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Kevin McGarry, LLC v. Bucket Innovations, LLC

United States District Court, M.D. Florida, Orlando Division

June 19, 2018

KEVIN MCGARRY, LLC and KEVIN MCGARRY, Plaintiffs,
v.
BUCKET INNOVATIONS, LLC, GLOBAL CONSUMER INNOVATIONS, LLC, HIGH WATER FLOOD GROUP, INC., Y HOLDER, BRIAN O'LEARY, DAVID QUINN, RON GERMAN, BUSTER MURPHY, LLC and STEPHEN CRAIG SAWICKI, Defendants.

          REPORT AND RECOMMENDATION

          THOMAS B. SMITH UNITED STATES MAGISTRATE JUDG

         Pending before the Court is Counter-Plaintiffs' Dispositive Motion for Final Default Judgment against Counter-Defendants (Doc 74). Upon due consideration, I respectfully recommend that the motion be DENIED, that Defendants' counterclaims be DISMISSED without prejudice, for lack of jurisdiction, that the Court TERMINATE any other pending motions, and direct the Clerk to CLOSE the file.

         Background

         Plaintiffs Kevin McGarry (“McGarry”) and Kevin McGarry, LLC filed this lawsuit alleging that McGarry is an inventor of the inventions claimed in Defendants' design patents (Doc. 1). Defendants answered and counterclaimed (Doc. 26). Then, Plaintiffs filed their Second Amended Complaint seeking: (1) a declaratory judgment that McGarry is an inventor of the inventions described in Defendants' two design patents; (2) damages for Defendants' alleged misappropriation of Plaintiffs' trade secrets allegedly used by Defendants in their utility patent application; (3) damages for deceptive and unfair trade practices and civil conspiracy; and (4) relief based on Defendants' alleged breaches of two license agreements (“License Agreements”) between the parties (Doc. 27). Defendants answered, interposed multiple affirmative defenses, and asserted eleven counterclaims (Doc. 50). Plaintiffs belatedly answered the counterclaims (Doc. 53).

         Plaintiffs failed to comply with this Court's Orders and failed to participate in discovery. Additionally, the mediator filed a notice of cancellation, citing Plaintiffs' failure to comply with the terms and the conditions of mediation (Doc. 69). After considering the mediator's notice, the District Judge issued an Order directing Plaintiffs to show cause why this case should not be dismissed for failure to comply with the Scheduling Order, which required mediation to be completed by April 2, 2018, and for want of prosecution (Doc. 70). Then, Defendants, citing Plaintiffs' failures to comply with Orders and their discovery obligations, filed a dispositive motion for sanctions, seeking dismissal of Plaintiffs' complaint with prejudice and entry of final default judgment in favor of Defendants on their counterclaims (Doc. 71).

         On May 21, 2018, the Court, after noting that Plaintiffs had not filed a response to the Show Cause Order or the motion for sanctions, found that Plaintiffs' violations of its Orders and failure to prosecute warranted the imposition of sanctions, and that dismissal of Plaintiffs' claims was appropriate (Doc. 72). The motion for sanctions was granted, and Plaintiffs' claims against Defendants were dismissed with prejudice (Id.). The Court said that the counterclaims against Plaintiffs remained pending and referred the case to me “to determine whether a default judgment is warranted.” (Id. at 2).

         On review, I determined that the Order granting the motion for sanctions (which sought a default judgment on the counterclaims as well as dismissal of the operative complaint) was a de facto striking of Plaintiffs' answer to the counterclaims, but the then-existing record would not support entry of final default judgment, and additional filings were necessary (Doc. 73). Accordingly, I directed:

To the extent Defendants seek entry of a default judgment, they have fourteen days in which to file a fully supported motion, accompanied by an evidentiary basis for the specific relief sought (or a statement that an evidentiary hearing is desired, a statement regarding the anticipated length of the hearing needed, and whether a jury is necessary).

Id. The instant motion timely followed.

         Discussion

         Standards of law

         A district court may enter a default judgment against a properly served defendant who fails to defend or otherwise appear. Fed.R.Civ.P. 55(b)(2). In defaulting, a defendant “admit[s] the plaintiff's well-pleaded allegations of fact” for purposes of liability. Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir.1987). Nonetheless, a court may only enter a default judgment if the factual allegations of the complaint, which are assumed to be true, provide a sufficient legal basis for entry of a default judgment. Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) ("The defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law. In short, despite occasional statements to the contrary, a default is not treated as an absolute confession by the defendant of his liability and of the plaintiff's right to recover").

         The United States Supreme Court has explained the difference between well-pleaded facts and conclusory allegations. In Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), the Supreme Court said a complaint need not contain detailed factual allegations, but it demands more than "an unadorned, the-defendant- unlawfully-harmed-me accusation. A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. at 678 (internal citations omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not 'show[n]'-'that the plaintiff is entitled to relief.'" Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)). This analysis is equally applicable to a motion for default judgment. See De Lotta v. Dezenzo's Italian Restaurant, Inc., No. 6:08-cv-2033-Orl-22KRS, 2009 WL 4349806, *5 (M.D. Fla. November 24, 2009).

