Legacy Investment and Management, LLC v. Susquehanna Bank et al

Filing 335

REPORT AND RECOMMENDATIONS re 329 MOTION for Default Judgment as to filed by The Council of Unit Owners of the Gardens at Owings Mills I, The Council of Unit Owners of the Gardens at Owings Mills II, Frankford Estates Homeowners Association, Inc., The Olney Towne Association, Inc., Burns Street Tenants Association, Inc., The Crossing at Chaddsford Homeowners Association, Inc., Kings Council Condominium Association, 330 MOTION to Seal filed by The Counc il of Unit Owners of the Gardens at Owings Mills I, The Council of Unit Owners of the Gardens at Owings Mills II, Frankford Estates Homeowners Association, Inc., The Olney Towne Association, Inc., Burns Street Tenants Association, Inc., The Crossing at Chaddsford Homeowners Association, Inc., Kings Council Condominium Association. Signed by Magistrate Judge Timothy J. Sullivan on 10/17/14. (ca2s, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
LEGACY INVESTMENT AND
MANAGEMENT, LLC,

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Plaintiff,
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Civil No. WDQ-12-2877

v.
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SUSQUEHANNA BANK, et al.,
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Defendants.
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REPORT AND RECOMMENDATION
This Report and Recommendation addresses the Motion By Certain Kings Council
Claimants for Entry of Default Judgments1 (“the Motion”) (ECF No. 329) filed by Cross-Claim
and Fourth-Party Counterclaim Plaintiffs, Burns Street Tenants Association, Inc.; Council of
Unit Owners of Kings Council Condominium; Frankford Estates Homeowners Association, Inc.;
The Council of Unit Owners of the Gardens at Owings Mills I; The Council of Unit Owners of
the Gardens at Owings Mills II; The Crossing at Chaddsford Homeowners Association, Inc.; and
The Olney Towne Association, Inc. (collectively, “Plaintiffs”) against William K. Francis (“Mr.
Francis”); Legacy Investment & Management, Inc. (“Legacy, Inc.”); Legacy Investment and
Management, LLC (“Legacy LLC”); Gorgeous Prince George’s LLC d/b/a The Grounds GuyPrince George’s County; Kennedy Compound, LLC; Epitome Properties, LLC; Global
Acquisitions Management Enterprises, Inc. d/b/a Game Janitorial (“Game Janitorial”); Iconic
Corporate Leasing, LLC; JobsGatesZuck Realty, LLC; Legacy Investment & Management –
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Along with this Motion, Plaintiffs have also filed a Motion to Seal (ECF No. 330), a
proposed sealed Memorandum (ECF No. 331) and a Certificate of Service (ECF No. 332). In the
Motion to Seal, Plaintiffs state that the proposed sealed documents contain personal financial
information designated by the producing parties during discovery as confidential. I recommend
that the Motion to Seal be granted.

Realty Sales & Acquisitions, LLC; Plumber Pride, LLC; Schultz Siegel & Weiss, LLC; and
Susquehanna Landscape of Maryland, LLC (collectively, I will refer to the defendant business
entities as the “Alter Ego Defendants”). Mr. Francis and the Alter Ego Defendants have not filed
a response, and the time for doing so has passed. See Loc. R. 105.2.a. On May 29, 2014, in
accordance with 28 U.S.C. § 636 and Local Rule 301, Judge Quarles referred this case to me for
a report and recommendation on the Motion. ECF No. 333. I find that a hearing is unnecessary
in this case. See Fed. R. Civ. P. 55(b)(2); Loc. R. 105.6. For the reasons set forth below, I
respectfully recommend that Plaintiff’s Motion be GRANTED.
I.

FACTUAL AND PROCEDURAL HISTORY
In September 2012, Legacy LLC sued Susquehanna Bank and Susquehanna Trust &

Investment Company in the Circuit Court for Baltimore County, Maryland for breach of contract
and unjust enrichment. ECF No. 2 at 1, 14-15. The case was removed to this Court (see ECF No.
1) and counterclaims were brought against Legacy LLC, along with a third-party interpleader
action, which named the Plaintiffs among the third-party defendants, to determine the ownership
of certain funds. ECF No. 16. Plaintiffs filed an answer, affirmative defenses, cross-claims,
counterclaims, and fourth-party claims against Mr. Francis, the Alter Ego Defendants and others
(the “Counterclaim and Fourth Party Complaint”). ECF No. 148.
In general, Plaintiffs alleged that the Alter Ego Defendants, through Mr. Francis and with
the assistance of the “many entities which he controlled and dominated, defraud[ed] the
[Plaintiffs] of several million dollars in reserve and operating funds.” ECF No. 329-1 at 3. Mr.
Francis and the Alter Ego Defendants were properly served, but did not file any answer or
responsive pleading within the requisite time period. On July 2, 2013, the Clerk of the Court
entered a default against Mr. Francis and the Alter Ego Defendants. See ECF Nos. 227-229, 231-

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240. On May 23, 2014, Plaintiffs filed the Motion, to which Mr. Francis and the Alter Ego
Defendants have not responded.
II.

LEGAL ANALYSIS
A.

