JACKSON HEWITT INC., v. FINANCIAL TAX CENTRES, INC., et al

Filing 13

OPINION. Signed by Judge Claire C. Cecchi on 4/29/14. (DD, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

JACKSON HEWITT INC.,

Civil Action No.: 13-cv-224

Plaintiff,

OPINION
V.

FINANCIAL TAX CENTRES, INC., ET AL,
Defendants.

CECCHI, District Judge.
This matter comes before the Court on Plaintiff’s motion for default judgment against
Defendant Financial Tax Centres. The Court decides this matter without oral argument pursuant
to Rule 78 of the Federal Rules of Civil Procedure. For the reasons set forth below, the Court
grants Plaintiff’s motion.

I.

BACKGROUND
Defendant Financial has not answered or otherwise responded to the Complaint. Because

of this, the Clerk entered a default as to Financial on August 26, 2013, The following facts, taken
from the complaint, are deemed admitted by Financial due to its default.
431 F3d 162, 165 n6 (3d Cir. 2005) (citing Comdyne I, Inc. v. Corbin, 90$ F.3d 1142, 1149 (3d
Cir. 1990)). Plaintiff entered into three Franchise Agreements with Financial for the operation of
income tax preparation businesses in Iowa. (Compl. ¶{ 8, 17, 23, 30). A representative agreement
was provided to the Court along with the Janofsky Declaration. çç ECF No. 9-3. Financial also
entered into four promissory Notes and one development advance Note in favor of Plaintiff.

(Compl.

¶ 36-40). The Notes were provided to the Court along with the Janofsky Declaration. Scc

ECF No. 9-4, Under the terms of the Notes. all unpaid balances would immediately become due
to Plaintiff upon termination of the Franchise Agreements. (Compi.

¶ 41; ECF No. 9-4). Under the

terms of the Franchise Agreements, Plaintiff granted the right to operate Jackson Hewitt Tax
Service businesses in exchange for payment of certain fees. (Compl. ¶ 43-47; ECF No. 9-3). The
Franchise Agreements state that Plaintiff may terminate the Franchise Agreements for nonpayment
of these fees. (Compi. ¶ 48; ECF No. 9-3). Unpaid sums under both the Notes and the Franchise
Agreements would be subject to the lower of eighteen percent interest or the highest interest
allowed by law on the balance of the Notes until they were paid off in full. (Compl ¶ 47; ECF No.
9-3; ECF No. 9-4).
Financial failed to make the required payments to Plaintiff, and Plaintiff properly
terminated the Franchise Agreements, with the final termination occurring on September 23, 2011.
(Compl. ¶ 49; ECF Nos. 9-5

—

9-7). Plaintiff contends that Financial owes it $366,600.04 and seeks

a final judgment in this amount pursuant to Fed. R. Civ. P. 55(b).
II.

DISCUSSION
A.

Plaintiff Is Entitled To Default

Rule 55 authorizes a district court to enter a default judgment against a properly served
defendant who has failed to answer or respond to the pleadings. Obtaining a default judgment is a
two-step process. First, when a party has failed to plead or otherwise defend, the clerk must enter
that party’s default. Fed, R. Civ. P. 55(a). Once the clerk enters default, plaintiff may move for a
default judgment. Fed R. Civ. P. 55(b). Here, the clerk has entered default, and so the Court will
address Plaintiffs motion on the merits.
In order to award a default judgment. a district court considers the following factors: (1)

whether the plaintiff would suffer prejudice if the default judgment were denied, (2) whether the
defendant has a meritorious defense, and (3) whether the defendanfs own culpable conduct caused
his delay. Chamberlain v. Giampapa. 210 F.3d 154. 164 (3d Cir. 2000)): Emcasco Ins. Co. v.
Sambrick. 834 F.2d 71. 74 (3d Cir. 1987) (Emcasco includes a fourth factor. ‘the effectiveness of
alternative sanctions.”). Because defendant has not appeared in this case, and the Court cannot
determine whether it has a meritorious defense or whether there has been misconduct, the Court
will focus only on whether plaintiff has presented a claim and whether plaintiff will be prejudiced
absent a default judgment. SeeDays Inn Worldwide. Inc. v. Mayu & Roshan. LLC. No. 06-cv1581, 2007 WL 1674485, at *4 (D.N.J. June 8, 2007) (holding that the default judgment inquiry
is truncated when a defendant has not appeared or otherwise answered)
The Complaint clearly states a cause of action for breach of contract. In order to prove its
breach of contract claims, Plaintiff must prove (1) a valid contract; (2) defendant’s failure to
perform; and (3) damages. Sheet Metal Workers Inf1 Ass’n Local Union No. 27, AFL-CIO v. E.P.
Donnelly. Inc., 737 F.3d 879, 900 (3d Cir. 2013). As set forth previously, the uncontested facts in
the Complaint demonstrate that Financial is in breach for nonpayment of fees, causing damage.
Furthermore, Plaintiff is harmed by not receiving payment, and absent default Plaintiff will have
no other means of vindicating their claims against Financial. Accordingly. Plaintiff will suffer
prejudice without default.
B.

Damages

All that remains is the issue of damages. Upon motion, the Court clerk may enter default
judgment if the damages are for a sum certain. Fed. R. Civ. P. 55(b)(1). A claim for damages is
not for a sum certain unless the amount the plaintiff seeks can be calculated without resorting to
extrinsic evidence. Trucking Emp. of N.J. Welfare Fund, Inc. v. Moskowitz Motor Transp., Inc..
j

No. 05-cv-5605, 2007 WL 608436, *3 (D.N.J. Feb. 23. 2007) (quoting KPS, 318 F.3d at 21), Such
situations include “money judgments, negotiable instruments, or similar actions where the
damages sought can be determined without resort to extrinsic proof.” Id. If the damages are not
for a sum certain, the Court must determine damages by conducting a factual inquiry through
evidentiary hearings, detailed affidavits, or documentary evidence. Fed. R. Civ. P. 55(b)(2);
of Trs. of Operating Ent’rs Local 825 Welfare Fund v. Robert Silagy Landscaping Inc., 06-cv1795, 2006 WL 3308578, at *4 (D.N.J. Nov. 13, 2006) (citing KPS Assocs. Inc. v. Designs by
FMC, Inc., 318 F.3d 1. 20 (1st Cir. 2001)).
The Court proceeds under Fed. R. Civ. P. 55(b)(2), since Plaintiff relies upon extrinsic
evidence regarding its accounts. Having considered the damage assessment and calculations of
Mr. Janofsky, the Court concludes that Plaintiff should be awarded $366,600.04. (Janofsky DecI.,

¶ 26).

Mr. Janofsky has submitted ample business records supporting his calculations. (ECF No.

9-9). Having also considered the assessment of reasonable costs and attorney’s fees provided by
Plaintiffs counsel, the Court concludes that Plaintiff should be awarded an additional $6,789.52
in costs and attorney’s fees, pursuant to the agreement. (Dienelt Deci. ¶1 3-8).
For the foregoing reasons, default judgment shall be entered against Defendants.

Date: April 29, 2014

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rAiRE C, CECCHI
United States District Judge

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