Goodman Distribution, Inc. v. Herb Haaf Heating & Cooling, Inc. et al

Filing 73

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that plaintiff Goodman Distirbution, Inc.'s amended motion for default judgment against defendant Herb Haaf Heating & Cooling, Inc., is GRANTED. [Doc. 67] IT IS FURTHER ORDERED that plain tiff Goodman Distribution, Inc.'s motion for default judgment against defendant Herb Haaf Heating & Cooling, Inc., is DENIED as moot. [Doc. 66] IT IS FURTHER ORDERED that plaintiff Goodman Distribution, Inc. is awarded damages in the amo unt of Sixty-One Thousand Eight Hundred Fifty Dollars ($61,850.00) against defendant Herb Haaf Heating & Cooling, Inc.. An appropriate judgment will accompany this memorandum and order. Signed by District Judge Charles A. Shaw on 2/13/2013. (KSM)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
GOODMAN DISTRIBUTION, INC.,
Plaintiff,
v.
MARY A. HAAF, et al.,
Defendants.

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No. 4:10-CV-806 CAS

MEMORANDUM AND ORDER
This matter is before the Court on plaintiff’s motion and amended motion for default
judgment against defendant Herb Haaf Heating & Cooling, Inc. (“Herb Haaf, Inc.”). Plaintiff’s
motion is accompanied by an affidavit and exhibits. For the following reasons, the Court will grant
plaintiff default judgment in the amount of $61,850.00, against Herb Haaf, Inc.
I. Procedural Background
Plaintiff Goodman Distributing, Inc. (“Goodman”) brought three state law claims against
defendants Mary Haaf and Herb Haaf, Inc. for fraud, money had and received, and breach of contract
based on allegations that defendants submitted fraudulent warranty claims to Goodman.1
Defendants answered the complaint, and defendant Herb Haaf, Inc. also filed a two-count
counterclaim against Goodman for breach of implied warranties. Herb Haaf, Inc. voluntarily
dismissed Count II of the counterclaim, and Goodman answered Count I.
On December 20, 2011, counsel for Mary Haaf and Herb Haaf, Inc. filed a motion for the
imposition of a withdrawal period, which they filed under seal. Defense counsel stated that their bills

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Plaintiff originally brought a claim against Mary Haaf pursuant to the Racketeer Influenced
and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq. (“RICO”). Shortly after filing its
complaint, plaintiff voluntarily dismissed its RICO claim. See Doc. 18.

had gone unpaid, there were problems with communications, and there were issues of trust such that
the attorney-client relationship had broken down. On December 30, 2011, the Court granted defense
counsel’s motion for a withdrawal period, and ordered defendants Mary Haaf and Herb Haaf, Inc. to
obtain substitute counsel no later than February 10, 2012. In its Order, the Court warned that because
Herb Haaf, Inc. was a corporation, if it failed to obtain substitute counsel within the time allowed, the
Court would strike its pleadings, including its answer and counterclaim. The Court further warned
that Herb Haaf, Inc. might be subject to a default judgment. The Court also stated in its Order that
if Mary Haaf failed to obtain substitute counsel within the time allowed, she might be required to
proceed to trial pro se.
Herb Haaf, Inc. did not respond to the Court’s Order, and ubstitute counsel never entered an
appearance on the company’s behalf. Following the withdrawal period, the Court granted defense
counsel’s motion to withdraw. Plaintiff filed a motion to strike Herb Haaf, Inc.’s pleadings, including
its answer and counterclaim, which the Court did on April 17, 2012. On May 14, 2012, the Clerk of
Court entered default against defendant Herb Haaf, Inc. pursuant to Rule 55(a) of the Federal Rules
of Civil Procedure.
Individual defendant Mary Haaf continued to proceed in this matter pro se. On August 7,
2012, plaintiff moved to voluntarily dismiss its claims against Mary Haaf, which the Court granted.
Plaintiff filed a motion for default judgment against Herb Haaf, Inc., which it later amended. In its
amended motion for default judgment, plaintiff seeks $64,700.00 in damages against defendant Herb
Haaf, Inc. for breach of contract and for money had and received.

