819d LLC v. Pcg Construction Group, LLC

• Court: District Court, District of Columbia
• Decided: September 14, 2020
• Docket: Civil Action No. 2019-0080
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

819D LLC,

Plaintiff,

v. Case No. 1:19-cv-00080 (TNM)

POTOMAC CONSTRUCTION GROUP, LLC,

Defendant.

MEMORANDUM ORDER

Defendant Potomac Construction Group, LLC (“Potomac”) has yet to appear or

participate in this litigation, which is more than a year old. Plaintiff 819D LLC (“819D”) has

diligently pursued its case, but it has been stymied by Potomac’s absence. 819D now moves for

a default judgment against Potomac. For the following reasons, the Court will grant in part and

deny in part the motion.

I.

In July 2014, 819D entered into a written contract with Potomac for work on the

renovation of condominiums in Washington, D.C. See Compl. & Demand for Jury Trial (“Am.

Compl.”) ¶¶ 7–8, ECF No. 16. The parties’ contract required Potomac to secure a performance

bond for its work under the contract, and Potomac provided one from Travelers Casualty and

Surety Company of America (“Travelers”) for $5,883,560.00. See id. ¶¶ 9–11; Pl.’s Rule 55(b)

Appl. for Entry of Default J. (“Pl.’s Mot.”) Ex. 3 at 1, ECF No. 27-6. Travelers was to serve as

surety and ensure Potomac’s performance under the contract. Am. Compl. ¶ 9.

819D alleges that Potomac failed to complete its work on the condominiums, and it later

discovered that Travelers had never issued any performance bond to Potomac for the work. Id. ¶¶ 23–24. 819D claims that the individual who purportedly signed the performance bond on

behalf of Travelers did not work there and “Travelers does not have a surety relationship with

[Potomac] and has not issued surety bonds for [Potomac].” Id. ¶ 25.

The parties’ contract also required Potomac to provide an express warranty against “all

structural defects,” including a “1 year builders warranty in addition to requirements per DC

Code §42-1903.16.” Id. ¶ 14 (cleaned up). The D.C. Code “requires a two-year limited warranty

for structural defects in the property.” Id. ¶ 15. 819D alleges that the owner’s association of the

condominiums and several individual residents identified structural defects with their properties,

but Potomac “affirmatively stated that its contractual warranties . . . have expired.” Id. ¶ 18–19,

21.

Under the contract, Potomac also had to submit “releases and/or waivers of liens from

[its] subcontractors, suppliers, and vendors whose labor, materials, or other services formed a

part of the basis for [its] request for payment from 819D.” Id. ¶ 27. When Potomac submitted

requests for payment, it represented “that it would use funds received from 819D to properly pay

all subcontractors.” Id. ¶ 28. 819D alleges that Potomac “failed to use the payments received

from 819D to properly pay its subcontractors.” Id. ¶ 30. And it claims Potomac submitted a

“Final Release of Liens” from subcontractor JR Roofing & Siding, Inc., which stated that

Potomac provided full payment for the subcontractor’s work “when in fact it had not been paid

in full.” Id. ¶¶ 35–38. 819D alleges that Potomac similarly failed to pay other subcontractors as

well. Id. ¶ 43.

819D first sued both Potomac and Travelers, but itlater voluntarily dismissed Travelers as

a defendant. See Compl. & Demand for Jury Trial, ECF No. 1; Notice of Voluntary Dismissal,

ECF No. 7. 819D then filed an Amended Complaint raising seven claims against Potomac:

2 Breach of Contract (Count I), Breach of Warranty (Count II), Breach of Duty of Good Faith and

Fair Dealing (Count III), Fraud (Count IV), Action for an Accounting (Count V), Action for

Declaratory Judgment (Count VI), and Punitive Damages (Count VII). See Am. Compl.

Potomac did not respond to either complaint.

819D moved for a default entry. Rule 55(a) Mot. for Entry of Default, ECF No. 22. And

the Clerk entered default against Potomac. See Default, ECF No. 24. There was still no

response from Potomac. 819D then filed this motion for a default judgment. See Pl.’s Mot.

