Trading v. Jitc, LLC

• Decision Date: 29 July 2014
• Docket Number: 1:12-cv-0355-WSD
• Court: U.S. District Court — Northern District of Georgia
• Parties: FUNCTIONAL PRODUCTS TRADING, S.A., Plaintiff and Counterclaim Defendant, v. JITC, LLC and ROBERT JANITZEK, Defendants, Counterclaim Plaintiffs and Third-Party Plaintiffs, v. I-GRAIN, LLC and LORIN A. TARR, Third-Party Defendants.

FUNCTIONAL PRODUCTS TRADING, S.A., Plaintiff and Counterclaim Defendant, v. JITC, LLC and ROBERT JANITZEK, Defendants, Counterclaim Plaintiffs and Third-Party Plaintiffs, v. I-GRAIN, LLC and LORIN A. TARR, Third-Party Defendants.

1:12-cv-0355-WSD

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

July 29, 2014

OPINION AND ORDER

This matter is before the Court on Magistrate Judge Alan J. Baverman's Final Report and Recommendation ("R&R") [168] which recommends granting Plaintiff's Motion for Default Judgment ("Motion") [159] against Defendants JITC, LLC ("JITC") and Robert Janitzek ("Janitzek") (collectively, "Defendants"). The Magistrate Judge also recommended that default judgment be entered againstDefendants on Counts I, II, III, IV, VI, VII, X, XI, and XIII of Plaintiff's Second Amended Complaint [99] (the "Amended Complaint") and that Defendants be held jointly and severely liable. The Magistrate Judge further recommended that Plaintiff be awarded compensatory damages (but not including lost profits), punitive damages, costs, and attorney's fees.

I. BACKGROUND

On February 2, 2012, Plaintiff Functional Products ("Plaintiff") filed a complaint seeking damages, replevin and specific performance against I-Grain, LLC ("I-Grain") and Lorin Tarr ("Tarr") for breach of an agricultural sales contract.¹

On February 24, 2012, Plaintiff filed its first amended complaint to add JITC and Janitzek as defendants. (See [32].)

On July 31, 2012, I-Grain, LLC and Lorin Tarr settled with Plaintiff and were dismissed from the action. (See [93].)

On September 7, 2012, Plaintiff filed its Second Amended Complaint [99] which included claims for fraud, violations of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), and violations of the Georgia RacketeerInfluenced and Corrupt Organizations Act ("Georgia RICO"). Plaintiff seeks compensatory damages, attorney's fees, punitive damages and declaratory relief. (See [99].)²

On September 21, 2012, Defendants filed their Answer, Counterclaim, Impleader, and Crossclaim (the "Answer"). (See [107].) Defendants included in their Answer counterclaims against Plaintiff, and made crossclaims against I-Grain and Tarr.

On November 11, 2012, Plaintiff filed an Expedited Motion to Compel Deposition of Defendants and for an Award of Sanctions (the "Motion to Compel").³ (See [117].) On December 21, 2012, the Magistrate Judge held ahearing on the Motion to Compel. The Magistrate Judge ordered Janitzek to appear for a deposition at his attorneys' Atlanta office on a date between February 4, 2013, and February 8, 2013. (See [131] at 2.) Finding that sanctions were not yet warranted, the Magistrate Judge warned that if Janitzek failed to appear for a deposition in February 2013, he would recommend that the Court strike Defendants' Answer and enter a default judgment against them. (See [142] at 5; see also [144] at 4.)

On February 6, 2013, Janitzek again failed to appear to be deposed. (See [142] at 5-6.)⁴ On February 21, 2013, Plaintiff filed its Motion for Sanctions. (See [142].)

On June 7, 2013, the Magistrate Judge issued his R&R [154] recommending that the Court grant Plaintiff's Motion for Sanctions. On August 20, 2013, the Court adopted the Magistrate Judge's R&R. (See [158].) The Court also directed the Clerk to strike Defendants' Answers, dismiss Defendants' counterclaims, and enter default against Defendants.

On September 16, 2013, Plaintiff moved for default judgment against Defendants. Plaintiff requests that the Court:

1. Enter judgment on Counts I, II, III, IV, VI, VII, X, XI, and XIII of the Amended Complaint;

2. Declare that the following agreements are invalid and rescinded on account of Defendants' fraud: (i) the November 14, 2011, Sales Contract; (ii) the December 15, 2011, White Seed Contract; and (iii) the January 27, 2012, Release;

3. Award compensatory damages in the amount of $5,401,243.05.00;

4. Award punitive damages in the amount of at least $1,000,000.00;

5. Award reasonable attorneys' fees in the amount of $432,760.00;

6. Award taxable costs in the amount of $9,601.62;

7. Award [Plaintiff] post-judgment interest as provided by Georgia law;

8. Hold Defendants jointly and severally liable for the Court's judgment; and

9. Award [Plaintiff] such other and further relief as the Court deems just, equitable and proper."⁵

(See Mot. at 14-15.)

