Wells Fargo Bank, N.A. v. Daniels ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 WELLS FARGO BANK, N.A., Case No. 1:21-cv-00643-JLT-BAK (EPG) 12 Plaintiff, FINDINGS AND RECOMMENDATIONS RECOMMENDING THAT PLAINTIFF’S 13 v. MOTION FOR DEFAULT JUDGMENT BE GRANTED 14 RAYMOND DANIELS, (ECF No. 25). 15 Defendant. FOURTEEN (14) DAY DEADLINE 16 17 Currently before the Court is Plaintiff Wells Fargo Bank, N.A.’s (“Plaintiff”) motion for 18 default judgment against Defendant Raymond Daniels (“Defendant”) and request for attorneys’ 19 fees and costs. The matter was referred to the undersigned pursuant to 28 U.S.C. § 636(b)(1)(B) 20 and Local Rule 302(c)(19). For the following reasons, the Court recommends granting the 21 motion. 22 I. BACKGROUND 23 Plaintiff filed this action on April 16, 2021, alleging state law claims for breach of 24 contract, unjust enrichment, express contractual indemnity, and money had and received arising 25 from Defendant’s breach of the terms of an account agreement between Plaintiff and Defendant. 26 (ECF No. 1). According to the complaint, Defendant and his now-estranged wife executed a business 27 account application with Plaintiff on June 22, 2017. (ECF No. 1 at 3). Defendant executed a 28 1 separate consumer account application with Plaintiff on February 11, 2020. (Id.) The executed 2 account applications both state that the signatory and Plaintiff are bound by the terms of 3 Plaintiff’s standard account agreement. (Id. at 13, 17). Plaintiff alleges that Defendant used his 4 estranged wife’s credentials to make a fraudulent and unauthorized transfer of $100,000.00 from her separate consumer account to the shared business account on June 22, 2020. (Id. at 4). 5 Defendant then transferred $99,000.00 from the shared business account to Defendant’s consumer 6 account. (Id.) According to Plaintiff, the unauthorized transfers violated the account agreement. 7 (Id. at 5). As a result of the first unauthorized transfer, Plaintiff credited $100,000.00 to 8 Defendant’s estranged wife’s consumer account. (Id.) Meanwhile, Defendant made use of the 9 funds transferred from the shared business account until his consumer account was overdrawn on 10 June 29, 2020. (Id.) Hence, the fraudulent transfers and Defendant’s subsequent failure to 11 indemnify Plaintiff as required by the parties’ contract provide the factual basis for the claims 12 brought against Defendant. (Id. at 5-7). 13 The Court granted Plaintiff’s ex parte application to serve Defendant by publication 14 pursuant to California Code of Civil Procedure § 415.50. (ECF Nos. 9). On October 19, 2021, 15 Plaintiff filed proof of service by publication of the summons and complaint. (ECF No. 11). 16 According to the proof of service, the summons and complaint were published in the Los Angeles 17 Daily Journal on the following dates: September 24, 2021; October 1, 2021; October 8, 2021; and 18 October 15, 2021. (Id.). 19 On December 16, 2021, after the Court directed Plaintiff to seek the Defendant’s default, 20 Plaintiff filed a request for entry of default against Defendant, and the Clerk of Court entered 21 Defendant’s default the same day. (ECF Nos. 14-17). On March 14, 2022, the Court issued an 22 order directing Plaintiff to show cause as to why the case should not be dismissed without 23 prejudice for failure to prosecute. (ECF No. 21). On April 13, 2022, Plaintiff filed a response and requested the Court to extend the deadline for Plaintiff to file a motion for default judgment. 24 (ECF No. 22). On April 14, 2022, the Court issued an order discharging the order to show cause 25 and setting a thirty-day deadline for Plaintiff to file a motion for default judgment. (ECF No. 24). 26 Plaintiff filed the instant motion for default judgment on April 22, 2022. (ECF No. 25). 27 Plaintiff argues default judgment should be granted against Defendant because the complaint 28 1 adequately alleges that Plaintiff is entitled to relief under California law. (ECF No. 25 at 7-8). 2 Specifically, Plaintiff’s motion argues the complaint sufficiently alleges meritorious claims 3 against Defendant for breach of contract, express contractual indemnity, and money had and 4 received.1 (Id.). Plaintiff is entitled to $100,000 in compensatory damages excluding interest, attorneys’ fees, and costs. (Id. at 8, 13). Pursuant to the account agreement between Plaintiff and 5 Defendant, Plaintiff is entitled to recover attorneys’ fees, and expenses “incurred in collecting any 6 overdraft in [Defendant’s Accounts].” (Id. at 9, 13). Additionally, because the damages amount is 7 liquidated, “[Plaintiff] is entitled to prejudgment interest from the date of the breach.” (Id. at 9, 8 13). In total, Plaintiff’s motion requests that the Court enter judgment against Defendant for $121, 9 792.85. (Id. at 13). 10 The Court granted Plaintiff leave to file supplemental briefing to address the adequacy of 11 service by publication. (ECF No. 27). Plaintiff’s supplemental brief outlined Plaintiff’s efforts to 12 locate and serve Defendant prior to requesting permission to serve Defendant by publication. 