Standard for Entry of Default Judgment

In determining whether to award a default judgment, the Court accepts as true the wellpleaded factual allegations in the complaint as to liability. See Ryan v. Homecomings Fin.
Network, 253 F.3d 778, 780-81 (4th Cir. 2001); United States ex rel. Durrett-Sheppard Steel Co.
v. SEF Stainless Steel, Inc., No. RDB-11-2410, 2012 WL 2446151, at *1 (D. Md. June 26,
2012). Nonetheless, the Court must consider whether the unchallenged facts constitute a
legitimate cause of action, since a party in default does not admit mere conclusions of law.
United States v. Redden, No. WDQ-09-2688, 2010 WL 2651607, at *2 (D. Md. June 30, 2012)
(citing Ryan, 253 F.3d at 790). Although the Fourth Circuit has a “strong policy that cases be
decided on the merits,” United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993),
default judgment “is appropriate when the adversary process has been halted because of an
essentially unresponsive party.” S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005). If
the Court determines that liability is established, the court must then determine the appropriate
amount of damages. CGI Finance, Inc., v. Johnson, No. ELH-12-1985, 2013 WL 1192353, at *1
(D. Md. March 21, 2013). The Court does not accept factual allegations regarding damages as
true, but rather must make an independent determination regarding such allegations. DurrettSheppard Steel Co., 2012 WL 2446151 at *1.
Rule 55 of the Federal Rules of Civil Procedure provides that “[i]f, after entry of default,
the Plaintiff’s Complaint does not specify a ‘sum certain’ amount of damages, the court may
enter a default judgment against the defendant pursuant to Fed. R. Civ. P. 55(b)(2).” A plaintiff’s
assertion of a sum in a complaint does not make the sum “certain” unless the plaintiff claims
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liquidated damages; otherwise, the complaint must be supported by affidavit or documentary
evidence. United States v. Redden, No. WDQ-09-2688, 2010 WL 2651607, at *2 (D. Md. June
30, 2012). Rule 55(b)(2) provides that “the court may conduct hearings or make referrals . . .
when, to enter or effectuate judgment, it needs to . . . determine the amount of damages.” The
Court is not required to conduct an evidentiary hearing to determine damages, however; it may
rely instead on affidavits or documentary evidence in the record to determine the appropriate
sum. See, e.g., Mongue v. Portofino Ristorante, 751 F. Supp. 2d 789, 795 (D. Md. 2010).
B.

Liability
1.

Count I – Fraud

Count I of Plaintiffs’ Counterclaim and Fourth Party Complaint asserts a claim of fraud
against Mr. Francis. ECF No. 148 at 44-45. To prevail on a fraud claim under Maryland law, a
plaintiff must show
(1) the defendant made a false representation to the plaintiff, (2) the falsity of the
representation was either known to the defendant or the representation was made
with reckless indifference to its truth, (3) the misrepresentation was made for the
purpose of defrauding the plaintiff, (4) the plaintiff relied on the misrepresentation
and had the right to rely on it, and (5) the plaintiff suffered compensable injury as
a result of the misrepresentation.
Hoffman v. Stamper, 385 Md. 1, 28 (2005).
Here, taking as true the well pleaded allegations of Plaintiffs’ Counterclaim and Fourth
Party Complaint (see ECF No. 148), Plaintiffs have shown that Mr. Francis, Legacy LLC and
Legacy, Inc. knowingly and “with actual malice” misrepresented the nature of his bank accounts
at Susquehanna and the funds contained in those accounts, including by “routinely providing
false bank statements that showed incorrect balances in each of the HOA Accounts.” ECF No.
148 at 45. In justifiable reliance on Mr. Francis’s misrepresentations, Plaintiffs deposited their
funds with Mr. Francis and entities he controlled, which were misappropriated by Mr. Francis
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and the Alter Ego Defendants. Accordingly, I find that Plaintiffs have established Mr. Francis’s
liability for fraud and recommend that the Motion for Default Judgment be granted as to Count I
of Plaintiffs’ Counterclaim and Fourth Party Complaint (ECF No. 148 at 44-45).
2.

Count II – Breach of Fiduciary Duty/Constructive Fraud

Count II of Plaintiffs’ Counterclaim and Fourth Party Complaint asserts a claim of breach
of fiduciary duty and constructive fraud against Mr. Francis, Legacy LLC and Legacy, Inc. ECF
No. 148 at 45-46. Constructive fraud is defined as
a breach of legal or equitable duty which, irrespective of the moral guilt of the
fraud feasor, the law declares fraudulent because of its tendency to deceive others,
to violate public or private confidence, or to injure public interests. Neither actual
dishonesty of purpose nor intent to deceive is an essential element of constructive
fraud.
Ellerin v. Fairfax Sav., F.S.B., 337 Md. 216, 236 n.11 (1995) (internal quotation omitted).
Here, Plaintiffs have established that Mr. Francis, Legacy LLC and Legacy, Inc. agreed
to provide services related to property management to Plaintiffs. Mr. Francis, Legacy, LLC, and
Legacy, Inc. had a contractual obligation to manage the funds Plaintiffs entrusted to them as
fiduciaries. Nonetheless, Mr. Francis, Legacy LLC and Legacy, Inc. misappropriated Plaintiffs’
funds in violation of their fiduciary duties. I recommend that Plaintiffs’ Motion for Default
Judgment by granted as to Count II of Plaintiffs’ Counterclaim and Fourth Party Complaint.2

