KMS, LLC v. Major League Trucking, Inc. ( 2024 )

O 1 2 3 4 5 6 7 8 United States District Court 9 Central District of California 10 11 KMS, LLC, Case № 2:22-cv-06245-ODW (MAAx) 12 Plaintiff, ORDER GRANTING PLAINTIFF’S 13 v. MOTION FOR DEFAULT JUDGMENT [99] 14 MAJOR LEAGUE TRUCKING, INC., 15 Defendant. 16 17 18 I. INTRODUCTION 19 Plaintiff KMS, LLC alleges that, in 2022, Defendant Major League Trucking, 20 Inc. (“MLT”) entered into a contract of carriage with KMS whereby MLT agreed to 21 transport KMS’s shipping containers, but instead took possession of them and now 22 refuses to deliver the containers or allow KMS to take them back. (Compl. ¶¶ 6–11, 23 ECF No. 1.) KMS now moves for entry of default judgment and an order of replevin 24 to recover the containers from MLT. (Mot. Default J. (“Motion” or “Mot.”), ECF 25 No. 99.) For the reasons discussed below, the Court GRANTS KMS’s Motion.1 26 27 28 1 After considering the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78(b); C.D. Cal. L.R. 7-15. 1 II. BACKGROUND 2 In 2022, MLT agreed to transport as a motor carrier of record six of KMS’s ocean 3 shipping containers, Nos. MRSU3366617; MRKU3595009; MRKU4442365; 4 MSKU1739639; MSKU1261724; and MSKU0176762, each containing 1090 units of 5 CL-RAC05MW-22 Cool Living Brand air conditioners (collectively, the “Cargo”). 6 (Compl. ¶ 6.) The Cargo has a collective purchase order value of $676,220.00. (Decl. 7 Douglas C. Smith ISO Mot. ¶ 4, Ex.1 (“Purchase Orders”), ECF No. 99-3; see also 8 Compl. ¶ 19.) MLT took possession of the Cargo, but did not issue a bill of lading, and 9 rather than deliver the Cargo to KMS’s facility as promised, MLT instead transported 10 it to MLT’s facility. (Compl. ¶¶ 6–8.) MLT has since refused to deliver the Cargo to 11 KMS or allow KMS to take possession of the Cargo, despite KMS taking all reasonable 12 steps to pay MLT freight and transport charges. (Compl. ¶¶ 9–11.) 13 Accordingly, on September 1, 2022, KMS filed this action against MLT for 14 breach of the carriage contract, conversion, replevin, and pre-judgment attachment. 15 (Compl. ¶¶ 12–27.) On September 7, 2022, KMS served the Complaint on MLT, (Proof 16 Service, ECF No. 10), but MLT failed to timely appear. Thus, upon KMS’s request, 17 the Clerk entered MLT’s default on September 29, 2022. (First Default, ECF No. 17.) 18 MLT subsequently moved to set aside the default. (MLT Mot. Set Aside, ECF 19 No. 28.) On March 6, 2023, the Court granted MLT’s motion on the condition that 20 MLT pay KMS’s attorneys’ fees. (Order Granting Set Aside, ECF No. 44.) MLT paid, 21 and its default was set aside on March 17, 2023. (See Decl. Alberto J. Campaign re 22 Compliance, ECF No. 45.) 23 Over the following year, litigation continued in the normal course, with the 24 parties engaging in discovery and motion practice. However, in Spring 2024, MLT 25 stopped paying its legal bills and its relationship with its counsel broke down 26 significantly, such that MLT’s counsel was no longer able to adequately represent MLT. 27 (Decl. Alberto J. Campaign ISO Mot. Withdraw, ECF No. 86-1.) After giving MLT 28 written notice of the potential consequences to MLT, MLT’s counsel moved to 1 withdraw from representation. (See id; Mot. Withdraw, ECF No. 86.) The Court set a 2 hearing for May 6, 2024, and ordered an MLT representative to attend. (Min. Orders, 3 ECF Nos. 88, 89.) Although MLT was notified by the Court and its counsel of the 4 requirement to appear, no MLT client representative attended the hearing. (See Mins., 5 ECF No. 91.) On May 10, 2024, finding that MLT had been adequately notified about 6 its potential consequences following its counsel’s withdrawal, the Court granted 7 counsel’s motion. (Order Granting Withdrawal & Striking MLT Answer, ECF No. 92.) 8 As MLT is a business entity that may only appear in federal court through licensed 9 counsel, the Court struck MLT’s answer and once again entered MLT’s default. (Id. 10 at 2; Second Default, ECF No. 94.) KMS now moves for entry of default judgment. 