THE HONORABLE ROBERT S. LASNIK 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 8 9 Diversified Lenders, LLC, an Oklahoma limited liability company, Plaintiff, 10 11 12 13 No. 16-cv-01232-RSL AMAZON’S MOTION FOR DEFAULT JUDGMENT AGAINST VERTICAL HOLDINGS UNLIMITED v. Amazon Logistics, Inc., a Delaware corporation; Vertical Holdings Unlimited, LLC, a Florida limited liability company doing business as VHU Express, 14 Defendants. 15 16 Amazon Logistics, Inc., 17 18 19 20 Cross-Claim Plaintiff, v. Vertical Holdings Unlimited, LLC, Cross-Claim Defendant. 21 22 Pursuant to Fed. R. Civ. Pr. 55(b)(2) and LCR 55(b)(2), Defendant Amazon Logistics, 23 Inc. (“Amazon”) moves for entry of an order of default judgment against Cross-Claim Defendant 24 Vertical Holdings Unlimited, LLC (“VHU”). Amazon seeks a declaration that VHU is required 25 to indemnify Amazon for claims asserted by Plaintiff Diversified Lenders, LLC (“Diversified”) 26 AMAZON’S MOTION FOR DEFAULT JUDGMENT (USDC WDWA Case No. 16-cv-01232-RSL) - 1 STOEL RIVES LLP 96825113.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600, Seattle, WA 98101 Telephone 206.624.0900 1 and for amounts Amazon paid on behalf of VHU to VHU employees in excess of amounts owed 2 to VHU for VHU’s services. II. 3 FACTUAL BACKGROUND 4 Contract Between Amazon and VHU 5 On March 9, 2015, VHU entered into a contract with Amazon comprising two parts: 6 Amazon’s standard Delivery Service Provider Terms of Service and the Work Order 7 (collectively, the “Contract”). Dkt. #27-2; Dkt. #42. 8 Under the Contract, VHU agreed that it was “solely responsible for any and all 9 obligations owed to [its] Personnel pursuant to applicable Law” and that VHU would “comply 10 with all Laws pertaining to the Services . . . .” Dkt. #27-2. VHU agreed to indemnify Amazon if its conduct gave rise to any claims against or 11 12 expenses borne by Amazon. Specifically, under paragraph 9 of the Contract VHU agreed that it 13 would: 14 15 16 17 18 [D]efend, indemnify and hold harmless Amazon . . . from any third-party allegation or claim based on, or any loss, damage, settlement, cost, expense and any other liability (including but not limited to reasonable attorneys’ fees and expenses) arising out of or in connection with, (i) any allegation or claim of negligence, strict liability or misconduct of you or your Personnel, (ii) a breach of these Terms . . . . , (iii) any action or inaction by you or any of your Personnel . . . , (iv) any allegation or claim that you or any of your Personnel failed to comply with applicable law. Dkt. #27-4. 19 20 VHU provided delivery services for Amazon pursuant to the Contract between March 21 2015 and February 2016. Dkt. #103, at 8. On February 4, 2015, following months of problems 22 with VHU’s services and employees failing or threatening to strike, Amazon terminated VHU. 23 Dkt. #103, at 4. 24 Shortly following termination of VHU, Amazon was notified of claims by VHU’s 25 employees relating to VHU’s failure to pay salaries to those employees. Dkt. #103, at 8. 26 Amazon worked with the Massachusetts Attorney General, United States Department of Labor AMAZON’S MOTION FOR DEFAULT JUDGMENT (USDC WDWA Case No. 16-cv-01232-RSL)- 2 STOEL RIVES LLP 96825113.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600, Seattle, WA 98101 Telephone 206.624.0900 1 (“DOL”) (located in Florida), and counsel for individual VHU employees, and ultimately settled 2 these claims by remitting payment of $35,591.30 to the Massachusetts Attorney General, 3 $169,659.14 to the DOL, $111,496 to individual employees in Florida, and $36,070.27 to 4 individual employees in Massachusetts, for a total of $352,816.71. Dkt. #103, at 8. Amazon 5 also incurred attorneys’ fees and costs associated with resolving claims relating to unpaid VHU 6 wages in the amount of $93,737.12. Dkt. #103, at 8. 7 Procedural Posture of Amazon’s Cross-Claims Against VHU. 8 On April 29, 2016, Diversified, a factoring company that financed VHU’s operations by 9 purchasing its rights to receive payment under VHU’s invoices submitted to Amazon, filed a 10 complaint in the U.S. District Court for the E.D. Florida against Amazon and VHU. Dkt. #1. On 11 June 13, 2016, Amazon filed an Answer, which included cross claims against VHU. Dkt. #23. 