Evans Delivery Company, Inc. v. Rabbit Logistics & Company, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF PENNSYLVANIA

EVANS DELIVERY COMPANY, :

“ Plaintiff, : CIVIL ACTION NO. 3:24-01277

Vv (JUDGE MANNION)

RABBIT LOGISTICS & COMPANY, :

LLC fik/a RABBIT LOGISTICS,

LLC :

Defendant. :

MEMORANDUM

Presently before the court is Plaintiff, Evans Delivery Company, Inc.’s

(“Evans”) motion for default judgement. (Doc. 8). On July 30, 2024, Evans

initiated this diversity action against Defendant, Rabbit Logistics &

Company, LLC (“Rabbit”) (Doc. 1). In the complaint, Evans alleges that

Rabbit breached their settlement agreement by failing to make timely

payments owed for transportation services. (Id). A summons was issued to

Rabbit on July 30, 2024, and a return receipt indicating service was filed

with the court. (Docs. 2-4). Rabbit did not file an answer or otherwise timely

respond to the complaint, and the Clerk of Court entered default against

Rabbit for failure to answer or otherwise defend the instant suit on

September 9, 2024. (Doc. 6). Accordingly, and for the reasons stated

below, the court will grant Evans’ motion in part and award all relief

requested minus late fees and costs, which Evans has not shown

entitlement to.

I. Background

As illustrated in the Complaint, Rabbit engaged Evans around

November 20, 2023, asking Evans to provide transportation services for his

company. (Doc. 1, p.2). Specifically, Evans’ job involved traveling to

shipment facilities, picking up shipments, and transporting them to a

destination. (Id.). After completing delivery, Evans would invoice Rabbit for

the services it rendered and the costs it incurred. (Id.). Evans claims that

Rabbit began to default on payments due for the services Evans rendered,

which ultimately lead to the execution of a “Settlement and Release

Agreement” (the “Settlement Agreement”) signed by both parties on March

15, 2024. (Id.).

Under the first term of the Settlement Agreement, Rabbit agreed to

pay Evans $170,310.00 (the “Settlement Amount”) in accordance with a 46-

week payment schedule to resolve the outstanding invoice payments. (Doc.

8-1, p.1). Under the second term, Rabbit agreed to pay all future invoices

for transportation services within seven days of receiving the invoice. (Id.).

Failure to make timely payments in accordance with either of these terms

constituted an “Event of Default” pursuant to the third term of Settlement

Agreement. (Doc. 8-1, p.2). Evans alleges that Rabbit breached the

Settlement Agreement both by failing to make the weekly settlement

payments and failing to timely pay new invoices for transportation services

rendered. (Doc. 8, p.2).

As a result of Rabbit's breach, Evans believes the entire Settlement

Amount is due, along with interest at a rate of eighteen percent and late

fees of ten percent on each outstanding invoice. Accordingly, Evans

requests an entry of default judgment against Rabbit in the amount of

$218,646.14 plus costs. (Doc. 8, p.4).

ll. Legal Standard

A. Default Judgment

Rule 55 of the Federal Rules of Civil Procedure allows a court to

enter a default judgment against a properly served defendant who fails to

file a timely responsive pleading. Fed. R. Civ. P. 55(b)(2); see Broad.

Music, Inc.v. Kujo Long, LLC, 2014 WL 4059711, at *1 (M.D. Pa. Aug. 14,

2014) (entry of default judgment is typically appropriate for a defendant

failing to appear at least until the defendant comes forward with a motion to

set aside the default judgment pursuant to Rule 55(c)) (citing Anchorage

Assocs. v. V.I. Bd. of Tax Review, 922 F.2d 168, 177 n. 9 (3d Cir. 1990)).

“A consequence of the entry of a default judgment is that the factual

allegations of the complaint . . . will be taken as true.” Comdyne |, Inc. v.

Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990) (internal quotation marks and

citations omitted). Whether to grant default judgment is left “primarily to the

discretion of the district court.” Hritz v. Woma Corp., 732 F.2d 1178, 1180

(3d Cir. 1984) (citation omitted).

Prior to entering default judgment, the court must determine whether

it has subject matter jurisdiction over the claims asserted and personal

jurisdiction over the parties. See Mark IV Transp. & Logistics v. Lightning

Logistics, inc., 705 F. App’x 103. 108 (3d Cir. 2017) (citation omitted). “A

court obtains personal jurisdiction over the parties when the complaint and

summons are properly served upon the defendant. Effective service of

process Is therefore a prerequisite to proceeding further in a case.” Lampe

v. Xouth, Inc., 952 F.2d 697, 700-01 (3d Cir. 1991)). Federal Rules of Civil

Procedure provides that a corporation must be served by “delivering a copy

of the summons and of the complaint to an officer, a managing or general

agent, or any other agent authorized by appointment or by law to receive

service of process.” Fed. R. Civ. P. 4(h)(1)(B). Further, the Court must

determine whether the moving party’s complaint establishes a legitimate

cause of action. Trustees of Laborers Loc. No. 1174 Pension Fund v. DB

Util. Contractors, LLC, 2023 WL 3743573, at *2 (M.D. Pa. May 31, 2023).

Once a default is entered by the clerk of court, the court may enter

default judgment under Fed. R. Civ. P. 55(b)(2) against a properly served

defendant who does not file a timely responsive pleading. The entry of

default is left primarily to the discretion of the district court.” Hritz, 732 F.2d

at 1180. But this discretion is not without limits; as the Third Circuit prefers

“cases be disposed of on the merits whenever practicable.” /d. at 1181.

Thus, when reviewing a motion for default judgment the court must

consider: “(1} the prejudice to the plaintiff if default is denied, (2) whether

the defendant appears to have a litigable defense, and (3) whether

defendant’s delay is due to culpable conduct.” Chamberlain v. Giampapa,

210 F.3d 154, 164 (3d Cir. 2000).

Once the Chamberlain factors are met, and default judgment has

been entered, the well-pleaded, factual allegations of the complaint, except

those relating to the damage amount, are accepted as true and treated as

though they were established by proof. See Coastal Mart, Inc. v. Johnson

Auto Repair, iInc., 2001 WL 253873, at *2 (E.D. Pa. Mar. 14, 2001): see

also U.S. ex rel. Motley v. Rundle, 340 F.Supp. 807, 809 (E.D. Pa. 1972)

(citing Thomson v. Wooster, 114 U.S. 104, 114, 5 S.Ct. 788, 29 L.Ed. 105

(1885)). While these well-pleaded allegations are admitted and accepted,

“the Court need not accept the moving party’s legal conclusions or factual

allegations relating to the amount of damages.” Broad. Music, Inc. v. Spring

Mount Area Bavarian Resort, Ltd, 555 F.Supp.2d 537, 541 (E.D. Pa. 2008)

(citing Comdyne |, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990)). A

party's default does not suggest that the party has admitted the amount of |

damages that the moving party seeks. See Comdyne, 908 F.2d at 1149.

When determining damages in the event of a default judgement, □□□□□

such a reasonable calculation cannot be made from the evidence and

affidavits, then a hearing may be held to better determine the appropriate

calculations.” E. Elec. Corp. of New Jersey v. Shoemaker Const. Co., 657

F. Supp. 2d 545, 552 (E.D. Pa. 2009} (citing Bakley v. A & A Bindery, Inc.,

1987 WL 12871 (E.D. Pa. June 18, 1987). However, a hearing is not

required where the damages can be determined from the evidence

submitted, and “a reasonable calculation [can] be made by looking at the

evidence and the affidavits submitted by the moving party.” /d. (citing J & J

Sports Prods. V. Roach, 2008 U.S. Dist. LEXIS 109055 (E.D. Pa. July 8,

2008)).

