Whitesell International Corporation v. Smith Jones, Inc.
827 F. Supp. 2d 964
S.D. Iowa2011Background
- Whitesell moved for default judgment under Rule 55(b)(2) after Smith Jones failed to appear following counsel withdrawal orders.
- Whitesell and Smith Jones entered a supply agreement proposal (Sept. 30, 2008) for Whitesell to supply steel per Smith Jones' forecasts and specs.
- Whitesell delivered roughly $600,000 of steel and claims Smith Jones owes $136,664.96 for products delivered in December 2008.
- Whitesell maintained an inventory to meet forecasts, totaling $932,092.73, because of Smith Jones' forecasted requirements and 100–120 day procurement lead times.
- Smith Jones stopped taking deliveries; Whitesell sought damages for unpaid goods and inventory, and mitigation efforts were attempted but largely unsuccessful.
- Default against Smith Jones was entered on May 4, 2011; damages were determined by the court at a hearing, with damages totaling $1,068,757.69 plus interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether default judgment is proper under Rule 55(b)(2) | Whitesell: default established liability and damages should be set. | Smith Jones did not appear to contest liability due to default; no opposing argument presented at hearing. | Yes; entry of default judgment appropriate. |
| What are Whitesell's recoverable damages for unpaid goods | Whitesell delivered $136,664.96 of steel not paid for. | No formal defense presented due to default. | $136,664.96 awarded for unpaid goods. |
| Whether Whitesell may recover the inventory value held for Smith Jones' forecast | Whitesell incurred $932,092.73 to meet forecasted needs and seeks that amount. | No responsive argument due to default. | $932,092.73 awarded for inventory. |
| Offset/mitigation against the total damages | Whitesell may offset against judgment any future sale of excess inventory to mitigate damages. | No counter-arguments due to default. | Offset language acknowledged; sales offset against judgment allowed to reduce liability. |
| Pre- and post-judgment interest on damages | entitlement to both pre- and post-judgment interest on damages. | Not contested due to default. | Pre-judgment interest awarded on $1,068,757.69; post-judgment interest at federal rate. |
Key Cases Cited
- Brown v. Kenron Aluminum & Glass Corp., 477 F.2d 526 (8th Cir.1973) (defaults establish liability and allegations are taken as true)
- Stephenson v. El-Batrawi, 524 F.3d 907 (8th Cir.2008) (default warrants accepting complaint facts)
- Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781 (8th Cir.1998) (default judgment procedures; damages can be fixed by court)
- Enron Oil Corp. v. Diakuhara, 10 F.3d 90 (2d Cir.1993) (court fixes damages after default)
- Everyday Learning Corp. v. Larson, 242 F.3d 815 (8th Cir.2001) (damages must be proven by preponderance of the evidence)