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United States of America v. John M. Cafolla

June 27, 2012

UNITED STATES OF AMERICA, PLAINTIFF,
v.
JOHN M. CAFOLLA, DEFENDANT



The opinion of the court was delivered by: Glenn T. Suddaby, United States District Judge

MEMORADUM-DECISION and ORDER

Currently before the Court, in this student debt collection action filed by the United States of America ("Plaintiff") against John M. Cafolla ("Defendant"), is Plaintiff's amended motion for default judgment pursuant to Fed. R. Civ. P. 55(b). (Dkt. No. 7.) For the reasons set forth below, Plaintiff's amended motion is granted in part and denied in part.

I. RELEVANT BACKGROUND

A. Plaintiff's Complaint

Generally, liberally construed, Plaintiff's Complaint asserts the following two claims: (1) a claim that Defendant is indebted to Plaintiff for the outstanding principal balance on a loan he took out through the Federal Family Education Loan Program ("Loan 1") in the amount of $5,511.23, plus prejudgment interest at a rate of 2.47 percent per year from June 12, 2003, to June 28, 2010, which (allegedly) amounts to $1,804.12; and (2) a claim that Defendant is indebted to Plaintiff for the outstanding principal balance on a loan he took out through the William D. Ford Federal Direct Loan Program ("Loan 2") in the amount of $3,681.79, plus prejudgment interest at a rate of 2.47 percent per year from February 22, 2003, to June 28, 2010, which (allegedly) amounts to $1,395.52. (Dkt. No. 1 & Exs. A-B.)

As relief, Plaintiff's Complaint requests (1) the above-described sums, (2) prejudgment interest for Loans 1 and 2 at the same 2.47 percent rate used to calculate the prejudgment interest, from June 28, 2010, to the date of judgment, (3) post-judgment interest for Loans 1 and 2 pursuant to 28 U.S.C. § 1961, (4) all administrative costs and service-of-process costs allowed by law, and (5) attorneys' fees allowed by law or contract. (Id.)

B. Plaintiff's Service of Its Complaint and Defendant's Failure to Answer

On January 27, 2012, Plaintiff served its Complaint on Defendant. (Dkt. No. 3.) As of the date of this Memorandum-Decision and Order, Defendant has filed no Answer to that Complaint. (See generally Docket Sheet.)

C. Clerk's Office's Entry of Default and Defendant's Non-Appearance

On February 24, 2012, Plaintiff requested that the Clerk of the Court enter default against Defendant pursuant to Fed. R. Civ. P. 55(a). (Dkt. No. 4.)*fn1 On February 24, 2012, the Clerk of the Court entered that default. (Dkt. No. 5.) As of the date of this Memorandum-Decision and Order, Defendant has not appeared in this action and/or attempted to cure that entry of default. (See generally Docket Sheet.)

D. Plaintiff's Motion and Amended Motion for Default Judgment, and Defendant's Non-Response

On February 24, 2012, Plaintiff filed a motion for default judgment pursuant to Fed. R. Civ. P. 55(b). (Dkt. No. 6.) As relief, Plaintiff requested as follows: (1) the outstanding principal balance on Loan 1 in the amount of $5,511.23 plus prejudgment interest at a rate of 2.47 percent per year from June 12, 2003, to an unspecified date, in the amount of $1,304.47; (2) the outstanding principal balance on Loan 2 in the amount of $3,681.79 plus prejudgment interest at a rate of 2.47 percent per year from February 22, 2003, to an unspecified date, in the amount of $904.78; (3) attorney's fees in the amount of $3,420.68; (4) service-of-process fees totaling $70.00; and (5) filing fees totaling $250.00. (Id.) In support of his request for attorney's fees, Plaintiff argued, in a three-page document labeled as an "Application," that (1) Defendant signed a promissory note obligating him to pay attorney's fees, and (2) the United States of America has agreed to pay Plaintiff's counsel a contingent fee of 30.0% on all amounts collected in this matter. (Id.)

On February 27, 2012, the Clerk of the Court advised Plaintiff's counsel that a motion for default judgment requires (1) a notice of motion setting forth the motion return date (which is 31 days from the date of filing) and (2) a memorandum of law in support of a attorneys fees portion of the motion. (Docket Entry filed Feb. 27, 2012.)

On February 29, 2012, the Clerk of the Court recommended to Plaintiff's counsel that "he submit a memorandum of law in support of his motion for attorneys' fees and attach a record of his hours and expenses to be considered by this Court." (Text Notice filed Feb. 29, 2012.)

