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Lehmanl Brothers Holdings, Inc v. Shasta Financial Services

April 29, 2011

LEHMANL BROTHERS HOLDINGS, INC., PLAINTIFF,
v.
SHASTA FINANCIAL SERVICES, INC. DEFENDANT.



The opinion of the court was delivered by: Craig M. Kellison United States Magistrate Judge

Plaintiff's motion for default judgment was submitted on the papers. The court's docket reflects that defendant has not filed any opposition to plaintiff's motion for entry of default judgment despite being served with the motion and supporting exhibits. For the reasons set forth below, the undersigned recommends that plaintiff's motion be granted and that default judgment be entered against defendant.

BACKGROUND

In the complaint filed November 16, 2010, plaintiff alleges mortgage loans were purchased by Lehman Brothers Bank, FSB ("LBB") from defendant pursuant to a series of written contracts and that the rights of LBB were subsequently assigned to plaintiff. Plaintiff further alleges that with respect to certain of the mortgages, defendant breached provisions of the contracts that required it to repurchase those mortgage loans for which the borrower failed to make payments on the mortgage.

The record reflects that defendant was properly served with process on December 5, 2010 and default was entered on January 13, 2011. (Doc. Nos. 9, 13.) On March 18, 2011, plaintiff filed a motion for default judgment. (Doc. No. 16.)

LEGAL STANDARDS

Federal Rule of Civil Procedure 55(b)(2) governs applications to the court for entry of default judgment. Upon entry of default, the complaint's factual allegations regarding liability are taken as true, while allegations regarding the amount of damages must be proven. Dundee Cement Co. v. Howard Pipe & Concrete Prods., 722 F.2d 1319, 1323 (7th Cir. 1983) (citing Pope v. United States, 323 U.S. 1 (1944); Geddes v. United Fin. Group, 559 F.2d 557 (9th Cir. 1977)); see also DirectTV v. Huynh, 503 F.3d 847, 851 (9th Cir. 2007); TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987).

Where damages are liquidated, i.e., capable of ascertainment from definite figures contained in documentary evidence or in detailed affidavits, judgment by default may be entered without a damages hearing. Dundee, 722 F.2d at 1323. Unliquidated and punitive damages, however, require "proving up" at an evidentiary hearing or through other means. Dundee, 722 F.2d at 1323-24; see also James v. Frame, 6 F.3d 307, 310-11 (5th Cir. 1993).

Granting or denying default judgment is within the court's sound discretion.

Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986); Aldabe v. Aldabe, 616 F.2d. 1089, 1092 (9th Cir. 1980). The court is free to consider a variety of factors in exercising its discretion. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Among the factors that may be considered by the court are (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, 782 F.2d at 1471-72 (citing 6 Moore's Federal Practice ¶ 55-05[2], at 55-24 to 55-26).

ANALYSIS

I. Whether Default Judgment Should Be Entered

The factual allegations of plaintiff's complaint, taken as true pursuant to the entry of default against defendant, and the affidavits submitted in support of the motion for summary judgment establish that plaintiff is entitled to the relief requested. The repurchase price of each loan has been appropriately calculated according to the formula set forth in the Seller's Guide that governs the parties' respective rights and responsibilities. Baker Decl., Exh. A-G. From the business records submitted by plaintiff, damages in a sum certain are calculable according to a set formula and the amount of damages is $1,993,605.63.

After weighing the Eitel factors, the undersigned finds that the material allegations of the complaint support plaintiff's claims. Plaintiff will be prejudiced if default judgment is denied because plaintiff has no other recourse for recovery of the damages ...


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