HEALTHCARE SERVICES GROUP, INC., Plaintiff, v. SKYLINE SERVICES GROUP, LLC, et al., Defendants CIVIL ACTION NO. 17-2703 United States District Court, E.D. Pennsylvania Filed July 02, 2019 Counsel Joseph E. Wolfson, Stevens & Lee, Philadelphia, PA, for Plaintiff. Bedford Gardens Care and Rehabilitation Center LLC, New Bedford, MS, Pro Se. Deirdre Jelks, Pro Se. Diane Bates, Pro Se. Lori Cahill, Pro Se. Slomsky, Joel H., United States District Judge ORDER *1 AND NOW, this 2nd day of July 2019, upon consideration of Plaintiff Healthcare Services Group, Inc.'s Motion for Default Judgment (Doc. No. 77), it is ORDERED that the Motion for Default Judgment (Doc. No. 77) is GRANTED.[1] It is further ORDERED that the claims against the 32 “Proposed Dismissed Facilities,” which are noted on page 6 of this Order, are dismissed and that the 32 “Proposed Dismissed Facilities” are terminated as Defendants. *2 BY THE COURT: Footnotes [1] On June 15, 2017, Plaintiff Healthcare Services Group, Inc. (“Plaintiff” or “HCSG”), initiated this case against Defendant Skyline Services Group, LLC (“Skyline”), Skyline's principals, Joseph Schwartz, Michael Schwartz, and Louis Schwartz (the “Schwartz Defendants”) (collectively with Skyline, “Skyline Defendants”), and the long-term care facilities under Skyline's ownership and/or control (the “Skyline Facilities”) (collectively, “Defendants”), to collect outstanding debts owed to HSCG as a result of services it provided to the Skyline Facilities. (Doc. No. 1.) Plaintiff alleged claims for breach of oral contract against Skyline and the Skyline Facilities (Count I), breach of promissory note against Skyline and Michael Schwartz (Count II), breach of contract in the alternative against Skyline and the Skyline Facilities (Count III), unjust enrichment in the alternative against the Skyline Defendants and Skyline Facilities (Count IV), promissory estoppel against the Schwartz Defendants (Count V), breach of contract against the Schwartz Defendants (Count VI), breach of restrictive covenant agreements (“RCAs”) against the facility managers who signed RCAs with HCSG (the “contractually-bound managers”) (Count VII), tortious interference with contractual relationships against Skyline and the Skyline Facilities (Count VIII), and made a request for injunctive relief against Skyline and the Skyline Facilities (Count IX). (Doc. No. 1.) On November 3, 2017, Defendants filed an Answer to the Complaint. (Doc. No. 30.) On May 10, 2018, Defendants' counsel, William Whitman, Esquire, filed a Motion to Withdraw, citing as the reason Defendants' failure “to fulfill their obligations ... regarding counsel's services.” (Doc. No. 41 at 2.) On May 22, 2018, the Court entered an Order scheduling a hearing on the Motion to Withdraw for June 8, 2018. (Doc. No. 46.) In the Order, the Court required that the Schwartz Defendants be present at the hearing. (Doc. No. 46.) The Court also required Mr. Whitman to serve a copy of the Order on the Schwartz Defendants and file proof of service of record. On June 8, 2018, the Schwartz Defendants failed to appear, but upon learning that Mr. Whitman had not served the Order on the Schwartz Defendants as required, the Court continued the hearing for June 20, 2018. (Doc. No. 51.) In the Order continuing the hearing, the Court again required the Schwartz Defendants to appear and Mr. Whitman to serve the Schwartz Defendants with a copy of the Order and file proof of service of record. (Doc. No. 51.) On June 20, 2018, Mr. Whitman filed a declaration certifying that he had served the Schwartz Defendants with the Order by First Class Mail and Certified Mail. (Doc. No. 52.) On June 20, 2018, the Schwartz Defendants failed to appear for the hearing and the Court granted Mr. Whitman's Motion to Withdraw. (Doc. No. 53.) On July 12, 2018, Kevin J. O'Connor, Esquire, a partner of the law firm Peckar & Abramson, P.C., entered