13 (ECF No. 28 at 2-3). Plaintiff first attempted to serve Defendant the summons and complaint at 14 Defendant’s last known address but was told that Defendant had moved. (Id. at 2). Defendant’s 15 estranged wife provided Plaintiff with Defendant’s email address. (Id.) Plaintiff’s counsel sent the 16 summons and complaint along with other filings directed to Defendant to Defendant’s email 17 address. (Id.) Plaintiff’s counsel also attempted to contact Defendant by telephone at three 18 different numbers associated with Defendant. (Id. at 2-3). Plaintiff’s counsel arranged for a “skip 19 trace” search of Defendant’s most recent known addresses, which revealed two potential 20 addresses in Santa Rosa, CA, and Bakersfield, CA. (Id. at 3). Plaintiff was unsuccessful in its 21 attempts to serve Defendant at either address. (Id.) The search indicated that Defendant had lived 22 in several cities over the last ten years throughout Southern California, Northern California, 23 Central California, Colorado and Arizona. (Id. at 4; see also ECF No. 9-2 at 10-11). Plaintiff provided a declaration from the individual who performed the search, which stated that numerous 24 public records indices were searched to locate Defendant such as bankruptcy filings, corporation 25 affiliations, county tax lien filings, DMV information, federal tax lien filings, national death 26 27 1 Plaintiff’s complaint states an additional claim for unjust enrichment. (ECF No. 1 at 5). However, Plaintiff’s motion does not specifically argue that it is entitled to default judgment on the unjust enrichment claim. (See ECF No. 25). 28 1 records, real property ownership, and state tax lien filings. (ECF No. 9-2 at 13). According to 2 Plaintiff, service by publication in the Los Angeles Daily Journal was adequate because as it was 3 unknown in which city, country, or state Defendant resided in, publication in the most populated 4 county in the state would be the most likely to give actual notice to Defendant. (Id. at 4-5). On August 19, 2022, the Court held a hearing on Plaintiff’s motion for default judgment. 5 (ECF No. 31). Counsel Matthew Follet appeared telephonically at the hearing on behalf of 6 Plaintiff. (Id.) Defendant did not appear. (Id.) At the hearing, the Court directed Plaintiff to file a 7 supplemental declaration addressing the date issue raised in the hearing, revised calculations of 8 the prejudgment interest and attorneys’ fees, and additional documentation in support of the 9 request for attorneys’ fees. (ECF No. 32). During the hearing, the Court also requested additional 10 briefing regarding whether Plaintiff was entitled to default judgment on the unjust enrichment 11 claim, but Plaintiff’s supplemental briefing did not address this issue.2 12 On September 1, 2022, Plaintiff filed a supplemental declaration in support of its motion. 13 (ECF No. 33). According to Plaintiff counsel’s declaration, the July 3, 2021, date in Plaintiff’s 14 motion set forth as the date upon which prejudgment interest began to accrue was incorrect. (Id. 15 at 2). The correct date that prejudgment interest began to accrue was July 3, 2020. (Id. at 3). 16 Plaintiff requests the Court award $21,665.49 in prejudgment interest based on the corrected date. 17 (Id.) Further, because Plaintiff has incurred additional attorneys’ fees and costs since drafting and 18 filing the motion, Plaintiff requests an updated $20,304.56 in attorneys’ fees and $1,781.52 in 19 costs. (Id.) In support of its request, Plaintiff provides documentation of the costs incurred and 20 hours billed. (Id. at 39, 9-37). In summary, Plaintiff’s motion for default judgment and 21 supplemental briefing requests the following judgment award against Defendant: 22 1. $100,000 in compensatory damages; 23 2. $21,665.49 in prejudgment interest; 3. $20,304.56 in attorneys’ fees; and 24 4. $1,781.52 in costs. 25 (Id. at 4). 26 27 2 Because Plaintiff has not provided argument as to why it is entitled to default judgment on the unjust enrichment claim, the Court will recommend that Plaintiff’s claim for unjust enrichment against Defendant be dismissed with 28 prejudice. 1 II. LEGAL STANDARDS 2 Federal Rule of Civil Procedure 55 permits the Court to enter default judgment following 3 a defendant’s default. See Fed. R. Civ. P. 55(b). Rule 55 specifically provides that: 4 (b) Entering a Default Judgment (1) By the Clerk. If the plaintiff’s claim is for a sum certain or a sum that can 5 be made certain by computation, the clerk—on the plaintiff’s request, with an affidavit showing the amount due—must enter judgment for that amount and 6 costs against a defendant who has been defaulted for not appearing and who is neither a minor nor an incompetent person. 7 (2) By the Court. In all other cases, the party must apply to the court for a 8 default judgement. A default judgment may be entered against a minor or incompetent person only if represented by a general guardian, conservator, or 9 other like fiduciary who has appeared personally or by a representative, that person or its representative must be served with written notice of the 10 application at least 7 days before the hearing. The court may conduct hearings or make referrals—preserving any federal statutory right to a jury trial—when, 11 to enter or effectuate judgment, it needs to: 12 (A) Conduct an accounting; (B) Determine the amount of damages; 13 (C) Establish the truth of any allegation by evidence; or (D) Investigate any other matter. 