Stewart v. MNS & Associates, LLC ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 TAYLOR STEWART, No. 2:21-cv-02418 WBS AC 12 Plaintiff, 13 v. FINDINGS AND RECOMMENDATIONS 14 MNS & ASSOCIATES, LLC, and MICHAEL SHAW, 15 Defendants. 16 17 18 This matter is before the court on plaintiff’s amended motion for default judgment against 19 defendant MNS & Associates and Michael Shaw. ECF No. 18. The motion was referred to the 20 undersigned pursuant to E.D. Cal. R. 302(c)(19). This motion was submitted without oral 21 argument. ECF No. 21. For the reasons set forth below, the undersigned recommends that 22 plaintiff’s motion be GRANTED. 23 Plaintiff previously filed a motion for default judgment against the corporate defendant 24 only, and the court issued findings and recommendations and an order to show cause regarding 25 that motion. ECF No. 14. Those findings and recommendations and order to show cause are 26 hereby WITHDRAWN in light of the amended motion addressed here. 27 I. Relevant Background 28 Plaintiff filed his complaint in this court on December 28, 2021, alleging that defendants 1 violated the Fair Debt Collection Practices Act and the California Rosenthal Fair Debt Collections 2 Practices Act. ECF No. 1. The complaint is predicated on defendants’ allegedly unlawful debt 3 collection practices. The complaint alleges that MNS & Associates LLC (“MNS”) and its owner, 4 Michael Shaw, are debt collectors as defined by the FDCPA and that MNS is a corporation doing 5 business collecting debts in Sacramento County, California while operating from Cheektowaga, 6 Erie County, New York. ECF No. 1 at 2. Plaintiff asserts that defendants are attempting to 7 collect a consumer debt (arising from personal, family, and house purposes) from plaintiff, 8 allegedly originating with Milestone Gold MasterCard. ECF No. 1 at 3. Plaintiff alleges that 9 MNS began placing calls to plaintiff’s cell phone on May 28, 2021. Id. On that date, MNS left a 10 voicemail stating that plaintiff’s failure to contact MNS may result in “further determinations 11 being made applicable to all state and federal guidelines.” Id. at 4. 12 On June 1, 2021, plaintiff spoke with one of MNS’s collectors, Isabella. During this call 13 plaintiff inquired about recently received voicemails, and Isabella stated that the “matter is 14 stemming from a breach of written express contract, which does violate statutory contract law” 15 and that payment arrangements must be made immediately. Id. Plaintiff asked for a payment 16 plan but was told that if he could not pay in full the case would be referred to another agency and 17 potentially to attorneys. Id. Shortly after the phone call, plaintiff received another voicemail 18 from MNS advising him that he needed to sign for and respond to a demand notice. ECF No. 1 at 19 5. Plaintiff alleges that at all relevant times, acting alone or in concert with others, defendant 20 Shaw has formulated, directed, controlled, had the authority to control, or participated in the acts 21 and practices of MNS, and its employees, including the acts and practices set forth in plaintiff’s 22 complaint. Id. at 6. 23 Both defendants were served in January of 2022. ECF Nos. 4 and 5. Neither defendant 24 filed an answer nor appeared in this case in any way. Plaintiff initially requested entry of default 25 as to defendant MNS only. ECF No. 7. The Clerk of Court entered default against defendant 26 MNS on February 28, 2022. ECF No. 8. Plaintiff requested entry of default as to Michael Shaw 27 on June 2, 2022. ECF No. 15. The Clerk of Court entered default as to Michael Shaw on June 28 17, 2022. ECF No. 17. On June 24, 2022, plaintiff moved for entry of default judgment and an 1 award of attorneys’ fees as to both defendants. ECF No. 18. 2 II. Motion 3 Defendant moves for default judgment against defendants on all counts, seeking damages 4 as follows: (1) $2,000 in statutory damages and (2) $4,365.00 in attorney’s fees and $540.75 in 5 costs, for a total award against defendants in the amount of $6,905.75. ECF No. 18 at 7. 