Federal Insurance Company v. Wallace et al
Filing
16
ORDER granting 11 Motion for Default Judgment as to Margaret Wallace; It is ORDERED that judgment be entered on behalf of Plaintiff and against Defendant in the amount of $844,552.70. All of the John Doe Defendants are hereby DISMISSED WITHOUT PREJUDICE. A copy of this order was forwarded to the parties on 3/5/15. Signed by District Judge Raymond A. Jackson and filed on 3/4/15. (tbro)
FiLED
IN THE UNITED STATES DISTRICT COURT
MAR -4 2015
FOR THE EASTERN DISTRICT OF VIRGINIA
CLERK, U S
Norfolk Division
FEDERAL INSURANCE COMPANY,
Plaintiff,
CIVIL ACTION NO. 2:13cv690
v.
MARGARET WALLACE,
And
JOHN DOES I-X,
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiff Federal Insurance Company ("Federal Insurance")'s Motion
for Default Judgment against Defendants Margaret Wallace ("Wallace") and John Does I-X ('"the
John Doe Defendants"). ECF No. 11. Defendant did not answer the complaint and has made no
filings in this case. The Court held a hearing on this matter on March 2, 2015, at which
Defendant Wallace appeared. This matter is now ripe for judicial determination. For the reasons
stated herein, Plaintiffs Motion for Default Judgment is GRANTED. It is ORDERED that
judgment be entered on behalf of Plaintiff and against Defendant Wallace only, in a total amount
of $844,552.70. The John Doe Defendants are all DISMISSED.
I. FACTUAL AND PROCEDURAL HISTORY
On December 6, 2013, Plaintiff Federal Insurance Company filed a Complaint against
Defendant Margaret Wallace and several unknown Defendants alleging (1) Fraud; (2)
Conversion; and (3) Misappropriation of Funds. Defendant was an employee of Harris Connect,
a fundraising and data solutions company, where she worked in the customer service department.
; COURT
Over time, Harris Connect discovered that Defendant Wallace had issued false refunds to her
personal credit cards. As a result of Harris Connect's claim, Federal Insurance paid Harris
Connect in the amount of $844,552.70. Plaintiff alleges that Defendants made intentional and
knowing misrepresentations, omissions, and concealments with the intent to induce reliance and
defraud Harris Connect.
According to a Status Report Plaintiff submitted, Defendant was found guilty of 35
counts of embezzlement on March 10, 2014. Defendant Wallace was sentenced in the Circuit
Court of the City of Chesapeake to (according to the Notice filed by Plaintiff) 105 years with 90
years suspended. ECF No. 8.
On March 20, 2014, the Summons and Complaint were served on Defendant Wallace.
Defendant failed to fire an Answer or otherwise defend this action, or to serve a copy of any
Answer or other defense upon Plaintiff, Plaintiffs agent, or Plaintiffs attorney of record.
On October 29, 2014, the Clerk of the United States District Court for the Eastern District
of Virginia entered default against Defendants. ECF No. 10.
On December 11, 2014, Plaintiff filed the instant Motion for Default Judgment, ECF No.
11. Plaintiff attached an affidavit and a Supplemental Roseboro Warning to its Motion.
On January 9, 2015, Plaintiff filed a Motion for a Hearing on the Default Judgment
Motion, ECF No. 12.
On March 2, 2015, the Court held a hearing on Plaintiffs Motion. Defendant Wallace
was present at the hearing. Because Defendant Wallace is currently incarcerated, the Court
ordered the Virginia Department of Corrections to transport Defendant Wallace to the courthouse
for a hearing on the Motion. ECF No. 14. At the hearing, Defendant admitted knowledge of this
action and that she had never filed a responsive pleading. Hear'g Tr. at 3. Defendant Wallace
has no objection to the Court granting Plaintiffs Motion. Id. at 7.
II. LEGAL STANDARD
The Federal Rules of Civil Procedure require the clerk to enter default against a party
from whom affirmative relief is sought when that party has "failed to plead or otherwise defend"
its case. Fed. R. Civ. P. 55(a). When a plaintiffs claim is not for a sum certain, as in this case,
the plaintiff must apply to the Court for default judgment, and if the party against whom the
judgment is sought has appeared previously, that party must be served with written notice at least
seven days prior to any hearing. Fed. R. Civ. P. 55(b)(2). Further, Rule 55(b)(2) provides that:
The court may conduct hearings or make referrals—preserving any federal statutory right
to a jury trial—when, to enter or effectuate judgment, it needs to:
(A) conduct an accounting;
(B) determine the amount of damages;
(C) establish the truth of any allegation by evidence; or
(D) investigate any other matter.