14 Fed. R. Civ. P. 55(b). 15 Whether to enter a default judgment lies within the court’s discretion. Draper v. Coombs, 16 792 F.2d 915, 924-25 (9th Cir. 1986). The Ninth Circuit has enumerated the following factors 17 (collectively, the Eitel factors) that a court may consider in determining whether to grant default 18 judgment: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff’s 19 substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the 20 action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due 21 to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure 22 favoring decision on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). 23 “The general rule of law is that upon default the factual allegations of the complaint, 24 except those relating to the amount of damages, will be taken as true.” TeleVideo Sys., Inc. v. 25 Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987). Therefore, the plaintiff is required to provide 26 proof of all damages sought in the complaint. In addition, before awarding a default judgment against a defendant, the Court must 27 determine the adequacy of service of process, as well as the Court’s jurisdiction over the subject 28 1 matter and the parties. In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999) (“When entry of judgment is 2 sought against a party who has failed to plead or otherwise defend, a district court has an 3 affirmative duty to look into its jurisdiction over both the subject matter and the parties.”); cf. 4 S.E.C. v. Internet Sols. for Bus. Inc., 509 F.3d 1161, 1165 (9th Cir. 2007) (“We review de novo whether default judgment is void because of lack of personal jurisdiction due to insufficient 5 service of process.”). 6 III. DISCUSSION 7 The Court first addresses its subject matter jurisdiction for entering default judgment as 8 well as adequacy of service of process. The Court will then examine the Eitel factors and the 9 terms of the proposed judgment. 10 A. Jurisdiction 11 Pursuant to 28 U.S.C. § 1332(a)(1), federal courts have original jurisdiction over “all civil 12 actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest 13 and costs, and is between . . . citizens of different States.” In addition to satisfying the minimum 14 amount in controversy, proper diversity jurisdiction requires that “the citizenship of each plaintiff 15 is diverse from the citizenship of each defendant.” See Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 16 (1996). The party asserting diversity jurisdiction bears the burden of proof. Lew v. Moss, 797 F.2d 17 747, 749 (9th Cir. 1986). “However, at the pleading state, allegations of jurisdictional fact need 18 not be proven unless challenged.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 614 (9th Cir. 19 2016) (affirming diversity jurisdiction based on allegations made in amended complaint for the 20 purposes of default judgment). 21 Individuals are deemed to be citizens of the state in which they are domiciled. See Kanter 22 v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). An individual is domiciled in the 23 location where they have established a “fixed habitation or abode in a particular place, and [intends] to remain there permanently or indefinitely.” Lew, 797 F.2d at 749-750 (internal 24 citations and quotation marks omitted). Domicile is determined at the time the lawsuit is filed. Id. 25 An individual’s domicile is not changed until a new one is acquired by “the confluence of (a) 26 physical presence at the new location with (b) an intention to remain there indefinitely.” Id. 27 28 1 Further, there are several relevant factors a court may consider when determining an individual’s 2 domicile, including: 3 [C]urrent residence, voting registration and voting practices, location of personal and real property, location of brokerage and bank accounts, location of spouse and 4 family, membership in unions and other organizations, place of employment or business, driver's license and automobile registration, and payment of taxes. 5 Id. For purposes of diversity jurisdiction, a corporation is a citizen of both the state where it is 6 incorporated and the state where its “nerve center” (typically its headquarters) is located. 7 28 U.S.C. § 1332(a)(1), (c)(1); Hertz Corp. v. Friend, 559 U.S. 77, 130 (2010). 