Valsoft Corporation, Inc. v. Bacalan

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Valsoft Corporation, Inc.
v. 	Case No. 19-cv-672-JL
Joseph Adam Bacalan
REPORT AND RECOMMENDATION
The plaintiff, Valsoft Corporation, Inc. (“Valsoft”),
brought suit against Joseph Adam Bacalan alleging a breach of
contract claim arising from an unpaid debt. 	The debt relates to
a personal guaranty (the “Guaranty”) Bacalan signed which
guaranteed payments to Valsoft by Connect Express, LLC (“Connect
Express”). 	On April 1, 2020, the Clerk of Court entered default
against Bacalan for failure to file an answer following the
court’s denial of his motion to dismiss. 	Doc. no. 15. 	Before
the court for Report and Recommendation is Valsoft’s motion for
default judgment (doc. no. 16). 	See Fed. R. Civ. P. 55(b)(2).
The defendant has not objected. 	For the reasons that follow,
the court recommends that the plaintiff’s motion be granted in
part and denied in part.
Standard of Review
After default is entered and when the amount at issue is
not a sum certain, “the party must apply to the court for a
default judgment.” 	Fed. R. Civ. P. 55(b)(2); see also KPS &
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Assocs., Inc. v. Designs by FMC, Inc., 318 F.3d 1, 18-19 (1st
Cir. 2003). 	Before entering a default judgment, the court “may
examine a plaintiff’s complaint, taking all well-pleaded factual
allegations as true, to determine whether it alleges a cause of
action.” 	Ramos-Falcon v. Autoridad de Energia Electrica, 301
F.3d 1, 2 (1st Cir. 2002) (citing Quirindongo Pacheco v. Rolon
Morales, 953 F.2d 15, 16 (1st Cir. 1992)). 	The defaulted party
is “taken to have conceded the truth of the factual allegations
in the complaint . . . .” 	Ortiz-Gonzalez v. Fonovisa, 277 F.3d
59, 62–63 (1st Cir. 2002) (quoting Franco v. Selective Ins. Co.,
184 F.3d 4, 9 n.3 (1st Cir. 1999)). 	The defaulted party does
not, however, “admit the legal sufficiency of [the] claims.” 	10
James Wm. Moore, Moore’s Federal Practice § 55.32[1][b] (3d ed.
2013). 	In short, “before entering default judgment, the court
must determine whether the admitted facts state actionable
claims.” 	United States v. Sullender, No. 16–cv–523–LM, 2018 WL
1368040, at *1 (D.N.H. Mar. 16, 2018) (citation omitted).
Background
By virtue of its default, Bacalan concedes the following
facts alleged in Valsoft’s complaint. 	Connect Express, LLC, a
Tennessee limited liability company with its principal place of
business in Tennessee, provides a range of shipping services,
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including regional truck shipping in the southeastern United
States. 	On January 31, 2017, Connect Express entered into an
agreement (the “Agreement”) with Profit Tools, Inc. (“Profit
Tools”), a New Hampshire corporation with its principal place of
business in New Hampshire, by which Connect Express enrolled in
Profit Tools’ “Fuel Discount Program.” 	See Doc. no. 1-1.
Profit Tools supplied “fuel cards” and occasionally “virtual
checks” for Connect Express truckers to purchase discounted gas
at participating service stations, among other things. 	The
Agreement required Connect Express to pay invoices issued by
Profit Tools for purchases with the fuel cards. 1 	Connect Express
would make these payments by ACH bank debit on the date of
invoicing. 	Also on January 31, 2017, Bacalan, who had a
financial interest in Connect Express, 2 entered into a Guaranty
with Profit Tools by which he guaranteed Connect Express’
payments under the Agreement. 3 	See Doc. no. 1-1 at 2.
1 Valsoft asserts that the Agreement also required Connect
Express to pay invoices for purchases made with the virtual
checks. 	This contention is unsupported by the language of the
Agreement and is addressed below.
2 The Agreement indicates that Bacalan is both owner and
president of Connect Express.
3 While Bacalan signed the Agreement and Guaranty as “Joseph
Adam Bacalan,” the “Account Contact Information” section lists
“Adam Bacalan” as the owner and president of Connect Express.
