The opinion of the court was delivered by: WILLIAM ALSUP, District Judge
ORDER GRANTING DEFAULT JUDGMENT
Plaintiff Educational Credit Management Corporation ("ECMC")
moves for default judgment against defendant The Front Porch
Telemarketing ("Front Porch"). Front Porch has never appeared in
this action and did not appear at the hearing on this motion.
Review of the Eitel factors favors entry of default judgment.
Accordingly, plaintiff's application is GRANTED.
Plaintiff ECMC is a guaranty agency covered under the Federal
Family Education Loan Program ("FFELP"), a federal-government
program designed to encourage private lenders to finance
students' post-secondary education (First Amd. Compl. ¶¶ 5,8).
See 20 U.S.C. 1071(a)(1)(A). Such guaranty agencies assist
implementation of FFELP by paying loans made by eligible lenders
and paying the holders of the loan if a student defaults (First
Amd. Compl. ¶ 6). As a means of collecting defaulted loans,
guaranty agencies have the authority to issue withholding orders
to employers of borrowers in default. 20 U.S.C. 1095a. These
orders may require the employers to garnish and remit up to ten percent of
the borrowers' disposable income, except as otherwise limited by
federal law. Ibid.; 15 U.S.C. 1673.
Karl W. Redmon owes student-loan debt to ECMC that is in
default (First Amd. Compl. ¶ 9). Mr. Redmon's debt consists of
three separate loans, with the balance of the debt at $11,624.55
as of October 23, 2005 and a daily-interest accrual of $1.25
(Gunderman Decl. ¶ 9). ECMC issued a notice to Mr. Redmon of
default and he made no request for a hearing as permitted by
statute (First Amd. Compl. at ¶¶ 10-11). On June 29, 2004, ECMC
issued a withholding order to Mr. Redmon's employer, Front Porch,
requesting that ECMC garnish Mr. Redmon's wages to the full
amount permitted by statute (Gunderman Decl. at ¶ 6 & Exh. B).
ECMC issued a subsequent notice to Front Porch after it failed to
comply with the order (id. at ¶ 7 & Exh. C). Front Porch has
yet to remit any of Mr. Redmon's wages in accordance with the
order (id. at ¶ 8; First Amd. Compl at ¶ 13).
On June 28, 2005, ECMC filed an amended complaint against Front
Porch demanding injunctive relief for it's failure to comply with
the withholding order in violation of 20 U.S.C. 1095a and damages
in the amount that defendant should have withheld from Mr.
Redmon's wages. ECMC served the summons and first amended
complaint on Front Porch on July 25, 2005 (Hiser Decl. ¶ 3).
After Front Porch failed to respond, ECMC sought an entry of
default. The Clerk entered default on September 28, 2005 (id.
at ¶ 4). ECMC now moves for default judgment, seeking relief for
Front Porch's alleged violation of 20 U.S.C. 1095a.
Under Federal Rule of Civil Procedure 55(b)(2), a party can
apply to the court for entry of judgment by default. "The
district court's decision whether to enter a default judgment is
a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089
(9th Cir. 1980). The following factors are considered:
(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 in the action, (5) the possibility of
a dispute concerning the material facts, (6) whether
the default was due to excusable neglect, and (7) the
strong policy underlying the Federal Rules of Civil
Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir.
1986). For the following reasons, these factors favor
entry of default judgment in this case.
1. MERITS OF SUBSTANTIVE CLAIMS AND SUFFICIENCY OF THE
After entry of default, well-pleaded factual allegations in the
complaint are taken as true, except as to the amount of damages.
Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir.
2002). The merits of plaintiff's substantive claims and the
sufficiency of the complaint are thus considered in tandem.
Plaintiff seeks relief under 20 U.S.C. 1095a, which provides
that guaranty agencies may garnish up to ten percent of the
earnings from a borrower who has defaulted on a student loan,
except as reduced by 15 U.S.C. 1673. Guaranty agencies garnish
the wages by issuance of a withholding order to the borrower's
employer. 20 U.S.C. 1095a. When an employer fails to pay the
guaranty agency as directed in the withholding order, the
guaranty agency may seek relief in federal court.
20 U.S.C. 1095a(a)(6).
Plaintiff's allegations of liability are sufficient. Front
Porch is alleged to have "refused to comply with the Withholding
Order" (First Amd. Compl. ¶ 13). No Ninth Circuit authority
exists interpreting the garnishment provisions. The statute,
however, makes clear that compliance or non-compliance with a
withholding order is the sole question with respect to an
employer's liability under 20 U.S.C. 1095a(a)(6). See, e.g.,
Educ. Credit Management Corp. v. Cherish Prods., Inc.,
247 F. Supp. 2d 1132, 1134 (D. Minn. 2003) (finding the defendant
"liable because it was obligated to withhold wages . . . and
failed to do so"). No defenses are available under the statute
for an employer that fails to so comply. 20 U.S.C. 1095a(a)(6);
see also Educ. Credit Management Corp. v. Cherish Prods., Inc.,
312 F. Supp. 2d 1183, 1186 (D. Minn. 2004) (holding that only
defense provided in statute extends to defaulting borrower, not
the borrower's employer). Plaintiff, therefore, has stated a
claim under the statute. This weighs in favor of default
2. THE REMAINING EITEL FACTORS.
This order finds that the remaining Eitel factors likewise
favor entry of default judgment. To deny plaintiff's application
would leave plaintiff without a remedy. Morever, defendant has refused to litigate this action here after being
properly served with the complaint and summons. Since Front Porch
never filed an answer to the complaint or appeared at the
hearing, it is unclear whether there is a possibility of dispute
concerning the material facts. There is no evidence that Front
Porch's failure to respond was the result of excusable neglect.
Although federal policy may favor a decision on the merits, FRCP
55(b) permits entry of default ...