United States District Court, M.D. North Carolina
MEMORANDUM OPINION AND ORDER
Carlton Tilley, Jr. Senior United States District Judge
matter is before the Court on a Motion for Default Judgment
against Defendant Ryan Clayton [Doc. #44] by Plaintiff M-Tek
Kiosk, Inc. (“MTEK”). On October 30, 2014, MTEK
filed a Complaint against Clayton and John W. Gosnell, and,
on November 4, 2014, summons was served on Clayton. (Compl.
[Doc. #1]; Executed Summons [Doc. #3].) After Clayton failed
to answer or otherwise respond, MTEK moved for an entry of
default. (See Mot. for Entry of Default [Doc. #9].) On
December 8, 2014, the Clerk entered default against
Clayton. (See Entry of Default [Doc.
#10].) On August 12, 2016, MTEK moved for a default judgment
against Clayton. In its motion, MTEK seeks (1) trebled
compensatory damages in the amount of $1, 130, 663.76 or
actual and punitive damages totaling the same amount; (2)
pre-judgment interest at a rate of 8% per annum; (3)
post-judgment interest as provided in 28 U.S.C. § 1961;
and (4) attorneys' fees. For the reasons explained below,
MTEK's motion is denied as to attorneys' fees, but
result of Clayton's default, the well-pled factual
allegations in the Complaint are admitted. See Ryan v.
Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir.
2001). However, allegations with respect to damages are not
deemed admitted. See Fed.R.Civ.P. 8(b)(6) (“An
allegation - other than one relating to the amount of damages
- is admitted if a responsive pleading is required and the
allegation is not denied.”) A court may hold a hearing
pursuant to Rule 55(b)(2)(B) of the Federal Rules of Civil
Procedure to determine damages, but “may also award
damages based on affidavits and documentary evidence.”
Masco Corp. v. Bennett, No. 3:08-cv-161-RJC-DCK,
2010 WL 1405136, at *2 (W.D. N.C. Mar. 31, 2010). Here, in
addition to the allegations, MTEK has submitted an affidavit
with accompanying documentary evidence in support of damages,
[see Docs. #45-1, 45-4 to 45-15], such that a
hearing is not necessary.
a citizen of North Carolina, held a 36.50913% ownership
interest in Luxury Tec, LLC (“Luxury Tec”), a
company that also went by the name of Mirrus. (Compl.
¶¶ 8, 14.) Clayton was the Senior Vice President of
International Business for Mirrus, a technology company that
developed and sold digital advertising media to commercial
retail companies. (Id. ¶¶ 15, 16.) In May
2013, Clayton reached out to David Thibeau, president of
MTEK, an Oregon corporation, about Mirrus's purchasing
specialized electronic equipment from MTEK. (Id.
¶¶ 4, 31.) In July 2013, Clayton met again with
Thibeau and other MTEK representatives and toured MTEK's
facilities in Oregon at which time Clayton and Thibeau
discussed various projects. (Id. ¶ 32.)
Following that meeting, MTEK and Mirrus reached an agreement
for MTEK to develop and deliver prototypes, which it did by
September 2013. (Id. ¶¶ 33, 34.) In
September and October 2013, Clayton travelled to Oregon
multiple times to discuss additional projects. (Id.
¶¶ 35, 36.) During this time period, Clayton
represented to Thibeau and MTEK that Mirrus was adequately
capitalized and had secured a $3 million line of credit for
purchasing equipment and provided MTEK with a list of
Mirrus's investors who had provided operational funding.
(Id. ¶¶ 37-40.) MTEK reasonably relied on
Clayton's representations, which Clayton knew to be false
at the time he made them. (Id. ¶¶ 42, 43.)
He intended to induce MTEK to design and deliver the
electronic products and services to Mirrus. (Id.
¶ 41.) In other words, on behalf of Mirrus, Clayton
entered into agreements with MTEK while knowing that Mirrus
was insolvent and incapable of paying for the products and
services that it purchased. (Id. ¶ 55.)
November 14, 2013, Luxury Tec filed for bankruptcy.
(Id. ¶ 46.) The previous day, The Mirrenium
Group, LLC (“Mirrenium”) had been formed in
Delaware with Clayton holding a 29.80515% ownership interest
and serving among its principal members and as its Chief
Technology Architect and Managing Director of Global Markets.
(Id. ¶¶ 18, 20-22, 130-31.) Mirrenium was
formed to operate as the functional successor of Mirrus, but
Clayton knew it was undercapitalized when it was formed.
(Id. ¶¶ 54, 138.) He did not disclose to
MTEK that Mirrus had filed for bankruptcy and, instead,
intentionally concealed the bankruptcy filing. (Id.
