DOUGLAS O. TICE, JR. CHIEF JUDGE
Hearing was held on January 31, 2001 on debtor/plaintiff's motion for default judgment against defendant, G.S. Services, Inc. (formerly G.C. Services, Inc.) t/a Educational Recovery Services (ERS) for failure to defend against debtor's motion for contempt for violation of the automatic stay. At the conclusion of the hearing, the court took the matter of default judgment under advisement.
Based upon the representations of debtor's counsel at the past pre-trial conferences, pleadings, and adversary proceeding file contents, the court has found ERS to be in default, actually entered default against ERS, and will now grant debtor's motion for default judgment.
Debtor's motion for default judgment is properly disposed of at this posture in the adversary proceeding, but only to the extent of a determination of defendant ERS' defaulting status.
However, notwithstanding the court's willingness to enter default judgment against defendant ERS, debtor's underlying motion for contempt for violation of the automatic stay also includes issues of compensatory, actual and punitive damages that will necessitate holding a hearing and the presentation of evidence. Therefore, the court will grant in part and deny in part debtor's motion for default judgment; in particular, the court will grant debtor's motion for default judgment only to the extent of granting the actual judgment of default against non-responding defendant ERS, but the court will carve out the issue of a potential damage award for later determination after a full evidentiary hearing is afforded the parties.
Findings of Fact and Procedural History Debtor filed a complaint on August 29, 2000, styled as a motion to hold creditors in contempt for violation of the automatic stay under 11 U.S.C. § 362. On August 29, 2000, debtor, by counsel or counsel's authorized agent, served a copy of the motion by first class United States mail, postage prepaid upon the following parties in interest and defendants:
"Educational Credit Management Corporation (ECMC), 101 East Fifth Street, Suite 2400, St. Paul, Minnesota, 55101; Commonwealth Legal Services Corporation, Registered Agent, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060; G.S. Services, Inc., t/a Educational Recovery Services, 6330 Gulfton, Houston, Texas, 77081; Gene S. Ball, Registered Agent, 62 Clark Lane, Stafford, Virginia, 22554; and Robert E. Hyman, Esq., Chapter 13 Trustee, P.O. Box 1780, Richmond, Virginia 23218-1780." A summons and notice in the adversary proceeding were issued on August 31, 2000, by the clerk in accordance with Federal Rule of Bankruptcy Procedure (FRBP) 7012 and Local Bankruptcy Rule (LBR) 9013-1(O) to notify parties of the pretrial conference set for October 11, 2000.
Additionally, also on August 31, 2000, Gene S. Ball of G S Services LLC in Stafford, Virginia wrote a memorandum to counsel for debtor explaining that debtor" . . . contacted the wrong GS Services. GS Services, Inc was terminated some time ago without ever doing any business with anyone . . . ." Mr. Ball's memorandum further indicated that "[n]either of the above [G S Services LLC or GS Services, Inc.] has ever t/a Educational Recovery Services." Mr. Ball's memorandum concluded with a suggestion that counsel for debtor may" . . . want to contact the GS Services noted in [counsel for debtor's] . . . correspondence with an address of 6330 Gulfton, Houston, Texas 77081."
Several weeks later, on September 21, 2000, defendant ECMC by counsel filed a timely response to debtor's motion to hold creditors in contempt for violation of the automatic stay of 11 U.S.C. § 362. ECMC served the answer on all parties in interest on September 20, 2000, according to the certificate of service endorsed by counsel for defendant ECMC, Rand L. Gelber.
On September 22, 2000, counsel for debtor sent a letter to the clerk of this court informing the court of new registered agents for the defendants and requesting the court to issue three additional summonses in order to properly perfect service on both defendants, ECMC and ERS. In response, the clerk issued summonses and notices required under federal and local bankruptcy rules on September 25, 2000, to Commonwealth Legal Services Corporation, Registered Agent; C.T. Corporation System, Registered Agent for ERS; ERS; and ECMC. Subsequently, on September 29, 2000, counsel for debtor or his agent filed four certificates of service dated September 28, 2000, for the summons and copy of the motion/ complaint that specified that first class United States mail service, postage fully pre-paid was made to the following addressees: "Commonwealth Legal Services Corp., Registered Agent, 4701 Cox Road, Suite 301, Glen Allen, VA 23060; C.T. Corporation System, Registered Agent for Educational Recovery Services, Ltd. Partn., 1300 E. 9th St., Cleveland, Ohio 44114; Educational Credit Management Corp., 101 East Fifth St., Suite 2400, St. Paul, Minnesota, 55101; [and] Educational Recovery Services, Limited Partnership, 4777 Hilton Corporate Drive, Suite 100, Columbus, OH 43232."
