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United States v. Marshall

United States District Court, N.D. New York

February 27, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
MARCIA MARSHALL, Defendant.

          OVERTON, RUSSELL, DOERR &LINDA L. DONOVAN, ESQ. DONOVAN, LLP Attorneys for Plaintiff

          MEMORANDUM-DECISION AND ORDER

          Mae A. D'Agostino, U.S. District Judge

         I. INTRODUCTION

         On October 5, 2015, the United States of America ("Plaintiff") commenced this action alleging that Marcia Marshall ("Defendant") defaulted on a promissory note. See Dkt. No. 1 at 2. On July 18, 2016, the Court granted Plaintiff's motion for default judgment with respect to liability, but denied the demanded relief with leave to reapply for damages. See Dkt. No. 11 at 5-6. Currently before the Court is Plaintiff's motion for entry of damages. See Dkt. No. 15.

         II. BACKGROUND

         The Court has taken the facts set forth below from Plaintiff's complaint, the Certificate of Indebtedness from the United States Department of Education executed on August 26, 2016 (the "Certificate of Indebtedness"), an affidavit submitted by Plaintiff's counsel, and attached exhibits. Defendant is a resident of Chenango County, New York. See Dkt. No. 1 at 1. Defendant executed a master promissory note on or about August 4, 2002 for a loan under the William D. Ford Federal Direct Loan Program. See Id. at 2; Dkt. No. 1-1 at 1; Dkt. No. 15 at 3.

         The Certificate of Indebtedness shows that the following loan disbursements were made: $4, 060.00 on October 8, 2002 to January 9, 2003; $2, 665.00 on October 8, 2002 to January 9, 2003; $4, 060.00 on August 27, 2003 to January 20, 2004; $2, 665.00 on August 27, 2003 to January 20, 2004; $2, 665.00 on August 17, 2004 to January 14, 2005; and $4, 060.00 on August 27, 2004 to January 14, 2005, all of which were subject to a variable rate of interest established annually. Dkt. No. 15 at 3. Defendant defaulted on the promissory note on July 25, 2009. Id. After the default, pursuant to 34 C.F.R. § 685.202(b), $2, 938.19 in unpaid interest was capitalized and added to the principal balance. See id. According to the Certificate of Indebtedness, Defendant owed $20, 102.84 in principal and $881.33 in interest as of August 26, 2016. Id. Currently, interest accrues on the principal at a rate of 2.65% with a daily rate of $1.47 through June 30, 2017. Id.

         On October 26, 2015, Plaintiff served Defendant with the complaint. See Dkt. No. 4. Plaintiff filed a request for entry of default on November 24, 2015. See Dkt. No. 6. On the same day, the Clerk of the Court entered default against Defendant pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. See Dkt. No. 8; Fed.R.Civ.P. 55(a). On December 2, 2016, Plaintiff filed a motion for default judgment pursuant to Rule 55(b) of the Federal Rules of Civil Procedure. See Dkt. No. 10.

         On July 18, 2016, this Court granted Plaintiff's motion for default judgment with respect to liability, but denied Plaintiff's motion with respect to damages because Plaintiff failed to meet its burden to establish a basis for the damages claimed. See Dkt. No. 11 at 5-6. While Plaintiff did submit the master promissory note, Plaintiff failed to satisfy Local Rule 55.2, which requires the interest rate submitted to be calculated at a per diem rate as well as the per annum rate. See Id. at 4; see also Local Rules N.D.N.Y. 55.2(a). Additionally, the Court found that Plaintiff could not recover server and travel fees for serving Defendant with the summons and complaint without proving that these costs were actually incurred. See Dkt. No. 11 at 5.

         In order to establish its entitlement to the damages claimed, Plaintiff was directed to submit a certificate of indebtedness, a full promissory note, disbursement history, demand for payment, evidence of the date of default, and evidence of the amount of the loan applied for and actually received. See Id. On August 12, 2016, Plaintiff submitted a letter request for an additional 30 days to obtain the necessary documentation to establish its claimed damages. See Dkt. No. 13. On September 7, 2016, Plaintiff submitted an attorney Affidavit of Amount Due and the Certificate of Indebtedness. See Dkt. No. 15.

         III. DISCUSSION

         "Where a default occurs, the well-pleaded factual allegations set forth in a complaint relating to liability are deemed true." Gesualdi v. Seacost Petroleum Prod., Inc., 97 F.Supp.3d 87, 95 (E.D.N.Y. 2015) (citing Greyhound Exhibitgroup, Inc. v. E.L. U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992) (other citations omitted)). "While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof unless the amount is liquidated or susceptible [to] mathematical computation." Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974) (citations omitted); see also Joseph v. HDMJ Rest., Inc., 970 F.Supp.2d 131, 149 (E.D.N.Y. 2013) (citations omitted). "[E]ven upon default, a court may not rubber-stamp the non-defaulting party's damages calculation, but rather must ensure that there is a basis for the damages that are sought." Overcash v. United Abstract Group, Inc., 549 F.Supp.2d 193, 196 (N.D.N.Y. 2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). "The burden is on the plaintiff to establish its entitlement to recovery." Bravado Int'l Grp. Merch. Servs., Inc. v. Ninna, Inc., 655 F.Supp.2d 177, 189 (E.D.N.Y. 2009) (citation omitted). "While 'the court must ensure that there is a basis for the damages specified in a default judgment, it may, but need not, make the determination through a hearing.'" Id. at 190 (quotation omitted).

         Plaintiff was directed to submit specific documentary evidence sufficient to "ascertain the amount of damages with reasonable certainty." Alcantara, 183 F.3d at 155 (citation omitted). "[A] document containing both the borrower's signature and the amount of the loan applied for and disbursed" may serve as a basis for an award of damages. See United States v. Linn, No. 10-CV-5289, 2011 WL 2848208, *3 (E.D.N.Y. July 14, 2011). In addition, damages have been awarded "relying solely on Certificates of Indebtedness." United States v. Reeves, No. 5:12-CV-0886, 2013 WL 4508721, *2 (N.D.N.Y. Aug. 23, 2013) (citing United States v. Zdenek, No. 10-CV-5566, 2011 WL 6754100, *2 (E.D.N.Y. Dec. 22, 2011)).

         Plaintiff has provided a Certificate of Indebtedness signed under penalty of perjury by a loan analyst. See Dkt. No. 15 at 3. As discussed above, the Certificate of Indebtedness sets forth the loan disbursements and the amounts due on the loan as of August 26, 2016. As of that date, Defendant owed $20, 102.84 in principal and $881.33 in interest, for a total debt of $20, 984.17. See Id. Currently, interest accrues on the principal at a rate of 2.65% with a daily rate of $1.47 through June 30, 2017. See Id. As such, an additional $270.48 in interest has ...


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