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Frankenmuth Credit Union v. Fitzgerald

United States District Court, E.D. Michigan, Northern Division

July 30, 2019

CHARLES R. FITZGERALD, et al., Defendant.


          THOMAS L. LUDINGTON, United States District Judge.

         This case was removed from the Circuit Court for Saginaw County on July 12, 2018. ECF No. 1. The complaint arises out of several auto loans allegedly obtained by fraudulent or other improper means, and the alleged non-payment thereof. The complaint names the individual borrower on these loans as well as the retailers, Jones Pre-Owned Auto Sales, LLC, Xclusive Auto Group LLC, and their agents Vernell and Nicole Phipps.

         The complaint asserts claims for fraudulent misrepresentation, silent fraud, breach of contract, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). Specifically, the complaint alleges (among other things): 1) that Defendants intentionally made false representations of material facts to Plaintiff regarding the condition of the vehicles they sold; 2) that Defendants intentionally sold those vehicles at prices that grossly exceeded their value; and 3) that Plaintiff relied on those false representations to their detriment when Plaintiff agreed to finance the purchase of these vehicles from Jones Pre-Owned Auto. Id. ¶¶ 77, 78, 82.

         Defendants Jones Pre-Owned Auto, Vernell Phipps, and Nicole Phipps answered the complaint and filed crossclaims against the remaining Defendants. ECF No. 3. Plaintiff moved for alternative service as to Defendants Coleman, Anderson, Ingram, Fitzgerald, Walker, Thornton, and Xclusive Auto Group, LLC, after Plaintiff's initial efforts at personal service were unsuccessful. The Court granted the motion. ECF No. 12. Plaintiff effectuated alternative service and filed certificates of service. ECF Nos. 19-23. After they did not answer the complaint, the Clerk entered default against Defendants Coleman, Anderson, Ingram, Fitzgerald, Walker, Thornton, and Xclusive Auto Group, LLC on Plaintiff's complaint and on the cross claims of Defendants Jones Pre-Owned Auto, Vernell Phipps, and Nicole Phipps. ECF Nos. 25, 27, 29, 38, 41-45, 52-56.

         On June 12, 2019, Plaintiff requested the Clerk's Entry of Default Judgment, which the Clerk denied the same day explaining that the request sought attorney fees which is not a sum certain.[1] ECF Nos. 65-78. On June 13, 2019, Plaintiff moved for entry of default judgment by the Court (on its RICO claim only) against the defaulting Defendants for the sum of $303, 204.75. Plaintiff reached this figure by taking the amount still owed (they have allegedly recovered all but $96, 329.89 of the original $232, 419.63 owed), tripling it pursuant to RICO's treble damages provision, and then adding costs of $1, 628.08 and attorneys' fees of $12, 590.00. Plaintiff's moves for default judgment solely on the RICO claim.

         On June 13, 2019 Defendant Fitzgerald moved the court to set aside the entry of default against him, explaining that he never received the complaint by personal service, mail, posting, or otherwise. Plaintiff did not respond to Defendant Fitzgerald's motion to set aside default, nor did Defendants Jones Pre-Owned Auto, Vernell Phipps, or Nicole Phipps (as to the entry of default on their cross-claim). Defendant Fitzgerald's motion will be granted as unopposed.


         Plaintiff moves the court to enter a default judgment on the RICO claim against the defaulted Defendants pursuant to Fed.R.Civ.P. Rule 55(a)(2). Before a default judgment may be entered, a party first must obtain a default. Fed.R.Civ.P. 55(a). “Once a default is entered, the defendants are considered to have admitted the well pleaded allegations in the complaint, including jurisdiction.” Ford Motor Company v. Cross, 441 F.Supp.2d 837, 845 (E. D. Mich. 2006) (citing Visioneering Construction v. U.S. Fidelity and Guaranty, 661 F.2d 119, 124 (6th Cir. 1981)) (emphasis added). Here, Plaintiff properly obtained a default against several Defendants.

         Federal Rule of Civil Procedure 55(b)(2) provides that upon application of the party, the court may enter a default judgment. A plaintiff seeking a default judgment from the court is “not entitled to a default judgment as of right” and a judge is “required to exercise sound judicial discretion” in deciding if default judgment is proper. 10A Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc. Civ. § 2685 (4d ed.). Rule 55(b)(2) further provides that a court “may conduct hearings . . . to determine the [applicable] amount of damages” or “establish the truth of any allegation by evidence.” While the well-pleaded factual allegations in the complaint are taken as true when a defendant is in default, damages are not. Ford Motor Company, 441 F.Supp.2d at 848 (citing Thomson v. Wooster, 114 U.S. 104 (1885)). “Ordinarily, the District Court must hold an evidentiary proceeding in which the defendant has the opportunity to contest the amount [of damages].” Antoine v. Atlas Turner, Inc., 66 F.3d 105, 110 (6th Cir. 1995) (internal quotation and citation omitted). However, Rule 55 gives the court the discretion to determine whether an evidentiary hearing is necessary, or whether to rely on detailed affidavits or documentary evidence to determine damages. Stephenson v. El Batrawi, 524 F.3d 907, 916 (8th Cir. 2008); Federal Rules of Civil Procedure, Rules and Commentary Rule 55.

         Moreover, there are additional requirements to consider in cases where some defendants, but not all defendants, have defaulted. In the seminal case Frow v. De La Vega, 82 U.S. 552 (1872), the United States Supreme Court held that in cases involving joint liability it is improper to enter a default judgment against some defendants when other defendants are still contesting the case on the merits. Frow does not preclude a plaintiff from seeking default judgment from defaulted defendants when a judgment has been awarded against the non-defaulting defendants. Id.


         Here, Plaintiff alleges that the Defendants, defaulted and non-defaulted, worked in concert to conspire against Plaintiff to commit RICO predicate acts, namely fraud by mail and/or wire (including submitting false pay stubs to obtain credit, and representing that the vehicles were in saleable condition). Plaintiff's motion for default judgment seeks judgment solely on the RICO claim, requesting the following:

Plaintiff respectfully requests this Court enter a Judgment in its favor and against Defendants Laron Thornton, Randall Anderson, Rashaud L. Coleman, Mark Ingram, Charles R. Fitzgerald, Nicholas Austin Walker, and Xclusive Auto Group, LLC for compensatory damages, together with treble damages, in the amount of $288, 986.66, costs through November 1, 2018 in the amount of $1, 628.08, and attorneys' fees through November 1, 2018 in ...

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