ASPEN GROUP, INC. et al v. HIGHER EDUCATION MANAGEMENT GROUP, INC..
Filing
12
OPINION/ORDER granting re 9 MOTION for Default Judgment as to Defendant Higher Education Management Group, Inc. pursuant to FRCP 55(b)(1) filed by ASPEN GROUP, INC., ASPEN UNIVERSITY, INC., DEFAULT JUDGMENT in the sum of $772,793.00 in favor of Pltfs., ASPEN GROUP, INC. against Deft., HIGHER EDUCATION MANAGEMENT GROUP, INC. ***CIVIL CASE TERMINATED. Signed by Judge Esther Salas on 9/29/15. (DD, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ASPEN GROUP, INC. and ASPEN
UNIVERSITY, INC.,
Plaintiffs,
v.
HIGHER EDUCATION
MANAGEMENT GROUP, INC.,
Defendant.
:
:
:
:
:
:
:
:
:
:
:
:
:
:
Civil Action No. 14-7194 (ES)
OPINION & ORDER
SALAS, DISTRICT JUDGE
Before the Court is a motion for default judgment pursuant to Federal Rule of Civil
Procedure 55(b)(2) by Plaintiffs Aspen Group, Inc. and Aspen University, Inc. (collectively,
“Aspen” or “Plaintiffs”). (D.E. Nos. 9, 111). The motion is unopposed. Having considered
Plaintiffs’ submissions, the Court grants Plaintiffs’ motion for default judgment.
I.
FACTS
On or about March 30, 2008, Aspen University and Higher Education Management Group
(“HEMG”) entered into a written agreement (the “March Agreement”) for the sale of 100 online
academic courses for the sum of $455,000. (D.E. No. 9-3, March 30, 2008 Marketing Agreement
(“Mar. Agmt.”), App. A). The March Agreement provided a term of five years for HEMG to pay
Aspen University $455,000. (Id.; D.E. No. 1, Complaint (“Compl.”) ¶ 7; see also D.E. No. 9,
1
D.E. No. 11 is Plaintiffs’ Notice of Motion, which was not included in Plaintiffs’ initial application,
D.E. No. 9.
1
Declaration of Michael Mathews in Support of Application for Default Judgment (“Mathews
Decl.”) ¶ 8).
On or about December 1, 2008, Aspen University and HEMG entered into a second written
agreement (the “December Agreement”) for the sale of twenty-four early childhood education
videos for the sum of $600,000. (D.E. No. 9-5, December 1, 2008 Marketing Agreement (“Dec.
Agmt.”) ¶¶ 1-2, App. A). The December Agreement provided a term of five years for HEMG to
pay Aspen University $600,000. (Id.; Compl. ¶ 8; see also Mathews Decl. ¶ 10).
Patrick Spada (“Spada”) is a resident and citizen of New Jersey. (Compl. ¶ 4). Spada is
the founder of Aspen University and served as its Chief Executive Officer and as chairman of its
Board of Directors until 2011. (Id.). Plaintiffs allege that Spada is also the founder, president, and
majority shareholder of HEMG. (Id. ¶ 4). Spada signed both agreements on behalf of Aspen
University and Betty Bednarski, HEMG’s vice president, signed on behalf of HEMG. (See Mar.
Agmt. at 3; Dec. Agmt. at 3).
The total amount due to Aspen University under the March and December Agreements is
$1,055,000. (Compl. ¶ 9). As of September 16, 2011, HEMG paid $282,207, leaving a balance
due to Aspen University of $772,793 (the “Amount Due”). (Id. ¶ 10).
On or about September 16, 2011, Aspen University and HEMG entered into a Pledge
Agreement (the “Pledge Agreement”), whereby HEMG admitted and acknowledged that it still
owed Aspen University the Amount Due. (Id. ¶ 11). In order to secure the repayment of the
Amount Due, HEMG granted Aspen University a security interest in 772,793 shares of Series C
Preferred Stock of Aspen University that were held by HEMG (“HEMG’s Pledged Shares”). (Id.).
Plaintiffs allege that the Pledge Agreement also provided that if there was “any controversy or
2
claim arising out of” the breach or enforcement of the Pledge Agreement, the prevailing party
would be entitled to reasonable attorneys’ fees, costs, and expenses. (Id.).
On or about March 13, 2012, Aspen Group acquired Aspen University and became its
corporate parent pursuant to a reverse merger transaction (the “Reverse Merger”). (Compl. ¶ 12).
Upon the closing of the Reverse Merger, HEMG’s Pledged Shares converted to 654,850 shares of
Aspen Group common stock. (Id. ¶ 12).
On or about April 4, 2012, Aspen Group and HEMG entered into a letter agreement (the
“Letter Agreement”) for the sale and transfer of stocks whereby, in relevant part, HEMG’s
president, Spada, admitted and acknowledged that HEMG still owed the Amount Due to Aspen
University pursuant to the March and December Agreements. (D.E. No. 9-7, April 4, 2012 Letter
Agreement (“Ltr. Agmt.”) ¶ 6). Aspen Group agreed to extend the due date for full payment of
the Amount Due from December 1, 2013, to September 30, 2014. 2 (Compl. ¶ 13; Mathews Decl.
