Mifflinburg Tel., Inc. v. Heidi Criswell, Dale E. Criswell, Wildcat Publications, LLC, 4:14-CV-0612

• Decision Date: 07 September 2017
• Docket Number: No. 4:14-CV-0612,4:14-CV-0612
• Parties: MIFFLINBURG TELEGRAPH, INC., Plaintiff, v. HEIDI CRISWELL, DALE E. CRISWELL, WILDCAT PUBLICATIONS, LLC, Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

MIFFLINBURG TELEGRAPH, INC., Plaintiff,
v.
HEIDI CRISWELL, DALE E. CRISWELL, WILDCAT PUBLICATIONS, LLC, Defendants.

No. 4:14-CV-0612

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

SEPTEMBER 7, 2017

(Judge Brann)

MEMORANDUM OPINION

The instant motion for default judgment presents the thorny task of determining the value of the surviving goodwill in a small business after employees surreptitiously absconded with proprietary customer information.

I. BACKGROUND

Plaintiff, Mifflinburg Telegraph, Inc. filed a complaint on March 31, 2014 against Defendants Heidi Criswell, Dale E. Criswell, and Wildcat Publications, LLC.¹ Mifflinburg Telegraph is a small business located in Mifflinburg, Union County, Pennsylvania, that operated, previously, as both a print shop and a newspaper publisher, and as of 2014, only a print shop. Heidi and Dale Criswell

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are spouses who had been two of only five employees of Plaintiff Mifflinburg Telegraph until their February 3, 2014 resignation from the business.

Heidi Criswell had been a long term employee of Mifflinburg Telegraph when its owner, John Stamm, died in 2013. Heidi Criswell's title was 'primary designer and printer,' but it is widely acknowledged that in the years preceding Stamm's death, while he was ill, she ran the business in his stead.

After Stamm's death, she entered into negotiations with the Stamm Estate to purchase the business for $225,000. Negotiations eventually failed, and in the fall of 2013, unbeknownst to the estate or Mifflinburg Telegraph, Heidi Criswell started a competing business, Wildcat Publications, LLC. Prior to her February 2014 departure from Mifflinburg Telegraph, she began providing customers with re-order forms listing Wildcat Publications contact information where Mifflinburg Telegraph's information had previously appeared. She also misappropriated from Mifflinburg Telegraph its customer list, then subsequently and secretly deleted the customer list from Mifflinburg Telegraph's computers so the business would not be able to use its own customer list. Not only did she delete the customer lists, she also deleted any order history, so that if a customer returned to Mifflinburg Telegraph with a repeat order, Mifflinburg Telegraph could not simply reprint a prior order, but would have to start from scratch and recreate the customer's logo and any other information.

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There are currently three motions pending in this action, one as to each of the three remaining defendants. Mifflinburg Telegraph filed a Motion for Default Judgment as to Wildcat Publications, LLC,² a Motion for Partial Summary Judgment against Heidi Criswell,³ and a Motion for Partial Summary Judgment against Dale E. Criswell.⁴ The instant Memorandum Opinion disposes of the Motion for Default Judgment against Defendant Wildcat Publications, LLC, hereinafter "Wildcat." The pending motions for partial summary judgment will be disposed of by separate Memoranda Opinions and Orders.

The complaint began as a fifty-four page, two-hundred twenty paragraph, eighteen count complaint against six defendants. Ten counts are alleged against Defendant Wildcat.⁵ Jurisdiction is based on two federal causes of action, alleged violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Lanham Act 15 U.S.C. § 1125. The Court is exercising supplemental jurisdiction over the pendant state claims.

What makes resolution of this default judgment motion more complex than the typical default judgment motion is the fact that Wildcat initially retained counsel. Counsel filed an answer to the complaint on behalf of these three