8 The Court finds that Plaintiff adequately alleges diversity jurisdiction. First, the amount in 9 controversy requirement is satisfied as Plaintiff seeks compensatory damages totaling 10 $100.000.00. Second, Plaintiff and Defendant are diverse in citizenship. Plaintiff is a citizen of 11 South Dakota because its “main office, as designated in its articles of association, [is] located in 12 Sioux Falls, South Dakota.” (See ECF No. 1 at 2). As for Defendant, the Court finds sufficient 13 evidence of Defendant’s domicile in California. See Stewart Title Guar. Co. v. 2485 Calle Del 14 Oro, LLC, 2018 WL 3222610 at *7 (S.D. Cal. Jun. 19, 2018) (quoting D.C. ex rel Am. 15 Combustion, Inc. v. Transamerica Ins. Co., 797 F.2d 1041, 1044 (D.C. Cir. 1986) (“The whole 16 record may be searched to determine if diversity existed.”)). Plaintiff’s complaint alleges that 17 Defendant is a “citizen of the State of California, residing in Kern County, California.” (ECF No. 1 at 2). Plaintiff’s supplemental briefing provides further documentation of Defendant’s last 18 known residential address in Bakersfield, California, where Defendant resided between August 19 23, 2018, and August 16, 2021. (ECF No. 9-2 at 10). Plaintiff’s complaint was filed on April 16, 20 2021. (ECF No. 1). Thus, the Court finds that the complaint and record establish a prima facie 21 case that Defendant was domiciled in California at the time of filing. See Smith v. Simmons, 2008 22 WL 744709 at *7 (E.D. Cal. Mar. 18, 2008) (“Maintaining a place of residence does not in and of 23 itself establish one’s domicile; it provides a ‘prima facie’ case of domicile . . .”) (internal citations 24 omitted). Accordingly, the Court finds that it has subject matter jurisdiction over this suit. 25 B. Service of Process 26 Federal Rule of Civil Procedure 4 sets forth the requirements for serving an individual 27 within a judicial district of the United States. An individual may be served by: 28 1 (1) following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service 2 is made; or 3 (2) doing any of the following: 4 (A) delivering a copy of the summons and of the complaint to the individual personally; 5 (B) leaving a copy of each at the individual's dwelling or usual place of 6 abode with someone of suitable age and discretion who resides there; or (C) delivering a copy of each to an agent authorized by appointment or by 7 law to receive service of process. 8 Fed. R. Civ. P. 4(e). 9 California law, in turn, permits substituted service by: 10 [L]eaving a copy of the summons and complaint . . . at his or her usual mailing address . . . with the person who is apparently in charge thereof, and by thereafter 11 mailing a copy of the summons and complaint by first-class mail. Cal. Civ. Proc. Code § 415.20(a). Further, 12 If a copy of the summons and complaint cannot with reasonable diligence be 13 personally delivered to the person to be served . . . a summons may be served by 14 leaving a copy of the summons and complaint at the person’s dwelling house, usual place of abode . . . or usual mailing address . . . in the presence of a 15 competent member of the household or a person apparently in charge of his or her . . . usual mailing address . . ., at least 18 years of age, who shall be informed of 16 the contents thereof, and by thereafter mailing a copy of the summons and of the complaint by first-class mail, postage prepaid to the person to be served at the 17 place where a copy of the summons and complaint were left. 18 Id. at § 415.20(b). California law allows for service by publication when: 19 [U]pon affidavit it appears to the satisfaction of the court in which the action is 20 pending that the party to be served cannot with reasonable diligence be served in another manner specified in this article and that. . . 21 22 (1) A cause of action exists against the party upon whom service is to be made or he or she is a necessary or proper party to the action. 23 24 . . . 25 (b) The court shall order the summons to be published in a named newspaper, published in this state, that is most likely to give actual notice to the party to be 26 served. If the party to be served resides or is located out of this state, the court may also order the summons to be published in a named newspaper outside this state 27 that is most likely to give actual notice to that party. The order shall direct that a 28 copy of the summons, the complaint, and the order for publication be forthwith 1 mailed to the party if his or her address is ascertained before expiration of the time prescribed for publication of the summons. Except as otherwise provided by 2 statute, the publication shall be made as provided by Section 6064 of the Government Code unless the court, in its discretion, orders publication for a longer 3 period. 4 Cal. Civ. Proc. Code § 415.50. California Government Code § 6064 requires publication to occur 5 once a week for four successive weeks. Service by publication is satisfied on the twenty-eighth 6 date after the first date of publication. Cal. Gov’t Code § 6064. Plaintiffs must publish the 7 summons at least once per week for four consecutive weeks, with at least five days between each 8 publication date. Id. 9 Here, the Court finds that Plaintiff has complied with Rule 4. After Plaintiff was unable to 10 locate Defendant through reasonable diligence, Plaintiff filed an ex parte application to serve 11 Defendant by publication in the Los Angeles Daily Journal pursuant to California Civil Procedure 12 Code § 415.50(a). (ECF No. 9 at 3-7). The Court granted Plaintiff’s request. (ECF No. 10). Plaintiff submitted proof of service by publication on October 19, 2021. (ECF No. 11). As stated 13 in Plaintiff’s proof of publication, the summons was published in the Los Angeles Daily Journal 14 on the following dates: September 24, 2021; October 1, 2021, October 8, 2021, and October 15, 15 2021. (Id. at 2). Accordingly, Plaintiff has met the service of process requirements by substantial 16 compliance with Rule 4. Thus, all jurisdictional requirements are satisfied. 