On October 6, 2000, counsel for debtor filed a letter dated October 3, 2000, addressed to him by a process supervisor at CT Corporation System that stated that "C T Corporation System has no record of being the statutory agent for ERS, LTD. PARTN. in the State of Ohio and has verified with the Secretary of State of Ohio that there is no such name listed on their records." The process supervisor further indicated in the letter that the summons and notice, complaint and exhibit that her office received were being returned to counsel for debtor after an unsuccessful attempt at service was made.
The pre-trial conference scheduled for October 11, 2000, on debtor's motion for contempt for violation of the automatic stay was continued to December 13, 2000.
Rand L. Gerber, counsel for ECMC wrote counsel for debtor in a letter dated October 26, 2000 (included in the adversary proceeding file but not filed with the court), that ECMC had advised him that a summons could be" . . . served upon Educational Recovery Services at 4777 Hilton Corporate Drive, Columbus, Ohio 43232 . . ." and further indicated that a check for $207.05 was forwarded to debtor that represented "the final amounts garnished" from debtor's wages.
On December 8, 2000, debtor filed a motion for default judgment under FRBP 7055, requesting the court to enter a default judgment against G.S. Services, Inc., t/a ERS for failure to respond in the adversary proceeding. The certificate of service included with debtor's motion for default judgment indicated that service was made by first class United States mail, postage pre-paid to the following parties in interest and defendants: "Rand L. Gelber, Esq., 8150 Leesburg Pike, Suite 600, Vienna, Virginia, 22182; G.S. Services, Inc., t/a Educational Recovery Services, 6330 Gulfton, Houston, Texas, 77081; G.S. Services, Inc., t/a Educational Recovery Services, 4777 Hilton Corporate Drive, Suite 100, Columbus, Ohio, 43232; and Robert E. Hyman, Esq., Chapter 13 Trustee, P.O. Box 1780, Richmond, Virginia 23218-1780" on December 8, 2000.
The pre-trial conference previously continued to December 13, 2000, was further rescheduled for January 3, 2001, on debtor's motion for contempt for violation of the automatic stay. Then, on January 3, 2001, the pre-trial conference was held and counsel for debtor informed the court that he was presently initiating the procedure for obtaining a notice of entry of default and default judgment against defendant ERS. At the conclusion of the January 3, 2001, pre-trial conference, the court granted a further continuance to January 31, 2001.
On January 11, 2001, counsel for debtor filed a motion for default against G.S. Services, Inc. t/a ERS, in which debtor requested that the court find respondent, G.S. Services, Inc., t/a ERS in default for its failure to respond to debtor's complaint/motion under FRBP 7055(a). The motion for default included a certificate of service dated December 10, 2000, in which counsel for debtor certified that service was completed by first class United States mail, postage pre-paid to the following parties in interest and defendants: "Rand L. Gelber, Esq., 8150 Leesburg Pike, Suite 600, Vienna, Virginia, 22182; G.S. Services, Inc., t/a Educational Recovery Services, 6330 Gulfton, houston, Texas, 77081; G.S. Services, Inc., t/a Educational Recovery Services, 4777 Hilton Corporate Drive, Suite 100, Columbus, Ohio, 43232; and Robert E. Hyman, Esq., Chapter 13 Trustee, P.O. Box 1780, Richmond, Virginia, 23218-1780." The court treated counsel for debtor's motion for default as technically, a motion for entry of default, as is required of parties seeking to complete the procedure required for obtaining default judgment in this court.
On January 22, 2001, the clerk entered default against the defendant under FRBP 7055 because of the appearance from the record that the defendant failed to plead or otherwise defend in this case as required by law.
Counsel for debtor filed an affidavit in accordance with the court's default judgment procedure on January 18, 2001, that set forth that debtor/movant filed an adversary proceeding on August 29, 2000, against defendant ERS and that no answer was filed within the required thirty-day response period under FRBP 7012(a). The affidavit set forth that defendant ERS was not enlisted in military service, nor an officer or agency of the United States, and so the "[d]efendant was therefore in default." However, the affidavit of counsel for debtor dated January 17, 2001, incorrectly identified the complaint at issue in this adversary proceeding as a motion to determine validity and nature of a lien. In actuality, the complaint at issue in this proceeding is debtor's motion for contempt against defendants for violation of the automatic stay.