11 (See Mot.) 12 III. LEGAL STANDARD 13 Federal Rule of Civil Procedure (“Rule”) 55(b) authorizes a district court to grant 14 a default judgment after the Clerk enters a default under Rule 55(a). Before a court can 15 enter a default judgment against a defendant, the plaintiff must satisfy the procedural 16 requirements set forth in Rules 54(c) and 55, and Central District Local Rules (“Local 17 Rule” or “Local Rules”) 55-1 and 55-2. Even if these procedural requirements are 18 satisfied, a “defendant’s default does not automatically entitle the plaintiff to a court- 19 ordered judgment.” PepsiCo, Inc., v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 20 (C.D. Cal. 2002). Instead, “[t]he district court’s decision whether to enter a default 21 judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 22 1980). 23 Generally, after the Clerk enters a default, the defendant’s liability is conclusively 24 established, and the well-pleaded factual allegations in the plaintiff’s complaint “will 25 be taken as true” except those pertaining to the amount of damages. TeleVideo Sys., 26 Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987) (per curiam) (quoting Geddes 27 v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977)). The court need not make 28 1 detailed findings of fact in the event of default, except as to damages. See Adriana Int’l 2 Corp. v. Thoeren, 913 F.2d 1406, 1414 (9th Cir. 1990). 3 IV. DISCUSSION 4 KMS satisfies the procedural requirements for default judgment and establishes 5 that entry of default judgment and replevin against MLT is appropriate. 6 A. Procedural Requirements 7 Local Rule 55-1 requires that the movant establish: (1) when and against which 8 party default was entered; (2) the pleading as to which default was entered; (3) whether 9 the defaulting party is a minor or incompetent person; (4) that the Servicemembers Civil 10 Relief Act does not apply; and (5) that the defaulting party was properly served with 11 notice, if required under Rule 55(b)(2). Rule 55(b)(2) requires written notice on the 12 defaulting party if that party “has appeared personally or by a representative.” 13 KMS meets these requirements. On May 10, 2024, the Clerk entered default 14 against MLT, as to KMS’s Complaint. (Second Default; Decl. Steven W. Block ISO 15 Mot. (“Block Decl.”) ¶¶ 2–3, ECF No. 99-2.) KMS asserts that MLT is a corporate 16 entity, not a minor or incompetent person, nor a service member. (Block Decl. ¶¶ 4–5.) 17 Finally, KMS served MLT with written notice of the Motion. (Id. ¶ 6; Decl. Mailing, 18 ECF No. 99-6). Thus, KMS satisfies the procedural requirements for entry of default 19 judgment. 20 B. Eitel Factors 21 In evaluating whether entry of default judgment is warranted, courts consider the 22 “Eitel factors”: (1) the possibility of prejudice to plaintiff; (2) the merits of plaintiff’s 23 substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake; 24 (5) the possibility of a material factual dispute; (6) whether the default was due to 25 excusable neglect, and (7) the strong policy favoring decisions on the merits. See Eitel 26 v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). “Of all the Eitel factors, courts 27 often consider the second and third factors to be the most important.” Vietnam Reform 28 Party v. Viet Tan-Vietnam Reform Party, 416 F. Supp. 3d 948, 962 (N.D. Cal. 2019) 1 (internal quotation marks omitted). Accordingly, the Court considers these two factors 2 first. 3 1. Second & Third Eitel Factors 4 The second and third Eitel factors require a plaintiff to “state a claim on which 5 the [plaintiff] may recover.” PepsiCo, 238 F. Supp. 2d at 1175 (alteration in original). 6 Although well-pleaded allegations are taken as true, “claims which are legally 7 insufficient[] are not established by default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 8 1261, 1267 (9th Cir. 1992). 9 Here, KMS asserts claims for breach of contract, replevin, conversion, and 10 pre-judgment attachment. (Compl. ¶¶ 12–27.) However, in the Motion, KMS seeks 11 default judgment only on the claim for replevin. (Mot. 1–2.) 