Corsair Special Situations Fund, L.P. v. Engineered Framing Systems, Inc., et al
Filing
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MEMORANDUM OPINION. Signed by Magistrate Judge Paul W. Grimm on 8/24/11. (bmh, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Northern Division
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CORSAIR SPECIAL SITUATIONS
FUND, L.P.,
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Plaintiff,
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v.
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ENGINEERED FRAMING
SYSTEMS, INC., et al.
Case No.: 09-1201-PWG
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Defendants.
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MEMORANDUM OPINION
This Memorandum Opinion addresses the Motion for Default Judgment Against
Garnishee EFS Global, LLC, ECF No. 135, that Plaintiff/Judgment Creditor Corsair Special
Situations Fund, L.P. (“Corsair”) filed; the Supplemental1 Response and Answer to Corsair’s
Motion that EFS Global, LLC (“Global”) filed, ECF No. 168; and Corsair’s Reply, ECF No.
182. Having reviewed the papers, which do not contain a request for a hearing, I find that a
hearing is not necessary. See Loc. R. 105.6; Md. R. 2-643(f). For the reasons stated herein,
Corsair’s Motion for Default Judgment Against Garnishee EFS Global, LLC is DENIED
WITHOUT PREJUDICE. This Memorandum Opinion disposes of ECF Nos. 135, 168, and 182.
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EFS Global, LLC titles its Response “Supplemental Response and Answer,” but it is the first
response filed with the Court.
I.
BACKGROUND
On June 9, 2010, this Court entered judgment in Corsair’s favor, against
Defendants/Judgment Debtors John J. Hildreth, Marie N. Hildreth, EFS Structures, Inc., and
Engineered Framing Systems, Inc. Order 1, ECF No. 39. The judgment was in the amount of
$4,875,000 plus interest at six percent from June 30, 2008 through the date of the judgment, June
9, 2010.2 Id. Since then, in an attempt to collect the judgment, Corsair has served interrogatories
and documents requests in aid of execution of the judgment, see Mot. to Compel Interrogatories
and Request for Production of Documents, ECF No. 43, as well as numerous writs of
garnishment, see Affidavits of Service of Writs of Garnishment, ECF Nos. 74, 75, 76, 118, and
133.
Corsair requested that the Clerk of Court issue writs of garnishment for property other
than wages as to Global, for any property Global had in its possession belonging to Defendants
John J. Hildreth, Marie Hildreth, EFS Structures, Inc., and Engineered Framing Systems, Inc.
ECF Nos. 100-103. The Clerk issued the Writs as to Global on April 18, 2011, directing it “to
hold, subject to further proceedings, any property of the Judgment Debtor[s] in [Global’s]
possession at the time of service of this Writ and all property of the Judgment Debtor[s] that may
come into [Global’s] possession after service of this Writ,” and to “file an answer to the court
within thirty (30) days,” because “failure to do so [could] result in a judgment by default being
entered against [it].” ECF Nos. 104-107. Corsair’s attorney, Robert S. Brennen, provided an
Affidavit of Service, stating that “on May 16, 2011, Writs of Garnishment for Property Other
than Wages as to Engineered Framing Systems, Inc., EFS Structures, Inc., John J. Hildreth and
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The Court entered a Revised Order of Judgment, nunc pro tunc to June 9, 2010, for judgment in
the amount of $5,443,171.33, which included the principal amount of $4,875,000, and the
interest from June 30, 2008 through June 9, 2010, of $568,171.33. ECF No. 181.
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Marie Hildreth were personally served on John J. Hildreth, Resident Agent for Garnishee EFS
Global, LLC . . . . at approximately 11:30 am in Judge Garbis’ courtroom in the United States
District Court for the District of Maryland.” Brennen Aff. 1, ECF No. 118.
According to Global, Mr. Hildreth received “a binder of papers pertaining to the
infringement matter” and “was unaware that he had been served garnishment papers on Global.”
Garnishee’s Resp. ¶¶ 2-3. Garnishee claims that Mr. Hildreth did not discover the Writs until
“several weeks later.” Id. ¶ 4. In a second affidavit, Plaintiff’s attorney insists, to the contrary,
that he “specifically told Mr. Hildreth that the documents [he] was giving to him were ‘Writs of
Garnishments’”; that he gave the binder to Defense counsel, not to Mr. Hildreth; and that the
Writs “were the only documents that [he] gave to John Hildreth on that date.” Second Brennen
Aff. ¶¶ 4-5, ECF No. 182-1.