¶ 14). Plaintiffs claim that HEMG failed to pay Aspen any portion of the Amount Due. (Compl.
¶ 14).
On November 18, 2014, Plaintiffs commenced this action seeking to recover payments
under the March and December Agreements signed by Defendant HEMG. (D.E. No. 1, Compl.).
On January 7, 2015, Defendant’s agent, Incorp Services, Inc., was served with a copy of
the Summons and Complaint. (D.E. No. 5). On January 15, 2015, Defendant was served with a
copy of the Summons and Complaint through the New Jersey Department of Treasury. (D.E. No.
6). On February 13, 2015, the Clerk of the Court entered default against Defendant pursuant to
Federal Rule of Civil Procedure 55(a) for failure to appear, plead, or otherwise defend in this case.
2
Pursuant to the Letter Agreement, the 654,850 shares of Aspen common stock pledged by HEMG continue
to be pledged to secure performance of the obligation to pay the amount due, $772,793. (Ltr. Agmt. ¶ 6).
3
(D.E. No. 8). Thereafter, Plaintiffs filed the instant motion seeking default judgment. (D.E. No.
9).
II.
LEGAL STANDARD
“Before granting a default judgment, the Court must determine (1) whether there is
sufficient proof of service, (2) whether a sufficient cause of action was stated, and (3) whether
default judgment is proper.” Teamsters Health & Welfare Fund of Phila. & Vicinity v. Dubin
Paper Co., No. 11-7137, 2012 WL 3018062, at *2 (D.N.J. July 24, 2012) (internal citations
omitted). A party seeking default judgment is not entitled to relief as a matter of right; the Court
may enter default judgment “only if the plaintiff’s factual allegations establish the right to the
requested relief.” Ramada Worldwide Inc. v. Courtney Hotels USA, L.L.C., No. 11-896, 2012 WL
924385, at *3 (D.N.J. Mar. 19, 2012) (quoting Nautilus Ins. Co. v. Triple C. Const. Inc., No. 102164, 2011 WL 42889, at *4 (D.N.J. Jan. 6, 2011) (internal quotation marks omitted)).
In order to determine whether granting default judgment is proper, the Court must consider
the following factors: “(1) prejudice to the plaintiff if default is denied, (2) whether the defendant
appears to have a litigable defense, and (3) whether defendant’s delay is due to culpable
conduct.” Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000). A meritorious defense
is one that, “if established at trial, would completely bar a plaintiff’s recovery.” Teamsters Health,
2012 WL 3018062, at *4 (citing Foy v. Dicks, 146 F.R.D. 113, 116 (E.D. Pa. 1993)). Furthermore,
a defendant’s culpable conduct in allowing default is a relevant consideration for a district court.
Farnese v. Bagnasco, 687 F.2d 761, 764 (3d Cir. 1982).
III.
JURISDICTION
Before entering a default judgment as to a party “that has not filed responsive pleadings,
‘the district court has an affirmative duty to look into its jurisdiction both over the subject matter
4
and the parties.’” Ramada Worldwide, Inc. v. Benton Harbor Hari Ohm, L.L.C., No. 08–3452,
2008 WL 2967067, at *9 (D.N.J. July 31, 2008) (internal citation omitted).
A. Subject Matter Jurisdiction
“The district courts shall have original jurisdiction of all civil actions arising where the
matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is
between citizens of different States . . . .” 28 U.S.C. § 1332(a). Plaintiffs are Delaware
corporations with their principal executive offices in Denver, Colorado. (Compl. ¶¶ 1, 2).
Defendant HEMG is a Nevada corporation with its principal place of business in Cedar Knolls,
New Jersey. (Compl. ¶ 3). Thus, complete diversity exists between the citizenship of the Plaintiffs
and Defendant. Additionally, the amount in controversy exceeds $75,000, exclusive of interest,
costs, disbursements, and attorneys’ fees. (Compl. ¶ 5).
B. Personal Jurisdiction
Aspen has “the burden of proving personal jurisdiction, [but it] can satisfy that burden with
a prima facie showing.” See HICA Educ. Loan Corp. v. Morse, No. 12-2785, 2012 WL 3757051,
at *2 (D.N.J. 2012) (internal citations omitted). Aspen alleges that Defendant’s principal place of
business is in Morris County, New Jersey, and a substantial portion of the transactions and conduct
forming the basis of this dispute occurred in this District. (Compl. ¶¶ 5, 6). Additionally,
Defendant was served in the State of New Jersey on January 15, 2015, pursuant to N.J.S.A. §
2A:15-30.1(b). (See D.E. No. 6; see also N.J.S.A. § 2A:15-30.1(b)). Therefore, this Court has
personal jurisdiction over Defendant.
IV.
