United States District Court, E.D. Virginia, Norfolk Division
UNITED STATES MAGISTRATE JUDGE'S REPORT AND
J. Krask United States Magistrate Judge
matter is before the Court on a motion for default judgment,
filed on December 12, 2017, by plaintiff Virginia
International Terminals, LLC ("VIT"), against
defendant Keystone Transportation Solutions, LLC
("KTS"). ECF No. 10. VIT's motion was referred
to the United States Magistrate Judge pursuant to the
provisions of 28 U.S.C. § 636(b)(1)(B) and (C) and Rule
72 of the Rules of the United States District Court for the
Eastern District of Virginia. ECF No. 11. The Court
recommends that VIT's motion be GRANTED IN
PART and DENIED IN PART.
October 12, 2017, VIT filed this action against KTS alleging
breach of contract and seeking monetary damages (count one)
and declaratory relief (count two). Compl., ECF No. 1. Due to
KTS's failure to enter an appearance or otherwise file a
responsive pleading, the Clerk entered default against KTS on
November 17, 2017. ECF No. 9. Thereafter, VIT filed the
pending motion on December 12, 2017. ECF No. 10. KTS did not
respond, and the deadline for a response has expired. On
February 20, 2018, the Court held a hearing on the
motion. ECF No. 15. David Ventker, Esq., and
Marissa Henderson, Esq., represented VIT. Id.
Neither KTS nor a KTS representative appeared. Id.
After the hearing, the Court ordered supplemental briefing
related to the propriety of declaratory relief, the
reasonableness of attorneys' fees, and certain invoices
labeled "Rail: Container/Chassis." ECF No. 16. VIT
filed its supplemental brief in support of default judgment
on March 5, 2018. ECF No. 21.
following factual allegations from the complaint are deemed
admitted by virtue of KTS's default. VIT is an entity
that manages the Virginia Inland Port (the
"terminal") in Front Royal, Virginia. Compl., ECF
No. 1 ¶ 4. On or about August 1, 2015, KTS, which
desired to "fumigate, handle, and stuff logs into
shipping containers at the Terminal, " entered into a
license agreement with VIT (the "agreement").
Id. ¶ 5. As part of the agreement, VIT licensed
a portion of the terminal to KTS so that KTS could provide
its desired services. License Agreement, ECF No. 1-1 at 1. In
exchange, "KTS agreed to pay VIT a monthly License Fee
and a monthly Variable Fee based on the numbers of containers
KTS handled at the Terminal." Compl. ¶ 8. Section
three of the agreement details the fees and charges to be
paid to VIT. ECF No. 1-1 at 3. Section 3(a) specifies that
KTS would pay VIT a fee of $10, 000.00 per month for the
licensed use of the premises. Id. Section 3(c)(i) of
the agreement provides, among other things, that KTS must pay
VIT $85.00 per container for every container it processed,
beginning in August 2015. Id. at 4. The agreement
also incorporated the VIT Schedule of Rates and the Virginia
Inland Port Tariff. Compl. ¶ 9. The schedule of rates
and tariff set forth rail service charges, which KTS incurred
when moving containers from the terminal to other terminals
operated by VIT in Hampton Roads. Id. KTS has
admitted by its default that VIT at all times performed its
obligations under the agreement. Id. ¶ 7. KTS
has further admitted that it failed to provide services as
required in the agreement, and that it failed to make the
required payments under the agreement. Id.
14(b) of the agreement states, in part, "[i]f any
payment due to VIT under this Agreement is not paid when due,
then at VIT's option such unpaid sum shall bear interest
at an annual rate of twelve percent (12%), or the highest
legal rate if lower, from the date it is due until
paid." ECF No. 1-1 at 11-12. VIT has submitted invoices
and a chart that show the payments owed and the interest
accrued. ECF No. 1-2.
purported to assign any tort and contract claims arising from
VIT's termination of the agreement to Teak, LLC, which
was created under the laws of Delaware on or about March 22,
2017. Compl. ¶ 17. With respect to assignments, the
agreement provides that:
9. Assignment and Sublicensing. Licensee
shall not assign or transfer this Agreement, or sublicense
any part of the Premises, in whole or in part, without the
prior written consent of VIT, which consent VIT may withhold
in its sole discretion.
1-1 at 8. Teak has made written and verbal demands to VIT for
monetary damages allegedly suffered by KTS related to or
arising from the agreement. Compl. ¶¶ 18-19. Prior
to these demands, VIT had no relationship with Teak, which
did not exist at the time the agreement was terminated.
Compl. ¶ 22.
agreement further provides:
10. Indemnification, (a) Except to the
extent caused by the negligence or intentional misconduct of
the VIT Parties,  Licensee shall indemnify, defend and hold
harmless the VIT Parties from and against all liability,
claims, actions, suits, losses, damages, fines, penalties,
fees, and expenses (including without limitation
attorney's and consultant's fees and expenses), of
every kind and nature (a) incurred by, or asserted or
threatened against, any of the VIT Parties and (b) arising
out of or related to (i) the use of the Terminal or the
Premises by any of the Licensee Parties, (ii) activities of
any of the Licensee Parties on the Terminal or the Premises,
(iii) Licensee's breach of this Agreement, and/or (iv)
the discovery of any Hazardous Materials brought on to the
Terminal or Premises by any of the Licensee Parties.
