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Dillard v. Victoria M. Morton Enterprises

April 23, 2010

MARILYN DILLARD, ET AL., PLAINTIFFS,
v.
VICTORIA M. MORTON ENTERPRISES, INC., ET AL., DEFENDANTS.
RUTH GALTIERI-CARLSON, ET AL., PLAINTIFFS,
v.
VICTORIA M. MORTON ENTERPRISES, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge

ORDER

Presently before the court is an application for default judgment, which was filed by plaintiffs in Dillard, et al. v. Victoria M. Morton Enterprises, Inc., et al., No. 2:08-cv-1339 FCD KJN PS ("Dillard"), and which the undersigned deemed filed in the related matter of Galtieri-Carlson, et al., v. Victoria M. Morton Enterprises, Inc., et al., No. 2:08-cv-1777 FCD KJN PS ("Galtieri-Carlson").*fn1 Although these two cases are related, they have not been consolidated.*fn2

As an initial matter, the undersigned notes that plaintiffs' single application for default judgment seeks a default judgment against defendants Victoria M. Morton Enterprises, Inc., Suddenly Slender, Suddenly Slender International, and Pyramid Consulting and Investment Co., Inc. in both cases. (Dillard, Dkt. No. 44 at 2:9-12.) However, Pyramid Consulting and Investment Co., Inc. is not, and has never been, a defendant in the Galtieri-Carlson matter. Accordingly, the undersigned does not address the Galtieri-Carlson plaintiffs' application for default judgment to the extent it seeks a judgment against Pyramid Consulting and Investment Co., Inc.*fn3

The court heard this matter on its law and motion calendar on April 22, 2010. Attorneys Jeffrey Fulton and William Brelsford appeared on behalf of plaintiffs in both cases. Despite being provided with notice of the hearing on the application for default judgment, no appearance was made on behalf of the defendants in the Dillard or Galtieri-Carlson matters.

Although these cases present a close call with respect to the grant of default judgment, the undersigned concludes that the plaintiffs' pleadings in each action are sufficient to justify the entry of default judgment in the respective actions. However, because plaintiffs in both actions have failed to substantiate their combined request for two million dollars in damages through the declarations filed with the court, the undersigned will refrain from recommending the entry of default judgment at this time. Instead, plaintiffs in each action will be granted thirty days in which to submit declarations and memoranda of points and authorities that legally and factually substantiate the precise damages sought in each case. Such filings, if any, shall separately address the damages sought in the Dillard and Galtieri-Carlson actions, respectively, and should be filed separately in the appropriate action. Plaintiffs in each action should also address the undersigned's substantive concerns identified below as they relate to the grant of default judgments.

I. FACTUAL AND PROCEDURAL HISTORY

A. The Dillard Action*fn4

1. Factual Background

The Dillard plaintiffs allege that the Dillard defendants manufacture, design, and sell "body wrap" products that purportedly reduce the size of the body part wrapped by an inch and also remove toxins from the human body. (Dillard, First Am. Compl. ¶ 11.) The products at issue, which purport to be weight loss, anti-aging, and toxin removal products, include the following: Slender Tone Solution Powder, Slender Tone with MSM, Gold Water, Anti-Aging, and Power Wrap. (Id. ¶¶ 11-12.) Defendants sell licences to individuals to market and sell their products. (Id. ¶ 11.) Plaintiffs also allege that defendant Victoria M. Morton, an individual, invented these products and used the remaining defendants as "shells or conduits for the conduct of certain [of her] affairs." (Id. ¶¶ 7, 11.)

On or about June 18, 2004, plaintiff Marilyn Dillard entered into a Start-Up License and Distribution Agreement with defendants to sell defendants' products and to provide body wraps through a home business. (Id. ¶ 12-13.) In following the instructions provided by defendants, Marilyn Dillard mixed powders, including the Slender Tone Solution Powder, Slender Tone with MSM, and Gold Water with a substance called Reverse Osmosis Water in order to soak bandages in the solution to be used in administering the body wraps. (Id. ¶ 13.) When mixing these powders, clouds of dust were present, and all plaintiffs who were in the vicinity of the dust clouds inhaled that dust. (Id.)