his appearance on behalf of Defendants. (Doc. No. 56.) Roughly six months later, on January 18, 2019, Mr. O'Connor filed a Motion to Withdraw. (Doc. No. 65.) The Court scheduled a hearing on the Motion to Withdraw for January 31, 2019. (Doc. No. 66.) In the Order scheduling the hearing, the Court required the Schwartz Defendants to appear on January 31, 2019, and ordered Mr. O'Connor to serve a copy of the Order on the Schwartz Defendants and file proof of service of record. (Doc. No. 66.) He did so. (Doc. No. 69.) On January 31, 2019, the Schwartz Defendants failed to appear for the hearing and the Court granted Mr. O'Connor's Motion to Withdraw. (Doc. No. 71.) On January 31, 2019, the Court entered an Order scheduling a status hearing in this case for February 14, 2019. (Doc. No. 72.) In the Order, the Court required the Schwartz Defendants and “[a]ny counsel representing the corporate Defendants, or any principal or agent of the corporate Defendants” be present at the hearing. (Id.) The Order scheduling the February 14, 2019 hearing was served on all Defendants by U.S. Mail at the addresses provided by their former counsel and noted on the docket. (Id.) On February 14, 2019, only counsel for Plaintiff was present at the status hearing. The Schwartz Defendants did not appear, nor did any counsel, principal or agent of Skyline or the Skyline Facilities appear. In addition to Defendants' failures to appear in court as ordered, Plaintiff submits that Defendants have obstructed the progress of this case in another way: Defendants have shirked their obligations to actively engage in discovery. (Doc. No. 78 at 5-6.) Plaintiff served Defendants with written discovery requests on May 11, 2018 and served Defendants with deposition notices on January 2, 2019. (Id. at 5.) To date, the Skyline Defendants have not responded to Plaintiff's discovery requests or deposition notices. (Id.) Because of Defendants' refusal to participate in this case, Plaintiff filed a Motion for Default Judgment on March 4, 2019. (Doc. No. 77.) In the Motion, Plaintiff requests that default judgment be entered against Defendants as a sanction pursuant to Federal Rules of Civil Procedure 16(f), 37, and 55. (Id.; Doc. No. 78 at 6.) Plaintiff also requests as part of the sanction an award of pre-judgment interest, post-judgment interest, and attorneys' fees. (Doc. No. 77.) Defendants have not responded to the Motion. On June 13, 2016, the Court entered an Order scheduling a hearing on the Motion for Default Judgment for June 24, 2019. (Doc. No. 83.) The Court required Plaintiff to serve a copy of the Order on all Defendants and file proof of service of record, which Plaintiff did on June 17, 2019. (Doc. No. 84.) On June 24, 2019, the Court held a hearing on the Motion for Default Judgment. At the hearing, counsel for Plaintiff was present, but Defendants did not appear. For the reasons that follow, and for the reasons stated by the Court on the record during the hearing on June 24, 2019, the Court will grant Plaintiff's Motion for Default Judgment, and award Plaintiff interest and fees, all as a sanction for Defendants' conduct in obstructing the progress of this case as described above. A. Entry of Default Judgment as a Sanction is Warranted Under Federal Rule of Civil Procedure 16(f), a district court may sanction a party who: (A) fails to appear at a scheduling or other pretrial conference; (B) is substantially unprepared to participate – or does not participate in good faith – in the conference; or (C) fails to obey a scheduling or other pretrial order. Fed. R. Civ. P. 16(f)(1). Rule 16(f) incorporates by reference the sanctions authorized under Rule 37(b)(2)(A). Applicable here, Rule 37(b)(2)(A)(vi) allows a district court to “render[ ] a default judgment” against a party that fails to comply with a court order. A default judgment may also be entered as