12 Amazon asserted claims against VHU for declaratory judgment, breach of contract and liability 13 under the Uniform Commercial Code. Id. Amazon’s first cross-claim, for declaratory judgment, 14 sought a declaration that “VHU is required to defend and indemnify Amazon against all claims 15 asserted against Amazon by Diversified.” Id. at p. 6-7. Amazon’s second cross-claim, under 16 contractual and UCC principles, alleged that VHU is required to reimburse and indemnify 17 Amazon for all amounts paid by Amazon on VHU’s behalf to VHU’s employees. Id. at p. 7. On 18 July 5, 2016, the E.D. Florida entered an order of default against VHU pursuant to Fed. R. Civ. 19 P. 55(a). Dkt. #37. The case was then transferred to the W.D. Washington on Amazon’s motion 20 to transfer venue. Dkt. #45. Amazon filed an Amended Answer on June 21, 2017, with 21 consistent cross claims against VHU. Dkt. #90. 22 Although VHU has not appeared or defended in this action, VHU did respond to 23 discovery and participated in the case in support of Diversified. VHU received subpoenas from 24 both Amazon and Diversified to produce documents. Declaration of Vanessa Power (“Power 25 Decl.”) ¶ 2. Amazon and Diversified deposed VHU’s principal, Lisa Bythewood, in both her 26 corporate representative and individual capacities. Id. Ms. Bythewood filed two declarations in AMAZON’S MOTION FOR DEFAULT JUDGMENT (USDC WDWA Case No. 16-cv-01232-RSL)- 3 STOEL RIVES LLP 96825113.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600, Seattle, WA 98101 Telephone 206.624.0900 1 this case, supporting Diversified’s opposition to Amazon’s motion to transfer venue and 2 supporting Diversified’s opposition to Amazon’s motion for summary judgment. Dkt. #33-1; 3 Dkt. #112. 4 On February 5, 2018, the Court entered an order dismissing Diversified’s claims against 5 Amazon with prejudice. Dkt. #129. On the same date, the Court entered an order dismissing 6 Diversified’s claims against VHU without prejudice. Dkt. #128. The only claims remaining are 7 Amazon’s cross-claims against VHU. 8 Amazon’s Demand to VHU for Defense and Indemnification 9 On June 1, 2016, Amazon issued a demand for defense and indemnification to VHU with 10 respect to Diversified’s claims against Amazon. Power Decl., ¶ 3, Ex. A. VHU refused to 11 defend and indemnify Amazon. Id. ¶ 4, Ex. B. III. 12 13 ARGUMENT Declaratory judgment in Amazon’s favor is appropriate because the only evidence in the 14 record establishes that Amazon is entitled to the relief sought in its cross-claims against VHU. 15 The undisputed facts show that Amazon is entitled to defense and indemnification against 16 Diversified’s claims. Additionally, the undisputed facts show that Amazon is entitled to 17 judgment in its favor based on the amounts it paid on VHU’s behalf to VHU employees 18 exceeding the amounts owed by Amazon to VHU for VHU’s services. 19 20 21 A. Declaratory Judgment Should Be Entered Confirming Amazon’s Right to Defense and Indemnification. Federal courts are authorized by the Declaratory Judgment Act to “declare the rights and 22 other legal relations of any interested party seeking such declaration, whether or not further relief 23 is or could be sought.” 28 U.S.C. § 2201. Under Washington law, courts are to “construe 24 contracts to reflect the parties’ intent, and give the contract language its ordinary meaning.” 25 26 AMAZON’S MOTION FOR DEFAULT JUDGMENT (USDC WDWA Case No. 16-cv-01232-RSL)- 4 STOEL RIVES LLP 96825113.