National Fitness Company, Inc. v. ProCore Laboratories, LLC

Filing 45

MEMORANDUM OPINION AND ORDER granting 41 Request for Entry of Default and Motion for Default Judgment. (Ordered by Judge Sam A Lindsay on 8/28/2013) (skt)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
NATIONAL FITNESS COMPANY, INC.,
Plaintiff,
v.
PROCORE LABORATORIES, LLC,
Defendant.

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Civil Action No. 3:11-CV-1352-L

MEMORANDUM OPINION AND ORDER
Before the court is Plaintiff National Fitness Company, Inc.’s Request for Entry of
Default and Motion for Default Judgment, filed November 30, 2012. After careful consideration
of the request, motion, record, and applicable law, the court grants Plaintiff National Fitness
Company, Inc.’s Request for Entry of Default and Motion for Default Judgment.
I.

Procedural and Factual Background
National Fitness Company, Inc. (“NFC” or “Plaintiff”) filed this action in the United

States District Court of Nevada against ProCore Laboratories, LLC (“ProCore” or “Defendant”)
on December 14, 2010, contending that diversity of citizenship exists between the parties and
that the amount in controversy, exclusive of interest and costs, exceeds $75,000. Plaintiff
asserted claims for breach of contract, breach of the implied covenant of good faith and fair
dealing, intentional interference with contractual relations, and negligence.
On August 16, 2012, the court permitted counsel for ProCore to withdraw. At that time,
the court advised Defendant that, because it is a limited liability company, it could not appear
pro se and must be represented by a licensed attorney. See Order, August 16, 2012 [Doc. #37]
(citing Donovan v. Road Rangers Country Junction, Inc., 736 F.2d 1004, 1005 (5th Cir. 1984)).
Memorandum Opinion and Order – Page 1

Accordingly, the court ordered Defendant to retain substitute counsel by September 17, 2012.
Id. When Defendant failed to comply with that order, the court gave Defendant one last
opportunity to retain counsel by November 12, 2012. See Order, November 2, 2012 [Doc. #38].
The court expressly warned Defendant that failure to comply with its order would result in “its
claims and/or defenses [being] stricken without further notice, and . . . further proceedings in
accordance with the law, including but not limited to, entry of an order of default, and/or default
judgment.” Id. at 2. The court also ordered Jim Tehan, ProCore’s president, to show cause in
writing no later than November 12, 2012, why Defendant should not be sanctioned for failing to
retain substitute counsel as ordered by the court.

Mr. Tehan was warned that additional

sanctions would be imposed if he failed to comply with the court’s order. Id. (citing Fed. R. Civ.
P. 16(f) & 37(b)(2)(C)). To date, no attorney has made an appearance for ProCore in this case.
On November 16, 2012, the court stated Defendant could not participate in this case
unless it was represented by a licensed attorney. There had been little to no activity in this case
for three months, and that delay was wholly attributable Defendant’s failure to retain counsel.
Defendant failed to comply with two orders requiring it to retain counsel. In the latter order,
Defendant was warned that failure to retain counsel would result in its claims and defenses being
stricken and a default entered against it. Mr. Tehan failed to respond to an order requiring him to
show cause why Defendant should not be sanctioned for failing to retain counsel. Because of
these failures, the court struck Defendant’s First Amended Answer and Original Counterclaim,
filed December 1, 2011. See Donovan, 736 F.2d at 1005; Adonai Commc’ns, Ltd. v. Awstin Invs.,
L.L.C., No. 3:10-CV-2642-L, 2012 WL 899271, at *2 (N.D. Tex. Mar. 16, 2012) (When a
corporate party declines to hire counsel to represent it, the court may properly dismiss its claims
or strike its defenses.). The court further directed Plaintiff to seek entry of default and to file a
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motion for default judgment against Defendant by November 30, 2012. See Order, November
16, 2012 [Doc #40]. NFC complied with the court’s directive and filed its request for entry of
default and motion for default judgment on November 30, 2012.
II.

Discussion
A.

Entry of Default

Pursuant to Federal Rule of Civil Procedure 55(a), “When a Party against whom a
judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure
is shown by affidavit or otherwise, the clerk must enter the party’s default.” The clerk entered a
default against ProCore on November 30, 2012, and the court agrees that the default was
properly entered because ProCore has not answered or otherwise defended or pleaded as directed
by the court. Accordingly, the court will grant NFC’s Request for Entry of Default.
B.

Motion for Default Judgment and Damages

The court specifically struck ProCore’s First Amended Answer and Original
Counterclaim because it failed to answer or otherwise plead or defend, despite being warned on
two occasions by the court. These were appropriate sanctions in light of ProCore’s refusal to
comply with the court’s orders and defend or otherwise plead in this action.
The court accepts as true the well-pleaded allegations of Plaintiff’s Complaint, originally
filed December 14, 2010, in Nevada and later transferred to this district on June 21, 2011. The
court determines that ProCore is not an infant, an incompetent person, or a member of the United
States military. The allegations of the Complaint and the evidence submitted in support of the
motion for default judgment establish that ProCore: (1) breached its contract with NFC, (2)
interfered with NFC’s contractual relations, and (3) was negligent in its dealings with NFC. The
evidence establishes that ProCore’s actions have caused NFC to suffer damages of at least
Memorandum Opinion and Order – Page 3

$718,848. Accordingly, NFC is entitled to and shall recover damages in this amount against
ProCore. The court will award such damages by separate document in its final judgment.
C.