17 C. Eitel Factors 18 1. Prejudice to Plaintiff 19 The first Eitel factor considers “whether the plaintiff will suffer prejudice if default 20 judgment is not entered.” PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp.2d 1172, 1177 (C.D. 21 Cal. 2002). Plaintiff argues that it will be prejudiced unless judgment is entered because Plaintiff 22 will have no other legal means to recover the $100,000 in damages caused by Defendant. (ECF 23 No. 25 at 13). The primary goal of Plaintiff’s lawsuit is to recover the loss of funds that resulted 24 from Defendant’s wrongful conduct. (Id.) 25 The Court agrees that Plaintiff will be prejudiced if default judgment is not granted. 26 Plaintiff filed this lawsuit on April 16, 2021. (See ECF No. 1.) If default judgment is not entered, 27 Plaintiff will effectively be denied relief, as it is apparent that Defendant will not defend this 28 action. Accordingly, this Eitel factor weighs in favor of default judgment. 1 2. Substantive Merits and Sufficiency of Complaint 2 “The second and third Eitel factors instruct the Court to evaluate the merits of the 3 substantive claims alleged in the complaint as well as the sufficiency of the complaint itself. It is 4 appropriate for the court to analyze these two factors together.” Arroyo v. J.S.T. LLC, 2019 WL 4877573, at *6 (E.D. Cal. Oct. 3, 2019) (citations omitted). The Court, then, examines the 5 complaint to determine whether it states a claim for the relief sought. 6 a. Breach of Contract 7 Under California law, the elements of a breach of contract claim are: “(1) the existence of 8 the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach and 9 (4) the resulting damages to the plaintiff.” Oasis West Realty, LLC v. Goldman, et al, 51 Cal. 4th 10 811, 821 (Cal. 2011) (internal citation omitted). For a contract to be enforceable, 11 the contract terms must be sufficiently definite as a matter of law for the court “to ascertain the 12 parties' obligations and to determine whether those obligations have been performed.” Ersa Grae 13 Corp. v. Fluor Corp., 1 Cal. App. 4th 613, 623 (Cal. Ct. App. 1991). “Stated otherwise, 14 the contract will be enforced if it is possible to reach a fair and just result even if, in the process, 15 the court is required to fill in some gaps.” (Id.) 16 As alleged in the complaint, the parties entered two separate contracts—the business 17 account application for the shared business account, and the consumer account application for 18 Defendant’s personal account—which were both governed by Plaintiff’s standard account 19 agreement. (ECF No. 1 at 3). Specifically, the account agreement forbade unauthorized transfers 20 and provided that, upon overdraft, the account holder must indemnify Plaintiff. (Id. at 5). The 21 complaint also alleges that Plaintiff performed its portion of the contract by performing all the 22 conditions, covenants, promises and agreements as required by the account agreement. (Id.) 23 According to the complaint, Defendant breached the account agreement by making several unauthorized transfers and failing to indemnify $100,000 to Plaintiff after Plaintiff credited 24 Defendant’s estranged wife’s account. (Id.) Further, after transferring those funds, Defendant 25 overdrew his consumer account. (Id. at 4). As a result, the complaint alleges Plaintiff suffered 26 monetary damage in the amount of $100,000. (Id. at 5). These allegations are legally sufficient to 27 entitle Plaintiff to judgment against Defendant on the breach of contract claim. 28 1 b. Express Contractual Indemnity 2 The obligation of indemnity “may arise by virtue of express contractual language.” C.L. 3 Peck Contractors v. Super. Ct., 159 Cal. App. 3d 828, 831 (Cal. Ct. App. 1984). The rules 4 governing express contractual indemnity clauses permit great “freedom of action to the parties in establishment of the indemnity arrangement while at the same time subjecting the resulting 5 contractual language to the establishes rules of construction.” Id. An express indemnity clause has 6 a “preemptive effect, displacing any implied rights which might otherwise arise within the scope 7 of its operation.” Id. at 834. 8 As set forth by the complaint, Defendant knowingly executed a consumer account 9 application on February 11, 2020, thereby entering a contract with Plaintiff, which stated the 10 account would be governed by Plaintiff’s standard account agreement. (ECF No. 1 at 3; see id. at 11 19-82). Specifically, the account agreement contained a clause in which Defendant agreed to 12 indemnify Plaintiff from “all claims, demands, losses, liabilities, judgments, and expenses 13 (including attorney’s fees and expenses” arising from Plaintiff’s performance under the account 14 agreement). (Id. at 6). Further, the complaint alleges that Defendant’s unauthorized account 15 activity resulted in Plaintiff crediting a third-party account holder with $100,000. (Id.) The Court 16 finds the language of this clause unambiguous as it clearly defines the Defendant’s obligation to 17 indemnify the Plaintiff from harms resulting from Plaintiff’s performance under the contract. 