"Upon default, the well-pled allegations in a complaint as to liability are taken as true,
although the allegations as to damages are not." S.E.C. v. Lawbaugh, 359 F. Supp. 2d 418, 422
(D. Md. 2005). A plaintiffs complaint is well-pleaded under the Federal Rules of Civil
Procedure when it "contains sufficient factual matter, accepted as true, to 'state a claim to relief
that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Ad.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Defaultjudgments are to be granted sparingly, with consideration to be given to, among
other factors, the question of whether a less severe sanction would suffice. See, e.g., Lolatchy v.
ArthurMurray, Inc., 816 F.2d 951, 953-54 (4th Cir. 1987); United States v. Moradi, 673 F.2d
725, 727-28 (4th Cir. 1982). The Court is certainly mindful of the Fourth Circuit's strong
preference that defaults be avoided and claims disposed of on their merits. Colleton Preparatory
Acad, Inc. v. Hoover Universal, Inc., 616 F.3d 413, 417 (4th Cir. 2010) (citing Tazo, Inc. v.
Director, Office of Workers Comp. Program, U.S. Dep't ofLabor, 895 F.2d 949, 950 (4th Cir.
1990); Consolidated Masonry & Fireproofing, Inc. v. Wagman Constr. Corp., 383 F.2d 249, 251
(4th Cir. 1967)). When a district court enters default judgment, however, the decision is
committed to the sound discretion of the court and shall be reviewed only for abuse of discretion.
Lolatchy, 816 F.2d at 953-54.
Because a default judgment order may dispose of a matter, the Court must first satisfy
itself that it has jurisdiction over the case. See Arbaugh v. Y&HCorp., 546 U.S. 500, 514 (2006)
("First, 'subject-matter jurisdiction, because it involves a court's power to hear a case, can never
be forfeited or waived.' Moreover, courts ... have an independent obligation to determine
whether subject-matter jurisdiction exists, even in the absence of a challenge from any party."
(citations omitted)); In re Kirkland, 600 F.3d 310, 315 (4th Cir. 2010) ("Subject matter
jurisdiction cannot be forfeited or waived, and can be raised by a party, or by the court sua
sponte, at any time prior to final judgment."). A plaintiff may bring suit in federal court only if
the matter involves a federal question arising "under the Constitution, laws or treaties of the
United States," 28 U.S.C. § 1331, or if "the matter in controversy exceeds the sum or value of
$75,000, exclusive of interests and costs, and is between citizens of different States." 28 U.S.C.
§ 1332(a)(1).
III. DISCUSSION
A. The John Doe Defendants
Before ruling on the Motion for Default Judgment, the Court finds it appropriate that all
of the John Doe Defendants be DISMISSED. In the Fourth Circuit, "John Doe suits are only
permissible against 'real, but unidentified defendants.'" Chidi Njoku v. Unknown Special Unit
Staff 217 F.3d 840, (4th Cir. 2000) (citing Schiffv. Kennedy, 691 F.2d 196, 197 (4th Cir. 1982)).
The designation of John Doe is generally not favored in federal courts and is only appropriate
"when the identity of the alleged defendant is not known at the time the complaint is filed and
the plaintiff is likely to be able to identify the defendant after further discovery." Id. (citing
Roper v. Grayson, 81 F.3d 124, 126 (10th Cir. 1996); Gillespie v. Civiletti, 629 F.2d 637, 642
(9th Cir. 1980)). When dismissed, the John Doe defendants should be dismissed without
prejudice. Id. As the Court noted on the record during the Motion Hearing, "[t]his Court does
not permit counsel to go forward with John Does." Hear'g Tr. at 7. Counsel expressed no
objections to the Court's dismissal of the John Doe Defendants. Hear'g Tr. at 7-8.
The Court
"will sua sponte dismiss all of the John Does in this case." Hear'g Tr. at 7. Therefore, all John
Doe Defendants are DISMISSED WITHOUT PREJUDICE.
B. Jurisdiction
The Court next addresses jurisdiction. This Court has subject matter jurisdiction pursuant
to 28 U.S.C. § 1332 because there is complete diversity and the amount in controversy exceeds
$75,000. Plaintiff is an Indiana corporation with its principal place of business in New Jersey.
Defendant Wallace is an individual who is a citizen and resident of the Commonwealth of
Virginia. The amount in controversy is at least $844,552.70. This Court has personal
jurisdiction over Defendants because Defendant Wallace is a Virginia resident and the actions
giving rise to the action took place in the Commonwealth of Virginia. Venue is proper in the
United States District Court for the Eastern District of Virginia pursuant to 28 § U.S.C. 1391
(b)(2) because a substantial part of the events or admissions giving rise to this action occurred in
the Eastern District of Virginia and because Defendant Wallace resides in Virginia.
