CDK GLOBAL, LLC v. MIDWEST TRUCK SALES, INC.

Filing 10

OPINION. Signed by Judge Madeline Cox Arleo on 3/3/2017. (ld, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

CDK GLOBAL, LLC, as successor-in-interest
to ADP DEALER SERVICES, INC.,
Civil Action No. 16-2575
Plaintiff,
OPINION
v.
MIDWEST TRUCK SALES, INC., d/b/a
CARS 4 LESS,
Defendant.

ARLEO, UNITED STATES DISTRICT JUDGE
This matter comes before the Court by way of Plaintiff CDK Global, LLC’s (“CDK”)
Motion for Default Judgment against Defendant Midwest Truck Sales, Inc. (“Midwest”) pursuant
to Federal Rule of Civil Procedure 55(b)(1). Dkt. No. 6. For the reasons set forth herein, the
motion is GRANTED IN PART and DENIED IN PART.
I.

BACKGROUND

In this case, CDK claims that Midwest breached a contract between them by failing to pay
for the services that CDK rendered.
CDK provides integrated computer operating systems for car and truck dealerships.
Compl. ¶ 12, Dkt. No. 1.

In early 2012, CDK and Midwest entered into a Master Services

Agreement (“MSA”) with accompanying schedules for various services, licenses, and equipment. 1

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Midwest entered into the agreement with ADP Dealer Services, CDK’s predecessor-in-interest.
Compl. ¶¶ 10, 13. CDK is now the successor-in-interest to all of ADP Dealer Services’ contracts,
including the MSA with Midwest. Id. ¶ 11.
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Id. ¶¶ 13-14. The MSA commenced on March 12, 2012 and ran until the schedules had been
completely terminated. Id. ¶ 15.
The MSA contains provisions governing any defaults and liquidated damages. Section
16.A states that, if Midwest “fail[s] to pay when due any sums of money due hereunder or pursuant
to any of the Schedules hereof” or “default[s] in the performance of any of its other obligations
under this Agreement or any of the Schedules,” then CDK “may, upon written notice thereof, (A)
terminate this Agreement and/or any or all of the Schedules hereto, [and] (B) declare all amounts
due and to become due and/or all of the Schedules hereto immediately due and payable.” Id. ¶ 17.
If that happens, Section 16.B states that CDK can recover liquidated damages equal to the product
of
(i) the number of full monthly periods remaining after the date of
termination until the then end of the applicable Schedule(s) of this
Agreement, as applicable;
(ii) the applicable monthly charges for the applicable Services,
Software, Equipment, Support Services and Maintenance Services
as of the effective time of any such termination; and
(iii) .70 (representing a reduction factor which the parties have
mutually determined to be fair and reasonable in light of the
anticipated harm to be caused by the breach, the difficulties of proof
of loss, and the unavailability of an adequate remedy.).
Id. ¶ 19. The MSA also provides that Midwest is subject to a late charge of 1.5% per month (but
in no event more than the highest interest rate allowed by law), on delinquent payments not paid
within ten days after the applicable invoice. Id. ¶ 22. Finally, Midwest also agreed to reimburse
CDK for any expenses, including reasonable attorney’s fees. Id. ¶ 17.
CSK has complied with all of its obligations under the MSA and schedules, but Midwest
fell delinquent on outstanding invoices. Id. ¶ 23. On January 19, 2016, CDK sent a demand letter
notifying Midwest of its breach, but Midwest refuses to make any payments. Id. ¶¶ 24-25. CDK
claims that Midwest owes $116,903.29 pursuant to the MSA’s default clause.
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On May 6, 2016, CDK filed the instant lawsuit against Midwest, asserting claims for breach
of the MSA and account stated. See generally Compl.
II.

STANDARD OF REVIEW

“The district court has the discretion to enter default judgment, although entry of default
judgments is disfavored as decisions on the merits are preferred.” Animal Sci. Prods., Inc. v. China
Nat’l Metals & Minerals Imp. & Exp. Corp., 596 F. Supp. 2d 842, 847 (D.N.J. 2008).

Before

entering default judgment the court must: (1) determine it has jurisdiction both over the subject
matter and parties; (2) determine whether defendants have been properly served; (3) analyze the
Complaint to determine whether it sufficiently pleads a cause of action; and (4) determine whether
the plaintiff has proved damages. See Chanel, Inc. v. Gordashevsky, 558 F. Supp. 2d 532, 535-36
(D.N.J. 2008); Wilmington Savings Fund Soc., FSB v. Left Field Props., LLC, No. 10-4061, 2011
WL 2470672, at *1 (D.N.J. June 20, 2011). Although the facts pled in the Complaint are accepted
as true for the purpose of determining liability, the plaintiff must prove damages. See Comdyne
I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990).
Additionally, prior to granting default judgment, the Court must make explicit factual
findings as to: (1) whether the party subject to the default has a meritorious defense; (2) the
prejudice suffered by the party seeking default judgment; and (3) the culpability of the party
subject to default. Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177
(D.N.J. 2008).
III.