Defendants had represented to Marilyn Dillard that "these products, once mixed with water, were so safe to the human body that one could drink the mixed formula." (Id.) In or around July 2004, during a training at defendants' office, Marilyn Dillard drank some of the liquid mix at the recommendation of defendants. (Id. ¶ 14.) After performing three body wraps, Marilyn Dillard developed flu-like symptoms. (Id.) She subsequently suffered myriad health problems including bronchitis, chronic vaginal yeast infections, joint pain, and a miscarriage in November 2004. (Id. ¶¶ 15-19.) Marilyn Dillard alleges that her conditions have not responded to normal courses of treatment and that she continues to suffer from intermittent extreme flu-like symptoms that often last for extended periods of time, extreme chronic yeast infections, and chronic fatigue that medical professionals have been unable to treat. (Id. ¶¶ 16, 19, 24.) As a result, she is unable to perform body wraps and can only operate her business in a limited capacity.*fn5 (Id. ¶ 20.)

In or around August 2006, Marilyn Dillard learned for the first time that the U.S. Food and Drug Administration ("FDA") had received a complaint about "the Slender Tone Solution Powder, Gold Water, and/or related products causing illnesses in body wrap customers." (Id. ¶ 21.) In addition, a Florida Department of Health Establishment Inspection Report, issued in October 2001, detailed the department's findings of the health problems and injuries posed by defendants' products. (Id. ¶ 22.) Moreover, the Florida Department of Health found that defendants' creation, manufacture, design, sale, and distribution of its products violated several federal regulations.*fn6 (Id.) Inspections conducted on March 26, 2002, and April 4, 2002, revealed several additional FDA violations.*fn7 (Id.) On March 5, 2004, August 18, 2004, and December 21, 2004, FDA issued warning letters to defendants to comply with FDA's warnings regarding defendants' ongoing violations. (Id.)

Plaintiff Stephen Dillard, Marilyn Dillard's husband, was exposed to defendants' products between August 2004 and August 2006. (Id. ¶ 31.) He alleges that since being exposed, he suffers from chronic and acute flu-like symptoms, chronic skin lesions, and hypersensitivity, all of which have not responded to antibiotics. (Id. ¶ 32.)

Minor plaintiff Ciera Dillard was approximately three years old when her mother, Marilyn Dillard, began working with defendants' products in their home. (Id. ¶ 25.) She often assisted her mother in mixing the powder and was physically present when her mother prepared the body wrap solutions. (Id.) After being exposed to defendants' products, Ciera Dillard began experiencing extreme flu-like symptoms and empyema.*fn8 (Id. ¶ 26.) In October 2004 and September 2005, she was hospitalized for pneumonia. (Id. ¶¶ 26-27.) She continues to suffer from acute flu-like symptoms, stomach pain, gastrointestinal issues, hypersensitivity, and breathing problems, and sees a physician monthly regarding breathing problems and chest pain.

(Id. ¶ 28.)

Minor plaintiff Ariel Dillard was approximately six years old when she was first exposed to defendants' products in her home. (Id. ¶ 29.) Since her exposure to the products, she experiences "chronic and acute flu-like symptoms, extreme throat irritations, forgetfulness, memory loss, reduced dexterity, and hypersensitivity, for which antibiotics have not resolved." (Id. ¶ 30.)

2. Procedural History

The Dillard plaintiffs originally filed their complaint in Sacramento Superior Court on April 7, 2008, naming the following defendants: Victoria M. Morton Enterprises, Inc.; Victoria M. Morton, an individual; Suddenly Slender; Suddenly Slender International; Personal Beauty Unlimited, Inc.; Research Foundation for Biochemistry and Nutrition Corp.; Pyramid Consulting and Investment Co., Inc.; and Hot Ticket Enterprises, Inc. (Dillard, Dkt. No. 1 at 7.) Defendants filed a notice of removal of the action to federal court on the basis of the court's federal diversity jurisdiction.*fn9 (Dillard, Dkt. No. 1.)

On July 18, 2008, the Dillard defendants filed a motion to dismiss and motion to strike. (Dillard, Dkt. No. 6.) On August 21, 2008, while the motions to dismiss and strike were pending, defendants Personal Beauty Unlimited, Inc., Research Foundation for Biochemistry and Nutrition Corp., and Hot Ticket Enterprises, Inc. were dismissed from the Dillard action without prejudice pursuant to a stipulation approved by the court. (Dillard, Dkt. Nos. 9, 10.) On October 8, 2008, the court granted defendants' motion to dismiss in part and denied it in part, granting plaintiffs' leave to amend their complaint, and denied the Dillard defendants' motion to strike. (Dillard, Dkt. No. 19.)