Although the Writs were for property other than wages, Global states that, in response to
the Writs, it began to garnish Mr. Hildreth’s wages “on or about May 30, 2011.” Garnishee’s
Resp. ¶ 6. Thus, Global was aware of the Writs by May 30, 2011 at the latest. See id. Garnishee
said nothing with regard to Mr. Hildreth’s or the other Defendants/Judgment Debtors’ property
other than wages. See id. The Defendants/Judgment Debtors did not respond to the Writs. On
July 15, 2011, Corsair filed the Motion for Default Judgment Against Garnishee EFS Global,
LLC, which is now before this Court.
II.
DISCUSSION
Garnishment, a “‘form of attachment,’” is “‘a means of enforcing a judgment’ which
‘allows a judgment creditor to recover property owned by the debtor but held by a third party, the
garnishee.’” Harbor Bank v. Hanlon Park Condo. Ass’n, 834 A.2d 993, 995 (Md. App. 2003)
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(citation omitted). The purpose “is to determine whether the garnishee has any funds, property
or credits which belong to the judgment debtor.” Fico v. Ghinger, 411 A.2d 430, 436 (Md.
1980). To garnish property, the judgment creditor serves a writ of garnishment on the garnishee,
which binds the garnishee “‘to safely keep the assets of the debtor in his possession, together
with any additional assets that come into his possession up to the time of trial.’” Harbor Bank,
834 A.2d at 995 (citation omitted). Thereafter, “‘if the garnishee surrenders the property after
service of the writ but prior to judgment, the garnishee is liable to the judgment creditor for the
value of the debtor’s property released.’” Id. (citation omitted). Notably, however, “a judgment
creditor ‘can recover only by the same right and to the same extent that the judgment debtor
might recover.’” Simpson v. Consol. Constr. Servs., 795 A.2d 754, 761 (Md. Ct. Spec. App.
2002) (quoting Fico, 411 A.2d at 436), aff’d in part, rev’d in part on other grounds, 813 A.2d
260 (Md. 2002). Put more clearly, the garnishee only is liable for “funds, property or credits for
which the debtor would himself have a right to sue.” Nw. Nat’l Ins. Co. v. William G. Wetherall,
Inc., 325 A.2d 869, 874 (Md. 1974).
State procedures govern the enforcement of a writ of garnishment of property. See Fed.
R. Civ. P. 69. Fed. R. Civ. P. 69(a)(1) provides:
A money judgment is enforced by a writ of execution, unless the court directs
otherwise. The procedure on execution—and in proceedings supplementary to and
in aid of judgment or execution—must accord with the procedure of the state
where the court is located, but a federal statute governs to the extent it applies.
Because no federal statute applies to writs of execution, Md. Rules 2-641 – 2-649 govern.
A writ of garnishment must “notify the garnishee of the time within which the answer
must be filed and that the failure to do so may result in judgment by default against the
garnishee,” Md. Rule 2-645(c)(3); “notify the judgment debtor and garnishee that federal and
state exemptions may be available,” Md. Rule 2-645(c)(4); and “notify the judgment debtor of
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the right to contest the garnishment by filing a motion asserting a defense or objection,” Md.
Rule 2-645(c)(5). Md. Rule 2-645(i) provides that the judgment debtor may move for release of
the property within thirty days. Md. Rule 2-645(e) provides that “[t]he garnishee shall file an
answer within the time provided by Rule 2-321,” which, in this case, is thirty days from service
of the Writ. See Md. Rule 2-321(a). If the garnishee does not file an answer with the allotted
time, “the judgment creditor may proceed pursuant to Rule 2-613 for a judgment by default
against the garnishee.” Md. Rule 2-645(f).
In this district, although “[t]he United States Court of Appeals for the Fourth Circuit has a
‘strong policy that cases be decided on the merits,’ . . . default judgment is available when the
‘adversary process has been halted because of an essentially unresponsive party.’” Disney
Enters. v. Delane, 446 F. Supp. 2d 402, 405 (D. Md. 2006) (citations omitted). Fed. R. Civ. P.
55 governs default judgments in federal court. Rule 55(b)(1) provides that the Clerk “must enter
judgment” if the plaintiff’s claim is “for a sum certain or a sum that can be made certain by
computation.” If the sum is not certain and cannot be made certain, the party seeking default
judgment “must apply to the court for a default judgment,” Fed. R. Civ. P. 55(b)(2), and the
Court will determine whether default judgment is appropriate, taking as true the well-pleaded
factual allegations in the complaint, other than those pertaining to damages.
Ryan v.
Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001).
The Court is not required to enter a default judgment simply because a defendant is
unresponsive and a plaintiff moves for default judgment. See 10A Charles A. Wright, Arthur R.
