JACKSON HEWITT INC. v. NATIONAL TAX NETWORK, LLC et al
OPINION & DEFAULT JUDGMENT in the sum of $282,480.65 in favor of Plaintiff JACKSON HEWITT INC. against Defendants NATIONAL TAX NETWORK, LLC, KATHRYNE L. WARD. Within thirty days of the date of this Opinion and Order, Plaintiff may file a brief and accompanying documents in support of an application for additional fees incurred since the filing of its original motion. ***CIVIL CASE TERMINATED. Signed by Judge Esther Salas on 9/29/15. (cm )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JACKSON HEWITT INC.,
Civil Action No. 10-5912 (ES)
OPINION & ORDER
NATIONAL TAX NETWORK, LLC, an
Arizona Limited Liability Company; and
KATHRYNE L. WARD, an individual,
SALAS, DISTRICT JUDGE
Pending before the Court are two motions by Plaintiff Jackson Hewitt Inc. Plaintiff’s first
motion seeks reinstatement of an order granting default judgment against Defendant National Tax
Network, LLC (“Defendant National Tax”). (D.E. No. 38). Plaintiff’s second motion seeks
attorneys’ fees, costs, and disbursements against Kathryne L. Ward (“Defendant Ward”). (D.E.
No. 39). Both motions are unopposed. For the reasons set forth below, the Court grants Plaintiff’s
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff is a Virginia corporation operating principally in New Jersey. (D.E. No. 1,
Complaint (“Compl.”) ¶ 1). Defendant National Tax is an Arizona limited liability company
operating principally in Arizona. (Id. ¶ 2). Defendant National Tax entered into three virtually
identical franchise agreements (the “Agreements”) with Plaintiff to operate tax preparation
businesses in Arizona under Plaintiff’s brand. (Id. ¶¶ 9, 31-48). The Agreements also granted
Defendant National Tax usage rights of Plaintiff’s proprietary business software and methods. (Id.
¶¶ 17-18). Defendant Ward, an Arizona citizen, is a guarantor for Defendant National Tax’s
obligations under the Agreements. (Id. ¶¶ 3, 32-35, 38-41, 44-47; Case No. 10-5108, D.E. No 4222, Ex. 1, Schedule C (“Guaranty”) at 4). 1
On November 12, 2010, Plaintiff filed an eleven-count Complaint against Defendants
National Tax and Ward. (D.E. No. 1). The Complaint asserts claims against all Defendants for
federal and common law trademark infringement, federal and common law unfair competition,
and breach of contract, among other claims. (Compl. at 21-24, 26-28). Additionally, the
Complaint asserts a breach of guaranty claim against Defendant Ward. (Id. at 31).
On August 30, 2011, Magistrate Judge Joseph A. Dickson held a status conference with
the parties. (See Case No. 10-5108, D.E. dated Aug. 30, 2011). Thereafter, on September 6, 2011,
Judge Dickson ordered Defendants to answer Plaintiff’s Complaint on or before September 8,
2011, serve initial disclosures on Plaintiff on or before September 15, 2011, and respond to
Plaintiff’s interrogatories and requests for document production on or before September 15, 2011.
(Case No. 10-5108, D.E. Nos. 222, 23 (collectively, “Scheduling Order”)). Judge Dickson also
ordered that Defendant Ward’s deposition take place on or before September 23, 2011. (Id.).
Finally, Judge Dickson warned Defendants that “failure to follow this Order will result in sanctions
pursuant to Fed. R. Civ. P. 16(f) and 37.” (Id.).
Defendant National Tax answered Plaintiff’s Complaint on September 8, 2011. (Case No.
10-5108, D.E. No. 227).
However, Defendant Ward did not answer.
Defendants failed to comply with the remainder of Judge Dickson’s Scheduling Order. (Case No.
10-5108, D.E. No. 230-3, Decl. of John F. Dienelt ¶¶ 7-8). Accordingly, on September 20, 2011,
On November 22, 2010, the instant action was consolidated by the Court, sua sponte, with similar actions
under Consolidated Action No. 10-5108. (D.E. No. 5). An order of deconsolidation was subsequently
entered on May 30, 2012; the deconsolidation order directed the parties to file submissions under the
original docket number for each individual case. (D.E. No. 6). Unless noted otherwise, all citations to
docket numbers refer to the instant civil action.
