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Adams v. United States

August 6, 2008


The opinion of the court was delivered by: Craig M. Kellison, United States Magistrate Judge


Pending before the court are separate motions for default judgment (Docs. 173, 179, and 180) filed by plaintiffs Ohm Ranch, Charles T. Ohm, Barbara A Ohm, John C. Ohm, and Susan L. Ohm ("Ohm plaintiffs"), Melvin Thompson and Mary Thompson ("Thompson plaintiffs"), and Douglas Hammond and Rhonda Hammond ("Hammond plaintiffs"), against defendant Donna Gordy. These motions are before the undersigned pursuant to Eastern District of California Local Rule 72-302(c)(19).


Plaintiffs' action proceeds on the amended complaint (Doc. 14) filed on September 3, 2004. Plaintiffs assert civil rights claims against defendant Gordy, who at the times relevant to this action was a Credit Manager at the Farm Service Agency of the United States Department of Agriculture, pursuant to Bivens v. Six Unknown Named Agents, 403 U.S. 388 (1971). Plaintiffs' claims are based on an alleged pattern of fraud, misrepresentation, failure to act, failure to follow published regulations, and breach of fiduciary duty, all done in defendant's capacity as a federal employee. Defendant Gordy was personally served on October 14, 2004 (see Doc. 19). After defendant Gordy failed to respond to the amended complaint, plaintiffs requested entry of default by the Clerk of the Court on December 27, 2004 (Docs. 21 and 22). The Clerk of the Court entered defendant Gordy's default on the same day (Doc. 23).

The Ohm plaintiffs filed their motion for default judgment on February 15, 2008. After reviewing the motion, the court issued an order on June 16, 2008, directing the Ohm plaintiffs to either submit supplemental declarations in support of their motion or set the matter for a hearing (see Doc. 176). In that order, the court noted that the Ohm plaintiffs sought default judgment in the amount of $714,628.04, but concluded that the proper measure of damages could not be assessed without further information. Specifically, the court stated:

In the present case, the court has reviewed and considered the Ohms' Amended Complaint (Doc. 14); Ohm Judgment (Doc. 155) and the declarations of John Ohm (Doc. 173.4) and Julie Sutterfield (Doc 173.5). Since the Amended Complaint offers little specificity as to the borrower/lender relationship between the Ohms and Defendant Farm Service Agency ("FSA") and how the Ohms have been damaged by the acts of Gordy, the court has also considered the declaration of Nels Christiansen (Doc. 128) in support of FSA's Motion for Summary Judgment (Doc. 126) which sets forth the long and rather complex loan history of the Ohms with FSA.

In the declaration of Julie Sutterfield (Doc 173.5), damages appear to be based on the difference between the actual Ohm obligation to FSA, including attorneys' fees, and what they would have been obligated to FSA had their loans been properly restructured by Gordy at lower interests rates. Since many of the FSA loans appear to have been subject to lending ceilings, the court is unsure whether Sutterfield's simple math will suffice. For example, loans having an interest rate of 3.75% may have had a ceiling of $400,000.00, and loans having an interest rate of 5.00% interest may have had a ceiling of $200,000.00. See, paragraphs 26 through 44 of the Christainsen Declaration (Doc. 128). How does Sutterfield's expertise as an IRS agent equate to an understanding of FSA lending policies? If Plaintiffs' damages are to be based upon Sutterfield's computations, a better understanding of prefix 29 and 44 FSA loans, and a more detailed accounting of damages would appear to be necessary.

The Ohms also request that damages against Gordy include the amount of stipulated attorneys' fees that they are required to pay to FSA (Doc 155) under the stipulated judgment. Does this require the court to assume that, but for Gordy's conduct, the Ohms' loans would not have been in default and the subject of future litigation by FSA? The Ohms' loans appear to have been in default several years before Gordy became involved with their portfolio. (Doc 128).

This is not to say that the Ohms are not entitled to damages from Gordy. The court is simply left without sufficient information to make an appropriate award in the absence of receiving supplemental information.

In response to the court's order, the Ohm plaintiffs submitted supplemental declarations by Julie Sutterfield (Doc. 178) and plaintiff John Ohm (Doc. 177).*fn1 With these declarations, the Thompson plaintiffs and Hammond plaintiffs filed their separate motions for default judgment.


Whether to grant or deny default judgment is within the discretion of the court. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising this discretion, the court considers the following factors: (1) the possibility of prejudice to the plaintiff if relief is denied; (2) the substantive merits of plaintiff's claims; (3) the sufficiency of the claims raised in the complaint; (4) the sum of money at stake; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy favoring decisions on the merits when reasonably possible. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir 1986). Regarding the last factor, a decisions on the merits is impractical, if not impossible, where defendants refuse to defend. See Pepsico, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002).

Where a defendant has failed to respond to the complaint, the court presumes that all well-pleaded factual allegations relating to liability are true. See Geddes v. United Financial Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam); Danning v. Lavine, 572 F.2d 1386 (9th Cir. 1978); Televideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam); see also Discovery Communications, Inc. v. Animal Planet, Inc., 172 F. Supp. 2d 1282, 1288 (C.D. Cal. 2001). Therefore, when determining liability, a defendant's default functions as an admission of the plaintiff's well-pleaded allegations of fact. See Panning v. Lavine, 572 F.2d 1386 (9th Cir. 1978). However, the court has the responsibility of determining whether the facts alleged in the complaint state a claim which can support the judgment. See Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978). For this reason, the district court does not abuse its discretion in denying default judgment where the factual allegations as to liability lack merit. See Aldabe, 616 F.2d at 1092-93.

While factual allegations concerning liability are deemed admitted upon a defendant's default, the court does not presume that any factual allegations relating to the amount of damages suffered are true. See Geddes, 559 F.2d at 560. The court must ensure that the amount of damages awarded is reasonable and demonstrated by the evidence. See id. In discharging its responsibilities, the court may conduct such hearings and make such orders as it deems necessary. See Fed. R. Civ. P. 55(b)(2). In assessing damages, the court must review the facts of record, ...

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