U.S. Merchants Fin. Grp. v. Martin
| Decision Date | 04 April 2022 |
| Docket Number | Civil Action 3:20-CV-2119-B |
| Parties | U.S. MERCHANTS FINANCIAL GROUP, INC., Plaintiff, v. LOUIS MARTIN, JR., CHARLES ARTHUR CLARK a/k/a CHUCK CLARK, JSCA, INC., and CANNA FARMS, INC., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Before the Court is Plaintiff U.S. Merchants Financial Group, Inc. (“U.S. Merchants”)'s Motion for Default Judgment (Doc. 32). For the reasons discussed below, the Court GRANTS Plaintiff's motion.
This is a fraudulent-transfer case. In 2013, U.S. Merchants obtained a judgment for fraud against Defendant Louis Martin, Jr. (“Martin”) in the 134th Judicial District Court in Dallas County, Texas (the “Texas Judgment”). Doc. 17, Am. Compl., ¶¶ 20-22; Doc. 17-3, Tex. J.; Doc. 17-6, Martin 2013 Findings & Conclusions. Following judgment, Martin filed for bankruptcy, but the bankruptcy court determined that the U.S. Merchants debt was non-dischargeable as a debt originally obtained by false representations. Doc. 17, Am. Compl., ¶ 25; In re Martin, 2017 WL 1316928, at *11 (E.D. Tex. Bankr. Apr 7, 2017). According to U.S. Merchants, the Texas Judgment “remains unpaid, and the total balance due . . . with accrued interest is over $675, 000.” Doc. 17, Am. Compl., ¶ 53.
U.S. Merchants claims that between November 2018 and April 2020, Martin moved money totaling $34, 464[1] from his personal bank account and the bank account of his alter ego, The King's Court Solutions, Inc. (“King's Court”), to Defendant Canna Farms, Inc. (“Canna Farms”). Id. ¶¶ 49, 57; Doc. 32-1, Gannon Decl. Exs. A-4, A-5, A-6. Martin is the president of Canna Farms and is a signatory on its bank accounts. Doc. 17, Am. Compl., ¶¶ 7(c), 59; Doc. 17-2, Articles of Incorporation; see also Doc. 1, Not. Removal, 5. U.S. Merchants avers that Martin previously admitted to using King's Court, Canna Farms, and other business accounts for personal expenditures in order to “stay[] one step ahead” of his creditors. Doc. 17, Am. Compl., ¶ 49. In addition to the Canna Farms transfers, U.S. Merchants alleges that Martin incurred $481, 000 in debts, including: a $425, 000 mortgage payable to JSCA, Inc. (“JSCA”); a $50, 000 wire transfer from JSCA to Martin's King's Court account; and a $6, 000 loan payable to Chuck Clark (“Clark”). Id. ¶¶ 34-35, 39; Doc. 32-1, Gannon Decl., ¶¶ 11-14, Exs. A-7, A-8, A-9. The transfers made to Canna Farms and obligations incurred to JSCA and Clark were only uncovered in post-judgment discovery. Doc. 17, Am. Compl., ¶ 40. U.S. Merchants avers that Martin has since absconded to Florida. Id. ¶ 50 (citing Doc. 17-12, Martin Decl. Domicile).
On July 30, 2020, U.S. Merchants filed the instant suit in Texas state court bringing various claims against Martin, Canna Farms, Clark, and JSCA. Doc. 1-1, Original Pet. Martin and Canna Farms were served on August 5, 2020. Doc. 32-1, Gannon Decl., Exs. A-2 (Martin), A-3 (Canna Farms). With Martin and Canna Farms' consent, Clark and JSCA removed the action to federal court on August 10, 2020. Doc. 1, Not. Removal, 5. Since then, Clark and JSCA settled with U.S. Merchants, and U.S. Merchants amended its petition to allege claims against Martin and Canna Farms for (1) fraudulent transfer and (2) civil conspiracy.[2] Doc. 17, Am. Compl., ¶¶ 54-67; Doc. 26, ADR Summ.; Doc. 28, Stip. Dismissal; Doc. 30, Order Dismissing Clark & JSCA. To date, Martin and Canna Farms have not answered or otherwise appeared.
On September 28, 2021, pursuant to the Court's order, U.S. Merchants moved for entry of default and for default judgment. Doc. 30, Order; Doc. 31, Pl.'s Request Entry Default; Doc. 32, Pl.'s Mot. The Clerk made entry of default on September 29, 2021. Doc. 33, Clerk's Entry of Default. Martin and Canna Farms (collectively “Defendants”) failed to respond to U.S. Merchant's motion, and the time to do so has passed. Accordingly, the Court now considers the motion for default judgment.
