Lewis Family Group Fund LP v. JS Barkats PLLC

Background

The court had previously found that default judgment against the Barkats Defendants was appropriate as a sanction under Federal Rule of Civil Procedure 37(b)(2)(A)(ii) and (vi), as incorporated by Rule 16(f). The court then requested briefing on whether the allegations in the plaintiffs’ second amended complaint were legally sufficient to establish the defendants’ liability under Rule 55. The plaintiffs submitted briefing concerning Counts 1, 4, 5, and 7, but did not provide legal authority concerning their other counts or their alter-ego allegations. The plaintiffs also maintained that an inquest was needed to determine the amount of damages. The Barkats Defendants did not submit an opposition despite having an opportunity to do so.

Court’s analysis

The plaintiffs argued that they did not need to establish the complaint’s legal sufficiency before default judgment and referral for an inquest because they sought judgment under Rule 37 rather than Rule 55. The court agreed in part. It held that Rule 37 provides an independent basis for default judgment and that the sufficiency of the complaint’s allegations is not necessarily relevant to whether default judgment was properly imposed as a Rule 37 sanction.

The court nevertheless explained that the sufficiency of the allegations remains relevant to damages. Even after a Rule 37 default judgment, damages are unavailable for a claim unless the complaint’s allegations supporting that claim are “well-pleaded”—meaning sufficient to establish liability. The court therefore directed that, during the inquest, Judge Cott evaluate whether the plaintiffs’ allegations establish liability as a matter of law.

Disposition

The court rendered default judgment and referred the matter to Judge Cott for an inquest. The opinion does not determine the amount of damages. It also directs counsel for the Barkats Defendants to serve the order on the clients within seven days and file proof of service with the court.