1-1 at 8. Relatedly, the agreement also requires KTS to
maintain liability insurance in connection with its
obligations under paragraph ten recited above. Compl. ¶
24; ECF No. 1-1 at 9 ("Such liability insurance shall
also . . . include contractual liability for [KTS's]
indemnity and hold harmless obligations under this
JURISDICTION AND VENUE
render a default judgment, the Court must have subject matter
jurisdiction over the case and personal jurisdiction over the
defaulting parties. Venue must also be proper. Here, the
Court has subject matter jurisdiction over VIT's claims
based on diversity of citizenship pursuant to 28 U.S.C.
§ 1332, because VIT is a Virginia limited liability
company, KTS is a Pennsylvania limited liability company, and
the amount in controversy exceeds $75, 000.00. The Court also
has federal question subject matter jurisdiction over count
two pursuant to the Declaratory Judgment Act, 28 U.S.C.
Court has personal jurisdiction over KTS because KTS
transacted business in the state of Virginia which gave rise
to the cause of action. See Va. Code Ann. §
8.01-328.1(A)(1); Fed.R.Civ.P. 4(k)(1)(A). Further, section
20 of the agreement states that "[t]he state and federal
courts having territorial jurisdiction in Norfolk, Virginia
shall have exclusive jurisdiction and shall be the exclusive
venue for the resolution of all disputes arising out of or
relating to this Agreement or the Premises. This Agreement
shall be deemed made in Norfolk, Virginia regardless of which
party is the last to sign." ECF No. 1-1 at 14. See
Pee Dee Health Care, P. A. v. Sanford, 509 F.3d 204, 213
(4th Cir. 2007) ("A forum-selection clause is 'prima
facie valid and should be enforced unless enforcement is
shown by the resisting party to be "unreasonable"
under the circumstances.'"). Venue is also proper by
virtue of the forum selection clause.
of the Federal Rules of Civil Procedure governs entries of
default and default judgments. Pursuant to Rule 55(a), the
Clerk must enter default against a party that "has
failed to plead or otherwise defend" against an action.
After the Clerk has entered default, a plaintiff may seek a
default judgment against a defendant pursuant to Rule 55(b).
A court must "exercise sound judicial discretion"
when considering whether to enter default judgment, "and
the moving party is not entitled to default judgment as a
matter of right." EMI Apr. Music, Inc. v.
White, 618 F.Supp.2d 497, 505 (E.D. Va. 2009) (citing
Sentry Select Ins. Co. v. LBL Skysystems (U.S.A.)
Inc., 486 F.Supp.2d 496, 502 (E.D. Pa. 2007)). The
United States Court of Appeals for the Fourth Circuit has
expressed "a strong preference that, as a general
matter, defaults be avoided and that claims and defenses be
disposed of on their merits." Colleton Preparatory
Acad., Inc. v. Hoover Universal, Inc., 616 F.3d 413, 417
(4th Cir. 2010). Default judgment may be appropriate,
however, "when the adversary process has been halted
because of an essentially unresponsive party."
S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md.
a defaulting party admits the factual allegations in the
complaint, a court must evaluate the sufficiency of the
allegations to determine if the complaint states a cause of
action. See 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."). See also Ryan v.
Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir.
2001) ("The court must . . . determine whether the
well-pleaded allegations in [the] complaint support the
relief sought in th[e] action."); Anderson v. Found
for Advancement, Educ. & Emp't of Am.
Indians, 155 F.3d 500, 506 (4th Cir. 1998) (holding that
the district court erred in granting default judgment to
plaintiff where plaintiff failed to state a valid claim).
KTS is liable for breach of contract, and VIT is entitled to
its requested damages, with the exception of two invoices
which predate the agreement.
VIT is entitled to recover its requested damages, with the
exception of two March 2015 invoices.
count one, VIT alleges that KTS breached the license
agreement by not paying VIT what was due under the agreement.
In its motion, VIT seeks judgment in the amount of $191,
551.05, plus interest of $47.15 per day beginning from
December 31, 2017. ECF No. 10 at 3; ECF No. 10-3. This number
purportedly represents the $165, 244.80 VIT claims it would
be owed as of December 31, 2017, plus $31, 306.25 in
attorneys' fees VIT claims to have accrued "to
investigate the claims made against it by Teak, LLC in
violation of the License Agreement and to pursue this
recovery action." ECF No. 10 at 2. The Court notes,
however, that those two amounts (amounts due under the
agreement and attorneys' fees) do not add up to the total
amount requested, but rather total $196, 551.05. In any case,
the Court concludes that VIT is not entitled to all of the
damages it asks for, and the amounts will be adjusted.
succeed on a claim for breach of contract under Virginia law,
VIT must prove (1)KTS had a legally enforceable obligation to
VIT; (2) KTS breached that obligation; and (3) KTS's
breach caused injury or damage to VIT. Sunrise Continuing
Care, LLC v. Wright, 671 S.E.2d 132, 135 (Va. 2009)
(citing Filak v. George, 594 S.E.2d 610, 614 (Va.
2004)). A Virginia cause of action for breach of contract is
subject to a five-year statute of limitations period, which
begins to run from the date the breach occurs. Va. Code Ann.
support the first element, VIT submitted the license
agreement entered into between VIT and KTS on August 1, 2015,
which specifies the terms and conditions of the contractual
relationship. ECF No. 1-1. The fees and charges to be paid by
KTS to VIT are covered in section three of that agreement.
Id. at 3-5. Section 14 of the agreement specifies
that failure by KTS to pay any fees within five days of
written notice of such failure is deemed to be an event of
default. Id. ...