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Servpro Industries, Inc. v. Santoro & Sons Enterprises, Inc.

United States District Court, M.D. Tennessee, Nashville Division

April 11, 2017

SERVPRO INDUSTRIES, INC., Plaintiff,
v.
SANTORO & SONS ENTERPRISES, INC., RICHARD G. SANTORO, and LINDA M. SANTORO, Defendants.

          MEMORANDUM AND ORDER

          Aeta A Trauger United States District Judge

         I. BACKGROUND

         The plaintiff, Servpro Industries, Inc., a Nevada corporation with its principal place of business in Gallatin, Sumner County, Tennessee, filed its complaint in this action on May 29, 2015, against the defendants, Santoro & Sons Enterprises, Inc., a Florida corporation, and Richard G. Santoro and Linda M. Santoro, Florida citizens, seeking injunctive relief and monetary damages pursuant to the Lanham Act, 15 U.S.C. §§ 1051 et seq., and claims under the laws of Tennessee and Florida. Specifically, the plaintiff asserted claims for federal trademark infringement, false designation of origin and dilution, common law trademark infringement and unfair competition, and breach of contract. The defendants, Santoro & Sons Enterprises, Inc. and Richard G. Santoro, did not file an answer or otherwise respond to the complaint[1] and subsequently on July 20, 2015, entry of default was entered against them by the Clerk of Court. (Docket Entry No. 17). The defendants were given notice of the entry of default by the Clerk's Office. (Docket Entry No. 22). On August 11, 2015, the plaintiff filed a Motion for Preliminary and Permanent Injunction to Be Entered by Default and for Final Judgment as to Certain Claims Against Defendants Santoro & Sons Enterprises, Inc. and Richard G. Santoro (Docket Entry No. 23). After the parties reached an agreement regarding the plaintiff's request for injunctive relief, the court on September 9, 2015, granted the plaintiff's Unopposed Motion for Entry of Consent Preliminary and Permanent Injunction and Final Order of Judgment as to Certain Claims of Plaintiff. (Docket Entry Nos. 29, 32, 34). However, the plaintiff's claim for damages, costs and fees remained unresolved. (Docket Entry No. 29).

         Pending before the court is the plaintiff's Motion for Default Judgment on Damages/Fees Against Defendants Santoro & Sons Enterprises, Inc. (Docket Entry No. 42) on the remaining claims, [2] to which the defendants did not respond. The plaintiff seeks a judgment for its fees pursuant to the franchise license agreement and guaranty attached to its complaint. The plaintiff has submitted declarations supporting the amount of damages involving a liquidated debt and attorney's fees incurred in the prosecution of this action.

         II. ANALYSIS

         Upon entry of default, only the complaint's well-pleaded allegations relating to liability are taken as true. In re Family Resorts of Am., Inc., 972 F.2d 347, No. 91-4127, 1992 WL 174539, at *4 (6th Cir. July 24, 1992). However, “‘[w]here damages are unliquidated a default admits only defendant's liability and the amount of damages must be proved.'” Antoine v. Atlas Turner, Inc., 66 F.3d 105, 110 (6th Cir. 1995) (citation omitted); Microsoft Corp. v. McGee, 490 F.Supp.2d 874, 878 (S.D. Ohio 2007) (“Once a default is entered against a defendant, that party is deemed to have admitted all of the well pleaded allegations in the complaint, except those relating to damages.”). “Proof of damages ordinarily requires an evidentiary hearing in which the defendant may contest the amount, but a hearing is not necessarily required if the moving party submits uncontested, sworn affidavits sufficient to establish the amount of damages.” Broad. Music, Inc. v. Marler, No. 1:09-CV-193, 2009 WL 3785878, at *5 (E.D. Tenn. Nov. 12, 2009); see Fed. R. Civ. P. 55(b)(2) (A district court “may conduct hearings . . . when, to enter or effectuate judgment, it needs to: (A) conduct an accounting; (B) determine the amount of damages; (C) establish the truth of any allegation by evidence; or (D) investigate any other matter.”) (emphasis added)); Vesligaj v. Peterson, 331 F. App'x 351, 354 (6th Cir. 2009) (Rule 55(b)(2), “by its terms, allows but does not require the district court to conduct an evidentiary hearing.”). Thus, as the plaintiff only seeks recovery of the unpaid and past-due royalties and fees, along with its attorney's fees and costs, pursuant to the franchise license agreements, the court concludes that an evidentiary hearing is not necessary to determine damages and attorney's fees. See Disney Enterprises v. Farmer, 427 F.Supp.2d 807, 814 (E.D. Tenn. 2006) (granting default judgment and permanent injunction and awarding statutory damages and attorney's fees and costs when defendant failed to defend the action, the district court concluded that no valid purpose would be served by requiring an evidentiary hearing as “any such hearing or argument would only serve to increase the Plaintiffs' claim for attorneys' fees and costs.”).