DISCUSSION
First, the Court concludes that Defendant was properly served. On January 7, 2015,
Defendant’s agent was personally served with a copy of the Summons and Complaint at Incorp
5
Services, Inc. in Henderson, Nevada. (See D.E. No. 5). Additionally, on January 15, 2015,
Defendant was served with a copy of the Summons and Complaint through the New Jersey
Department of Treasury. (D.E. No. 6). 3
Second, the Court finds that Plaintiffs sufficiently stated a cause of action for breach of
contract against HEMG. In New Jersey, a plaintiff must allege three elements to state a breach of
contract claim: “(1) a valid contract, (2) breach of that contract, and (3) damages resulting from
that breach.” Ramada, 2012 WL 924385, at *3. Wholly accepting the factual contentions in the
Complaint as true, HEMG entered into two valid agreements with Plaintiffs for the sale of online
and video educational courses. (Compl. ¶¶ 7-8; Mar. Agmt.; Dec. Agmt.). Furthermore, HEMG
breached its obligations under both the March and December Agreements by failing to timely pay
the Amount Due to Plaintiffs. Indeed, Defendant acknowledged in the Pledge Agreement and
Letter Agreement that it still owed Plaintiffs the Amount Due. (Compl. ¶¶ 11, 13; Ltr. Agmt. ¶ 6).
Accordingly, Plaintiffs were damaged by the breach in the amount of $772,793. (Compl. ¶¶ 9-10,
14).
Finally, the Court must determine whether default judgment is proper. To do so, the Court
must address “(1) prejudice to the plaintiff if default is denied, (2) whether the defendant appears
to have a litigable defense, and (3) whether defendant’s delay is due to culpable conduct.”
Chamberlain, 210 F.3d at 164. First, the Court determines that “Plaintiff[s] will be prejudiced if
the default judgment is not granted because Defendant failed to comply with its financial
3
Under New Jersey law, “process in any action in any court of this State directed to the business may be
served on the State official or agency, if: (1) the business entity has failed to register or re-register as
required by law; or (2) the business entity has failed to maintain a registered address or a registered agent
in this State for service of process, as required by law.” See N.J.S.A. § 2A:15-30.1(b). As detailed in the
affidavit of service, after attempting to serve Defendant three times at its registered address and once at an
address developed by investigation, Plaintiffs served the Complaint on Defendant via substituted service
with the New Jersey Department of Treasury. (D.E. No. 6).
6
obligations pursuant to” the Agreements. Howard Johnson Int’l, Inc. v. BKD Investments, L.L.C.,
No. 13-7574, 2015 WL 1469703, at *4 (D.N.J. Mar. 30, 2015). Additionally, if a default judgment
is not entered, Plaintiffs will continue to be harmed “because [they] will not be able to seek
damages for [their] injuries due to defendant’s continuing refusal” to participate in this case.
Ramada, 2012 WL 924385, at *5 (citing Newman v. Axiom Worldwide, No. 06-5564, 2010 WL
2265227, at *5 (D.N.J. June 2, 2010)). Second, Defendant does not have a litigable defense
because it entered into two valid agreements with Aspen University and subsequently failed to
meet its obligations under those Agreements. (See Mar. Agmt.; Dec. Agmt.). Additionally,
Defendant has not filed anything with the Court; thus, there is nothing in the current record to
indicate any possible defenses. See Teamsters Health, 2012 WL 3018062, at *4.
Lastly,
Defendant’s delay is due to culpable conduct because copies of the Summons and Complaint were
served upon Defendant’s agent and with the New Jersey Department of Treasury, and Defendant
has failed to respond to or defend against Plaintiffs’ claims. See Ramada, 2012 WL 924385, at *5
(“The Court presumes that Defendants acted culpably because they have ‘failed to answer, move,
or otherwise respond.’”) (citing Stonebridge Bank v. Nita Props., L.L.C., No. 09-5145, 2011 WL
380759, at *6 (D.N.J. Jan. 31, 2011)). Therefore, the Court concludes that default judgment is
proper.
In addition to the Amount Due, Plaintiffs seek “interest, costs, disbursements, and any other
relief the Court deems just and proper.” (Mathews Decl. ¶ 17). However, Plaintiffs have not
supplied any information to the Court regarding the calculation of interest, costs, or disbursements.
Therefore, Plaintiffs’ request for interest, costs, and disbursements is denied without prejudice.
7
V.
CONCLUSION
Accordingly, it is on this 29th day of September 2015,
ORDERED that Plaintiffs’ motion for default judgment, (D.E. No. 9), against Defendant
Higher Education Management Group is hereby GRANTED; and it is further
ORDERED that judgment is entered against Defendant Higher Education Management
Group in the amount of $772,793.00; and it is further
ORDERED that Plaintiffs are permitted to submit adequate evidence documenting any
additional interest, costs, or disbursements, within fourteen days of this Opinion.
The Clerk of Court shall terminate Docket Entries 9 and 11.
SO ORDERED.
s/ Esther Salas
Esther Salas, U.S.D.J.
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?