WESTFIELD INSURANCE COMPANY v. PAVEX CORPORATION et al

Filing 22

OPINION AND ORDER Granting 17 Motion for Default Judgment. Signed by District Judge Denise Page Hood. (BGar)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
WESTFIELD INSURANCE COMPANY,
Plaintiff,

CASE NO. 17-14042
HON. DENISE PAGE HOOD

v.
PAVEX CORPORATION,
BRIAN MORRISON,
Defendants.
/
OPINION AND ORDER GRANTING PLAINTIFF’S MOTION FOR
DEFAULT JUDGMENT [#17]
I.

BACKGROUND
On December 15, 2017, Plaintiff Westfield Insurance Company (“Westfield”)

filed a Verified Complaint against Defendants Pavex Corporation and Brian
Morrison (collectively, “Defendants”). (Doc # 1) Plaintiff’s allegations against
Defendants include: Breach of Contract (Count I), Exoneration and Quia Timet
(Count II), Specific Performance of the Indemnity Agreement (Count III),
Temporary Restraining Order and/or Preliminary Injunction (Count IV),1 and
Declaratory Judgment (Count V). (Id.) On December 15, 2017, Plaintiff filed a
Motion for Temporary Restraining Order and/or Preliminary Injunction. (Doc # 2)

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Plaintiff’s fourth count is not actually a count, but a form of relief.
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The Court denied Plaintiff’s Motion for Temporary Restraining Order on December
15, 2017 (Doc # 5), but granted Plaintiff’s Motion for Preliminary Injunction on
January 4, 2018 (Doc # 9). Pursuant to the Stipulated Order Granting Preliminary
Injunctive Relief, Defendants were given twenty days from the date of the Order to
answer or otherwise respond to Plaintiff’s Complaint. (Doc # 9) On January 3,
2018, Plaintiff provided the Court with proof of service for Defendants. (Doc # 7;
Doc # 8) On June 21, 2018, having received no responsive pleading from either
Defendant, Plaintiff requested a Clerk’s Entry of Default against Defendants. (Doc
# 11; Doc # 12) On June 21, 2018, the Clerk entered Default against Defendants.
(Doc # 13; Doc # 14) On July 12, 2018, Plaintiff filed a Motion for Default Judgment
against Defendants. (Doc # 17) A hearing on this Motion was held on August 29,
2018. To date, neither Defendant has filed an answer to the Complaint or a response
to the instant Motion. Defendants had attorney William Donovan (“Donovan”) and
the Serra Donovan Law Group, P.C. appear on their behalf, but it was for the sole
and limited purpose of representing Defendants in matters related to preliminary
injunctive relief. (Doc # 9) The Court granted Donovan and the Serra Donovan
Law Group, P.C.’s request to withdraw as counsel for Defendants on January 4,
2018. (Id.)
On March 1, 2017, Plaintiff and Defendants allegedly executed an Agreement
of Indemnity (“Indemnity Agreement”) in connection with at least eight construction
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projects (“Projects”) in Michigan that were to be completed by Defendants. (Doc #
1, Pg ID 3) Plaintiff agreed to issue Defendants various performance and payment
bonds for the Projects.

(Id.)

Subsequently, Defendants defaulted on their

contractual obligations that pertained to the Projects, which resulted in Plaintiff
receiving claims against the bonds and paying several claimants. (Id. at 4-5.)
Plaintiff now seeks to be compensated for the payments it has made pursuant to the
Indemnity Agreement. (Id. at 5.) Plaintiff also alleges that pursuant to the Indemnity
Agreement, among other things, Defendants were obligated to provide collateral to
Plaintiff, and provide Plaintiff with access to their books and records. (Id. at 9.)
Plaintiff perfected its security interest by filing an appropriate UCC financing
statement. (Doc # 1-5)
Plaintiff asserts that it is entitled to a default judgment under Rule 55(b)(2) of
the Rules of Civil Procedure. (Doc # 17) Plaintiff requests that the Court continue,
as a permanent injunction, paragraph D of the Stipulated Order Granting Preliminary
Injunctive Relief that was previously entered by this Court. (Id.) Plaintiff also
requests specific performance of Defendants’ obligations under the Indemnity
Agreement. (Id.)
Regarding damages, Plaintiff requests that the Court enter judgment in its
favor and against Defendants, jointly and severally, in the amount of $869,584.30.
(Id. at 342.) This amount consists of $700,367.42 for losses that were incurred by
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Plaintiff, to date, as a result of paying claims against the bonds, $160,927.38
constituting collateral that Plaintiff alleges it is entitled to for pending claims against
the bonds in accordance with the terms and conditions of the Indemnity Agreement,
and $8,289.50 in attorney’s fees and consulting fees incurred as a result of having
issued the bonds (including an award of statutory interest). (Id. at 342-343.)
II.

