Pharma Funding, LLC v. FLTX Holdings, LLC

Decision Date08 March 2021
Docket NumberCase No. 20-21103-Civ-WILLIAMS/TORRES
PartiesPHARMA FUNDING, LLC, Plaintiff, v. FLTX HOLDINGS, LLC et al., Defendants.
CourtU.S. District Court — Southern District of Florida

PHARMA FUNDING, LLC, Plaintiff,
v.
FLTX HOLDINGS, LLC et al., Defendants.

Case No. 20-21103-Civ-WILLIAMS/TORRES

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

March 8, 2021


REPORT AND RECOMMENDATION ON PLAINTIFF'S MOTION FOR FINAL DEFAULT JUDGMENT

This matter is before the Court on Pharma Funding, LLC's ("Plaintiff") motion for final default judgment against FLTX Holdings, LLC, Reem Pharmacy, Inc., Sheefa Pharmacy, Inc., A&K Pharmacy, LLC, (collectively, the "Corporate Defendants"), and Kenneth Tripoli and Jeremy David Klein (collectively, the "Individual Defendants"). [D.E. 42]. No response was filed in opposition and the time to do so has passed. Therefore, Plaintiff's motion is now ripe for disposition. After careful consideration of the motion, relevant authorities, and for the reasons discussed below, Plaintiff's motion for final default judgment should be GRANTED in part and DENIED in part.1

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I. BACKGROUND

Plaintiff filed this action on March 12, 2020, alleging that the Corporate Defendants executed a promissory note in the amount of $3,973,110.28. [D.E. 1]. The note required 1,248 weekly payments of $15,000 beginning on September 30, 2019. The Corporate Defendants defaulted on the note when they failed to make the first payment and any payment thereafter. Plaintiff accelerated payment of the note and, as of July 31, 2020, the Corporate Defendants owe a balance of $4,204,489.59. Plaintiff claims that the Individual Defendants personally guaranteed the payments and defaulted on their obligations. Thus, the amended complaint includes causes of action for breach of a loan agreement, breach of a promissory note, civil theft, conversion, breach of a personal guarantee, and constructive trust. [D.E. 8].

On December 28, 2020, the undersigned issued a Report and Recommendation (the "R&R"), finding that Plaintiff should be entitled to Rule 37 sanctions and default judgment because the Corporate Defendants and the Individual Defendants failed to comply with several discovery court orders. The Court adopted the R&R on January 12, 2021 [D.E. 41] and gave Plaintiff until January 26, 2021 to file a motion for final default judgment. Plaintiff complied with that order, filed a motion for final default judgment, and that motion is now ripe for disposition.2 [D.E. 42].

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II. APPLICABLE PRINCIPLES AND LAW

Rule 55 of the Federal Rules of Civil Procedure sets forth a two-step process for obtaining default judgment. First, when a defendant fails to plead or otherwise defend a lawsuit, the clerk of court is authorized to enter a clerk's default. See Fed. R. Civ. P. 55(a). Second, after entry of the clerk's default, the court may enter default judgment against the defendant so long as the defendant is not an infant or incompetent person. Fed. R. Civ. P. 55(b)(2). "The effect of a default judgment is that the defendant admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by entry by the judgment, and is barred from contesting on appeal the facts thus established." Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987) (internal quotation and citation omitted).

A court must review the sufficiency of the complaint before determining whether a moving party is entitled to default judgment pursuant to Rule 55(b). See United States v. Kahn, 164 F. App'x 855, 858 (11th Cir. 2006) (citing Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206) (5th Cir. 1975)). "While a complaint . . . does not need detailed factual allegations," a plaintiff's obligation to provide the grounds of his entitlement to relief "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). If the admitted facts are sufficient to establish liability, the Court must then ascertain the appropriate amount of damages and enter final judgment in that

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amount. See Nishimatsu, 515 F.2d at 1206; see also PetMed Express, Inc. v. MedPets.com, Inc., 336 F. Supp. 2d 1213, 1216 (S.D. Fla. 2004).

Damages may be awarded only if the record adequately reflects the basis for the award, which can be shown with submission of detailed affidavits establishing the facts necessary to support entitlement to the damages requested. See Adolph Coors Co. v. Movement Against Racism and the Klan, 777 F.2d 1538, 1544 (11th Cir. 1985). Rule 55 does not require an evidentiary hearing on the appropriate amount of damages, and it is within the Court's discretion to choose whether such a hearing should takes place. See SEC v. Smyth, 420 F.3d 1225, 1232 n.13 (11th Cir. 2005).