The Dillard plaintiffs subsequently filed a First Amended Complaint. (Dillard, Dkt. No. 20.) The First Amended Complaint alleges claims for: (1) strict products liability; (2) products liability based on manufacturing and design defects; (3) products liability based on a failure to warn; (4) fraud; and (5) products liability on a negligence theory. The remaining Dillard defendants-Victoria M. Morton Enterprises, Inc., Suddenly Slender, Suddenly Slender International, Pyramid Consulting and Investment Co., Inc., and Victoria M. Morton, an individual-filed an answer to the First Amended Complaint. (Dillard, Dkt. No. 22.)

The Dillard defendants originally appeared in federal court through an attorney. However, shortly after the filing the answer, the Dillard defendants' attorney filed a motion to withdraw as counsel. (Dillard, Dkt. No. 23.) On February 26, 2009, the court granted the motion to withdraw and cautioned defendants that, pursuant to the court's local rules and case law, defendants Victoria M. Morton Enterprises, Inc., Suddenly Slender, Suddenly Slender International, and Pyramid Consulting and Investment Co., Inc. could not appear in the action without legal counsel because they are corporations. (Dillard, Dkt. No. 28 at 2-4; see also Eastern District Local Rule 183(a).)

On August 14, 2009, the Dillard plaintiffs filed a request for entry of default as to the unrepresented corporate defendants Victoria M. Morton Enterprises, Inc., Suddenly Slender, and Suddenly Slender International. (Dillard, Dkt. No. 31.) On September 8, 2009, the court directed defendants Victoria M. Morton Enterprises, Inc., Suddenly Slender, Suddenly Slender International, and Pyramid Consulting and Investment Co., Inc. to retain legal representation and warned that failure to do so would result in the entry of default against the non-complying corporate defendants. (Dillard, Dkt. No. 36.) Despite the court's order and the passage of roughly nine months from the time the court granted counsel's motion to withdraw, these defendants remained unrepresented. Accordingly, on November 25, 2009, the court granted plaintiffs' request for entry of default and directed the Clerk of Court to enter default against Victoria M. Morton Enterprises, Inc., Suddenly Slender, Suddenly Slender International, and Pyramid Consulting and Investment Co., Inc. (Dillard, Dkt. Nos. 38, 39.)

On March 17, 2010, the Dillard plaintiffs filed an application for default judgment.*fn10 (Dillard, Dkt. No. 44.) Along with their application, they filed declarations regarding damages from the following plaintiffs: Marilyn Dillard; Stephen Dillard; Marilyn Dillard, on behalf of minor plaintiff Ariel Dillard; and Marilyn Dillard, on behalf of minor plaintiff Ciera Dillard. (Dillard, Dkt. No. 44.)

The proof of service filed with the application for default judgment reflects that Victoria M. Morton, an individual defendant appearing without counsel, was served with the application by U.S. Mail.*fn11 (Dillard, Dkt. No. 45.) On April 14, 2010, the Dillard plaintiffs filed a supplemental proof of service indicating that they had served Victoria M. Morton Enterprises, Inc., Suddenly Slender, Suddenly Slender International, and Pyramid Consulting and Investment Co., Inc. with the application for default judgment. (Dillard, Dkt. No. 49.)

B. The Galtieri-Carlson Action

1. Factual Background*fn12

Although the Galtieri-Carlson action involves fewer defendants and different plaintiffs, the factual basis for the Galtieri-Carlson plaintiffs' claims and the Dillard plaintiffs' claims are substantially similar. This is because, like Marilyn Dillard, plaintiffs Ruth Galtieri-Carlson and Deana Galtieri are licensees with respect to defendants' products.

In or around March or April 1999, plaintiffs Ruth Galtieri-Carlson and Deana Galtieri entered into a Start-Up License and Distribution Agreement with defendants to provide defendants' body wrap products, weight loss products, and anti-aging products and services for sale to the general public. (Galtieri-Carlson, First Am. Compl. ¶ 13, Dkt. No. 17.) Ruth Galtieri-Carlson and Deana Galtieri sold defendants' products and provided body wraps to clients through their salon business. (Id. ¶ 14.) The Galtieri-Carlson plaintiffs allege that defendants made the same representations as they did to Marilyn Dillard regarding the safety of products once mixed with water, although there is no allegation that the Galtieri-Carlson plaintiffs consumed the mixed liquid. (See id. ¶ 14.)

