Schnur et al v. Shields, et al
OPINION AND ORDER Granting 26 Motion for Default Judgment; Denying 27 Motion to Set Aside; Denying 28 Motion to Withdraw as Attorney. Signed by District Judge Sean F. Cox. (JMcC)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
John Schnur, et al.,
Case No. 12-12115
Sean F. Cox
United States District Court Judge
OPINION & ORDER
The matter is currently before the Court on: 1) a motion asking the Court to set aside
sanctions imposed on attorney T. Edward Williams; 2) a motion wherein attorney T. Edward
Williams asks to withdraw from representing Defendant Jeffory Shields in this action; and 3)
Plaintiffs’ motion seeking entry of a default judgment against Defendant Jeffory Shields.
The Court held a hearing on January 13, 2014, at which time the Court denied the motion
to withdraw and then Plaintiffs’ Counsel presented evidence as to Plaintiffs’ damages. This
Court now memorializes its ruling denying the motion to withdraw, and denies the motion to set
In addition, for the reasons set forth below, the Court denies Plaintiffs’ request for
punitive damages and denies their request for an award of attorney fees under 28 U.S.C. § 1927.
Having heard evidence as to the amount of damages incurred, the Court shall issue a default
judgment against Defendant Jeffory Shields, awarding Plaintiff John Schnur a total of
$304,450.50 in damages, and awarding Plaintiff Douglas Schnur a total of $85,523.50 in
Plaintiffs John Schnur and Douglas Schnur filed this action against Defendant Jeffory
Shields and two different corporate entities on May 9, 2012. The two corporate Defendants have
since been dismissed, leaving only Defendant Shields.
Plaintiffs’ Second Amended Complaint (Docket Entry No. 11) asserts the following
claims, which are based upon an alleged fraudulent oil and gas investment scheme perpetrated by
Shields: “Intentional Misrepresentation and Fraud” (Count I); “Negligent Misrepresentation”
(Count II); “Aiding and Abetting Civil Conspiracy” (Count III); “Breach of the Covenant of
Good Faith and Fair Dealing” (Count IV); and “Breach of Fiduciary Duty” (Count V1). The
Second Amended Complaint seeks judgment “in excess of $75,000.00” as to each of the counts.
It does not request punitive damages.
Attorney T. Edward Williams has been representing Shields in this action since June 15,
2012, and he appeared for a Scheduling Conference in this matter on November 14, 2012. The
following day, November 15, 2012, this Court issued its Scheduling Order (Docket Entry No.
The Final Pretrial Conference in this matter was scheduled for November 18, 2013.
Counsel for Plaintiffs contacted chambers shortly prior to that date, however, to advise that he
could not prepare a joint final pretrial order because he could not contact Defense Counsel. In
addition, mail addressed to Defense Counsel had been returned to the Court as undeliverable and
Defense Counsel had not provided the Court with any new contact information. Nevertheless,
This Count is also listed as Count “IV” in the Second Amended Complaint.
the Court’s Docket Manager was able to locate Williams at a new firm and determine his contact
In an Order issued on November 13, 2013, this Court ordered: 1) Williams to
immediately register as an e-filer on the ECF system; 2) Williams to file a notice advising the
Court of his complete current contact information; 3) Williams to immediately contact Plaintiffs’
Counsel to prepare a proposed joint final pretrial order, and cautioned it may impose sanctions if
he failed to do so; 4) Williams and Shields to personally appear for the November 18th Joint
Final Pretrial Conference and cautioned that if they failed to appear, the Court “may impose
sanctions, including an award of costs and fees incurred by Plaintiff and his Counsel for having
appeared for the conference and/or the entry of a default judgment in this action.” (Docket Entry
No. 21). Notably, this Court’s Docket Manager not only mailed the notice to both addresses for
Williams, but also e-mailed the order to Williams. And Williams actually received the order
because he called chambers after receiving it – claiming he no longer represented Shields. This
Court’s Docket Manager advised Williams that, according to the docket, he was still
representing Shields and that no motion to withdraw had been filed or granted in this case.
