The opinion of the court was delivered by: Simandle, District Judge
HONORABLE JEROME B. SIMANDLE
MEMORANDUM OPINION GRANTING PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT AS TO LIABILITY ONLY ON LEGAL MALPRACTICE CLAIM AGAINST BAKER DEFENDANTS
This matter is before the Court upon plaintiffs' motion for entry of a default judgment against defendants Scott R. Baker, Esquire, and The Scott Baker Firm, P.C., pursuant to Rule 55(b), Fed. R. Civ. P., following this Court's Order striking defendants' answer to plaintiffs' Third Amended Complaint for failure to appear and defend. The Court has considered the Affidavits of Elizabeth G. Dixon, Esquire (on behalf of plaintiff Louis F. Larsen) and Richard J. Kwasny, Esquire (on behalf of the other twenty-six plaintiffs), and the letter opposition of Scott Baker on his own behalf. Where, as in this case, default has previously been entered against these defendants, the plaintiffs have the burden under Rule 55(b)(2), Fed. R. Civ. P., to establish that the essential elements of the pleaded claims are present, normally taking the factual allegations in the complaint as true. See Fed. R. Civ. P. 8(d); *fn1 Comdyne I v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990); Fehlhaber v. Indian Trails, Inc., 425 F.2d 715, 717 (3d Cir. 1970); D.B. v. Bloom, 896 F. Supp. 163, 170 n. 3 (D.N.J. 1995). The court in its discretion may require some proof of facts that must be established to determine liability. 10A Wright, Miller & Kane, Federal Practice and Procedure § 2688 at 60-61 (citing, inter alia, D.B. v. Bloom, supra, 896 F. Supp. at 170 n.2). Requiring supplemental proof of essential facts would be especially appropriate in the present case where defendants' default arose not from failure to answer but instead from the striking of the answer (and defendants' denials) due to failure to appear and defend.
After the Court determines that judgment by default should be entered as to liability, the court must address the quantum of damages or other recovery to be awarded. If a specific damages sum was sought in the complaint and uncontested, the court has discretion to award that amount without further hearing. 10A Wright, Miller & Kane, supra, § 2688 at 63.
Where, as in the present case, the sum is not certain and is not susceptible to easy computation, the court may require submission of supplemental evidence of damages by hearing or otherwise. Id. at 69-70. The court has discretion to convene a damages hearing or to act upon the basis of affidavits setting forth the amount and basis for establishing and calculating damages, by a person with knowledge, and sufficient documentary evidence to satisfy the court. Bartkus, N.J. Federal Civil Procedure, § 17-3:3.2 at 443 n. 53 (1999), citing Dundee Cement Co. v. Howard Pipe & Concrete Products, 722 F.2d 1319, 1323 (7th Cir. 1983)(citing Magette v. The Daily Post, 535 F.2d 856 (3d Cir. 1976)); Broadcast Music, Inc. v. De Gallo, Inc., 872 F.Supp. 167 (D.N.J. 1995); accord, Transportes Aeros DeAngola v. Jet Traders Inv. Corp., 624 F. Supp. 264 (D. Del. 1985). A damages hearing will be especially appropriate under Rule 55(b)(2) where there are multiple claimants, issues of proximate causation, or other complexities in ascertaining the degree of damages, as contrasted with the mere fact of damage. See generally Pope v. United States, 323 U.S. 1, 12 (1944); Fehlhaber v. Indian Trails, supra, 425 F.2d at 715; Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105 (2d Cir. 1997); Eisler v. Stritzler, 535 F.2d 148 (1st Cir. 1976).
Based upon the pleadings and all relevant submissions, the Court finds as follows:
1. On August 3, 1995, plaintiffs filed a Third Amended Complaint, which named Scott R. Baker, Esquire and The Scott Baker Firm, P.C. *fn2 (collectively, "the Baker defendants") as defendants and asserted fraud, civil Racketeer Influenced and Corrupt Organizations Act ("RICO"), civil conspiracy, and legal malpractice claims against those defendants.
2. The history of this case was previously summarized by this Court. Andrews v. Holloway, No. 95-1047, slip op. (D.N.J. Nov. 9, 1995). The plaintiffs in this case are twenty-seven individuals *fn3 who invested in a limited partnership, defendant Continental Rare Coin Fund I, Ltd. ("CRCF I"), *fn4 in response to a 1988 prospectus issued by defendant Gregory Holloway ("Holloway"). Holloway was the sole shareholder of CRCF I and served as the firm's investment advisor. The purpose of the limited partnership was to invest in rare domestic coins, capitalized by the $1.7 million dollar investment of the partner plaintiffs. The total investment in CRCF I, including those investors who are not plaintiffs, was $4 million in 1988. At the end of 1989, the limited partnership held coins in its inventory worth over $5 million. By 1992, the partnership had no value and had ceased operations. The investor-plaintiffs were not made aware of the status of the venture until 1994. See Andrews v. Holloway, No. 95-1047, slip op. at 2 (D.N.J. Nov. 9, 1995).
