt is clear and convincing” and demonstrates “that 1) the allegedly
violated order was valid and lawful; 2) the order was clear, definite and
unambiguous; and 3) the alleged violator had the ability to comply with the
order.” McGregor v. Chierico, 206 F.3d 1378, 1383 (11th Cir. 2000) (quoting
Jordan v. Wilson, 851 F.2d 1290, 1292 n.2 (11th Cir. 1988)).
The alleged contemnor has the burden to show an inability to comply.
Commodity Futures Trading Comm’n v. Wellington Precious Metals, Inc., 950
F.2d 1525, 1529 (11th Cir. 1992) (citing United States v. Rylander, 460 U.S.
752, 757 (1983)). “[T]o succeed on the inability defense, the alleged contemnor
must go beyond a mere assertion of inability and establish that he has made in
good faith all reasonable efforts to meet the terms of the court order he is
seeking to avoid.” Id. (cleaned up). Even substantial, diligent, and good-faith
efforts are insufficient if an alleged contemnor fails to show he made “all

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reasonable efforts.” United States v. Hayes, 722 F.2d 723, 725 (11th Cir. 1984)
(internal quotation marks and quoted authority omitted).
“District courts enjoy wide discretion to fashion an equitable remedy for
civil contempt that is appropriate to the circumstances.” United States v. City
of Mia., 195 F.3d 1292, 1298 (11th Cir. 1999) (cleaned up). “These sanctions may
serve one of two broad purposes: (1) coercing the contemnor to comply with a
court order, or (2) compensating a party for losses suffered as a result of the
contemptuous act.” Id. “In serving these ends, a court’s civil contempt power is
measured solely by the requirements of full remedial relief.” Id. (cleaned up).
Here, the Court directed Warehouse Holdings and McInerney to pay
Recoveraid the agreed $112,000 by July 31, 2023. Doc. 54. Warehouse Holdings
and McInerney do not challenge that the Court’s order was valid, lawful, clear,
definite, and unambiguous. They assert that they cannot pay, but they have not
attempted to show that they have made any efforts, let alone all reasonable
efforts, to do so. They thus fail to establish an inability to pay. The conditions
for holding them in contempt are satisfied.
The purpose of the contempt sanction is compensation. Recoveraid states
a claim for $200,000 plus interest, costs, and attorneys’ fees. See generally Doc.
1. Warehouse Holdings and McInerney agreed to settle the claim for $112,000,
Docs. 47, 54, but failed to pay, Docs. 38, 54, 66. According to Recoveraid,
Warehouse Holdings and McInerney acknowledged their failure and consented
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to sanctions, including striking their Answer and Affirmative Defenses. Doc. 66
at 6. They have not disputed this. By failing to comply with the Court’s order,
they have left Recoveraid uncompensated for its losses. Considering the value
of Recoveraid’s claim and Warehouse Holdings and McInerney’s acquiescence,
granting the requested sanctions is warranted.
Default Judgment
The Report and Recommendation establishes the basis for granting
default judgment against Level 1. No party has filed an objection, and the time
in which to do so has passed. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).
Upon de novo review of the file and for the reasons stated in the Report and
Recommendation, Doc. 67, granting default judgment is warranted.
Accordingly, it is hereby
ORDERED:
1.

Recoveraid’s Motion for Contempt and Sanctions, Doc. 66, is

GRANTED.
2.

The Magistrate Judge’s Report and Recommendation, Doc. 67, is

ADOPTED as the opinion of the Court as to default judgment against Level 1.
3.

Warehouse

Holdings

and

Sean

McInerney’s

Answer

and

Affirmative Defenses, Doc. 20, is STRICKEN.
4.

Recoveraid’s Renewed Motion for Final Judgment on Default

Against Level 1 Transport, Inc., Doc. 58, is GRANTED to the extent that
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default judgment will be entered against Level 1 on the worthless check claim
under section 68.065, Florida Statutes (count six of the Complaint, Doc. 1).
5.

The clerk will be DIRECTED to enter judgment in favor of

Recoveraid and against Warehouse Holdings and Sean McInerney in the
amount of $200,000 plus interest, to be jointly and severally liable with Level
1.
6.

The clerk will be DIRECTED to enter judgment in favor of

Recoveraid and against Level 1 in the total amount of $800,000 (with Level 1
to be jointly and severally liable with Warehouse Holdings and Sean McInerney
for $200,000 plus interest), along with attorneys’ fees in the amount of $6,515.
7.

The clerk will withhold entry of judgment pending a decision by

Recoveraid whether to file a motion for attorneys’ fees against Warehouse
Holdings and Sean McInerney under Local Rule 7.01. Any such motion must be
filed no later than February 26, 2024.
DONE AND ORDERED in Jacksonville, Florida, the 5th day of
February, 2024.

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vng
Copies to:
The Honorable Laura Lothman Lambert
United States Magistrate Judge
Counsel of record

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