Spencer v. Stafford

[2] 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 ROBERT SPENCER 7 Plaintiff, Case No. 2:19-cv-01592-RFB-EJY 8 v. ORDER 9 TROY STAFFORD, an individual, STEVEN SCAMMELL, an individual; MILESTONE 10 PROGRAM MANAGEMENT, LLC, a Wyoming limited liability company; 11 MILESTONE HOLDINGS, LLC, a Wyoming limited liability company; MILESTONE 12 INSURANCE SERVICES, LLC, an Arkansas limited liability company; NEW ERA 13 DEVELOPMENT FUND, an unknown entity; ; DOES I – X, inclusive; and ROE ENTITIES 1 – 14 10, inclusive, 15 Defendants. [16] I. INTRODUCTION [17] Before the Court is Plaintiff’s Motion for Default Judgment against Defendants Troy [18] Stafford, Steven Scammell, Milestone Program Management, LLC, Milestone Holdings, LLC, and [19] Milestone Insurance Services, LLC (“Defendants”). ECF No. 15. [20] 21 II. PROCEDURAL BACKGROUND 22 On September 10, 2019, Plaintiff filed the operative complaint with sixteen claims of 23 relief in tort and contract: (1) Fraudulent Misrepresentation; (2) Fraudulent Inducement; (3) 24 Constructive Fraud; (4) Constructive Trust; (5) Violation of NRS Chapter 90; (6) Financial Elder Abuse; (7) Breach of Fiduciary Duty; (8) Alter Ego; (9) Civil Conspiracy; (10) Conversion of [25] Money; (11) Negligent Misrepresentation; (12) Breach of Contract; (13) Contractual Breach of the [26] Implied Covenant of Good Faith and Fair Dealing; (14) Tortious Breach of the Implied Covenant [27] of Good Faith and Fair Dealing; (15) Unjust Enrichment; (16) Accounting. ECF No. 1. Each of [28] the Defendants were served with copies of the Summons and Complaint but have failed to answer 1 or otherwise respond. ECF Nos. 3-10. 2 On October 16, 2019, Plaintiff moved for the clerk to enter an Entry of Default against 3 Defendants. ECF No. 12. Plaintiff sued New Era Development Fund, but in the Motion for Entry of Default, Plaintiff stated, “…[it] now appears that entity may not exist. Accordingly, Plaintiff [4] has not been able to effectuate service upon New Era Development Fund and does not seek a [5] default against it at this time.” ECF No. 12 at Exhibit 1 at n.1. On October 17, 2019, the Clerk [6] entered a default against Troy Stafford, Steven Scammell, Milestone Program Management, LLC, [7] Milestone Holdings, LLC, and Milestone Insurance Services, LLC as requested by Plaintiff. ECF [8] No. 14. 9 Plaintiff now seeks an entry of default judgment against Defendants specifically as to two 10 of its tort claims: (Claim 1) fraudulent misrepresentation and (Claim 10) conversion of money, as 11 opposed to the contract claims. ECF No. 15 at 19. Plaintiff states that the fraud and conversion 12 claims should be entered jointly and severally against all Defendants because they allegedly all worked together to defraud Plaintiff and convert his money. Id. at 20, n.85. Plaintiff seeks the [13] principal amount of $250,000, $750,000 in punitive damages, and judgment interest of $46.23 per [14] day from September 23, 2019, which is the date the last Defendant was served with the Summons [15] and Complaint. ECF No. 15. [17] III. ALLEGED FACTS 18 In his complaint, Plaintiff alleges the following facts. ECF No. 1. 19 Steven Scammell advised Plaintiff and his family regarding insurance matters for 20 approximately the past 15 years. In 2018, when Plaintiff was then 87 years old with Parkinson’s 21 disease, Scammell approached Plaintiff with an investment opportunity involving the alleged development of three commercial projects in the Tahoe Reno Industrial Center (TRIC). By [22] providing fabricated and materially false and misleading information and documentation, as well [23] as aggressively contacting Plaintiff via e-mail, phone calls, and in-person meetings, Scammell and [24] the other Defendants induced Plaintiff to wire them $450,000 in connection with the non-existent [25] development project. Almost immediately after receiving the $450,000, Defendants began to [26] default on the Memorandum of Understanding and Promissory Note that parties agreed on. 27 Plaintiff realized that Defendants were not going to perform and demanded his money back. 28 Defendants returned $200,000 of the $450,000, but $250,000 remains due and outstanding. 