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Ubs Financial Services, Inc. v. Martin

United States District Court, S.D. California

May 23, 2014

UBS FINANCIAL SERVICES, INC., Petitioner,
v.
FRANCISCO MARTIN, Respondent.

ORDER GRANTING PETITIONER'S MOTION TO ENTER DEFAULT JUDGMENT [Doc. No. 13]

MICHAEL M. ANELLO, District Judge.

Before the Court is Petitioner UBS Financial Services, Inc.'s Motion to Confirm FINRA[1] Arbitration Award and Enter Judgment Thereon or, in the Alternative, Enter Default Judgment. Doc. No. 13. To date, Respondent Francisco Martin has failed to appear or otherwise defend this action. For the reasons stated below, the Court GRANTS Petitioner's motion to enter default judgment.

BACKGROUND

A. Factual Background

Petitioner is a Delaware corporation with its principal place of business in Weehawken, New Jersey. Doc. No. 1 ¶ 1. Specifically, Petitioner is a securities broker-dealer and a FINRA member firm. Doc. No. 13-1 at 2. Respondent is an individual and former employee of Petitioner, who resided in the State of California at the time of filing. Doc. No. 1 ¶ 2. Petitioner employed Respondent in its San Diego office as a licensed securities broker and a FINRA registered representative, beginning on or about October 23, 2009. Doc. No. 13-1 at 2. When Respondent began his employment, he signed a Uniform Application for Securities Industry Registration or Transfer document wherein he expressly agreed to arbitrate any disputes with Petitioner. Id.

On or about December 17, 2009, Petitioner loaned Respondent $100, 000.00. Doc. No. 1 ¶ 7. The parties memorialized the loan in Promissory Note No. 3915, which both parties executed. See Steele Decl. Ex. 2 ("Promissory Note") at 3. Pursuant to the Note, the parties agreed to resolve any disputes via binding arbitration. Id. Specifically, the Note provides that "Employee and UBS agree that, unless prohibited by applicable law, any disputes between Employee and UBS... will be determined by arbitration as authorized and governed by the arbitration law of the state of New Jersey." Id. The Note further provides that "the decision of the Arbitrator(s) will be final and binding on the parties...." Id. at 4. Pursuant to the terms of the Note, Respondent was to repay Petitioner in 9 equal, annual installments of $11, 111.11, plus accrued interest at a rate of 3.8% per annum, on December 14 of each year beginning in 2010 through 2018. See id. at 1. However, "in the event that the Employee's employment with UBS is terminated... for any reason[, ]" the balance due would become immediately payable. Id. at 2.

On or about April 19, 2011, Petitioner terminated Respondent's employment based on alleged violations of FINRA rules and Petitioner's policies. See Doc. No. 13-1 at 3. Upon termination, the balance due on Respondent's loan became immediately payable pursuant to the terms of the Note. Id. On or about April 20, 2011, Petitioner requested payment, but Respondent refused to pay. Id. After Respondent's refusal to pay, Petitioner brought an arbitration action pursuant to the terms of the Note to collect the balance due on the loan. Id.

On or about June 17, 2011, Petitioner filed a Statement of Claim with FINRA Dispute Resolution. See Steele Decl. Ex. 3 ("Arbitration Award") at 1. Both parties participated in binding arbitration proceedings related to Respondent's alleged failure to make contractual payments on the Note. Doc. No. 1 ¶ 9; see also Arbitration Award. Specifically, Respondent appeared pro se at the arbitration hearing held on November 13-14, 2012 in San Diego, California. See Arbitration Award. On December 7, 2012, the two-member arbitration panel issued a written arbitration award finding in favor of Petitioner and against Respondent. After considering the parties' submissions and the evidence presented at the hearing, the panel found Respondent liable and awarded Petitioner $92, 617.50 in compensatory damages and $25, 000.00 in legal fees and costs, totaling $117, 617.50. See id. The panel also denied Respondent's counterclaims in their entirety. Id.

B. Procedural History

On June 28, 2013, Petitioner filed a Petition to Confirm the FINRA Arbitration Award and Enter Judgment Thereon against Respondent as provided for under the Federal Arbitration Act. Doc. No. 1.

On October 29, 2013, the Court issued an Order to Show Cause ("OSC") why Respondent had not been served within 120 days as required by Federal Rule of Civil Procedure 4(m). See Doc. No. 5. On November 22, 2013, Petitioner filed a response detailing its attempts to serve Respondent, and requesting the Court deem service complete or, in the alternative, permit Petitioner to serve Respondent via email pursuant to Rule 4(f)(3) because Respondent appeared to be outside the United States, specifically in Switzerland. See Doc. No. 6.

On December 3, 2013, the Court vacated the OSC hearing. Doc. No. 7. Thereafter, on December 5, 2013, the Court granted Petitioner leave to serve Respondent via email pursuant to Federal Rule of Civil Procedure 4(f)(3). Doc. No. 8. On December 11, 2013, Petitioner filed a Declaration in Support of Service, averring that Respondent had been served by email, return receipt requested, on December 6, 2013. See Doc. No. 9. Petitioner also attached the email and confirmation of receipt by Respondent. See id. To date, Respondent has failed to respond or otherwise appear in this case.

Petitioner then moved to confirm the FINRA Arbitration award. On February 4, 2014, the Court found that although Respondent had been properly served, Respondent had not appeared in the case. As such, Federal Rule of Civil Procedure 55 applied. However, because the Clerk had not entered default under Rule 55(a), the Court denied without prejudice Petitioner's motion.

On March 21, 2014, Petitioner requested Entry of Clerk Default pursuant to Federal Rule of Civil Procedure 55(a), and the Clerk entered default against Respondent on March 25, 2014. Doc. Nos. 11, 12.

Petitioner now moves to confirm the FINRA arbitration award and entry of judgment thereon or, in the alternative, to enter default judgment pursuant to Federal Rule of Civil Procedure 55(b)(2). To date, Respondent has failed to appear or otherwise defend this action. Accordingly, the Court must determine whether to enter default judgment in this case.

LEGAL STANDARD

Where a respondent fails to appear in an action to confirm an arbitration award, and default has been entered, courts will first consider the appropriateness of entry of default judgment. See Fed.R.Civ.P. 55; see, e.g., Wells Fargo Advisors, LLC v. Braver, No. 11-CV-06685, 2012 U.S. Dist. LEXIS 102052, at *3 (N.D. Cal. July 9, 2012) (applying Rule 55 in the context of arbitration awards).[2]

If a defendant fails timely to defend an action, a plaintiff may move the Court for entry of default judgment. See Fed.R.Civ.P. 55(b)(2). Although generally disfavored, Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986), district courts do have discretion to enter default judgments. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (per curiam). In Eitel, the Ninth Circuit enumerated various factors for district courts to consider when deciding whether to enter a default judgment, including:

(1) the possibility of prejudice to the plaintiff;
(2) the merits of plaintiff's ...

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