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Ninth Circuit:
Failure to Plead Damages Is No Bar to Recovery After Default
Opinion Reverses District Court Judgment Denying Monetary Relief, Says Statute Limiting Award to Amount ‘Demanded in Pleadings’ Does Not Mean Party Seeking Unspecified Sums Gets Nothing
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals on Friday reversed a District Court judge’s denial of monetary damages to a plaintiff who successfully moved for default judgment, finding that the jurist erred in determining that a federal law mandates the restricted award due to the complaint having left open the amount of recovery that was sought.
At issue is Federal Rule of Civil Procedure 54(c), which provides:
“A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.”
Senior District Court Judge George Wu of the Central District of California acknowledged the 1974 Ninth Circuit decision in Henry v. Snieders, which held that a plaintiff who prayed for $71,243.68 in direct losses was not limited to that number when seeking a monetary award after default because the complaint also requested “additional amounts not yet fully determined” for “legal expenses and attorneys’ fees, embarrassment, anxiety, and loss of health.”
However, Wu declared that the case was “clearly distinguishable” from the present matter, in which the plaintiff’s complaint asked only for “actual, compensatory, consequential, statutory, special, and/or punitive damages in an amount to be proven at trial.”
Per Curiam Opinion
In a per curiam opinion, signed by Circuit Judge Michelle T. Friedland, Senior Circuit Judge Marsha S. Berzon, and Senior District Court Judge Matthew F. Kennelly of the Northern District of Illinois, sitting by designation, the court disagreed, saying:
“We now hold that Rule 54(c) does not prohibit awarding actual damages in a default judgment to a party that sought in its pleadings actual damages in an amount to be determined at trial.”
The judges added:
“To the extent that we could distinguish Henry on the ground that the Complaint here, unlike the one in Henry, did not quantify any amount of damages whatsoever, we decline to draw such a distinction.”
Berzon, joined by Kennelly, wrote separately “to explain why Henry…is not only dispositive of the issue before us but was correctly decided.”
Dispute Between Competitors
The question arose after AirDoctor LLC, a Delaware company operating out of Sherman Oaks as a seller of air purifiers and replacement air filters, filed a complaint against a Chinese competitor, Xiamen Qichuang Trade Co. Ltd., in August 2022.
According to the pleading, the defendant sells replacement air filters, primarily on Amazon.com, by falsely advertising that its products, which it identifies as compatible with AirDoctor systems, offer equivalent filtration, diverting sales from the plaintiff and harming its reputation.
The plaintiff asserted claims based on, among other statutes, the federal Lanham Act and California’s Unfair Competition Law.
In addition to undetermined damages, AirDoctor sought attorney fees and an injunction to restrain Xiamen from further violations.
After the defendant failed to appear or otherwise file a responsive pleading after service was effected, AirDoctor moved for default judgment and requested the entry of a permanent injunction as well as actual damages of approximately $2.5 million, based on provided formulations, and approximately $50,000 in attorney fees, calculated in accordance with Local Rule 55-3.
Wu’s Reasoning
In November 2023, Wu said that he was inclined to grant the plaintiff’s motion for a default judgment and enjoin Xiamen from advertising that its air filters offered equivalent functionality to AirDoctor products but denied the request for actual damages. He wrote:
“Henry is the only published Ninth Circuit decision that Plaintiff has…identified in support of its position that Rule 54(c) does not mean what its plain language would suggest….
“Plaintiff contends that ‘[a]t the time it filed the Complaint, Plaintiff had no way of knowing that Defendant would default.’….That is always the case. Yet, Rule 54(c) says what it says….
“In short, any amount of actual damages awarded here would violate the plain language of Rule 54(c)….unless Plaintiff elects to amend the Complaint, delineate a specific amount and reserve the Defendant….[T]he Court will allow Plaintiff to file by December 5, 2023, as to its intentions for future litigation in this matter and sets a status conference for December 7, 2023 at 8:30 a.m.”
On Dec. 5, the plaintiff requested entry of “a final opinion and order with respect to damages.” Judgment was entered on Dec. 12, enjoining the defendant but denying any monetary damages or attorney fees, noting that Local Rule 55-3 bases such awards after default on the amount of recovery.
Consistent With Request
The judges wrote:
“Henry instructs that Rule 54(c) presents no bar to awarding actual damages in a default judgment where the complaint sought those damages in an amount to be proven at trial. Specifically, in Henry, we allowed the complaint’s request for ‘additional damages for breach of contract, the amount of which was to be proved at trial’ to support an award of…$235,338.89…exceed[ing] the $71,243.68 of damages for direct losses pleaded in the complaint. Because the Complaint here similarly sought actual damages in an amount to be proven at trial, under Henry, Rule 54(c) does not prevent Plaintiff from obtaining actual damages in the default judgment.”
Noting that the court will seek to avoid a direct conflict with other circuits absent a strong reason to do otherwise, the jurists pointed out that the Seventh U.S. Circuit Court of Appeals has held, in the 1980 decision in Appleton Elec. Co. v. Graves Truck Line Inc., that Rule 54(c) does not bar an award of damages in a default judgment due to the pleading failing to state a number.
Under those circumstances, they said:
“There is no ‘strong reason’ to depart from the rule that follows from Henry and thereby to conflict with the Seventh Circuit.”
Concurring Opinion
Berzon opined:
“Omitting a numerical damages demand but requesting an amount to be determined by the trier of fact is not equivalent to demanding zero dollars, or any other amount, in damages. A request for a damages award based on evidence submitted to and reviewed by the trial judge cannot ‘exceed in amount[] what is demanded in the pleadings,’ as no specific amount is demanded.”
She added:
“[A]bsent from Rule 54(c)—or any other provision in the Federal Rules of Civil Procedure—is a requirement that a plaintiff plead a specific amount of damages. Pleading for an unspecified, appropriate amount, as found by a judge or jury, is exceedingly common….Rule 54(c) requires only that if a plaintiff does plead a specific damage estimate, the award on default judgment may not exceed that amount.”
The jurist wrote:
“[W]here the defendant defaults, the appropriate procedure is for the plaintiff to move for judgment in a particular amount and provide an evidentiary basis for the amount asserted. The court then must determine the appropriate award based on this evidence.”
The case is AirDoctor LLC v. Xiamen Qichuang Trade Co. Ltd., 24-215.
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