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II. Discussion
Default judgments are not favored in the law, United States ex rel. Time Equip. Rental &
Sales, Inc. v. Harre, 983 F.2d 128, 130 (8th Cir. 1993), and their entry is discretionary. See Taylor
v. City of Ballwin, Mo., 859 F.2d 1330, 1332 (8th Cir. 1988). “The entry of a default judgment
should be a ‘rare judicial act.’” Comiskey v. JFTJ Corp., 989 F.2d 1007, 1009 (8th Cir. 1993) (quoted
case omitted). There is a judicial preference for adjudication on the merits. Oberstar v. F.D.I.C., 987
F.2d 494, 504 (8th Cir. 1993). Entry of default judgment pursuant to Federal Rule of Civil Procedure
55 is appropriate only if there is a “clear record of delay or contumacious conduct.”
Taylor, 859 F.2d at 1332 (quoted case omitted).
Even when a defendant is technically in default and all of the requirements for a default
judgment are satisfied, a plaintiff is not entitled to default judgment as a matter of right. 10 James
Wm. Moore, et al., Moore’s Federal Practice § 55.31[1] (3d ed. 2008); Taylor, 859 F.2d at 1332. Prior
to the entry of a discretionary default judgment, this Court should satisfy itself that the moving party
is entitled to judgment, including by reviewing the sufficiency of the complaint and the substantive
merits of the plaintiff’s claim. 10 Moore’s Federal Practice § 55.31[2].
An entry of default from the Clerk of the Court pursuant to Fed. R. Civ. P. 55(a) is a
prerequisite to the grant of a default judgment under Rule 55(b). Johnson v. Dayton Elec. Mfg. Co.,
140 F.3d 781, 783 (8th Cir. 1998). “A default judgment by the court binds the party facing the default
as having admitted all of the well pleaded allegations in the plaintiff’s complaint.” Angelo Iafrate
Constr., LLC v. Potashnick Constr., Inc., 370 F.3d 715, 722 (8th Cir. 2004) (citing Taylor, 859 F.2d
at 1333 n.7). Where default has been entered, the “allegations of the complaint, except as to the
amount of damages are taken as true.” Brown v. Kenron Aluminum & Glass Corp., 477 F.2d 526,
531 (8th Cir. 1973). If the damages claim is indefinite or uncertain, the amount of damages must be

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proved in a supplemental hearing or proceeding to a reasonable degree of certainty. Everyday
Learning Corp. v. Larson, 242 F.3d 815, 818-19 (8th Cir. 2001).
The Court takes the allegations plaintiff made in its complaint as true, except for those
allegations as to the amount of damages, and finds plaintiff is entitled to default judgment for its state
law claims of breach of contract and money had and received.2 Taylor, 859 F.2d at 1333. n.7 (“[A]
defendant on default has no further standing to contest the factual allegations of plaintiff’s claim for
relief.”) (internal quotes and quoted authority omitted).
A.

Breach of Contract

Goodman is in the business of designing, selling, and distributing heating and air conditioning
equipment. Defendant Herb Haaf, Inc. is a dealer and service contractor of heating and air
conditioning equipment, and Mary Haaf is an officer, director and technician of the company. The
complaint arises from an alleged scheme by Mary Haaf to submit fraudulent warranty claims to
Goodman.
Goodman states that at some point in time it recognized that certain service valves on its
equipment had a tendency to leak. In response, plaintiff instigated a cap replacement program, under
which service technicians would replace existing service valve caps with newly designed o-ring
service valve caps. Under the program, Goodman agreed to pay its dealers and service contractors
$150.00 for labor costs associated with replacing the caps, and an additional $50.00, if the technician
determined the unit was leaking and needed to be refilled or recharged. Under the cap replacement
program, technicians were required to have access to the thermostat inside the residence or building.

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In plaintiff’s motion for default judgment and the memorandum in support thereof, plaintiff
seeks damages for breach of contract and for money had and received. Plaintiff has not requested
damages for fraud (Count II). Because plaintiff did not seek default judgement as to its fraud claim
the Court considers plaintiff to have abandoned this claim.
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To receive compensation under the program, which was limited to $200.00 per unit, a service
contractor or dealer was required to submit a warranty claim for each unit requiring repair by mailing
the completed form to Goodman’s regional office or its corporate headquarters in Texas.
Goodman alleges defendants devised a scheme to submit false and fraudulent warranty
claims. Goodman alleges that between approximately August 21, 2009, and October 16, 2009, Herb
Haaf, Inc. submitted over 375 false claims. A list of 377 claims with the claim numbers, unit serial
numbers, dates of approval, and check numbers is attached to the complaint as Exhibit B.3 Goodman
alleges these claims were fraudulent in that: the work required to charge the unit was not done; the
work performed was not necessary; the unit was no longer under warranty; and/or the maximum
$200.00 per unit limit under the cap replacement program had already been paid.
Under Missouri law in order to establish a breach of contract claim, plaintiff must show: “(1)
the existence and terms of a contract; (2) that plaintiff performed or tendered performance pursuant
to the contract; (3) breach of contract by the defendant; and (4) damages suffered by the plaintiff.”
Martha’s Hands, LLC v. Rothman, 328 S.W.3d 474, 479 (Mo. Ct. App. 2010). The complaint
establishes that Goodman and Herb Haaf, Inc. entered into an agreement whereby Goodman agreed
to sell air conditioning units to Herb Haaf, Inc. and pay it for any legitimate warranty claims, while
Herb Haaf, Inc. agreed to submit legitimate warranty claims for the units it bought, installed, and
repaired. In reliance on said agreement, upon receipt of a warranty claim form, Goodman would mail