18 Because the complaint clearly explains how Plaintiff was harmed while performing under the 19 deposit account agreement, the Court finds that Plaintiff has sufficiently stated a claim for express 20 contractual indemnity. 21 c. Money had and received 22 A claim for money had and received makes a defendant indebted to a plaintiff 23 “for money had and received by the defendant for the use of the plaintiff.” Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 460 (Cal. Ct. App. 1997). The elements are as follows: (1) defendant 24 received money; (2) the money defendant received was for plaintiff's use; and (3) defendant is 25 indebted to plaintiff. Fireman's Fund Ins. Co. v. Commerce & Indus. Co., 2000 WL 1721080, at 26 *8 (N.D. Cal. Nov. 7, 2000). The limitations period for a claim of money had and received is two 27 28 1 years. Murphy v. Am. Gen. Life Ins. Co., 74 F.Supp.3d 1267, 1280 (C.D. Cal. 2015) (citing Cal. 2 Civ. Proc. Code § 339(1) (two-year period for liabilities not founded on written instruments)). 3 According to the complaint, Defendant received money when Plaintiff executed the 4 transfer from the Defendant’s estranged wife’s consumer account to the shared business account 5 based on Defendant’s improper direction. (ECF No. 1 at 7). Further, Plaintiff then credited the 6 shared business account with Plaintiff’s own funds. (Id., see also ECF No. 25 at 8). Thus, 7 Defendant’s unauthorized transfer was paid by Plaintiff, and was for Plaintiff’s own use. Finally, 8 the complaint alleges that as a result of Defendant’s fraudulent conduct, Defendant is now 9 indebted to Plaintiff in the amount of $100,000, as well as any interests and costs. (ECF No. 1 at 10 7). These allegations are legally sufficient to entitle Plaintiff to judgment against Defendant on 11 the money had and received claim. 12 3. Sum of Money in Relation to Seriousness of Conduct Next, the Court considers the sum of money at stake in the action, with a lower sum 13 supporting default judgment. See G & G Closed Circuit Events, LLC v. Nguyen, 2012 WL 14 2339699, at *2 (N.D. Cal. May 30, 2012); PepsiCo Inc., 238 F.Supp.2d at 1176 (“Under the 15 [fourth] Eitel factor, the court must consider the amount of money at stake in relation to the 16 seriousness of Defendant’s conduct.”). 17 Here, Plaintiff requests the amount of money Plaintiff would have received in 18 indemnification had Defendant fully performed under the contract, $100,000.00, plus interest in 19 the amount of $21,665.49. (ECF No. 33 at 4). These requests are supported and corroborated by 20 Plaintiff’s evidence as discussed in detail below. Plaintiff also requests $20,304.56 in attorneys’ 21 fees, and $1,781.52 in costs. In total, Plaintiff seeks $143,751.57. 22 4. Possibility of Dispute 23 No genuine issue of material fact is likely to exist. Plaintiff has adequately alleged claims 24 for breach of contract, express contractual indemnity, and money had and received under 25 California law. Defendant has not made an appearance or otherwise contradicted the well-pleaded 26 allegations of the operative complaint. Accordingly, the Court finds that this factor favors entry 27 of default judgment. 28 1 5. Whether the Default was Due to Excusable Neglect 2 The Court finds that the default in this matter was not due to excusable neglect. Defendant 3 was adequately served with notice of the complaint and failed to respond. Defendant failed to file 4 an answer or otherwise meaningfully participate in this case. Accordingly, the Court finds that 5 this Eitel factor weighs in favor of granting default judgment against Defendant. 6. Policy Favoring Decision on the Merits 6 Default judgments are disfavored because “[c]ases should be decided on their merits 7 whenever reasonably possible.” Eitel, 782 F.2d at 1472. However, the policy favoring decisions 8 on the merits does not weigh against entering default judgment where, as here, the defendant’s 9 failure to appear has made a decision on the merits impossible at this juncture. Arroyo, 2019 WL 10 4877573, at *11. 11 Given the prejudice to Plaintiff if default judgment is not granted as discussed above, and 12 the merits of the allegations contained in complaint, granting default judgment in this case would 13 not violate the general policy under the Federal Rules of Civil Procedure favoring decisions on 14 the merits. See PepsiCo, 238 F. Supp. 2d at 1177 (“Defendant’s failure to answer Plaintiffs’ 15 Complaint makes a decision on the merits impractical, if not impossible. Under Fed. R. Civ. P. 16 55(a), termination of a case before hearing the merits is allowed whenever a defendant fails to 17 defend an action.”). Accordingly, the Court finds the policy favoring decisions on the merits does 18 not preclude entering default judgment against Defendant under these circumstances. 19 In light of the above findings regarding the Eitel factors, the Court recommends granting 20 default judgment in favor of Plaintiff and against Defendant. 