Opinion
Civil Action 23-cv-02094-DDD-SBP
05-31-2024
HAVANA AUTO PARTS, INC., a Colorado corporation, Plaintiff, v. WESTERN LOGISTICS, INC., d/b/a DILIGENT DELIVERY SYSTEMS, a Texas corporation, Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
SUSAN PROSE, UNITED STATES MAGISTRATE JUDGE
Plaintiff Havana Auto Parts, Inc. (“Havana”) has filed an application seeking to have this court confirm an arbitration award in favor of Havana and against Defendant Western Logistics, Inc., d/b/a Diligent Delivery Systems (“Western”). See ECF No. 1 (“Application”); see also ECF No. 1-1 (“Final Award”). Western waived service in this case, ECF No. 5, but never answered or otherwise responded to the Application. This recommendation addresses Havana's motion for default judgment dated November 17, 2023. ECF No. 11 (“Motion”). The court has reviewed the Motion, the exhibits and affidavit submitted by Havana, the entire case file, and the applicable law, and for the following reasons RECOMMENDS that the Motion be GRANTED.
BACKGROUND
According to Havana's Application, on November 4, 2022, Havana filed a demand for arbitration against Western. Application ¶ 7. Havana is an auto parts store, auto shop, and machine shop. Id. ¶ 1. In its demand for arbitration, Havana claimed that Western breached a provision of a “Client Services Agreement, or “CSA,” between Havana and Western, in which Western agreed to provide driver delivery services to Havana through persons known as “Delivery Owner Operators.” Id. ¶¶ 5-7. On June 30, 2023, following a two-day hearing, the arbitrator awarded Havana $123,505.02 in damages for breach of contract, along with prejudgment interest on this sum in the amount of eight percent per annum, compounded annually, beginning on January 19, 2022. Id. ¶¶ 8, 9(a), 9(b).
The arbitrator divided the administrative fees and expenses of $9,550.00, and the arbitrator's expenses of $16,117.67, equally between the parties. Id. ¶ 9(d). Havana does not seek any fees stemming from the arbitration here.
On August 17, 2023, Havana filed the Application in this court. After Western failed to enter an appearance, answer, or otherwise defend this case, Havana moved for default on October 26, 2023. ECF No. 9. The Clerk of Court entered default against Western on November 15, 2023. ECF No. 10. Havana now moves for default judgment pursuant to Rule 55(b). See Motion; see also Plaintiff's Supplemental Brief Regarding Defendant's Personal Jurisdiction, ECF No. 17.
Havana filed this supplemental briefing in response to this court's order dated November 27, 2023, to facilitate the court's determination “whether it has the requisite personal jurisdiction over Defendant.” ECF No. 15. Western was given an opportunity to respond, see id., but did not.
STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 55(b), default judgment may enter against a party who fails to appear or otherwise defend a case brought against them. However, “a party is not entitled to the entry of default judgment as a matter of right; rather the entry of a default judgment is entrusted to the ‘sound judicial discretion' of the court.” Greenwich Ins. Co. v.
Daniel Law Firm, No. 07-cv-02445-LTB-MJW, 2008 WL 793606, at *2 (D. Colo. Mar. 22, 2008) (quoting Cablevision of S. Conn. Ltd. P'ship v. Smith, 141 F.Supp.2d 277, 281 (D. Conn. 2001)). See also Olcott v. Del. Flood Co., 327 F.3d 1115, 1124 (10th Cir. 2003) (“Decisions to enter judgment by default are committed to the district court's sound discretion, and our review is for an abuse of discretion.”) (quoting Dennis Garberg & Assocs. v. Pack-Tech Int'l Corp., 115 F.3d 767, 771 (10th Cir. 1997)). Even after the entry of default, “it remains for the court to consider whether the unchallenged facts constitute a legitimate basis for the entry of a judgment.” McCabe v. Campos, No. 05-cv-00846-RPM-BNB, 2008 WL 576245, at *2 (D. Colo. Feb. 28, 2008) (citing Black v. Lane, 22 F.3d 1395, 1407 (7th Cir. 1994)). “In determining whether a claim for relief has been established, the well-pleaded facts of the complaint are deemed true.” Id. “[A] court may not enter a default judgment without a hearing unless the amount claimed is a liquidated sum or one capable of mathematical calculation.” Niemi v. Lasshofer, 770 F.3d 1331, 1352 (10th Cir. 2014) (quoting Venable v. Haislip, 721 F.2d 297, 300 (10th Cir. 1983)).
