SL Financial Services Corporation v. Woodberry Graphics Limited Liability Company et al
Filing
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REPORT AND RECOMMENDATIONS re 10 MOTION for Default Judgment. Signed by Magistrate Judge Stephanie A Gallagher on 10/3/13. (bmhs, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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SL FINANCIAL SERVICES CORP.,
Plaintiff,
v.
WOODBERRY GRAPHICS, LLC, et al.,
Defendants
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Civil Case No.: WDQ-13-1661
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REPORT AND RECOMMENDATIONS
This Report and Recommendations addresses the Motion for Entry of Default Judgment
(ECF No. 10) filed by Plaintiff, SL Financial Services Corporation (“SL Financial”) against the
Defendants, Woodberry Graphics, LLC (“Woodberry”) and Thomas M. Cheek (collectively
“Defendants”). The Defendants have not filed an opposition, and their deadline has now passed.
On August 22, 2013, Judge Quarles referred this case to me to review SL Financial’s motion and
to make recommendations concerning damages, pursuant to 28 U.S.C. § 301 and Local Rule
301.6. (ECF No. 12). I have reviewed SL Financial’s Supplemental Affidavit and Declaration
Concerning Attorneys’ Fees. (ECF Nos. 20, 21). No hearing is deemed necessary. Local Rule
105.6 (D. Md. 2011).
For the reasons discussed below, I respectfully recommend that SL
Financial’s motion (ECF No. 10) be GRANTED and that damages be awarded as set forth
herein.
I.
BACKGROUND
On June 8, 2013, SL Financial filed a Complaint in this Court alleging that Woodberry
breached the terms of its Loan Agreement by failing to make payments owed to SL Financial.
Compl. ¶ 21-24. The Complaint also included a breach of contract claim against Mr. Cheek for
failing to pay Woodberry’s obligations pursuant to a personal guaranty agreement.1 Compl. ¶
30-34. According to the Complaint, on October 25, 2006, Woodberry obtained financing from
SL Financial to acquire certain equipment. Compl. ¶ 8. In order to induce SL Financial to
provide the financing, Mr. Cheek executed a personal guaranty, in which he agreed to pay
Woodberry’s obligations under the loan agreement in the event of Woodberry’s default. Compl.
¶ 10. When Woodberry failed to meet its obligations, SL Financial repossessed the equipment,
which served as collateral for the loan, and sold it to a third party. Compl. ¶ 12. After the
proceeds from the sale were applied to the balance owed, a deficiency remained, which, to date,
neither Woodberry nor Mr. Cheek has satisfied. Compl. ¶ 12.
According to the Supplemental Affidavit, as of September 25, 2013, SL Financial has
incurred financial injury totaling $278,742.46, due to Woodberry’s breach of the loan agreement
and Mr. Cheek’s breach of the guaranty. Aff. ¶ 16, (ECF No. 20). That sum includes the
principal balance on the two pieces of financed equipment, late charges, interest, attorneys’ fees,
costs of the equipment sale, and costs of suit, less the amount recouped from the equipment sale.
Id. Woodberry was served with the summons and Complaint on July 5, 2013, and Mr. Cheek
was served with the summons and Complaint on June 15, 2013. (ECF No. 11). The time for
Woodberry and Mr. Cheek to answer or otherwise respond expired on July 26, 2013 and July 8,
2013, respectively. Id. On August 22, 2013, the Clerk entered an Order of Default against both
Defendants.
Id.
On August 19, 2013, SL Financial filed the instant Motion for Default
Judgment. (ECF No. 10).
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The Complaint also included a breach of contract claim against Douglass E. Waring. However, SL Financial
requested that this Court administratively stay proceedings against Mr. Waring pending the outcome of his
bankruptcy petition in the U.S. Bankruptcy Court for the District of Maryland. See ECF No. 7.
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II.
STANDARD FOR DEFAULT JUDGMENT
In reviewing Plaintiff’s Motion for Default Judgment, the court accepts as true the well-
pleaded factual allegations in the complaint as to liability. Ryan v. Homecomings Fin. Network,
253 F.3d 778, 780-81 (4th Cir. 2001). It, however, remains for the court to determine whether
these unchallenged factual allegations constitute a legitimate cause of action. Id.; see also 10A
Wright, Miller & Kane, Federal Practice and Procedure § 2688 (3d ed. Supp. 2010)
(“[L]iability is not deemed established simply because of the default . . . and the court, in its
discretion, may require some proof of the facts that must be established in order to determine
liability.”).
