IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA
June 9, 2009
ROHIT BIOCHEM PVT. LTD, ET AL., PLAINTIFFS,
ARYA GROUP, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Gregory G. Hollows United States Magistrate Judge
FINDINGS AND RECOMMENDATIONS
Plaintiffs' motion for entry of default judgment against defendants Arya Group, Inc. and Rayan Laxmanan, was heard on April 23, 2009. After hearing, and upon review of the motion and the supporting documents, and good cause appearing, the court issues the following findings and recommendations.
On August 2, 2007, plaintiff filed the underlying complaint in this action. The complaint was amended on October 27, 2008, naming defendants Arya Group, Inc. and Rayan Laxmanan. The amended complaint alleges that plaintiffs had a written agreement whereby defendants would loan them $2 million for business ventures in exchange for plaintiffs' advance of $100,000. The agreement provided that defendants would repay the $100,000 to plaintiffs if they failed to provide the loan. Defendants failed to fund the loan and did not return the $100,000, but did eventually provide a check for $100,000 drawn on insufficient funds. Thereafter, plaintiffs brought suit for breach of contract, fraudulent deceit, and common counts. The action is based on diversity.
The summons and complaint were served on both defendants by substituted service on November 24, 2008, with follow up service by U.S. mail on both defendants on November 25, 2008. Fed. R. Civ. P. 4(e)(2); 4(h). Pacific Atlantic Trading Co. v. M/V Main Express, 758 F.2d 1325, 1331 (9th Cir. 1985) (default judgment void without personal jurisdiction). Defendants failed to file an answer or otherwise appear in this action. On December 18, 2008, the clerk entered default against defendants the Arya Group and Rayan Laxmanan.
The notice of hearing on the motion for default judgment were served by mail on defendants at their last known address. Defendants filed no opposition to the motion for entry of default judgment and did not appear at the hearing. Plaintiffs seek an entry of default judgment in the amount of $100,000 plus costs, attorneys' fees, and interest from the date of judgment until paid.
I. Service of Process
After much deliberation and research, the court concludes that service of process was effected in accordance with the requirements of Fed. R. Civ. P. 4 (e)*fn1 which governs federal service of process upon individuals, and 4(h), which governs service on corporations and partnerships.*fn2 "Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied. '[S]ervice of summons is the procedure by which a court having venue and jurisdiction of the subject matter of the suit asserts jurisdiction over the person of the party served.' Mississippi Publishing Corp. v. Murphree, 326 U.S. 438, 444-445  (1946). Thus, before a court may exercise personal jurisdiction over a defendant, there must be more than notice to the defendant and a constitutionally sufficient relationship between the defendant and the forum." Omni Capital Intern., Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104 (1987).
Here, the returns of summons indicate that the process server first attempted personal service three times at the given home address for defendants in Davis. The first two times there was no response. On the third try, the current occupant answered the door and said the servees were unknown at that address. (Docket #s 27, 28.) Both defendants Laxmanan and Arya Group were then served by substituted service on Gustavio Bermudez, the owner of "Post Marks," a mail box drop, which was provided as defendants' business address. This service was followed with mail service on both Laxmanan and Arya Group at the same address as the mail box drop.
Under California law, substituted service at a private or commercial mailbox is proper if the mailbox is considered the party's usual mailing address. Ellard v. Conway, 94 Cal.App.4th 540, 546, 114 Cal.Rptr.2d 399, 403 (2001). As in Ellard, "no facts suggest personal or substitute service was available at any other address or on any other individual." Id. Bonita Packing Co. v. O'Sullivan, 165 F.R.D. 610, 614 (C.D. Cal. 1995), which holds that substitute service at a private post office box is improper, was distinguished because it based its holding on the fact that there was an alternative means of service, the attorney for the defendants. Id. In this case, the process server attempted personal service three times before substituted service was made. Bonita, 165 F.R.D. at 613 (two or three attempts at personal service sufficient). There was no other available address for personal or substitute service, and defendants are not represented by counsel. Furthermore, it is true that if the California legislature intended to include private mailboxes in its exclusion of post office boxes, it would not have used the language "United States Postal Service" preceding "post office box" in Cal. Civ. Proc. Code § 415.20(b). Burrows v. City of League City, Texas, 985 F. Supp. 704, 706 (S.D.Tex. 1997).
The court finds that service on both defendants was proper.
II. Relief Requested
Entry of default effects an admission of all well-pleaded allegations of the complaint by the defaulted party. Geddes v. United Financial Group, 559 F.2d 557 (9th Cir. 1977). The court finds the well pleaded allegations of the complaint state a claim for which relief can be granted. Anderson v. Air West, 542 F.2d 1090, 1093 (9th Cir. 1976). The memorandum of points and authorities and affidavits filed in support of the motion for entry of default judgment also support the finding that plaintiffs are entitled to the relief requested. There are no policy considerations which preclude the entry of default judgment of the type requested. See Eitel v. McCool, 782 F.2d 1470, 1471-1472 (9th Cir. 1986).
After determining that entry of default judgment is warranted, the court must next determine the terms of the judgment. The agreement at issue provides for repayment of the $100,000 advance if the loan is not funded. First Am. Compl., Attach. at ¶ 2. Therefore, plaintiffs' request for damages in the amount of $100,000 is supported.
Although the agreement also provides for binding arbitration, First Am. Compl., Attach. at ¶ 13, the court finds that defendants have waived the right to arbitration. AT&T Corp. v. Innocom Telecom LLC, 2007 WL 163193, *3 (N.D. Cal. 2007) (delay of assertion of right to arbitration by party may result in waiver if opposing party incurs actual prejudice).
Costs and Attorneys' Fees
Since the arbitration agreement has been waived, plaintiffs are not precluded from recovering costs and fees. Plaintiffs have submitted the declaration of Chad Carlock in support of the requested amounts of $814.91 in costs and $4,005 in attorney's fees. Therefore, plaintiffs' request for costs and attorneys' fees will be granted.
Plaintiffs seek interest from the date of judgment until paid. Post-judgment interest is governed by federal law. Northrop Corp. v. Triad Int'l Mktg. S.A., 842 F.2d 1154, 1155 (9th Cir. 1988). The rate of post-judgment interest is determined under 28 U.S.C. § 1961 which provides that "[s]uch interest shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding... the date of the judgment." By way of example, the current rate of interest set by the Federal Reserve Board for one year constant maturities for the week of May 4, 2009 is.49%. Therefore, post-judgment interest should be set at the federal rate to be determined at the time of judgment for the calendar week preceding that date. See www.federalreserve.gov.
Based on the evidence submitted in connection with the instant motion, the undersigned will recommend that the aforementioned amounts be awarded.
Accordingly, IT IS HEREBY RECOMMENDED that:
1. Plaintiffs' February 4, 2009 motion for default judgment be granted on the terms set forth below;
2. Plaintiffs be awarded damages in the amount of $100,000;
3. Plaintiffs be awarded fees and costs in the amount of $4,819.91; and
4. Plaintiffs be awarded interest at a rate determined by the guidelines set forth in 28 U.S.C. § 1961 after judgment until paid.
These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636(b)(l). Within ten days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any reply to the objections shall be served and filed within ten days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).