ANALYSIS
I. Subject Matter and Personal Jurisdiction
In determining whether the entry of default judgment is warranted, the court must first determine whether it has jurisdiction over the subject matter and the defendant. Garberg, 115 F.3d at 772; Williams v. Life Sav. & Loan, 802 F.2d 1200, 1202-03 (10th Cir. 1986). It is well-settled that “[a] judgment is void when a court enters it lacking subject matter jurisdiction or jurisdiction over the parties.” Williams, 802 F.2d at 1202. Here, the allegations in the Application, taken as true for purposes of default judgment, establish the court's jurisdiction over this lawsuit and the parties.
This court has subject matter jurisdiction over these proceedings pursuant to 28 U.S.C. § 1332(a)(1) because the parties are of diverse citizenship and the amount in controversy exceeds $75,000. Application ¶ 3. The well-pleaded allegations in the Application establish that Havana is a Colorado corporation with its principal place of business in Aurora, Colorado. Id. Western is a Texas corporation with its principal place of business in Houston, Texas. Id. ¶ 2. See also Welsh Decl., ECF No. 11-1 ¶ 2 (affirmation by Havana's Executive Vice President that Havana is a Colorado corporation with its principal place of business in Aurora, Colorado); Plaintiff's Supplemental Brief, ECF No. 17 ¶ 3 (stating that “Defendant is a Texas corporation engaged in the delivery logistics business”).
Likewise is it apparent from the record that this court has personal jurisdiction over Western. See Hukill v. Okla. Native Am. Domestic Violence Coalition, 542 F.3d 794, 797 (10th Cir. 2008) (“[A] default judgment in a civil case is void if there is no personal jurisdiction over the defendant.”) (citation omitted). The court begins its assessment of personal jurisdiction by recognizing that “[d]efects in personal jurisdiction are not waived by default when a party fails to appear or to respond, and the plaintiff bears the burden of proving personal jurisdiction before a default judgment may be entered.” Malluk v. Berkeley Highlands Prods., LLC, 611 F.Supp.3d 1134, 1138 (D. Colo. 2020) (citing Williams, 802 F.2d at 1202-03). “Where, as here, the issue is determined on the basis of the pleadings and affidavits, that burden may be met by a prima facie showing.” Sharpshooter Spectrum Venture, LLC v. Consentino, No. 09-cv-0150-WDM-KLM, 2011 WL 3159094, at *2 (D. Colo. July 26, 2011) (citing Shrader v. Biddinger, 633 F.3d 1235, 1239 (10th Cir. 2011)).
To establish personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show (1) that jurisdiction is legitimate under the laws of the forum state and (2) that the exercise of jurisdiction does not offend the Fourteenth Amendment's Due Process Clause. Dental Dynamics, LLC v. Jolly Dental Group, LLC, 946 F.3d 1223, 1228 (10th Cir. 2020) (citing Walden v. Fiore, 571 U.S. 277, 282 (2014)). Colorado's long-arm statute “confer[s] the maximum jurisdiction permitted by the due process clauses of the United States and Colorado constitutions]” Archangel Diamond Corp. v. Lukoil, 123 P.3d 1187, 1193-94 (Colo. 2005) (citing Keefe v. Kirschenbaum & Kirschenbaum, P.C., 40 P.3d 1267, 1270 (Colo. 2002)); accord Old Republic Ins. Co. v. Continental Motors, Inc., 877 F.3d 895, 903 (10th Cir. 2017) (“Colorado's long-arm statute, Colo. Rev. Stat. § 13-1-124, extends jurisdiction to the Constitution's full extent.”). Therefore, the personal jurisdictional analysis here reduces to a single due process inquiry: whether the exercise of personal jurisdiction over Western comports with the requirements of federal due process. Old Republic, 877 F.3d at 903. Federal law, rather than state law, guides this analysis. Matthys v. Narconon Fresh Start, 104 F.Supp.3d 1191, 1198-99 (D. Colo. 2015).
“The Due Process Clause authorizes personal jurisdiction if two elements are met.” Dental Dynamics, 946 F.3d at 1229. “First, a defendant must have ‘purposefully established minimum contacts with the forum state.'” Id. (quoting Int'lShoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Sufficient minimum contacts with the forum state allow the defendant to “reasonably anticipate being haled into court there.” Monge v. RG Petro-Mach. (Grp.) Co. Ltd., 701 F.3d 598, 613 (10th Cir. 2012) (quotation omitted). This requires a showing of more than “random, fortuitous, or attenuated contacts[;”] instead, the plaintiff must demonstrate that the defendant “purposefully direct[ed]” its activities at residents of the forum and that the litigation “result[s] from alleged injuries that arise out of or relate to those activities.” Id. at 613-14. (quotation omitted). “Second, the assertion of personal jurisdiction must comport with traditional notions of fair play and substantial justice.” Dental Dynamics, 946 F.3d at 1229 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985)).