However, as the Agreement also lists Bacalan’s title as
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In March 2018, Valsoft purchased some of Profit Tools’
assets, not including the fuel discount business. 	Profit Tools
changed its name to Envio, Inc. (“Envio”). 	Envio continued the
fuel discount program, supplying fuel cards and virtual checks
to Connect Express. 	During this time, Connect Express fell
behind in its payment obligations. 	Connect Express and Envio
established a payment plan and Connect Express paid almost all
of the outstanding balance.
In December 2018, Valsoft acquired the fuel discount
business from Envio; Envio assigned its rights and obligations
under the Agreement to Valsoft. 	From then on, Valsoft continued
supplying fuel cards and checks to Connect Express. 	By January
2019, Connect Express had again fallen behind on its payments.
Valsoft issued an invoice on January 23, 2019 – Connect Express
made a partial payment and failed to pay the balance. 	Connect
Express did not make any payments on the invoices issued on
February 13, 2019 and February 20, 2019. 	It also failed to make
payments for virtual checks issued to Connect Express from
February 13-18, 2019. 	Valsoft alleges that Connect Express
“President” and there is no information suggesting that another
person with the last name Bacalan was involved in the
transaction, it appears that the contact information and
signatures throughout the Agreement and Guaranty refer to the
defendant.
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currently owes $126,350.49 under the Agreement and that both
Connect Express and Bacalan have failed to pay.
Discussion
Valsoft brings a single breach of contract claim against
Bacalan and seeks $126,350.49 in damages for the amount owed
under the Agreement and Guaranty, plus interest. 	It also seeks
attorneys’ fees and costs in the amount of $18,779.13.
I. 	Liability
Under New Hampshire law, 4 “a breach of contract occurs when
there is a failure without legal excuse to perform any promise
which forms the whole or part of a contract.” 	BAE Sys. Info.
and Elecs. Sys. Integration, Inc. v. SpaceKey Components, Inc.,
941 F. Supp. 2d 197, 213 (D.N.H. 2013) (brackets omitted)
(quoting Axenics, Inc. v. Turner Constr. Co., 164 N.H. 659, 668
(2013)), aff'd, 752 F.3d 72 (1st Cir. 2014).
Under the Agreement, Connect Express was required to pay
4 As specified in the Guaranty’s choice-of-law clause, the
court applies New Hampshire law. 	See Doc. no. 1-1 at 2;
Ferrofluidics Corp. v. Advanced Vacuum Components, Inc., 968
F.2d 1463, 1467 (1st Cir. 1992) (“Where the contracting parties
select the law of a particular jurisdiction to govern their
affairs, as a rule New Hampshire courts will honor their choice
‘if the contract bears any significant relationship to that
jurisdiction.’” (quoting Allied Adjustment Serv. v. Heney, 125
N.H. 698 (1984))).
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invoices for purchases made using the fuel cards. 	See Doc. no.
1-1 at 2. 	In its complaint, Valsoft alleges that Connect
Express made only a partial payment on the January 23, 2019
invoice 5 and failed to make any payment on the February 13, 2019
invoice, the February 20, 2019 invoice, or the virtual checks
issued to Connect Express from February 13-18, 2019. 	See Doc.
no. 1 at 3. 	The default judgment affidavit also asserts that
Connect Express is responsible for the remaining balance under a
payment plan. 6 	Doc. no. 16-2 at 3. 	Valsoft alleges that Bacalan
breached the Guaranty by failing to pay these amounts. 	Doc. no.
1 at 4.
The invoices for fuel card charges are covered by the terms
of the Agreement and Connect Express failed to make the payments
as required. 	See Doc. no. 1-1. 	Further, as to the three
invoices, Bacalan breached the Guaranty by failing to pay these
amounts on behalf of Connect Express. 	See id. 	The Agreement,
5 The invoice provided by Valsoft (doc. no. 16-4) does not
reflect the partial payment. 	However, as Ms. Romero, in her
affidavit (doc. no. 16-2), asserts personal knowledge of the
payment and the reduction in the amount due on the invoice does
not benefit Valsoft, the court accepts the remaining balance on
the January 23, 2019 invoice asserted by Valsoft as the correct
amount due.
6 While this payment plan is not mentioned in the complaint,
it appears that the amount due on the payment plan was included
in Valsoft’s initial calculation of the total debt.