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In support of its motion for default judgment, plaintiff attached the affidavit of Dan
Hagenhoff, a regional manager for Goodman. Mr. Hagenhoff attests that Herb Haaf, Inc. made 434
warranty claims that were “invalid, illegitimate, and improper.” Aside from this assertion, there was
no evidence submitted to the Court to support the claim that Herb Haaf, Inc. made 434 fraudulent
claims. Based on the record before it, the Court finds that plaintiff has established to the Court’s
satisfaction that Herb Haaf, Inc. made 377 fraudulent warranty claims that Goodman paid.
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checks to the dealer or service contractor as compensation for the warranty claims submitted under
the cap replacement program.
The complaint also establishes that Herb Haaf, Inc. made at least 377 warranty claims under
the cap replacement program, and that 377 of the claims, which Goodman paid, were invalid. In its
complaint and motion for default judgment, plaintiff seeks $50.00 for each fraudulent claim that it
paid. Taking the facts outlined in the complaint as true, the Court finds that Herb Haaf, Inc. did
breach the contract between the parties by submitting false warranty claims. The Court further finds
that plaintiff has established through exhibits and an affidavit that the company was damaged in an
amount of at least $18,850.00. The Court will award plaintiff damages in the amount of $18,850.00
for its breach of contract claim.
B.

Money Had and Received

Plaintiff also alleges in its complaint that it inadvertently paid money to defendants that was
not due or owed. Plaintiff alleges it mistakenly sent checks to defendants as a result of a “typo.”
Plaintiff alleges it has demanded the return of this money, but defendants have refused to do so.
In order to sustain an action for money had and received Goodman must show that: (1)
defendant received or obtained possession of plaintiff’s money; (2) defendant thereby appreciated a
benefit; and (3) the defendant’s acceptance and retention of the gift was unjust. Pitman v. City of
Columbia, 309 S.W.3d 395, 403 (Mo. Ct. App. 2010).
According to the complaint, Goodman inadvertently paid to Herb Haaf, Inc. $43,000.00
through the issuance of six checks: Check No. 175214 for $400.00; Check No. 175605 for $1,600.00;
Check No. 849880 for $4,200.00; Check No. 850708 for $8,400.00; Check No. 853720 for $8,200.00;
and Check No. 854517 for $20,200.00. The money represented by these checks was not due to Herb
Haaf, Inc. and the checks were issued due to a “typo” in processing another service contractor’s

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warranty claims. On or about February 3, 2010, Goodman sent a letter to Herb Haaf, Inc. demanding
the return of the $43,000.00, but defendant has refused to return the $43,000.00
Taking the facts outlined in the complaint as true, the Court finds that the Herb Haaf, Inc. has
money in its possession that rightfully belongs to Goodman. The Court also finds that the affidavit
and exhibits attached to plaintiff’s motion for default judgment, together with the complaint, establish
that Goodman is entitled to $43,000.00 in damages for its claim of money had and received against
Herb Haaf, Inc. The Court will award plaintiff damages in the amount of $43,000.00 for its money
had and received claim.
III. Conclusion
In sum, the Court finds plaintiff is entitled to the entry of default judgment against Herb Haaf,
Inc. in the amount of $18,850.00 for the breach of contract claim, and $43,000.00 for the money had
and received claim, for a total judgment of $61,850.00.
Accordingly,
IT IS HEREBY ORDERED that plaintiff Goodman Distribution, Inc.’s amended motion
for default judgment against defendant Herb Haaf Heating & Cooling, Inc., is GRANTED. [Doc.
67]
IT IS FURTHER ORDERED that plaintiff Goodman Distribution, Inc.’s motion for default
judgment against defendant Herb Haaf Heating & Cooling, Inc., is DENIED as moot. [Doc. 66]
IT IS FURTHER ORDERED that plaintiff Goodman Distribution, Inc. is awarded damages
in the amount of Sixty-One Thousand Eight Hundred Fifty Dollars ($61,850.00) against defendant
Herb Haaf Heating & Cooling, Inc..

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An appropriate judgment will accompany this memorandum and order.

CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE
Dated this

13th

day of February, 2013.

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