a sanction under Rule 55 when a party has failed to “plead or otherwise defend.” Fed. R. Civ. P. 55(a). The phrase “otherwise defend” is broadly interpreted and allows a district court to enter default judgment when a party has failed to comply with court orders, file pre-trial memorandum, and respond to discovery requests. Hoxworth v. Blinder, Robinson & Co., Inc., 980 F.2d 912, 917 (3d Cir. 1992). Entry of a default judgment is a “drastic sanction.”Harris v. City of Phila., 47 F.3d 1311, 1330 n.18 (3d Cir. 1995). As such, the Third Circuit requires a court to consider the six factors set forth in Poulis v. State Farm Fire & Casualty Co., when determining whether to enter a default judgment against a non-compliant party: (1) the extent of the party's personal responsibility; (2) the prejudice to the adversary caused by the failure to meet scheduling order and respond to discovery; (3) a history of dilatoriness; (4) whether the conduct of the party or the attorney was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal, which entails an analysis of alternative sanctions; and (6) the meritoriousness of the claim or defense. 747 F.2d 863 (3d Cir. 1984). There is no “magic formula” or “mechanical calculation” for balancing the Poulis factors and no single factor is dispositive.Brisco v. Klaus, 538 F.3d 252, 263 (3d Cir. 2008). Under the first Poulis factor, Defendants are solely responsible for the conduct that has led Plaintiff to seek default judgment. Defendants have failed to comply with several Orders requiring them to be present in Court (see Doc. Nos. 46, 51, 66, 72), and Defendants have ignored Plaintiff's requests for written discovery responses and depositions. Thus, the first factor weighs in favor of entering default judgment. Under the second Poulis factor, Defendants' failure to comply with Court orders and respond to discovery have undermined Plaintiff's attempts to litigate this case. As such, the second Poulis factor weighs in favor of entering default judgment. With respect to the third Poulis factor, Defendants' lack of participation in this case demonstrates a history of dilatoriness on their part. Aside from Defendants failing to appear for four Court hearings, Defendants and, more specifically, the Skyline Defendants, have refused to respond to Plaintiff's discovery requests and have failed to respond to Plaintiff's deposition notices. Given Defendants' blatant disregard for defending this action, the third Poulis factor weighs in favor of entering default judgment. Likewise, the fourth Poulis factor weighs in favor of entering default judgment because Defendants' conduct has been willful and in bad faith. Defendants have repeatedly failed to participate in this case by ignoring Court Orders, refusing to respond to discovery, refusing to participate in depositions, and even refusing to cooperate with their former counsel. Under the fifth Poulis factor, the Court is satisfied that there exists no effective alternative sanction other than a default judgment in this case. Defendants have failed to participate in this case, and Plaintiff's Motion for Default Judgment, which was filed nearly four months ago, has failed to spur Defendants to action. Consequently, the Court is convinced that no lesser sanction than a default judgment would be effective. This sanction would result in this case being terminated in Plaintiff's favor. Finally, the sixth Poulis factor covers whether Plaintiff has a meritorious claim. Under this factor, the Court need only be satisfied that “the allegations of the pleadings, if established at trial, would support recovery by plaintiff or would constitute a complete defense.” Poulis, 747 F.2d at 870. To that end, the merits of a plaintiff's claim are evaluated under the standard of a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Huertas v. City of Phila., No. 02-7955, 2005 WL 226149, at *5 (E.D. Pa. Jan. 26, 2005), aff'd, 139 Fed. App'x 444 (3d Cir. 2005). To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223, 262 n.14 (3d Cir. 2013) (citing Sheridan v. NGK Metals Corp., 609 F.3d 239, 262 n.27 (3d Cir. 2010)). Under this standard and having reviewed the allegations of the Complaint, the Court is satisfied that Plaintiff's claims would be meritorious. In this case, Plaintiff provided services to the Skyline Facilities, including housekeeping, laundry, dietary, and nutrition services. (Doc. No. 78 at 11.) According to the Complaint, however, Plaintiff has not been paid for the services provided. These allegations, if proven at trial, would support recovery by Plaintiff on its breach of contract claims. As such, the six Poulis factor weight in favor of entering default judgment. Having reviewed each of the Poulis factors, the Court finds that the factors clearly weigh in favor of entry of a default judgment. Defendants have had a sufficient opportunity to protect their interests in this case, but they have chosen instead to ignore these proceedings and thwart Plaintiff's efforts to litigate this case. The Court is left with no option but to sanction Defendants and grant Plaintiff's Motion for Default Judgment. However, because this is essentially a breach of contract case, a default judgment will be entered only as to Plaintiff's contract claims in Counts I, II, III, VI, and VII. Default judgment will be denied as to Plaintiff's equitable and tort claims in Counts IV, V, VIII, and IX. B. Plaintiff is Entitled to Compensatory Damages A consequence of the entry of a default judgment is that the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.” Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). As such, Plaintiff's damages must still be proven. In the Motion for Default Judgment, Plaintiff seeks compensatory damages in the amount of $862,989.80. (Doc. No. 77.) In support of its compensatory damages, Plaintiff has submitted the sworn-affidavit of Jim O'Toole, HCSG's Financial Services Manager. (Id.) Mr. O'Toole's affidavit sets forth the specific amounts owed to Plaintiff pursuant to a promissory note executed between Plaintiff and Michael Schwartz on October 18, 2016. (Id. at 1-3, Ex. 1 to Ex. C.) According to the affidavit, Plaintiff is owed to $157,000 on the promissory note: $150,000 for the outstanding last payment and a $7,500 late fee. (Id.) The affidavit then sets forth the amounts owed to Plaintiff by the Skyline Facilities. For the services rendered at the Skyline Facilities that were parties to the promissory note located in Arkansas, Florida, and Massachusetts, Plaintiff is owed $368,522.27 pursuant to contracts attached to the affidavit at Exhibits 2 through 5. (Id. at 3-5; Exs. 2-5 to Ex. C.) For the services rendered at the Skyline Facilities located in Kansas, Plaintiff is owed $239,321.35 pursuant to contracts attached to the affidavit at Exhibit 6. (Id. at 6-10; Ex. 6 to Ex. C.) For services rendered at the Skyline Facilities located in South Dakota, Plaintiff is owed $97,646.18 pursuant to a contract which is attached the affidavit at Exhibit 7. (Id. at 10-14; Ex. 7 to Ex. C.) In total, Plaintiff is owed $705,489.80 for unpaid services it provided at the Skyline Facilities located in Arkansas, Florida, Massachusetts, Kansas, and South Dakota. The amount owed to Plaintiff from the services rendered at the Skyline Facilities, together with the $157,000 owed to Plaintiff on the promissory note, totals $862,489.80. Although Plaintiff is seeking $862,989.80 in compensatory damages, the Court finds that Plaintiff has made a calculation error in the amount due for the services at the Skyline Facilities and under the promissory note. Plaintiff's compensatory damages are $862,489.80, not $862,989.90. Based on Mr. O'Toole's affidavit, the Court finds that an evidentiary hearing to assess damages in