Nevertheless, neither Shields nor Williams appeared for the November 18th Final Pretrial
Conference. Thereafter, on November 19, 2013, the Court issued an “Order Entering Default
Against Defendant And Imposing Sanctions Against Defense Counsel T. Edward Williams.”
(Docket Entry No. 23). As to Williams, the Court imposed sanctions in the amount of $460.16,
to be paid to Plaintiffs’ Counsel within 10 days of the order.
On December 3, 2013, Williams mailed two written motions to the Court – although the
Court had already ordered him to immediately become an “e-filer,” as mandated by the Local
Rules. In the first motion, Docket Entry No. 27, Williams asks the Court to set aside the
sanctions imposed against him. In the second motion, Docket Entry No. 28, Williams seeks to
withdraw from representing Shields in this action.
The Court set all three motions for hearing on January 13, 2014. On that date, Plaintiffs’
Counsel appeared along with both Plaintiffs, John Schnur and Douglas Schnur. Williams also
At the beginning of the hearing, the Court ruled from the bench and denied the motion to
withdraw as unsupported and untimely. The Court ruled that it was taking the motion asking the
Court to set aside sanctions under advisement, and then proceeded with the hearing to determine
the amount of damages, if any, to which Plaintiffs are entitled.
The Court Hereby Memorializes Its Ruling Denying The Motion To Withdraw.
Williams sought to withdraw from representing Shields in this action. His motion
referenced a “new attorney” for Shields, who is aware of all deadlines in the case – but no other
attorney has filed an appearance on behalf of Shields. As to the reason for his request to
withdraw, Williams stated only, without any further explanation, that:
Withdrawal is appropriate for grounds specified in the Colorado Rules of
Professional Conduct 1.16. A full description of the basis for seeking
withdrawal would violate Colorado Rule of Professional Conduct 1.6(a).
In addition, the undersigned counsel is withdrawing because he has
changed law firms and Mr. Shields has not signed an engagement
agreement with the undersigned’s new law firm.
(Docket Entry No. 28). William’s five-paragraph motion was not accompanied by a supporting
brief. The only attachments to that motion were filings from other cases involving Shields, a
“Notice of Non-Participation” Williams filed in a case before the Tenth Circuit, and an “Order
Granting Motion To Dismiss” in a case before the United States District Court for the District of
This Court denied Williams’s Motion to Withdraw on January 13, 2014, finding that
Williams’s Motion to Withdraw does not establish an appropriate ground for withdrawal,
especially at this late stage of the litigation.
The Court Denies The Motion To Set Aside Sanctions.
In this motion, Docket Entry No. 27, Williams asks the Court to set aside the sanctions
previously imposed against him. This motion lacks merit. Williams essentially states that he
advised his client he was going to file a motion to withdraw back in October of 2012, and that he
mailed a motion seeking to withdraw in this case on December 7, 2012 – but mailed it to the
wrong address. The motion to withdraw that he attaches, however, is not from this case. Rather,
it is from a criminal case in Colorado. Moreover, Williams knew when he got this Court’s
November 13, 2013 Order that the Court still considered him to be representing Shields in this
case and was ordering him to appear on November 18th. Williams also knew, by virtue of his
conversation with this Court’s Docket Manager, that no motion to withdraw had been filed or
granted in this case and that he had been ordered to appear on November 18th. The Court
DENIES this motion.
The Court Shall Issue A Default Judgment In Favor Of Plaintiffs.
This Court entered a default on behalf of Shields as a sanction for his failure to appear for
the Final Pretrial Conference. Thus, Shields’s liability as to Counts I, II, III, and V of Plaintiffs’
Second Amended Complaint is now established.2
In order to obtain a default judgment, the proponent must seek entry of a default
judgment from the clerk or by the Court. FED. R. CIV. P. 55(b). Here, Plaintiffs’ damages are
unliquidated and thus Plaintiffs applied to this Court for entry of a default judgment against
Defendant Shields. Where damages are unliquidated, a default admits only the defendant’s
liability and the amount of damages must be proved. Antoine v. Atlas Turner, Inc., 66 F.3d 105,
110 (6th Cir. 1995). Thus, this Court must make an appropriate inquiry into in order to ascertain
the amount of damages. Vesligaj v. Peterson, 331 Fed.Appx. 351, 355 (6th Cir. 2009).
