Meridian Dental Labs. v. Sonny Chiang
| Decision Date | 07 March 2023 |
| Docket Number | Civil Action 3:21-CV-1189-S-BH |
| Parties | MERIDIAN DENTAL LABORATORIES, LTD., Plaintiff, v. SONNY CHIANG a/k/a SONNY KIA-SANG CHIANG a/k/a KIA-SANG CHIANG a/k/a SONNY KIN SANG CHIANG a/k/a SONNY KINSANG CHIANG a/k/a SONNY KIN-SANG CHIANG a/k/a KIN SANG CHIANG a/k/a JIANSHENG JIANG, Defendant. |
| Court | U.S. District Court — Northern District of Texas |
FINDINGS, CONCLUSIONS, AND RECOMMENDATION
By electronic order of reference dated April 30, 2022 (doc. 24) before the Court is Plaintiff's Motion and Memo in Support of Motion for Default Judgment, filed April 29 2022 (doc. 23). Based on the relevant filings and applicable law, the motion for default judgment should be GRANTED.
On May 24, 2021, Meridian Dental Laboratories, Ltd. (Plaintiff) sued Sonny Chiang, a/k/a Sonny Kia-Sang Chiang a/k/a Kia-Sang Chiang a/k/a Sonny Kin Sang Chiang a/k/a Sonny Kin-sang Chiang a/k/a Sonny Kin-Sang Chiang a/k/a Kin Sang Chiang a/k/a Jiansheng Jiang (Plaintiff) for breach of fiduciary duty, common law fraud, civil theft under the Texas Theft Liability Act (TTLA), conversion, and fraudulent concealment. (doc. 1 at 8-13.)[1]
Defendant was a salaried sales manager for Plaintiff from June 2017 to May 2019. (doc. 29 at 4.) In that role, he marketed and sold dental products to Highland Dental Laboratory, LLC (Customer) and had exclusive responsibility for all interactions with Customer, including sales, billing, and payment collection. (Id.) Beginning in August 2017, Defendant directed Customer to wire payments for dental products purchased from Plaintiff to his personal bank accounts without any authorization or direction from Plaintiff. (Id.) From between August 2017 and April 2019, Customer followed Defendant's instructions and wired more than $400,000 of payments to his bank account, believing each wire was to Plaintiff's bank accounts in payment for goods purchased from it. (Id. at 4-5.) During this period, Defendant made false representations to Plaintiff that Customer had not made payments for purchased products and falsified account statements that misrepresented Customer's account balance. (Id. at 5.)
In May 2019, Plaintiff contacted Customer about its past due balances and was told about the payments wired to Defendant's bank account. (Id. at 6.) Plaintiff removed Defendant as its sales manager and investigated his past dealings with Customer and its account records. (Id.) Plaintiff completed its investigation the following month, and demanded that Defendant return the payments that had been improperly wired to his account; he refused to return any of the stolen payments. (Id.)
On August 17, 2021, Plaintiff filed its first amended complaint, and a summons was issued for Defendant the following day. (docs. 6; 8.) On September 8, 2021, Plaintiff's motion for substituted service on Defendant was granted, and it properly served him through the Texas Secretary of State that same day. (docs. 10; 15.) After Defendant failed to answer or respond to the first amended complaint, it sought and obtained entry of default on November 22, 2021. (docs. 1617.) On January 5, 2022, Plaintiff was granted leave to file its second amended complaint to add all of Defendant's known aliases. (docs. 19; 20.) On January 3, 2023, Plaintiff was ordered to file an amended complaint to address certain deficiencies in its jurisdictional pleadings, and it filed its third amended complaint on January 24, 2023. (doc. 26-27.) Because the complaint still failed to adequately allege Plaintiff's citizenship, Plaintiff was again ordered to file an amended complaint on January 27, 2023. (doc. 28.) On January 30, 2023, Plaintiff filed its fourth amended complaint. (doc. 29.)
Plaintiff seeks compensatory damages against Defendant for breach of fiduciary duty, fraud, and theft under the TTLA. (docs. 23 at 3; 29 at 14-15.)[2] It also seeks to recover attorney's fees and pre- and post-judgment interest. (Id.)
Plaintiff moves for default judgment under Rule 55 of the Federal Rules of Civil Procedure. (See doc. 23.)
Rule 55 sets forth the conditions under which default may be entered against a party, as well as the procedure to seek the entry of default judgment. There is a three-step process for securing a default judgment. See New York Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996). First, a default occurs when a party “has failed to plead or otherwise defend” against an action. Fed.R.Civ.P. 55(a). Next, an entry of default must be entered when the default is established “by affidavit or otherwise.” See id.; New York Life Ins. Co., 84 F.3d at 141. Third, a party may apply to the clerk or the court for a default judgment after entry of default. Fed.R.Civ.P. 55(b); New York Life Ins. Co., 84 F.3d at 141. Here, because Defendants have failed to plead or otherwise defend, and Plaintiff has obtained an entry of default on them, the first two requisites for a default judgment have been met. (docs. 11, 13, 16.) Remaining for determination is whether a default judgment is warranted.