6 III. Analysis 7 A. Legal Standard 8 Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party 9 against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend 10 against the action. See Fed. R. Civ. P. 55(a). However, “[a] defendant’s default does not 11 automatically entitle the plaintiff to a court-ordered judgment.” PepsiCo, Inc. v. Cal. Sec. Cans, 12 238 F.Supp.2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th 13 Cir. 1986)); see Fed. R. Civ. P. 55(b) (governing the entry of default judgments). Instead, the 14 decision to grant or deny an application for default judgment lies within the district court’s sound 15 discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this 16 determination, the court may consider the following factors: 17 (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake 18 in the action; (5) the possibility of a dispute concerning material facts; (6) whether 19 the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 20 21 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily 22 disfavored. Id. at 1472. 23 As a general rule, once default is entered, well-pleaded factual allegations in the operative 24 complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. 25 v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. 26 Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); see also Fair Housing of Marin v. 27 Combs, 285 F.3d 899, 906 (9th Cir. 2002). Although well-pleaded allegations in the complaint 28 are admitted by a defendant’s failure to respond, “necessary facts not contained in the pleadings, 1 and claims which are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. 2 of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 3 (9th Cir. 1978)); accord DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (“[A] 4 defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law”) 5 (citation and quotation marks omitted); Abney v. Alameida, 334 F.Supp.2d 1221, 1235 (S.D. Cal. 6 2004) (“[A] default judgment may not be entered on a legally insufficient claim.”). A party’s 7 default conclusively establishes that party’s liability, although it does not establish the amount of 8 damages. Geddes, 559 F.2d at 560; cf. Adriana Int’l Corp. v. Thoeren, 913 F.2d 1406, 1414 (9th 9 Cir. 1990) (stating in the context of a default entered pursuant to Federal Rule of Civil Procedure 10 37 that the default conclusively established the liability of the defaulting party). 11 B. The Eitel Factors 12 1. Factor One: Possibility of Prejudice to Plaintiff 13 As a preliminary matter, it is worth noting that plaintiff’s brief does not directly address 14 the Eitel factors. Nonetheless, the court has considered the entire record in its evaluation here. 15 The first Eitel factor considers whether the plaintiff would suffer prejudice if default judgment is 16 not entered, and such potential prejudice to the plaintiff weighs in favor of granting a default 17 judgment. See PepsiCo, Inc., 238 F.Supp.2d at 1177. In this case, plaintiff would suffer 18 prejudice if the court did not enter a default judgment because he would be without recourse for 19 recovery. Accordingly, the first Eitel factor favors the entry of default judgment. 20 2. Factors Two and Three: Merits of Claims and Sufficiency of Complaint 21 The merits of plaintiff’s substantive claims and the sufficiency of the complaint are 22 considered here together because of the relatedness of the two inquiries. The court must consider 23 whether the allegations in the complaint are sufficient to state a claim that supports the relief 24 sought. See Danning, 572 F.2d at 1388; PepsiCo, Inc., 238 F.Supp.2d at 1175. Here, the merits 25 of the claims and sufficiency of the complaint favor entry of default judgment. 26 a. The Fair Debt Collection Practices Act 27 “The FDCPA was enacted as a broad remedial statute designed to ‘eliminate abusive debt 28 collection practices by debt collectors, to ensure that those debt collectors who refrain from using 1 abusive debt collection practices are not competitively disadvantaged, and to promote consistent 2 State action to protect consumers against debt collection abuses.’” Gonzales v. Arrow Fin. 3 Servs., Inc., 660 F.3d 1055, 1060 (9th Cir. 2011) (quoting 15 U.S.C. § 1692(e)). Under §§ 1692d 4 and 1692d(5) of the FDCPA, it is a violation for a debt collector to engage in conduct the natural 5 consequence of which is to harass, oppress, and abuse the consumer. Further, it is a violation of 6 the FDCPA for a debt collector to communicate with a consumer to collect a debt “if the debt 7 collector knows the consumer is represented by an attorney with respect to such debt and has 8 knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails 9 to respond within a reasonable period of time to a communication from the debt collector or 10 unless the attorney consents to direct communication with the consumer.” 