Amount Of Damages
Entry of default judgment by the Court is governed by Fed. R. Civ. P. 55(b)(2), which
provides in pertinent part that the Court may conduct hearings in order to determinate the
amount of damages. Thus, the rule “allows but does not require the district court to conduct an
evidentiary hearing.” Yesligaj v. Peterson, 331 F. App’x. 351, 354 (6th Cir. 2009).
This Court held an evidentiary hearing on January 13, 2014. Plaintiffs’ Counsel
presented testimony from Plaintiffs, along with documentary evidence. Defense Counsel crossexamined the Plaintiffs.
Having observed the evidence and the witnesses who testified at the evidentiary hearing,
allowing for this Court to assess credibility, having considered the arguments presented by
counsel, and having applied the governing legal principles, the Court finds that Plaintiff John
Schnur incurred damages in the total amount of $304,450.50, and that Plaintiff Douglas Schnur
Michigan does not recognize claim for breach of an implied covenant of good faith and
fair dealing. Coyer v. HSBC Mortgage Svs., Inc., 701 F.3d 1104, 1108 (6th Cir. 2012).
incurred damages in the total amount of $85,523.50. The Court shall issue a default judgment
awarding Plaintiffs those compensatory damages.
Request For Punitive Damages
At the January 13, 2014 hearing, Plaintiffs’ Counsel requested that the Court also award
Plaintiffs punitive damages. Fed. R. Civ. P. 54(c), however, provides that a “default judgment
must not differ in kind from, or exceed in amount, what is demanded in the pleadings.”
Here, Plaintiffs’ Second Amended Complaint3 does not request punitive damages. Accordingly,
the default judgments issued in favor of Plaintiffs may not include punitive damages.4 The Court
DENIES Plaintiffs’ request for an award of punitive damages.
Request For Attorney Fees Under 28 U.S.C. § 1927
Plaintiffs’ also ask the Court to award them attorney fees under 28 U.S.C. § 1927.
Plaintiffs contend that Defense Counsel failed to respond to the Court’s orders and therefore
“vexatiously and unreasonably delayed this case.” (Pls.’ Br. at 3).
Section 1927 provides that “[a]ny attorney or other person admitted to conduct cases in
any court of the United States” “who so multiplies the proceedings in any case unreasonably and
vexatiously may be required by the court to satisfy personally the excess costs, expenses, and
attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927. An award is
discretionary under the statute. Runfola & Assocs., Inc. v. Spectrum Reporting II, Inc., 88 F.3d
368,375 (6th Cir. 1996).
Plaintiffs’ Motion for Default Judgment also failed to request punitive damages.
Moreover, even if this Court had the discretion to award punitive damages, it would
decline to do so here because Plaintiffs’ Counsel did not even articulate the standard for an
award of punitive damages, much less establish that such damages are warranted here.
The Court DENIES Plaintiffs’ request for an award under § 1927. This not a case where
a party or its attorney took actions that caused unnecessary legal fees to be incurred by the
opposing party by, for example, filing frivolous motions or failing to cooperate during discovery.
Rather, Defendant has simply failed to defend himself beyond filing an answer. That is simply
not the kind of conduct that warrants an award under § 1927. In addition, Plaintiff’s Counsel has
already been awarded the amount incurred due to Defense Counsel’s failure to appear for the
Final Pretrial Conference. No further sanctions are warranted.
Dated: January 21, 2014
S/ Sean F. Cox
Sean F. Cox
U. S. District Court Judge
I hereby certify that on January 21, 2014, the foregoing document was served upon counsel for
Plaintiffs by electronic means and upon T. Edward Williams by First Class Mail at the address
T. Edward Williams
600 17th Street, Suite 2800 South
Denver, CO 80202
T. Edward Williams
Benjamin, Bain, Howard & Cohen, LLC
7315 E. Orchard Road, Suite E400
Greenwood Village, CO 80111
Dated: January 21, 2014
S/ J. McCoy
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