Alt. Materials v. Monroe
| Docket Number | 5:20-cv-239-AW/MJF |
| Decision Date | 24 April 2023 |
| Parties | ALTERNATIVE MATERIALS, LLC, Plaintiff, v. TIMOTHY W. MONROE, et al., Defendants. |
| Court | U.S. District Court — Northern District of Florida |
1
ALTERNATIVE MATERIALS, LLC, Plaintiff,
v.
TIMOTHY W. MONROE, et al., Defendants.
No. 5:20-cv-239-AW/MJF
United States District Court, N.D. Florida, Panama City Division
April 24, 2023
REPORT AND RECOMMENDATION
MICHAEL J. FRANK, UNITED STATES MAGISTRATE JUDGE
On March 29, 2023, the undersigned conducted an evidentiary hearing to determine the damages stemming from Plaintiff Alternative Materials, LLC's (“AM”), claims of fraudulent misrepresentation and fraud as to Defendant Timothy W. Monroe. For the reasons set forth below, the District Court should enter judgment in favor of AM against Monroe in the amount of $169,935.78, which entails $150,000 in damages and $19,935.78 in prejudgment interest.[1]
I. Background
AM mines and processes agricultural limestone (“aglime”) in Marianna, Florida. Doc. 4 at 5-6 ¶ 18. On June 8, 2020, AM contracted with TCH Construction
Group, Inc. (“TCH”),[2]a corporation of which Monroe is the chief executive officer. Id. at 6 ¶ 21. AM agreed to pay TCH $1,540,000 for TCH to install a shed at AM's quarry in Marianna, under which AM could store and dry aglime. Id. ¶¶ 20-21.
On June 22, 2020, AM made an initial payment of $154,000 to TCH pursuant to the payment schedule set forth in the contract. Id. at 8 ¶ 29. Monroe represented that a portion of the $154,000 would be paid to Akers Building Systems, Inc. (“Akers”), as a down payment on the shed's fabrication. Doc. 54-3 at 3 ¶ 11.
On July 1, 2020, AM and Monroe modified the contract's payment schedule because Monroe fraudulently misrepresented that Akers required an additional down payment of $150,000. Doc. 4 at 8 ¶ 31; Doc. 54-3 at 3 ¶ 13. Based on Monroe's misrepresentation, on July 8, 2020, AM paid $150,000 to TCH. Doc. 4 at 8-9 ¶ 33. Monroe further misrepresented that he transmitted AM's $150,000 payment to Akers for the shed's fabrication. Doc. 54-3 at 4 ¶ 15; Doc. 54-4 at 3 ¶ 12.
The next day, on July 9, 2020, TCH made its first and only payment to Akers in the amount of $110,000. Doc. 54-2 at 5, 7, 11. At some point, Monroe also provided to AM an invoice from Akers and documents indicating that TCH had transmitted money to Akers. Doc. 4 at 10 ¶ 39; Doc. 54-3 at 4-5 ¶ 20. The documents were fraudulent. For example, Monroe altered the invoice from Akers to
indicate that Akers was charging $749,554 for the shed, when in fact Akers was charging only $549,554, which entails a difference of $200,000. Monroe also altered the wire transfer receipt to indicate that TCH had paid Akers $150,000 when TCH actually had paid Akers only $110,000, which entails a difference of $40,000. Doc. 54-3 at 5 ¶ 21; see Doc. 54-2 at 3, 10-11.
TCH never commenced construction of the shed at the quarry site. In August 2020, AM canceled the contract because it was evident that TCH would not complete the project by the agreed-upon deadline, if ever. Doc. 4 at 12 ¶ 48; Doc. 54-3 at 5 ¶ 24; Doc. 54-4 at 4 ¶ 19.
II. Evidentiary Hearing and Exhibits
On March 8, 2023, the District Court entered a default judgment against Monroe as to AM's claims of fraudulent misrepresentation and fraud. Doc. 81.The District Court also ordered the undersigned to conduct an evidentiary hearing to determine the damages stemming from those claims. Id.
On March 29, 2023, the undesigned conducted an evidentiary hearing. Doc. 87. During the hearing, AM presented the testimony of Charles Rouse, AM's operations manager, only as to AM's lost profits resulting from Monroe's fraudulent conduct. AM previously submitted an exhibit list, a witness list, and proposed findings of fact. Doc. 82. On April 4, 2023, AM supplemented its exhibit list with an affidavit from Rouse and copy of Rouse's calculations of AM's lost profits.
Docs. 88, 88-1. Because Rouse's testimony, affidavit, and calculations overlap significantly, the undersigned addresses them together.
During the hearing, AM's counsel asked Rouse what Rouse's “projections” were “for the material tonnage with the drying shed” when AM “came to Northwest Florida.” Rouse testified that the “historical market showed that there were available up to 70, 80 tons per year range [sic] for sales.” Rouse did not explain what he meant by the “historical market.” Rouse also testified at the hearing that “historically” a company such as AM could sell as much aglime as it could produce.
The entirety of Rouse's calculations is set forth below.
(Image Omitted)
Doc. 88-1 at 4. Because Rouse's calculations are ambiguous, three entries warrant further discussion.
First, in the row marked “YTD2023,” Rouse indicates that AM's “Projected Production/Sales in Tons” is 50,000 tons. Perhaps Rouse meant that the 50,000-tons projection was for the entirety of 2023, as opposed to only January 1, 2023 to March 29, 2023. Rouse's testimony, affidavit, and calculations fail to specify this, however, and the undersigned is not free to make guesses about what a party intended to communicate through an exhibit.