         Given the entry of default, the allegations in the well-pleaded complaint are accepted as true. Under the franchise license agreements, the defendants were required to comply with all post-termination obligations and to pay royalties and other fees to the plaintiff. (Docket Entry No.

         1, at ¶ 21; Docket Entry No. 1-1, Sections 3.1, 3.2, 3.7, 3.8, and 4.1; Docket Entry No. 1-6, Sections 3.3, 3.5, 3.7, and 4.1). Additionally, the defendants are obligated to pay all costs, including attorney's fees, incurred by Servpro in connection with enforcement of the agreements. Section 13.9 of the Palm Harbor/Oldsmar Franchise License Agreement provides:

In the event that a dispute or an action in law or equity arises between FRANCHISOR and OPERATOR concerning the operation, enforcement, construction or interpretation of this Agreement or the relationship created thereby or for any other reason, FRANCHISOR is entitled to recover its reasonable attorney's fees, court costs and expenses from OPERATOR, whether incurred prior to, in preparation for or in contemplation of the filing or defense of any such proceeding, unless OPERATOR ultimately prevails on all issues.

(Docket Entry No. 1-6, at 36; Docket Entry No. 1, at ¶ 29). Likewise, Section 14.4 of the Countryside/Safety Harbor Franchise License Agreement provides that the plaintiff shall be entitled to fees, costs, and expenses, including attorney's fees and court costs, “incurred in enforcing the provisions of this Agreement or securing damages for its breach[.]” (Docket Entry No. 1-1, Section 14.4).

         A. DAMAGES

         As to damages, the plaintiff submits the declaration of its Credit Insurance Compliance Division Manager, H. D. Wheeler. (Docket Entry No. 45). In his declaration, Wheeler attests to the following:

3. As a part of my job responsibilities, I have access to and familiarity with financial and reporting records, including royalties, related to Servpro franchises. I have reviewed the records associated with the Countryside/Safety Harbor and Palm Harbor/Oldsmar franchises, now terminated, which were previously operated by Santoro & Sons Enterprises, Inc., with guarantors Richard G. Santoro and Linda Santoro. These records are kept by Servpro in the ordinary course of business.
4. As of the date of the termination, March 18, 2014, Santoro & Sons Enterprises, Inc., and Richard Santoro owed Servpro the principal amount of $4, 412.13 in unpaid and past-due royalties and fees. This principal figure consisted of a balance of $2, 278.97 associated with the operation of and pursuant to the Franchise License Agreement governing the Servpro of Countryside/Safety Harbor franchise ($1, 570.37 in unpaid royalties and $780.60 for an unpaid product fee) and a balance of $2, 133.17 associated with the operation of and pursuant to the Franchise License Agreement governing the Palm Harbor/Oldsmar franchise ($2, 041.49 in unpaid royalties and $91.67 for an unpaid software fee). I have had calculated interest on that amount from and after March 18, 2014, at what I understand is the Tennessee statutory rate of 5.25% per annum, which adds an additional $687.30 as of March 6, 2017 ...

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