15 U.S.C.A. § 1692c. 11 To state a claim under the FDCPA, a plaintiff must allege facts that establish the 12 following: (1) the plaintiff has been the object of collection activity arising from a consumer debt; 13 (2) the defendant attempting to collect the debt qualifies as a ‘debt collector’ under the FDCPA; 14 and (3) the defendant has engaged in a prohibited act or has failed to perform a requirement 15 imposed by the FDCPA.” Pratap v. Wells Fargo Bank, N.A., 63 F.Supp.3d 1101, 1113 (N.D. 16 Cal. 2014). The FDCPA comprehensively regulates the conduct of debt collectors, imposing 17 affirmative obligations and broadly prohibiting abusive practices.” Id. at 1060–61. “The FDCPA 18 does not ordinarily require proof of intentional violation, and is a strict liability statute.” Id. 19 (citing McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939, 948 (9th Cir. 2011)). 20 Plaintiff’s complaint is sufficient to state a claim under the FDCPA. Plaintiff alleges that 21 defendants called him multiple times, attempting to collect a debt, and made false threats of legal 22 action and wage garnishment that it had no intent of following through on. ECF No. 9 at 5. 23 Plaintiff’s allegations, which the court accepts as true for purposes of plaintiff’s motion for 24 default judgment, see, e.g., Cripps, 980 F.2d at 1267, are sufficient to establish that defendants, 25 acting as a “debt collector,” engaged in conduct the natural consequence of which was to harass 26 and mislead plaintiffs, in violation of the FDCPA at §§ 1692d and 1692e. Assuming the truth of 27 plaintiff’s allegations, defendant also violated § 1692g, which requires a debt collector to send the 28 consumer, within five days after the initial communication, a written notice containing certain 1 disclosures. These allegations support a successful FDCPA claim, and the merits of this claim 2 thus favor entry of default judgment. 3 b. Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”) 4 The Rosenthal Act is the “state version of the FDCPA.” Riggs v. Prober & Raphael, 681 5 F.3d 1097, 1100 (9th Cir. 2012). Section 1788.17 of the Rosenthal Act provides that, 6 “[n]otwithstanding any other provision of this title, every debt collector collecting or attempting 7 to collect a consumer debt shall comply with the provisions of Sections 1692b to 1692j, inclusive, 8 of, and shall be subject to the remedies in Section 1692k of, Title 15 of the United States Code.” 9 Cal. Civ. Code § 1788.17. In sum, Section 1788.17 “mimics or incorporates by reference the 10 FDCPA’s requirements ... and makes available the FDCPA’s remedies for violations.” Riggs, 11 681 F.3d at 1100 (citing Cal. Civ. Code § 1788.17). Thus, whether an act violates the Rosenthal 12 Act turns on whether it violates the FDCPA. Id., see also, Barria v. Wells Fargo Bank, N.A., No. 13 2:15-cv-01413-KJM-AC, 2016 WL 474319, at *4 (E.D. Cal. Feb. 8, 2016) (“[C]onduct by a debt 14 collector that violates the FDCPA violates the Rosenthal Act as well.” (citations omitted)). The 15 undersigned has found that plaintiff’s allegations support a meritorious claim that defendant 16 violated the FDCPA. Accordingly, the merits of plaintiff’s Rosenthal Act claim likewise favor 17 entry of default judgment. 18 3. Factor Four: The Sum of Money at Stake in the Action 19 Under the fourth Eitel factor, the court considers the amount of money at stake in relation 20 to the seriousness of defendant’s conduct. This analysis requires the court to assess whether the 21 recovery sought is proportional to the harm caused by the defendant’s conduct. Landstar Ranger, 22 Inc. v. Parth Enters., Inc., 725 F.Supp.2d 916, 921 (C.D. Cal. 2010). Default judgment is 23 disfavored if the sum of money at stake is too large or unreasonable in relation to the defendant’s 24 conduct. Vogel v. Rite Aid Corp., 992 F.Supp.2d 998, 1012 (C.D. Cal. 2014). Courts consider 25 plaintiff’s declarations, calculations, and other documentation of damages in determining if the 26 amount at stake is reasonable. HICA Educ. Loan Corp. v. Warne, No. 11-CV-04287-LHK, 2012 27 WL 1156402, at *3 (N.D. Cal. Apr. 6, 2012). 