1 Plaintiff’s counsel submits a declaration in the Motion for Default Judgment stating that 2 through his investigation and research, Defendants made numerous misrepresentations to Plaintiff 3 including how much personal money Defendants invested in the project; the involvement of Hyatt, Amazon, and the University of Nevada in the project; bond funding availability; the availability [4] of accounting services, and more. ECF No. 15 at Exh. 14. For example, Plaintiff’s counsel states, [5] “Scammell’s November 7, 2018 representation to Spencer via email that MPM ‘can provide you [6] a collateral guarantee to a property we own free and clear up to it’s [sic] value of $418k,’ was [7] false,” and “Upon information and belief after conducting several hours of research, MPM did not [8] own any property worth $418k free and clear on November 7, 2081.” Id. at ¶¶ 31-32. [9] 10 IV. LEGAL STANDARD 11 The granting of a default judgment is a two-step process directed by Rule 55 of the Federal 12 Rules of Civil Procedure. Fed. R. Civ. P. 55; Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). The first step is an entry of clerk’s default based on a showing, by affidavit or otherwise, that the [13] party against whom the judgment is sought “has failed to plead or otherwise defend.” Fed. R. Civ. 14 P. 55 (a). [15] The second step is default judgment under Rule 55(b), a decision which lies within the [16] discretion of the Court. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Factors which a [17] court, in its discretion, may consider in deciding whether to grant a default judgment include: (1) 18 the possibility of prejudice to the plaintiff, (2) the merits of the substantive claims, (3) the 19 sufficiency of the complaint, (4) the amount of money at stake, (5) the possibility of a dispute of 20 material fact, (6) whether the default was due to excusable neglect, and (7) the Federal Rules' 21 strong policy in favor of deciding cases on the merits. Eitel, 782 F.2d at 1471–72. If an entry of default is made, the Court accepts all well-pleaded factual allegations in the [22] complaint as true; however, conclusions of law and allegations of fact that are not well-pleaded [23] will not be deemed admitted by the defaulted party. DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847 , [24] 854 (9th Cir. 2007). Additionally, the Court does not accept factual allegations relating to the [25] amount of damages as true. Geddes v. United Fin. Grp., 559 F.2d 557 , 560 (9th Cir. 1977). Default [26] establishes a party’s liability, but not the amount of damages claimed in the pleading. Id. 27 // 28 // 1 V. ANALYSIS 2 A. Motion for Default Judgment 3 In considering the seven Eitel factors, the Court finds that default judgment against Defendants Troy Stafford, Steven Scammell, Milestone Program Management, LLC, Milestone [4] Holdings, LLC, and Milestone Insurance Services, LLC is warranted. [5] The first and sixth factors favor granting default judgment because the Defendants failed [6] to defend or appear at all in this matter since being served with the summons and the complaint in [7] September 2019. Defendants’ failure to appear for over a year prejudices Plaintiff by preventing [8] him from recovering the full amount of money that he wired to Defendants for the non-existent 9 property development project. Further, Defendants’ failure to appear for a substantial time 10 demonstrates the lack of excusable neglect. And while the seventh factor generally counsels 11 against the granting of default judgment, Defendants’ failure to appear prevents the Court from 12 determining the claims on their merits. The Court next examines the merits of the substantive claims and sufficiency of the [13] Complaint. Plaintiff seeks default judgment for Claim 1: Fraudulent Misrepresentation and Claim [14] 10: Conversion of Money. The Court finds that the second and third Eitel factors, the merits of the [15] substantive claims and the sufficiency of the complaint, respectively, favor judgment for Plaintiff. [16] 1. Fraudulent Misrepresentation [17] “Under Nevada law, [a plaintiff] has the burden of proving each and every element of 18 his fraudulent misrepresentation claim by clear and convincing evidence: (1) A false 19 representation made by the defendant; (2) defendant's knowledge or belief that its representation 20 was false or that defendant has an insufficient basis of information for making the representation; 21 (3) defendant intended to induce plaintiff to act or refrain from acting upon the misrepresentation; and (4) damage to the plaintiff as a result of relying on the misrepresentation.” Barmettler v. Reno [22] Air, Inc., 956 P.2d 1382, 1386 (Nev. 1998). “Fraud is never presumed; it must be clearly and [23] satisfactorily proved.” Havas v. Alger, 461 P.2d 857, 860 (Nev. 1969). [24] Here, Plaintiff alleges that Scammell and Stafford, individually and together through their [25] jointly owned entities, made numerous oral and written misrepresentations about their [26] qualifications related to project development and management, budget, funding sources, and more. 27 ECF No. 15 at Exhs. 1-12. They drew up a Memorandum of Understanding, Residential Resale 28 Purchase Contract, and Note. Id. at Exhs. 9-10, 12. Defendants promised to repay Plaintiff the 1 $450,000 