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however, does not mention “virtual checks” or provide for a
“payment plan.” 	See id. 	Moreover, Valsoft has not argued that
the breach of contract claim, as to the checks and payment plan,
relies on the parties’ course of dealing or another alternative
basis. 	Thus, the breach of contract claim cannot survive as to
those two amounts. 	Accepting Valsoft’s allegations as true,
Bacalan breached his obligations under the Agreement and
Guaranty as to the three invoices, but not as to the virtual
checks or payment plan.
II. 	Damages 7
“In the case of defaulting defendants, allegations of
damages are not deemed admitted in the context of a default
judgment, and it is the plaintiff’s burden to establish any
entitlement to recovery.” 	Joe Hand Promotions, Inc. v. Rajan,
No. 10-40029-TSH, 2011 WL 3295424, at *3 n.2 (D. Mass. July 28,
2011) (internal quotation marks and citation omitted). 	Valsoft
seeks to recover damages for (1) the amounts due under the
Agreement and Guaranty, plus interest and (2) attorneys’ fees
and costs.
7 The court did not hold a hearing on damages. 	Rule
55(b)(2) “makes an evidentiary hearing an available tool, not a
prerequisite, to the determination of a damage award.”
AngioDynamics, Inc. v. Biolitec AG, 780 F.3d 429, 436 (1st Cir.
2015).
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A. Contractual damages and interest
Valsoft seeks $126,350.49 in damages for Bacalan’s failure
to pay the unpaid charges under the Guaranty. 	The affidavit of
Valsoft paralegal Pamela Romero, filed with Valsoft’s motion for
default judgment, specifies that the damages claim includes the
following unpaid amounts: $28,068.97 from the partially paid
invoice of January 23, 2019; $46,214.76 from the February 13,
2019 invoice; $39,891.72 from the February 20, 2019 invoice;
$11,558.36 from unpaid fuel checks; and $616.68 from the unpaid
balance under the payment plan. 	See Doc. no. 16-2 at 2-3. 	The
three invoices for fuel card charges are recoverable under the
terms of the Agreement and Guaranty, with one minor adjustment.
There is a discrepancy regarding the February 20 invoice – the
affidavit (doc. no. 16-2) lists the amount due as $39,891.72,
but the actual invoice sets that amount fifty cents lower, at
$39,891.22. 	The invoice is the most direct and accurate
evidence of the proper amount due; the court will therefore
reduce the damage amount by fifty cents.
As detailed above, the $11,558.36 for unpaid fuel checks
and the $616.68 payment plan balance are not covered by the
terms of the Agreement and cannot be recovered. 8
8 In addition to the legal deficiencies, the court notes
that the documents submitted by Valsoft to support these two
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For these reasons, the court recommends that the district
judge award damages in the amount of $114,174.95, plus interest. 9
B. Attorneys’ fees and costs
The Guaranty states that the “[g]uarantor agrees to pay all
reasonable costs and attorneys’ fees incurred by Profit Tools,
Inc. in enforcing this guaranty.” 	Doc. no. 1-1 at 2. 	Valsoft
is Profit Tools’ successor-in-interest, see Doc. no. 1, and has
requested $18,779.13 in attorneys’ fees and costs. 	Doc. no. 16.
“The lodestar approach is the method of choice for
calculating fee awards.” 	Matalon v. Hynnes, 806 F.3d 627, 638
(1st Cir. 2015) (citations omitted). 	Under this approach, a
district court first “calculate[s] the number of hours
reasonably expended by the attorneys for the prevailing party,
excluding those hours that are ‘excessive, redundant, or
otherwise unnecessary.’” 	Cent. Pension Fund of the Int'l Union
amounts (doc. nos. 16-7 & 16-8) are not readily identifiable as
authentic business records. 	While it is a close call as to
whether, when considered alongside Ms. Romero’s affidavit (doc.
no. 16-2), they would be enough to merit default judgment, the
court need not reach that issue.
9 As the Agreement does not include an interest provision,
Valsoft may only recover interest as provided under New
Hampshire law. 	See Doc. no. 1-1; see also N.H. Rev. Stat. Ann.
§ 524:1-b; Healy v. Franklin Elec. Co., No. 08–cv–503–PB, 2011
WL 32522, at *1 (D.N.H. Jan. 5, 2011) (citing Commercial Union
Ins. Co. v. Walbrook Ins. Co., 41 F.3d 764, 772 (1st Cir. 1994))
(“State law applies to an award of prejudgment interest in
diversity suits.”).