In support of its motion, 819D submits the following evidence: an affidavit from its

President, the Amended Complaint, the written contract between 819D and Potomac, the

performance bond from Travelers, an affidavit from a senior counselor of Travelers, the Final

Release of Liens from JR Roofing & Siding, Inc., and an email chain between 819D and JR

Roofing & Siding, Inc.

II.

“Default judgments are not favored by modern courts, perhaps because it seems

inherently unfair to use the court’s power to enter and enforce judgments as a penalty for delays

in filing.” Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir. 1980). That is why they “must

normally be viewed as available only when the adversary process has been halted because of an

essentially unresponsive party.” H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe,

432 F.2d 689, 691 (D.C. Cir. 1970) (per curiam).

Rule 55 establishes a two-step process for default judgments. First, the plaintiff asks the

Clerk of Court to enter a default when the opposing party “has failed to plead or otherwise

defend.” Fed. R. Civ. P. 55(a). After the Clerk enters the default on the docket, the plaintiff then

moves for a default judgment under Rule 55(b).

3 “Whether the entry of a default judgment is appropriate is committed to the sound

discretion of this Court.” Boland v. Yoccabel Constr. Co., 293 F.R.D. 13, 17 (D.D.C. 2013). “A

defaulting defendant is deemed to admit every well-pleaded allegation in the complaint.” Adkins

v. Teseo, 180 F. Supp. 2d 15, 17 (D.D.C. 2001). “After establishing liability, the court must

make an independent evaluation of the damages to be awarded and has considerable latitude in

determining the amount of damages.” Ventura v. L.A. Howard Constr. Co., 134 F. Supp. 3d 99,

103 (D.D.C. 2015) (cleaned up).

III.

A.

Potomac has yet to appear or participate in this case. It failed to respond to either

complaint or this motion for a default judgment, and it has not moved to set aside the default

entered by the Clerk. As a result, the Court will enter a default judgment against Potomac.

Accord Boland v. Elite Terrazzo Flooring, Inc., 763 F. Supp. 2d 64, 68 (D.D.C. 2011) (entering

default judgment where defendant responded “neither to the plaintiffs’ request for default nor to

their motion for default judgment”). Now the Court need only determine whether the allegations

for each count are well-pleaded to establish Potomac’s liability. See id. at 67.

The elements for breach of contract (Count I) and breach of warranty (Count II) are the

same. A party must show (1) a valid contract; (2) an obligation or duty arising out of the

contract; (3) a breach of that duty; and (4) damages. See SNH Med. Off. Props. Tr. v. Healthy

Eateries LLC, 325 F.R.D. 514, 518 (D.D.C. 2018); Wetzel v. Cap. City Real Estate, LLC, 73

A.3d 1000, 1005 (D.C. 2013). 819D alleges that it entered a contract with Potomac, which

required Potomac to pay its subcontractors and honor its warranty obligations. Am. Compl. ¶¶ 8,

4 11, 46, 53. 819D claims Potomac failed to fulfill these obligations causing 819D to sustain

damages. Id. ¶¶ 47–51, 54–56. These allegations state a claim under Counts I and II.

The duty of good faith and fair dealing (Count III) “prevents a party from evading the

spirit of the contract, willfully rendering imperfect performance or interfering with the other

party’s performance.” Hais v. Smith, 547 A.2d 986, 987–88 (D.C. 1988). 819D details

Potomac’s forgery of the Travelers’s performance bond and “its elaborate course of deceitful

conduct with respect to” that bond. Am. Compl. ¶ 59; see id. ¶¶ 23–26; Pl.’s Mot. Exs. 3–4. It

also shows other misconduct by Potomac, including false representations about subcontractor

payments. See Am. Compl. ¶¶ 27–44, 59; Pl.’s Mot. Exs. 5–6. Thus, Potomac is liable under

Count III because it “destroyed or injured the right of [819D] to receive the fruits of the

contract.” Paul v. Howard Univ., 754 A.2d 297, 310 (D.C. 2000) (cleaned up).