If the court determines that liability is established, the court must then determine the
appropriate amount of damages. Ryan, 253 F.3d at 780-81. The court does not accept factual
allegations regarding damages as true, but rather must make an independent determination
regarding such allegations. See, e.g., Credit Lyonnais Secs. (USA), Inc. v. Alcantara, 183 F.3d
151, 154 (2d Cir. 1999). In so doing, the court may conduct an evidentiary hearing. Fed. R. Civ.
P. 55(b)(2). The court can also make a determination of damages without a hearing so long as
there is an adequate evidentiary basis in the record for an award. See, e.g., Adkins v. Teseo, 180
F. Supp. 2d 15, 17 (D.D.C. 2001) (court need not make determination of damages following
entry of default through hearing, but rather may rely on detailed affidavits or documentary
evidence to determine the appropriate sum); see also Trustees of the Nat’l Asbestos Workers
Pension Fund v. Ideal Insulation Inc., 2011 WL 5151067, at *4 (D. Md. Oct. 27, 2011)
(determining, in a case of default judgment against an employer, “the Court may award damages
without a hearing if the record supports the damages requested.”); Pentech Fin. Servs. Inc. v. Old
Dominion Saw Works, Inc., 2009 WL 1872535, at *2 (W.D. Va. June 30, 2009) (concluding that
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there was “no need to convene a formal evidentiary hearing on the issue of damages” after
default judgment where plaintiff submitted affidavits and electronic records establishing the
amount of damages sought); JTH Tax, Inc. v. Smith, No. 2:06CV76, 2006 WL 1982762, at *3
(E.D. Va. June 23, 2006) (“If the defendant does not contest the amount pleaded in the complaint
and the claim is for a sum that is certain or easily computable, the judgment can be entered for
that amount without further hearing.”).
In sum, (1) the court must determine whether the unchallenged facts in Plaintiff’s
Complaint constitute a legitimate cause of action, and, if they do, (2) the court must make an
independent determination regarding the appropriate amount of damages and the appropriate
injunctive relief.
III.
DISCUSSION
a. Breach of Contract
To establish breach of contract under Maryland law, a plaintiff must demonstrate a
contractual obligation, breach, and damages. See, e.g., Kumar v. Dhanda, 198 Md. App. 337,
345, 17 A.3d 744 (Ct. Spec. App. 2011). SL Financial alleged the existence of a valid contract
with Woodberry in the form of a Master Loan and Security Agreement (“the Agreement”). The
Agreement contained two equipment schedules, which provided the address for each piece of
equipment, and the financed cost. (ECF No. 1, Ex. 1, at 20). It further provided that the
“[b]orrower agrees to repay the Loan Agreement in successive installments (which installment
payments are inclusive of interest), plus breakage (if any) as set forth in the following Payment
Schedule.” Id. According to the Agreement, Woodberry agreed to make 108 monthly payments
of $14,545.55 at an interest rate of 8.90 percent for the first piece of equipment, and 108 monthly
payments of $910.30 at an identical interest rate for the second piece of equipment. Id. at 21-25.
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SL Financial alleged that Woodberry has failed to make payments for either piece of equipment
since December 2012.2 (ECF No. 20, Exs. 4, 5).
SL Financial also alleged the existence of a valid contract with Mr. Cheek in the form of
a Personal Guaranty agreement.
