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Jth Tax, Inc. v. Grabert

United States District Court, Fourth Circuit

December 30, 2013



MARK S. DAVIS, District Judge.

This matter is before the Court on an unopposed Motion for Default Judgment filed by Plaintiff, JTH Tax, Inc., d/b/a Liberty Tax Service ("Liberty"). Defendant Trisha Grabert ("Grabert" or "Defendant") has not filed a response in opposition to the instant motion, and the time for doing so has long since passed. For the reasons set forth below, Liberty's Motion for Default Judgment is GRANTED, in part, and the Court WITHOLDS ruling, in part, until an evidentiary hearing is conducted.


Liberty is engaged in the business of advertising, promoting, and licensing a system of tax preparation centers throughout the United States. Compl. ¶ 6, ECF No. 1. Between 2008 and 2012, Grabert signed four franchise agreements with Liberty for four separate "Liberty Tax" franchise locations and executed four promissory notes payable to Liberty. Id . ¶ 12. Each of the franchise agreements expressly sets forth Grabert's contractual post-termination duties including: paying all amounts due to Liberty, ceasing to associate herself with Liberty, transferring all telephone numbers, customer files, and operations manuals to Liberty, and adhering to limited covenants not to compete. Aff. of Robert Oliver, Exs. 2-5, ECF No. 6.

On April 20, 2012, Liberty terminated all four of Grabert's franchise agreements due to her failure to submit contractually required reports and failure to pay monies owed to Liberty. Compl. ¶ 13. The promissory notes associated with the terminated franchises expressly provide that failure to timely pay the amounts due constitutes a default and authorizes Liberty to accelerate the entire outstanding debt. Aff. of Danilo Jose, Exs. 1-4, ECF No. 4. Each promissory note also requires payment of all attorney's fees, costs, or expenses that Liberty may incur in enforcing the notes. Id.

On January 28, 2013, Liberty filed a complaint in this Court against Grabert alleging breach of the promissory notes, breach of the franchise agreements, and defamation per se. Compl. ¶¶ 6-12. Liberty's complaint seeks monetary damages and equitable relief in the form of a permanent injunction. Liberty's claimed damages result from Grabert's failure to make timely payments, refusal to abide by her post-termination obligations, and defamatory postings on the internet.

On April 8, 2013, Grabert was properly served with a copy of the summons and complaint. Summons, ECF No. 8. However, Grabert failed to file a responsive pleading. On May 6, 2013, Liberty requested Entry of Default, and the Clerk entered default on May 7, 2013. ECF No. 10. Liberty, thereafter, filed the instant motion for default judgment, and the time for Grabert's response has long since passed. Liberty's motion for default judgment is therefore ripe for review.


"A court confronted with a motion for default judgment is required to exercise sound judicial discretion in determining whether the judgment should be entered, and the moving party is not entitled to default judgment as a matter of right." EMI April Music, Inc. v. White , 618 F.Supp.2d 497, 505 (E.D. Va. 2009). When a defendant defaults he admits "the plaintiff's well-pleaded allegations of fact." Ryan v. Homecomings Fin. Network , 253 F.3d 778, 780 (4th Cir. 2001) (internal quotation marks and citations omitted); see also Fed.R.Civ.P. 8(b) (6). In determining whether a plaintiff has presented well-pled allegations of fact, the Supreme Court of the United States has interpreted the Federal Rules of Civil Procedure as requiring that a complaint "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. V. Twombly, 550 U.S. 544, 570 (2007)). Accordingly, in the default judgment context, factual allegations in the complaint are deemed admitted and the "appropriate inquiry is whether or not the face of the pleadings supports the default judgment and the causes of action therein." Anderson v. Found, for Advancement, Educ. & Employment of Am. Indians, 187 F.3d 628 (4th Cir. 1999) (unpublished table opinion) (citing Nishimatsu Constr. Co. v. Houston Nat'l Bank , 515 F.2d 1200, 1206 (5th Cir. 1975)).


Liberty's instant motion for default judgment seeks an award of: (1) all amounts due on the promissory notes and the attorney's fees incurred in conjunction with enforcement of such notes; (2) a permanent injunction to enforce the post-termination obligations of the franchise agreements; and (3) compensatory damages, punitive damages, and a permanent injunction based on Defendant's defamation of Liberty.[1] As discussed below, the Court: (1) grants Liberty's motion for default judgment as to the breach of the promissory notes; (2) withholds judgment as to Liberty's injunctive relief claim; and (3) grants Liberty's motion for default judgment as to liability on the defamation claim, but withholds ruling on the amount of defamation damages.

A. Breach of Promissory Notes

1. Outstanding Balance on the Notes

First, Liberty asserts a claim against Grabert based on the four unpaid promissory notes, seeking damages in the aggregate amount of $170, 814.77. Pi's Mem. in Supp. of Mot. for Default J. ("Pi's Mem.") at 3-4, ECF No. 12; Aff. of Danilo Jose, Ex. 5. As set forth in Liberty's complaint, Liberty and Grabert entered into four enforceable written franchise agreements and four associated promissory notes. Aff. of Danilo Jose, Exs. 1-4. Under Virginia law, a breach of contract occurs if a party "without legal excuse fails to perform an obligation in a timely manner." Va. Code Ann. § 59.1-507.1(a).[2] Assuming the truth of the facts stated in the complaint, the Court finds that Grabert has materially breached the franchise agreements and associated promissory notes by failing to make scheduled payments. As a result of such breaches, Liberty has appropriately invoked its contractual right to accelerate the outstanding balances. Liberty has presented the Court with the promissory notes themselves, as well as affidavits setting forth the outstanding balances on such notes, and there has been no challenge to the enforceability or ...

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