ANALYSIS

A. Jurisdiction & Service
The Court has both subject matter jurisdiction over this dispute and personal jurisdiction
over Midwest. Subject matter jurisdiction is present here based on diversity since CDK is a limited

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liability company with members in Illinois and Delaware and a principal place of business in
Illinois, Midwest is a Kansas corporation with its principal place of business in Kansas, and the
amount in controversy exceeds $75,000.00. See Compl. ¶¶ 1-2, 4, 27, 29; see also 28 U.S.C. §
1332. Personal jurisdiction over Midwest is present here based on the MSA’s consent-tojurisdiction clause, which provides for jurisdiction and venue in this district. Compl. ¶ 5. CDK
also provided the Court with proof of service on Midwest by serving its designated registered agent
for service of process in Kansas. See Fed. R. Civ. P. 4(h) (permitting service of a corporation by
“delivering a copy of the summons and complaint to . . . any other agent authorized by appointment
or by law to receive service of process . . . .); see also Letter dated Feb. 2, 2017 at 1 and Exs. A-C,
Dkt. No 9. The Court is satisfied that it has jurisdiction to enter default judgment and that Midwest
was properly served.
B. Liability
“A consequence of the entry of a default judgment is that the factual allegations of the
complaint, except those relating to the amount of damages, will be taken as true.” Comdyne I, 908
F.2d at 1149. The Complaint pleads facts which, taken as true, establish Defendant’s liability for
breach of contract.
The MSA is governed by New Jersey law. Compl. ¶ 7. In New Jersey, a plaintiff must
allege three elements to state a cause of action for breach of contract: (1) a valid contract, (2)
breach of that contract, and (3) damages resulting from that breach. Ramada Worldwide Inc. v.
Courtney Hotels USA, LLC, No. 11-896, 2012 WL 924385, at *3 (D.N.J. Mar. 19, 2012). Here,
CDK has alleged that (1) there was a contractual relationship based on the MSA and accompanying
schedules, (2) Midwest breached the MSA when it failed to pay for CDK’s services rendered, and

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(3) CDK suffered damages. CDK therefore has sufficiently alleged a cause of action for breach
of contract.
C. Appropriateness of Default Judgment
Next, the Court must consider (1) whether the party subject to the default has a meritorious
defense; (2) the prejudice suffered by the party seeking default judgment; and (3) the culpability
of the party subject to default. Doug Brady, 250 F.R.D. at 177. The Court concludes that in the
absence of any responsive pleading and based upon the facts alleged in the Complaint, Midwest
does not have a meritorious defense. See Ramada, 2012 WL 924385, at *5. Second, the Court
finds that CDK will suffer prejudice absent entry of default judgment as it would have no other
means of obtaining relief. Finally, the Court finds that Midwest acted culpably as it has been
served with the Complaint, is not an infant or otherwise incompetent, and is not presently engaged
in military service. See Compl. ¶ 2; Nationwide Mut. Ins. Co. v. Starlight Ballroom Dance Club,
Inc., 175 F. App’x 519, 523 (3d Cir. 2006) (holding that a defendant’s failure to respond to
communications from the plaintiff and the court can constitute culpability).
D. Monetary Damages
Although the facts pled in the Complaint are accepted as true for the purpose of determining
liability, the plaintiff must prove damages. See Comdyne I, 908 F.2d at 1149. CDK has not done
so.
CDK seeks judgment in the amount of $116,903.29, plus interest. But CDK does not
provide any evidentiary support for this figure. Its only proof is an unsubstantiated allegation in
the Complaint that Midwest owes that much. See Pl.’s Br. at 8 (citing Complaint only), Dkt. No.
6-1. It has not provided invoices or other documentary evidence supporting the amount owed for
the schedule payments and late fees or any explanation of the figures used to calculate liquidated

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damages. As such, CDK has not yet provided sufficient evidence to justify the damages portion
of its default motion. See Paniagua Grp., Inc. v. Hosp. Specialists, LLC, 183 F. Supp. 3d 591, 606
(D.N.J. 2016) (citing Mapssy Int’l, Inc. v. Hudson Valley Trading Inc., No. 08-3037, 2012 WL
4889229, at *6 (D.N.J. Oct. 11, 2012) (concluding that the plaintiff had asserted a specific damage
amount based on a breach of contract but had “not submitted documentation to support” the
damages claim and that the court would enter a damages judgment “[u]pon receipt of memoranda
and proof of [the] [d]efendant’s outstanding debts”)).
IV.

CONCLUSION

For the reasons set forth above, CDK’s motion for final judgment by default against
Midwest is GRANTED IN PART and DENIED IN PART. CDK shall provide evidence in
support of its damages claim no later than Friday, March 17, 2017.
/s Madeline Cox Arleo___________
MADELINE COX ARLEO
United States District Judge

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