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RSDC Holdings, LLC v. Steinberg

United States District Court, E.D. Louisiana

January 12, 2017


         SECTION “R” (2)



         Plaintiff RSDC Holdings, LLC moves the Court to enter a default judgment declaring the mortgages originally granted in favor of defendant debis Financial Services, Inc. and defendant Ganis Credit Corporation against the vessel Tuna Taxi are satisfied.[1] For the following reasons, the Court GRANTS plaintiff's motion.

         I. BACKGROUND

         On June 6, 2016, plaintiff filed this action for declaratory judgment under 28 U.S.C. § 2201.[2] Plaintiff seeks a declaration that plaintiff is the rightful owner of the Tuna Taxi and that the ship mortgages in favor of defendants debis Financial Services, Inc. and Ganis Credit Corporation are satisfied.[3] Defendant debis Financial Services, Inc. was served August 3, 2016.[4] Plaintiff asked this Court for permission to serve defendants Ron Steinberg and Ganis Credit Corporation via publication, [5] and the Court granted plaintiff's motion.[6] On December 5, plaintiff filed an affidavit of publication, signed by Sandra Campos, the principal clerk of the Orange County Register, attesting that the Court's order was published in the Register once a week for six weeks.[7] No defendant has filed any response to the summons and complaint, nor did any defendant request additional time to respond.[8]

         Plaintiff sought an entry of default as to debis Financial Services on September 29, 2016, [9] and the clerk entered default against debis Financial Services on the following day.[10] On December 5, 2016, plaintiff sought an entry of default against Steinberg and Ganis Credit Corporation, [11] and the clerk entered default against them on December 9, 2016.[12] Plaintiff now seeks a default judgment.


         Under Federal Rule of Civil Procedure 55(b), the Court may enter a default judgment against a party when it fails to plead or otherwise respond to the plaintiff's complaint within the required time period. Fed.R.Civ.P. 55(b). A plaintiff who seeks a default judgment against an unresponsive defendant must proceed through two steps. First, the plaintiff must petition the court for the entry of default, which is simply “a notation of the party's default on the clerk's record of the case.” Dow Chem. Pac. Ltd. v. Rascator Mar. S.A., 782 F.2d 329, 335 (2d Cir. 1986); see also United States v. Hansen, 795 F.2d 35, 37 (7th Cir. 1986) (describing the entry of default as “an intermediate, ministerial, nonjudicial, virtually meaningless docket entry”). Before the clerk may enter the default, the plaintiff must show “by affidavit or otherwise” that the defendant “has failed to plead or otherwise defend.” Fed.R.Civ.P. 55(a). Beyond that requirement, however, the entry of default is largely mechanical.

         After the defendant's default has been entered, the plaintiff may request the entry of judgment on the default. In that context, the court deems the plaintiff's well-pleaded factual allegations admitted. See Nishimatsu Const. Co., Ltd. v. Houston Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). At the same time, the court does not hold the defaulting defendant “to [have] admit[ed] facts that are not well-pleaded or to [have] admit[ed] conclusions of law.” Id. The default judgment should not be entered unless the judgment is “supported by well-pleaded allegations and . . . ha[s] a sufficient basis in the pleadings.” Wooten v. McDonald Transit Associates, Inc., 788 F.3d 490, 498 (5th Cir. 2015) (internal quotation marks omitted) (citing Houston Nat. Bank, 515 F.2d at 1206).

         If the plaintiff's claim is for a sum certain and the defendant has not made an appearance in court, the clerk may enter a default judgment. Fed.R.Civ.P. 55(b)(1). In all other cases, “the party must apply to the court for a default judgment.” Fed.R.Civ.P. 55(b)(2). No party is entitled to a default judgment as a matter of right. Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001) (per curiam) (quoting Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996)). The disposition of a motion for the entry of default judgment ultimately rests within the sound discretion of the district court. Mason v. Lister, 562 F.2d 343, 345 (5th Cir. 1977).


         A. Jurisdiction

         Before entering judgment, a district court must “look into its jurisdiction both over the subject matter and the parties.” System Pipe & Supply, Inc. v. M/V Viktor Kurnatovskiy, 242 F.3d 322, 324 (5th Cir. 2001) (quoting Williams v. Life Sav. & Loan, 802 F.2d 1200, 1203 (10th Cir.1986)) (quotation marks removed). Judgment entered in the absence of jurisdiction is void, and the Court must therefore refrain from entering judgment if its jurisdiction is uncertain.

         In this case, subject matter jurisdiction is founded upon diversity of citizenship. See 28 U.S.C. § 1332. RSDC is a Louisiana LLC and its sole member, Donald Joe Calloway, is a Louisiana citizen. Defendant Steinberg is a citizen of California; defendant debis Financial Services is a Delaware corporation; defendant Ganis Credit is a California corporation;[13] and the amount in controversy exceeds $75, 000.[14] Service of process on debis Financial Services appears to have been properly executed under the Federal Rules of Civil Procedure. The Court therefore finds that it has jurisdiction to enter this default judgment.

         B. Procedural Requirements for Default Judgment

         The record shows that all defendants were served with process, but have failed to plead or otherwise defend against plaintiff's claims. Indeed, the defendants have made no appearance at all. Although judgments by default are generally disfavored, see Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998), the Court finds that the defendants' failure to appear has made it impossible to achieve a “just, speedy, and inexpensive disposition” of this case on the merits. Sun Bank of Ocala v. Pelican Homestead and Sav. Ass'n, 874 F.2d 274, 276 (5th Cir. 1989). The record does not reveal any excuse for defendants' failure to appear. Accordingly, the Court finds that the requirements for a default judgment have been met.

         C. Declaratory Relief

         Having established that the procedural requirements for default judgment have been satisfied, the Court must also evaluate whether declaratory relief is appropriate in this case. See, e.g., Clarendon America Ins. Co. v. CM General Contractors, Inc., No. 07-2037, 2009 WL 136028, *2-3 (W.D. La. Jan. 20, 2009) (evaluating whether to grant declaratory relief independently of the procedural requirements for default judgment); Mayflower Transit, LLC v. Troutt, 332 F.Supp.2d 971, 975-76 (W.D. Tex. 2004) (same). “When considering a declaratory judgment action, a district court must engage in a three-step inquiry.” Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000). First, the court must determine whether the declaratory action is justiciable. Or, in other words, whether an “actual controversy” exists between the parties to the action. Id. Second, if the court has jurisdiction, it must determine whether it has the “authority” to grant declaratory relief. Id. Finally, the court must determine whether to exercise its discretion to decide or dismiss the declaratory action. Id. The Court address each of these three steps in turn.

         1. Justiciability

         “A declaratory judgment action is ripe for adjudication only where an ‘actual controversy' exists.” Id. at 896. Generally, “an actual controversy exists where ‘a substantial controversy of sufficient immediacy and reality exists between parties having adverse legal interests.'” Id. (quoting Middle South Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir. 1986)). Whether the facts are sufficiently immediate to establish an actual controversy is a case-by-case inquiry. Id.

         As a result of defendants default, defendants have admitted that RSDC Holdings' allegations in its complaint are true. See Nishimatsu, 515 F.2d at 1206 (“The defendant, by his default, admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established.”). The factual allegations establish that RSDC Holdings is currently in possession of the Tuna Taxi, and seeks to sell the vessel.[15] But in order for the vessel to be merchantable, RSDC Holdings must determine the status of two mortgages associated with the Tuna Taxi and establish that RSDC Holdings is the rightful owner of the vessel. Plaintiff's allegations and the documents attached to plaintiff's complaint indicate the ...

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