within 45-60 days (Id. at Exhs. 6-8) and to purchase Plaintiff’s house for $3,100,000. Id. 2 at Exhs. 8-10. Plaintiff, who was then an elderly man suffering from Parkinson’s disease, relied 3 on Defendants’ misrepresentations and wired them $450,000. Id. at Exh. 11. Defendants returned $200,000 but never returned the remaining $250,000. Id. at Exh. 1, ¶23. Counsel for Plaintiff [4] submits a declaration that, among other assertations, states, “After conducting hours of due [5] diligence and research, I believe all of the information contained in the August 24, 2018 Executive [6] Summary was false and fabricated, from the TRIC Project summary, to the budget, to the funding [7] information, along with details regarding the alleged TRIC Project executive management team,” [8] and “Upon information and belief, none of the Defendants ever owned any land for any alleged 9 development related to the TRIC Project, nor were they ever granted any permits for grading or 10 underground utilities for the alleged development related to the TRIC Project.” Id. at Exh. 14, ¶¶ 11 7, 39. 12 The Court finds, accepting these supported allegations as true, that there are sufficient facts to support a finding in favor of Plaintiff against Defendants on the fraudulent [13] misrepresentation claim. 1 [14] 2. Compensatory Damages [15] If an entry of default is made, the Court accepts all well-pleaded factual allegations in the [16] complaint as true. DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007). The Court [17] does not accept factual allegations relating to the amount of damages as true, and while default 18 establishes a party’s liability, it does not establish the amount of damages claimed in the 19 pleading. Geddes v. United Fin. Grp., 559 F.2d 557 , 560 (9th Cir. 1977). 20 Here, the Court finds that the Plaintiff is entitled to the $250,000 that he alleges to have 21 lost due to the loan. The Court finds that Plaintiff submitted credible evidence to support the amount of damages of $250,000 jointly and severally against Defendants Troy Stafford, Steven [22] Scammell, Milestone Program Management, LLC, Milestone Holdings, LLC, and Milestone [23] Insurance Services, LLC in this case, and that it is subject to calculation. See Davis v. Fendler, 650 24 F.2d 1154 , 1161 (9th Cir. 1981). Scammell represented that he was president of Milestone, and [25] Troy Stafford represented that he was its Project Manager. ECF No. 1 at 10-11, ECF No. 15 at [26] 27 1 As the Court has found for the Plaintiff on the fraudulent misrepresentation claim, the Court does not find that it needs to reach the merits of the conversion claim as the relief would be 28 the same. 1 Exh. 4. On November 15, 2018, Troy Stafford e-mailed Plaintiff that he received Plaintiff’s 2 $450,000 transfer. ECF No. 15 at Exh. 11. The Court also finds pursuant to the District’s Local 3 Rules that Defendants Troy Stafford, Steven Scammell, Milestone Program Management, LLC, Milestone Holdings, LLC, and Milestone Insurance Services, LLC have consented to the granting [4] of this motion by failing to respond. LR 7-2(d); see ECF Nos. 3-14. [5] 3. Punitive Damages [6] Under NRS 42.005, a Plaintiff may recover punitive damages “where it is proven by clear [7] and convincing evidence that the defendant has been guilty of oppression, fraud or malice, express [8] or implied.” An award of exemplary or punitive damages made pursuant this section may not 9 exceed “(a) three times the amount of compensatory damages awarded to the plaintiff if the amount 10 of compensatory damages is $100,000 or more; or (b) three hundred thousand dollars if the amount 11 of compensatory damages awarded to the plaintiff is less than $100,000.” Id. 12 Proof of bad faith, in and of itself, does not establish liability for punitive damages. United Fire Insurance Company v. McClelland, 780 P.2d 193 (Nev. 1989). [13] The Nevada Supreme Court has “defined oppression as ‘a conscious disregard for the rights of [14] others which constitutes an act of subjecting plaintiffs to cruel and unjust hardship.’ ” Id. at 198 . [15] “A jury may award punitive damages where the defendant has been guilty of fraud, malice, or [16] oppression. NRS 42.010.” Ainsworth v. Combined Ins. Co. of Am., 763 P.2d 673, 675 (Nev. [17] 1988). “Traditionally this court has held that the amount of a punitive damages award was 18 subjective, and therefore best left to the jury's determination.” Ainsworth, 763 P.2d at 677 . “The 19 district court has discretion to determine whether the defendant’s conduct 20 merits punitive damages as a matter of law.” Bongiovi v. Sullivan, 138 P.3d 433, 451 (Nev. 2006). 