¶ 51.) He also represented to MTEK that Mirrus had
changed its name to Mirrenium as a strategic branding
decision. (Id. ¶ 52.) Just as he had with
Mirrus, Clayton then entered into agreements on behalf of
Mirrenium with MTEK even though he knew that Mirrenium was
insolvent and could not pay for the products and services
that it purchased. (Id. ¶¶ 55, 139.)
in the fall of 2013, Clayton informed Thibeau that he needed
countertop units for Estee Lauder Companies, Inc. and The
LIDS Sports Group (“LIDS”). (Id.
¶¶ 58-59.) From September through December 2013,
Clayton and representatives from MTEK met in person and
communicated over the telephone and email about those
countertop units and ultimately entered into an agreement
according to which Clayton would purchase from MTEK ten units
for $29, 411.47. (Id. ¶¶ 60-62.) After
MTEK delivered those units on December 2, 2013, Thibeau
emailed Clayton documenting the specifics of the completed
order for which MTEK also provided Clayton an invoice.
(Id. ¶¶ 63-66.) From March through June of
2014, MTEK attempted numerous times to collect payment from
Clayton, which he failed to remit. (Id. ¶¶
in November 2013, Clayton discussed with MTEK representatives
in person and over the telephone and email the purchase of
six LCD units for the Chicago Paul Mitchell store for which
Clayton and MTEK eventually entered into a written agreement.
(Id. ¶¶ 69-77.) After MTEK delivered the
units, it sent Clayton an invoice totaling $11, 528.65.
(Id. ¶¶ 78-80.) As above, from March
through June 2014, MTEK was unsuccessful in its numerous
attempts to collect payment from Clayton. (Id.
September 2013 through January 2014, Clayton discussed with
MTEK representatives in person and over the telephone and
email the purchase of “2260 Display” units and
countertop units for Macy's and LIDS. (Id.
¶¶ 83-89.) Ultimately, Clayton and MTEK entered
into a written agreement for the purchase of fifty countertop
units for a total price of $135, 830.17 and entered into a
separate written agreement for the purchase of thirty 2260
Display units for a total price of $159, 474.93.
(Id. ¶¶ 90-91.) On December 12, 2013,
Clayton notified MTEK that a colleague would be
“sending out a $30, 000 check for the start of the
LIDs/Macys [sic] deal.” (Id. ¶ 93.) On
December 30, 2013, he emailed MTEK, stating in part:
“Can you generate an invoice for the $30k initial
payment on the Macy's/Lids install we discussed for
December and then a 2nd one for $40, 000 for
January. . . . We will send checks out this week once I get
these.” (Id. ¶ 94.) MTEK provided those
invoices and others and delivered the units as agreed.
(Id. ¶¶ 95-107.) As it was doing for its
other agreements with Clayton, from March through June 2014,
MTEK attempted numerous times to collect payment from
Clayton, which he failed to remit. (Id. ¶¶
108-11, 114-15, 117-18.)
2014, Mirrenium filed for bankruptcy. (Id.
¶¶ 26, 127, 161.) In total, Clayton owes MTEK $376,
887.92. (Id. ¶¶ 119-120; see also
Invoice Nos. 6505, 6522, 6550, 6552, 6553, 6577, 6578, 6590,
6651-54 [Docs. #45-4 to 45-15]; Aff. of Gary Beaver
¶¶ 12, 19 [Doc. #45-1].) The
agreements between MTEK and Clayton state, in part,
“In return for MTEK extending credit under this
Agreement, you jointly and severally agree to pay for all the
purchases pertaining to this agreement and all other charges
. . . according to the terms of this agreement.”
(Id. ¶ 122.) The agreements also provide,
You are in default of this agreement if you: (a) fail to pay
the balance due by the due date, (b) breach any other term or
condition of this agreement, (c) have made a material
misrepresentation or misstatement in the Application,
financial statement or other document submitted to us in
connection with this agreement, (d) become the subject of a
bankruptcy, receivership, or other insolvency proceeding.
(Id. ¶ 123.) MTEK performed its obligations
under the agreements, but Clayton breached the agreements by
(1) not timely and fully remitting payment to MTEK, (2)
falsely and deceptively representing that Mirrus and
Mirrenium were adequately capitalized, (3) and
Mirrenium's filing for bankruptcy on July 21, 2014.
(Id. ¶¶ 124-27.)
addition, despite owing money to MTEK and knowing Mirrenium
was insolvent, Clayton took advantage of his position as a
corporate officer and acted in his own self-interest rather
than the interest of Mirrenium by misappropriating corporate
funds. (Id. ¶ 140-41.) Specifically, between
December 5, 2013 and April 7, 2014, ...