Assist Financial Services, Inc. v. Freight One Transportation, Inc. et al

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
ASSIST FINANCIAL SERVICES, INC., a
South Dakota Corporation,
Plaintiff,
vs.
FREIGHT ONE TRANSPORTATION, INC., a
California Corporation, and DAVID
PALACIOS,
Defendants.
4:20-CV -4015-LLP
MEMORANDUM OPINION AND ORDER
DENYING MOTION FOR DEFAULT
JUDGMENT
On January 28, 2020, Plaintiff, Assist Financial Services, Inc. (“Plaintiff”), filed a
complaint against defendants Freight One Transportation, Inc. (“Freight One”) and David
Palacios (“Palacios”), (collectively, “Defendants”) alleging the following claims: 1) Breach of
Purchasing Agreement against Freight One; 2) Breach of Purchasing Agreement against
Palacios, d/b/a/ Freight One; 3) Breach of Guaranty against Palacios; 4) Fraudulent Inducement
& Deceit against Defendants. 	Doc. 1. 	This Court had diversity jurisdiction over this matter
pursuant to 28 U.S.C. § 1332(a).
On July 8, 2020, Plaintiff filed a Motion for Default Judgment pursuant to Rule 55(b)(1)
of the Federal Rules of Civil Procedure, Doc. 9, and moves the Clerk of Court to enter default
judgment against defendants Freight One and Palacios. 	Doc. 9. 	For the following reasons,
Plaintiff’s Motion for Default Judgment is denied.
DISCUSSION
The Clerk of Court may enter default judgment if the Plaintiff’s claim “is for a sum
certain or a sum that can be made certain by computation.” 	Fed. R. Civ. P. 55(b)(1). 	“In all
other cases, a party must apply to the Court for a default judgment.” 	Fed. R. Civ. P. 55(b)(2)
(emphasis added). “[A] claim is not a sum certain unless there is no doubt as to the amount to
which a plaintiff is entitled as a result of the defendant’s default.” Stephenson v. El-Batrawi, 524
F.3d 907, 917 n.11 (8th Cir. 2008) (quoting KPS & Assocs., Inc. v. Designs By FMC, Inc., 318
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F.3d 1, 19 (1st Cir. 2003)); see also KPS & Assocs., Inc. v. Designs by FMC, Inc., 318 F.3d 1, 20
(1st Cir. 2003) (citing actions to enforce liquidated damages clause or seeking delinquent tax
assessment); Thorpe v. Thorpe, 364 F.2d 692, 694 (D.C. Cir. 1966) (holding that the “full
amount of the check in question” for which plaintiff demanded judgment was a sum certain for
purposes of Rule 55(b)(1)); Purity Bakery Bldg. Ltd. P’ship v. Penn-Star Inc. Co., Civ. No. 11-
0094, 2011 WL 1324973, at *2 (D. Minn. Apr. 7, 2011) (“Typically, Rule 55(b)(1) is used to
collect a specific amount that was due on a specific date under a specific contract, such as the
balance due on a student loan. 	Rule 55(b)(1) is not used when the amount of the judgment
cannot be calculated with such certainty.”); Interstate Food Processing Corp. v. Pellerito Foods,
Inc., 622 A.2d 1189, 1193 (Me. 1993) (stating that “sum certain” situation including actions on
money judgments and negotiable instruments or similar actions where the damages sought can
be determined without resort to extrinsic proof).
In the present case, in addition to the value of the account receivables Plaintiff purchased
from Freight One, Plaintiff also seeks to recover a closing fee upon termination of the
Purchasing Agreement, default fees, collection charges, and an early termination fee—all of
which Plaintiff states it is entitled to recover in the event of Freight One’s breach of the
Purchasing Agreement. 	While the Court was able to locate the sections in the Purchasing
Agreement that referred to these fees, the fee amount or rates in the Purchasing Agreement have
been redacted. Accordingly, there is doubt as to what Plaintiff is entitled to as a result of Freight
One’s default and this motion is therefore improper under Rule 55(b)(1).
In addition, Plaintiff is seeking attorney’s fees. Under South Dakota law—the law of the
forum and the law chosen by the parties to govern the Purchasing Agreement—each party
generally bears the burden of the party’s own attorney’s fees. 	In re S. Dakota Microsoft
Antitrust Litig., 707 N.W.2d 85, 98 (S.D. 2005) (citation omitted). 	However, as stated by the
South Dakota Supreme Court:
[T]wo exceptions to this general rule exist, first when a contractual agreement
between the parties entitles the prevailing party to attorney fees, and second when
an award of attorney fees is authorized by statute. The fees awarded by the court
in each case must be reasonable for the services rendered.