C. Default Judgment
Having satisfied itself that jurisdiction and venue are proper, the Court now turns to the
merits of the Motion. It is clear that Defendant Wallace is in default, as she never filed an
answer or other responsive pleading. Plaintiffs Motion for Default Judgment should be granted
because Plaintiff has met each of the five prongs of Rule 55(b) and because Defendant Wallace
has failed to plead or otherwise defend this action. The Complaint and the Motion demonstrate
that (1) the Clerk of the United States District Court for the Eastern District of Virginia entered
default against Defendants Margaret Wallace et al., on October 29, 2014; (2) default was entered
to the Complaint filed by Federal Insurance Company on December 6, 2013; (3) Defendant is not
an infant or an incompetent person; (4) Defendant is not in the military; and (5) notice was
served on Defendant on December 11, 2014, by ECF filing and through the United States mail.
Further, Defendant admits knowledge of this action and she admits that she never filed
any pleadings. See Trial Tr. at 3.1 Defendant further admits that she has no objection to the
Court going forward on the Motion, that she has no defenses, and that she does not want leave to
make any filings. Id. at 7. Even though this is a civil case and Defendant has no right to
counsel, the Court questioned this pro se Defendant about her ability to fully understand the
nature of these proceedings. Defendant testified under oath that she has never been
1Under questioning by the Court:
Q.
...But did you read the paperwork that they sent you the first time? You said you didn't
know how to respond; did you read it?
A.
Q.
A.
Q.
A.
Yes, 1 did.
So you were aware they were trying to get a judgment against you?
Oh, yeah, I was aware of that.
And you were aware you were supposed to respond. You're under oath now.
Q.
Well, I didn't know I was supposed to respond. As I said, I didn't know how to do the
mailing. Once I got to Chesapeake jail, I didn't know how to do the mailing out.
Ok, so you never responded to anything?
A.
No, I didn't
Hear'g Tr. at 3.
institutionalized for any type of addiction or illness, and that she has more than a high school
education (one year of college). Hear'g Tr. at 9. Defendant further testified multiple times that
she received, read, and understood Plaintiffs filings. Hear'g Tr. at 1, 2, 3, 4, 5. Finally,
Defendant raises no defenses in this action and is ready to "go forward and get it—everything
over with..." Hear'g Tr. at 5.
Plaintiff prevails on the substance of its claims because of its pleadings, an attached
exhibit, and the affidavit submitted by Ms. Dorothy DeScala. ECF No. 11-2. Ms. DeScala is a
Regional Recovery Specialist for Federal Insurance Company. Id. Ms. DeScala states that
Harris Connect made a claim under a policy of insurance issued by Federal Insurance Company
in the amount of 844,552.70 caused by theft committed by Defendant Margaret Wallace when
she was a Harris Connect employee. DeScala further notes that Federal Insurance Company paid
Harris Connect $839,552.70 (there exists a $5,000.00 deductible, which accounts for the
difference between the loss amount and the amount paid). Id. Plaintiff also attached a copy of
the executed partial release and assignment for settlement in the amount of 844,552.70. Id.
Plaintiff has therefore sufficiently demonstrated pursuant to Rule 55(b) that default judgment is
appropriate. For these reasons, Plaintiffs Motion for Default Judgment is GRANTED.
C. Damages
Having found that judgment should be entered in favor of Plaintiff, the Court must next
determine the appropriate relief. Although entry of default represents a concession and the
factual allegations in the Complaint may be taken as true, a default does not concede the amount
demanded. Damages must therefore be proven to the Court, although the Court retains discretion
to determine how the amount of damages may be appropriately shown. E.g.,Monge v. Portofino
Ristorante, 751 F. Supp. 2d 789, 794-96 (D. Md. 2010).
Plaintiff submits that it has incurred $844,552.70 in actual damages as a result of
Defendant Wallace's fraud and misappropriation of funds. The Court finds Plaintiffs figure
supported by the evidence presented and ORDERS judgment to Federal Insurance Company in
the amount of $844,552.70.
IV. CONCLUSION
Plaintiffs Motion for Default Judgment against Defendant Margaret Wallace is
GRANTED. It is ORDERED that judgment be entered on behalf of Plaintiff and against
Defendant in the amount of $844,552.70. All of the John Doe Defendants are hereby
DISMISSED WITHOUT PREJUDICE.
The Clerk is DIRECTED to send a copy of this Memorandum Opinion and Order to the
parties.
IT IS SO ORDERED.
Norfolk, Virginia
March U ,2015
Raymond A. Jackson
United Mates District Judge
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