United States District Court, E.D. Kentucky, Southern Division
NEW LONDON TOBACCO MARKET, INC. and FIVEMILE ENERGY, LLC, Plaintiffs,
KENTUCKY FUEL CORPORATION and JAMES C. JUSTICE COMPANIES, INC., Defendants.
MEMORANDUM OPINION & ORDER
Gregory F. Van Tatenhove United States District Judge
matter is before the Court pending review of the Recommended
Disposition of United States Magistrate Judge Hanly A.
Ingram, filed on January 17, 2017. [R. 302.] Judge
Ingram's Recommended Disposition is in response to
Plaintiffs' Renewed Motion under Rule 55 filed April 29,
2016. [R. 270.] Judge Ingram conducted a comprehensive and
thorough review of the record, concluding that the Defendants
owed damages totaling nearly $60 million. [See R.
34.] Even so, Judge Ingram reached his conclusion without
conducting an evidentiary hearing. Without the benefit of
clear guidance in the Sixth Circuit, Judge Ingram concluded
that, based on his thorough review of the record, an
evidentiary hearing was not required. This is a close call,
but for the reasons set out below, the Defendants'
objection to the denial of their request for an evidentiary
hearing will be SUSTAINED.
Federal Rule of Civil Procedure 72(b)(2), parties have
fourteen days after service to register any objections to the
R&R or else waive their rights to appeal. In order to
receive de novo review by this Court, any
objection to the recommended disposition must be specific.
Mira v. Marshall, 806 F.2d 636, 637 (6th Cir. 1986).
A specific objection “explain[s] and cite[s] specific
portions of the report which [counsel] deem[s]
problematic.” Robert v. Tesson, 507 F.3d. 981,
994 (6th Cir. 2007) (quoting Smith v. Chater, 121
F.3d 709, 1997 WL 415309, at *2 (6th Cir. 1997) (unpublished
opinion)). A general objection that fails to identify
specific factual or legal issues from the Recommendation,
however, is not permitted, since it duplicates the
magistrate's efforts and wastes judicial economy.
Howard v. Secretary of Health and Human Services,
932 F.2d 505, 509 (6th Cir. 1991).
objected to the Report and Recommendation on January 31, 2017
[R. 305], and Plaintiffs filed a response to Defendants'
objections on February 14, 2017. [R. 301.] Defendants
specifically object to nearly every conclusion in the
Recommended Disposition, but this Court will focus on their
objection to the lack of evidentiary hearing, as that
determination makes their other objections moot.
[See R. 305 at 6.] Defendants' objections are
sufficiently definite to trigger this Court's obligation
to conduct a de novo review. See 28 U.S.C.
§ 636(b)(1)(c). The Court has satisfied that duty,
reviewing the entire record, including the motions, briefing,
the parties' arguments, relevant case law and statutory
authority, as well as applicable procedural rules.
lawsuit arises out of a contract to mine coal. On September
30, 2014, this Court entered default judgment against
Defendants as to Counts I, II, and V of the Amended
Complaint. [R. 206.] Count 1 alleges breach of contract by
not paying minimum royalties and monthly retainer fees; Count
2 alleges breach of contract according to payments per ton of
coal to be mined on Fivemile properties; and Count 5 alleges
fraud generally. [See R 40.] Plaintiffs filed a Rule
55 motion on October 16, 2014, but this Court determined that
awarding damages should be delayed until liability was
determined on Counts III and IV. [See R. 227.]
Counts III and IV were dismissed by this Court on February 1,
2016, and the case was referred to the Magistrate Judge to
“hold any proceedings necessary to make appropriate
findings of law and fact regarding damages as to Counts I,
II, and V of the plaintiffs' Amendment Complaint”
and “issue a report and recommendation regarding these
damages.” [R. 251 at 6.] Plaintiffs filed their Renewed
Motion under Rule 55 on April 29, 2016 [R. 270], and
Defendants filed a response on June 3, 2016 [R. 277], and a
Reply on June 15, 2016. [R. 284.] Defendants requested an
evidentiary hearing multiple times. [See R. 214; R.
223; R. 262; R. 277.] Judge Ingram scheduled a telephone
conference to discuss a limited issue related to discovery,
but it was cancelled. [R. 298; R. 299.]
Ingram ultimately recommended that no evidentiary hearing was
needed. [R. 302 at 7.] He further found:
(1) For Count I, as of the date of this Report, Defendants
owe $680, 000 in unpaid retainer fees. That amount continues
to increase by $10, 000 on the first day of each month. The
Court should assess 8% interest on these fees, compounded
annually. No amount for unpaid minimum royalties should be
(2) For Count II, Defendants owe $16, 990, 900, as determined
by the independent arbiter, with 8% prejudgment interest
compounded annually beginning May 1, 2012.
(3) As compensatory damages under Count V, Defendants owe
$16, 990, 900, without interest, for lost royalties. They
also owe $20, 000 for the Strong Brothers lease
reimbursements, plus 8% compound interest beginning October
14, 2011, for the first $5, 000 payment; October 4, 2012, for
the second; November 22, 2013, for the third; and April 28,
2016, for the fourth $5, 000 payment.
(4) As punitive damages under Count V, Defendants owe $17,
010, 900, without interest.
(5) Under section 14 of the Fourth Amendment, Defendants owe
“all attorney fees and expenses” in connection
with this lawsuit (D.E. 40-5 at 7). But the total amount
cannot yet be assessed. After Judge Van Tatenhove acts on
this Recommendation and all motions are resolved, the
undersigned recommends that Plaintiffs be allowed to file an
affidavit of fees and costs with an opportunity for a
response from Defendants. See Fed. R. Civ. P.
54(d)(2)(C). Interest should not be applied to the award of
attorneys' fees and expenses. [R. 302 at 34.] Judge
Ingram asserted that he had “sufficient facts for the
Court to make an informed calculation of damages” and
relied mainly on “the Amendment Complaint, the Fourth
Amendment (the operative contract between the parties), and