12 “‘[R]eplevin” no longer exists under California law, and courts generally 13 interpret pleadings alleging replevin as alleging a claim for conversion. Gia v. Tang, 14 No. 5:21-cv-00696-KES, 2024 WL 2107324, at *1 n.2 (C.D. Cal. Mar. 15, 2024) 15 (citing Foster v. Sexton, 61 Cal. App. 5th 998, 1020 (2021)); see also BMA LLC v. HDR 16 Glob. Trading Ltd., No. 20-cv-03345-WHO, 2021 WL 4061698, at *17 (N.D. Cal. 17 Sep. 7, 2021) (“The . . . ‘writ of replevin’ claim collapses into the conversion claim.”). 18 Further, a prayer for relief in the form of replevin is equivalent to requesting judgment 19 for the possession or value of personal property pursuant to California Code of Civil 20 Procedure section 667. See Foster, 61 Cal. App. 5th at 1020; Irving Nelkin & Co. v. S. 21 Beverly Hills Wilshire Jewelry & Loan, 129 Cal. App. 4th 692, 700 (2005). 22 The Court has previously “looked past [KMS’s] pleading’s label and examine[d] 23 its substance,” to conclude that KMS’s action pursuing recovery of specific personal 24 property is essentially one for conversion. (Order Den. Mot. J. Pleadings 4, ECF No. 72 25 (quoting Foster, 61 Cal. App. 5th at 1020).) Under California law, the tort of conversion 26 is the “wrongful exercise of dominion over personal property of another.” Foster, 27 61 Cal. App. 5th at 1020 (quoting Voris v. Lampert, 7 Cal. 5th 1141, 1150 (2019)). “The 28 essential elements of conversion are ‘(a) plaintiff’s ownership or right to possession of 1 personal property, (b) defendant’s disposition of property in a manner inconsistent with 2 plaintiff’s property rights, and (c) resulting damages.’” Id. at 1021–22. In addition, 3 when a “defendant lawfully acquires possession of property with consent of the owner,” 4 demand for its return “is necessary to create a liability for conversion.” Flennaugh v. 5 Heinrich, 89 Cal. App. 2d 214, 221 (1948). 6 Taking KMS’s well-pleaded allegations as true, TeleVideo Sys., 826 F.2d at 917– 7 18, KMS sufficiently pleads that (1) it is the rightful owner of the Cargo, (2) that MLT 8 is wrongfully withholding the Cargo and refusing to deliver it or allow KMS to take 9 possession, and (3) that KMS has been damaged by MLT’s wrongful conduct, (Compl. 10 ¶¶ 6–11, 16–23). Additionally, KMS alleges that it has repeatedly demanded return of 11 the Cargo, to no avail. (Id. ¶ 11.) Thus, KMS plausibly states a cause of action for 12 conversion such that it is entitled to replevin of the Cargo.2 Therefore, the second and 13 third Eitel factors weigh in favor of granting the Motion. 14 2. Remaining Eitel Factors 15 On balance, the remaining Eitel factors also weigh in favor of entering default 16 judgment against Defendants. To begin, the first and fourth Eitel factors—possibility 17 of prejudice and sum of money at stake—favor default judgment. KMS would suffer 18 prejudice absent entry of default judgment because it would have no recourse against 19 MLT’s continuing default. Further, as discussed below, KMS does not seek any 20 monetary relief unless the Cargo has been damaged, in which case the sum of money 21 sought is directly proportionate to the harm inflicted on KMS’s property by virtue of 22 MLT’s wrongful possession. 23 24 25 2 The Court’s early denial of KMS’s motion for judgment on the pleadings does not alter this conclusion. At that time, MLT had appeared and denied KMS’s allegation that KMS demanded return 26 of the Cargo. (Order Den. Mot. J. Pleadings 5.) Thus, a material dispute then remained as to an essential element of the claim, and judgment on the pleadings was improper. (Id.) However, MLT 27 has since defaulted, resulting in the Court striking its answer. (Order Granting Withdrawal & Striking 28 MLT Answer 2.) As such, KMS’s well-pleaded allegations are now accepted as true, and MLT presents no opposition or reason to doubt KMS’s allegation that it demanded return of the Cargo. 1 The fifth and sixth factors—possibility of dispute and excusable neglect—also 2 weigh in favor of default judgment. KMS’s well-pleaded allegations are accepted as 3 true on default, and MLT may not now “challenge the accuracy of the allegations in the 4 complaint.” Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F. Supp. 2d 916, 922 5 (C.D. Cal. 2010). Although MLT previously appeared in the case, MLT’s answer has 6 since been stricken in light of MLT’s decision to accept entry of its default and to not 7 retain new counsel. (See MLT Answer, ECF No. 46 (stricken); Order Granting 8 Withdrawal & Striking MLT Answer.) KMS supports its claim for replevin with 9 evidence and the Court’s review of the record reveals “no factual disputes . . . that 10 preclude the entry of default judgment.” Landstar Ranger, 725 F. Supp. 2d at 922. 11 Further, MLT was previously engaged in this litigation and has since accepted entry of 12 its default. KMS properly served MLT with its Motion for Default Judgment and MLT 13 has failed to respond in any way. Thus, despite being on notice of this action, the likely 14 consequences of its default, and KMS’s motion for default judgment, MLT nevertheless 15 failed to respond. These facts undermine any possibility of excusable neglect. 16 Finally, the seventh factor—policy favoring decisions on the merits—always 17 weighs in a defaulting defendant’s favor. See Vietnam Reform Party, 416 F. Supp. 3d 18 948 at 970. However, because MLT’s default in this action prevents the Court from 19 reaching a decision on the merits, this factor does not prevent the Court from entering 20 judgment by default. See Duralar Techs. LLC v. Plasma Coating Techs., Inc., 848 F. 21 App’x 252, 255 (9th Cir. 2021) (affirming entry of default judgment where all factors 22 except the seventh weighed in the plaintiff’s favor). 23 In sum, the Eitel factors weigh in favor of entering default judgment against MLT 24 on KMS’s claim for replevin. 25 C. Requested Relief 26 “A default judgment must not differ in kind from, or exceed in amount, what is 27 demanded in the pleadings.” Fed. R. Civ. P. 54(c). In its Complaint, KMS seeks 28 replevin of the Cargo or a monetary judgment in the amount of $973,544.40 against 1 MLT as a result of its conversion. (Compl., Prayer for Relief ¶¶ 1–2.) In the Motion, 2 KMS seeks an order of replevin of the Cargo or a monetary judgment of damages up to 3 the Cargo’s original value—$676,220.00—in the event the Cargo’s value is diminished. 4 (Mot. 6.) This request does not differ in kind from that demanded in the pleadings, and 5 the monetary amount sought in the Motion is not more than that demanded in the 6 pleading. (Compare Mot. 6, with Compl., Prayer for Relief ¶¶ 1–2.) Accordingly, the 7 relief KMS requests here is authorized. See Fed. R. Civ. P. 54(c). Moreover, KMS 8 submits evidence establishing the Cargo’s original value of $676,220.00, (see Purchase 9 Orders), which supports that the monetary damages KMS requests in the alternative to 10 replevin are directly proportional to any harm MLT’s wrongful possession has inflicted 11 on the Cargo. Although KMS seeks additional relief in its Complaint, it does not seek 12 that relief in its Motion; thus, KMS waives all such additional relief. 13 Therefore, KMS is entitled to replevin of its Cargo or monetary damages up to 14 its original value of $676,220.00 in the event MLT’s wrongful possession has 15 diminished the Cargo’s value. 16 V. CONCLUSION 17 For the foregoing reasons, the Court GRANTS Plaintiff’s Motion for Default 18 Judgment and Replevin. (ECF No. 99.) The Court ORDERS that KMS shall have 19 replevin from MLT of its Cargo—six ocean containers, Nos. MRSU3366617; 20 MRKU3595009; MRKU4442365; MSKU1739639; MSKU1261724; and 21 MSKU0176762, each containing 1090 units of CL-RAC05MW-22 Cool Living Brand 22 air conditioners. MLT shall immediately make the Cargo available to KMS within two 23 business days of the date of this Order. In the event that the Cargo is not released to 24 25 26 27 28 1 || KMS as required above, KMS shall have judgment against MLT in the amount of 2 || $676.220.00. The Court will issue judgment consistent with this Order. 3 4 IT IS SO ORDERED. 5 6 October 21, 2024 7 aes 9 OTIS D. WRIGHT, II 0 UNITED STATES DISTRICT JUDGE 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28