Second, Rouse's calculations use the term “Projected Lost Profits 2020 - 2023 Due to Lack of Dry Storage.” Because Rouse had yet to subtract any expenses when he calculated the $1,935,817, the undersigned below refers to this number as AM's “revenue.”
Third, Rouse calculated that AM's production costs for the “lost tonnage” were $930,000. At the evidentiary hearing, Rouse testified that AM expends $6 to produce each ton of aglime. Although it is unclear, it appears that Rouse calculated the “production cost of lost tonnage” as follows: (the quantity of aglime that AM estimates it would have produced between May 2020 and “YTD2023”[3]) x (the cost to produce each ton of aglime). With Rouse's numbers, it appears the calculation would be: 155,000 tons of aglime x $6 per ton = $930,000.
At the hearing, Rouse testified that AM lost $1,935,817 in “revenue” “mainly” because AM did not have a drying shed during the relevant period. Rouse attributed AM's lack of a drying shed to Monroe's fraudulent conduct. See Doc. 88-1 at 1 ¶ 3.
III. Findings of Fact
Based on the allegations in AM's complaint, the testimony elicited at the evidentiary hearing, and the documentary evidence provided by AM, the undersigned makes the following factual findings:
1. On June 8, 2020, AM contracted to pay TCH $1,540,000 to install a shed at AM's quarry in Marianna, Florida. Doc. 4 at 2-3 ¶ 4; Doc. 54-3 at 8-9.
2. The contract contained the following payment schedule:
a. 10% of the total price within ten days of accepting TCH's offer,
b. 50% of the total price within ten days of TCH arriving at the project site, and
c. 40% of the total price within 30 days of TCH completing the project. Doc. 54-3 at 8.
3. On June 18, 2020, the parties agreed to modify the shed's dimensions from “200 feet by 400 feet” to “200 feet by 300 feet.” The parties also agreed that the shed would now be a “‘clear span' building.” Doc. 4 at 7-8 ¶ 28.
4. On June 22, 2020, AM paid $154,000 to TCH under the payment schedule. Id. at 8 ¶ 29.
5. Monroe represented that a portion of the $154,000 payment would be paid to Akers. Doc. 54-3 at 3 ¶ 11.
6. On July 1, 2020, the parties met at the project site and agreed to modify the schedule for AM's remaining payments to the following:
a. $150,000 as an additional down payment to Akers,
b. $450,000 upon completion of the footers, and
c. $786,000, the remaining balance, upon the project's completion. Doc. 4 at 8 ¶¶ 30-31; Doc. 54-3 at 3 ¶ 13.
7. The parties modified the payment schedule because Monroe falsely represented that Akers required a second down payment of $150,000. Doc. 4 at 8 ¶ 31; Doc. 54-3 at 3 ¶ 13.
8. On July 8, 2020, AM paid $150,000 to TCH under the amended payment schedule. Doc. 4 at 8-9 ¶ 33; Doc. 54-3 at 3-4 ¶ 14; Doc. 54-5 at 2.
9. But for Monroe's fraudulent misrepresentations, AM would not have paid TCH the $150,000 discussed in the preceding paragraph.
10. Monroe also fraudulently misrepresented to AM that the entire $150,000 payment was paid to Akers for the shed's fabrication. Doc. 54-3 at 4 ¶ 15; Doc. 54-4 at 3 ¶ 12; Doc. 54-2 at 11.
11. On July 9, 2020, TCH paid only $110,000 to Akers. Doc. 54-2 at 5.
12. On July 11, 2020, AM emailed Monroe and expressed its concern that TCH had not yet started constructing the concrete footers. Monroe represented that TCH needed building permits, but that the project would not be delayed. Doc. 4 at 10 ¶ 38.
13. On July 16, 2020, Akers ordered the shed's fabrication. Doc. 54-2 at 7.
14. On July 17, 2020, AM emailed Monroe and again expressed concerns about TCH's ability to complete the project on time. Doc. 4 at 10 ¶ 40.
15. In response, Monroe requested $450,000. AM did not make that payment. Id.
16. Sometime afterwards, Monroe sent AM copies of an invoice from Akers and a wire transfer to Akers. Doc. 54-3 at 4-5 ¶ 20.
17. Monroe altered the copy of the Akers invoice he provided to AM as follows:
a. Monroe increased the shed's total cost by $200,000 from $549,554 to $749,554.
b. Monroe increased the down payment on the shed by $40,000 from $110,000 to $150,000. Id. at 5 ¶ 21; see Doc. 54-2 at 3, 10-11.
18. Sometime in August 2020, AM canceled the contract after TCH failed to begin construction at the project site. Doc. 54-3 at 5 ¶ 24.
IV. Discussion
Absent a factual basis for damages in the record, a federal court must hold a hearing to determine the appropriate damages upon entry of a default judgment. Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264, 1266 (11th Cir. 2003); Adolph Coors Co. v. Movement Against Racism & the Klan, 777 F.2d 1538, 1543-44 (11th Cir. 1985) (“[A] judgment of default awarding cash damages could not properly be entered ‘without a hearing, unless the amount claimed is a liquidated sum or one capable of mathematical calculation.'”) (quotation omitted). Indeed, “[a] court has an obligation...
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