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To the extent that Plaintiffs have also asserted a separate claim for breach of fiduciary
duty, it is not clear that such a tort exists under Maryland law. In George Wasserman & Janice
Wasserman Goldsten Family LLC v. Kay, the Court of Special Appeals recently observed that
while “an alleged breach of fiduciary duty may give rise to a cause of action, . . . it does not,
standing alone, constitute a cause of action.” 197 Md. App. 586, 631 (2011) (citing Kann v.
Kann, 344 Md. 689, 690 A.2d 509 (1997) (“[T]here is no universal or omnibus tort for the
redress of breach of fiduciary duty by any and all fiduciaries.”)).
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3.

Count III – Conspiracy

Count III of Plaintiffs’ Counterclaim and Fourth Party Complaint asserts a claim of
conspiracy against Mr. Francis and the Alter Ego Defendants. ECF No. 148 at 46. A claim for
civil conspiracy requires proof of:
1) A confederation of two or more persons by agreement or understanding; 2)
some unlawful or tortious act done in furtherance of the conspiracy or use of
unlawful or tortious means to accomplish an act not in itself illegal; and 3) actual
legal damage resulting to the plaintiff.
Lloyd v. Gen. Motors Corp., 397 Md. 108, 154 (2007) (internal quotation omitted).
Here, Plaintiffs allege that Mr. Francis and the Alter Ego Defendants “agreed and
conspired to steal millions of dollars” from Plaintiffs. To accomplish this theft, Plaintiffs allege
that Mr. Francis and the Alter Ego Defendants “committed criminal acts, and acts of fraud and
breaches of fiduciary duty.” ECF No. 148 at 46. With respect to Game Janitorial, Plaintiffs allege
that Mr. Francis was assisted in committing “acts of fraud and breaches of fiduciary duty” by
Danielle Candella, who signed the corporation authorization resolution for Game Janitorial as the
secretary. ECF No. 148 at 33. Ms. Candella assisted Mr. Francis in opening financial accounts in
the names of the various Plaintiffs, but her connection with any other of the Alter Ego
Defendants is unclear based on the allegations of the Counterclaim and Fourth Party Complaint.
I find that Plaintiffs’ allegations are sufficient to establish the liability of Mr. Francis and Game
Janitorial for civil conspiracy.
With respect to the other Alter Ego Defendants, however, Plaintiffs do not allege that Mr.
Francis conspired with any other person within the Alter Ego Defendants, only that he conspired
with the Alter Ego Defendants, which were entities under his complete control. Plaintiffs have
not presented any argument in their submissions on whether Maryland law permits a claim for
civil conspiracy where only one person is involved (albeit with numerous business entities
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owned and controlled by the person). It appears to me that unless Mr. Francis conspired with
another person, which Plaintiffs do not allege, his liability for civil conspiracy cannot be
established. Other courts have recognized generally that “corporate officers cannot conspire with
their own corporation.” Layton v. AAMCO Transmissions, Inc., 717 F. Supp. 368, 370-71 (D.
Md. 1989) (citing Marmott v. Maryland Lumber Co., 807 F.2d 1180, 1184 (4th Cir. 1986).
Accordingly, I recommend that Plaintiffs’ Motion for Default Judgment be granted as to Count
III of the Counterclaim and Fourth Party Complaint with respect to Mr. Francis and Game
Janitorial, LLC, but denied as to the other Alter Ego Defendants.
4.

Count IV – Aiding and Abetting

Count IV of Plaintiffs’ Counterclaim and Fourth Party Complaint asserts a claim of
aiding and abetting against all of the Alter Ego Defendants. ECF No. 148 at 46-47. Maryland has
“expressly recognized aider and abettor tort liability.” Alleco, Inc. v. Harry & Jeanette Weinberg
Found., Inc., 340 Md. 176, 199 (1995). To establish a person or entity’s liability for aiding and
abetting, a plaintiff must show that the person or entity was aware of a tort committed by a
principal, and that the person or entity gave substantial assistance or encouragement to the
principal to engage in the tortious conduct. Id. at 186. In a case where an individual within a
corporate entity acts in his own interest, a corporate entity can be liable for aiding and abetting
the fraudulent acts of that individual. See Kay, 197 Md. App. at 629-30.
In this case, Plaintiffs have established that Mr. Francis perpetrated a fraud against
Plaintiffs. The Alter Ego Defendants necessarily had knowledge of this fraud and acted as the
vehicles to assist Mr. Francis to perpetrate the fraud. Accordingly, the liability of the Alter Ego
Defendants for aiding and abetting has been established. Because Mr. Francis’s liability as a
principal for fraud has already been established, I recommend that the Court grant the Motion for

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Default Judgment as to Count IV of the Counterclaim and Fourth Party Complaint, but only as to
the Alter Ego Defendants. I recommend that the Motion be denied as to Mr. Francis.
5.