Prejudgment and Postjudgment Interest

NFC has requested prejudgment and postjudgment interest.

In Texas, a claim for

prejudgment interest may be based upon general principles of equity or an enabling statute.
Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549, 552 (Tex. 1985). Under both the
common law and the Texas Finance Code, prejudgment interest begins to accrue on the earlier
of: (1) 180 days after the date a defendant received written notice of a claim, or (2) the date suit
is filed. Tex. Fin. Code Ann. § 304.104 (West 2006). Prejudgment interest is awarded to
compensate fully the injured party, not to punish the defendant, and is considered compensation
allowed by law as additional damages for lost use of the money due between the accrual of the
claim and the date of judgment. See Johnson & Higgins, Inc. v. Kenneco Energy, Inc., 962
S.W.2d 507, 528 (Tex. 1998). The prejudgment interest rate for property damage cases is “equal
to the postjudgment interest rate applicable at the time of judgment.” § 304.103. As the parties’
contract or Agreement does not include a postjudgment rate, section 304.003 of the Texas
Finance Code provides that the postjudgment interest is “five percent a year if the prime rate as
published by the Board of Governors of the Federal Reserve System is less than five percent.”
§ 304.003(c)(2). As of August 28, 2013, the published rate by the Board of Governors is 3.25
percent, which is less than five percent, and the prejudgment rate is therefore five percent per
annum.
Plaintiff presents no equitable considerations for the court to consider, and it is unclear
from the record when or whether Defendant received written notice of a claim from Plaintiff.
The court therefore determines that prejudgment interest should be calculated from the date this
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action was filed on December 14, 2010, to August 28, 2013, the date of entry of the judgment.
The amount of prejudgment interest is therefore $97,290.66.
With respect to an award of postjudgment interest, federal law applies on “any judgment
in a civil case recovered in a district court . . . including actions based on diversity of
citizenship.” Travelers Ins. Co. v. Liljeberg Enters., Inc. 7 F.3d 1203, 1209 (5th Cir. 1993)
(citation omitted).

A court awards postjudgment interest pursuant to 28 U.S.C. § 1961.

Accordingly, postjudgment interest shall accrue at the applicable federal rate, which is currently
.14 percent per annum.
D.

Attorney’s Fees and Costs

NFC requests $50,385.79 in applicable attorney’s fees and costs. The court ordered NFC
to supplement its request for attorney’s fees because the initial documentation was insufficient
for the court to determine the amount of attorney’s fees. Pursuant to the court’s order, Plaintiff
NFC, Inc.’s Supplement to Motion for Clerk’s Entry of Default [and] Motion for Subsequent
Entry of Default Judgment was filed on August 27, 2013. The documentation consists of an
affidavit of Mr. P. William Stark, time records, and billing statements regarding services
performed and costs associated with the performance of those services. Mr. Stark opines that the
fees sought by Plaintiff were necessarily incurred in the prosecution of this action and that the
fees and costs associated with the performance of the services performed were reasonable and
necessary. He further states that the hourly rates charged by Plaintiff’s counsel are well within
the usual and customary rates charged by attorneys in the Dallas County area. The court agrees.
In reviewing the documentation, the court notes that significant portions of the records or
billing statements are redacted, and the court is unable to determine the nature of the services
provided. The court presumes that the redaction was done to maintain attorney-client privilege
Memorandum Opinion and Order – Page 5

and confidentiality; however, redacted documents are of no assistance to the court in performing
its task of determining the reasonableness of attorney’s fees. If Plaintiff is concerned about
divulging privileged or confidential matters, the preferred approach is to file a redacted copy and
submit an unredacted copy ex parte to the court for in camera review. The court has no concerns
with Mr. Stark’s affidavit. Indeed, the affidavit is what convinces the court to make an award of
attorney’s fees and costs; however, the redactions do not allow the court to conduct a thorough
and independent review. When a court lacks sufficient information to determine independently
whether all of the fees requested were reasonably expended, it may exercise its discretion and
reduce the amount requested. See Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 326
(5th Cir. 1995) (reducing a fee award by ten percent for inadequate documentation).
Accordingly, the court believes a reduction of ten percent is appropriate in this case and awards
NFC $45,347.21 in attorney’s fees and costs.
III.

Conclusion
For the reasons herein stated, the court grants Plaintiff National Fitness Company, Inc.’s

Request for Entry of Default and Motion for Default Judgment. By separate document the court
will enter a default judgment in the amount of $861,485.87, which includes $718,848 as
damages; $97,290.66 as prejudgment interest; and $45,347.21 as reasonable attorney’s fees and
costs. The court will issue a final default judgment by separate document as required by Federal
Rule of Civil Procedure 58.
It is so ordered this 28th August, 2013.

_________________________________
Sam A. Lindsay
United States District Judge

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