Federal Rule of Civil Procedure 55 provides for the entry of default judgments in federal court. According to Rule 55, “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, . . . the clerk must enter the party's default.” Fed. R. Civ. P. 55(a). Once default has been entered, the Court may enter a default judgment against the defaulting defendant upon motion of the plaintiff. Fed.R.Civ.P. 55(b).
That being said, “[d]efault judgments are a drastic remedy, not favored by the Federal Rules and resorted to by courts only in extreme situations.” Sun Bank of Ocala v. Pelican Homestead & Sav. Ass'n, 874 F.2d 274, 276 (5th Cir. 1989) (footnote omitted). A party is not entitled to a default judgment merely because the defendant is technically in default. Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996). “Rather, a default judgment is generally committed to the discretion of the district court.” United States v. 1998 Freightliner Vin #: IFUYCZYB3WP886986, 548 F.Supp.2d 381, 384 (W.D. Tex. 2008) (citing Mason v. Lister, 562 F.2d 343, 345 (5th Cir. 1977)).
In determining whether a default judgment should be entered against a defendant, courts have developed a three-part analysis. See, e.g., Id. First, courts consider whether the entry of default judgment is procedurally warranted. See Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998). The factors relevant to this inquiry include: (1) “whether material issues of fact” exist; (2) “whether there has been substantial prejudice”; (3) “whether the grounds for default are clearly established”; (4) “whether the default was caused by good faith mistake or excusable neglect”; (5) “the harshness of a default judgment”; and (6) “whether the court would think itself obliged to set aside the default on the defendant's motion.” Id.
Second, courts assess the substantive merits of the plaintiff's claims and determine whether there is a sufficient basis in the pleadings for the judgment. See Nishimatsu Constr. Co. v. Hous. Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (). In doing so, the Court is to assume that due to its default, defendant admits all well-pleaded facts in the plaintiff's complaint. Id. However, a “defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law.” Id. (emphasis omitted).
Third, courts determine what form of relief, if any, the plaintiffs should receive. Ins. Co. of the W. v. H&G Contractors, Inc., 2011 WL 4738197, at *4 (S.D. Tex. Oct. 5, 2011) . Normally damages are not to be awarded without a hearing or a demonstration by detailed affidavits establishing the necessary facts. See United Artists Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir. 1979). However, if the amount of damages can be determined with mathematical calculation by reference to the pleadings and supporting documents, a hearing is unnecessary. James v. Frame, 6 F.3d 307, 310 (5th Cir. 1993).
Applying this three-part analysis, the Court concludes that a default judgment is (1) procedurally warranted and (2) supported by a sufficient factual basis in Plaintiff's complaint, and that (3) damages can be determined by mathematical calculation without a hearing.
After reviewing U.S. Merchants's motion in light of the six Lindsey factors, the Court determines that default judgment is procedurally warranted. First, Defendants have not filed any responsive pleadings. Consequently, there are no material facts in dispute. Lindsey, 161 F.3d at 893; Nishimatsu Constr., 515 F.2d at 1206 (“The defendant, by his default, admits the plaintiff's well-pleaded allegations of fact[.]”). Second, Defendants' “failure to respond threatens to bring the adversary process to a halt, effectively prejudicing [U.S. Merchants's] interest.” See Ins. Co. of the W., 2011 WL 4738197, at *3 (citing Lindsey, 161 F.3d at 893). Third, the grounds for default are “clearly established, ” as Defendants have not responded to the summons and petition, the amended complaint, the entry of default, or the motion for default judgment over the past twenty-one months-despite consenting to removal of this action. See Doc. 1, Not. Removal, 5 (consenting to removal); J.D. Holdings, LLC v. BD Ventures, LLC, 766 F.Supp.2d 109, 113 (D.D.C. 2011) . Fourth, there is no evidence before the Court to indicate that Defendants' silence is the result of a “good faith mistake or excusable neglect.” Lindsey, 161 F.3d at 893. Fifth, Defendants' “complete failure to respond to [U.S. Merchants's] Complaint or otherwise appear . . . ‘mitigat[es] the harshness of a default judgment.'” See COG Marketers, Ltd. v. Bohr, 2021 WL 3721459, at *2 (N.D. Tex. July 6, 2021) (quoting John Perez Graphics & Design, LLC v. Green Tree Inv. Grp., Inc., 2013 WL 1828671, at *3 (N.D. Tex. May 1, 2013)). Finally, the Court is not aware of any facts that would give rise to “good cause” to set aside the default if challenged by Defendants. See Lindsey, 161 F.3d at 893. Therefore, the Court concludes that default judgment is procedurally warranted.
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