Clark v. JPMorgan Chase Bank

• Decision Date: 28 March 2022
• Docket Number: 20-24326-CIV-SCOLA/GOODMAN
• Parties: LATOYA CLARK, et al., Plaintiffs/Counter-Defendants, v. JPMORGAN CHASE BANK, N.A., Defendant/Counter-Plaintiff/ Third-Party Plaintiff, v. KABBAGE, INC. Third-Party Defendant.
• Court: U.S. District Court — Southern District of Florida

LATOYA CLARK, et al., Plaintiffs/Counter-Defendants, v. JPMORGAN CHASE BANK, N.A., Defendant/Counter-Plaintiff/ Third-Party Plaintiff, v. KABBAGE, INC. Third-Party Defendant.

No. 20-24326-CIV-SCOLA/GOODMAN

United States District Court, S.D. Florida, Miami Division

March 28, 2022

REPORT AND RECOMMENDATIONS ON DEFENDANT/COUNTER-PLAINTIFF/THIRD-PARTY PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT

JONATHAN GOODMAN UNITED STATES MAGISTRATE JUDGE

This Cause is before the Undersigned on Defendant/Counter-Plaintiff/Third-Party Plaintiff JPMorgan Chase Bank, N.A.'s (“Chase”) Motion for Default Judgment and Motion for Discharge [ECF No. 93], which United States District Court Judge Robert N. Scola referred to me. [ECF No. 94]. The Undersigned has reviewed the motion and other relevant portions of the record.^[1] For the reasons given below the Undersigned respectfully recommends that the District Court grant Chase's motion.

I. Background

On October 21, 2020, Plaintiffs Latoya Clark, Luxx Lashes By Lay, LLC, Tasteunup, LLC, and Squeeze-It Corp (“Clark” or “Plaintiffs”) filed a Civil Rights and Breach of Contract action against Chase, alleging multiple causes of actions based on Chase's purported racist motivations in refusing to allow Plaintiffs' access to their bank account funds that were obtained via Paycheck Protection Program (“PPP”)^[2] loans. [ECF No. 1].

Chase filed an Answer containing its Affirmative Defenses and an Interpleader and Declaratory Judgment Counterclaim against Clark and Third-Party Defendant Kabbage, Inc. (“Kabbage”). [ECF No. 20]. Chase's interpleader counterclaim alleges “Chase has no interest in the funds.” It asked the Court to determine whether Clark or Kabbage, “the entity that originated the PPP loans, ” should be entitled to the funds in Clark's Chase bank accounts. Id. As part of its Interpleader claim, Chase also sought discharge from the case. Id.

In response, Clark filed a Motion to Dismiss Chase's Counterclaim, alleging, among other things, that Chase is not a “mere innocent stakeholder, ” there is no possibility of “multiple exposure, ” and that Chase failed to state a valid claim for declaratory relief. [ECF No. 31]. The District Court entered an Order granting in part and denying in part Clark's motion. [ECF No. 54]. In the Order, the District Court dismissed Chase's declaratory judgment claim because it was duplicative of Chase's interpleader claim and denied Chase's request to be discharged because it could still be independently liable to Clark on her claims. Id. The Court denied Clark's request to dismiss Chase's interpleader claim and also granted Chase's request to deposit the funds into the Court's registry. Id.

Kabbage, meanwhile, filed an Answer to Chase's Counterclaims. [ECF No. 42]. Further, following the Court's Order, Chase deposited the interpleaded funds into the Court's registry. [ECF Nos. 74; 74-1].

Clark, however, never filed an answer to Chase's remaining interpleader counterclaim. In fact, since entry of the Order granting in part and denying in part her motion to dismiss, Clark has participated in the litigation in only a limited fashion, attending only two discovery hearings scheduled by the opposing parties. [ECF Nos. 56; 60; 65-67; 72]. During this time, Clark's counsel filed multiple motions to withdraw because “Clark ha[d] not responded to telephone calls or emails” regarding the prosecution of her and the companies' claims. [ECF Nos. 64; 68; 71]. The Court granted the request to withdraw on September 8, 2021. [ECF No. 76].

The three corporate Plaintiffs were instructed to obtain counsel by September 28, 2021, and Clark, individually, was instructed to either retain counsel or file a written notice of intent to represent herself by the same date. Id. Neither Clark nor the three corporate Plaintiffs retained counsel or filed any document indicating a desire to proceed forward with the litigation.

Judge Scola then directed Chase to submit a Motion for Entry of Clerk's Default by October 21, 2021. [ECF No. 80]. Chase complied [ECF No. 82] and the Clerk entered a Default [ECF No. 83]. After the Clerk's entry of a default, Chase filed both a Motion to Dismiss Plaintiffs' Complaint with Prejudice [ECF No. 92] and the instant motion [ECF No. 93]. Judge Scola granted Chase's Motion to Dismiss Plaintiffs' Complaint with Prejudice due to “Plaintiffs' action for failure to prosecute and failure to comply with this Court's orders.” [ECF No. 98]. Judge Scola noted that, despite this dismissal, “Chase's counterclaim and interpleader action remain pending.” Id.

