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Southern Bank and Trust Co. v. Pride Group, LLC

United States District Court, E.D. Virginia, Norfolk Division

January 28, 2015

SOUTHERN BANK AND TRUST COMPANY, Plaintiff,
v.
PRIDE GROUP, LLC, PRADIP SHAH, VIJAY PATEL, and VIJAY SHAH, Defendants.

OPINION AND ORDER

MARK S. DAVIS, District Judge.

This matter is before the Court on an unopposed Motion for Default Judgment, ECF No. 11, filed by Southern Bank and Trust Company ("Plaintiff") requesting that the Court enter judgment in its favor under Federal Rule of Civil Procedure 55(b)(2) against Pradip Shah, Vijay Patel, and Vijay Shah (collectively "Individual Defendants"), and Pride Group, LLC ("Pride" or, collectively with Individual Defendants, "Defendants"). For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Plaintiff's Motion for Default Judgment and DIRECTS that default judgment be entered against Defendants in the amounts detailed below.

I. FACTUAL AND PROCEDURAL BACKGROUND

This action involves two promissory notes and a series of guaranties on such notes. Plaintiff alleges that Pride failed to make timely payments on the two promissory notes and that Pradip Shah, Vijay Patel, and Vijay Shah failed to make payments as required under guaranties of such notes.

On March 15, 2006, Pride executed a promissory note ("First Note") with an original principal amount of $4, 845, 000.00 in favor of Bank of the Commonwealth. Compl. ¶ 7, ECF No. 1; id. Ex. 1, ECF No. 1-1. The interest rate for the First Note was 7.65 percent per annum; however, such note also contained a provision whereby Bank of the Commonwealth could increase the interest rate on the note by 4.00 percentage points upon default. See id. Ex. 1. On or about March 15, 2006, Pradip Shah, Vijay Patel, and Vijay Shah each executed separate commercial guaranties (respectively, "First P. Shah Guaranty, " "First Patel Guaranty, " and "First V. Shah Guaranty, " and, collectively, "the First Guaranties") guaranteeing payment of the First Note. See id. ¶¶ 21, 29, 38. Individual Defendants each guaranteed payment of $2, 422, 500.00 on the First Note. Id . ¶¶ 21, 29, 38; Compl. Exs. 5, 7, 9, ECF Nos. 1-5, 1-7, 1-9. On January 20, 2009, Bank of the Commonwealth and Pride modified the terms of the First Note by revising the principal amount of the loan ("First Loan") evidenced by the First Note to $4, 622, 291.67 and by decreasing the interest rate on the note from 7.65 percent per annum to 6.75 percent per annum. Id . ¶ 8; id. Ex. 2, ECF No. 1-2.[1]

On February 4, 2010, Pride executed a promissory note ("Second Note") in the principal amount of $190, 000.00 in favor of Bank of the Commonwealth. Id . ¶ 15; id. Ex. 4, ECF No. 1-4. The interest rate for the Second Note was 6.75 percent per annum; however, such note also contained a provision whereby Bank of the Commonwealth could increase the interest rate on the note by 4.00 percentage points upon default. See id. Ex. 4. On or about February 4, 2010, Pradip Shah, Vijay Patel, and Vijay Shah each executed separate commercial guaranties (respectively, "Second P. Shah Guaranty, " "Second Patel Guaranty, " and "Second V. Shah Guaranty, " and, collectively, "the Second Guaranties") guaranteeing payment in full of the Second Note. See id. ¶ 22, 30, 39; id. Exs. 6, 8, 10, ECF Nos. 1-6, 1-8, 1-10.[2] On September 22, 2011, after being placed into receivership, Bank of the Commonwealth was closed by regulatory authorities. Id . ¶ 10.

Thereafter, Plaintiff purchased and succeeded to all of Bank of the Commonwealth's interest in the First Loan, including the First Note and the First Guaranties; the Second Note; and the Second Guaranties. See id. ¶¶ 10, 16, 23, 31-32, 40-41. Thus, Plaintiff is the current holder of the First Note, id. ¶ 12, and the Second Note, id. ¶ 19.

