ACFC Delta Holdings, LLC v. Coastal West LLC ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ACFC DELTA HOLDINGS, LLC, Case No. 18-cv-05845-WHO 8 Plaintiff, ORDER RE MOTION FOR DEFAULT 9 v. JUDGMENT 10 COASTAL WEST LLC, et al., Defendants. 11 12 Plaintiff ACFC Delta Holdings, LLC, has moved for default judgment against defendants 13 Coast West LLC (“CW”) and Cruiser Haven Inc. (“CHI”), and for summary judgment against 14 Kevin Hinman. Dkt. Nos. 59, 61, 67, 68. Defendant Hinman does not oppose plaintiff’s motion 15 for summary judgment; accordingly, plaintiff’s motion for summary judgment is GRANTED. 16 Dkt. No. 69. CW and CHI have failed to respond to the complaint or appear in this case, and the 17 clerk entered default against both defendants on December 10, 2018. Dkt. No. 31. No party has 18 opposed the motion for default judgment. For the reasons discussed below, I GRANT plaintiff’s 19 motion for default judgment against CW and CHI.1 20 BACKGROUND 21 Plaintiff filed this case on September 24, 2018. Dkt. No. 1. Defendant Hinman timely 22 filed an answer on November 30, 2018; the remaining two defendants did not file any answer. 23 Dkt. Nos. 28, 33. Plaintiff filed a motion for entry of default by the Clerk for failure to timely 24 respond to the complaint on November 21, 2018, which the clerk granted on December 10, 2018. 25 Dkt. Nos. 25, 31. On January 28, 2020, plaintiff filed a motion for summary judgment against 26 Hinman and a motion for default judgement against CW and CHI. Dkt. Nos. 59, 61. On February 27 1 11, 2020, Hinman filed a notice of non-opposition to plaintiff’s motion. Dkt. No. 69. 2 LEGAL STANDARD 3 Pursuant to Federal Rule of Civil Procedure 55(b)(2), a district court may enter a final 4 judgment in a case following a defendant’s default. Whether to enter a judgment lies within the 5 court’s discretion. Bd. of Trustees of Laborers Health & Welfare Tr. Fund for N. California v. 6 Cazadores Constr., Inc., No. 17-cv-05242-WHO, 2018 WL 986020, at *2 (N.D. Cal. Feb. 20, 7 2018). In order to exercise this discretion, the court must first confirm that it has subject matter 8 jurisdiction over the case and personal jurisdiction over the parties, as well as ensure the adequacy 9 of service on the defendant. Id. Once these elements are satisfied, the court turns to the following 10 factors (the “Eitel factors”) to determine whether it should grant a default judgment: (1) the possibility of prejudice to the plaintiff, (2) the merits of 11 plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action[,] (5) the possibility of a 12 dispute concerning material facts [,] (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal 13 Rules of Civil Procedure favoring decision on the merits. 14 Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). 15 DISCUSSION 16 I. JURISDICTION AND SERVICE OF PROCESS 17 The complaint asserts that I have jurisdiction over this matter pursuant to 28 U.S.C.A. § 18 1332, which provides for diversity jurisdiction. Dkt. No. 1 ¶ 2. Plaintiff alleges that it is a 19 Delaware limited liability company, and has alleged that its members are citizens of states other 20 than California. Id. The defendants are all allegedly citizens of California. Id. The matter in 21 controversy is at least $723,549.12, which exceeds the requirement of $75,000 mandated by 22 statute. Dkt. No. 1 at 3; Dkt. No. 63 ¶¶ 6-7; Dkt. No. 67 at 2. Accordingly, I have subject matter 23 jurisdiction over this matter. 24 I also have personal jurisdiction over this matter because the defendants are California 25 citizens and because the transactions at issue occurred in California. See Dkt. No. 1 ¶¶ 2-11. 26 Finally, both CW and CHI were properly served with the summons and Complaint on October 19, 27 2018. Dkt. Nos. 16, 18; see also Dkt. No. 60 ¶¶ 3-12. Both entities failed to appear and on II. EITEL FACTORS 1 A. Possibility of prejudice to plaintiff 2 The possible prejudice to plaintiff weighs in its favor. Although defendant Hinman does 3 not oppose summary judgment and plaintiff thus has secured a judgment against him, it is possible 4 that defendant Hinman will not have adequate funds to pay the judgment in full. Plaintiff has 5 documented the monetary damages that it has sustained, which outweighs the possible prejudice to 6 CW and CHI, both of which were parties to the contracts at issue. 