3. An Order Striking the Answer and Granting Default against the Baker defendants was entered in this Court on July 29, 1997, due to the Baker defendants' repeated disobedience to court orders and failure to participate, for reasons found therein. Plaintiffs now seek entry of a final default judgment against Baker and his firm in an amount equal to their initial contributions, or $2,009,302.70. Plaintiffs additionally seek treble damages related to their RICO claim, pursuant to 18 U.S.C. § 1964(c).
4. Because only plaintiffs' submissions on the claim of legal malpractice brief the issue, as previously requested by this Court, this Court will evaluate and grant the entry of a default judgment of liability against the Baker defendants only on the legal malpractice claim. Plaintiffs' motion for entry of default judgments on the remaining fraud, civil RICO, and civil conspiracy claims will be denied.
5. Scott R. Baker, Esquire, served as counsel to the partnership and the individual partners from 1988 until July 30, 1991. Baker prepared the limited partnership agreement for CRCF I (Dixon Aff., Ex. H) and advised Holloway on redemption procedures (Dixon Aff., Ex. B, T 11-3 to 11-5).
6. In 1989, the Continental Companies entered into an oral contract with Charles and Michael Byers ("Byers") and their corporations, The C.B. Byers Corp. and Byers Numismatic Corp., which contract required Byers and their corporations to purchase foreign coins on behalf of CRCF I. (Dixon Aff., para. 14.) From March, 1989 until August, 1990, Byers purchased foreign coins on behalf of CRCF I. (Id.) No later than April 3, 1990, after receiving a letter from Price Waterhouse regarding CRCF I's ownership of foreign coins, Baker became aware that the Continental Companies were involved in the sale of foreign coins, in violation of the Partnership Agreement he himself drafted. In a draft reply letter to Price Waterhouse, Baker stated that "it is not clear whether [CRCF I]'s acquisition of foreign coins would constitute a factual basis which might give rise to legal liability for potential claims and assessments." (Dixon Aff., Ex. F).
7. In May, 1990, Baker drafted a letter to investors that proposed an Amended and Restated Partnership Agreement which would allow CRCF I to deal in foreign coins. (Dixon Aff., Ex. G.) This letter did not inform investors that Continental Companies had been purchasing foreign coins from Byers since March, 1989. In July, 1990, Baker received a letter from the attorney for Byers threatening litigation related to their oral purchasing contract. (Dixon Aff., Ex. B, T 99-9 to 99- 12.) Baker testified that he does not recall what, if anything, he did in response to the letter. (Id., T 99-13 to 100-2.) On November 7, 1990, Byers filed a fraud and breach of contract suit in California against Continental Companies. Baker gave advice and counsel to Holloway and CRCF I on that litigation. (Dixon Aff., Ex. B, T 11-9 to 11-12.) On December 14, 1990, Baker and Byers settled the California suit for $32,500.00. (Dixon Aff., para. 22.) In May, 1991, the Continental Companies filed suit against Byers, alleging fraud and breach of contract. (Id. at 23.) The CRCF I investors were not advised of these suits by Baker or Holloway until July, 1991, when a general status letter was sent out. (Dixon Aff., Ex. I.) There were few details about the foreign coin dealings, litigation, or settlement agreement contained in the status letter. (Id.)
8. Plaintiffs allege that Baker improperly benefitted from CRCF I and the sale of King of Siam foreign coin sets. (Kwasny Aff., para. 23.) Baker denies receiving any money not owed to him for services. (Baker Reply Letter, Sep. 11, 1997 at 3-4.) On July 30, 1991, Baker advised Holloway that he was resigning as corporate counsel for the Continental Companies. (Dixon Aff., Ex. C., Holloway Letter.) In the lengthy resignation letter, Baker refers to a series of conversations and communications in which he expressed concern about the dealings of the Continental Companies. Baker acknowledges that he was aware Holloway commingled funds and used CRCF I monies for personal investments. (Id. at 1.) Baker further acknowledges that he was aware that the non-disclosure of such commingling to investors violated securities law. (Id. at 2.) Also on July 30, 1991, Baker sent a very brief letter to investors advising only that ...