Claybar v. Huffman

• Decision Date: 07 December 2015
• Docket Number: CIVIL ACTION 14-0205-WS-C
• Parties: WARREN CLAYBAR, et al., Plaintiffs, v. MICHAEL R. HUFFMAN, et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

WARREN CLAYBAR, et al., Plaintiffs, v. MICHAEL R. HUFFMAN, et al., Defendants.

CIVIL ACTION 14-0205-WS-C

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

December 7, 2015

ORDER

On October 23, 2015, the undersigned entered an Order (doc. 64) imposing the sanction of default against defendant Michael R. Huffman pursuant to Rule 16(f)(1), Fed.R.Civ.P., and the inherent powers of this Court. The October 23 Order fixed deadlines for plaintiffs to submit evidence proving their claimed damages, and for Michael Huffman to respond to same. Plaintiffs made an extensive evidentiary submission - consisting of a memorandum of law, affidavits, spreadsheets, invoices and other exhibits - on November 4, 2015. (See doc. 65.) Despite being served with copies of both the October 23 Order and plaintiffs' November 4 evidentiary submission, Huffman has remained silent on the issue of damages, and his time for responding expired more than 10 days ago. The issues of damages and entry of default judgment against Michael Huffman are now squarely before the undersigned.

I. Relevant Background.

By virtue of his default, defendant Michael Huffman has admitted all well-pleaded factual allegations in the Second Amended Complaint (doc. 22).¹ Those facts deemed admitted include, inter alia, the following: (i) following the DEEPWATER HORIZON oil spill in May2010, an oil-spill response entity called National Response Corporation ("NRC") was tasked with managing cleanup efforts; (ii) in mid-June 2010, NRC requested additional resources from one of its contractors, Northstar Marine, Inc., which lacked the administrative capacity to accommodate the request; (iii) Northstar Marine offered the direct NRC contract to plaintiff Rian Glasscock if he could marshal the necessary resources; (iv) Glasscock, in turn, partnered with plaintiffs Warren Claybar and Halley Moor, as well as defendant Huffman Construction, Inc., to utilize their respective strengths, resources and expertise to perform the NRC direct contract; (v) in exchange for plaintiffs providing resources and services in fulfillment of the NRC direct contract, defendants, Michael R. Huffman and Huffman Construction, Inc., verbally agreed to a profit-sharing arrangement under which defendants would pay each of Glasscock, Claybar and Moor 25% of the net profits from the NRC direct contract; and (vi) notwithstanding their promise and the millions of dollars in profits they received for the NRC direct contract, defendants never paid Glasscock, Claybar and Moor any portion of their agreed-upon shares of such net profits. (See doc. 22, at ¶¶ 9-35.) The Second Amended Complaint specifically alleges that Huffman and Huffman Construction knowingly deceived plaintiffs into providing assistance for the NRC contract, and that defendants never intended to make good on their promise to share profits equally with each of Glasscock, Claybar and Moor. (See id. at ¶¶ 39-41.)

On the strength of these and other factual allegations, plaintiffs asserted claims against Michael Huffman and Huffman Construction for breach of contract, unjust enrichment, conversion, and fraudulent/negligent/reckless misrepresentation. In addition to bringing claims against Michael Huffman individually for making the contested promises and misrepresentations, plaintiffs asserted a claim against him on a theory of piercing the corporate veil, predicated on allegations that Huffman and Huffman Construction had "combined and operated their affairs in such a way as to lose the protection of separate corporate and individual entities." (Id. at ¶ 47.) By Order (doc. 34) dated September 19, 2014, the Court denied Huffman's Rule 12(b)(6) motion and specifically found that the fraud/misrepresentation and piercing the corporate veil causes of action stated cognizable claims for relief against Michael Huffman.² As such, it cannot be seriously questioned - and the Court expressly finds - that theSecond Amended Complaint states actionable claims against Michael Huffman, so as to support entry of a default judgment against him on those causes of action. See generally Graveling v. Castle Mortgage Co., 2015 WL 6847947, *6 (11^th Cir. Nov. 9, 2015) ("A default is warranted only when there is a sufficient basis in the pleadings for the judgment entered - that is, when the factual allegations of the complaint state a claim for relief. ... The requisite factual showing for a default judgment is similar to the factual showing necessary to survive a motion to dismiss for failure to state a claim.") (citations omitted); North American Specialty Ins. Co. v. Southern Reinforcing, LLC, 2014 WL 4322391, *1 (S.D. Ala. Aug. 29, 2014) ("before entering a default judgment for damages, the district court must ensure that the well-pleaded allegations of the complaint actually state a cause of action and that there is a substantive, sufficient basis in the pleadings for the particular relief sought") (citations, internal marks and emphasis omitted).