28 Plaintiff in this case seeks $2,000 in total statutory damages ($1,000 under 15 U.S.C. § 1 1692k(a)(2)(A) and $1,000 under California Civil Code § 1788.30(b)), as well as an award of 2 reasonable attorneys’ fees and costs of litigation. ECF No. 18 at 7. The court finds the statutory 3 damages reasonable. Plaintiff’s claim for attorney’s fees and costs are supported by an acceptable 4 billing statement and therefore awardable. The court finds that the request for fees in the amount 5 of $4,365.00 for 10.9 hours of attorney work and expenses in the amount of $540.75 is reasonable 6 and proportionate to the claims in this case. See ECF Nos. 9-1, 9-2, 9-3, and 9-4. The fourth 7 Eitel factor is satisfied in this case. 8 4. Factor Five: Possibility of Dispute Concerning Material Facts 9 The facts of this case are relatively straightforward, and plaintiff has provided the court 10 with well-pleaded allegations supporting its claims and affidavits in support of its allegations. 11 Here, the court may assume the truth of well-pleaded facts in the complaint (except as to 12 damages) following the clerk’s entry of default and, thus, there is no likelihood that any genuine 13 issue of material fact exists. See, e.g., Elektra Entm't Group Inc. v. Crawford, 226 F.R.D. 388, 14 393 (C.D. Cal. 2005) (“Because all allegations in a well-pleaded complaint are taken as true after 15 the court clerk enters default judgment, there is no likelihood that any genuine issue of material 16 fact exists.”); accord Philip Morris USA, Inc., 219 F.R.D. at 500; PepsiCo, Inc., 238 F.Supp.2d at 17 1177. 18 5. Factor Six: Whether Default Was Due to Excusable Neglect 19 Upon review of the record before the court, there is no indication that the default was the 20 result of excusable neglect. See PepsiCo, Inc., 238 F.Supp.2d at 1177. Despite ample notice of 21 this lawsuit, defendants failed to appear or defend themselves in this action. Thus, the record 22 supports a conclusion that the defendants have chosen not to defend this action, and not that the 23 default resulted from any excusable neglect. Accordingly, this Eitel factor favors the entry of a 24 default judgment. 25 6. Factor Seven: Policy Favoring Decisions on the Merits 26 “Cases should be decided upon their merits whenever reasonably possible.” Eitel, 782 27 F.2d at 1472. However, district courts have concluded with regularity that this policy, standing 28 alone, is not dispositive, especially where a defendant fails to appear or defend itself in an action. 1 PepsiCo, Inc., 238 F.Supp.2d at 1177; see also Craigslist, Inc. v. Naturemarket, Inc., 694 2 F.Supp.2d 1039, 1061 (N.D. Cal. Mar. 5, 2010). Accordingly, although the court is cognizant of 3 the policy favoring decisions on the merits – and consistent with existing policy would prefer that 4 this case be resolved on the merits – that policy does not, by itself, preclude the entry of default 5 judgment. 6 7. Conclusion: Propriety of Default Judgment 7 Upon consideration of all the Eitel factors, the court concludes that plaintiff is entitled to 8 the entry of default judgment against both defendants. 9 IV. Conclusion 10 It is hereby ORDERED that the prior motion for default judgment (ECF No. 9) is 11 VACATED as MOOT and the associated Findings and Recommendations (ECF No. 14) are 12 WITHDRAWN. 13 It is further RECOMMENDED THAT: 14 1. Plaintiff’s motion for default judgment (ECF No. 18) be granted; 15 2. The court enter judgment in favor of plaintiff and against MNS & Associates, LLC and 16 Michael Shaw; 17 3. The court GRANT plaintiff’s request for statutory damages in the total amount of 18 $2,000; and 19 4. The court grant plaintiff’s request for attorney’s fees in the amount of $4,365.00 and 20 costs in the amount of $540.75. 21 These findings and recommendations are submitted to the United States District Judge 22 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within twenty one days 23 after being served with these findings and recommendations, any party may file written 24 objections with the court and serve a copy on all parties. Id.; see also Local Rule 304(b). Such a 25 document should be captioned “Objections to Magistrate Judge’s Findings and 26 Recommendations.” Any response to the objections shall be filed with the court and served on all 27 parties within fourteen days after service of the objections. Local Rule 304(d). Failure to file 28 objections within the specified time may waive the right to appeal the District Court’s order. 1 | Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. YIst, 951 F.2d 1153, 1156-57 2 | (9th Cir. 1991). 3 | DATED: August 8, 2022 ~ 4 Hthren— Lhar—e- ALLISON CLAIRE 5 UNITED STATES MAGISTRATE JUDGE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28