Centrinex, LLC v. Darkstar Group, LTC et al

Filing 110

ORDER ADOPTING REPORT AND RECOMMENDATIONS 109 : Subject to the damage findings on counts four and five, and default judgment on liability is granted for the plaintiff and entered against the defendants on the counts and in the amounts as pled and su mmarized. Plaintiff shall have 20 days from the filing date of this order to make all additional applications along with affidavits and evidentiary material, that the defendants shall have 20 days thereafter to file their opposing responses along wit h any affidavits and evidentiary material, and that the court shall determine any need for an evidentiary hearing based on the issues and arguments raised in the parties' filings. Signed by U.S. District Senior Judge Sam A. Crow on 8/4/15. (msb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
CENTRINEX, LLC,
Plaintiff
vs.

Case No. 12-2300-SAC

DARKSTAR GROUP, LTC,
AJAX GROUP, LLC, and
ALEXANDER L. SHOGREN,
Defendants.
MEMORANDUM AND ORDER
The case comes before the court on the Magistrate Judge's
report and recommendation filed June 30, 2015. (Dk. 109). It recommends
granting in large part the plaintiff’s motion for judgment (Dk. 96). The
defendants have filed no objections and have waived their right to de novo
review pursuant to 28 U.S.C. § 636(b)(1). See Hill v. SmithKline Beecham
Corp., 393 F.3d 1111, 1114 (10th Cir. 2004) (There is a “firm waiver rule”
for review of all factual and legal questions to which a party has failed to
object to the magistrate judge’s findings and recommendations. (citing
Moore v. United States, 950 F.2d 656, 659 (10th Cir. 1991)). The parties on
both sides have not submitted any objections or additional pleadings asking
the district court to modify or supplement the report and recommendation in
any respect.

