Federman, PC v. Smith et al

OCR transcription for search; preserved printed pages are authoritative

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IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION

WILLIAM B. FEDERMAN, PC, d/b/a
FEDERMAN & SHERWOOD PLAINTIFF

V. CASE NO. 5:24-CV-5191

KATHLEEN SUE SMITH; RILEY PARK;
and KAD ONCOLOGY SPECIALISTS, LLC DEFENDANTS

OPINION AND ORDER
On December 13, 2024, the Court held an in-person hearing on Plaintiff William B.
Federman, PC, d/b/a Federman & Sherwood’s (“Federman”) Motion for Default Judgment
(Doc. 13) as to Defendants Kathleen Sue Smith and KAD Oncology Specialists, LLC. At
the conclusion of the hearing, the Court made the following findings:

(1) KAD Oncology Specialists, LLC did not appear and is in substantive default for the
amount that was transferred by wire to KAD’s bank account, plus interest;
however, at the time of the hearing, the Court could not make a final determination
as to the precise dollar amount of liquidated damages KAD owed to Federman—
including whether attorney’s fees and/or prejudgment interest were owed.

(2) Ms. Smith appeared at the hearing but never filed an answer. Accordingly, the
Court finds that she is in service default. However, Federman’s theory of recovery
against Ms. Smith is unclear from the face of the Complaint and the Motion for
Default Judgment. Federman accuses Ms. Smith of acting in concert with KAD to
commit fraud, but Federman acknowledges that Ms. Smith is KAD’s owner—the
person who “established and registered KAD Oncology Specialist [sic] with the

Arkansas Secretary of State’s Office,” (Doc. 2, J 16), and “direct[ly] control[led]”

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KAD’s JP Morgan Chase bank account,” id. at | 18. The Complaint does not assert
facts to justify piercing the corporate veil to impose personal liability on Ms. Smith
for the debts of KAD.

“(I]t is incumbent upon the district court to ensure that ‘the unchallenged facts
constitute a legitimate cause of action’ prior to entering final judgment” because a party
in default neither admits to facts that are not well-pleaded nor admits to mere legal
conclusions. Marshall v. Baggett, 616 F.3d 849, 852-53 (8th Cir. 2010); accord Trout
Point Lodge, Ltd. v. Handshoe, 729 F.3d 481, 491 (5th Cir. 2013) (‘[A] default judgment
does not equate to a general admission or an absolute confession.” (quotation and
citation omitted)). The standard for determining “what constitutes ‘a sufficient basis’ for
the judgment’ is “akin to that necessary to survive a motion to dismiss for failure to state
a claim.” Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1245 (11th Cir.
2015); accord Wooten v. McDonald Transit Assocs., Inc., 788 F.3d 490, 498 (5th Cir.
2015). Therefore, in order for Federman to obtain a substantive default against Ms. Smith
in her individual capacity, the Complaint must plausibly assert a theory of liability against
her that survives scrutiny under Rule 12(b)(6).

Bearing the above in mind, the parties are ORDERED to appear in person for an
evidentiary hearing on the Motion for Default Judgment pursuant to Federal Rule of Civil
Procedure Rule 55(b)(2). The purpose of the hearing will be to determine: (1) the amount
of damages owed by KAD to Federman and (2) whether the Complaint states a plausible
claim against Ms. Smith in her individual capacity, such that she should be held personally
liable for the debts owed by KAD in this suit. Twenty-one days prior to the hearing,

Federman is to file a supplemental legal brief and exhibits in support of its Motion, and

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seven days prior to the hearing, Ms. Smith is to file a response brief and supporting
exhibits. If KAD retains counsel and appears in the case, KAD’s response brief and
exhibits will be due on the same day as Ms. Smith’s. The hearing date will be set by

separate Order.

IT IS SO ORDERED on this g day of Jan tary, 2024.