On January 9, 2014, the Magistrate Judge reviewed Plaintiff's Motion and ordered a hearing pursuant to Rule 55(b)(2)(C) of the Federal Rules of Civil Procedure. ⁶ The hearing was conducted on February 18, 2014. At the hearing, Plaintiff presented affidavit testimony and documents to support its requested damages, attorneys' fees, and costs. Defendants and Defendants' counsel did not attend the hearing.

On May 8, 2014, the Magistrate Judge issued his R&R recommending that Plaintiff's Motion be granted. The Magistrate Judge also recommended that default judgment be entered against Defendants on Counts I, II, III, IV, VI, VII, X, XI, and XIII of the Amended Complaint and that Defendants be held jointly and severely liable. The Magistrate Judge further recommended that Plaintiff be awarded compensatory damages (not including lost profits), punitive damages, costs, and attorney's fees. Neither party filed objections to the R&R.

II. DISCUSSION

A. Legal Standards

1. Review of a Magistrate Judge's R&R

After conducting a careful and complete review of the findings and recommendations, a district judge may accept, reject, or modify a magistrate judge's report and recommendation. 28 U.S.C. § 636(b)(1) (2006); Williams v. Wainwright, 681 F.2d 732, 732 (11th Cir. 1982) (per curiam). A district judge "shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1). In the absence of objections, the Court reviews the Magistrate Judge's findings and recommendations for plain error. United States v. Slay, 714 F.2d 1093, 1095 (11th Cir. 1983) (per curiam).

2. Motion for Default Judgment

Rule 55(b) of the Federal Rules of Civil Procedure governs the entry of default judgments:

(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 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. . . . If the party against whom a defaultjudgment 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 . . . 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.

"The entry of a default judgment is committed to the discretion of the district court . . . ." Hamm v. DeKalb Cnty., 774 F.2d 1567, 1576 (11th Cir. 1985) (citing 10A Charles Alan Wright et al., Federal Practice and Procedure § 2685 (1983)). When considering a motion for entry of default judgment, a court must investigate the legal sufficiency of the allegations and ensure that the complaint states a plausible claim for relief. Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1278 (11th Cir. 2005); Bruce v. Wal-Mart Stores, Inc., 699 F. Supp. 905, 906 (N.D. Ga. 1988). A "district court has the authority to enter default judgment for failure to prosecute with reasonable diligence or to comply with its orders or rules of procedure." See Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985) (citations omitted); see also U.S. v. Inter-Amn. Shipping Corp., 455 F.2d 938, 940 (5th Cir. 1972) ("[n]ormally a defendant's failure to defend results in default judgment upon motion of the plaintiff") (citing Fed. R. Civ. P. 55)).

Courts must also ensure they have subject-matter jurisdiction over the case and personal jurisdiction over the defaulting parties, and that the factual allegations state a cause of action. See, e.g., Dennis Garberg & Assocs. v. Pack-Tech Int'l Corp., 115 F.3d 767, 772 (10th Cir.1997); Bruce, 699 F.Supp. at 906.⁷

B. Analysis

1. Legal Standards for RICO and Georgia RICO Claims

To state a claim for a violation of the federal RICO statute, a plaintiff has the burden of showing that "(1) that the defendant (2) through the commission of two or more acts (3) constituting a "pattern" (4) of "racketeering activity" (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an "enterprise" (7) the activities of which affect interstate or foreign commerce." See McCulloch v. PNC Bank, Inc., 298 F.3d 1217, 1225 (11th Cir. 2002) (citing 18 U.S.C. §§ 1962(a)-(c)). The Georgia RICO Act is modeled on the federal RICO statute and, in the absence of Georgia authority, Georgia courts often look to federal decisions for guidance on the interpretation of similar provisions of the Georgia RICO Act.⁸ Williams General Corp. v. Stone, 279 S.E.2d 428, 430 (Ga.2005).

Under the Georgia RICO act, it is "unlawful for any person, through a pattern of racketeering activity or proceeds derived therefrom, to acquire or maintain, directly or indirectly, any interest in or control of any enterprise, real property, or personal property of any nature, including money." See O.C.G.A. § 16-14-4(a). A "pattern of racketeering activity" means "at least two acts of racketeering activity in furtherance of one or more incidents, schemes, or transactions" that are interrelated. Id. § 16-14-3(8)(A). A "racketeering activity" is the commission, attempt, solicitation of another, or coercing of another to commit a "crime which is...