this case is unnecessary. E. Elec. Corp. of New Jersey v. Shoemaker Const. Co., 657 F. Supp. 2d 545, 552 (E.D. Pa. 2009). Accordingly, the Court will award Plaintiff $862,489.80 in compensatory damages. C. Because an Evidentiary Hearing is Unnecessary, Plaintiff's Claims Against the “Proposed Dismissed Facilities” Will Be Dismissed Plaintiff requests that if the Court chooses to rely on Mr. O'Toole's affidavit to prove damages instead of hold an evidentiary hearing on damages, that the Court dismiss Plaintiff's claims against the following Skyline Facilities (“Proposed Dismissed Facilities”) pursuant to Federal Rule of Civil Procedure 41(a)(2): 1. Batesville Holdings LLC 2. Broadway Health Holdings LLC 3. Heritage of Hot Springs Holdings LLC 4. Mine Creek Holdings LLC 5. Searcy Holdings LLC 6. Highlands of North Little Rock John Ashley Holdings, LLC 7. Sidney Care and Rehabilitation Center, LLC 8. Sorenson Care and Rehabilitation Center, LLC 9. Clarkson Care and Rehabilitation Center, LLC 10. Valhaven Care and Rehabilitation Center, LLC 11. Columbus Care and Rehabilitation Center, LLC 12. Cozad Care and Rehabilitation Center, LLC 13. Franklin Care and Rehabilitation Center, LLC 14. Fullerton Care and Rehabilitation Center, LLC 15. Hartington Care and Rehabilitation Center, LLC 16. Nebraska City Care and Rehabilitation Center, LLC 17. Norfolk Care and Rehabilitation Center, LLC 18. Omaha Metro Care and Rehabilitation Center, LLC 19. O'Neill Care and Rehabilitation Center, LLC 20. Plattsmouth Care and Rehabilitation Center, LLC 21. Schuyler Care and Rehabilitation Center, LLC 22. Tekamah Care and Rehabilitation Center, LLC 23. Wausa Care and Rehabilitation Center, LLC 24. Grand Island Park Place Care and Rehabilitation Center, LLC 25. Grand Island Lakeview Care and Rehabilitation Center, LLC 26. Neligh Care and Rehabilitation Center, LLC 27. Broken Bow Care and Rehabilitation Center, LLC 28. Scottsbluff Care and Rehabilitation Center, LLC 29. Neodesha Care and Rehabilitation Center SNF 30. Arlington Care and Rehabilitation Center, LLC 31. Bella Vista Care and Rehabilitation Center, LLC 32. Lake Norden Care and Rehabilitation Center, LLC Under Rule 41(a)(2), once a party has answered a claim, an action may be dismissed “at the plaintiff's request only by court order, on terms that the court considers proper.” Fed. R. Civ. P. 41(a)(2). Requests for voluntary dismissal are liberally granted where the defendant cannot show that dismissal would cause substantial prejudice. See In re Paoli R.R. Yard PCB Litig., 916 F.2d 829, 863 (3d Cir. 1990); Equal Opportunity Employment Comm'n v. Bethlehem Steel Corp., 727 F. Supp. 952, 954 (E.D. Pa. 1990). In this case, Defendants have not defended the Motion for Default Judgment, let alone shown that dismissal of the Proposed Dismissed Facilities would cause them substantial prejudice. Accordingly, the Court will grant Plaintiff's request and dismiss the Proposed Dismissed Facilities. D. Plaintiff is Entitled to Attorneys' Fees In addition to compensatory damages, Plaintiff requests attorney's fees and costs pursuant to its several contracts with Defendants. (Doc. Nos. 77, 87.) “Where there is an agreement which provides a remedy for reasonable collection costs, the right to costs and attorney's fees arises from a favorable default verdict.” Wells Fargo Fin. Leasing, Inc. v. Target Ad, Inc., No. 09-340, 2010 WL 1141332, at *2 (E.D. Pa. Mar. 24, 2010) (citing De Lage Landen Financial Services, Inc. v. Rozentsvit, 939 A.2d 915 (Pa. Super. Ct. 2007)). In this case, each of Plaintiff's contracts with Defendants provide for attorney's fees and costs. First, with respect to the promissory note executed between Plaintiff and Michael Schwartz, the note states that in the event of a breach, Skyline “shall pay all costs and expenses including, without limitation, all reasonable attorneys' fees and disbursements and