The First Note is in default. Id . ¶ 11. On November 14, 2013, Plaintiff demanded payment in full from Pride under the First Note. Id. at 13. However, Pride has failed to make payment and, therefore, is in default under the First Note and allegedly liable to Plaintiff for: 1) $1, 513, 145.49 in principal; 2) $213, 824.32 in interest through May 30, 2014; 3) interest thereafter at the rate of interest after default provided for in the First Note; and 4) reasonable attorneys' fees and collection expenses. Id . ¶ 14. Plaintiff has also demanded payment in full under the First Guaranties. Id . ¶¶ 24, 33, 42. Individual Defendants have failed to make payment in response to Plaintiff's demands. See id. ¶¶ 25, 34, 43. Therefore, Plaintiff alleges that, under the First Guaranties, Individual Defendants are liable to Plaintiff for: 1) $1, 513, 145.49 in principal; 2) $213, 824.32 in interest through May 30, 2014; and 3) interest thereafter at the rate of interest after default provided for in the First Note; and 4) reasonable attorneys' fees and collection expenses. Id . ¶¶ 26, 35, 44.

The Second Note is also in default. Id . ¶ 17. Plaintiff demanded payment in full from Pride under the Second Note. Id . ¶ 19. However, Pride has failed to make payment and, therefore, is in default under the Second Note and allegedly liable to Plaintiff for: 1) $180, 342.62 in principal; 2) $6, 959.56 in interest through May 30, 2014; 3) interest thereafter at the rate of interest after default provided for in the Second Note; and 4) reasonable attorneys' fees and collection expenses. Id . ¶ 20. Plaintiff has also demanded payment in full under the Second Guaranties. Id . ¶¶ 24, 33, 42. Individual Defendants have failed to make payment in response to Plaintiff's demands. See id. ¶¶ 25, 34, 43. Therefore, Plaintiff alleges that, under the Second Guaranties, Individual Defendants are liable to Plaintiff for: 1) $180, 342.62 in principal; 2) $6, 959.56 in interest through May 30, 2014; 3) interest thereafter at the rate of interest after default provided for in the Second Note; and 4) reasonable attorneys' fees and collection expenses. Id . ¶ 20. Id . ¶¶ 27, 36, 45.

On May 30, 2014, Plaintiff filed an action in this Court to recover from Pride under the First and Second Notes and from Individual Defendants under the First and Second Guaranties. ECF No. 1. On June 5, 2014, Individual Defendants were served with process. ECF No. 4. On June 23, 2014, Pride was served with process through its registered agent. ECF No. 7. Defendants failed to timely file an answer to the Complaint or otherwise respond thereto. On July 18, 2014, the Clerk entered default as to Defendants. ECF No. 10.

On September 19, 2014, Plaintiff moved for entry of default judgment. Mot. for Default J., ECF No. 11. In such motion, Plaintiff requests judgment against Defendants on the First Note and First Guaranties in the amount of $1, 513, 145.49 in principal, $263, 074.88 in interest through September 19, 2014, and interest thereafter at the First Note's alleged rate of interest after default of 11.65 percent per annum. Plaintiff seeks judgment against Defendants on the Second Note and Second Guaranties in the amount of $180, 342.62 in principal, $12, 829.91 in interest through September 22, 2014, and interest thereafter at the Second Note's alleged rate of interest after default of 10.75 percent per annum.

Plaintiff also seeks to recover reasonable attorneys' fees and collection expenses already incurred in the amount of $121, 528.00 and post-judgment attorneys' fees and expenses estimated at $30, 000. In support of its request for attorneys' fees, Plaintiff initially submitted a declaration of Jeffrey Gray, Plaintiff's lead counsel in this action, and detailed billing entries to substantiate the amount of attorneys' fees billed by Plaintiff's counsel. In its initial briefing in support of its motion for default judgment, Plaintiff did not submit an affidavit from a disinterested local attorney attesting to the reasonableness of the hourly rates charged by Plaintiff's counsel or information concerning recent fee awards by courts in comparable cases.