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600, Seattle, WA 98101 Telephone 206.624.0900 1 Forest Marketing Enterprises, Inc. v. State, Dept. of Natural Resources, 125 Wn. App. 126, 132, 2 104 P.3d 40, 43 (2005). VHU agreed to “defend, indemnify and hold harmless Amazon . . . from any third-party 3 4 allegation or claim based on, or any loss, damage, settlement, cost, expense and any other 5 liability (including but not limited to reasonable attorneys’ fees and expenses) arising out of or in 6 connection with, (i) any allegation or claim of negligence, strict liability or misconduct of you or 7 your Personnel, (ii) a breach of these Terms . . . . , (iii) any action or inaction by you or any of 8 your Personnel . . . , (iv) any allegation or claim that you or any of your Personnel failed to 9 comply with applicable law.” Dkt. #27-4 at ¶ 9. As detailed in Amazon’s summary judgment 10 briefing, incorporated in full here, Diversified’s claims against Amazon arose because of action 11 or inaction by VHU and potential misconduct by VHU. This action, inaction and potential 12 misconduct included the following: 13 • VHU generated 26 invoices that it submitted to Diversified to obtain financing but that it never submitted to Amazon in accord with VHU’s contractual obligations (these invoices were largely duplicative of other, paid invoices and were therefore not valid anyway). Dkt. #103 at 14-16; Dkt. #122, at 7-8. • VHU issued numerous duplicative invoices for which it obtained financing from Diversified but which were never due and owed by Amazon. See generally Dkt. #103 at 16-17; Dkt. #122, at 8-10. • VHU failed to make payment to its employees, which necessitated Amazon making such payment. See generally Dkt. #103, at 12-14; Dkt. #122, 5-7. 14 15 16 17 18 19 20 After taking into account the undisputed evidence supporting Amazon’s claims for offset 21 and defenses to Diversified’s claims, it is clear that Diversified’s claims in this action arise from 22 VHU’s action, inaction, and breaches of the Contract, which provide a complete defense for 23 Amazon to Diversified’s claims. See Dkt. #103 at 20-21. Amazon is therefore entitled to 24 judgment declaring that VHU is required to defend and indemnify Amazon against Diversified’s 25 26 claims. AMAZON’S MOTION FOR DEFAULT JUDGMENT (USDC WDWA Case No. 16-cv-01232-RSL)- 5 STOEL RIVES LLP 96825113.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600, Seattle, WA 98101 Telephone 206.624.0900 1 B. Amazon is Entitled to Judgment for Reimbursement of Amounts Paid on VHU’s Behalf to VHU Employees in Excess of Amounts Owed for VHU’s Services. 2 3 Amazon is also entitled to reimbursement of the amounts it paid on VHU’s behalf to 4 VHU employees that exceeded its total payment obligations to VHU for VHU’s services. VHU 5 agreed that it would “indemnify and hold harmless Amazon . . . from any . . . loss, damage, 6 settlement, cost, expense and any other liability (including but not limited to reasonable 7 attorneys’ fees and expenses) arising out of or in connection with, (i) any allegation or claim of 8 negligence, strict liability or misconduct of you or your Personnel, (ii) a breach of these Terms . . 9 . . , (iii) any action or inaction by you or any of your Personnel . . . , (iv) any allegation or claim 10 that you or any of your Personnel failed to comply with applicable law.” Dkt. #27-4. VHU also 11 agreed that it was “solely responsible for any and all obligations owed to [its] Personnel.” Dkt. 12 #27-4, § 5(b). Finally, VHU agreed that “Amazon may (i) deduct from and offset against any 13 amounts owing by Amazon to you under these Terms or any Work Order any sums payable by 14 you to Amazon . . . .” VHU breached the Contract when it failed to pay salaries to its own 15 employees, and Amazon is entitled to be reimbursed by VHU for payments made on VHU’s 16 behalf in excess of payments otherwise due to VHU for services. 17 The undisputed evidence confirms that Amazon made payments on VHU’s behalf to 18 VHU employees in the amount of $446,554. Dkt. #103, at 20-21. After accounting for amounts 19 due to VHU for services rendered, Amazon overpaid for VHU’s services by at least $296,906. 20 Id. Amazon is therefore entitled to judgment in its favor and against VHU in the amount of 21 $296,906. IV. 22 23 CONCLUSION VHU actively participated in this litigation by submitting declarations in support of 24 Diversified’s claims against Amazon. Yet VHU elected not to respond to or answer Amazon’s 25 cross-claims. Based on the undisputed evidence record, Amazon is entitled to default judgment: 26 (1) declaring that under the terms of the Contract, VHU is required to defend and indemnify AMAZON’S MOTION FOR DEFAULT JUDGMENT (USDC WDWA Case No. 16-cv-01232-RSL)- 6 STOEL RIVES LLP 96825113.