Count V – Piercing the Corporate Veil

Count V of Plaintiffs’ Counterclaim and Fourth Party Complaint is a request to pierce the
corporate veil of the entities named as the Alter Ego Defendants. ECF No. 148 at 47-48. Under
Maryland law, “courts will pierce the corporate veil only when necessary to prevent fraud or a
paramount inequity.” Bart Arconti & Sons, Inc. v. Ames-Ennis, Inc., 275 Md. 295, 310 (1975). In
order to pierce the corporate veil, “plaintiff’s well-pleaded allegations and evidence must be
tantamount to fraud or invoke a paramount equity.” Baltimore Line Handling Co. v. Brophy, 771
F. Supp. 2d 531, 553 (D. Md. 2011). Maryland courts are reluctant to pierce the corporate veil
“except in the most obvious cases of fraud.” Id. (noting that a party seeking to pierce the
corporate veil by alleging fraud must present “clear and convincing evidence” of fraud). The
Maryland Court of Appeals has not defined a “paramount equity” in the context of piercing the
corporate veil. Id. (noting that the Court of Appeals has not yet pierced the corporate veil to
enforce a paramount equity).
Here, the Court is not required to decide whether a paramount equity requires the
corporate veil to be pierced because Plaintiffs have established the fraud committed by Mr.
Francis, and aided and abetted by the Alter Ego Defendants. Mr. Francis “commingled corporate
funds, diverted corporate assets, and used corporate assets to pay for his personal expenses.”
ECF No. 148 at 48. Plaintiffs’ Motion also lists a number of fraudulent transactions Mr. Francis
perpetrated through the Alter Ego Defendants. ECF No. 331 at 9. I find that Plaintiffs have
sufficiently established that the Alter Ego Defendants “were either formed for or used principally

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for the purpose of cheating and defrauding Fourth Party Plaintiffs,” and I recommend that their
request to pierce the corporate veil of the Alter Ego Defendants be granted.
6.

Count VI – RICO

Count VI of Plaintiffs’ Counterclaim and Fourth Party Complaint asserts a claim of
violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) against Mr.
Francis and the Alter Ego Defendants. ECF No. 148 at 48-50. Plaintiffs state that “[t]o simplify
this motion, Plaintiffs intend to dismiss their RICO claim, Count VI of the Kings Council
Counterclaim (Document 148 at 48).” ECF No. 329-1 at 4. Because Plaintiffs do not seek a
default judgment as to Count VI, I recommend that the Motion be denied as to this count.
7.

Count VII – Fraudulent Transfer

Count VII of Plaintiffs’ Counterclaim and Fourth Party Complaint asserts a claim of
fraudulent transfer against Mr. Francis and the Alter Ego Defendants. ECF No. 148 at 50-51. The
Maryland Uniform Fraudulent Conveyance Act provides that “[e]very conveyance made and
every obligation incurred with actual intent, as distinguished from intent presumed in law, to
hinder, delay, or defraud present or future creditors, is fraudulent as to both present and future
creditors.” Md. Code Ann., Com. Law § 15-207. To prevail on a claim of fraudulent conveyance,
a plaintiff must show “that a creditor-debtor relationship exists and that the debtor has
fraudulently transferred assets.” Christian v. Minnesota Min. & Mfg. Co., 126 F. Supp. 2d 951,
961 (D. Md. 2001). Here, Plaintiffs contend that Mr. Francis and the Fourth Party Defendants are
liable for fraudulent transfers and that it is a creditor of the defendants.
As discussed above, Plaintiffs have shown that they entrusted Mr. Francis and the Alter
Ego Defendants with assets for property management services. Mr. Francis misappropriated
these funds through the Alter Ego Defendants, with the intent to defraud Plaintiffs. See ECF No.

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148 at 50. Having shown that creditor-debtor relationships existed between Plaintiffs and the
Alter Ego Defendants, and that Mr. Francis and the Alter Ego Defendants fraudulently
transferred the Plaintiffs’ assets, I find that Plaintiffs have established Mr. Francis and the Alter
Ego Defendants’ liability for fraudulent transfer. I recommend that the Motion for Default
Judgment be granted as to Count VII of Plaintiffs’ Counterclaim and Fourth Party Complaint.
C.

Damages

Having determined that Plaintiffs have established liability, it is now appropriate to
determine the damages to which Plaintiffs are entitled. Generally, an evidentiary hearing is
required to determine an award of damages, even in the case of a defendant’s default. See
Laborers’ Dist. Council Pension v. E.G.S., Inc., No. WDQ-09-3174, 2010 WL 1568595 (D. Md.
Apr. 16, 2010). However, the Court may award damages “if the record supports the damages
requested.” Id. at *3 (collecting cases). Here, Plaintiffs have provided sufficient evidence to
support their claim for damages, as outlined below.
1.

