United States District Court, E.D. Virginia, Alexandria Division
PRECISION FRANCHISING LLC, et at, Plaintiffs.
GALAXIE CARTUNE, INC., et al., Defendants.
PROPOSED FINDINGS OF FACT AND
F. Anderson United States Magistrate Judge.
matter is before the court on plaintiffs' motion for
default judgment pursuant to Federal Rule of Civil Procedure
55(b)(2). (Docket no. 13). In this action, plaintiffs
Precision Franchising LLC and Precision Tune Auto Care. Inc.
(collectively "'Precision Franchising" or
"plaintiffs") seek a default judgment against
defendants Galaxie Cartune, Inc., Matthew Gallagher, and Kari
Gallagher (collectively "defendants") in the amount
of $301, 746.14, plus attorney's fees and costs. Pursuant
to 28 U.S.C. § 636(b)(1)(C), the undersigned magistrate
judge is filing with the court his proposed findings of fact
and recommendations, a copy of which will be provided to all
November 17, 2017. plaintiffs tiled a complaint against
defendants alleging three counts of breach of contract
(Docket no. 1). On November 22. 2017, plaintiffs fded a
materially similar amended complaint (Docket no. 3). On
November 24, 2017, summonses were issued as to defendants
Galaxie Cartune, Inc., Matthew Gallagher, and Kari Gallagher
(Docket no. 5). The summonses were returned executed on
December 7, 2017. and indicated that defendants were served
on November 28, 2017. (Docket no. 8). In accordance with
responsive pleading was due on December 19, 2017, twenty-one
(21) days after service of process. On December 20, 2017, at
the request of defendant Matthew Gallagher, plaintiffs
granted defendants an extension to December 29, 2017 to
answer or otherwise respond to the amended complaint. (Docket
no. 13 ¶ 44). After defendants failed to answer or
otherwise respond by December 29, 2017, plaintiffs refrained
from seeking a default judgment as the parties explored an
amicable resolution to the matter, but the parties were
unable to reach an agreement, and further attempts to engage
defendants did not yield a meaningful response. (Docket no.
13 ¶ 45). Plaintiffs requested entry of default as to
defendants on January 23, 2018 (Docket no. 9), which the
Clerk of Court entered as to defendants Galaxie Cartune,
Inc., Matthew Gallagher, and Kari Gallagher on January 24,
2018 (Docket no. 10). On February 6, 2018, plaintiffs filed
this motion for default judgment (Docket no. 13) and noticed
the hearing for 10:00 a.m. on Friday, March 9, 2018 (Docket
no. 14). On March 8, 2018, plaintiffs filed an amended notice
for hearing setting a hearing on this motion for Friday,
March 23, 2018 at 10:00 a.m. (Docket no. 17). At the hearing
on March 23, 2018, counsel for the plaintiffs appeared, but
no one appeared on behalf of defendants.
following facts are established by the amended complaint
(Docket no. 3) ("Compl.") and plaintiffs'
motion for default judgment (Docket no. 13). Defendant
Galaxie Cartune, Inc. ("Galaxie") is a former
franchisee of Precision Tune Auto Care pursuant to a
franchise agreement with plaintiffs dated March 1, 2003 (the
"Franchise Agreement"), a renewal dated June 29,
2012 (the "Renewal"), and an addendum dated
November 23, 2013 (the "Addendum"). (Compl.
¶¶ 11-12, 14). Defendant Matthew Gallagher
("Mr. Gallagher") executed two guaranty agreements,
dated March 1, 2003 and July 1, 2012, personally guaranteeing
Galaxie's obligations under the franchise agreement (the
"Guarantee Agreements"). (Compl. ¶¶
11-12). In 2015, after a third-party lessor threatened to
evict Galaxie from the premises where Galaxie was operating
its Precision Tune Auto Care Center, Galaxie induced
plaintiffs to purchase the premises, including an adjoining
carwash. (Compl. ¶ 13). Galaxie assured plaintiffs that
purchasing and then leasing the premises to Galaxie would
allow it to reorganize its business and timely pay its
obligations. (Id.). On November 24, 2015, plaintiffs
leased the premises and the adjoining carwash to defendants
in two separate lease agreements (the "Leases"):
(1) a lease agreement for the Apple Valley Precision Tune
Auto Care Center (the "Center"); and (2) a lease
agreement for the Apple Valley Carwash (the
"Carwash"). (Compl. ¶ 14). In connection with
the Leases, Mr. Gallagher and Kari Gallagher executed a
guaranty agreement, guaranteeing Galaxie's obligations
under the leases. (Id.). In addition, on November
22, 2016, Galaxie and Mr. Gallagher granted plaintiffs a
promissory note in the principal amount of $13, 592.13 with
interest accruing at a rate of 0% per annum (the
"Promissory Note"). (Compl. ¶ 15).
point after November 24, 2015, defendants began subleasing
the Carwash without obtaining plaintiffs' prior written
approval as required under the Carwash lease, and became
delinquent on the Leases. (Compl. ¶¶ 42-43). On
October 31, 2017, after plaintiffs offered to terminate the
Franchise Agreement and the lease on the Center, defendants
abandoned the Center and ceased all operations, and failed to
remit past due balances. (Compl. ¶¶ 45-46). On
November 16, 2017, plaintiffs sent defendants a letter
withdrawing the October 27 offer, along with notices of
termination of the Franchise Agreement and Leases. (Compl.
¶ 47). To date, defendants have outstanding obligations
under the Franchise Agreement, Leases, and Promissory Note,
and have failed to comply with any of the post-termination
obligations under the Franchise Agreement. (Compl.
Findings and Recommendations
of the Federal Rules of Civil Procedure provides for the
entry of a default judgment when "a party against whom a
judgment for affirmative relief is sought has failed to plead
or otherwise defend." Based on defendants' failure
to plead or otherwise defend against the action, the Clerk of
Court has entered a default as to defendants Galaxie Cartune,
Inc., Matthew Gallagher, and Kari Gallagher. (Docket no. 10).
defendant in default admits the factual allegations in the
complaint. See Fed. R. Civ. P. 8(b)(6) ("An
allegation-other than one relating to the amount of
damages-is admitted if a responsive pleading is required and
the allegation is not denied."); see also
GlobalSantaFe Corp. v. Globalsantafe.com, 250 F.Supp.2d
610, 612 n.3 (E.D. Va. 2003) ("Upon default, facts
alleged in the complaint are deemed admitted and the
appropriate inquiry is whether the facts as alleged state a
claim."). Rule 55(b)(2) of the Federal Rules of Civil
Procedure provides that a court may conduct a hearing to
determine the amount of damages, establish the truth of any
allegation by evidence, or investigate any other matter when
necessary to enter or effectuate judgment.
must have both subject matter and personal jurisdiction over
a defaulting party before it can render a default judgment.
Plaintiffs allege that this matter is properly brought in
this court under 28 U.S.C. § 1332 based on complete
diversity of citizenship and an appropriate amount in
controversy. (Compl. ¶ 7).
Precision Franchising LLC is wholly owned by plaintiff
Precision Tune Auto Care, Inc., a Virginia corporation with
its principal place of business in Leesburg, Virginia.
(Compl. ¶ 3). Defendant Galaxie Cartune, Inc. is a
Minnesota corporation with its principal place of business in
Minnesota, and defendants Matthew Gallagher and Kari
Gallagher are residents of Minnesota. (Compl. ¶¶
4-6). Plaintiffs complaint also seeks a judgment in excess of
$75, 000. (Compl. ¶ 7). ...