To establish fraud (Count IV), the plaintiff must show that “(1) the defendant made a

false representation; (2) in reference to material fact; (3) with knowledge of its falsity; (4) with

the intent to deceive the plaintiff; (5) the plaintiff acted in reasonable reliance on that

representation; (6) and which consequently resulted in provable damages.” Cordoba Initiative

Corp. v. Deak, 900 F. Supp. 2d 42, 47 (D.D.C. 2012) (cleaned up). 819D meets these

requirements. It offers extensive allegations that Potomac knowingly and intentionally

perpetrated multiple fraudulent schemes over the condominium project on which 819D relied,

including misrepresentations that Potomac properly paid subcontractors and obtained an

authentic performance bond from Travelers, and that it “knowingly and deliberately submitted

the forged” liens release from subcontractor JR Roofing & Siding, Inc. Am. Compl. ¶¶ 61–82.

A right to an accounting (Count V) exists if a party is “unable to determine how much, if

any, money is due from another.” Bates v. Nw. Hum. Servs., Inc., 466 F. Supp. 2d 69, 103

5 (D.D.C. 2006) (cleaned up). “Such relief may be obtained at the close of a litigation in actions

arising out of a tort where there is an allegation of fraud.” Id. (cleaned up). That is the case

here. 819D cannot access Potomac’s records. And an “accounting of [Potomac’s] project

finances is necessary” because 819D cannot determine the exact damages it sustained as a result

of Potomac’s “deliberate and egregious financial misconduct.” Am. Compl. ¶¶ 83–86.

And an “actual controversy” exists to warrant declaratory relief under Count VI. See 28

U.S.C. § 2201(a). 819D has shown that “there is a substantial controversy, between parties

having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a

declaratory judgment.” Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Several

condominium residents have claimed structural defects with their properties, but Potomac denies

its warranty obligations under the parties’ contract. See Am. Compl. ¶¶ 12–22, 87–89.

The Court, however, declines to award punitive damages under Count VII. “Punitive

damages are warranted only when the defendant commits a tortious act accompanied with fraud,

ill will recklessness, wantonness, oppressiveness, wilful disregard of the plaintiff’s right, or other

circumstances tending to aggravate the injury.” Butera v. District of Columbia, 235 F.3d 637,

657 (D.C. Cir. 2001) (cleaned up). 819D must show “by clear and convincing evidence that the

act was accompanied by conduct and a state of mind evincing malice or its equivalent.” Id.

(cleaned up). And “proof of fraud alone, unaccompanied by aggravating circumstances, is not

sufficient to justify punitive damages.” BWX Elecs. v. Control Data Corp., 929 F.2d 707, 712

(D.C. Cir. 1991) (emphasis in original).

The Court agrees with 819D that Potomac’s conduct is troubling. But 819D has not

established by clear and convincing evidence that Potomac acted with “malice or its equivalent.”

Accord Robinson v. Ergo Sols., LLC, 4 F. Supp. 3d 171, 180 (D.D.C. 2014) (declining to impose

6 punitive damages in default judgment when the plaintiff “put on no evidence whatsoever

regarding the mental state of the alleged wrongdoers in this case”). To be sure, the allegations

prove Potomac engaged in fraudulent conduct involving “fake payment and performance bonds

and forgery of documents.” See Pl.’s Mot. at 4. But fraud alone is not enough. And the

allegations do not “rise to the level of ‘gross fraud’ or comparable wrongdoing to sufficiently

justify awarding punitive damages.” Reisinger v. Dist. Builders of S. Md., LLC, No. CV 19-

1358 (JEB), 2020 WL 1189305, at *3 (D.D.C. Mar. 12, 2020) (denying punitive damages in

default judgment motion). Thus, Potomac is not liable under Count VII.

B.

Having established Potomac’s liability for Counts I through VI of the Amended

Complaint, the Court now turns to damages. “Although the default establishes a defendant’s

liability, the court is required to make an independent determination of the sum to be awarded

unless the amount of damages is certain.” Int’l Painters & Allied Trades Indus. Pension Fund v.

R.W. Amrine Drywall Co., 239 F. Supp. 2d 26, 30 (D.D.C. 2002). The party “must prove its

entitled to the amount of monetary damages requested using detailed affidavits or documentary

evidence on which the court may rely.” Boland v. Providence Constr. Corp., 304 F.R.D. 31, 36

(D.D.C. 2014) (cleaned up). And it must prove these damages “to a reasonable certainty.” Elite

Terrazzo Flooring, 763 F. Supp. 2d at 68. The evidence from 819D falls short.

