The Savings Bank Mutual Life Insurance Company of Massachusetts v. Blackston

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

THE SAVINGS BANK MUTUAL LIFE

INSURANCE COMPANY OF

MASSACHUSETTS,

Plaintiff,

v. No. 4:23-cv-0194-P

JAY BRANDON BLACKSTON,

Defendants.

MEMORANDUM OPINION & ORDER

Before the Court is Plaintiff’s Motion for Default Judgment. ECF No.

11. Having considered the motion, relevant docket entries, supporting

documentation, and the applicable law, the Court concludes that the

motion should be, and it is hereby, GRANTED. The Court therefore

ORDERS that a default judgment be entered against Defendant.

BACKGROUND

Defendant sold life insurance for Plaintiff. Pursuant to Defendant’s

“Producer’s Agreement” with Plaintiff, Defendant agreed to: (1) solicit

and transmit applications for insurance policies to be issued by

Defendant, (2) remit life insurance premiums to Plaintiff, (3) conduct

himself in a way not to adversely affect Defendant’s business or

reputation, and (4) comply with all of Defendant’s rules, policies, and

procedures.

In return for selling a policy, Defendant earned a commission of up

to 75% of the policy’s first-year premium. Defendant’s calculation of

these premiums is based on the expectation that a newly issued policy

will remain in effect for years.

From January to June of 2022, Plaintiff received over 144

applications for life insurance naming Defendant as the producer of

record. Relying on the information in those applications, Plaintiff

advanced Defendant $255,667.33 in commissions. But Plaintiff

experienced difficulty withdrawing the premium funds from the bank

accounts listed in the applications and was contacted by some of the

applicants who demanded refunds—representing to Plaintiff that they

never actually wanted to purchase the policy.

According to Plaintiff’s records, 105 policies lapsed for non-payment,

one policy was surrendered, and 38 policies were not taken, meaning

that an initial premium payment was never remitted or the purchaser

decided they no longer wanted the policy during the initial “free look”

period. When Plaintiff filed this action in February 2023, Defendant

owed approximately $253,097.18 in “unearned” commissions on these

policies.

Plaintiff sued, alleging breach of contract, money had and received,

and unjust enrichment. Plaintiff also seeks restitution and attorneys

fees. Defendant never answered or otherwise responded to Plaintiff’s

Complaint. The Clerk entered a default against Defendant, and Plaintiff

now brings the instant Motion for Default Judgment.

LEGAL STANDARD

A plaintiff can move for default judgment under Federal Rule of Civil

Procedure 55. FED. R. CIV. P. 55(A). Courts use a three-step analysis to

determine if a party can secure a default judgement. See N.Y. Life Ins.

Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996). First, a party must fail

to respond or otherwise defend against an action. Second, an entry of

default must be entered when the default is established by affidavit or

otherwise. Third, a party has applied to the court for a default judgment

after the clerk’s entry of default. Id.

ANALYSIS

Plaintiff meets all three requirements to qualify for a default

judgment. Defendant failed to answer or otherwise respond against

Plaintiff’s Complaint. An entry of default was entered by the Clerk of

the Court, and the request was properly supported by affidavits. ECF

Nos. 11-1, 11-2, and 11-3. Plaintiff has moved for a default judgment

after the Clerk’s entry of default. ECF Nos. 11, 12. But the decision to

enter a default judgement is discretionary, and the Court will resolve

any doubt in its decision in favor of the defaulting party. Lindsey v. Prive

Corp., 161 F.3d 886, 893 (5th Cir. 1998).

In exercising its discretion, the Court should consider whether:

(1) default judgment is procedurally warranted; (2) there is a sufficient

factual basis in the complaint that would entitle to the plaintiff to

judgment; and (3) the specific dollar amount of damages can be

determined with mathematical calculation by using information in the

pleadings and supporting documents. James v. Frame, 6 F.3d 307, 310

(5th Cir. 1993). The Court addresses each in turn.

A. Procedural Requirements

First, the Court must determine if default is procedurally warranted.

The Court considers a variety of factors to make such a determination,

including whether: (1) there is an issue of material fact; (2) substantial

prejudice is present; (3) proper grounds for default are clearly

established; (4) the defaulting party made a good faith mistake or

committed excusable neglect; (5) default judgment would be a harsh

remedial measure; and (6) the Court would feel obligated to set aside

default upon a defendant’s motion. Davis v. Parkhill-Goodloe Co., Inc.,

302 F.2d 489, 495 (5th Cir. 1962).

First, Plaintiff filed a well-pleaded complaint alleging sufficient

facts, which taken as true, raise a right to relief. ECF No. 1. Because

Defendant has failed to answer or otherwise respond, he admits

Plaintiff’s non-conclusory allegations, except those relating to the

amount of damages. See Jackson v. FIE Corp., 302 F.3d 515, 525 n. 29

(5th. 2002). Second, Defendant’s failure to answer or otherwise respond

to the complaint brings the adversarial process to a halt, causing

substantial prejudice to Plaintiff and its claims. Defendant has had

ample opportunity to answer or otherwise respond and, in fact, the

instant Motion has been pending with the Court since April, 2023. Thus,

Defendant is not substantially prejudiced by the entry of a default

judgment. Third, Defendant’s continued failure to participate in this

litigation establishes the requisite grounds for default, particularly

when the default request is properly supported. Fourth, there is no

reason to believe that Defendant is acting under a good-faith mistake or

excusable neglect. Fifth, a default judgment is not harsh because it is

the exact procedural device that is necessary for the Court to maintain

the efficiency of its docket. See Merrill Lynch Mortg. Corp. v. Narayan,

908 F.2d 246, 253 (7th Cir. 1990). Plaintiff properly served Defendant,

Defendant has failed to answer or otherwise appear, and Defendant is

in default. Such circumstances warrant a default judgment under Rule

55(b)(2). Sixth, there is nothing in the record that suggests that Court

would set aside its putative default against Defendant if he were to move

for such relief.