II. Legal Standard

Federal Rule of Civil Procedure 12(a)(1)(B) states that a party has 21 days from the date of service to respond to a counterclaim. “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.” Fed.R.Civ.P. 55(a).

A party may then apply to the District Court for a default final judgment. Fed.R.Civ.P. 55(b)(2); Alfa Corp. v. Alfa Mortg. Inc., 560 F.Supp.2d 1166, 1173 (M.D. Ala. 2008).

A court may not enter a final default judgment based solely on the existence of a clerk's default. Id. at 1174. Instead, a court is required to examine the allegations to see if they are well-pleaded and present a sufficient basis to support a default judgment on the causes of action. Id. (citing Nishimatsu Constr. Co., Ltd. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). Only those factual allegations that are well-pleaded are admitted in a default judgment. Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987).

A court may conduct a hearing on a motion for default judgment when, in order “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.” Fed.R.Civ.P. 55(b)(2); see also Tara Productions, Inc. v. Hollywood Gadgets, Inc., 449 Fed.Appx. 908, 911-12 (11th Cir. 2011) (finding that Rule 55(b)(2) “leaves the decision to hold an evidentiary hearing to the court's discretion.”).

III. Analysis

Chase's Interpleader claim alleges the following pertinent facts: (1) Chase has no interest in the interpleaded funds; (2) Chase is a citizen of Ohio, Plaintiffs are citizens of Florida, and Kabbage is a citizen of Georgia; (3) the interpleaded funds at issue are more than $500.00 (specifically, $1, 012, 203.00); and (4) Plaintiffs have made a claim of entitlement to the funds and Kabbage, as the PPP lender, may also be entitled to the funds. [ECF No. 20]. According to Chase, these facts, as admitted by Plaintiffs via their default, combined with its deposit of the interpleaded funds into the court registry, constitute sufficient evidence to support a default judgment on their interpleader counterclaim. [ECF No. 93].

“Interpleader is the means by which an innocent stakeholder, who typically claims no interest in an asset and does not know the asset's rightful owner, avoids multiple liability by asking the court to determine the asset's rightful owner.” In re Mandalay Shores Coop. Hous. Ass'n, Inc., 21 F.3d 380, 383 (11th Cir. 1994).

The federal interpleader statute grants district courts “original jurisdiction of any civil action of interpleader or in the nature of interpleader” only when two or more adverse claimants of diverse citizenship assert claims to a “note, bond, certificate, policy of insurance, or other instrument of value or amount of $500 or more” and the plaintiff has deposited the subject funds or property into the court registry. 28 U.S.C. § 1335; see also McBride v. McMillian, 679 Fed.Appx. 869, 871 (11th Cir. 2017).

The well-pleaded allegations of Chase's interpleader counterclaim, as detailed above by the Undersigned, combined with Chase's deposit of the funds into the court registry, establish all the necessary requirements for proper federal interpleader. In fact, this type of situation -- a non-interested bank seeking to resolve possibly adverse claims to funds in an account -- is a common interpleader action. See, e.g., Southtrust Bank of Fla., N.A. v. Wilson, 971 F.Supp. 539, 542 (M.D. Fla. 1997) (bank properly brought interpleader action as innocent stakeholder when two adverse parties laid claims to the funds); In re Mandalay Shores Co-op. Hous. Ass'n, Inc., 21 F.3d 380, 383 (11th Cir. 1994) (discussing fees and finding that “[b]anks, too, sometimes resort to interpleader in their normal course of business”); Am. Univ. of the Caribbean v. Tien, No. 04-20834-CIV, 2011 WL 13151200, at *1 (S.D. Fla. Aug. 18, 2011) (bank brought interpleader action so court could resolve competing claims to funds held in a depository account).

Moreover, this Court has already acknowledged the sufficiency of Chase's interpleader claim at the motion to dismiss stage, stating that,

the Court finds that Chase has met its burden at the pleading stage. Chase has sufficiently stated that it is possibly subject to claims from the Plaintiffs and from Kabbage. Indeed, the Plaintiffs have filed their claims and Kabbage, in its response to the counterclaim, admitted that it may be entitled and seek return of some of the funds at issue. (ECF No. 42 at ¶ 40.)

[ECF No. 54].

Having found that Chase has established an evidentiary foundation for its interpleader claim, the Undersigned turns next to its prayers for relief. First, Chase requests a default judgment and a ruling that Plaintiffs have forfeited their right to the interpleaded funds. [ECF No. 93].

It is well settled that default judgment is available in an interpleader action where a claimant who has been properly served fails to file a response. Sun Life Assur....