B. Governing Law

A federal court sitting in diversity must apply state substantive law

and federal procedural law. See Erie R.R. Co. v. Tompkins, 304 U.S. 64,

78 (1938). It is widely held that “[a] settlement agreement is a contract and

is interpreted according to local law.” Wilcher v. City of Wilmington, 139

F.3d 366, 372 (3d Cir. 1998). Paragraph twelve of the Settlement

Agreement at the center of this controversy contains a choice of law

provision selecting Pennsylvania law as the governing law and neither

party has disputed the validity of this provision. (Doc. 8-1, p.3). Therefore,

the Court will apply Pennsylvania contract law in resolving this dispute.

lll. Discussion

A. Jurisdiction

“(When entry of a default judgment is sought against a party who has

failed to plead or otherwise defend, the district court has an affirmative duty

to look into its jurisdiction both over the subject matter and the parties.” Pue

v. New Jersey Transit Corporation, 2023 WL 2930298 (3d Cir. 2023)

(quoting Williams v. Life Sav. & Loan, 802 F.2d 1200, 1203 (10th Cir.

1986)).

Here, this Court has subject-matter jurisdiction under 28 U.S.C.

§1332 because the case involves citizens of different states and the

amount in controversy exceeds $75,000.00. Evans is a Pennsylvania

corporation with its principal place of business in Pennsylvania and Rabbit

is a Georgia limited liability company with its principal place of business in

Georgia. As for the jurisdictional amount, Evans seeks $218,646.14 in

damages. Thus, the parties are completely diverse and the amount in

controversy exceeds the jurisdictional! minimum.

This Court also has personal jurisdiction and venue pursuant to the

forum selection clause in the fourth term of the Settlement Agreement,

whereby it states that “[t]ne Parties consent to the jurisdiction of the Middle

District of Pennsylvania for the resolution of all disputes arising out of or in

connection with this Agreement’. (Doc. 8-1, p.2).

B. Entry of Default

The clerk properly entered default under Rule 55(a). Evans filed its

Complaint on July 30, 2024. (Doc. 1). Subsequently, Evans submitted an

Affidavit of Service from its process server affirming that on August 15,

2024, he personally served Adam Rutledge, Rabbit’s authorized agent.

(Doc. 4). Thus, Evans properly served Rabbit within 90 days after filing its

Complaint. See Fed R. Civ. P. 4(m) (a plaintiff must serve the summons

and complaint within 90 days from filing). Rabbit did not respond to the

Complaint within twenty-one days after service. SeeFed. R. Civ. P.

12(a) (defendant must respond within twenty-one days of service). Thus,

default was proper because Rabbit received fair notice of the claims

against it but did not respond.

C. Plaintiff's Allegations

Evans asserts a claim for breach of contract as a result of Rabbit’s

failure to abide by the terms of their Settlement Agreement. To state a

claim for breach of contract under Pennsylvania law, a plaintiff must allege

““(1) the existence of a contract, including its essential terms, (2) a breach

of a duty imposed by the contract[,] and (3) resultant damages.” Ware v.

Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir. 2003) (quoting CoreStates

Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999)). Evans

has provided this Court with the Settlement Agreement signed by both

parties, alleged in detail Rabbit’s breach of the Settlement Agreement, and

provided invoices for unpaid services in support of the alleged damages.

Thus, Evans has made proper allegations.

D. Factors for Default Judgment

The above analysis does not end the Court's inquiry. Even where

default judgment is permissible, the Court must consider the three

Chamberlain factors to determine whether default judgment is appropriate,

specifically: “(1) prejudice to the plaintiff if default is denied, (2) whether the

defendant appears to have a litigable defense, and (3) whether defendant's

delay is due to culpable conduct.” See Chamberlain, 210 F.3d at 164.

Applying each factor in turn, this Court finds that entry of default judgment

is appropriate in this case.