Id. (emphasis added); see also Eagle Ridge Estates Homeowners Ass’n, Inc. v. Anderson, 827
N.W.2d 859 (S.D. 2013) (stating that under the two exceptions to the general rule that each party
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bears the burden of its own attorney fees, the award for attorney fees must be reasonable for the
services rendered). Thus, although the Purchasing Agreement provides that Freight One agrees
to reimburse Plaintiff for attorney’s fees incurred in enforcing the Purchasing Agreement, under
South Dakota law, any award of attorney fees must “reasonable.”
Courts that have addressed the issue have concluded that “reasonable attorney’s fees” are
not sum certain within the meaning of Rule 55(b)(1). 	See, e.g., Flynn v. Mastro Masonry
Contractors, 237 F.Supp.2d 66, 70 (D.D.C. 2002) (“The amount of the attorney’s fees, however,
is not considered a sum certain as the ‘reasonableness of the fees requested by the [plaintiff] is a
“judgment call” which only the [c]ourt can make.’”); Combs v. Coal & Mineral Mgmt. Servs.,
Inc., 105 F.R.D. 472, 475 (D.D.C. 1984); Ferraro v. Arthur M. Rosenburg Co., 156 F.2d 212,
214 (2d Cir. 1946) (“But for the need to fix a reasonable attorney’s fee the clerk could have
entered the judgment under Rule 55(b)(1).”); Chemtall, Inc. v. Citi-Chem, Inc., 992 F.Supp.
1390, 1412 (S.D. Ga. 1998) (“[I]tems like ‘reasonable attorney’s fees' are simply not ‘sum
certain.’”); Design & Dev., Inc. v. Vibromatic Mfg., Inc., 58 F.R.D. 71 (E.D. Pa. 1973) (“[W]hat
is a ‘reasonable’ fee may only be determined after a hearing.”); Phillips 66 Co. v. Grainer, Civ.
No. 13-1890, 2015 WL 3797396 (E.D. Cal. Jun. 18, 2015) (“A calculation of reasonable
attorney’s fees is not a sum certain calculation, and the default judgment entered by the Clerk of
Court pursuant to [Rule] 55(b)(1) is no longer proper.”); Stolicker v. Muller, Muller, Richmond,
Harms, Myers & Sgroi, P.C., Civ. No. 04-733, 2005 WL 2180481, at *5 (W.D. Mich. Sept. 9,
2005) (holding that a reasonable attorney fee cannot be a “sum certain” because it requires
judicial evaluation of the evidence regarding the fee).
Rule 55(b)(1) “carefully limits the clerk’s authority to those cases where the entry of
judgment is purely a ministerial act, since ‘[s]ound policy dictates that the clerk should not be
invested with discretionary power.’” 	Combs v. Coal & Mineral Mgmt Servs., Inc., 105 F.R.D.
472, 474 (D.D.C. 1984) (quoting C. Wright, A. Miller & M. Kane, Federal Practice &
Procedure § 2683 at 416 (1983)). Many of the fees that Plaintiff states it is entitled to under the
Purchasing Agreement for its breach are incalculable because such rates and figures in the
Purchasing Agreement have been redacted. In addition, any award of attorney’s fees will require
the Court to exercise its discretion in determining what is reasonable.
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For these reasons, Plaintiff’s Motion for Default Judgment pursuant to Rule 55(b)(1) of
the Federal Rules of Civil Procedure is denied. 	Should Plaintiff seek to apply to the Court for
default judgment under Rule 55(b)(2), Plaintiffs are instructed that allegations relating to the
amount of damages must be proven to a reasonable degree of certainty, Everyday Learning
Corp. v. Larson, 242 F.3d 815, 818-19 (8th Cir. 2001), and that the party seeking default should
document “the mathematical calculation to reach the final amount in each category of damages
requested,” Stephenson v. El-Batrawi, 524 F.3d 907, 917 (8th Cir. 2008).
Accordingly, it is hereby ORDERED that Plaintiff’s Motion for Default Judgment
pursuant to Rule 55(b)(1) of the Federal Rules of Civil Procedure, Doc. 9, is DENIED.
Dated this 12th day of August, 2020.
BY THE COURT:
________________________________
Lawrence L. Piersol
ATTEST: 	United States District Judge
MATTHEW W. THELEN, CLERK
______________________________
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