United States District Court, D. New Jersey
KEVIN MCNULTY, District Judge.
The complaint in this case alleges that, among them, two companies (Sapta and Cilicorp) and one individual (Lennard Tenende) have entered into three contracts: 1) a written independent contractor agreement between Sapta and Cilicorp; 2) a written "Memorandum of Understanding" that purports to modify the payment schedule in the first contract; 3) An oral contract wherein Lennard Tenende personally guaranteed Cilicorp's debt to Sapta. Sapta alleges that it performed over $1.2 million worth of services for Cilicorp under the independent contractor agreement, but that neither Cilicorp nor Tenende paid.
Sapta filed a complaint in this Court asserting breach of contract and other claims. Neither Cilicorp nor Tenende has answered the complaint or defended the suit. Accordingly, Sapta has moved for a default judgment under Fed.R.Civ.P. 55(b)(2). With respect to the Independent Contractor Agreement, the motion will be granted in part and denied in part. With respect to the Memorandum of Understanding and the personal guaranty, the motion will be denied.
The first contract at issue is a written one between two companies. Sapta Global Inc. and Cilicorp, LLC entered into an "Independent Contractor Agreement" (Agreement) under which Sapta was to provide Cilicorp with "computer skilled consultants." (Agrmt., ¶ 1). It appears that the initial rate for these services would be $76 per hour, while subsequent rates would be provided in individual invoices. (Id. at ¶ 8 and Appx. A). The contract also provided that Cilicorp would not be liable for payment unless it accepted Sapta's services in writing, for example by email. (Id. at ¶ 3). A human resources director of Sapta and the Chief Executive Officer of Cilicorp executed the Agreement on behalf of their companies on January 1, 2011. Sapta alleges that in connection with this Agreement, it performed some $1, 210, 955.00 worth of services for Cilicorp. (Compl., ¶ 41).
Almost six months later, on May 25, 2011, the two companies entered into a second alleged contract. This document, titled "Memorandum of Understanding, " seems to be intended to set a schedule on which Cilicorp would pay numerous invoices that were outstanding from the original Agreement. (Memo, 1). The Memorandum of Understanding lists some twenty seven invoices. However, it lists payment dates for only four of those invoices. (Id. at 1-2). Like the Agreement, the Memorandum of Understanding was signed by a human resources director of Sapta, and the CEO of Cilicorp. (Id. at 2).
The third alleged contract is an oral one. Sapta alleges that Lennard Tenende, the CEO of Cilicorp, personally guaranteed that Cilicorp would pay its debt to Sapta. (Compl., ¶ 13). Sapta alleges that neither Cilicorp as principal nor Tenende as guarantor has paid Sapta's invoices. (Id. at ¶ 14).
Sapta filed suit in this Court in June of 2013. The complaint contains six counts. It is not always clear which defendant or contract is referred to. Count I alleges that "Defendants" breached the contract created by the Memorandum of Understanding. Count II alleges that the defendants breached the implied covenant of good faith and fair dealing that inhered in their "contracts" with Sapta (presumably, all three of the purported contracts). Counts III, IV, and VI appear to allege breach of contract based on the Independent Contractor Agreement. Count V appears to allege fraud by the defendants.
Sapta filed an affidavit of service, attesting that a complaint and summons had been served on Lennard Tenende personally and on the Secretary of State for the State of Texas, who is authorized to receive service for defendant Cilicorp. (Dkt. Nos. 6, 7). Neither Tenende nor Cilicorp has answered the complaint or otherwise appeared to defend the case. At Sapta's request, the Clerk entered default on October 28, 2013. Some seven months later, I ordered Sapta to either move for a default judgment or face dismissal of its suit. (Dkt. No. 19). Sapta moved for a default judgment on May 27, 2014. The motion is unopposed.
This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1). Plaintiff has proffered that both defendants are citizens of Texas: Tenende is a citizen of Texas, and Cilicorp is an LLC organized under the laws of Texas with a corporate office in Texas. Sapta is a corporation formed under the laws of New Jersey, with its principal place of business in New Jersey. (Compl., ¶ 2, 3, 5; see also Dkt. No. 4 (Sapta's response to the Court's order to show cause why jurisdiction exists).
I. Default judgment standard
In deciding whether to grant a default judgment, courts consider three factors: (1) prejudice to the plaintiff if default is denied, (2) whether the defendant appears to have a litigable defense, and (3) whether defendant's delay is due to culpable conduct. Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000); see also Catanzaro v. Fischer, 570 F.App'x 162, 165 (3d Cir. 2014) (non-precedential). Here, I find that the first two factors are satisfied with respect to all counts. The plaintiff has been prejudiced in that it has experienced substantial delay in receiving money allegedly owed to it, and it has incurred the time expense of litigation. Because there is proof of service, I must assume that the defendants are aware of the case, and the record reveals no excuse for their failure to defend. With respect to the second factor, however, I find that Cilicorp and Tenende may well have valid defenses as to certain of Sapta's claims.
II. Breach of Contract Claims
a. Independent contractor agreement
Under New Jersey law,  a breach of contract claim has three elements: a valid contract, a breach of that contract by the defendant, and damage to the plaintiff. Murphy v. Implicito, 920 A.2d 678, 689 (N.J. App. Div. 2007). With respect to the Independent Contractor Agreement, Sapta has satisfied these requirements with respect to a portion of its claims. The Agreement constitutes a contract: two parties entered into a written agreement to exchange money for services. Each side received consideration (namely the other side's promise to perform). Sapta has also pled that Cilicorp breached that contract. It alleges that although Sapta provided the services it promised, Cilicorp did not make the required payments. (Compl., ¶¶ 14, 37). There ...