Miller & Mary Kay Kane, Federal Practice & Procedure § 2685 (3d ed. 1998). Indeed, “the party
making the request is not entitled to a default judgment as of right, even when defendant is
technically in default and that fact has been noted under Rule 55(a).” Id. Rather, “the district
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judge is required to exercise sound judicial discretion in determining whether the judgment
should be entered,” and the Court may “refuse to enter a default judgment.” Id. The Court may
consider various factors in determining whether a default judgment is appropriate, including
“whether it later would be obliged to set aside the default on defendant’s motion, since it would
be meaningless to enter the judgment as a matter of course if that decision meant that the court
immediately would be required to take up the question of whether it should be set aside.” Id.
Here, the Court already has entered judgment against Defendants/Judgment Debtors for
$4,875,000 plus interest in Corsair’s favor. See Order 1. Corsair moves for default judgment
against Garnishee Global for $4,875,000. Pl.’s Mot. 2. Corsair served Writs on Global on April
18, 2011, and neither Garnishee nor Defendants/Judgment Creditors responded within thirty days
of receipt of the Writs. See Md. Rule 2-645(e), (i), 2-321(a). Garnishee ultimately responded on
July 29, 2011, well over thirty days after Corsair served the Writs on Mr. Hildreth as a
representative of Global in mid-May, and well over thirty days after Mr. Hildreth allegedly
realized he had been served in late May. The Writs complied with Md. Rule 2-645 and stated
that the amount of judgment owed is $4,875,000. Therefore, if Garnishee has possession of any
of Defendants/Judgment Debtors’ property, the Court may enter judgment against Garnishee for
that amount, up to $4,875,000. See Md. Rule 2-645(f); Harbor Bank, 834 A.2d at 995.
Notably, the judgment against Garnishee should be for Defendants/Judgment Debtors’
“funds, property or credits” in Garnishee’s possession, see Nw. Nat’l Ins. Co., 325 A.2d at 874,
which is not necessarily equivalent to the $4,875,000 judgment entered in Corsair’s favor, see
Order 1. That judgment “is conclusive proof of the judgment debtor’s obligation” to Corsair. See
Fico, Inc., 411 A.2d at 436 (emphasis added).
Yet, it is not proof of the amount of
Defendants/Judgment Debtors’ property that Garnishee holds. Moreover, Corsair has the burden
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of proving the amount of Defendants/Judgment Debtors’ property that Garnishee holds, because
“[t]o recover in a garnishment action, the judgment creditor must present evidence legally
sufficient to prove a liability of the garnishee which existed when the writ was issued or when
the case was tried.” Johns Hopkins Hosp. v. Post, 321 Fed. App’x 259, 263 (4th Cir. 2009).
In an effort to acquire that proof, Corsair served the aforementioned Writs on Global.
Through Garnishee’s late-filed Response, the Court learned that, as of July 29, 2011, Global had
garnished $5,699.43 from Mr. Hildreth’s wages and “will continue to [garnish Mr. Hildreth’s
wages] on a weekly basis.” Garnishee’s Resp. ¶¶ 7, 9. Thus, Garnishee holds $5,699.43 of Mr.
Hildreth’s wages. Remarkably, Global’s incomplete and evasive Response to the Writs does not
address the subject of the Writs, i.e., property other than wages. Consequently, through no fault
of its own, Corsair fails to meet its burden of producing evidence of Defendants/Judgment
Debtors’ property in Garnishee’s possession.
The Court exercises its discretion not to enter a default judgment at this time, because
Garnishee Global could challenge a judgment against it in any amount that exceeded the amount
of Defendants/Judgment Debtors’ property that Global actually held at the time the Writ was
served or acquired thereafter. See Wright & Miller, Fed. Practice & Proc. § 2685. Global is
ordered to provide, within fourteen (14) days of the date of this Memorandum Opinion, a
complete and non-evasive response to the Writs, indicating the amount, if any, of each
Defendant/Judgment Debtor’s property other than wages that Global holds. If Global fails to do
so, the Court may treat that failure as contempt of court. See Fed. R. Civ. P. 37(b)(2)(A)(vii).
III.
CONCLUSION
Global is ordered to provide, within fourteen (14) days of the date of this Memorandum
Opinion, a complete and non-evasive response to the Writs, indicating the amount, if any, of
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each Defendant/Judgment Debtor’s property other than wages that Global holds. Corsair’s
Motion for Default Judgment is DENIED without prejudice to renewing it, as appropriate, after
Global has responded to the Writs.
A separate order shall issue.
Dated: August 24, 2011
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Paul W. Grimm
United States Magistrate Judge
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