Based on these factors, the Court concludes that a default judgment

is procedurally warranted.

B. Entitlement to Judgement

The Court next assesses whether the factual content of the pleadings

provide a sufficient basis for default judgment. See Lindsey, 161 F.3d at

886. Although defendants in default are considered to have conceded the

allegations stated in the plaintiff's complaint upon entry of default, the

Court is obligated to evaluate the pleadings to ensure the sufficiency of

the complaint. Nishimatsu Const. Co. v. Hous. Nat. Bank, 515 F.2d 1200,

1201 (5th Cir. 1975).

In accordance with the precedent of the Fifth Circuit, district courts

refer to Federal Rule of Civil Procedure 8 to determine the adequacy of

pleadings. Wooten v. McDonald Transit Assocs., Inc., 788 F.3d 490, 498

(5th Cir. 2015) (recognizing that a pleading complying with Rule 8 is

sufficient for default judgment under Rule 55). Under Rule 8(a)(2), a

pleading must provide a short and plain statement of the claim showing

that the pleader is entitled to relief. FED. R. CIV. P. 8(A)(2). The pleadings

must ultimately give the defendants sufficient notice of the claims

alleged against them and their underlying bases. Wooten, 788 F.3d at

498. While the factual allegations are not required to be exhaustive, they

must raise a right to relief beyond mere speculation and offer more than

unsubstantiated accusations. Id.

When a federal court sits in diversity, it must apply the substantive

law of the state in which it sits. Nelson v. C.R. Bard, Inc., 44 F.4th 277,

281 (2022). In Texas, a breach of contract action arises when a plaintiff

proves (1) the existence of a valid contract, (2) performance or tender by

the plaintiff, (3) breach by the defendant, and (4) damages sustained by

the plaintiff. Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App. 2006).

To prevail on a claim for money had and received, a plaintiff must

show that (1) the defendant received money that (2) belonged to the

plaintiff in equity and good conscience. Yowell v. Granite Operating Co.,

630 S.W.3d 566, 578 (Tex. App. 2021)

By its well-pleaded facts, Plaintiff has shown that the Parties had a

valid and voluntary employment agreement, which contemplated that

Plaintiff would advance Defendant the appropriate commissions on the

sale of life insurance policies contingent on the long-term maintenance

of those policies. Plaintiff tendered performance by advancing

Defendant the commissions due on the approximately 144 policies at

issue here. Defendant ensured he would receive those funds, and indeed

he received and retained those funds despite the failure of those policies

take beyond the first year. That is a breach. And Plaintiff has now

sustained loss in the amount of the commissions it advanced to

Defendant on policies which did not meet the contractual condition

necessary for Defendant to rightfully retain those commissions.

Likewise, because Defendant knew of and agreed to this commission

arrangement, he knew that his contract allowed Plaintiff to reclaim

advanced commissions on policies that didn’t take. According to

Plaintiff’s well-pleaded facts, Defendant took affirmative steps to

exercise legal control and dominion over the retained commissions

explicitly to prevent Plaintiff’s reclaiming them when the policies were

never paid.

Plaintiff has demonstrated its claims for breach of contract and

money had and received. And because Plaintiff has proven that a valid

and enforceable contract existed, the Court declines to reach its claim

for unjust enrichment.

C. Entitlement to Damages

In an action for breach of contract, actual damages may be recovered

when the plaintiff’s losses is a natural, probable, and foreseeable

consequence of the defendant’s conduct. Mead v. Johnson Grp., Inc., 615

S.W.2d 685 (Tex. 1981). Damages are natural, probable, and foreseeable

when the parties would have contemplated them at the time they

executed the contract. See Basic Capital Management, Inc. v. Dynex

Commercial, Inc., 648 S.W.3d 894, 901 (Tex. 2011).

Here, Plaintiff alleges $253,097.18 in actual damages resulting from

Plaintiff's payment of unearned commissions that were never recovered

from Defendant despite its contractual right to do so. The entire sales

commission pay structure at issue was based on the parties’ agreement

that the policies on which Defendant earned those commissions would

be taken by the customer subject to Plaintiffs right to reclaim the

commissions should the premiums on those policies not be paid. Thus,

any amount that Defendant retains in violation of this agreed upon

structure would be a natural, probable, and foreseeable damage

resulting from Defendant’s breach.

CONCLUSION

Accordingly, the Court concludes that Plaintiff is entitled to default

judgment against Defendant as to liability and damages. The Court

therefore GRANTS Plaintiff's Motion for Default Judgment (ECF No.

11). The Court further ORDERS that Plaintiff is entitled to be awarded

damages in the amount of $253,097.18 plus reasonable attorney's fees

in the amount of $18,354.00, and court costs and expenses incurred in

the prosecution of this action in the amount of $920.00.

SO ORDERED on this 26th day of July 2023.

MARK T. PITTMAN

UNITED STATES DISTRICT JUDGE