The Guaranty states that Mr. Cheek “irrevocably and
unconditionally guarantees the full and prompt payment and performance in full (but not
collection) of all present and future obligations of Borrower to SL USA, arising from SL USA’s
loan to Borrower of monies to purchase machinery, fixtures or other equipment…” (ECF No. 1,
Ex. 3). Mr. Cheek signed the guaranty in his individual capacity and has failed to pay
Woodberry’s outstanding obligations. Compl. ¶ 31, 33. As a result, accepting the well-pleaded
allegations as true for the purposes of this motion, SL Financial has established breach of
contract with respect to Woodberry and Mr. Cheek.
b. Damages
SL Financial has provided an adequate evidentiary basis for an award of damages in this
case. Thus, no hearing is necessary. Specifically, SL Financial provided the Master Loan and
Security Agreement, which sets out the governing terms of the loan. SL Financial also provided
the sworn Supplemental Affidavit of Joseph Littier, Vice President of Portfolio Management for
North Mill Equipment Finance, LLC, the servicer for SL Financial. Mr. Littier’s Affidavit
establishes that the principal balance for the first piece of equipment is $490,001.14 and the
balance for the second piece of equipment is $29,691.78. Aff. ¶ 16. In relation to the first piece
of equipment, SL Financial calculated the total interest due as of September 25, 2013, at
$40,581.75. Aff. ¶ 16. The total interest due for the second piece of equipment is $2,040.58.
Aff. ¶ 16. The late charges are $17,774.52 and $141.42, respectively. Aff. ¶ 16. The costs and
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SL Financial received Woodberry’s last payment for the first piece of equipment on December 26, 2012 for the
October 2012 monthly installment. SL Financial also received Woodberry’s last installment payment for the second
piece of equipment on December 21, 2012. See (ECF No. 20, Exs. 4, 5).
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expenses of the equipment sale total $39,588.81, and the proceeds from the sale total
$350,000.00. Aff. ¶ 16.
In support of the figures above, SL Financial attached amortization
schedules and payment histories reflecting the outstanding principal balance owed on both pieces
of equipment, and their respective late charges. (ECF No. 20, Exs. 4, 5). SL Financial also
attached an invoice, correspondence, and wire confirmations reflecting the expenses of the
equipment storage and sale. (ECF No. 20, Exs. 2, 3). Finally, SL Financial attached an invoice
for the sale of the collateral showing the $350,000.00 in net proceeds. (ECF No. 20, Ex. 1). SL
Financial properly calculated the total amount owed as $278,742.46.
With respect to attorneys’ fees and costs, the Affidavit shows attorneys’ fees of $8205.00
and costs of suit totaling $717.76. Aff. ¶ 16. This Court requested SL Financial to provide
greater detail as to how it calculated its attorneys’ fees. See (ECF No. 13). In response to that
request, SL Financial has submitted the Declaration of Steven N. Leitess, stockholder and officer
of Leitess Friedberg PC, counsel for SL Financial. (ECF No. 21). Attached to the Declaration of
Mr. Leitess are invoices and descriptive billing entries, which show expenses incurred in relation
to this action, such as filing fees, and rates assessed for tasks performed by attorneys and a
paralegal. (ECF No. 21, Exs. 2, 3). The descriptive billing entries show that two attorneys and
one paralegal performed the work in this case. Gordon S. Young, a partner who has been
admitted to the bar for “more than 13 years,” billed at a rate of $295.00 per hour. Decl. ¶ 9,
(ECF No. 21, Exs. 1-3). Pierce C. Murphy, an associate who has been admitted to the bar for
“more than one year,” billed at a rate of $205.00 per hour. Decl. ¶ 10, (ECF No. 21, Exs. 1-3).
Finally, Dapo R. Lawal, a paralegal with “more than seven years” of experience, billed at a rate
of $150.00 per hour. Decl. ¶ 11, (ECF No. 21, Exs. 1-3).
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In calculating an appropriate award of attorneys’ fees, the Court must first determine the
lodestar amount, defined as a “reasonable hourly rate multiplied by hours reasonably expended.”
Grissom v. Mills Corp., 549 F.3d 313, 320-21 (4th Cir. 2008). A trial court may exercise its
discretion in determining the lodestar amount because it possesses “superior understanding of the
litigation,” and the matter is “essentially…factual.” Thompson v. HUD, No. MJG–95–309, 2002
WL 31777631, at *6 n. 18 (D. Md. Nov. 21, 2002) (quoting Daly v. Hill, 790 F.2d 1071, 1078–
79 (4th Cir.1986)). Once the lodestar amount has been determined, the Court determines a
reasonable fee by assessing whether the hours worked were reasonable or whether the request
includes hours that were unnecessary or duplicative. In evaluating both the lodestar calculations
and the overall reasonable fee, the Court looks to twelve factors, articulated in Johnson v.
Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974) and adopted by the Fourth
Circuit in Barber v. Kimbrell’s, Inc., 577 F.2d 216, 226 (4th Cir. 1978). The factors include:
(1) the time and labor expended; (2) the novelty and difficulty of the questions
raised; (3) the skill required to properly perform the legal services rendered; (4)
the attorney's opportunity costs in pressing the instant litigation; (5) the customary
fee for like work; (6) the attorney's expectations at the outset of the litigation; (7)
the time limitations imposed by the client or circumstances; (8) the amount in
controversy and the results obtained; (9) the experience, reputation and ability of
the attorney; (10) the undesirability of the case within the legal community in
which the suit arose; (11) the nature and length of the professional relationship
between attorney and client; and (12) attorneys' fees awards in similar cases.
Grissom, 549 F.3d at 321. Appendix B of this Court’s Local Rules is also instructive. Appendix
B provides guidelines regarding hourly rates for attorneys’ fees. See Local Rules, Appendix B
(D. Md. 2011). The Guidelines cap hourly rates based on the number of years a lawyer has been
admitted to the bar. Id. A lawyer admitted to the bar for less than five years may bill between
$150-$190. Id. Paralegals and law clerks may bill between $95-$115. Id.
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Mr. Leitess’s Declaration only establishes that Mr. Murphy has been admitted to the bar
“more than one year.” Decl. ¶ 10. Assuming Mr. Murphy has been admitted to the bar less than
five years, his rate exceeds the cap by $15, and Mr. Lawal’s paralegal rate exceeds the cap by
$35. Although the Guidelines are “intended solely to provide practical guidance to lawyers and
judges when requesting, challenging, and awarding fees,” there seems to be no reason to deviate
from the Guidelines in this case. Local Rules, Appendix B (3) (D. Md. 2011). As a result, I
recommend reducing Mr. Murphy’s fee to $170.00 per hour, a rate falling within the middle of
the range, which reflects a fee commensurate with the fees of attorneys recently admitted to the
bar. Similarly, I recommend reducing Mr. Lawal’s fee to $115.00 per hour, the maximum
compensable rate for law clerks and paralegals. Additionally, the amounts billed in relation to
Mr. Waring’s bankruptcy, which total 1.1 hours for Mr. Young, 0.95 hours for Mr. Lawal, and
0.4 hours for Mr. Murphy, should be omitted.3 Also, the $50.00 private process fee for service
on Mr. Waring should not be compensable, as he is not a party to this motion. I therefore
recommend an award of fees in the amount of $6,961.75, and costs in the amount of $667.76.
Conclusion
For the reasons set forth above, I recommend that:
1. The Court GRANT SL Financial’s Motion for Default Judgment; and
2. The Court award SL Financial $269,820.00 as damages for breach of contract, plus
$6,961.75 for attorneys’ fees, and $667.76 for costs of suit, to be paid jointly and
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Mr. Lawal actually billed 0.80 hours in an entry dated July 1, 2013, for bankruptcy-related tasks, including
reviewing “correspondence from Michael Rinn and Notice of chapter 7 bankruptcy case” and processing the
voluntary petition for Douglass Waring. See (ECF No. 21, Ex. 2). Mr. Lawal also included, in this same descriptive
entry, the tasks of filing and processing the proof of service as to Mr. Cheek. I recommend that the billable time for
this entry be reduced to 0.2 hours to better reflect the time spent on tasks related to this motion. I also recommend
reducing by half Mr. Lawal’s July 8, 2013 billing entry for the ECF filings of the proof of service as to Woodberry
and the suggestion of bankruptcy as to Mr. Waring, as Mr. Waring is not a party to this motion. See (ECF No. 21,
Ex. 2).
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severally by the Defendants, plus post-judgment interest as calculated under 28
U.S.C. § 1961.
I also direct the Clerk to mail a copy of this Report and Recommendations to the
Defendants at the address listed on SL Financial’s Complaint (ECF No. 1).
Any objections to this Report and Recommendations must be served and filed within
fourteen (14) days, pursuant to Fed. R. Civ. P. 72(b) and Local Rule 301.5.b.
Dated: October 3, 2013
/s/
Stephanie A. Gallagher
United States Magistrate Judge
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