Plaintiff filed a motion for sanctions and entry of default judgment against Defendants pursuant to
Federal Rule of Civil Procedure 37. (Case No. 10-5108, D.E. No. 230). Defendants did not oppose
On October 16, 2011, before the return date of Plaintiff’s motion, Defendant National Tax
filed a petition in Arizona Bankruptcy Court for Chapter 7 bankruptcy protection, thus triggering
an automatic stay in this case. See 11 U.S.C. § 362; (Case No. 10-5108, D.E. No. 249-3, Ex. B,
Bankruptcy Petition (“Bankruptcy Petition”)). Nonetheless, on November 28, 2011, while the
Bankruptcy Petition was pending, Judge Cavanaugh granted Plaintiff’s motion for default
judgment and sanctions against Defendant National Tax. 2 (Case No. 10-5108, D.E. No. 246,
Opinion (“Op.”); Case No. 10-5108, D.E. No. 247, Order Granting Motion for Default Judgment
and Sanctions (“Order”)). Judge Cavanaugh’s Order also included an award for attorneys’ fees,
costs, and disbursements against Defendants National Tax and Ward. (Order at 2). In granting
the motion, Judge Cavanaugh pointed to Defendants’ willful noncompliance. (Op. at 7-9). As to
Defendant National Tax, Judge Cavanaugh found that National Tax had “repeatedly ignored the
orders of Judge Dickson and this Court.” (Id. at 9). Similarly, as to Defendant Ward, Judge
Cavanaugh found that she had “repeatedly ignored, or sought to evade, the orders of both Judge
Dickson and this Court.” (Id. at 6). Additionally, Judge Cavanaugh observed that Defendant Ward
engaged in “contumacious tactics and [a] pattern of avoidance of responsibility [that] cannot be
tolerated.” (Id. at 4; see also id. at 6 (“[H]er pattern of avoidance, ignoring court orders, and filing
of repetitive and dilatory motions leaves this Court with the firm impression that Ward’s actions
are strategic attempts to delay this litigation.”)).
On April 15, 2014, this case was reassigned from Judge Cavanaugh to Judge Faith S. Hochberg. (D.E.
No. 26). The action was later reassigned to Judge Esther Salas on April 23, 2014. (D.E. No. 29).
On December 14, 2011, Defendant National Tax filed a motion to vacate the default
judgment, arguing that it was entitled to an automatic stay of all proceedings against it pursuant to
11 U.S.C. § 362 of the United States Bankruptcy Code. (Case No. 10-5108, D.E. No. 249, Motion
to Vacate (“Motion to Vacate”); Case No. 10-5108, D.E. No. 249-1, Memorandum in Support of
Motion to Vacate Default Judgment Entered Against Defendant National Tax Network, LLC
(“Def. Motion to Vacate Br.”) at 1, 3-4). Judge Cavanaugh vacated the judgment against
Defendant National Tax in light of the ongoing bankruptcy proceedings. (Case No. 10-5108, D.E.
No. 253, Vacatur Order at 1-2). However, Judge Cavanaugh denied vacatur as to Defendant Ward.
(Id. at 2).
On February 10, 2012, Defendant National Tax’s bankruptcy action was dismissed because
National Tax failed to attend a mandatory creditors meeting. (D.E. No. 38-3, Ex. A, Order
Dismissing Case). Defendant National Tax did not challenge the dismissal, and the bankruptcy
action was officially closed on April 30, 2012. (D.E. No. 38-4, Ex. B).
On January 22, 2015, Plaintiff filed a motion to reinstate the default judgment entered
against Defendant National Tax. (D.E. No. 38). The next day, Plaintiff filed a motion for
attorneys’ fees, costs, and disbursements against Defendant Ward. (D.E. No. 39). These motions
are properly before the Court and ripe for resolution.
Plaintiff’s Motion for Reinstatement of Default Judgment
Plaintiff asserts that the default judgment entered against Defendant National Tax should
be reinstated on the grounds that (1) the dismissal of the bankruptcy case dissolved the automatic
stay and (2) Judge Cavanaugh’s findings in support of the original default judgment award once
again warrant default judgment. (D.E. No. 38-1, Brief in Support of Plaintiff Jackson Hewitt’s
Motion to Reinstate Default Judgment (“Pl. Br. for Reinstatement of Default Judgment”) at 3-5).