The “minimum contacts” requirement may be satisfied by showing either general jurisdiction or specific jurisdiction. OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1090-91 (10th Cir. 1998); see also Old Republic, 877 F.3d at 903 (“Depending on their relationship to the plaintiff's cause of action, an out-of-state defendant's contacts with the forum state may give rise to either general (all-purpose) jurisdiction or specific (case-linked) jurisdiction.”). “General personal jurisdiction means that a court may exercise jurisdiction over an out-of-state party for all purposes.” Old Republic, 877 F.3d at 903-04 (citing Intercon, Inc. v. Bell Atl. Internet Sols., Inc., 205 F.3d 1244, 1247 (10th Cir. 2000)). Specific personal jurisdiction, by contrast, is “jurisdiction specific to this dispute.” Newsome v. Gallacher, 722 F.3d 1257, 1264 (10th Cir. 2013). In this case, Havana appears to assert only specific jurisdiction over Western, based on Western's particular contacts with this forum in connection with the instant dispute. See ECF No. 17 ¶ 4. This court accordingly does not address the requirements of general jurisdiction.
Specific jurisdiction “allows a court to exercise jurisdiction over an out-of-state defendant only for claims related to the defendant's contacts with the forum State.” XMission, L.C. v. Fluent LLC, 955 F.3d 833, 840 (10th Cir. 2020) (citing Old Republic, 877 F.3d at 904). “In order for a state court to exercise specific jurisdiction, the suit must arise out of or relate to the defendant's contacts with the forum ”:
In other words, there must be an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum State and is terefore subject to the State's regulation. For this reason, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.Bristol-Myers Squibb Co. v. Sup. Ct., 582 U.S. 255, 262 (2017) (cleaned up; emphasis in original).
To establish specific personal jurisdiction over Western, Havana must first show that Western “purposefully directed” its activities at Colorado. Old Republic, 877 F.3d at 904 (quoting Shrader, 633 F.3d at 1239). “Purposeful availment requires actions by the [d]efendant which ‘create a substantial connection with the forum state.'” OMI Holdings, 149 F.3d at 1092 (quoting Asahi Metal Indus. Co., Ltd. v. Sup. Ct., 480 U.S. 102, 109 (1987)). The court “must examine the quantity and quality of Defendants' contacts with [the forum state] to determine whether the district court's assertion of personal jurisdiction over Defendants comports with due process.” Id. (emphasis in original). “The purpose of this requirement is to ensure that a defendant will not be subject to the laws of a jurisdiction solely as the result of random, fortuitous, or attenuated contacts, or of the unilateral activity of another party or a third person.” Emp'rs Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1160 (10th Cir. 2010) (quoting AST Sports Science, Inc. v. CLF Distribution, Ltd., 514 F.3d 1054, 1058 (10th Cir. 2008)) (cleaned up).
Applying these legal principles to the instant case, the record before the court evinces that Western conducts business in Colorado; that Havana and Western entered into a Client Services Agreement on January 18, 2018, pursuant to which Western provided driver delivery services to Havana within Colorado; and that the underlying dispute arose out of Western's conducting business in Colorado-a business dispute that was subject to an arbitration (in which Western fully participated) in Denver, Colorado. ECF No. 17 ¶¶ 4, 7. This record establishes that Havana has met its prima facie burden to prove that this court has specific personal jurisdiction over Western based on Western's purposeful availment of the privilege of conducting business activities in Colorado, and that the assertion of personal jurisdiction over Western comports with fair play and substantial justice.
In sum, there is no jurisdictional barrier to the court entering default judgment against Western in this matter. The court therefore turns to the question of whether the Final Award satisfies the requirements of the Federal Arbitration Act (“FAA”).