On December 1, 2014, in light of Plaintiff's failure to submit either an affidavit of a local attorney or evidence of courts' fee awards in similar cases to establish the reasonableness of the hourly rates billed by Plaintiff's counsel, the Court entered an order taking Plaintiff's motion under advisement until Plaintiff supplemented its submission with 1) an affidavit from a disinterested, experienced local attorney attesting to the reasonableness of the hourly rates and hours billed, and 2) relevant biographical information for each attorney and staff member who billed services. ECF No. 15. In response to such order, Plaintiff requested that the Court reconsider its requirement that Plaintiff submit an affidavit to support the reasonableness of the attorneys' fees Plaintiff seeks and, instead, allow Plaintiff to support the reasonableness of such fees based on decisions in comparable cases. Pl.'s Supplement to Mot. for Default J. & Req. for Recons., ECF No. 16. On December 17, 2014, Plaintiff submitted an additional supplement requesting that the Court consider a recent fee award in a very similar case in this District, Southern Bank & Trust Co. v. Priyam, LLC, to determine the reasonableness of Plaintiff's request for attorneys' fees. Pl.'s Supplement to Req. for Recons., ECF No. 17. With the benefit of Plaintiff's submissions in response to the Court's December 1, 2014 Order, this matter is now ripe for disposition.

II. LEGAL STANDARD

Rule 55 of the Federal Rules of Civil Procedure provides that entry of default is appropriate "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend...." Fed.R.Civ.P. 55(a). Such is the case here and, as noted above, the Clerk has entered default against Defendants in this matter. After securing entry of default, a plaintiff may then move for entry of default judgment. Rule 55(b) (2) provides that, where a claim is not for a sum certain, the plaintiff must apply to the court for entry of default judgment. Fed.R.Civ.P. 55(b)(2); EMI April Music, Inc. v. White, 618 F.Supp.2d 497, 505 (E.D. Va. 2009). The decision to enter default judgment lies within the sound discretion of the court. Lolatchy v. Arthur Murray, Inc., 816 F.2d 951, 953-54 (4th Cir. 1987); see EMI April Music, Inc., 618 F.Supp.2d at 505 (citation omitted) (noting that "the moving party is not entitled to default judgment as a matter of right").

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). To present well-pleaded allegations of fact, a complaint must "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. & Emp't of Am. Indians, 187 F.3d 628 (4th Cir. 1999) (unpublished table decision) (citing Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)).

Although well-pleaded factual allegations are accepted as true for default judgment purposes, a party who defaults does not admit the allegations in the claim as to the amount of damages. See Fed.R.Civ.P. 8(b)(6) (providing that "[a]n allegation-other than one relating to the amount of damages-is admitted if a responsive pleading is required and the allegation is not denied."). For that reason, after a district court concludes that liability is established, it must then independently calculate the appropriate amount of damages. Ryan, 253 F.3d at 780-81. To assess the extent of a plaintiff's damages, a district court may conduct a formal evidentiary hearing under Rule 55(b)(2), or may determine damages based on affidavits or documents attached to the plaintiff's motion. See Anderson v. Found. for Advancement, Educ. & Emp't of Am. Indians, 155 F.3d 500, 507 (4th Cir. 1998) (citation omitted) (noting that "in some circumstances a district court entering a default judgment may award damages ascertainable from the pleadings without holding a hearing."); cf. Pentech Fin. Servs., Inc. v. Old Dominion Saw Works, Inc., No. 6:09cv4, 2009 WL 1872535, at *2 (W.D. Va. June 30, 2009) (unpublished) (citation omitted) (finding "no need to convene a formal evidentiary hearing on the issue of damages" where the plaintiff submitted ...


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