First, the Court addresses the dismissal of the bankruptcy proceeding against Defendant
National Tax and its effect on the instant civil action. Congress intended “the dismissal of a
[bankruptcy] case . . . ‘to undo the bankruptcy case as far as practicable, and restore all property
rights to [their original] position’” before the bankruptcy proceedings. Ingrid Malat Irrevocable
Trust v. Sur. Title Corp., No. 10-0002, 2010 WL 3732983, at *3 (D.N.J. Sept. 16, 2010) (quoting
In re Nagel, 245 B.R. 657, 662 (D. Ariz. 1999)). A bankruptcy case’s termination “invite[s] the
continuation of whatever non-bankruptcy proceedings were already in motion.” Id. Accordingly,
“when a [bankruptcy] case is dismissed, the stay is terminated,” and “creditors are free to exercise
their rights in the debtor’s assets.” Id. at *4 (internal quotation marks and citation omitted); see
also 11 U.S.C. § 362(c)(2)(B) (providing that the automatic stay ends when the bankruptcy case
is dismissed). Given the dismissal of Defendant National Tax’s bankruptcy case, the automatic
stay in the instant case is no longer in effect. Thus, Plaintiff is free to exercise its rights in
Defendant National Tax’s assets and can seek reinstatement of Judge Cavanaugh’s Order granting
Next, the Court addresses whether Plaintiff is actually entitled to reinstatement of the
default judgment entered against Defendant National Tax. Notably, Defendant National Tax never
contested the merits of the default judgment award when seeking to vacate Judge Cavanaugh’s
Order. Rather, Defendant National Tax’s motion to vacate was based solely on the fact that its
bankruptcy proceedings triggered an automatic stay in the case. (Def. Motion to Vacate Br. at 34). To date, Defendant National Tax has failed to comply with Judge Dickson’s Scheduling Order
and Plaintiff’s discovery requests. (See Pl. Br. for Reinstatement of Default Judgment at 4-5).
Because Judge Cavanaugh’s findings in support of the original default judgment award remain
applicable, the Court concludes that Plaintiff is entitled to reinstatement of the default judgment
against Defendant National Tax.
Plaintiff’s Motion for Attorneys’ Fees, Costs, and Disbursements
Plaintiff also seeks $282,480.65 in attorneys’ fees, costs, and disbursements against
Defendant Ward. 3 In particular, Plaintiff seeks $281,840.65 in attorneys’ fees and $640.00 in costs
and disbursements. (Pl. Br. for Attorneys’ Fees at 6-7). As noted above, Judge Cavanaugh’s Order
granting default judgment and sanctions against Defendants National Tax and Ward specified that
Plaintiff was entitled to attorneys’ fees, costs, and disbursements in an amount to be determined in
further proceedings. (Order at 2). Judge Cavanaugh never vacated his Order with respect to
Defendant Ward. Accordingly, the Court need only determine whether Plaintiff’s requested
attorneys’ fees, costs, and disbursements are reasonable.
The party seeking attorneys’ fees has the burden of proving that the requested fees are
reasonable. See Hensley v. Eckerhart, 461 U.S. 424, 433 (1983) (finding that a fee petitioner must
submit evidence supporting hours worked and rates claimed); see also Pub. Interest Research Grp.
of N.J., Inc. v. Windall, 51 F.3d 1179, 1185 (3d Cir. 1995) (“The starting point in determining a
reasonable hourly rate is the attorneys’ usual billing rate, but this is not dispositive.”). Redundant,
excessive, or unnecessary fees are not reasonable. Hensley, 461 U.S. at 434. Courts have
The instant motion is nearly identical to the motion for attorneys’ fees that Plaintiff filed on January 27,
2012, following Judge Cavanaugh’s Order granting default judgment and sanctions. (See Case No. 105108, D.E. No. 288). The January 27, 2012 motion was filed under Case No. 10-5108 and administratively
terminated in August 2012. (Case No. 10-5108, D.E. No. 333). On December 8, 2014, the Court held a
telephone conference and directed Plaintiff to re-file the instant motion on this docket. (D.E. No. 35). The
motion does not include fees and costs incurred since the filing of the January 2012 motion. (See D.E. No.
39-1, Brief in Support of Plaintiff Jackson Hewitt Inc.’s Application for Attorneys’ Fees, Costs, and
Disbursements (“Pl. Br. for Attorneys’ Fees”) at 1 n.2).
discretion in determining the amount of a fee award. Id. at 437; Pub. Interest Research Grp., 51
F.3d at 1184.
Here, Plaintiff has met its burden of producing evidence supporting the hours and rates
claimed by its attorneys. Plaintiff submitted billing records itemizing the time spent litigating this
action; these billing records list the attorneys’ hours and rates and detail the services performed on
Plaintiff’s behalf. (D.E. Nos. 39-3, 39-7). In support of its motion, Plaintiff also submitted the
declarations of John F. Dienelt, its lead counsel, and James S. Coon, its local counsel. (D.E. No.
