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Benegas v. Byram

United States District Court, W.D. Texas, Austin Division

June 20, 2019

ANA VAREZ BENEGAS and YAWAN KAYALI FERNANDEZ, Plaintiffs,
v.
MONICA BYRAM, Defendant.

          ORDER

          ROBERT PITMAN UNITED STATES DISTRICT JUDGE.

         Before the Court is Plaintiffs Ana Verez Benegas and Yawan Kayali Fernandez's (collectively, “Plaintiffs”) Motion for Default Judgment. (Dkt. 5). Having considered Plaintiffs' motion, the record, and the relevant law, the Court finds that the motion should be granted.

         I. BACKGROUND

         Plaintiffs allege the following facts in their complaint. (Dkt. 1). In 2013, Defendant Monica Byram (“Defendant”) and Blake Byram (collectively, “the Byrams”) contacted Plaintiffs seeking their investment in the construction and sale of private aircraft hangers at Austin Bergstrom International Airport. (Id. ¶ 8). Relying on the Byrams' representations, Plaintiffs each wire-transferred approximately $500, 000 to the Byrams. (Id. ¶¶ 8-10). Plaintiffs and Defendant subsequently became the three members of Jet Star Real Estate Holdings, LLC (“the Company”) pursuant to an agreement they each signed (the “Company Agreement”). (Id. ¶ 11). Plaintiffs were members of the company in name only, however, as Defendant handled the company's day-to-day affairs and was listed as its sole manager. (Id. ¶ 12).

         The private aircraft hangers were never built. (Id. ¶ 13). For years, Plaintiffs attempted to determine what became of their investment, and they eventually requested that Defendant return their funds to them. (Id. ¶ 14). Defendant did not do so and instead assured Plaintiffs that the venture was moving forward. (Id. ¶¶ 14-15). After further delay, Plaintiffs sent the Byrams a formal demand letter on June 12, 2017, demanding repayment of their approximately $1 million investment. (Id. ¶ 16). It became clear to Plaintiffs, however, that the Byrams would not return the investment money absent legal action, and so Plaintiffs brought an arbitration action against Defendant. (Id. ¶ 17).

         On August 16, 2018, the arbitrator issued a final arbitration award. (Id. ¶ 22). The arbitrator found that Defendant had “repeatedly misled [Plaintiffs] about the Company and its project” and had breached her fiduciary duties to them. (Id.). The final award required Defendant to pay Plaintiffs the amount of their investment, legal and administrative fees and expenses, and post-judgment interest. (Id.). The award also required that these payments be made within 30 days of its transmittal. (Id. ¶ 25). Defendant did not timely pay Plaintiffs, and they subsequently filed this action for confirmation of their arbitration award. (Id.).

         Defendant's answer to Plaintiffs' complaint was due on January 15, 2019. (Dkt. 2). Defendant did not submit an answer. On March 5, Plaintiffs moved for an entry of default against Defendant, which the Clerk of the Court entered later that day. (Dkt. 3). On March 6, Plaintiffs moved for default judgment against Defendant. (Dkt. 5). Defendant has still not appeared in this case; Plaintiffs' motion is unopposed.

         II. DISCUSSION

         Under Rule 55 of the Federal Rules of Civil Procedure, federal courts have the authority to enter a default judgment against a defendant that has failed to plead or otherwise defend itself. Fed.R.Civ.P. 55(a)-(b). That said, “[d]efault judgments are a drastic remedy, not favored by the Federal Rules and resorted to by courts only in extreme situations.” Sun Bank of Ocala v. Pelican Homestead & Sav. Ass'n, 874 F.2d 274, 276 (5th Cir. 1989). A party is not entitled to a default judgment simply because the defendant is in default. Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996). Rather, a default judgment is generally committed to the discretion of the district court. Mason v. Lister, 562 F.2d 343, 345 (5th Cir. 1977).

         In considering Plaintiffs' motion, the Court must determine: (1) whether default judgment is procedurally warranted, (2) whether Plaintiffs' complaint sets forth facts sufficient to establish that it is entitled to relief, and (3) what form of relief, if any, Plaintiffs should receive. United States v. 1998 Freightliner Vin #: 1FUYCZYB3WP886986, 548 F.Supp.2d 381, 384 (W.D. Tex. 2008); see also J & J Sports Prods., Inc. v. Morelia Mexican Rest., Inc., 126 F.Supp.3d 809, 813 (N.D. Tex. 2015) (using the same framework).

         A. Procedural Requirements

         To determine whether entry of a default judgment is procedurally warranted, district courts in the Fifth Circuit consider six factors: “[1] whether material issues of fact are at issue, [2] whether there has been substantial prejudice, [3] whether the grounds for default are clearly established, [4] whether the default was caused by a good faith mistake or excusable neglect, [5] the harshness of a default judgment, and [6] whether the court would think itself obliged to set aside the default on the defendant's motion.” Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998).

         Every Lindsey factors weighs in favor of entering a default judgment against Defendant. Because Defendant has not filed a responsive pleading, there are no material facts in dispute. See Nishimatsu Const. Co., Ltd. v. Hous. Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (“The defendant, by his default, admits the plaintiff's well-pleaded allegations of fact.”). Defendant's failure to appear and respond has ground the adversary process to a halt, prejudicing Plaintiffs' interest in pursuing their claim for relief. See J & J Sports, 126 F.Supp.3d at 814 (“Defendants' failure to respond threatens to bring the adversary process to a halt, effectively prejudicing Plaintiff's interests.”) (citation and quotation marks omitted). The grounds for default are established: Defendant was properly served and has failed to appear and participate at all, much less timely file a responsive pleading. There is no indication that the default was caused by a good faith mistake or excusable neglect, and the harshness of a default judgment in this case is mitigated by Defendant's failure to respond to Plaintiffs' complaint or otherwise appear. Finally, the Court is not aware of any facts that would obligate it to set aside the default if challenged by Defendant. The Court therefore finds that default judgment is procedurally warranted.

         B. Sufficiency of ...


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