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Pacific Business Capital Corp v. Globex Brands

January 7, 2011

PACIFIC BUSINESS CAPITAL CORP., PLAINTIFF(S),
v.
GLOBEX BRANDS, INC. ET. AL., DEFENDANT(S).



The opinion of the court was delivered by: David O. Carter United States District Judge

O

ORDER DENYING MOTION FOR DEFAULT JUDGMENT

Before the Court is a Motion for Default Judgment filed by Pacific Business Capital, Inc. ("Plaintiff") against Globex Brands, Inc. ("Motion") (Docket 35). After considering the moving papers and oral argument, the Court hereby DENIES the Motion.

I. BACKGROUND

The alleged facts that the Court can glean from Plaintiff's Complaint are as follows. In December 2003, Globex Brands executed and delivered to Plaintiff an Accounts Receivable Purchase & Security Agreement (the "Agreement"). Under the terms of the Agreement, Plaintiff extended short term financing to Globex in exchange for the assignment of certain of Globex's accounts receivable. Globex further assigned to Plaintiff a security interest in assets that could be recouped in the event that Globex defaulted on the loan. Plaintiff avers that Globex is currently in default.

Plaintiff further asserts that Dan E. Silberberg ("Silberberg"), an officer, director, and shareholder of Globex, executed a guaranty in favor of Plaintiff, guaranteeing payment and performance of all of Globex's obligations to Pacific (the "Guaranty"). According to Plaintiff, the purpose of the Guaranty was to induce Plaintiff to extend additional credit to Globex. Plaintiff states that Defendants are currently in default on the Guaranty.

In addition, Plaintiff alleges that Globex and Silberberg engaged in fraudulent conduct throughout the parties dealings, using fraudulent misrepresentations to convince Plaintiff to advance money and perform various services.

On August 31, 2010 the Clerk entered a default against Globex (Docket 27). Plaintiff now moves the Court for an entry of default judgment on its claims for (1) breach of contract and (2) fraud.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 55 provides that the Court may, in its discretion, order default judgment following the entry of default by the Clerk. Fed. R. Civ. P. 55(b). "The district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Factors that may be considered by the Court in exercising its discretion to enter default judgment include:

(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 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). "The general rule of law is that upon default, the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true." Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (per curiam).

However, "necessary facts not contained in the pleading, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). Where the pleadings are insufficient, the Court may require the moving party to produce evidence in support of the motion for default ...


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