all court costs” incurred by Plaintiff. (Doc. No. 78, Ex. 1 to Ex. C, § 12.) Plaintiff's contracts for the Skyline Facilities located in Arkansas, Florida, and Massachusetts each contain provisions entitling Plaintiff to attorney's fees and costs in the event of a breach. (Id. at Ex. 2 to Ex. C, at App. 17, 30, 40, 52, 62, 71, 80.) Plaintiff's contracts for the Skyline Facilities in Kansas also entitle Plaintiff to attorney's fees and costs. (Id. at Ex. 6 to Ex. C, at App. 182, 193, 204, 215, 226, 237, 248, 270, 292, 303, 314, 325, 336, 380.) Likewise, Plaintiff's contracts for the Skyline Facilities in South Dakota allow Plaintiff to recover attorney's fees and costs that result from a breach. (See id. at Ex. 7 to Ex. C, at § 7.2A.) In entering default judgment, this Court accepts as true Plaintiff's allegations that Defendants breached their contracts with HCSG. Corbin, 908 F.2d at 1149. Because Plaintiff's contracts with the Skyline Defendants and the Skyline Facilities allow Plaintiff to recover attorney's fees and costs in the event of a breach, the Court will award Plaintiff attorney's fees and costs. Attorney's fees and costs are also being awarded as a sanction pursuant to Rules of Civil Procedure noted above. Plaintiff submits that $125,474.30 in attorney's fees and $10,590.33 in costs have been billed to HCSG on this case. (Doc. No. 87.) To support these fees and costs, Plaintiff has submitted a sworn-affidavit of its counsel, Elizabeth A. Ware, Esquire, of the firm Stevens & Lee, P.C. (Id.) The affidavit sets forth the attorney's fees charged to Plaintiff for each task counsel had to complete in this case. The affidavit also lists the time spent by each Stevens & Lee attorney, paralegal, and assistant who worked on this case, and the rate they each charged for their time. Based on Ms. Ware's affidavit, the Court finds that the fees and costs requested by Plaintiff are reasonable. As such, in addition to compensatory damages, the Court will award Plaintiff $132,921.23 in of attorney's fees and costs. E. Plaintiff is Entitled to Pre- and Post-Judgment Interest Finally, Plaintiff requests that it be awarded pre-judgment and post-judgment interest calculated at the legal rate of interest in Pennsylvania of six percent per year. (Doc. No. 87 at 2.) In diversity cases such as this one, “the question of whether to award prejudgment interest is one of state law.” Lexington Ins. Co. v. Abington Co., 621 F. Supp. 18, 19 n.3 (E.D. Pa. 1985). In Pennsylvania, a plaintiff is entitled to pre-judgment interest if “a defendant commits a breach of a contract to pay a definite sum of money ....” Vanalt Elec. Const., Inc. v. Selco Mfg. Corp., No. 03-6741, 2005 WL 3447632, at *1-2 (E.D. Pa. Dec. 15, 2005) (citing Black Gold Coal Corp. v. Shawville Coal Co., 730 F.2d 941, 944 (3d Cir. 1984)). In this case, Plaintiff is entitled to pre-judgment interest because the amounts owed to Plaintiff for Defendants' breaches are clearly ascertainable from the contracts executed between the parties. At an interest rate of six-percent per year, the pre-judgment interest on Plaintiff's compensatory damages of $862,989.80 is $51,779.39 per year, or $141.86 per day. Plaintiff initiated this case on June 15, 2017, 747 days ago. (Doc. No. 1.) Accordingly, Plaintiff is entitled to pre-judgment interest in the amount of $105,969.42. Plaintiff is also entitled to an award of post-judgment interest pursuant to 28 U.S.C. § 1961(a). Section 1961(a) provides that “[i]interest shall be allowed on any money judgment in a civil case recovered in a district court” and, further, that the “interest shall be calculated from the date of the entry of the judgment ....” Accordingly, the Court also will award Plaintiff post-judgment interest. A separate judgment in this case will be filed in favor of Plaintiff and against the remaining Defendants in accordance with this Opinion.