II. Review of the Final Award
Because the parties agreed to arbitration subject to the FAA, see Application ¶ 6,3 the court's review of the Final Award is governed by that statute:
Section 9 of the Federal Arbitration Act (“FAA”) can be broken into the following elements: (1) the parties must have agreed to binding arbitration; (2) the petition to confirm the award must be brought within one year of the award; (3) notice of the petition must be served on the adverse party; and (4) the petition must be brought in an appropriate court. See 9 U.S.C. § 9. Provided those elements are met and there are no grounds for vacatur, modification, or correction as prescribed in §§ 10 & 11 of the Act, the Court “must” enter judgment confirming the award. Id. Morgan Stanley Smith Barney LLC v. Monaco, No. 14-cv-00275-RM-MJW, 2014 WL 5353628, at *1 (D. Colo. Aug. 26, 2014), report and recommendation adopted as modified, 2014 WL 5390677 (D. Colo. Oct. 21, 2014); see also Fisher v. Gen. Steel Domestic Sales, LLC, No. 10-cv-01509-WYD-BNB, 2011 WL 5240372, at *2 (D. Colo. Oct. 31, 2011).
While a copy of the CSA is not in the record, the court accepts as true Havana's well-pleaded allegation concerning the provision in that agreement requiring arbitration of disputes-a point confirmed by the parties having proceeded to arbitration. See Application ¶ 6 (“Under paragraph 16 of the CSA, jurisdiction is conferred upon the American Arbitration Association[.]”).
“Confirmation of an arbitration award under § 9 of the FAA is intended to be summary; a district court does not sit to hear claims of factual or legal error by an arbitrator as if it were an appellate court reviewing a lower court's decision.” Morgan Stanley, 2014 WL 5353628, at *1 (internal quotation marks and citations omitted, citing Morrill v. G.A. Mktg., Inc., No. 04-cv-01744-MSK-BNB, 2006 WL 2038419, at *1 (D. Colo. July 18, 2006)); see also United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 37-38 (1987); Denver & Rio Grande W. R.R. v. Union Pac. R.R., 119 F.3d 847, 849 (10th Cir. 1997)). And so a court “must give extreme deference to the determination of the [arbitrator] for the standard of review of arbitral awards is among the narrowest known to law.” THI of New Mexico at Vida Encantada, LLC v. Lovato, 864 F.3d 1080, 1083 (10th Cir. 2017) (citation omitted) (emphasis in original). “Once an arbitration award is entered, the finality of arbitration weighs heavily in its favor and cannot be upset except under exceptional circumstances.” White River Village, LLP v. Fid. & Deposit Co. of Md., No. 08-cv-00248-REB-MEH, 2014 WL 976881, at *1 (D. Colo. Mar. 12, 2014) (internal quotation marks and citations omitted, citing Burlington N. & Santa Fe Railway Co. v. Pub. Serv. Co. of Okla., 636 F.3d 562, 567 (10th Cir. 2010)).
Examining the record in accordance with this deferential standard of review, the court finds that the elements of 9 U.S.C. § 9 are readily satisfied here. The first element (agreement to binding arbitration) is met because, per Havana's well-pleaded representation, the CSA contains a binding arbitration provision. Application ¶ 6. With regard to the fourth element (petition brought in appropriate court), the CSA “does not specify a particular federal court in which actions to enforce arbitration awards should be filed.” Id. ¶ 4. In that circumstance, the FAA provides that jurisdiction lies in the judicial district in which the underlying arbitration was filed and the final award was made. 9 U.S.C. § 9. The Final Award was made in this judicial district.
As for the second element of § 9 (petition brought within one year), Havana filed the Application within two months of the issuance of the Final Award. ECF No. 1. Likewise the court finds that the third element (notice of the petition provided to the adverse party) is met. Western was properly served notice of the Application. On August 24, 2023, Western waived service of a summons in this matter, in which Western's representative explicitly acknowledged that Western was obliged to “serve responding papers within 21 days from August 21, 2023, the date this request was sent. If I fail to do so, a default will be entered against me, or the entity I represent.” ECF No. 5 at 1. Accordingly, the record plainly reflects that Western received notice of the Application.
To reiterate, all four elements of § 9 of the FAA are met. Unless the record reflects a basis for vacating or modifying the Final Award under §§ 10 or 11 of the FAA, Havana is entitled to default judgment. 9 U.S.C. § 9 (“the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title”). The court can vacate an arbitration award only where
the award was procured by corruption, fraud, or undue means; . . . there was evident partiality or corruption in the arbitrators, or either of them; . . . the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
. . . where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.9 U.S.C. § 10(a)(1)-(4). The court can modify an arbitration award only where
there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award; . . . the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted; . . . the award is imperfect in matter of form not affecting the merits of the controversy.9 U.S.C. § 11(a)-(c). The court has reviewed the entire case file and finds that nothing in the record suggests any basis to vacate or modify the Final Award. Thus, the court finds that the Final Award in favor of Havana should be confirmed against Western.