21 D. Terms of Judgment 22 Under Rule 8(a)(3), plaintiff's demand for relief must be specific, and it “must ‘prove up’ 23 the amount of damages.” Philip Morris USA Inc. v. Banh, 2005 WL 5758392, at *6 (C.D. Cal. Jan. 14, 2005). Rule 54(c) “allows only the amount prayed for in the complaint to be awarded to 24 the plaintiff in a default.” Elektra Entertainment Group v. Bryant, 2004 WL 783123, at *5 (C.D. 25 Cal. Feb. 13, 2004); PepsiCo, 238 F.Supp.2d at 1174 (stating that a default judgment “shall not be 26 different in kind from or exceed in amount that prayed for in the [complaint]”). 27 // 28 1 1. Compensatory Damages 2 In its motion for default judgment, Plaintiff seeks $100,000.00 in compensatory damages. 3 (ECF No. 25 at 10). As set forth in the declaration from Plaintiff’s fraud and claims consultant, 4 Defendant made an unauthorized transfer of $100,000.00 from his estranged wife’s separate consumer account to the shared business account on June 21, 2020. (ECF No. 25-3 at 3). 5 Defendant then transferred $99,000.00 from the shared business account to Defendant’s consumer 6 account and dissipated those funds. (Id.) As a result of the June 21, 2020, unauthorized transfer 7 by Defendant, Plaintiff conducted an investigation and, upon determining that Defendant’s 8 transfers were fraudulent, credited the wronged account holder $100,000.00 on July 3, 2020.3 9 (Id.) Pursuant to the account agreement, Plaintiff demanded that Defendant repay the 10 $100,000.00. (Id. at 4). 11 The Court finds that Plaintiff has provided sufficient proof of the damages amount 12 through the declaration from Plaintiff’s fraud and claims consultant and supporting 13 documentation, and thus, Plaintiff is entitled to the full amount of compensatory damages. See 14 Nike, Inc. v. B&B Clothing Co., 2007 WL 1515307, at *1 (E.D. Cal. May 22, 2007) (internal 15 citations omitted) (“Where damages are liquidated or otherwise capable of ascertainment from 16 definite figures contained in the documentary evidence or in detailed affidavits, judgment by 17 default may be entered without a damages hearing.”). 18 2. Prejudgment Interest 19 Plaintiff also seeks prejudgment interest pursuant to California Civil Procedure Code § 20 3287. (ECF No. 25 at 10). As the statutory interest rate is ten percent (10%), Plaintiff argues that 21 it is entitled to $21,665.49 4 in prejudgment interest. (Id.) 22 Prejudgment interest “serves to compensate [the prevailing wronged party] for the loss of 23 use of money due as damages from the time the claim accrues until judgment is entered, thereby achieving full compensation for the injury those damages are intended to redress.” Schneider v. 24 County of San Diego, 285 F.3d 784, 789 (9th Cir. 2002) (internal quotation omitted). State law 25 generally governs the award of prejudgment interest in diversity actions. Oak Harbor Freight 26 27 3 The declaration at times references June 2021 dates. The Court relies on the corrected dates as set forth in Plaintiff’s supplemental brief. (ECF No. 33 at 2). 28 4 This amount reflects the prejudgment interest total as updated in Plaintiff’s supplemental brief. (ECF No. 33 at 4). 1 Lines, Inc. v. Sears Roebuck & Co., 513 F.3d 949, 961 (9th Cir. 2008). California Civil Procedure 2 Code § 3287(a) provides that a party “entitled to recover damages certain, or capable of being 3 made certain by calculation, and the right to recover which is vested in the person upon a 4 particular day, is entitled to also recover interest thereon from that day.” Further, the obligation set forth by a contract “shall bear interest at a rate of 10 percent per annum after a breach.” Cal. 5 Civ. Proc. Code § 3289(b). 6 Because Plaintiff alleged that it was entitled to prejudgment interest under California law 7 in the complaint and because the Court finds that Plaintiff provided adequate proof of the 8 damages amount, the Court also finds that Plaintiff is entitled to recover the full amount of 9 prejudgment interest. 10 3. Attorneys’ Fees and Costs 11 Plaintiff also seeks attorneys’ fees and costs pursuant to California Civil Procedure Code 12 §§ 1021 & 1717. (ECF No. 25 at 11-13). Plaintiff’s motion and supporting declaration state that 13 the account agreement between Plaintiff and Defendant provided that Defendant would 14 “reimburse [Plaintiff] for the costs and expenses (including attorney’s fees and expenses)” 15 incurred in collecting any overdraft in Defendant’s accounts. (Id. at 12). Further, as set forth in 16 Plaintiff’s complaint, the express indemnity clause in the account agreement between Plaintiff 17 and Defendant provided that Defendant would “indemnify and hold [Plaintiff] harmless from all 18 claims, demands, losses, liabilities, judgments, and expenses (including attorney’s fees and 19 expenses) arising out of or in any connected with [Plaintiff’s] performance under the Agreement.” 20 (ECF No. 1 at 6). 21 Plaintiff seeks a total of $20,304.56 in attorneys’ fees, and $1,781.52 in costs. (ECF No. 22 33 at 4). In support of its request for attorneys’ fees, Plaintiff provides billing statements as 23 documentation of the work performed by Plaintiff’s counsel in this action. (Id. at 6-37). Plaintiff states that approximately $1,594.60 of the requested attorneys’ fees is yet to be billed. (Id. at 3). 