As for the first factor, “Plaintiffs will be prejudiced if the court declines

to enter defauit judgment, as they are unable to proceed with the action

due to the Defendant's failure to respond and have no other means of

recovering against Defendant.” Trustees of Laborers Loc. No. 1174

Pension Fund, 2023 WL 3743573, at *2 (citing Broad. Music, Inc. v. Kujo

Long, LLC, 2014 WL 40597711, at *2 (M.D. Pa. Aug. 14, 2014) (finding that

the “[p]laintiffs will be prejudiced .. . by their current inability to proceed

with their action due to Defendants’ failure to defend”)). Evans is harmed by

Rabbit’s failure to respond to the Complaint, and Rabbit cannot evade

liability for its contractual obligations by simply refusing to respond.

Second, Rabbit has not asserted a defense, neither by filing an

answer to Evans’ complaint nor by filing a responsive pleading to the

present motion for default judgment. Accordingly, this Court is unable to

construe a defense from Rabbit’s silence. See /d. (finding that a litigable

defense cannot be concluded from defendant's silence).

Finally, a defendant’s failure to answer, respond, or otherwise

participate in the litigation process without providing any good faith

justification has qualified as “culpable conduct” when considering the entry

of a default judgment. See Joe Hand Promotions, inc. v. Yakubets, 3 F.

Supp. 3d 261, 273 (E.D. Pa. 2014) (citing &. Elec. Corp. of NJ v.

Shoemaker Constr. Co., 657 F.Supp.2d 545, 554 (E.D. Pa. 2009)); see

also Perez v. Am. Health Care, inc. 401(k) Plan, 2015 WL 5682446, at *1

(D.N.J. Sept. 25, 2015) (“[W]here a defendant has failed to answer, move,

or otherwise respond, the defendant is presumed culpable.”). Here, Rabbit

was properly served and failed to respond. The court “cannot discern from

the record any excuse or justification for the Defendant's default apart from

its culpability.” Trustees of Laborers Loc. No. 1174 Pension Fund, 2023 WL

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3743573, at *2. It is therefore appropriate for the Court to enter default

judgment against Rabbit.

E, Damages

Evans believes it is entitled to default judgment against Rabbit in an

amount of $218,646.14. Specifically, Evans seeks $177,720.00 for the

amount due under the Settlement Agreement and for transportation

services provided after the Settlement Agreement was executed.

Additionally, Evans seeks $17,772.00 in late fees, $23,154.14 in interest,

and unspecified costs.’ The court will discuss each category of damages

below.

i. Services Provided

The cost of services provided in the amount of $177,720.00 should

be included in the award amount for two reasons. First, the Settlement

Agreement expressly states that Rabbit “shall pay to [Evans] the total sum

of $170,310.00 to resolve the unpaid charges owed for the [s]hipments.”

(Doc. 8-1, p.1). It further states that “[mJoving forward, [Evans] will issue

invoices to [Rabbit] on Friday every other week (biweekly) for shipments

moved and/or invoiced in the proceeding weeks. Invoices will become due

and payable the Friday following the issuance of each invoice.” (Id.). Thus,

' Plaintiff has not provided any information for the Court to consider

additional, unspecified costs.

the Settlement Agreement amount, which became due in full upon Rabbit's

default, along with the invoices issued after the execution of the Settlement

Agreement are to be given full effect. See Madison Constr. Co. v.

Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999). ([w]here ... the

language of the contract is clear and unambiguous, a court is required to

give effect to that language’).

