United States District Court, W.D. Oklahoma
TIMOTHY D. DeGIUSTI, UNITED STATES DISTRICT JUDGE
the Court is Plaintiff's request for damages following
the Clerk's Entry of Default against Defendant Western
Dakota [Doc. No. 68]. The Court conducted an evidentiary hearing
on March 1, 2017; supplemental filings by Plaintiff followed
the hearing [Doc. Nos. 71, 72, 73]. Western Dakota did not
appear at the hearing. The Court has reviewed the evidence
and Plaintiff's submissions. As stated more fully below,
the Court awards Plaintiff actual damages in the amount of
$454, 554.90; nominal damages in the amount of $1.00;
punitive damages in the amount of $89, 952.80; and
attorney's fees in the amount of $108, 390.25.
Ace Oilfield Rentals, LLC, sells and leases trailer-mounted
hydraulic catwalks (the “HydraCat”) in the oil
drilling industry. Plaintiff and Western Dakota entered into
a manufacturing agreement (“Manufacturing
Agreement”) on April 29, 2013. See Pl.'s
Ex. 2 at Hr'g on Damages. Pursuant to the Manufacturing
Agreement, Plaintiff committed to use Western Dakota as its
sole and exclusive manufacturer of the HydraCat. Id.
at 1. Western Dakota agreed to hold all Plaintiff's
confidential, proprietary and trade secret information
“in strict confidence” and not disclose any
information to third parties absent “express prior
written permission” from Plaintiff. Id. at 2.
Manufacturing Agreement also included a non-compete clause,
which precluded Western Dakota from soliciting, contacting or
communicating with “any person, company, or business
that is or was a client, customer, or prospective
client” of Plaintiff. Id. Moreover, Western
Dakota agreed not to engage in the same or similar business
as Plaintiff. Id. If a client or customer asked to
purchase a HydraCat from Western Dakota directly, Western
Dakota was required to notify Plaintiff. Id. Only
after full disclosure and approval from Plaintiff could
Western Dakota independently lease or sell such equipment.
April 2013 through November 2014, Plaintiff and Western
Dakota operated within the terms of the Manufacturing
Agreement with Western Dakota manufacturing 10 HydraCats for
Plaintiff. See Pl.'s Mot. for Partial Summ. J.
at 2. In early November 2014, Plaintiff negotiated with
Consolidated Wellsite Services, LLC
(“Consolidated”), for the purchase of HydraCat
No. 11, which Western Dakota had recently manufactured at
Plaintiff's request pursuant to the Manufacturing
Agreement. Id. at 6. While Plaintiff and
Consolidated were negotiating the sale of HydraCat No. 11,
Consolidated abruptly abandoned the transaction. Id.
The president of Consolidated, Bill Benedick, advised
Plaintiff that Western Dakota had independently sold
Consolidated a separate HydraCat at a lower price. Id.
See also Pl.'s Ex. 3 at Hr'g on Damages;
Pl.'s Pet. at 3. Moreover, Western Dakota refused to
deliver HydraCat No. 11 to Plaintiff. Pl.'s Mot. for
Partial Summ. J. at 5.
addition, Western Dakota sold a HydraCat to Continental
Industries Services, LLC (“Continental”), in
September 2015, without prior notice to Plaintiff and absent
express written consent. Id. at 7. See also
Pl.'s Ex. 4 at Hr'g on Damages.
late 2014 until the March 1, 2017, hearing on damages,
Western Dakota continued to market the HydraCat for sale on
its website as its own product. See Pl.'s Exs.
5-6, 9 at Hr'g on Damages. Western Dakota invited
potential customers to “Buy direct from the
manufacturer and SAVE!” Pl.'s Ex. 5 at Hr'g on
13, 2015, Plaintiff filed a petition in Beckham County
District Court in Sayre, Oklahoma, alleging 13 claims against
Western Dakota and its two co-owners. [Doc. No. 1-2]. The
action was removed to federal court on June 19, 2015,
pursuant to 28 U.S.C. § 1332(a)(1). [Doc. Nos. 1, 12,
March 24, 2016, while this action was pending, Tucker
Pankowski, co-owner of Western Dakota, filed Articles of
Organization with the South Dakota Secretary of State for
WesDak Welding and Diesel, LLC (“WesDak”).
See Pl.'s Ex. 10 at Hr'g on Damages. A
search of Custer County, South Dakota property records
revealed that on April 13, 2016, Western Dakota transferred
all of its property and assets to WesDak. Pl.'s Ex. 11 at
Hr'g on Damages. On May 5, 2016, the South Dakota
Secretary of State received Western Dakota's Articles of
Termination dissolving the LLC. Pl.'s Ex. 12 at Hr'g
on Damages. As of March 1, 2017, WesDak continued to
advertise the HydraCat for sale as its own, using the same
web address previously identified with Western Dakota.
Pl.'s Ex. 9 at Hr'g on Damages.