II. Plaintiffs' Proof of Damages.

Notwithstanding the propriety of default judgment, it remains incumbent on plaintiffs to prove their 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." Fun Charters, Inc. v. Vessel SHADY LADY, Official No. 681969, 2015 WL 789751, *3 (S.D. Ala. Feb. 25, 2015) (citations omitted). "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." Id. (citations and internal marks omitted). Thus, the entry of default against Michael Huffman and the sufficiency of the factual allegations of the Second Amended Complaint to state claims against him do not, in and of themselves, establish plaintiffs' entitlement to any quantum of damages, much less the particular amount recited in the pleadings. Plaintiffs must prove their damages. Of course, such proofneed not be to a level of absolute certainty; however, there must be a sufficient showing that the damages award is not speculative. See, e.g., Atchafalaya Marine, LLC v. National Union Fire Ins. Co. of Pittsburgh, PA, 959 F. Supp.2d 1313, 1327 (S.D. Ala. 2013) ("while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show[s] the extent of the damages as a matter of just and reasonable inference, although the result be only approximate") (citations omitted); Parsons v. Aaron, 849 So.2d 932, 949 (Ala. 2002) (explaining that "[i]n computing damages for breach of contract, a jury need not achieve mathematical precision," as long as the record reveals "some reasonable basis for the amount of its award").

Cognizant of their burden to prove damages by establishing a sound record basis for same, plaintiffs have worked up an extensive evidentiary submission, as well as a memorandum of law to explain their evidence. (See doc. 65.) Again, the well-pleaded factual allegations in the Second Amended Complaint reflect as follows:

"Plaintiffs and Defendants agreed to share equally in the net profits of the Defendants [sic] contract with NRC. In other words, each Plaintiff would keep 25% of the net proceeds of the NRC contract, and Huffman Construction would receive 25% of the net proceeds."

(Doc. 22, ¶ 20.) Plaintiffs have also pleaded that defendants never paid anything under the profit-sharing agreement. (Id., ¶ 22.) Accordingly, each plaintiff's measure of damages is one quarter of the net profits paid to Huffman Construction under the NRC direct contract.

As a matter of contractual interpretation, undefined terms in a contract are given their plain meaning. See, e.g., City of Gadsden v. Boman, 143 So.3d 695, 704 (Ala. 2013) ("Where there is no indication that the terms of the contract are used in a special or technical sense, they will be given their ordinary, plain, and natural meaning.") (citations omitted); In re FFS Data, Inc., 776 F.3d 1299, 1304 (11^th Cir. 2015) ("The plain meaning of a contract's language governs its interpretation under general contract principles.") (citations and internal marks omitted). The plain, ordinary meaning of the terms "net profits" or "net proceeds" would be the total revenue / earnings paid to Huffman Construction under the NRC direct contract, less all costs, expenses, charges and outlays associated with same.³

To establish the net profits received on the NRC direct contract, plaintiffs begin with the Joint Pretrial Document, which contained a stipulation that "[t]he parties agree that the Defendants received gross revenue of $9,159,039.77 under the NRC contract." (Doc. 62, at 14.) Plaintiffs then make an extensive showing (in the form of affidavits, spreadsheets, invoices and other exhibits) of defendants' expenses, costs, charges and outlays associated with performing the NRC direct contract. Careful review of those materials demonstrates to a reasonable certainty that Huffman Construction's costs and expenses for the NRC direct contract consisted of the following: (i) payment of $4,903,479.32 to Jones & Moor, LLC, for vessels, operators, deckhands and materials provided by that firm during the Deepwater Horizon cleanup (Moor Aff. (doc. 65, Exh. B), ¶¶ 3-4, 6-10); (ii) payment of $541,159.59 to Lily Contractors, LLC, for vessels, operators, deckhands and materials provided by that firm during the Deepwater Horizon cleanup (Claybar Aff. (doc. 65, Exh. C), ¶¶ 3-4, 6-8); (iii) payment of $376,561.08 in expenses such as meals and entertainment, repairs and maintenance, supplies, travel expenses, fuel, and so on in connection with performance of the NRC contract (McEwing Aff. (doc. 65, Exh. D), ¶ 10)⁴; and (iv) payment of an agreed 10% finder's fee of $915,903.98 owed to Northstar Marine,as ordered by this Court in related litigation styled Northstar Marine, Inc. v. ...