Compensatory Damages

Plaintiffs have established multiple claims for relief against the defendants, but each of
the Plaintiffs has only suffered one injury. For each claim that has been established, each of the
Plaintiffs’ injuries was the same: Plaintiffs each lost a significant portion of their reserve funds
entrusted to the defendants. Under the “one wrong, one recovery rule,” a “plaintiff may not
recover damages twice for the same injury simply because he has two legal theories.”
Montgomery Ward & Co., Inc. v. Cliser, 267 Md. 406, 425 (1972). In accordance with this rule, I
have evaluated Plaintiffs’ individual damages claims under Counts I (fraud) and IV (aiding and
abetting fraud) of the Counterclaim.

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a.

Burns Street Tenants Association, Inc.

Burns Street Tenants Association, Inc. (“Burns Street”) requests judgment for
compensatory damages in the amount of $23,036.00. ECF No. 329-1 at 4. In support of this
request, Burns Street has submitted the Affidavit of Billy J. Hughley (“Hughley”). ECF No. 3292. Hughley is the President of Burns Street, a homeowner’s association based in Washington,
DC. Id. at 3. Hughley attests that in August 2011, Burns Street entered into a contract for
management services with Legacy LLC. Id. at 4. Between October 2011 and August 2012, Mr.
Francis and the Alter Ego Defendants made several deposits of Burns Street’s reserve funds to an
escrow account, which Legacy LLC opened in Burns Street’s name. Id. In August 2012, Mr.
Francis and the Alter Ego Defendants transferred $23,036.00 from Burns Street’s account to a
business checking account in Legacy, Inc.’s name. Id. This transfer was made without Burns
Street’s authorization. This $23,036.00 has not been returned to Burns Street. Id. at 5. In
addition, Burns Street points to fraudulent bank statements Mr. Francis and the Alter Ego
Defendants provided to Burns Street during the years of the business relationship. ECF Nos. 3292 at 5 n.1 & 329-8.
Having reviewed Hughley’s affidavit and the exhibits attached in support (ECF Nos. 3293 to 329-8), I find that Burns Street has made a sufficient evidentiary showing to support an
award of compensatory damages in the amount of $23,036.00, which represents the
misappropriated funds that have not been returned. I recommend that Burns Street be awarded
$23,036.00 against Mr. Francis and the Alter Ego Defendants.
b.

Council of Unit Owners of Kings Council Condominium

The Council of Unit Owners of Kings Council Condominium (“Kings Council”) requests
judgment for compensatory damages in the amount of $32,569.01. ECF No. 329-1 at 4. In
support of this request, Kings Council has submitted the Affidavit of Darryl Spruill (“Spruill”).
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ECF No. 329-9. Spruill is the president of Kings Council, a homeowner’s association based in
Upper Marlboro, Maryland. Id. at 3. Spruill attests that in October 2010, Kings Council entered
into a contract for management services with Legacy LLC. Id. at 4. Between October 28, 2011
and August 10, 2012, Mr. Francis and the Alter Ego Defendants transferred a total of $32,569.01
of Kings Council’s funds to a business checking account in Legacy, Inc.’s name. Id. at 4-6.
These transfers were performed without Kings Council’s authorization and the misappropriated
funds have not been returned to Kings Council. Id. at 6. In addition, Kings Council has submitted
fraudulent bank statements Mr. Francis and the Alter Ego Defendants provided to Kings Council
during the years of the business relationship. ECF Nos. 329-9 at 6 n.1 & 329-18.
Having reviewed Spruill’s affidavit and the exhibits attached in support (ECF Nos. 32910 to 329-18), I find that Kings Council has made a sufficient evidentiary showing to support an
award of compensatory damages in the amount of $32,569.01, which represents the
misappropriated funds that have not been returned. I recommend that Kings Council be awarded
$32,569.01 against Mr. Francis and the Alter Ego Defendants.
c.

Frankford Estates Homeowners Association, Inc.

The Frankford Estates Homeowners Association, Inc. (“Frankford”) requests judgment
for compensatory damages in the amount of $6,274.66.3 ECF No. 329-1 at 5. In support of this
request, Frankford has submitted the Affidavit of Garry Aime (“Aime”). ECF No. 329-19. Aime
is the president of Frankford, a homeowner’s association based in Baltimore, Maryland. Id. at 3.
Aime attests that in January 2011, Frankford entered into a contract for management services
with Legacy LLC. Id. at 4. Between October 2011 and July 2012, Mr. Francis and the Alter Ego

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Plaintiffs’ Motion states that Frankford incurred losses totaling $6,304.66, but the
affidavit and exhibits to which it refers document a loss of $6,274.66. It appears to me that
Plaintiffs’ Motion contains a typographical error, and that the affidavit and exhibits are correct.
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Defendants transferred a total of $7,249.66 of Frankford’s funds to accounts in Legacy, Inc.’s
name. Id. at 4-5. These transfers were performed without Frankford’s authorization and while
$975.00 of the funds was returned to Frankford, the remainder of the misappropriated funds has
not been returned. Id. at 5-6. In addition, Frankford has submitted fraudulent bank statements
Mr. Francis and the Alter Ego Defendants provided to Frankford during the years of the business
relationship. ECF Nos. 329-19 at 5 n.1 & 329-26.
Having reviewed Aime’s affidavit and the exhibits attached in support (ECF Nos. 329-20
to 329-26), I find that Frankford has made a sufficient evidentiary showing to support an award
of compensatory damages in the amount of $6,274.66, which represents the misappropriated
funds that have not been returned. I recommend that Frankford be awarded $6,274.66 against
Mr. Francis and the Alter Ego Defendants.
d.