“‘Default judgments are a drastic remedy, not favored by the Federal Rules and resorted to by courts only in extreme situations.'” Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001) (quoting Sun Bank of Ocala v. Pelican Homestead & Sav. Ass'n, 874 F.2d 274, 276 (5th Cir. 1989)). Moreover, “a party is not entitled to a default judgment as a matter of right, even where the defendant is technically in default.” Id. (quoting Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996) (per curiam)). “There must be a sufficient basis in the pleadings for the judgment entered.” Nishimatsu Constr. Co. v. Hous. Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). Only well-pleaded facts, not conclusions of law, are presumed to be true. Id. Default judgment “should not be granted on the claim, without more, that the defendant had failed to meet a procedural time requirement.”Mason & Hanger-SilasMason Co., Inc. v. Metal Trades Council, 726 F.2d 166, 168 (5th Cir. 1984) (per curiam).
The decision to enter a judgment by default is discretionary. Stelax Indus., Ltd. v. Donahue, No. 3:03-CV-923-M, 2004 WL 733844, at *11 (N.D. Tex. Mar. 25, 2004). “Any doubt as to whether to enter or set aside a default judgment must be resolved in favor of the defaulting party.” John Perez Graphics & Design, LLC v. Green Tree Inv. Grp., Inc., No. 3:12-CV-4194-M, 2013 WL 1828671, at *3 (N.D. Tex. May 1, 2013) (citing Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998)). In determining whether the entry of a default judgment is appropriate, courts look to whether default judgment is procedurally warranted, whether the plaintiff's complaint provides a sufficient factual basis for the plaintiff's claim for relief, and whether the requested relief is appropriate. See J & J Sports Prods., Inc. v. Morelia Mexican Rest., Inc., 126 F.Supp.3d 809, 813 (N.D. Tex. 2015) (citing United States v. 1998 Freightliner Vin #: 1FUYCZYB3WP886986, 548 F.Supp.2d 381, 384 (W.D. Tex. 2008) (citing James v. Frame, 6 F.3d 307, 310 (5th Cir. 1993)).
Courts consider numerous factors in deciding whether to grant a motion for default judgment. 10A CHARLES ALAN WRIGHT, ARTHUR R. MILLER, MARY KAY KANE & RICHARD L. MARCUS, FEDERAL PRACTICE AND PROCEDURE § 2685 (3d ed. 1998). The applicable factors include: (1) the amount of money involved; (2) whether there are material issues of fact or issues of substantial public importance at stake; (3) whether the default is technical in nature; (4) the extent of prejudice to the plaintiff due to the delay; (5) whether the grounds for default are clearly established; (6) the harsh effect of a default judgment; (7) whether the default resulted from a good faith mistake or excusable neglect on the defendant's part; (8) whether the plaintiff's actions contributed to delay; and (9) whether the court would be obligated to set aside the default on motion by the defendant. Id.; see Lindsey, 161 F.3d at 893 (citing 10A WRIGHT, MILLER, KANE & MARCUS, FEDERAL PRACTICE AND PROCEDURE § 2685); Stelax Indus., Ltd., 2004 WL 733844, at *11 (same).
Plaintiff seeks $448,716.56 in compensatory damages, $23,523.75 in attorney's fees, and interest. (doc. 23 at 3.) It provides the affidavits of Plaintiff's representative and Customer's owner, which verify the allegations in the fourth amended complaint. (docs. 23-2; 23-3.) They state that Customer had sent 57 wire payments totaling $448,716.56 to Plaintiff, and identify the dates and amounts of each wire payment. (Id.) It also includes the declaration from its counsel in this lawsuit stating that the $23,523.75 in attorney's fees incurred were reasonable and necessary, and billing invoices showing the work performed, hourly rates, and fee amount for each task. (doc. 23-4.)
Under the first factor, although the total amount requested could be considered substantial, that “is not dispositive.” US Green Bldg. Council, Inc. v Wardell, No. 3:14-CV-01541-M-BH, 2016 WL 3752964, at *3 (N.D. Tex. June 17, 2016), adopted by 2016 WL 3766362 (N.D. Tex. July 11, 2016). Regarding the second factor, there are no material issues of fact in dispute as Defendant has failed to file any responsive pleadings in this case.[3] See Nishimatsu Constr. Co., 515 F.2d at 1206 (). Although the default appears to be technical in nature (third factor), Plaintiff is prejudiced and harmed by the continued delay in this case, which is the fourth factor. See United States v. Fincanon, No. 7:08-CV-61-O, 2009 WL 301988, at *2 (N.D. Tex. Feb. 6, 2009) ( that a plaintiff's interests were...
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