25, 2016, Defendants Pankowski and Kerkvliet filed petitions
in the United States Bankruptcy Court for the District of
South Dakota. Pl.'s Ex. 13 at Hr'g on Damages;
see also [Doc. No. 64]. Upon receiving those
notices, the Court stayed the action as to Pankowski and
Kerkvliet. [Doc. No. 65]. Subsequently, Plaintiff filed a
Motion for Entry of Judgment as to Defendant Western Dakota
[Doc. No. 66], to which Western Dakota failed to respond.
January 17, 2017, finding “a willful failure by Western
Dakota to comply with the Court's Orders to ensure legal
representation of the company in this case, ” the Court
dismissed Western Dakota's counterclaim and directed the
Clerk of Court to enter default against Western Dakota. [Doc.
No. 67]. In accordance with Fed.R.Civ.P. 55(b)(2)(B), a
hearing was held to determine the amount of Plaintiff's
damages. [Doc. No. 70]. Defendant Western Dakota did not
appear at the hearing.
an entry of default, a defendant cannot defend a claim on the
merits.” Olcott v. Delaware Flood Co., 327
F.3d 1115, 1125, n. 1 (10th Cir. 2003) (citations
omitted). However, a default judgment does not establish the
amount of damages. Plaintiff must establish that the amount
requested is reasonable under the circumstances.
Mathiason v. Aquinas Home Health Care, Inc., 187
F.Supp.3d 1269, 1274-75 (D. Kan. 2016). “Damages 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.”
Id. (citation omitted); Reg'l Dist. Council
et al. v. Mile High Rodbusters, Inc., 82 F.Supp.3d 1235,
1243 (D. Colo. 2015) (“Actual proof must support any
default judgment for money damages where there is an
uncertainty as to the amount. This requirement ensures that a
plaintiff is not awarded more in damages than can be
supported by actual evidence.” (citing Klapprott v.
United States, 335 U.S. 601, 611-12 (1949)). “The
Court accepts as undisputed any facts set forth by the moving
party in affidavits and exhibits.” See Id.
award of damages is appropriate in this case. Plaintiff bears
the burden of submitting sufficient evidence in support of
its damages claim. Niemi v. Lasshofer, 770 F.3d
1331, 1355 (10th Cir. 2014). The applicable
standard regarding compensatory damages is a preponderance of
the evidence. Wethington v. Swainson, No.
CIV-14-899-D, 2017 WL 1366068, at *2 (W.D. Okla. April 12,
2017). As a federal court sitting in diversity, the Court
applies the substantive law of the forum state, Oklahoma.
Hayes Family Trust v. State Farm Fire & Cas.
Co., 845 F.3d 997, 1005 (10th Cir. 2017).
Moreover, the Manufacturing Agreement states that the
contract “is to be construed in accordance with and
governed by the internal laws of the State of Oklahoma,
USA.” Pl's. Ex. 2 at Hr'g on Damages.
identifies and seeks damages for 13 claims: (1) breach of
contract; (2) misappropriation of trade secrets; (3)
conversion; (4) defamation; (5) tortious interference with
contracts; (6) tortious interference with prospective
economic advantage; (7) deceptive trade practices; (8)
omitted; (9) breach of contract (10) fraud; (11) unfair
competition; (12) civil conspiracy; and (13) unjust
enrichment. [Doc. No. 1-2]. Although Rule 8 permits Plaintiff
to “state as many separate claims … as it has,
regardless of consistency, ” double recovery is not
permitted under Oklahoma law. See Fed. R. Civ. P.
8(d)(3); see also Kruchowski v. Weyerhaeuser Co.,
202 P.3d 144, 153-154 (Okla. 2008).
of Contract - Count 1
damages in a breach of contract claim consist of the amount
that will compensate the aggrieved party for all the harm
proximately caused or which would naturally and generally
result from a breach in the usual course of things. Okla.
Stat. tit. 23, § 21. In order to recover, the damages
must be clearly ascertainable in their nature and
origin. See Id.
L. Puckett, managing member of Ace, testified at the hearing
on damages that Western Dakota sold directly to Consolidated
and Continental in violation of the Manufacturing Agreement.
E-mail correspondence between Western Dakota and
Consolidated, invoices for the sale of the HydraCats to
Consolidated and Continental, and the check from Continental
to Western Dakota were introduced as exhibits at the hearing.
Pl.'s Exs. 3-4 at Hr'g on Damages.
award in the form of loss profits is generally considered a
common measure of damages for a contract breach. See
Florafax Int'l, Inc. v. GTE Mkt Res. Inc., 933 P.2d
282, 292 (Okla. 1997). “[I]t frequently represents
fulfillment of the non-breaching party's expectation
interest, and it often closely approximates the goal of
placing the innocent party in the same position as if the
contract had been fully performed.” See Id.
“Liability for lost profits arises where the loss of
anticipated profits upon breach can reasonably be said to be