24 As for the $1,781.52 in costs sought, Plaintiff provides an itemized disbursement summary of 25 costs. (Id. at 39). 26 a. Relevant Legal Standards to be used when calculating attorneys’ fee award 27 “A federal court sitting in diversity applies the law of the forum state regarding an award 28 1 of attorneys’ fees.” Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 977, 883 (9th Cir. 2000). 2 California Civil Procedure Code § 1021 provides that “[e]xcept as attorney’s fees are specifically 3 provided for by statute, the measure and mode of compensation of attorneys and counselors at 4 law is left to the agreement, express or implied, of the parties.” California Civil Procedure Code § 1717(a) provides that, 5 In any action on a contract, where the contract specifically provides that attorney’s 6 fees and costs, which are incurred to enforce that contract . . .then the party who 7 determined to be the party prevailing on the contract . . .shall be entitled to reasonable attorney’s fess in addition to other costs. 8 Further, the trial court “shall determine who is the party prevailing on the contract,” and “the 9 party prevailing on the contract shall be the party who recovered a greater relief in the action on 10 the contract.” § 1717(b)(1). The trial court is given “broad authority to determine the amount of a 11 reasonable fee.” PLCM Group v. Drexler, 22 Cal. 4th 1084, 1095 (Cal. 2000). 12 b. Discussion of attorneys’ fees and costs 13 First, the Court must determine whether Plaintiff is entitled to attorneys’ fees under 14 California law. Both the business account and consumer account were governed by Plaintiff’s 15 standard account agreement, which specifically provided for the payment of attorneys’ fees and 16 costs by Defendant to Plaintiff in the event of breach or overdraft. (See ECF No. 25-6 at 19, 32). 17 Further, because the Court has found that Plaintiff is entitled to judgment against Defendant for its breach of contract claim, the Court also finds that for the purposes of § 1717, Plaintiff is the 18 prevailing party in this action. Thus, Plaintiff may be awarded attorneys’ fees pursuant to 19 California Civil Code of Procedure § 1717. 20 Second, the Court must address whether Plaintiff’s fees are reasonable. Here, Plaintiff’s 21 counsel, Fox Rothschild LLP contends that four attorneys, Eric Andrew Bevan, Joseph A. 22 Milano, Matthew R. Follett, Christopher J. McNamara, and four Fox Rothschild LLP employees 23 only identified as A.S. Rubin, W. Hendel, N. Yegazarian, and S.B. Burack, performed work on 24 this case, billing approximately 73.9 hours.5 (Id.) The billing entries are itemized for each 25 individual and list the various tasks performed in this case, including reviewing the client’s case 26 file, preparing the complaint, investigating Defendant’s location, pursuing service by publication, 27 5 As Plaintiff’s supplemental brief states that a portion of the fees requested has not yet billed, this total is the sum of 28 al hours documented by the provided billing entries. 1 | responding to the Court’s order to show cause, and preparing the motion for default judgment. 2 | Ud.) Plaintiffs counsel also states that it has incurred litigation costs in the amount of $1,781.52, 3 | for which Plaintiff provides an itemized list of costs such as research, document retrieval, court 4 | filings, investigation, and messenger services. (/d. at 39). Upon review, the Court finds that the 5 | 73.9 hours billed in this case are reasonable in light of the legal services performed. In particular, 6 Plaintiffs counsel expended considerable effort to locate Defendant and in briefing the matter. 7 Thus, the Court will recommend that Plaintiffs request for attorneys’ fees and costs be granted. 8 IV. CONCLUSION AND RECOMMENDATION For the foregoing reasons, it is HEREBY RECOMMENDED that: ° 1. Plaintiff's motion for default judgment (ECF No. 25) be GRANTED; 2. Default judgment be entered in favor of Plaintiff against Defendant Raymond Daniels, for Plaintiff's claims for breach of contract, express contractual indemnity, and money 2 had and received; 13 3. Plaintiff's claim for unjust enrichment (ECF No. 1) be dismissed with prejudice; 4. Plaintiff be awarded $100,000.00 in compensatory damages; 15 5. Plaintiff be awarded $21,665.49 in prejudgment interest; 16 5. Plaintiff be awarded $22,086.08 in attorneys’ fees and costs; and 17 6. The Clerk of Court be directed to close this case. 18 These findings and recommendations will be submitted to the United States district judge 19 || assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636(b)(1). Within fourteen 20 | (4) days after being served with these findings and recommendations, the parties may file 21 || written objections with the Court. The document should be captioned “Objections to Magistrate 922 | Judge’s Findings and Recommendations.” The parties are advised that failure to file objections 23 | within the specified time may result in the waiver of rights on appeal. Wilkerson v. Wheeler, 772 F.3d 834, 838-39 (9th Cir. 2014) (citing Baxter v. Sullivan, 923 F.2d 1391, 1394 (9th Cir. 1991)). IT IS SO ORDERED. 25 26 | Dated: _ October 5, 2022 [Je Fahey — 4 UNITED STATES MAGISTRATE JUDGE 28 17