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Barlow v. Herman

United States District Court, D. Nevada

March 20, 2017

Randall Bruce Barlow, Plaintiff
v.
Donald S. Herman., et al., Defendants

          ORDER DENYING WITHOUT PREJUDICE MOTION FOR DEFAULT JUDGMENT [ECF NO. 102]

          Jennifer A. Dorsey United States District Judge.

         Randall Bruce Barlow sues Donald S. Herman, the Herman Family Trust, and six entities managed by Herman and majority-owned by the Trust for breach of an employment contract and breach of the implied covenant and fair dealing. After defendants refused to respond to written discovery requests and repeatedly violated this court's discovery orders, I struck their answer and counterclaims.[1] Defaults have been entered against all defendants, [2] and Barlow now moves for default judgment.[3] Because Barlow has not sufficiently pled claims upon which relief can be granted or proven his damages, I deny the motion without prejudice and give him until April 3, 2017, to file a renewed motion for default judgment curing these deficiencies.

         Background

         Donald S. Herman serves as the grantor, trustee, and beneficiary of the Herman Family Trust, which owns at least a 90% controlling interest in six limited-liability companies that provide assisted-living services and residences and are managed by Herman.[4] In September 2012, Herman and Randall Bruce Barlow entered into an employment agreement under which Barlow agreed to serve as the Chief Executive Officer of the LLCs from October 1, 2012-October 1, 2013.[5] The parties agreed that Barlow would be compensated $20, 000 per month for the first six months and $30, 000 for the second six months, and that Barlow would receive a 5% interest in the companies and be compensated for all travel expenses associated with his employment.[6] Shortly after Barlow assumed the role of CEO, the parties engaged in failed negotiations to amend the employment agreement to alter the terms of Barlow's compensation.[7] On November 19, 2012, Herman advised Barlow that he no longer “desire[d] any long term employment relationship with Mr. Barlow, ” and he never paid him for any services rendered under the contract.[8]

         Barlow filed this suit in January 2013 asserting claims for breach of contract and breach of the implied covenant of good faith and fair dealing against Herman, both individually and as alter ego of the Herman Family Trust and the Herman entities: Willow Creek at San Martin Assisted Living, LLC; Willow Creek San Martin Building, LLC; Willow Creek Buffalo Assisted Living, LLC; Willow Creek Buffalo, LLC; Willow Creek Memory Care West, LLC; and Silver Care, LLC. After defendants refused to respond to written discovery requests and repeatedly violated this court's discovery orders despite being warned that case-dispositive sanctions could result, I struck defendants' answer and counterclaims.[9] Defaults have been entered against all defendants, [10] and Barlow now moves for default judgment.[11] Barlow seeks $625, 000 in compensatory damages-$300, 000 in salary payments and $325, 000 for the 5% interest in the Herman Entities that was due under the contract-plus interest and costs.

         Discussion

         A. Default judgment

         Federal Rule of Civil Procedure 55(b)(2) permits a plaintiff to obtain a default judgment if the clerk previously entered default based on a defendant's failure to defend. After entry of default, the complaint's factual allegations are taken as true, except those relating to damages.[12] “[N]ecessary facts not contained in the pleadings, and claims [that] are legally insufficient, are not established by default.”[13] The court has the power to require a plaintiff to provide additional proof of facts or damages in order to ensure that the requested relief is appropriate.[14] Whether to grant a motion for default judgment lies within my discretion, [15] which is guided by the seven factors outlined by the Ninth Circuit in Eitel v. McCool:

(1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.[16]

         A default judgment is generally disfavored because “[c]ases should be decided upon their merits whenever reasonably possible.”[17]

         B. Barlow fails to plead claims upon which relief may be granted.

         The second and third Eitel factors require Barlow to demonstrate that he has stated a claim on which he may recover.[18] To prevail on a breach-of-contract claim in Nevada, [19] Barlow must show: (1) formation of a valid contract; (2) performance or excuse of performance by the plaintiff; (3) material breach by the defendant; and (4) damages.[20]

         Barlow alleges that “on or about September 8, 2012, Defendant Herman and Plaintiff Barlow entered into an Employment Agreement, ” and he details several terms of that agreement.[21] Barlow also alleges that Herman executed the employment agreement on behalf of the Trust (of which he is the grantor, beneficiary, and trustee) and the Barlow LLCs (in which the Trust owns a controlling 90% share). Finally, Barlow alleges that Herman has the “sole and final governing authority and influence” over the Herman Trust and the Herman LLCs, has commingled his assets with each of those entities, and that he runs them for his own benefit, making Herman personally liable as an alter-ego for any damages incurred on their behalf.[22]

         I find that Barlow has not sufficiently pled the existence of a valid contract. In some places he alleges that he entered into a contract with Herman himself, but in others he alleges that he entered into contracts with the Herman Trust and the Herman entities through Herman, who was acting on their behalf. I am thus unable to tell who employed Barlow: Was it Herman, the Herman Trust, the Entities (or a portion of them), or all three? Barlow's conclusory bathtub alter-ego allegations do not cure this defect and allow me to conclude whoM contracted with Barlow and is thus liable ...


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