ANALYSIS
A. Default Judgment
An Entry of Default under Rule 55 of the Rules of Civil Procedure is the first

procedural step necessary to obtain a default judgment. Shepard Claims Serv. Inc.
v. Williams Darrah & Assoc., 796 F.2d 190, 193 (6th Cir. 1986). “When a party
against whom a judgment for affirmative relief is sought has failed to plead or
otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must
enter the party’s default.” Fed. R. Civ. P. 55(a). The party must then apply to the
Court for entry of the default judgment. Fed. R. Civ. P. 55(b)(2). A default judgment
may be entered by the Clerk when the plaintiff’s claim is for a sum certain or a sum
which can be made certain, and the defendant is not an infant or an incompetent
person. Fed. R. Civ. P. 55(b)(1). The Court may conduct an accounting, determine
the amount of damages, establish the truth of any allegations by evidence, or
investigate any other matter. Fed. R. Civ. P. 55(b)(2).

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Default judgment is generally disfavored because there is a “strong preference
for trials on the merits.” Shepard Claims Serv., Inc. v. William Darah & Assoc., 796
F.2d 190, 193 (6th Cir. 1986). According to the Sixth Circuit, “[j]udgment by default
is a drastic step which should be resorted to only in the most extreme cases.” United
Coin Meter Co., Inc. v. Seaboard Coastline RR., 705 F.2d 839, 845 (6th Cir. 1983).
“When considering whether to enter a default judgment, a court should take into
account: 1) possible prejudice to the plaintiff; 2) the merits of the claims; 3) the
sufficiency of the complaint; 4) the amount of money at stake; 5) possible disputed
material facts; 6) whether the default was due to excusable neglect; and 7) the
preference for decisions on the merits.” Russell v. City of Farmington Hills, 34 Fed.
App’x. 196, 198 (6th Cir. 2002) (citing Eitel v. McCool, 782 F.2d. 1470, 1472 (9th
Cir. 1986)). The Court considers each factor below.
The first factor weighs in favor of entering default judgment. Plaintiff would
suffer prejudice if the Court were to deny its Motion and dismiss this action without
prejudice. If that were to happen, Plaintiff’s only recourse would be to re-file, and
it would be unlikely that Defendants would answer or respond to Plaintiff’s
subsequent complaint. The continuation of this case would only lead to Plaintiff
enduring further prejudice because Plaintiff would still remain liable to claimants
without receiving any relief from Defendants.