The court need not conduct a hearing to make this determination because the amounts claimed here were established by the arbitrator or are “capable of mathematical calculation.” See Niemi, 770 F.3d at 1352.
In addition to the principal amount of $123,505.02 which the arbitrator awarded to Havana for Western's breach of the CSA, Havana requests confirmation of an award of “$14,265.67 in prejudgment interest pursuant to C.R.S. § 5-12-102 at the rate of 8% per annum compounded annual[ly] for the period from January 19, 2022 through June 30, 2023, the date of the Award,” and “post-judgment interest at the rate of 8% per annum, which interest continues to accrue until satisfaction thereof.” Motion ¶ 14; Welsh Decl.¶ 10. The arbitrator awarded Havana prejudgment interest under at the rate of eight percent per annum, compounded annually from January 19, 2022, the date Havana made a demand on Western for payment of attorney's fees pursuant to the CSA. Final Award at 8 (citing Colo. Rev. Stat. § 5-12-102(1)(a)). However, the arbitrator made no mention of post-judgment interest. See generally Final Award. Despite this omission, the court finds it appropriate to recommend that Havana be awarded post-judgment interest here.
The court assumes the accuracy of Mr. Welsh's calculation of prejudgment interest, to which he attests in a sworn declaration.
“In contrast to prejudgment interest, the issue of post-judgment interest is governed by federal law.” Slawson Exploration Co., Inc. v. U.S. Energy Dev. Corp., No. 17-cv-01248-PAB-KMT, 2018 WL 3079708, at *4 (D. Colo. June 20, 2018) (citing Hosier v. Citigroup Global Markets, Inc., 858 F.Supp.2d 1206, 1209 (D. Colo. 2012) (“Federal law governs the award of post-judgment interest in federal cases, including when the federal court confirms an arbitration agreement.”)). Once an arbitration award is confirmed in federal court, post-judgment interest is mandatory and “the rate specified in [28 U.S.C.] § 1961 applies.” Hosier, 858 F.Supp.2d at 1209 (quotation omitted). And “[w]hile prejudgment interest under Colorado law may only be awarded on compensatory damages, see Seaward Constr. Co., Inc. v. Bradley, 817 P.2d 971, 977-78 (Colo. 1991), post-judgment interest ‘applies to the entire Award.'” Slawson, 2018 WL 3079708, at *4 (quoting Hosier, 858 F.Supp.2d at 1211). Here, as in Slawson, this court recommends that Havana be awarded post-judgment interest in accordance with the rate specified in 28 U.S.C. § 1961.
CONCLUSION
For the foregoing reasons, this court respectfully RECOMMENDS:
1. Havana's Application to Confirm Award of Arbitrator be granted, and pursuant to 9 U.S.C. § 9, the Final Award issued by the American Arbitration Association (Jack W. Berryhill, Arbitrator) in AAA Case number 01-22-0004-6775 on June 30, 2023, in favor of
Havana and against Western, be confirmed;
2. Havana's Motion for Clerk's Entry of Default Judgment, ECF No. 11, be granted and the Clerk of Court enter default judgment in favor of Havana and against Western in the amount of $137,770.69, consisting of $123,505.02 in actual damages and of $14,265.67 in prejudgment interest calculated at the rate of eight percent per annum compounded annually (for the period of January 19, 2022, to June 30, 2023); and
3. Post-judgment interest, accruing on any unpaid portions of the Final Award from the date of entry of Final Judgment in this court until the judgment is paid in full, be awarded in accordance with the rate and method of calculation set forth in 28 U.S.C. § 1961.
Additionally, this court ORDERS that Plaintiff's Request for Immediate Ruling on Motion for Default Judgment, ECF No. 18, be DENIED as moot.
Rule 72 of the Federal Rules of Civil Procedure provides that within fourteen (14) days after service of a Magistrate Judge's order or recommendation, any party may serve and file written objections with the Clerk of the United States District Court for the District of Colorado. 28 U.S.C. §§ 636(b)(1)(A), (B); Fed.R.Civ.P. 72(a), (b). Failure to make any such objection will result in a waiver of the right to appeal the Magistrate Judge's order or recommendation. See Sinclair Wyo. Ref. Co. v. A & B Builders, Ltd., 989 F.3d 747, 782 (10th Cir. 2021) (firm waiver rule applies to non-dispositive orders); but see Morales-Fernandez v. INS, 418 F.3d 1116, 1119, 1122 (10th Cir. 2005) (firm waiver rule does not apply when the interests of justice require review, including when a “pro se litigant has not been informed of the time period for objecting and the consequences of failing to object”).