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600, Seattle, WA 98101 Telephone 206.624.0900 1 Amazon against Diversified’s claims; and (2) entering judgment in favor of Amazon and against 2 VHU in the amount of $296,906. 3 4 DATED: May 9, 2018. STOEL RIVES LLP 5 6 s/ Vanessa Power Vanessa Soriano Power, WSBA No. 30777 vanessa.power@stoel.com Reed William Morgan, pro hac vice reed.morgan@stoel.com 7 8 9 STOEL RIVES LLP 600 University Street, Suite 3600 Seattle, WA 98101 Telephone: 206.624.0900 Facsimile: 206.386.7500 10 11 12 Attorneys for Defendant Amazon Logistics, Inc. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 AMAZON’S MOTION FOR DEFAULT JUDGMENT (USDC WDWA Case No. 16-cv-01232-RSL)- 7 STOEL RIVES LLP 96825113.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600, Seattle, WA 98101 Telephone 206.624.0900 1 CERTIFICATE OF SERVICE 2 I hereby certify that on May 9, 2018, I electronically filed the foregoing with the Clerk of 3 the Court using the CM/ECF system which will send notification of such filing to the following: 4 5 6 • • • 7 8 9 • • 10 11 Franklin Dennis Cordell fcordell@gordontilden.com,jlucien@gordontilden.com Jocelyne Anne Macelloni jocelyne.macelloni@uulaw.net,tami.gordon@uulaw.net,joshua.brownlee@uulaw.net Jeffrey M Thomas jthomas@gordontilden.com,chudson@gordontilden.com Jared Alan Ullman jared.ullman@uulaw.net,secretary_assistant@uulaw.net,tami.gordon@uulaw.net,joshua. brownlee@uulaw.net Michael W. Ullman michael.ullman@uulaw.net,tami.gordon@uulaw.net,joshua.brownlee@uulaw.net,diana.si mon@uulaw.net • 12 13   s/ Vanessa Power Vanessa Soriano Power, WSBA No. 30777 • 14 15 16 17 18 19 20 21 22 23 24 25 26 AMAZON’S MOTION FOR DEFAULT JUDGMENT (USDC WDWA Case No. 16-cv-01232-RSL)- 8 STOEL RIVES LLP 96825113.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600, Seattle, WA 98101 Telephone 206.624.0900 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 Diversified Lenders, LLC, an Oklahoma limited liability company, Plaintiff, 11 12 13 14 v. Case No. 16-cv-1232-RSL ORDER ENTERING DEFAULT JUDGMENT AGAINST CROSS-CLAIM DEFENDANT VERTICAL HOLDINGS UNLIMITED, LLC, d/b/a, VHU EXPRESS Amazon Logistics, Inc., a Delaware corporation; Vertical Holdings Unlimited, LLC, a Florida limited liability company doing business as VHU Express, 15 Defendants. 16 17 18 19 Amazon Logistics, Inc., Cross-Claim Plaintiff, v. Vertical Holdings Unlimited, LLC, Cross-Claim Defendant. 20 This matter comes before the Court on Amazon Logistics, Inc.’s Motion for Default 21 Judgment Against Vertical Holdings Unlimited (“Motion”). On July 5, 2016, entry of default 22 was entered against Vertical Holdings Unlimited (“VHU”) pursuant to Fed. R. Civ. P. 55(a). 23 Thus, Amazon Logistics, Inc. (“Amazon”) has complied with the requirements of Local Rule 24 W.D. Wash. CR 55(b), and now seeks default judgment. 25 26 The Court, having reviewed Amazon’s Motion, the accompanying declaration, and being otherwise advised in the premises, hereby GRANTS the Motion. ORDER ENTERING DEFAULT JUDGMENT AGAINST CROSS-CLAIM DEFENDANT VERTICAL HOLDINGS UNLIMITED, LLC, d/b/a, VHU EXPRESS (No. 16-cv-1232-RSL) - 1 STOEL RIVES LLP 96896327.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600,Seattle, WA 98101 Telephone 206.624.0900 1 Accordingly, the Court ORDERS as follows: 2 (1) It is declared that, under the Delivery Service Provider Terms of Service and Work 3 Orders agreed to by Amazon and VHU, VHU is required to defend and indemnify 4 Amazon against Diversified Lenders, LLC’s claims in this action; and 5 6 (2) Amazon is awarded damages in the amount of $296,906 on its cross-claims against VHU. 7 8 SIGNED and ENTERED this ___ day of May, 2018. 9 10 11 Robert S. Lasnik United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 ORDER ENTERING DEFAULT JUDGMENT AGAINST CROSS-CLAIM DEFENDANT VERTICAL HOLDINGS UNLIMITED, LLC, d/b/a, VHU EXPRESS (No. 16-cv-1232-RSL) - 2 STOEL RIVES LLP 96896327.1 0053837-00652 ATTORNEYS 600 University Street, Suite 3600,Seattle, WA 98101 Telephone 206.624.0900