Whitebox Holdings LLC v. Parket

Background

Whitebox Holdings LLC alleged that Jeffrey Parket and Robyn Parket made materially false statements and supplied falsified financial documents to obtain a $4,000,000 loan. The documents allegedly included statements showing substantial retirement-account and bank-account balances and a personal financial statement listing Jeffrey Parket’s assets and liabilities. The Parkets also allegedly made false representations in the loan documents.

After the loan was made, Jeffrey Parket’s attorney told Whitebox’s president that Jeffrey Parket had lied about his financial condition, had undisclosed debt, and had no assets. Jeffrey Parket also allegedly admitted that he had lied and that the financial documents were fabricated. The Parkets then defaulted on the loan. Whitebox filed claims for fraud, negligent representation, and breach of contract.

The Parkets did not appear or respond to the lawsuit. The clerk entered default against Robyn Parket on March 31, 2022, and against Jeffrey Parket on June 7, 2022. Whitebox then moved for default judgment and injunctive relief.

Default Judgment

The court explained that default judgment required both an entry of default by the clerk and an application to the court. Because default had been entered, the factual allegations in Whitebox’s complaint were treated as admitted, but the court still had to determine whether those facts established valid legal claims.

For Count I, fraud, the court concluded that Whitebox’s allegations established that the Parkets made knowingly false financial representations to induce Whitebox to make the loan, that Whitebox relied on those representations, and that Whitebox suffered damages after the Parkets defaulted. The court granted default judgment on the fraud claim.

For Count III, breach of contract, the court concluded that Whitebox’s allegations established the existence of the loan agreements, Whitebox’s performance, and the Parkets’ breach, including their failure to repay the loan and their alleged violations of other loan-document requirements. The court granted default judgment on the breach-of-contract claim.

For Count II, negligent representation, Whitebox’s motion did not address the claim or expressly request default judgment on it. The court therefore did not grant default judgment on Count II.

Damages, Fees, and Costs

The court awarded Whitebox $4,000,000 for the loan principal. Under the Credit Agreement, the interest rate after default was 22 percent, consisting of the 12 percent regular rate plus an additional 10 percent. Using the agreement’s 360-day year and the 205 days between the alleged default and the filing of Whitebox’s motion, the court calculated $501,111.11 in interest. The order awarded $4,501,111.11 in actual damages, plus additional interest that accrued between June 7, 2022, and the date the court ordered entry of default judgment.

Whitebox requested $61,072.60 in attorneys’ fees and costs. The court calculated $59,072.50 in attorneys’ fees based on the documented hours and hourly rates, and identified a $402 filing fee as a recoverable cost. The court excluded a $900 payment for a declaration because Whitebox had not shown a legitimate need for that declaration or explained that the payment was included in its request. The order awarded $59,072.50 in attorneys’ fees and $402 in costs.

Injunctive Relief

Whitebox sought an injunction preventing the Parkets from impairing or transferring loan collateral and requiring them to comply with post-default obligations. The court considered the request as potentially seeking either a preliminary injunction or a permanent injunction.

The court denied the request to the extent it sought a preliminary injunction because such an injunction is intended to preserve the parties’ positions until a trial, and a trial was not appropriate after default judgment. The court also denied the request to the extent it sought a permanent injunction because Whitebox had not adequately explained why money damages were an inadequate remedy. The order therefore denied Whitebox’s motion for injunctive relief.

Disposition

The court granted in part and denied in part Whitebox’s motion for entry of default judgment. It denied Whitebox’s motion for injunctive relief. The clerk was directed to enter judgment for $4,501,111.11 in actual damages, plus specified additional interest, $59,072.50 in attorneys’ fees, and $402 in costs.