Council of Unit Owners of the Gardens at Owings Mills I

The Council of Unit Owners of the Gardens at Owings Mills I (“Owings Mills I”)
requests judgment for compensatory damages in the amount of $12,051.29. ECF No. 329-1 at 5.
In support of this request, Owings Mills I has submitted the Affidavit of Donna DaRoja
(“DaRoja”). ECF No. 329-27. DaRoja is the secretary of Owings Mills I, a condominium based
in Reisterstown, Maryland. Id. at 3. DaRoja attests that on April 1, 2011, Owings Mills I entered
into a contract for management services with Legacy LLC. Id. at 4. Between October 2011 and
August 2012, Mr. Francis and the Alter Ego Defendants transferred nearly $500,000 of Owings
Mills I’s funds to accounts in Legacy, Inc.’s name. Id. at 4. These transfers were performed
without Owings Mills I’s authorization. Id. Of the funds misappropriated from Owings Mills I,
$12,051.29 has not been recovered or returned. Id. at 4-5.

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Having reviewed DaRoja’s affidavit and the exhibits attached in support (ECF Nos. 32928 to 329-31), I find that Owings Mills I has made a sufficient evidentiary showing to support an
award of compensatory damages in the amount of $12,051.29, which represents the
misappropriated funds that have not been returned. I recommend that Owings Mills I be awarded
$12,051.29 against Mr. Francis and the Alter Ego Defendants.
e.

Council of Unit Owners of the Gardens at Owings Mills II

The Council of Unit Owners of the Gardens at Owings Mills II (“Owings Mills II”)
requests judgment for compensatory damages in the amount of $23,739.90. ECF No. 329-1 at 56. In support of this request, Owings Mills II has submitted the Affidavit of Donna DaRoja
(“DaRoja”). ECF No. 329-32. DaRoja is the secretary of Owings Mills II, a homeowner’s
association based in Reisterstown, Maryland. Id. at 3. DaRoja attests that on April 1, 2011,
Owings Mills II entered into a contract for management services with Legacy LLC. Id. at 4.
Between October 2011 and September 2012, Mr. Francis and the Alter Ego Defendants
transferred more than $200,000 of Owings Mills II’s funds to accounts in Legacy, Inc.’s name.
Id. at 4-5. These transfers were performed without Owings Mills II’s authorization. Id. Of the
funds misappropriated from Owings Mills II, $23,739.90 has not been recovered or returned. Id.
at 4-5.
Having reviewed DaRoja’s affidavit and the exhibits attached in support (ECF Nos. 32933 to 329-36), I find that Owings Mills II has made a sufficient evidentiary showing to support
an award of compensatory damages in the amount of $23,739.90, which represents the
misappropriated funds that have not been returned. I recommend that Owings Mills II be
awarded $23,739.90 against Mr. Francis and the Alter Ego Defendants.

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f.

The Crossing at Chaddsford Homeowners Association, Inc.

The Crossing at Chaddsford Homeowners Association, Inc. (“Chaddsford”) requests
judgment for compensatory damages in the amount of $32,196.03. ECF No. 329-1 at 6. In
support of this request, Chaddsford has submitted the Affidavit of Thomas Prince (“Prince”).
ECF No. 329-37. Prince is the president of Chaddsford, a homeowner’s association based in
Brandywine, Maryland. Id. at 3. Prince attests that on May 1, 2008, Chaddsford entered into a
contract for management services with Legacy LLC. Id. at 4. Between October 2011 and July
2012, Mr. Francis and the Alter Ego Defendants transferred $34,196.03 of Owings Mills II’s
funds to accounts in Legacy, Inc.’s name. Id. at 4-5. These transfers were performed without
Owings Mills II’s authorization. Id. Of the funds misappropriated from Owings Mills II, $2,000
was recovered, but the remaining $32,196.03 has not been recovered or returned. Id. at 4-5.
Having reviewed Prince’s affidavit and the exhibits attached in support (ECF Nos. 32938 to 329-44), I find that Chaddsford has made a sufficient evidentiary showing to support an
award of compensatory damages in the amount of $32,196.03, which represents the
misappropriated funds that have not been returned. I recommend that Chaddsford be awarded
$32,196.03 against Mr. Francis and the Alter Ego Defendants.
g.

The Olney Towne Association, Inc.