On January 31, 2001, a continued pre-trial conference was held, and only counsel for debtor appeared to update the court on the prosecution of the adversary proceeding. At the conclusion of the matter, the court took the issue of debtor's motion for default judgment under advisement.
Also on January 31, 2001, counsel for debtor filed another affidavit in which counsel again stated incorrectly that movant filed a motion to determine validity and nature of a lien, and added several sworn statements, including the fact that defendant ERS was in default by his failure to appear, that the court entered default against defendant ERS on January 22, 2001, and that movant's claim was for a sum certain or a sum which can be made certain by computation.
Movant's claim included monies defendants have received from a wage assignment since debtor's November 12, 1999, bankruptcy filing; $5,000.00 in damages, attorney's fees and costs; $2,000.00 in additional damages, presumably also against defendant ERS for an unspecified purpose; and damages for ERS' FDCPA violations in the amount of $1,000.00.
Conclusions of Law
Federal Rule of Civil Procedure (FRCP) 55 applies to adversary proceedings under FRBP 7055, such as debtor's present motion for default judgment on the underlying motion for contempt for violations of the automatic stay under 11 U.S.C. § 362. In accordance with Rule 55(a), the clerk appropriately entered default against defendant ERS for its failure" . . . to plead or otherwise defend . . ." against debtor's motion for contempt for stay violations, and debtor filed the appropriate affidavit(s). Fed.R.Civ.Proc. 55(a). Now, debtor seeks entry of an order granting default judgment against defendant ERS.
Once an entry of default is achieved, Rule 55(b) governs default judgment, whether granted by the clerk or the court. See Fed.R.Civ.Proc. 55(b)(1) (b)(2). Debtor appears to be moving for judgment by default under Rule 55(b)(1), although his proposed order was submitted to the court, rather than the clerk. Rule 55(b)(1) requires eligible movants' claims against defaulting defendants to be" . . . for a sum certain or for a sum which can by computation be made certain", to be made at the request of movants who have submitted the required affidavit(s) of the amount(s) due and costs against the defendant(s), and to be made against only defendants who have" . . . defaulted for failure to appear . . ." rather than because they are incompetent or infants.
Fed.R.Civ.Proc. 55(b)(1).
The language of Rule 55(b)(1) is mandatory regarding the duty of the clerk to enter default judgment for the sum certain amount of damages and costs requested by properly pleading plaintiffs, assuming all prerequisites for bringing a default judgment proceeding are met. See Fed.R.Civ.Proc. 55(b)(1) (stating that ". . . the clerk upon request of the plaintiff and upon affidavit of the amount due shall enter judgment for that amount and costs against the defendant, if the defendant has been defaulted for failure to appear . . . ."). Because debtor's motion for default judgment does not state damages for a sum certain or damage established by evidence and the record to be readily capable of calculation as required by Rule 55(b)(1), the court defers to the second procedural avenue under which default judgment may be entered, subsection (b)(2).
Rule 55(b)(2) includes an additional potential requirement for entry of default judgment, the requirement that the court conduct a hearing. See Fed.R.Civ.Proc. 55(b)(2) (describing that "[i]f, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation . . .", the court can conduct a hearing). In this instance, debtor's requested damage sums, as set forth purely in a summary fashion in the pleadings filed, do not necessarily rise to the level of "sums certain" or sums readily capable of calculation, as required by Rule 55 to dispose of the default judgment and damage issues concurrently without requirement of further hearing. Rather, here, it is necessary for the court to conduct a hearing to further explore the propriety of debtor's requested $8,000.00 actual, compensatory, and punitive damage award.
Thus, debtor's motion for default judgment will be granted in part to the extent of entering default judgment against defendant ERS but denied as to the entry of an award for damages. Upon debtor's request, the court will schedule a hearing for the determination of damages. Accordingly,
IT IS ORDERED that debtor's motion for default judgment against defendant ERS is GRANTED IN PART to the extent that the court will enter a judgment of default against defendant ERS for failure to respond or defend against debtor's motion for contempt for violation of the automatic stay. Explicitly, the court GRANTS debtor's motion for default judgment only to the extent of a disposition of defendant ERS' defaulting status; IT IS ORDERED that debtor's motion for default judgment is DENIED to the extent that an award of damages is requested on the face of debtor's pleadings alone, without presentation of further evidence, an investigation, or establishment of a full accounting. An award of damages within the motion for default judgment will only be entered pursuant to Rule 55(b);
IT IS ORDERED that upon debtor's request, the court will schedule a hearing for a determination of damages; and
IT IS FURTHER ORDERED that debtor give notice of the scheduled hearing to the defendant.