Park Miller, LLC v. Durham Group, Ltd.

Background

Park Miller moved for default judgment against Durham Group, Ltd. and Durham Commercial Capital Corp. after the defendants’ attorney withdrew and the defendants indicated they would not continue responding to the lawsuit. Park Miller also sought discovery concerning damages, punitive damages, and the defendants’ claimed insolvency.

Default judgment

Under Federal Rule of Civil Procedure 55(b)(2), a court may enter a final judgment when a defendant defaults, meaning the defendant stops defending the case. Judge Orrick found that Park Miller properly served the defendants and that the court had the required jurisdiction over the case and these defendants. He also applied the factors used to decide whether default judgment is appropriate, including the possible harm to Park Miller, the sufficiency and apparent merits of its claims, the amount at stake, the likelihood of factual disputes, whether the default resulted from excusable neglect, and the preference for decisions on the merits.

The court found that these factors favored default judgment. It noted that the defendants had previously challenged the complaint, that the remaining claims had been adequately stated, and that the defendants then stopped participating. The court therefore granted Park Miller’s Motion for Default Judgment.

Damages, fees, and costs

The court did not award the requested damages at this stage. Park Miller calculated $4,200,000 in unpaid loan principal and $1,521,666.67 in interest, for stated contract damages of $5,721,666.67. Although the notes and a declaration supported the principal amounts and interest rates, Park Miller did not provide sufficient evidence that no loan amounts had been repaid, that all notes went into default on December 1, 2018, or that the principal on every note had been transferred to the account that triggered a higher interest rate. The court required a declaration certifying those facts.

Park Miller also sought $1,065,407.49 for lost revenue from eight clients, $60,675 for refunded client fees, and $5,350,000 related to threatened lawsuits by former clients. The court found that the general statements offered did not prove those losses. Park Miller needed to explain how each amount was calculated, provide evidence of the losses, show that the defendants’ conduct caused them, and provide more information about the threatened lawsuits and the election-of-remedies issue.

Park Miller requested $131,937.50 in attorney fees and $4,577.80 in costs. The court found that the supporting declaration lacked the required detail, including the costs incurred, billing rates, hours worked, and tasks performed. Accordingly, the order states that Park Miller’s request for damages was denied without prejudice and that further information was required to support any requested damages, attorney fees, and costs.

Discovery

Park Miller proposed 50 interrogatories, 71 document requests, a subpoena to Craig McGrain, and 47 additional document requests. The court found the requests overbroad because they sought information such as all employee identities and financial records for ten years and communications involving a person affiliated with 1-800 SOLAR.

The court therefore granted in part and denied in part Park Miller’s request for discovery. In the conclusion, it authorized discovery consistent with the order’s instructions and indicated that it was inclined to allow a deposition subpoena for Craig McGrain with no more than five narrowly tailored document requests, plus up to five interrogatories and five document requests to each of Durham Group, Ltd. and Durham Commercial Capital Corp. Park Miller could seek more discovery only by substantially narrowing the requests and explaining why more was necessary.

Disposition

Judge William Orrick granted the Motion for Default Judgment; denied without prejudice Park Miller’s request for damages; and granted in part and denied in part its request for discovery. The order did not set a final monetary award.