7 B. Merits of plaintiff’s claims, sufficiency of the complaint, and possibility of 8 dispute with regard to material facts 9 The merits of plaintiff’s claim, sufficiency of the complaint, and the possibility of a dispute 10 with regard to material facts also weigh in favor of granting its motion. This matter involves a 11 loan agreement guaranteed by the defendants, with a property in Contra Costa County as 12 collateral. Dkt. No. 1-1. These agreements were attached to the complaint. Dkt. Nos. 1-1. 1-2, 1- 13 3, 1-4. The principal on the loan was $2,300,000.00. Dkt. No. 1-1. On January 2, 2019, plaintiff 14 purchased the property at a foreclosure sale for $1,800,000. Dkt. No. 66-1. On January 11, 2019, 15 Delta Waterways MGT, LLC (“Delta”) purchased the property. Dkt. No. 63 ¶ 3. Plaintiff asserts 16 that 723,549.12 is owing on the loan, which is the total amount owed on the loan at the time of the 17 foreclosure sale minus the sale proceeds. Dkt. No. 64 ¶ 4. 18 Defendant Hinman has not opposed plaintiff’s motion for summary judgment, and has not 19 disputed the material facts in this case. Moreover, plaintiff has submitted declarations in support 20 of its motions that support its claim for damages. Dkt. Nos. 63, 64. It has also provided the 21 contracts at issue, either attached to the complaint or in support of its motion for fault judgment. 22 Accordingly, plaintiff has presented a legally sufficient complaint, as well as supporting 23 documentation as to the merits of its claim, that supports granting its motion. 24 C. Sum of the money at stake 25 “When the money at stake in the litigation is substantial or unreasonable, default judgment 26 is discouraged,” but “where the sum of money at stake is tailored to the specific misconduct of the 27 defendant, default judgment may be appropriate.” Cazadores, 2018 WL 986020, at *4 (citations 1 the loan. Dkt. No. 64 ¶ 4. This amount is tailored to the defendants’ claim for breach of 2 commercial guaranty and is appropriate. Accordingly, this factor weighs in favor of granting 3 plaintiff’s motion. 4 D. Policy favoring decisions on the merit 5 There is no evidence that CW’s and CHI’s failure to participate in this litigation or 6 participate in this proceeding is due to excusable neglect. Further, prompt resolution of this matter 7 outweighs policy considerations favoring resolution on the merits of this dispute. Therefore, 8 policy considerations weigh in favor of granting plaintiff’s motion. 9 Because all of the Eitel factors weigh in favor of granting default judgment, plaintiff’s 10 motion is GRANTED. 11 III. RELIEF SOUGHT 12 Plaintiff’s motion for default judgment seeks $723,549.12 in damages on its first claim for 13 relief. Dkt. No. 67-1 at 2. As discussed above, this is the amount owing on the loan minus the 14 proceeds from the foreclosure sale of the collateral property. Plaintiff’s motion for summary 15 judgment against Hinman also seeks $723,549.12. Dkt. No. 68 at 5. Darren Clow, a principal of 16 Delta, has detailed $273,800 in additional costs that it claims plaintiff and Delta incurred due to 17 defendants’ “failure . . . to properly maintain” the property. Dkt. No. 63 ¶¶ 1, 4, 6. Plaintiff 18 submitted this declaration in support of its motion for default judgment but has not requested this 19 additional amount in either of its motions. It is also not clear how these damages relate to 20 plaintiff’s claims in the complaint. Accordingly, I will grant plaintiff’s request for $723,549.12 in 21 damages. To the extent that plaintiff seeks additional damages stemming from defendants’ breach 22 of commercial guaranty, it may move for them along with any attorney’s fees, costs, or interest, 23 but must explain how these damages are tethered to the claims in the complaint. 24 25 26 27 1 CONCLUSION 2 For the above reasons, plaintiff is entitled to judgment against all defendants in the amount 3 || of $723,549.12. 4 IT IS SO ORDERED. 5 Dated: March 2, 2020 6 . 7 liam H. Orrick 8 United States District Judge 9 10 1] 15 16 17 O Z 18 19 20 21 22 23 24 25 26 27 28