As with the Dillard plaintiffs, the Galtieri-Carlson plaintiffs also allege that in or around August 2006, they learned for the first time that FDA had received a complaint about defendants' products. (Id. ¶ 15.) The Galtieri-Carlson plaintiffs allege the same facts as the Dillard plaintiffs with respect to the Florida Health Department's 2001 Establishment Inspection Report, the alleged federal violations, and the subsequent inspections that revealed additional federal violations. (See id. ¶ 16.)

As with the Dillard plaintiffs, the Galtieri-Carlson plaintiffs also allege myriad adverse medical reactions to defendants' products. (Id. ¶¶ 18-21.) Plaintiff Ruth Galtieri-Carlson alleges that since being exposed to defendants' products, she has experienced symptoms including flu-like symptoms, chronic fatigue, respiratory issues, severe vertigo resulting in blackouts, Herpes Simplex (I and II), fungal infections, muscle spasms and weakness, rectal burning and itching, and "various related conditions, all of which medical professionals have been unable to treat." (Id. ¶ 18.) She further alleges that as of the filing of the First Amended Complaint, her conditions had not responded to normal courses of treatment. (Id.)

Plaintiff Deana Galtieri alleges that as a result of her exposure to defendants' products, she has experienced various symptoms, including chronic vaginal bacterial and yeast infections, extreme flu-like symptoms, throbbing joint pain throughout her body, gastrointestinal issues, lethargy and chronic fatigue, abnormal pap smears, severe cramping and menstrual pain, and "various related conditions, all of which medical professionals have been unable to treat." (Id. ¶ 19.) She, too, alleges that as of the filing of the First Amended Complaint, her conditions had not responded to normal courses of treatment. (Id.)

Minor plaintiff Christian Galtieri-Brown, who is plaintiff Deana Galtieri's son, was allegedly exposed to defendants' products as a result of his involvement in the daily activities at Ruth Galtieri-Carlson and Deana Galtieri's salon business. (Id. ¶ 20.) He was "present during the mixture of solution for mineral body wraps, washing and rolling of the bandages used, cleaning and general assistance in the daily functions and operations of Defendants' products." (Id.) As a result of Christian Galtieri-Brown's exposure to defendants' products, he allegedly suffers from symptoms including continually high fevers for months at a time, bacterial infections, fungal infections, acute respiratory conditions including pneumonia and bronchitis, cognitive impairment, and "various related conditions, all of which medical professionals have been unable to treat." (Id. ¶ 21.) He also alleges that as of the filing of the First Amended Complaint, his conditions had not responded to normal courses of treatment. (Id.)

2. Procedural History

On July 31, 2008, plaintiffs in the Galtieri-Carlson action filed their complaint in this court against defendants Victoria M. Morton Enterprises, Inc., Suddenly Slender, Suddenly Slender International, and Victoria M. Morton, an individual. (Galtieri-Carlson, Dkt. No. 1.) The Galtieri-Carlson defendants were originally represented by counsel and executed waivers of service forms. (See Galtieri-Carlson, Dkt. Nos. 11-14.)

The Galtieri-Carlson plaintiffs subsequently filed a First Amended Complaint, which alleged claims for: (1) strict products liability; (2) products liability based on manufacturing and design defects; (3) products liability based on a failure to warn; (4) fraud; and (5) products liability on a negligence theory. (Galtieri-Carlson, Dkt. No. 17.) The Galtieri-Carlson defendants filed an answer to the First Amended Complaint. (Galtieri-Carlson, Dkt. No. 21.)

After the filing of the answer, the Galtieri-Carlson defendants' attorney filed a motion to withdraw as counsel. (Galtieri-Carlson, Dkt. Nos. 23-24.) As occurred in the Dillard case, on February 26, 2009, the court granted the motion to withdraw and cautioned defendants that, pursuant to the court's local rules and applicable case law, defendants Victoria M. Morton Enterprises, Inc., Suddenly Slender, Suddenly Slender International could not appear in the action without legal counsel because they are corporations. (Galtieri-Carlson, Dkt. No. 26 at 2-4.)

Defendants Victoria M. Morton Enterprises, Inc., Suddenly Slender, and Suddenly Slender International failed to retain counsel despite the court's order directing them to do so, and the court's related warning that failure to do so would result in an entry of default against non-complying corporate defendants. (Galtieri-Carlson, Dkt. No. 28.) Accordingly, on November 25, 2009, the court granted plaintiffs' request for entry of default and directed the Clerk of Court to enter default against ...


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