Bon Worth, Inc. v. Runway 7 Fashions, Inc.

Background

Bonworth brought the action against Runway over alleged breaches of several purchase orders for garments that Runway was to sell to Bonworth. Runway answered and filed counterclaims alleging that Bonworth, rather than Runway, had breached the parties’ agreements.

In an earlier summary-judgment decision, the court held that genuine disputes of material fact prevented summary judgment on Bonworth’s claims. The court granted Runway summary judgment solely as to liability on its claim that Bonworth had not paid for goods accepted under 10 purchase orders. The court denied summary judgment on Runway’s claims involving several canceled purchase orders for goods Runway had produced but not delivered.

Bankruptcy and representation

After discovery ended and the summary-judgment motions were decided, Bonworth notified the court that it was considering bankruptcy. Bonworth’s counsel later sought permission to withdraw, citing loss of contact with Bonworth and unpaid legal fees. The court gave Bonworth time to obtain new counsel and stated that, absent successor counsel, Runway could seek a default judgment because a corporation may not represent itself in federal court.

Bonworth filed for Chapter 11 bankruptcy, which automatically stayed proceedings in this case. The court later learned that the bankruptcy case had been dismissed and that the stay had lifted on April 9, 2021. Bonworth’s counsel again sought to withdraw, citing the inability to contact Bonworth representatives and the death of lead counsel. The court granted the withdrawal motion and directed Runway to seek default judgment if successor counsel did not appear.

Default-judgment motion

Runway moved for default judgment on April 19, 2021, and served Bonworth with the motion and supporting materials. The court gave Bonworth until May 12, 2021, to retain counsel and oppose the motion. No successor counsel appeared, and Bonworth filed no opposition.

A default judgment is a judgment entered when a party does not defend the case after receiving proper notice. Applying Federal Rule of Civil Procedure 55(b)(2), the court found that Runway had filed proof of service, that Bonworth had no counsel, that Bonworth had not opposed the motion or pursued the case, and that Runway had provided enough evidence to support its claims.

Ruling

The court entered a default judgment for Runway against Bonworth. Specifically, it granted default judgment dismissing Bonworth’s claims and dismissing Bonworth’s affirmative defenses. It also granted default judgment solely as to liability in favor of Runway on Runway’s counterclaims against Bonworth. The court did not determine damages in this order; it directed that a separate order would begin an inquest into damages. The court directed Runway to serve the order on Bonworth and terminated the pending motion.