39-2, Declaration of James S. Coons in Support of Application for Attorneys’ Fees, Costs, and
Disbursements (“Coons Decl.”); D.E. No. 39-6, Declaration of John F. Dienelt in Support of
Application for Attorneys’ Fees, Costs, and Disbursements (“Dienelt Decl.”)). Furthermore,
Plaintiff submitted a 2011 National Law Journal Billing Survey, which sets forth a national
sampling of law firm billing rates. (D.E. No. 39-13). Having considered the declarations of
Plaintiff’s counsel and compared the 2011 survey to the billing rates claimed, the Court finds that
the attorneys’ rates are reasonable.
The Court also finds that the hours billed by Plaintiff’s counsel are not redundant,
excessive, or unnecessary. The hours claimed are particularly reasonable in light of Defendant
Ward’s “contumacious tactics,” her “pattern of avoidance of responsibility,” and her “filing of
repetitive and dilatory motions.” (Op. at 4, 6). According to Plaintiff, such tactics required
Plaintiff “to incur substantial attorneys’ fees over and above what otherwise would have been
necessary to resolve this case.” (Pl. Br. for Attorneys’ Fees at 5; see also Dienelt Decl. ¶ 6).
Where, as here, the plaintiff has demonstrated that its requested fees are reasonable, “[t]he
burden then shifts to the party opposing the fee to contest the reasonableness of the hourly rate
requested or the reasonableness of the hours expended.” See Apple Corps. v. Int’l Collectors Soc’y,
25 F. Supp. 2d 480, 485 (D.N.J. 1998). The adverse party must challenge a requested fee award
if it wants a court to reduce the award, as courts will not do so sua sponte. Interfaith Cmty. Org.
v. Honeywell Int’l, Inc., 426 F.3d 694, 711 (3d Cir. 2005) (“The court may not reduce an award
sua sponte; rather, it can only do so in response to specific objections made by the opposing
party.”); see also Stair v. Thomas & Cook, No. 06-4454, 2009 WL 1635346, at *2 (D.N.J. June
10, 2009) (“Once the party seeking fees provides evidence of the hours worked and the rate
claimed, the burden shifts to its adversary to contest, with sufficient specificity, the reasonableness
of the hourly rate or the reasonableness of the hours expended.” (internal quotation marks
Significantly, Defendant Ward never opposed Plaintiff’s requested fee award.
incumbent on Defendant Ward to challenge Plaintiff’s requested award if she seeks a reduction of
the award, as the Court will not do so sua sponte. See Interfaith Cmty. Org., 426 F.3d at 711;
Stair, 2009 WL 1635346, at *2. Because Plaintiff has satisfied its burden of proving that its
claimed attorneys’ fees are reasonable and because Defendant Ward never opposed Plaintiff’s
motion, the Court concludes that Plaintiff is entitled to its requested attorneys’ fees in full. Thus,
the Court awards Plaintiff $281,840.65 in fees.
As noted above, Plaintiff also seeks $640.00 in costs and disbursements. In support of its
motion, Plaintiff submitted a Bill of Costs indicating that it incurred $350.00 in filing fees and
$290.00 in “[f]ees for service of summons and subpoena.” (D.E. No. 39-5, Ex. C). Having
reviewed Plaintiff’s submissions, the Court concludes that Plaintiff is entitled to $640.00 in costs
Finally, Plaintiff requests leave to supplement its motion and supporting declarations to
seek additional attorneys’ fees, costs, and disbursements incurred since the filing of the original
motion in January 2012. (Pl. Br. for Attorneys’ Fees at 1 n.2). The Court grants Plaintiff’s request
and directs Plaintiff to submit a brief explaining why it is entitled to additional attorneys’ fees,
costs, and disbursements. Plaintiff has thirty days from the date this Opinion and Order is entered
on the docket to file its brief and accompanying documents.
For the foregoing reasons, the Court grants Plaintiff’s motions.
Accordingly, IT IS on this 29th day of September 2015,
ORDERED that Plaintiff’s motion for reinstatement of default judgment against
Defendant National Tax, (D.E. No. 38), is GRANTED; and it is further
ORDERED that Plaintiff’s motion for attorneys’ fees, costs, and disbursements against
Defendant Ward, (D.E. No. 39), is GRANTED; and it is further
ORDERED that Plaintiff is awarded attorneys’ fees in the amount of $281,840.65; and it
ORDERED that Plaintiff is awarded costs and disbursements in the amount of $640.00;
and it is further
ORDERED that, within thirty days of the date of this Opinion and Order, Plaintiff may
file a brief and accompanying documents in support of an application for additional fees incurred
since the filing of its original motion.
Esther Salas, U.S.D.J.
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