III. ANALYSIS

Plaintiff's motion seeks final default judgment for (1) breach of contract, (2) breach of a promissory note, (3) civil theft, (4) conversion, (5) breach of a personal guarantee, and (6) constructive trust. Plaintiff asks for $3,973,110.28 in actual damages and requests that this amount be trebled pursuant to California law. Plaintiff also seeks pre-judgment and post-judgment interest, $106,886.50 in fees, $1,558.50 in costs, and a constructive trust on the proceeds of the Corporate and Individual Defendants. Plaintiff asks that all the relief requested be granted.

A. Choice of Law Principles

The first question is to determine what law applies to which claims. When a federal court exercises jurisdiction based on diversity of citizenship, 28 U.S.C. § 1332, the court "must apply the choice of law rules of the forum state to

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determine which substantive law governs the action." U.S. Fid. & Guar. Co. v. Liberty Surplus Ins. Corp., 550 F.3d 1031, 1033 (11th Cir. 2008) (per curiam). That means, "as a preliminary matter, the court must characterize the legal issue and determine whether it sounds in torts, contracts, property law, etc. Once it has characterized the legal issue, it determines the choice of law rule that the forum state applies to that particular type of issue." Grupo Televisa, S.A. v. Telemundo Commc'ns Grp., Inc., 485 F.3d 1233, 1240 (11th Cir. 2007) (citing Acme Circus Operating Co., Inc. v. Kuperstock, 711 F.2d 1538, 1540 (11th Cir. 1983)).

The forum state here is Florida, and Florida courts generally enforce choice-of-law provisions in contracts. See Gilman Ciocia, Inc. v. Wetherald, 885 So. 2d 900, 902 (Fla. 4th DCA 2004) ("Florida courts are obligated to enforce choice-of-law provisions unless a showing is made that the law of the chosen forum contravenes strong public policy or that the clause is otherwise unreasonable or unjust.") (citing cases). In fact, "Section 671.105(1), Florida Statutes, 'expressly anticipates that parties may enter into choice-of-law provisions: '[w]hen a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.'" Arndt v. Twenty-One Eighty-five, LLC, 448 F. Supp. 3d 1310, 1315 (S.D. Fla. 2020) (quoting Jet Pay, LLC v. RJD Stores, LLC, 2011 WL 2708650, at *5 (S.D. Fla. July 12, 2011)). The underlying contracts here contain several choice-of law provisions where they "shall be

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governed by and construed in accordance with the laws of the State of California." [D.E. 8-7 at 2 (promissory note provision)]; see also [D.E. 8-5 at 8] (stating that under the loan agreement, it "shall be governed by and construed in accordance with the laws of the State of California.").3 As a result, California law applies to Plaintiff's contractual claims.4

For tort claims, Florida uses the "most significant relationship" test set forth in Restatement (Second) of Conflict of Laws § 145. See Trumpet Vine Investments, N.V. v. Union Capital Partners I, Inc., 92 F.3d 1110, 1115-6 (11th Cir. 1996). That test generally requires a court to consider (1) "the place where the injury occurred"; (2) "the place where the conduct causing the injury occurred"; (3) "the domicile, residence, nationality, place of incorporation and place of business of the parties"; and (4) "the place where the relationship, if any, between the parties is

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centered." Restatement (Second) of Conflict of Laws § 145(2) (1971). A court should evaluate these contacts "according to their relative importance with respect to the particular issue." Grupo Televisa, S.A., 485 F.3d at 1240. The first contact is generally the most important, as "absent special circumstances, '[t]he state where the injury occurred would . . . be the decisive consideration in determining the applicable choice of law.'" Pycsa Panama, S.A. v. Tensar Earth Techs., Inc., 625 F. Supp. 2d 1198, 1220 (S.D. Fla. 2008) (quoting Bishop v. Fla. Specialty Paint Co., 389 So. 2d 999, 1001 (Fla. 1980)). Thus, "[i]n tort actions involving more than one state, all substantive issues should be determined in accordance with the law of the state having the most 'significant relationship' to the occurrence and the parties." Merkle v. Robinson, 737 So. 2d 540, 542 (Fla. 1999) (citing Bishop, 389 So. 2d at 1001).

Here, Plaintiff failed to undertake any analysis as to why California law should apply to the tort claims (i.e. civil theft and conversion) alleged in the amended complaint.5 Plaintiff merely reasoned that the contractual language was sufficient to apply California law. But, for the reasons already discussed, that is incorrect. Plaintiff needed to explain - at the very least - the place where the injury occurred and why California law should apply. Plaintiff failed, however, to

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reference anything in the motion concerning Florida's choice-of-law principles for tort claims and why the laws of California should apply to the allegations presented.

In looking to the amended complaint, almost all of the allegations are unhelpful because there is a lack of clarity on where the injury took place.6 The pleading says, for instance, that the Corporate Defendants diverted funds for their own...

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