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Fun Charters, Inc. v. Vessel Shady Lady

United States District Court, S.D. Alabama, Southern Division

February 25, 2015

FUN CHARTERS, INC., Plaintiff,
The Vessel SHADY LADY, Official No. 681969, her engines, etc., in rem, Defendant.


WILLIAM H. STEELE, Chief District Judge.

This matter comes before the Court on plaintiff's Motion for Default Judgment (doc. 34). After receiving notice of the Motion ( see doc. 35), potential claimants Adrenaline Charters, LLC and Edward Sims have elected to remain silent. The Motion, as to which no opposition has been filed, is now ripe.

I. Procedural History.

Plaintiff, Fun Charters, Inc., filed its Complaint (doc. 1) against the Vessel SHADY LADY, U.S. Official Number 681969, her engines, etc., in rem (the "Vessel"), on June 9, 2014. Well-pleaded factual allegations of the Complaint reflect that the Vessel's owner, nonparty Adrenaline Charters, LLC, became indebted to Fun Charters in December 2012 pursuant to a Promissory Note secured by a First Preferred Ship Mortgage on the Vessel. The Complaint further alleged that Adrenaline defaulted on its indebtedness to Fun Charters, and that it also breached its obligations as to the Vessel pursuant to the Preferred Ship Mortgage. On the strength of these allegations, Fun Charters requested that the Vessel be condemned and sold in these proceedings to pay off the Note's unpaid balance (which totaled $129, 195.20 in principal and interest as of the filing of the Complaint); plus an additional $25, 762.66 in expenditures incurred by Fun Charters upon Adrenaline's failure to fulfill Vessel-related obligations under the Preferred Ship Mortgage; plus interest accruing at a per diem rate of $21.23; plus expenses and attorney's fees.

The Clerk's Office issued a Warrant for Arrest in Rem (doc. 7), after which the U.S. Marshals Service arrested the Vessel on June 12, 2014 and placed it in possession of a substitute custodian. ( See doc. 11.) Actual notice of this action was given to Adrenaline and all lien claimants who had filed notices of lien; moreover, public notice was published in The Press-Register. ( See doc. 16.) Neither Adrenaline nor any other claimant filed a verified statement of claim pursuant to Supplemental Rule C(6)(A), or otherwise took meaningful action to defend against Fun Charters' in rem claims against the Vessel. On September 16, 2014, the Court entered a Decree Ordering Sale of Vessel (doc. 24) providing for the sale of the Vessel at public auction by the U.S. Marshals Service. Such auction took place on October 22, 2014, with Fun Charters submitting the highest (and only) bid in the sum of $70, 000. ( See doc. 28.) Pursuant to the Order of Sale, Fun Charters was authorized to credit bid for the Vessel, up to a maximum amount of $184, 631.50, without being required to deliver cash or earnest money to the Marshal.

On December 19, 2014, the undersigned entered an Order (doc. 31) granting plaintiff's Motion for Default and directing the Clerk of Court to enter a Clerk's Entry of Default against the Vessel pursuant to Rule 55(a), Fed.R.Civ.P., for failure to appear or otherwise defend. A copy of the December 19 Order was served on Adrenaline Charters, LLC; however, despite a full and fair opportunity, that entity has not come forward to oppose or object to these default proceedings against the Vessel. Accordingly, on January 30, 2015, Fun Charters filed its Motion for Default Judgment (doc. 34), seeking entry of default judgment against the Vessel in the amount of $188, 954.48. Fun Charters furnished notice of its Motion to Adrenaline Charters, but that entity has neither appeared nor contested entry of default judgment against the Vessel in the specified amount.

II. Propriety of Entry of Default Judgment.

In this Circuit, "there is a strong policy of determining cases on their merits and we therefore view defaults with disfavor." In re Worldwide Web Systems, Inc., 328 F.3d 1291, 1295 (11th Cir. 2003); see also Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S. and Canada, 674 F.2d 1365, 1369 (11th Cir. 1982) ("Since this case involves a default judgment there must be strict compliance with the legal prerequisites establishing the court's power to render the judgment."). Nonetheless, it is well established that a "district court has the authority to enter default judgment for failure... to comply with its orders or rules of procedure." Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985).

