United States District Court, N.D. Texas, Dallas Division
LAWRENCE M. SMITH, and UNITED STATES OF AMERICA, ex rel Plaintiffs,
DEION L. SANDERS, Individually, ET AL., Defendants.
FINDINGS, CONCLUSIONS, AND RECOMMENDATION
CARRILLO RAMIREZ UNITED STATES MAGISTRATE JUDGE
standing order of reference dated June 8, 2015 (doc. 126),
this case was referred for full case management, including
the determination of non-dispositive motions and issuance of
findings of fact and recommendations on dispositive motions.
Before the Court is Plaintiff's Motion to Strike
Pleadings, Enter Default, and Enter Default Judgment Against
Defendant, Prime Time Association, filed November 5,
2018 (doc. 432). Based on the relevant filings and applicable
law, the motion should be DENIED.
October 31, 2012, Lawrence Smith (Relator) filed suit
against several defendants on behalf of the United States of
America for violations of the False Claims Act, 21 U.S.C.
§§ 3729-30 (the Act) in United States ex rel.
Smith v. Sanders, No. 3:12-CV-4377-M. (doc. 2.) He
alleges that the defendants, including Prime Time Association
(Defendant), “committed several acts and omissions that
contributed to and resulted in the making of false and
fraudulent statements and claims to obtain federal grant
funds” through the National School Lunch Program and
Summer Food Service Program. (doc. 89 at 10-12.)
filed another action on August 7, 2013 in United States
ex rel. Smith v. Wallace, No. 3:13-CV-3106-M (the
Related Action) against some of the same defendants as in
this case, as well as others. (See doc. 2, Related
Action.) His claims related to the charter school
application and grant applications for Prime Prep Academy.
(See doc. 2, Related Action; doc. 172 at 8.) On May
27, 2015, the Court consolidated both cases. (doc. 122 at 1;
doc. 46, Related Action.)
August 1, 2017, counsel for Defendant moved to withdraw from
representing it and defendant Deion Sanders in this case
based on Sander's alleged failure to respond to them,
other than to state that he did not have time to respond to
discovery requests. (See doc. 338.) The motion was
granted on August 11, 2017. (See doc. 348.) After
the attorneys were allowed to withdraw, the Court issued an
order which stated:
Here, defendant Prime Time Association must appear through
licensed counsel within TWENTY-ONE (21) days
from the date of this order. If licensed counsel has not
entered an appearance on behalf of the artificial entity
defendant within that time, it will be recommended that its
defenses be stricken without further notice and that the
Court conduct further proceedings in accordance with the law,
including but not limited to, entry of an order of default
and/or default judgment.
(See doc. 349.) No. appearance was made on
Defendant's behalf within that time. On November 5, 2018,
Relator moved to strike Defendant's answer, for entry of
default, and for default judgment. (See doc. 432.)
Two weeks after the motion was filed, counsel filed a notice
of appearance on behalf of Defendant and a response to the
motion. (See docs. 433, 434.) The response states
that Defendant “is prepared to defend itself and move
forward with the lawsuit, ” and that the Relator
“has not asserted that he suffered any prejudice from
Defendant's delay in retaining counsel and has not filed
any pleadings requiring a response from Defendant  since
the Court's order to retain counsel.” (doc. 434 at
1-2.) Relator responds that Defendant has no good reason for
the court not to strike its pleadings.
MOTION TO STRIKE PLEADINGS
federal courts of the United States, “parties may plead
and conduct their own cases personally or by counsel.”
28 U.S.C. § 1654. It is well-established that although
individuals have the right to represent themselves or proceed
pro se under this statute, corporations are
fictional legal persons who can only be represented by
licensed counsel. Rowland v. California Men's
Colony, 506 U.S. 194, 201-02 (1993); Memon v. Allied
Domecq QSR, 385 F.3d 871, 873 (5th Cir. 2004) (per
curiam) (citing Rowland and Donovan v. Road
Rangers Country Junction, Inc., 736 F.2d 1004, 1005 (5th
Cir. 1984) (per curiam)); Southwest Express Co.,
Inc. v. Interstate Commerce Commission, 670 F.2d 53,
54-56 (5th Cir. 1982). “This is so even when the person
seeking to represent the corporation is its president and
major stockholder.” In re K.M.A., Inc., 652
F.2d 398, 399 (5th Cir. 1981) (citation omitted). The
rationale for this long-standing rule applies equally to
“all artificial entities”, such as partnerships
and associations. Rowland, 506 U.S. at 202. When a
corporation or artificial entity declines to hire counsel to
represent it, the court may dismiss its claims if it is a
plaintiff, or strike its defenses if it is a defendant.
See Donovan, 736 F.2d at 1005.
although it has taken well more than twenty-one days,
Defendant has now retained counsel to represent it. Other
than the delay in obtaining counsel, Defendant does not
appear to have failed to comply with any court orders.
Additionally, the related defendant has now been afforded an
opportunity to comply with discovery orders within thirty
days of March 18, 2019, and new deadlines will be set for the
completion of discovery and filing motions. It does not
appear that there will be any prejudice to Relator from
allowing this case to also proceed against Defendant,
especially since the claims against all other non-defaulting
defendants (except the related defendant) have been
dismissed. Relator's motion to strike Defendant's
pleadings should be denied.
MOTION FOR DEFAULT JUDGMENT
moves for default judgment under Fed.R.Civ.P. 55.
sets forth the conditions under which default may be entered
against a party, as well as the procedure to seek the entry
of default judgment. There is a three-step process for
securing a default judgment. See New York Life Ins. Co.
v. Brown, 84 F.3d 137, 141 (5th Cir. 1996). First, a
default occurs when a party “has failed to plead or
otherwise defend” against an action. Fed.R.Civ.P.
55(a). Next, an entry of default must be entered by the clerk
when the default is established “by affidavit or
otherwise.” See id.; NewYork Life Ins.
Co., 84 F.3d at 141. ...