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Phillips 66 Co. v. George

United States District Court, D. Kansas

January 8, 2019

PHILLIPS 66 COMPANY, Plaintiff,
v.
DAVID GEORGE, MICHAEL GEORGE, GREGORY GUSTIN, and THE GEORGE IRREVOCABLE TRUST, Defendants.

          DEFAULT JUDGMENT

          JULIE A. ROBINSON, CHIEF UNITED STATES DISTRICT JUDGE.

         Before the Court is Plaintiff Phillips 66 Company's (“Phillips 66”) Motion for Default Judgment (Doc. 42) and Amended Motion for Default Judgment (Doc. 52). Phillips 66 seeks payment from the remaining Defendant in this action, The George Irrevocable Trust (“Trust”), pursuant to a Corporate Guaranty signed by the Trust on behalf of Gas-Mart USA, Inc. For the reasons below, the Court finds that default judgment should be entered in favor of Phillips 66 against the Trust, and that Phillips 66 should be awarded fees and costs as set forth below.

         I. Factual and Procedural Background

         Phillips 66 filed its Complaint in this matter on December 14, 2016, against David George, Michael George, Gregory Gustin, and The George Irrevocable Trust, alleging breach of contract and failure to fully pay all amounts owed under the Defendants' guaranties of Gas-Mart USA, Inc.'s indebtedness to Phillips 66. On February 23, 2017, Phillips 66 voluntarily dismissed Defendants David George and Michael George and issued summons to Gregory Gustin and the Trust. On February 24, 2017, Phillips 66 personally served the Trust through its agent, David George, and service was returned executed on March 2, 2017. A Clerks Entry of Default was entered as to the Trust on March 29, 2017, [1] and on July 13, 2018, Phillips 66 filed a Motion for Default Judgment.[2] The Court conducted a damages hearing on November 6, 2018. At the hearing, the Court admitted into evidence Phillips 66's attorneys' billing records and granted Phillips 66 leave to amend the damages requested in its original Complaint. Phillips 66 filed its Amended Complaint on November 30, 2018, [3] and the Trust's time to answer or otherwise respond has expired. The Court entered a Clerks Entry of Default as to the Amended Complaint on January 7, 2019.[4]

         I. Standard

         Following entry of default, Fed.R.Civ.P. 55(b)(2) allows the court to enter default judgment. Under federal law, once default is entered, the defendant is not entitled to defend itself on the merits.[5] Default judgment may only be entered against defendants whom the court determines are not minors or incompetent persons.[6] As there is no evidence in the record that Defendant-a trust-is a minor or an incompetent person, the Court may enter default judgment against it. Default judgment only establishes liability; it does not establish the amount of damages.[7] The factual allegations in the complaint relating to the amount of damages are not taken as true.[8] Rather, “[d]amages may be awarded only if the record adequately reflects the basis for [the] award via a hearing or a demonstration by detailed affidavits establishing the necessary facts.”[9]

         The case is before the Court on diversity jurisdiction. The Trust Guaranty provides that the law of the State of Texas, without regard to that state's choice of law principles, applies.[10]Accordingly, the Court will apply Texas law.

         II. Damages

         In its Complaint, Phillips 66 prayed for $3, 942, 580.75 in damages. At the hearing on November 6, the Court orally granted Phillips 66's Motion for Leave to Amend the Complaint to remove a consignment credit of $241, 687.76, which was related to Gas-Mart's start-up costs. On November 30, 2018, Phillips 66 filed an Amended Complaint, which removed the credit. The damages prayed for in the Amended Complaint are as follows:

Promissory Note $1, 918, 053.62
Trade A/R $185, 715.64
BIP Long Term Quarterly Rebate $346, 343.05
BIP Upfront Payments $1, 558, 772.78
BIP Frontload Rebate $135, 953.53
Image Removal Charges $30, 551.00
Verifone Equipment Charges $730.66
Mystery Shopper Program Charges $1, 855.00
Credit Card Fees $5, 431.92
Credit Card Chargeback Fees $72.42
Credit Card Shortfall/Adjustment ($511.93)
Heritage Excise Tax $1, 245.82
Traditional Monthly Dial Fees $55.00
TOTAL: $4, 184, 268.51

         Phillips 66 has presented the following evidence to support its claim for damages:

. Exhibit A: Declaration of Chad Cunningham
. Exhibit A-1: Branded Reseller Agreement dated effective March 1, ...

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