Second, $177,720.00 is an appropriate service cost as it is supported

by invoices provided by Evans which can be reasonably calculated to

reflect that sum total. See Stevenson v. Economy Bank of Ambridge, 197

A.2d 721, 727 (Pa. 1964) (“a claim for damages must be supported by a

reasonable basis for calculation’). Rabbit is obligated to pay Evans for work

performed and properly invoiced in accordance with the terms of the

Settlement Agreement. Because Evans provided outstanding invoices in

the amount of $177,720.00, which reflects the Settlhement Agreement

amount plus services rendered afterwards, the Court will add this to the

award amount.

ii. Interest

The third term of the Settlement Agreement includes the interest rate

provision, stating that, in the event of a default, Rabbit's entire debt

becomes due “along with an interest rate of 18%, which shall accrue from

the date each invoice was first sent to [Rabbit] by Evans.” (Doc. 8-1, p.2).

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Thus, once Rabbit defaulted, interest began to accrue on each outstanding

invoice retrospectively, beginning from the date Rabbit received each

invoice. Because this provision is expressly written in the Settlement

Agreement, and each invoice with an accurately calculated interest rate

has been provided, Rabbit has a contractual obligation to pay these fees.

See, e.g., Restatement (Second) of Contracts §354 cmt. a ("[i]f the parties

have agreed on the payment of interest, it is payable not as damages but

pursuant to a contract duty that is enforceable”); see also TruServ Corp. v.

Morgan's Tool & Supply Co., 39 A.3d 253, 262 (Pa. 2012) (because the

Retail Member Agreement between the parties clearly provided for the

payment of interest at a rate of 18% per annum on defendant’s past due

balances, defendant was contractually obligated to pay that interest).

Therefore, the interest rate of $23,154.14 provided by Evans will also be

added to the award amount.

iii. Late Fees

Immediately following the interest rate provision mentioned above,

the Settlement Agreement states “[a]dditionally, any payments made after

the date listed in Exhibit B are subject to a late fee of ten percent (10%),

which shall be made with the next payment owed by [Rabbit].” (Doc. 8-1,

p.2). Using this provision, Evans tacked a ten percent late fee onto each

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outstanding invoice for the total amount of $17,772.00. This court finds that

Evans is not entitled to these late fees for at least two reasons.

First, accepting a ten percent late fee for each invoice would simply

misconstrue the plain language of the Settlement Agreement. The

payments listed in Exhibit B to Settlement and Release Agreement (“Exhibit

B”) to which these late fees are said to apply represent the weekly recurring

payments for the Settlement Amount, not the individual invoice payments.

In contrast to the interest rate provision, the late fee provision fails to

mention anything regarding the outstanding invoice payments.

Second, the recurring payments in Exhibit B are subject to the

following acceleration clause:

“Upon an [e]vent of [dJefault, Evans shall provide notice to

[Rabbit] via email sent to [Rabbit's email address]. [Rabbit] will

have five (5) days from the date any such notice is sent by

Evans to cure the [event] of [dJefault (“Cure”). If [Rabbit] fails to

cure within the 5 days, the total amount then owed by [Rabbit]

to Evans shall become immediately due [. . .].”

(Doc. 8-1, p.2).

Once the default from Rabbit caused the entire Settlement Amount to

become due, the recurring payments listed in Exhibit B were no longer an

acceptable form of payment unless Evans chose to waive this acceleration

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clause. Applying its plain meaning, the late fee provision suggests that, in

the event that Rabbit misses one of the payment dates in Exhibit B, thereby

defaulting on the Settlement Agreement, but “cures” the default within the

five-day period, the ten percent fee would be added onto the next recurring

payment. However, after the curing period lapsed and the entire Settlement

Amount became due, the recurring payments in Exhibit B were no longer

an acceptable form of payment and the late fee provision became

ineffective. Therefore, Evans may not apply a ten percent late fee to each

outstanding invoice as part of the award amount.

iV.Conclusion

For all the foregoing reasons, Plaintiff's motion for default judgment is

granted in part. An appropriate order and a judgment in the amount of

$200,874.14 will be entered. Plaintiffs shall submit a form of judgment

within five (5) working days.

i E. MANNION

United States District Judge

Date: January 3, 2025

24-1277-01

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