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of Operating Eng'rs & Participating Emp'rs v. Ray Haluch Gravel
Co., 745 F.3d 1, 5 (1st Cir. 2014) (quoting Hensley v.
Eckerhart, 461 U.S. 424, 434 (1983)). 	The court then determines
“a reasonable hourly rate or rates — a determination that is
often benchmarked to the prevailing rates in the community for
lawyers of like qualifications, experience, and competence.”
Id. (citation omitted). 	Multiplying the results of these two
inquiries yields the lodestar amount. 	Id. 	The court may then
adjust the potential award based on factors not captured in the
lodestar calculation. 	See Hensley, 461 U.S. at 434 & n.9;
Coutin v. Young & Rubicam P.R., Inc., 124 F.3d 331, 337 (1st
Cir. 1997). 	“The party seeking the [fee] award has the burden
of producing materials that support the request.” 	Hutchinson ex
rel. Julien v. Patrick, 636 F.3d 1, 13 (1st Cir. 2011) (citing
Hensley, 461 U.S. at 433).
Here, Valsoft has provided affidavits and bills from both
out-of-state and local counsel. 	It asserts that out-of-state
counsel, Rich May, is entitled to $14,961.15 in fees and $611.48
in costs. 	See Doc. no. 16-9 at 3. 	The fees are further broken
into fees generated by Attorneys Gaeta and Donoghue. 	Rich May
applied a 10% discount to its bill throughout this case.
Attorney Donoghue billed for 9.5 hours at a rate of $235 per
hour, for a total of $2,232.50. 	Based on the billing records
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and Attorney Donoghue’s experience, both the hours and the rate
are reasonable and the plaintiff is entitled to recover those
fees.
Attorney Gaeta billed for 33.9 hours at a rate of $390 per
hour. 	Based on the billing records and Attorney Gaeta’s
experience, those figures are reasonable as well. 	However, it
appears that Valsoft has made a calculation error. 	It asserts
that 33.9 hours at $390 per hour results in a fee total of
$14,391. 	However, according to the court’s calculations, the
correct total is $13,221. 	Thus, the combined fees should be
$15,453.50. 	Factoring in the 10% discount, the total is
$13,908.15. 	When added to the $611.48 in reasonable costs, Rich
May’s total for fees and costs is $14,519.63.
Valsoft asserts that its local counsel, Hage Hodes, is
entitled to $2,694.50 in fees and $512 in costs. 	See Doc. no.
16-11. 	Attorney Hage billed for 2.8 hours at a rate of $400 per
hour and Attorney Hedges billed for 6.7 hours at a rate of $235
per hour. 	Based on the billing records and the experience of
Attorneys Hage and Hedges, the claimed fees are reasonable.
When added to the $512 in reasonable costs, Hage Hodes’ total
for fees and costs is $3,206.50.
Based on the court’s analysis of the affidavits and billing
records of Valsoft’s attorneys, it recommends that the district
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judge award $17,726.13 in fees and costs.
Conclusion
For the foregoing reasons, the court recommends that the
district judge: (1) grant Valsoft’s motion for default judgment
(doc. no. 16) on its breach of contract claim as to the unpaid
amounts for fuel card use; (2) deny the motion for default
judgment as to the amounts related to virtual checks and the
payment plan; (3) award Valsoft $114,174.95, plus interest; and
(4) award Valsoft $17,726.13 in attorneys’ fees and costs.
Any objection to this Report and Recommendation must be
filed within fourteen days of receipt of this notice. 	See Fed.
R. Civ. P. 72(b)(2). 	The fourteen-day period may be extended
upon motion. 	Failure to file specific written objections to the
Report and Recommendation within the specified time waives the
right to appeal the district court’s order. 	See Santos-Santos
v. Torres-Centeno, 842 F.3d 163, 168 (1st Cir. 2016).
__________________________
Andrea K. Johnstone
United States Magistrate Judge
August 4, 2020
cc: 	Frank N. Gaeta, Esq.
Katherine Elisabeth Hedges, Esq.
Jamie N. Hage, Esq.
Joseph Adam Bacalan, Pro se
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