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The second and third factors also weigh in favor of entering a default
judgment. Plaintiff has alleged in its Complaint that a valid contract between it and
Defendants was breached. Since Plaintiff’s factual allegations are considered true
due to Defendants’ default, the analysis of the second and third factors becomes
rather straightforward. See Ford Motor Co. v. Cross, 441 F. Supp. 2d 837, 848 (E.D.
Mich. 2006).
The fourth factor, the amount of money at stake, weighs in favor of Plaintiff.
Plaintiff requests $869,584.30 in total damages. The amount Plaintiff is seeking is
not extreme considering that it is the amount of money that Defendants agreed to
pay Plaintiff under these circumstances.
The three remaining factors also weigh in favor of entering a default judgment
against Defendants. Regarding the fifth factor, Defendants forfeited their right to
dispute the allegations by not answering the Complaint. As for the sixth factor,
Defendants’ failure to answer the Complaint was not a result of excusable neglect
because they were each served with the Complaint. Finally, regarding the seventh
factor, while true that public policy favors the resolution of cases on the merits,
Defendants have prevented a merits-based resolution by not appearing. See State
Farm Bank, F.S.B. v. Sloan, No. 11-CV-10385, 2011 WL 2144227, at *3 (E.D.
Mich. May 31, 2011).
The seven factors weigh in favor of granting the instant Motion.
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Regarding the issue of damages, Rule 55(b)(2) of the Rules of Civil Procedure
empowers a federal court to hold a hearing to determine damages, but such a hearing
is not needed in all instances. See SEC v. Smyth, 420 F.3d 1225, 1231–32 n. 13 (11th
Cir. 2005) (noting that an evidentiary hearing on damages is not a “per se
requirement; indeed, Rule 55(b)(2) speaks of evidentiary hearings in a permissive
tone”). Here, Plaintiff submitted an affidavit detailing its damages request. (Doc #
17-3) There is no need to hold a separate damages hearing.
Plaintiff also requests payment of its attorney’s fees and costs incurred in
pursuing this action. However, Plaintiff has not cited any provision in the agreement
between Plaintiff and Defendants which awards attorney's fees to a non-breaching
party should there be a finding of a breach of the agreement. Plaintiff also has not
cited any statute which awards Plaintiff attorney's fees as the prevailing party in this
type of lawsuit. Therefore, Plaintiff’s request does not comply with the Federal
Rules of Civil Procedure or this District’s Local Rules, and must be denied at this
time. See Fed. R. Civ. P. 54(d)(2); E.D. Mich. L.R. 54.1.2.
B. Permanent Injunction
Plaintiff has also requested that the Court continue, as a permanent injunction,
paragraph D from the Stipulated Order Granting Preliminary Injunctive Relief,
which states:
D. Indemnitors are restrained from selling, transferring, disposing of or
liening their assets and property and further enjoined and restrained
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from allowing their assets and property to be liened, sold, transferred
or disposed of, other than in the ordinary course of business.
(Doc # 9, Pg ID 320) Considering that Defendants have failed to answer Plaintiff’s
Complaint or this instant Motion, the material allegations against them are taken as
true. Since the Indemnity Agreement provides for injunctive relief (Doc # 17-2, Pg
ID 351), the Court finds that injunctive relief is appropriate and grants Plaintiff’s
request for a permanent injunction as specified in paragraph D.
C. Specific Performance
Plaintiff’s request for specific performance directing Defendants to provide
Plaintiff with complete access to their books and financial records is granted since
Defendants have failed to respond to Plaintiff’s Complaint or this instant Motion.
Further, the Indemnity Agreement provides for this type of relief. (Doc # 17-2, Pg
ID 355)
III.

CONCLUSION
For the reasons set forth above,
IT IS HEREBY ORDERED that Plaintiff Westfield Insurance Company’s

Motion for Default Judgment against Defendants Pavex Corporation and Brian
Morrison in the amount of $861,294.80 ($700,367.42 + $160,927.38) (Doc # 17) is
GRANTED.

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IT IS FURTHER ORDERED that Plaintiff Westfield Insurance Company’s
request for a permanent injunction is GRANTED: Defendants Pavex Corporation
and Brian Morrison are restrained from selling, transferring, disposing of or liening
their assets and property and further enjoined and restrained from allowing their
assets and property to be liened, sold, transferred or disposed of, other than in the
ordinary course of business.
IT IS FURTHER ORDERED that Plaintiff Westfield Insurance Company’s
request for specific performance is GRANTED.
IT IS FURTHER ORDERED that Plaintiff Westfield Insurance Company
may file a motion for attorney’s fees under E.D. Mich. L.R. 54.1.2 and may request
costs under E.D. Mich. L.R. 54.1.

DATED:

s/Denise Page Hood
DENISE PAGE HOOD
Chief Judge. U.S. District Court

2/22/2019

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