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Defendants.⁶ Thus, the default here is unlike the typical default one sees in federal court where the Defendant simply fails to answer and the default is entered shortly after the date the answer had been due. Here, the default on the part of Wildcat slowly unfolded over time. After a fashion, there was a breakdown of the relationship between counsel and the collective Wildcat Defendants. I eventually granted counsels' motion to withdraw.⁷ In so Ordering, I provided these Defendants with two months, until July 28, 2015, to find replacement counsel. When no counsel entered an appearance, I entered a second Order extending the time one additional month. However, I warned in that Order that:

if the Wildcat defendants do not find counsel by August 28, 2015, approximately ninety days after their original counsel withdrew, no further continuances will be granted to find new counsel. The individual Wildcat defendants, Dale E. Criswell, Heidi Criswell, and Darlene Sharp may proceed pro se, that is to say they will represent themselves. If Wildcat Publications, LLC. does not find counsel by August 28, 2015, entry of default will be made against it. See, e.g., Galtieri-Carlson v.Victoria M. Morton Enterprises, Inc., No. 2:08-CV-01777, 2010 WL 3386473, at *1 (E.D. Cal. Aug. 26, 2010).⁸

Neither Wildcat, nor the Criswells, obtained counsel by August 28, 2015. In fact, nearly two years later, these defendants still have not retained counsel. On

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September 3, 2015, Mifflinburg Telegraph duly moved for entry of default and the Clerk entered default the same date.⁹

On November 6, 2015, Mifflinburg Telegraph filed a motion for default judgment¹⁰ against Wildcat, and an evidentiary hearing was held on December 17, 2015. The motion for default judgment is now granted, for the reasons that follow.

II. ANALYSIS

Because default judgment is being entered as a sanction here, I look both to the rule governing defaults, Federal Rule of Civil Procedure 55, and also to the case law of the United States Court of Appeals for the Third Circuit. First, I turn to the Rules of Civil Procedure.

A. Motion for Default Judgment Standard

Federal Rule of Civil Procedure 55 discusses default and default judgment, the Rule provides in pertinent part:

(a) Entering a Default.

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.

(b) Entering a Default Judgment.

(1) By the Clerk. If the plaintiff's claim is for a sum certain or a sum that can be made certain by computation, the clerk—on the plaintiff's request, with an affidavit showing the amount due—must enter

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judgment for that amount and costs against a defendant who has been defaulted for not appearing and who is neither a minor nor an incompetent person.

(2) By the Court. In all other cases, the party must apply to the court for a default judgment. A default judgment may be entered against a minor or incompetent person only if represented by a general guardian, conservator, or other like fiduciary who has appeared. If the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application at least 7 days before the hearing. The court may conduct hearings or make referrals—preserving any federal statutory right to a jury trial—when, 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

"Courts should look with disfavor upon allowance of judgments by default."¹¹ That said, however, "grant or denial of motion for entry of default judgment is within discretion of trial court; in exercising that discretion the philosophy of these rules favors trial on the merits in contradistinction to judgments by default and court must look to that policy not only when petition to vacate a default judgment is presented but also when approving or denying entry of default."¹² The Honorable Arlin M. Adams, writing for the Third Circuit, explained:

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It is well settled in this Circuit that the entry of a default judgment is left primarily to the discretion of the district court. As Justice Harlan explained in the parallel context of sanctions for failure to prosecute a claim, a trial court's discretion to dismiss a complaint is a power of "ancient origin" that "has generally been considered an 'inherent power,' governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases."¹³

"Once a default has been entered and entry of judgment pursuant to default is sought, the function of the trial court is not to weigh conflicting evidence, but, rather, a court must make sole determination whether allegations of party in whose favor default has been entered are susceptible of proof."¹⁴ Default was entered against Wildcat on September 3, 2015.¹⁵ "Defaults are treated as admissions of the facts alleged, but a plaintiff may still be required to prove that he or she is entitled to the damages sought."¹⁶ "A reasonable calculation should be made by looking at the evidence and the affidavits submitted by the moving party."¹⁷

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"Before entering a default judgment, a court must consider a number of factors."¹⁸ "The Third Circuit . . . has condensed these factors into three main issues: (i) whether the plaintiff will be prejudiced if the default is denied, (ii) whether the defendant has a meritorious defense; and (iii) whether the default was the product of defendant's culpable conduct."¹⁹

First, Mifflinburg Telegraph will be prejudiced if the default is denied. This action has been pending for more than three year. It is a straightforward matter and the time has come for resolution. To delay entry of default any longer is unnecessary and would "detrimentally affect[] their ability to vindicate their rights."²⁰

Second, Wildcat does not have a meritorious defense. "A meritorious defense is presumptively established when the "allegations of defendant's answer, if established on trial would constitute a complete defense to the action."²¹ Wildcat...