21 Plaintiff requests the Court award punitive damages against Defendants to the fullest extent permitted under NRS 42.005: three times the amount of compensatory damages, which in this case [22] would amount to $750,000. ECF No. 15 at 24. Here, the Court finds that Plaintiff is entitled to a [23] punitive award because the evidence demonstrates that Defendants targeted and misled an elderly [24] man in his late eighties with whom they had a prior relationship with, to send them $450,000 for [25] a development project that Defendants knew was not going to actualize. The Court finds that these [26] damages should be joint and several because all the Defendants participated in this egregious 27 scheme to defraud. Defendants’ actions subjected Plaintiff, who was suffering from Parkinson’s 28 disease, cruel and unjust hardship. However, the Court does not find evidence sufficient to 1 demonstrate that $750,000 is a reasonable amount of punitive damages in relation to Defendants’ 2 actions. Upon review of the evidence, which includes exhibits such as a declaration from Plaintiff, 3 affidavits of service to Defendants, and e-mail correspondence between Plaintiff and Defendants, the Court finds that $500,000 is a reasonable and calculable amount of punitive damages. [4] 4. Judgment Interest [5] To calculate interest, Nevada law provides: “When no rate of interest is provided by [6] contract or otherwise by law, or specified in the judgment, the judgment draws interest from the [7] time of service of the summons and complaint until satisfied, except for any amount representing [8] future damages, which draws interest only from the time of the entry of the judgment until satisfied, 9 at a rate equal to the prime rate at the largest bank in Nevada as ascertained by the commissioner 10 of financial institutions on January 1 or July 1, as the case may be, immediately preceding the date 11 of judgment, plus 2 percent. The rate must be adjusted accordingly on each January 1 and July 1 12 thereafter until the judgment is satisfied.” Nev. Rev. Stat. § 17.130 (2). Nev. Rev. Stat. § 99.040 (1) requires: “When there is no express contract in writing fixing [13] a different rate of interest, interest must be allowed at a rate equal to the prime rate at the largest [14] bank in Nevada, as ascertained by the Commissioner of Financial Institutions, on January 1, or [15] July 1, as the case may be, immediately preceding the date of the transaction, plus 2 percent, upon [16] all money from the time it becomes due, . . [17] (c) Upon money received to the use and benefit of another and detained without his 18 or her consent.” 19 The Summons and Complaint was served upon the last Defendant on September 23, 2019. 20 ECF No. 8. Plaintiffs state that that computing from September 23, 2019 at 6.75% (4.75% prime 21 rate established by the Nevada Financial Institutions Division for January 1, 2020 plus 2%) to a principal judgment amount of $250,000 yields an annual interest figure of $16,875 and a daily [22] accrual of $46.23. [23] Since that calculation, the prime rate established by the Nevada Financial Institutions [24] Division for January 1, 2021, which immediately precedes the date of this judgment is 3.25%: [25] http://fid.nv.gov/Resources/Fees_and_Prime_Interest_Rate/. The 3.25% prime rate established by [26] the Nevada Financial Institutions plus 2% is 5.25%. Applying that figure to a principal amount of 27 $250,000 yields an annual interest figure of about $13,125.40 at an approximate daily accrual of 28 $35.96 (rounded up). From September 23, 2019 to the date of this judgment, February 26, 2021, it 1 | has been five hundred and twenty-two days. Therefore, as of the date of this judgment, February 2| 26, 2021, the interest amounts to $18,771.12 (rounded up). [3] 4 VI. CONCLUSION 5 IT IS HEREBY ORDERED that Plaintiff's Motion for Default Judgment (ECF No. 15) is granted in part and denied in part. The Court grants default judgment on Claim 1: Fraudulent ° Misrepresentation in Plaintiff's favor against Defendants Troy Stafford, Steven Scammell, Milestone Program Management, LLC, Milestone Holdings, LLC, and Milestone Insurance 8 Services, LLC. The remaining claims are dismissed without prejudice. The Court awards Plaintiff 9) $250,000 jointly and severally against Defendants Troy Stafford, Steven Scammell, Milestone Program Management, LLC, Milestone Holdings, LLC, and Milestone Insurance Services, LLC 11 | for what Plaintiff allegedly lost in the loan. The Court also awards Plaintiff $500,000 in punitive damages joint and severally against all the above Defendants, and judgment interest at $35.96 per 13 day from September 23, 2019 until satisfied. As of the date of this judgment, February 26, 2021, 14 the interest amounts to $18,771.12. [16] 7 DATED: February 26, 2021. 18 ang RICHARD F. HOULWARE, II 20 UNITED STATES DISTRICT JUDGE