819D relies only on an affidavit from its president, Andrew Rubin, to support its claim

for damages. See Aff. in Supp. of Default J. (“Rubin Aff.”), ECF No. 27-2. But the Rubin

Affidavit raises more questions than it answers. And it does not provide “sufficient information

for the Court to make the necessary determination on the amount of damages owed.” SNH Med.

Off. Props. Tr., 325 F.R.D. at 519. Instead, the Rubin Affidavit “has simply listed the dollar

7 figures for these costs, without any explanation as to their calculation.” GAG Enters., Inc. v.

Rayford, 312 F.R.D. 230, 234 (D.D.C. 2015).

For example, 819D claims it “incurred damages in the amount of $35,784.46 to pay for

the cost to perform the contract that Potomac had left incomplete and to correct defective work

installed by Potomac.” Rubin Aff. ¶ 9 (cleaned up). This is not enough. 819D submits no

invoices, bank statements, contracts, or other documentary evidence proving it made payments in

this amount. Nor does 819D justify how it incurred these costs as a result of Potomac’s failure to

perform its contractual obligations.

819D also seeks to recoup $372,975.36, which represents the entire contractor fee owed

to Potomac under the parties’ contract. See id. ¶ 13; Pl.’s Mot. Ex. 2 at 4. But 819D fails to

explain why Potomac is “not contractually entitled to receive” any of this fee. Rubin Aff. ¶ 13.

819D does not allege that Potomac performed no work on the project, only that the work was

defective and incomplete. See Am. Compl. ¶ 23. And this is already the basis for a separate

damages claim. Rubin Aff. ¶ 9. So 819D needs to prove why it should still recover this full

amount. Accord GAG Enters., 312 F.R.D. at 235 (“Plaintiff does not state a basis as to why

Defendant owes Plaintiff these costs.”).

The Court is similarly left guessing about the other damages claims. 819D requests

$56,965.57 for premium payments, which includes $50,285.00 in direct costs and $6,680.57 in

interest costs. Rubin Aff. ¶ 11. The record, however, lacks any evidence proving payments were

made in this amount, to whom the payments were made, or a breakdown between the direct and

interest payments.

819D also seeks $27,465.00 in attorney’s fees. Id. ¶ 14. The Court must make a

“judgment call” on whether these fees are reasonable. Combs v. Coal & Min. Mgmt. Servs., Inc.,

8 105 F.R.D. 472, 475 (D.D.C. 1984) (cleaned up). But it cannot do so based on the Rubin

Affidavit. 819D offers no invoices for its legal work, or declarations from its attorneys attesting

to the work performed, the hours billed for that work, the billing rate, and the reasonableness of

that rate.

819D requests $365,016.00 because the “District of Columbia continues to hold” a

structural warranty bond in that amount. Rubin Aff. ¶ 16. On this record, the Court cannot

confirm that a structural warranty bond exists in this amount, or that the District of Columbia

refuses to release that bond. 819D also needs to justify why it is entitled to these compensatory

damages and the declaratory relief sought under Count VI of the Amended Complaint. See Am.

Compl. ¶¶ 87–89.

In sum, 819D has not “provided any basis demonstrating its entitlement to its requested

damages amount.” Fed. Nat’l Mortg. Ass’n v. Epicurean Foods, LLC, Civil Action No. 16-1154

(RBW), 2018 WL 4193639, at *3 (D.D.C. June 21, 2018). 819D must submit additional

evidence proving the compensatory damages it seeks.

IV.

For these reasons, it is hereby ORDERED that 819D’s motion for a default judgment is

GRANTED in part as to liability for Counts I through VI of the Amended Complaint, but

DENIED WITHOUT PREJUDICE in part as to liability for Count VII and an award of damages.

It is further ORDERED that 819D shall supplement its motion for a default judgment by filing

on the docket another submission proving its entitlement to the requested amount of

compensatory damages on or before October 16, 2020.

SO ORDERED. 2020.09.14 11:52:56 -04'00' Dated: September 14, 2020 TREVOR N. McFADDEN, U.S.D.J.