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UM Technologies, LLC v. Hilts Global (Cayman) Ltd.

United States District Court, M.D. Pennsylvania

April 3, 2019

UM TECHNOLOGIES, INC., Plaintiff,
v.
HILTS GLOBAL (CAYMAN) LIMITED, et al., Defendants.

          Mariani Judge

          REPORT AND RECOMMENDATION

          MARTIN C. CARLSON UNITED STATES MAGISTRATE JUDGE.

         I. Factual Background

         We are now called upon to write the first draft of the final chapter in this litigation and make recommendations regarding two issues: First, whether to find the individual defendant in this case, Mark Brooke, in default; and second, to propose the proper scope of a liquidated damages order against Brooke in this lawsuit in the event that Brooke is found to be in default.[1]

         By way of background, this is a breach of contract and fraud action brought by a Pennsylvania company against various Cayman island business entities, and the principal behind these businesses, Mark Brooke. The plaintiff commenced this action on November 1, 2017, to collect on a $200, 000 promissory note allegedly executed by Brooke on behalf of these Cayman island companies in order to secure financing from the plaintiff.

         The plaintiff filed proof of service upon the following named corporate defendants in March of 2018: HILTS GLOBAL US, HILTS GLOBAL CAYMAN, and HILTS GLOBAL UK. (Doc. 7.) Despite the passage of many months, none of these defendants ever answered or otherwise appeared in this action. Accordingly, on December 17, 2018, we directed the plaintiff to either seek entry of default judgments against these previously served corporate defendants who have failed to respond to this complaint, or provide the court with a status report regarding the plaintiff's proposed course of action with respect to these other defendants. (Doc. 13.) The plaintiff then moved for entry of default against these defendants. (Doc. 15.) When the time for responding to this motion passed without any response from the defendants, we recommended that the motion be granted, but that this case be remanded to us in order to liquidate the amount of damages owed in this case. (Doc. 17.) The district court adopted this recommendation, (Doc. 18), and on March 19, 2019, the plaintiff filed a motion to liquidate its damages as to these corporate defendants. (Docs. 22 and 23.)

         While we were in the process of resolving this case with respect to the Cayman corporate defendants, we also considered UM's claims against Mark Brooke, the principal behind these companies who was also named as a defendant in this lawsuit. On this score, in December of 2018, we addressed an uncontested motion by UM to serve Brooke via email. This motion, accompanying affidavit, and exhibits revealed that plaintiff's counsel had engaged in diligent and repeated efforts to effect service upon Brooke. As part of these efforts, UM had direct communications with Brooke, who acknowledged that he was personally on notice of this lawsuit. The plaintiff also attempted to effect service upon Brooke in multiple different ways, but Brooke consistently avoided service of process in this matter.

         Presented with this persistent refusal by Brooke, who is believed to be a British national residing in the Cayman Islands, to accept service, the plaintiff sought leave of court to serve Brooke through email at the email address which he had used in the past to communicate with the plaintiff regarding this lawsuit. (Doc. 8.) We granted this motion, noting that service of process upon foreign individuals is governed in part by Rule 4(f)(3) of the Federal Rules of Civil Procedure, which provides that service may be made “by other means not prohibited by international agreement, as the court orders.” Fed.R.Civ.P. 4(f)(3). Cases construing Rule 4(f)(3) have held that the rule authorizes courts to permit service of a complaint upon a recalcitrant foreign party by email, particularly when it is evident that the foreign defendant has actual knowledge of the pending lawsuit but has simply avoided service through other means. See, e.g., Rio Properties, Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1012 (9th Cir. 2002); Celgene Corporation v. Blanche Ltd., 2017 WL 1282200 (D.N.J. March 10, 2017); WhosHere, Inc. v. Orun, No. 1:13-CV-00526-AJT, 2014 WL 670817, at *3 (E.D. Va. Feb. 20, 2014) (citing Garung v. Malhorta, 279 F.R.D. 215, 219 (S.D.N.Y.2011)); F.T.C. v. PCCare247 Inc., 2013 WL 841037 at *3-4 (S.D.N.Y Mar. 7, 2013) (permitting service by email and Facebook); Facebook Inc. v. Banana Ads, LLC, 2012 WL 1038752, at *2 (N.D. Cal. Mar. 27, 2012) (referencing cases where service by email did not violate the Hague Convention); S.E.C. v. Lines, No. 07 CIV. 11387 (DLC), 2009 WL 3179503, at *1 (S.D.N.Y. Oct. 2, 2009); Williams v. Advert. Sex LLC., 231 F.R.D. 483, 484 (N.D. W.Va. 2005).

         In the instant case, it is abundantly clear that Brooke has actual knowledge of this pending case since he used emails to attempt to try to negotiate a compromise of the case with the plaintiff. In the absence of any objection to service by email, and given Brooke's use of email to demonstrate actual knowledge of this litigation, we found that service by email comported with the requirements of Rule 4(f)(3).

         UM has now moved for the entry of a default judgment against Brooke and for liquidation of that default judgment. (Doc. 20.) That motion recited that on January 11, 2019, counsel for Plaintiff served Brooke via email at the email address used by Brooke, and the January 11, 2019 email did not return as undeliverable. (Doc. 20, ¶¶ 15-16.) Having effected service in the manner authorized by the court, Brooke-who has long been aware of this lawsuit-has made no effort to respond to the claim or mount a defense. Instead, Brooke has adopted the posture of an ostrich, burying his head in the sand and ignoring the fact that he owed UM more than $200, 000.

         Given this latest default by Brooke, on March 19, 2019, UM moved for entry of default against this defendant and simultaneously requested that we liquidate this default judgment in its favor. (Doc. 20.) Once again, we afforded Brooke an opportunity to respond or be heard on this motion by deferring action on the motion for the 14-day response period prescribed by the rules of this court. However, once again, Brooke has defaulted on his responsibilities as a litigant by failing to respond to this motion, and the time for responding has passed. Therefore, this motion is now ripe for resolution.

         For the reasons set forth below, it is recommended that the court enter a default judgment in favor of the plaintiff against Brooke in the amount of $238, 723.07.

         II. Discussion

         Default judgments are governed by Rule 55 of the Federal Rules of Civil Procedure. Under Rule 55, a default judgment may be entered when the party against whom the default judgment is sought was served and “has failed to plead or otherwise respond.” Fed.R.Civ.P. 55(a) Furthermore, in ruling ...


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