United States District Court, M.D. Louisiana
RULING AND ORDER
A. JACKSON JUDGE.
the Court is the Motion for Default Judgment Against
Defendant Shawn M. Nelson (Doc. 16) filed by
Plaintiff Randel Lewis, as receiver for Cobalt Sports
Capital, LLC. Jurisdiction is proper under 28 U.S.C. §
1331. For the following reasons, the Motion for
Default Judgement Against Shawn M. Nelson (Doc. 16)
Randel Lewis, acting as receiver for Cobalt Sports Capital,
LLC ("Cobalt") alleges that Defendant, Shawn Nelson
("Nelson") accepted a business loan from
Cobalt's predecessor entity on or about February 28,
2011. (Doc. 16 at p. 1). Cobalt claims that its predecessor
entity, Gibraltar Sports Capital, LLC
("Gibraltar") loaned Nelson $60, 000, 00 (the
"Loan"), with interest accruing on the unpaid
principal at a rate of 18% per year. (Id.). Cobalt
alleges that pursuant to the terms of the loan agreement, a
single payment of principal and all accrued interest was due
and payable on February 28, 2012. (Doc. 1 at ¶ 10).
Cobalt avers that Nelson failed to pay the required amount by
the Loan's maturity date. (Id. at ¶ 11). As
a result of Nelson's default, an additional 5% late
payment charge became due and owing. (Id. at ¶
1113). Pursuant to a purchase agreement with Gibraltar,
Cobalt purchased certain assets from Gibraltar, including
Nelson's note. (Id. at ¶ 14). On August 8,
2017, Cobalt sent Nelson a demand letter, informing Nelson
that he was in default on the Loan, and informing Nelson that
the outstanding balance on the Loan was $130, 967.62.
(Id. at ¶ 15). Having not received any response
from Nelson, Cobalt moved for entry of default against Nelson
on March 25, 2018. (Doc. 12). The Court granted Cobalt's
motion on that same day. (Doc. 13).
United States Court of Appeals for the Fifth Circuit has
adopted a three step process to obtain a default judgment.
See New York Life Ins. Co. v. Brown, 84 F.3d 137,
141 (5th Cir. 1996). First, a default occurs when a party
"has failed to plead or otherwise defend" against
an action. Fed.R.Civ.P. 55(a). Next, an entry of default must
be entered by the clerk when the default is shown "by
affidavit or otherwise." See id.; New York
Life, 84 F.3d at 141. Third, a party may apply to the
court for a default judgment after an entry of default.
Fed.R.Civ.P. 55(b); New York Life, 84 F.3d at 141.
party files for a default judgment, courts must apply a
two-part process to determine whether a default judgment
should be entered. First, a court must consider whether the
entry of default judgment is appropriate under the
circumstances. Lindsey v. Prive Corp., 161 F.3d 886,
893 (5th Cir. 1998). Several factors are relevant to this
inquiry, including: (1) whether there are material issues of
fact at issue, (2) whether there has been substantial
prejudice, (3) whether the grounds for default have been
clearly established, (4) whether the default was caused by
excusable neglect or good faith mistake, (5) the harshness of
the default judgment, and (6) whether the court would think
itself obliged to set aside the default on a motion by
the Court must assess the merits of the plaintiffs claims and
determine whether the plaintiff has a claim for relief.
Nishimatsu Constr. Co. v. Houston Nat'l Bank,
515 F.2d 1200, 1206 (5th Cir. 1975); Hamdan v. Tiger
Bros. Food Mart, Inc., No. CV 15-00412, 2016 WL 1192679,
at *2 (M.D. La. Mar. 22, 2016).
Default Judgment is Appropriate under the Lindsey
Court must first decide whether the entry of default judgment
is appropriate under the circumstances, by considering the
Lindsey factors. First, there are no material facts
in dispute because Nelson failed to file an Answer or motion
under Rule 12. Second, it is undisputed that Nelson has not
responded to any of Cobalt's attempts to contact him.
Third, the grounds for granting a default judgment against
Nelson are clearly established, as evidenced by the
action's procedural history and the Clerk's entry of
default. Fourth, the Court has no basis to find that
Nelson's failure to respond was the result of a good
faith mistake or excusable neglect because Nelson has failed
to respond to Cobalt. Fifth, Nelson's failure to file any
responsive pleading or motion mitigates the harshness of a
default judgment. Finally, the Court is not aware of any
facts that would lead it to set aside the default judgment if
challenged by Nelson. The Court therefore finds that the six
Lindsey factors weigh in favor of default.
The Sufficiency of the Pleadings
Court must also determine whether Cobalt's pleadings
provide a sufficient basis for a default judgement. Cobalt
sued Nelson on the grounds of breach of contract after Nelson
defaulted on the Loan agreement and has not made any effort
to pay the amounts owed under the agreement. (Doc. 1 at
¶¶ 21-26). Under Louisiana law, "generally,
when a person neglects to do what he is obligated to do under
a contract, he has committed a passive breach of the
contract." Huggs, Inc. v. LPC Energy, Inc., 889
F.2d 649, 655 (5th Cir. 1989) (quoting Hennessy v. So.
Central Bell Telephone, 382 So.2d 1044 (La.App.2d Cir.
1980). Therefore, in order to be successful, Cobalt must
establish that an agreement existed, that Nelson was
obligated to perform under that agreement, and that Nelson
failed to do so.
Cobalt alleges that Nelson entered into a loan agreement with
Gibraltar, and that Cobalt purchased Nelson's note from
Gibraltar. (Doc. 1 at ¶ 8). Cobalt also avers that the
terms of the note required Nelson to pay the entirety of the
Loan by a certain date, and that Nelson failed to do so.
(Id. at ¶¶ 10-11). Cobalt
has attached a copy of the note to its complaint.
(Id. at Exhibit B). The Court finds that Cobalt has