         “Once liability is established, the court turns to the issue of relief.” Enpat, Inc. v. Budnic, 773 F.Supp.2d 1311, 1313 (M.D. Fla. 2011). “Pursuant to Federal Rule of Civil Procedure 54(c), ‘[a] default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings,' and a court may conduct hearings when it needs to determine the amount of damages, establish the truth of any allegation by evidence, or investigate any other matter.” Enpat, 773 F.Supp.2d at 1313 (citing Fed.R.Civ.P. 55(b)(2)). Where all the essential evidence is of record, an evidentiary hearing on damages is not required. SEC v. Smyth, 420 F.3d 1225, 1232 n. 13 (11th Cir. 2005).

         In sum, in order to enter a default judgment, the Court must find that an adequate showing has been made as to liability and the kind or amount of damages or other relief sought.

         The Counterclaims

         Defendants' eleven count counterclaim alleges: Count I - declaratory judgment as to ‘385 Patent; Count II - declaratory judgment as to ‘032 Patent; Count III- breach of contract (second License Agreement); Count IV- breach of contract (first License Agreement); Count V - fraud in the inducement as to the Highwater Non-Disclosure Agreement; Count VI - fraud in the inducement as to the first License Agreement; Count VII- fraud in the inducement as to the second License Agreement; Count VIII - rescission of the Highwater NDA; Count IX - rescission of the first License Agreement; Count X-rescission of the second License Agreement; and Count XI - defamation. Only the first two counts raise federal questions, the remainder are state law claims.

         As pled, Defendants seek a dizzying array of relief:

A. Declaratory judgment that Counter-Defendant Kevin McGarry is not an inventor of the invention claimed in the ‘385 Patent;
B. Declaratory judgment that Counter-Defendant Kevin McGarry is not an inventor of the invention claimed in the ‘032 Patent;
C. Judgment in favor of Counter-Plaintiff Bucket Innovations, LLC and against Counter-Defendants Kevin McGarry, LLC and Kevin McGarry for breach of the Second License Agreement, and awarding Bucket Innovations, LLC its prejudgment interest, damages, and costs of this action;
D. Judgment in favor of Counter-Plaintiff Global Consumer Innovations, LLC and against Counter-Defendants Kevin McGarry, LLC and Kevin McGarry finding that the First License Agreement was the result of fraud in the inducement by Kevin McGarry, Kevin McGarry, LLC, or both; rescinding the First License Agreement in its entirety, or in the alternative, declaring it inoperative in its entirety; disgorging any amounts paid to Kevin McGarry or Kevin McGarry, LLC by Global Consumer Innovations, LLC under the First License Agreement and returning such amounts to Global Consumer Innovations, LLC; and awarding Counter-Plaintiff Global Consumer Innovations, LLC its pre-judgment interest, damages, attorneys' fees, and costs of this action;
E. Judgment in favor of Counter-Plaintiff Bucket Innovations, LLC and against Kevin McGarry, LLC and Kevin McGarry finding that the Second License Agreement was the result of fraud in the inducement by Kevin McGarry, Kevin McGarry, LLC, or both; rescinding the Second License Agreement in its entirety, or in the alternative, declaring it inoperative in its entirety; and disgorging any amounts paid to Kevin McGarry or Kevin McGarry, LLC by Bucket Innovations, LLC under the Second License Agreement and returning such amounts to Counter-Plaintiff Bucket Innovations, LLC; and awarding Counter-Plaintiff Bucket Innovations, LLC its pre-judgment interest, damages, attorneys' fees, and costs of this action;
F. Rescission of the Highwater Non-Disclosure Agreement in its entirety, or, in the alternative, declaration that it is inoperative as being fraudulently induced; and an award of pre-judgment interest, damages, attorney's fees and costs in favor of Counter-Plaintiff Highwater Flood Group, Inc. and against Counter-Defendants Kevin McGarry and Kevin McGarry, LLC;
G. Judgment in favor of Counter-Plaintiffs and against Counter-Defendants Kevin McGarry, LLC and Kevin McGarry for defaming Counter-Plaintiffs Bucket Innovations, Casey Holder and Buster Murphy, LLC; an award of injunctive relief enjoining Kevin McGarry and Kevin McGarry, LLC from making defaming public statements against any of the Counter-Plaintiffs in this action; and awarding Counter-Plaintiffs their damages and costs of litigation regarding same;
H. Judgment against Counter-Defendants Kevin McGarry and Kevin McGarry, LLC, and in favor of Counter-Plaintiff Global Consumer Innovations, LLC, finding that Counter-Defendants breached the First License Agreement, and awarding Counter-Plaintiff Global Consumer Innovations, LLC pre-judgment interest, damages, and its attorney's fees and costs of representation including but not limited to court costs, expert witness fees, costs of depositions, costs of travel, per diem costs, filing fees, costs of copying and faxing, and all other costs ...

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