The Olney Towne Association, Inc. (“Olney”) requests judgment for compensatory
damages in the amount of $29,426.25. ECF No. 329-1 at 6. In support of this request, Olney has
submitted the Affidavit of Christopher Jeffrey (“Jeffrey”). ECF No. 329-46. Jeffrey is the
president of Olney, a homeowner’s association based in Olney, Maryland. Id. at 3. Jeffrey attests
that on September 9, 2009, Olney entered into a contract for management services with Legacy
LLC. Id. at 4. Between October 2011 and July 2012, Mr. Francis and the Alter Ego Defendants

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transferred at least $29,426.25 of Olney’s funds to accounts in Legacy, Inc.’s name. Id. at 4-6.
These transfers were performed without Olney’s authorization. Id. Of the funds misappropriated
from Olney, $29,426.25 has not been recovered or returned. Id. at 4-6. In addition, Olney has
submitted fraudulent bank statements Mr. Francis and the Alter Ego Defendants provided to
Olney during the years of the business relationship. ECF Nos. 329-46 at 6 n.1 & 329-55.
Having reviewed Jeffrey’s affidavit and the exhibits attached in support (ECF Nos. 32947 to 329-55), I find that Olney has made a sufficient evidentiary showing to support an award of
compensatory damages in the amount of $29,426.25, which represents the misappropriated funds
that have not been returned. I recommend that Olney be awarded $29,426.25 against Mr. Francis
and the Alter Ego Defendants.
2.

Punitive Damages

A “default judgment must not differ in kind from, or exceed in amount, what is
demanded in the pleadings.” Fed. R. Civ. P. 54(c). There is no prohibition in the Federal Rules of
an award of punitive damages in a default judgment, provided that they are sought in a plaintiff’s
complaint. See, e.g., Murphy v. Islamic Rep. of Iran, 740 F. Supp. 2d 51, 83 (D.D.C. 2010)
(awarding punitive damages in a default judgment). Here, Plaintiffs’ Counterclaim seeks
“punitive damages in the amount of $10,000,000” against Mr. Francis (Counts I & II) and
Legacy, LLC and Legacy, Inc. (Count II). Id. at 44-45. In Count IV, Plaintiffs’ Counterclaim
seeks for the Legacy Entities to “be held jointly and severally liable for any judgment entered
against Defendant Francis.” Id. at 46-47.
Punitive damages are available under Maryland law in tort actions. See Bowden v.
Caldor, Inc., 350 Md. 4, 22 (1998). Punitive damages serve to punish a defendant “for
egregiously bad conduct toward the plaintiff, [and] also to deter the defendant and others

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contemplating similar behavior.” Id. (internal quotation omitted). An award of punitive damages
is discretionary, Philip Morris Inc. v. Angeletti, 358 Md. 689, 773-74 (2000), and a number of
factors must be considered in determining whether an award of punitive damages is appropriate,
including the minimum amount of damages that will deter the defendant and others from similar
misconduct, the proportion of punitive damages to compensatory damages, and the financial
circumstances of the defendant. See HBCU Pro Football, LLC v. New Vision Sports Properties,
LLC, No. WDQ-10-0467, 2011 WL 2038512 (D. Md. May 24, 2011).
In the case of fraud, punitive damages may be awarded where a defendant acts with
“actual malice.” Frazier v. Castle Ford, Ltd., 430 Md. 144, 162 (2013) (defining “actual malice”
as “a misrepresentation [made] with intent to deceive and actual knowledge of the falsity of the
representation”) (internal quotation omitted) (citing Hoffman v. Stamper, 384 Md. 1, 41-43
(2005)). Actual malice may be evidenced by “an element of aggravation, evidenced by
malicious, deliberate, gross or wanton conduct [accompanying] the fraud.” Crawford v. Mindel,
57 Md. App. 111, 126 (1984) (citing Wedeman v. City Chevrolet Co., 278 Md. 524, 530-31
(1976)).
Here, Plaintiffs argue that the fraud Mr. Francis and the Alter Ego Defendants perpetrated
against them “is the ‘type of deliberate wrongdoing’ that was undertaken with an ‘evil motive
that has traditionally justified the award of punitive damages.’” ECF No. 329-1 at 10 (quoting
Hoffman, 384 Md. at 42). Plaintiffs seek an award of punitive damages in an amount equal to
three times the amount of the compensatory damages award. Id. Under Maryland law, there is no
presumptively reasonable proportion of punitive damages to compensatory damages.
Nonetheless, the Court of Appeals has noted that numerous statutes in Maryland authorizing

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punitive damages limit any award to a maximum of three times of the actual damages awarded.
Bowden, 350 Md. at 39 n.11 (collecting statutes).
I find that a punitive damages award of $300,000 is appropriate in this case. I have
considered the compensatory damages that I have recommended to be awarded, which total
$159,293.14. It is noteworthy that this amount is less than the total amount of the funds Mr.
Francis and the Alter Ego Defendants misappropriated from Plaintiffs. The affidavits submitted
in support of Plaintiffs’ Motion attest that, in several instances, most of the funds
misappropriated by the Alter Ego Defendants were recouped by Plaintiffs by credits to their
financial accounts, or by recovery on execution of another judgment. I also consider that Mr.
Francis used “millions of dollars of protected reserve funds . . . to fund his extravagant lifestyle
and to fund his various business ventures.” ECF No. 148 at 26, 43. These factors weigh in favor
of a significant punitive damages award, as Mr. Francis and others contemplating engaging in
similar misconduct must be deterred from doing so.
Although deterring Mr. Francis and others in his position is a principal concern in
calculating an appropriate award of punitive damages, I recognize that punitive damages may not
be designed to bankrupt or financially destroy a defendant. While Plaintiffs have not produced
any evidence of Mr. Francis’s financial condition,4 the Counterclaim and Fourth Party Complaint
states that “[o]n March 5, 2013, Mr. Francis pleaded guilty to possession of an illegal firearm” in
the Circuit Court for Howard County, Maryland, and at least as of the date of the Counterclaim
was awaiting sentencing. ECF No. 148 at 44. This fact, along with other allegations contained in
the Counterclaim and Fourth Party Complaint suggest that Mr. Francis does not have significant