Where, as here, defendant and putative claimants have failed to appear or otherwise respond to a pending lawsuit for more than eight months, entry of default judgment is appropriate. Indeed, Rule 55 itself provides for entry of default and default judgment where a defendant "has failed to plead or otherwise defend." Rule 55(a), Fed.R.Civ.P. In a variety of contexts, courts have entered default judgments against defendants who have failed to appear and defend in a timely manner following proper service of process.[1] In short, "[w]hile modern courts do not favor default judgments, they are certainly appropriate when the adversary process has been halted because of an essentially unresponsive party." Flynn v. Angelucci Bros. & Sons, Inc., 448 F.Supp.2d 193, 195 (D.D.C. 2006) (citation omitted). That is precisely what has happened here. Despite service of process on the Vessel (and notice to all known claimants, including Adrenaline Charters) in June 2014, no claims were made and no entity or person stepped forward to defend against this action.

That said, a defendant's failure to appear and a Clerk's Entry of Default do not automatically entitle a plaintiff to a default judgment in the requested (or any) amount. After all, a default is not "an absolute confession by the defendant of his liability and of the plaintiff's right to recover, " but is instead merely "an admission of the facts cited in the Complaint, which by themselves may or may not be sufficient to establish a defendant's liability." Pitts ex rel. Pitts v. Seneca Sports, Inc., 321 F.Supp.2d 1353, 1357 (S.D. Ga. 2004); see also Nishimatsu Const. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1204 (5th Cir. 1975) (similar); Cotton States Mut. Ins. Co. v. Sellars, 2008 WL 4601015, *5 (M.D. Ala. Oct. 15, 2008) ("the failure to defend does not automatically entitle a plaintiff to recover"); Descent v. Kolitsidas, 396 F.Supp.2d 1315, 1316 (M.D. Fla. 2005) ("the defendants' default notwithstanding, the plaintiff is entitled to a default judgment only if the complaint states a claim for relief"). Stated differently, "a default judgment cannot stand on a complaint that fails to state a claim." Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1370 n.41 (11th Cir. 1997); see also Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009) ("A default defendant may, on appeal, challenge the sufficiency of the complaint, even if he may not challenge the sufficiency of the proof.").

The threshold question, then, is whether the Complaint states a viable claim for relief. The Court readily concludes that it does. After all, the well-pleaded factual allegations of the Complaint (which are deemed admitted pursuant to Rule 55) identify in extensive detail the subject Promissory Note, Adrenaline's default of same, plaintiff's security interest in the Vessel pursuant to the First Preferred Ship Mortgage, Adrenaline's breach of its obligations under said Preferred Ship Mortgage, and plaintiff's contractual right to recover against the Vessel, in rem, pursuant to the express terms of the Promissory Note and the Preferred Ship Mortgage.

Because the Complaint is sufficient to state a claim against the Vessel, the Court finds that entry of default judgment is appropriate pursuant to Rule 55, given the failure to appear after service of process and the sufficiency of the well-pleaded factual allegations of the Complaint (which are now deemed admitted) to establish liability of the defendant Vessel to plaintiff.

III. Amount of Damages.

Notwithstanding the propriety of default judgment, it remains incumbent on Fun Charters to prove damages. "While well-pleaded facts in the complaint are deemed admitted, plaintiffs' allegations relating to the amount of damages are not admitted by virtue of default; rather, the court must determine both the amount and character of damages." Virgin Records America, Inc. v. Lacey, 510 F.Supp.2d 588, 593 n.5 (S.D. Ala. 2007); see also Eastern Elec. Corp. of New Jersey v. Shoemaker Const. Co., 652 F.Supp.2d 599, 605 (E.D. Pa. 2009) ("A party's default does not suggest that the party has admitted the amount of damages that the moving party seeks."). Even in the default judgment context, "[a] court has an obligation to assure that there is a legitimate basis for any damage award it enters." Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264, 1266 (11th Cir. 2003); see also Adolph Coors Co. v. Movement Against Racism and the Klan, 777 F.2d 1538, 1544 (11th Cir. 1985) (explaining that damages may be awarded on default judgment only if the record adequately reflects the basis for award); Everyday Learning Corp. v. Larson, 242 F.3d 815, 818 (8th Cir. 2001) (affirming lower court's decision not to award damages on default judgment, where ...

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