On March 2, 2012, Plaintiff filed an amended motion for default judgment pursuant to Fed. R. Civ. P. 55(b). (Dkt. No. 7.) As relief, Plaintiff requests as follows: (1) the outstanding principal balance on Loan 1 in the amount of $5,511.23 plus prejudgment interest at a rate of 2.47 percent per year from June12, 2003, to an unspecified date, in the amount of $1,304.47; (2) the outstanding principal balance on Loan 2 in the amount of $3,681.79 plus prejudgment interest at a rate of 2.47 percent per year from February 22, 2003, to an unspecified date, in the amount of $904.78; (3) attorney's fees in the amount of $3,420.68; and (4) service-of-process fees totaling $55.00. (Id.) In response to the Clerk of the Court's notice that his motion must be supported by a memorandum of law, Plaintiff resubmitted the application it submitted in support of its original motion, with the words "Memorandum of Law" inserted into the title. (Id.)

Familiarity with the particular grounds of Plaintiff's amended motion for default judgment, and the relief requested therein, is assumed in this Memorandum-Decision and Order, which is intended primarily for review of the parties.

As of the date of this Memorandum-Decision and Order, Defendant has filed no response to either the motion or the amended motion. (See generally Docket Sheet.)

II. RELEVANT LEGAL STANDARD

A. Legal Standard Governing Motions for Default Judgment

"Federal Rule of Civil Procedure 55 provides a two-step process that the Court must follow before it may enter a default judgment against a defendant." Robertson v. Doe, 05-CV-7046, 2008 WL 2519894, at *3 (S.D.N.Y. June 19, 2008). "First, under Rule 55(a), when a party fails to 'plead or otherwise defend . . . the clerk must enter the party's default.'" Robertson, 2008 WL 2519894, at *3 (quoting Fed. R. Civ. P. 55[a]). "Second, pursuant to Rule 55(b)(2), the party seeking default judgment is required to present its application for entry of judgment to the court." Id. "Notice of the application must be sent to the defaulting party so that it has an opportunity to show cause why the court should not enter a default judgment." Id. (citing Fed. R. Civ. P. 55[b][2]). "When an action presents more than one claim for relief . . . , the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties . . . if the court expressly determines that there is no just reason for delay." Fed. R. Civ. P. 54(b).

When the Court considers a motion for the entry of a default judgment, it must "accept[ ] as true all of the factual allegations of the complaint . . . ." Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) (citations omitted). "However, the court cannot construe the damages alleged in the complaint as true." Eng'rs Joint Welfare, Pension, Supplemental Unemployment Benefit and Training Funds v. Catone Constr. Co., Inc., 08-CV-1048, 2009 WL 4730700, at *2 (N.D.N.Y. Dec. 4, 2009) (Scullin, J.) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 [2d Cir. 1999] [citations omitted]). "Rather, the court must 'conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.'" Eng'rs Joint Welfare, Pension, Supplemental Unemployment Benefit and Training Funds, 2009 WL 4730700, at *2 (quoting Alcantara, 183 F.3d at 155 [citation omitted]). This inquiry "involves two tasks: (1) determining the proper rule for calculating damages on such a claim, and (2) assessing plaintiff's evidence supporting the damages to be determined under this rule." Alcantara, 183 F.3d at 155. Finally, in calculating damages, the court "need not agree that the alleged facts constitute a valid cause of action . . . ." Au Bon Pain, 653 F.2d at 65 (citation omitted).

B. Legal Standard Governing Request for Pre-Judgment Interest

Generally, the purpose of prejudgment interest is to put a party in the position that it would have been in had it been paid immediately. Prejudgment interest is designed to ensure that a party is fully compensated for its loss. See City of Milwaukee v. Cement Div. Nat'l Gypsum Co., 515 U.S. 189, 195 (1995); Rodgers v. United States, 332 U.S. 371, 373 (1947) (explaining that a party "who has suffered actual money damages by another's breach . . . should be fairly compensated" by entry of appropriate interest). Prejudgment interest is usually awarded in situations where economic injuries have been sustained. McDow v. Rosado, 657 F. Supp. 2d 463, 464 (S.D.N.Y. 2009).Prejudgment interest typically accrues from the date of the loss or from the date on which the claim accrued. West Virginia v. United States, 479 U.S. 305, 311 n.2 (1987); Cornell Univ. v. Hewlett-Packard Co., 01-CV-1974, 2009 U.S. Dist. LEXIS 41408 at *10 (N.D.N.Y May 15, 2009) (Rader, J.) ("[P]rejudgment interest ordinarily is awarded from the date of infringement until entry of judgment.").

The Court has broad discretion in calculating a rate of interest for an award of prejudgment interest. "There is no federal statute that purports to control the rate of prejudgment interest." Jones v. UNUM Life Ins. Co. of Am., 223 F.3d 130, 139 (2d Cir. 2000). The Second Circuit has not definitively spoken concerning the particular methodology to be employed in choosing an interest rate for prejudgment interest. See Endico Potatoes, Inc. v. CIT Group/Factoring, Inc., 67 F.3d 1063, 1071 (2d Cir. 1995) (stating that the rate used for prejudgment interest is confided to the district court's discretion). Thus, the fashioning of relief and the assessment of prejudgment interest are ...


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