4

Plaintiffs are not required to produce information about a defendant’s ability to pay
punitive damages. See Darcars Motors of Silver Spring, Inc. v. Borzym, 379 Md. 249, 275
(2004).
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assets or employment that would permit him to satisfy a large judgment. A punitive damages
award of $300,000, less than the award of three-times the compensatory damages sought by the
Plaintiffs, is sufficient to deter Mr. Francis and others in his position from engaging in fraudulent
conduct in the future, but not so great as to “financially destroy” the defendant.
3.

Allocation of Total Damages

I recommend that judgment in the total amount of $459,293.14 (the sum of $159,293.14
in compensatory damages and $300,000 in punitive damages) be entered against Mr. Francis and
the Alter Ego Defendants, jointly and severally. Plaintiffs are entitled to judgment in this amount
against Mr. Francis based on their allegations in Count I of the Counterclaim and the damages
sought therein. In addition, Plaintiffs are entitled to judgment in this amount against the other
Alter Ego Defendants based on their allegations in Counts IV, which requests that the Alter Ego
Defendants “be held jointly and severally liable for any judgment entered against Defendant
Francis.” ECF No. 148 at 47.
I recommend that judgment be entered in favor of each of the Plaintiffs as set forth in the
table below. The first column of the table beside the name of each of the Plaintiffs contains the
amount of compensatory damages I recommend. The second column contains the amount of
punitive damages I recommend. This amount was calculated by multiplying each of the
Plaintiffs’ compensatory damages award by the ratio of punitive to compensatory damages that I
recommend ($300,000 divided by $159,293.14). The last column contains the total
recommended damages award for each of the Plaintiffs.

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Plaintiff
Burns Street Tenants Association, Inc.
Council of Unit Owners of Kings
Council Condominium
Frankford Estates Homeowners
Association, Inc.
Council of Unit Owners of the
Gardens at Owings Mills I
Council of Unit Owners of the
Gardens at Owings Mills II
Crossing at Chaddsford Homeowners
Association, Inc.
Olney Towne Association, Inc.
III.

Compensatory
Damages
$23,036.00
$32,569.01

Punitive
Damages
$43,384.17
$61,337.88

Total
Judgment
$66,420.17
$93,906.89

$6,274.66

$11,817.19

$18,091.85

$12,051.29

$22,696.44

$34,747.73

$23,739.90

$44,709.83

$68,449.73

$32,196.03

$60,635.44

$92,831.47

$29,426.25

$55,419.05

$84,845.30

CONCLUSION
In sum, I recommend that the Court:

1.

Grant Plaintiffs’ Motion to Seal (ECF No. 330);

2.

Grant Plaintiffs’ Motion for Default Judgment (ECF No. 329) as to the liability of Mr.

Francis and the Alter Ego Defendants;
3.

Enter judgment in favor of Plaintiffs against Mr. Francis and the Alter Ego Defendants,

jointly and severally, in the total amount of $459,293.14, as follows:

Plaintiff
Burns Street Tenants Association, Inc.
Council of Unit Owners of Kings
Council Condominium
Frankford Estates Homeowners
Association, Inc.
Council of Unit Owners of the
Gardens at Owings Mills I
Council of Unit Owners of the
Gardens at Owings Mills II
Crossing at Chaddsford Homeowners
Association, Inc.
Olney Towne Association, Inc.

Compensatory
Damages
$23,036.00
$32,569.01

Punitive
Damages
$43,384.17
$61,337.88

Total
Judgment
$66,420.17
$93,906.89

$6,274.66

$11,817.19

$18,091.85

$12,051.29

$22,696.44

$34,747.73

$23,739.90

$44,709.83

$68,449.73

$32,196.03

$60,635.44

$92,831.47

$29,426.25

$55,419.05

$84,845.30

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I also direct the Clerk to mail a copy of this Report and Recommendation to the following
defendants: William K. Francis; Legacy Investment & Management, Inc.; Legacy Investment
and Management, LLC; Gorgeous Prince George’s LLC d/b/a The Grounds Guy-Prince
George’s County; Kennedy Compound, LLC; Epitome Properties, LLC; Global Acquisitions
Management Enterprises, Inc. d/b/a Game Janitorial; Iconic Corporate Leasing, LLC;
JobsGatesZuck Realty, LLC; Legacy Investment & Management – Realty Sales & Acquisitions,
LLC; Plumber Pride, LLC; Schultz Siegel & Weiss, LLC; and Susquehanna Landscape of
Maryland, LLC. Any objections to this Report and Recommendation must be served and filed
within fourteen (14) days, pursuant to Fed. R. Civ. P. 72(b) and Local Rule 301.5.b.

October 17, 2014
Date

/s/
Timothy J. Sullivan
United States Magistrate Judge

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