After reviewing the record, the district court accepts, approves
and adopts as its order the Magistrate Judge’s report and recommendation
as filed subject to the below paragraphs on damages. This report and
recommendation and the orders referenced and incorporated therein fully
detail the more than sufficient grounds for this extraordinary relief. In
particular, the court highlights the following:
On September 22, 2013, defendants filed a response to the court’s
order to show cause, claiming that defense counsels’ efforts to procure
discovery from defendants had been unsuccessful, and that, “in lieu of
incurring more costs and fees that [defendants] are unable to pay in
an attempt to comply with the Court’s order compelling discovery,
they have instead authorized counsel to notify the Court, and the
Plaintiff, in this response that Defendants’ [sic] hereby withdraw all
defenses in this matter and will allow the Plaintiff to seek an
unopposed Final Judgment in its favor.” In addition, defendants’
response requested they not be sanctioned in light of their agreement
not to oppose final judgment in this matter.
. . . On October 16, 2013, the court held a status conference and
ordered defendants to produce on or before November 6, 2013, their
financial records relevant to this litigation as previously ordered in the
court’s September 6, 2013 Memorandum and Order.12 At a November
13, 2013 status conference, the court was informed that defendants
had not complied with its previous orders requiring the production of
documents. . . .
At a March 10, 2014 status conference, the parties indicated that
they were in the process of exchanging proposed settlement
documents. After several continuances, the court held a status
conference on April 29, 2014, where the parties indicated that plaintiff
had provided a proposed consent judgment to defendants and
defendants’ counsel was in the process of discussing it with them.
At a May 12, 2014 status conference, defendants’ counsel stated that
they no longer had authority from defendants to enter into a consent
judgment. The court issued an order on May 14, 2014 again requiring
Mr. Shogren to personally appear for his deposition, this time within
thirty (30) days of the order, and warning that failure to appear could
lead to sanctions, including a recommendation of default judgment.14
Defense counsel noticed the deposition of Mr. Shogren to occur on May
29, 2014. Mr. Shogren did not appear. On September 9, 2014
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Centrinex, LLC filed its Motion for Judgment. In their response,
defendants essentially concede liability for the claims being asserted
against them, having “agreed to withdraw their defenses to the lawsuit
. . .” However, defendants contend that plaintiff is not entitled to
recover punitive damages.
(Dk. 109, pp. 2-4) (footnotes omitted). The court grants default judgment
against the defendants and for the plaintiff on the claims as pled. Default
judgment is imposed as a proper and appropriate sanction pursuant to Fed.
R. Civ. P. 37(b)(2)(A)(vi) for all the reasons stated in the report and
recommendation.
With the entry of default judgment, “a defendant cannot defend
a claim on the merits.” Olcott v. Delaware Flood Co., 327 F.3d 1115, 1125 n.
11 (10th Cir.) (citation omitted), cert. denied, 540 U.S. 1089 (2003); see
Meitler Consulting, Inc. v. Dooley, 2007 WL 1834008 at *7 n.37, *8 n.39 (D.
Kan. 2007) (entry of Rule 37(b) default judgment generally establishes
liability for each pled action, for the defendant is deemed to have admitted
all well-pled allegations other than allegations on damages). The plaintiff’s
“Motion for Entry of Judgment” (Dk. 97) proposes that the matter is ripe for
imposing judgment and for determining damages. The plaintiff attaches a
proposed form of judgment and explains that it “is substantially the same as
that which had been provided to defendants’ counsel back in October of
2013 after defendants withdrew all defenses.” (Dk. 97, p. 3). The plaintiff’s
position is that the court could adopt that form and then entertain a
separate submittal for attorneys’ fees and expenses to be included in the
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final judgment. Counsel for the defendants filed a limited opposition noting
they did not have authority to work on this case but were filing this response
out of an abundance of caution. Counsel stated that the defendants had
withdrawn their defenses to the plaintiff’s proof of the “undisputed actual
damages of $145,761.78, with interest at the contract rate of 18% [per
annum], from and after January 17, 2012,” and that the plaintiff’s efforts to
collect punitive damages have “complicated this matter.” (Dk. 100, p. 2).
The court follows the magistrate judge’s recommendation to accept this
calculation of actual damages as undisputed. The district court, however,
accepts this calculation of actual damages as an undisputed matter also
applicable to other related damage claims as pleaded by the plaintiff and
proposed in its form of judgment.
The court directs the entry of judgment on the following claims
and in the following amounts subject to the additional proceedings noted
herein. For the Count Two Trade Secrets claim, judgment shall be entered
in favor of the plaintiff and against all the defendants for injunctive relief,
damages, and fees and costs as to be determined after the plaintiff’s
additional submission and, if needed, an evidentiary hearing. The plaintiff
shall have 20 days from the filing date of this order to submit its
pleading/application concerning the scope of injunctive relief, the amount of
damages, and the amount of fees and costs. This pleading/application shall
set forth the specific requested relief and amounts along with all necessary
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affidavits and documents supporting a final determination of these matters.
For the Count Three Breach of Contract claim, judgment shall be entered in
favor of the plaintiff and against the defendant Darkstar in the amount of
$145,761.78, plus interest at the contract rate of 18% per annum, from and
after January 17, 2012, and with “costs and expenses, including reasonable
attorney fees, incurred by . . . enforcing its rights in the transaction,” to be
determined after the plaintiff’s additional submission and, if needed, an
evidentiary hearing. (Dk. 22-1, p. 7, ¶ 8). The plaintiff shall have 20 days
from the filing date of this order to submit its application for these expenses
and fees setting forth its requested amounts along with all necessary
affidavits and documents supporting them. For the Count Four Tortious
Interference with Business Relationship claim, judgment shall be entered in
favor of the plaintiff and against AJAX and Alexander Shogren in the actual
damages amount of $145,761.78, plus interest at the contract rate of 18%
per annum, from and after January 17, 2012. For the Count Five Fraud
claim, judgment shall be entered in favor of the plaintiff and against all
defendants in the actual damages amount of $145,761.78, plus interest at
the contract rate of 18% per annum, from and after January 17, 2012. On
Counts Four and Five, the court accepts the uncontested report and
recommendation of the magistrate judge to award punitive damages against
all defendants. The plaintiff shall have 20 days from the filing date of this
order to submit its application on punitive damages that will set forth its
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specific requested amount, its analysis of the relevant considerations, and
any affidavits and evidence necessary for making this determination.
Upon the plaintiff’s filing of these additional applications and
supplemental material, the defendants shall have 20 days to file their
responses. On any matter disputed, legally or factually, the defendants shall
be expected to state their positions specifically and to support the same with
relevant affidavits, other evidentiary material, and/or a request for an
evidentiary hearing that is justified as reasonable under the circumstances.
The court will treat a party’s failure to follow these additional procedures as
a waiver and rule on all pending matters promptly.
IT IS THEREFORE ORDERED that the court accepts, approves
and adopts as its order the Magistrate Judge’s report and recommendation
filed June 20, 2015 (Dk. 109) subject to the damage findings on counts four
and five, and default judgment on liability is granted for the plaintiff and
entered against the defendants on the counts and in the amounts as pled
and summarized above;
IT IS FURTHER ORDERED that, as explained more fully above,
the plaintiff shall have 20 days from the filing date of this order to make all
additional applications along with affidavits and evidentiary material, that
the defendants shall have 20 days thereafter to file their opposing responses
along with any affidavits and evidentiary material, and that the court shall

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determine any need for an evidentiary hearing based on the issues and
arguments raised in the parties’ filings.
Dated this 4th day of August, 2015, Topeka, Kansas.

s/Sam A. Crow
Sam A. Crow, U.S. District Senior Judge

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