United States District Court, E.D. California
FINDINGS AND RECOMMENDATIONS RECOMMENDING GRANTING IN
PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT OBJECTIONS
DUE WITHIN FOURTEEN DAYS (ECF NOS. 12, 19)
before the Court is Plaintiff Kyle Kolb's motion for
default judgment against Defendants David Telling
(“Defendant Telling”) and Wakecraft Boats II,
Inc. (“Defendant Wakecraft”). The matter has been
referred to the undersigned pursuant to 28 U.S.C. §
636(b)(1)(B) and Local Rule 302. Having considered the moving
papers, the declarations attached thereto, the April 5, 2018
hearing, Plaintiff's supplemental briefing, the
declarations and exhibits attached thereto, as well as the
Court's file, the Court issues the following findings and
about February 27, 2015, Plaintiff entered into a sales
agreement with Defendant Wakecraft for the manufacture and
purchase of a 2015 ZR8 Boat (“the boat”). The
boat was to be delivered by June 13, 2015. Upon executing the
sales agreement, Plaintiff wired $85, 000.00 to Defendant
Wakecraft. However, Defendant Wakecraft did not manufacture
and deliver the boat according to the sales agreement.
Defendant Telling assured that the boat would be ready and
delivered by July 3, 2015, but Defendants failed to deliver
the boat by the July 3, 2015 delivery date. Defendant Telling
provided multiple dates upon which the boat would be
completed and delivered to Plaintiff.
about October 15, 2015, Plaintiff had a conversation with
Defendant Telling. Defendant Telling told Plaintiff that he
was having financial difficulties that prevented him from
completing the boat by the agreed upon dates, but he
guaranteed that the boat would be completed and delivered by
March 15, 2016. Plaintiff and Defendants entered into an
agreement entitled “Boat Delivery Agreement, ”
which provided that it superseded all prior written or oral
agreements between the parties. The Boat Delivery Agreement
provided that the boat would be completed and delivered by
March 15, 2016, or that the $85, 000 that Plaintiff paid
Defendant would be returned by March 15, 2016.
Defendants did not manufacture and deliver the boat by March
15, 2016, and have failed and/or refused to return
Plaintiff's $85, 000.00. Defendant Telling told Plaintiff
that the boat was almost complete, but that he needed an
additional $25, 415.00 to upgrade the boat to a 2017 ZR8.
Defendant Telling requested that Plaintiff loan $25, 415 to
Defendants. Thereafter, Plaintiff and Defendants entered into
an agreement entitled “Amendment to Boat
Agreement” (the “Amendment”), which
provides that Defendants would upgrade the boat to a 2017 ZR8
that would be completed by July 15, 2016, and that Plaintiff
would loan $25, 415 to Defendants which would be repaid with
monthly payments of $2, 000 that would begin 30 days after
Plaintiff loaned the funds to Defendants.
18, 2017, Plaintiff filed the complaint. (ECF No. 1.)
Plaintiff brought claims for breach of contract, unjust
enrichment, and breach of the covenant of good faith and fair
dealing against Defendants and a claim for intentional
misrepresentation against Defendant Telling.
defendants were served with the complaint and summonses on
August 29, 2017, and September 6, 2017. (ECF Nos. 7, 8.) On
December 13, 2017, Plaintiff requested that the Clerk of
Court enter default against Defendants because they had not
filed a responsive pleading. (ECF No. 9.) On December 15, 2017, the
Clerk of Court entered default against Defendants. (ECF No.
February 23, 2018, Plaintiff filed a motion for default
judgment against Defendants. (ECF No. 12.) The motion was
served on Defendants.
April 5, 2018, Magistrate Judge Michael J. Seng held a
hearing on the motion. Edward Stepans appeared telephonically
on behalf of Plaintiff. Defendants did not appear. Plaintiff
was ordered to file supplemental briefing and competent
evidence to explain and justify the judgment requested. On
April 19, 2018, this action was reassigned to the undersigned
due to the retirement of Magistrate Judge Seng. (ECF No. 18.)
Plaintiff filed his supplemental briefing on April 26, 2018.
(ECF No. 19.)
to Rule 55 of the Federal Rules of Civil Procedure, unless a
claim is for a sum certain or a sum that can be made certain
by computation, a party must apply to the court for a default
judgment. Fed.R.Civ.P. 55(b). Upon entry of default, the
complaint's factual allegations regarding liability are
taken as true. Geddes v. United Financial Group, 559
F.2d 557, 560 (9th Cir. 1977); Garamendi v. Henin,
683 F.3d 1069, 1080 (9th Cir. 2012). However, the
complaint's factual allegations relating to the amount of
damages are not taken as true. Geddes, 559 F.2d at
560. Accordingly, the amount of damages must be proven at an
evidentiary hearing or through other means. Microsoft
Corp. v. Nop, 549 F.Supp.2d 1233, 1236 (E.D. Cal. 2008).
“[N]ecessary facts not contained in the pleadings, and
claims which are legally insufficient, are not established by
default.” Cripps v. Life Ins. Co. of North
America, 980 F.2d 1261, 1267 (9th Cir. 1992). Pursuant
to Federal Rule of Civil Procedure 54(c), “[a] default
judgment must not differ in kind from, or exceed in amount,
what is demanded in the pleadings.” Entry of default
judgment is not a matter of right and it is within the
discretion of the court whether default judgment should be
entered. Shanghai Automation Instrument Co. v. Kuei,
194 F.Supp.2d 995, 999 (N.D. Cal. 2001); Eitel v.
McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). The Ninth
Circuit has set forth the following factors for the court to
consider in exercising its discretion:
(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.
motion for default judgment and supplement, Plaintiff seeks
default judgment and requests monetary damages, prejudgment
interest, post-judgment interest, attorneys' fees, and
Subject Matter Jurisdiction
courts are courts of limited jurisdiction and their power to
adjudicate is limited to that granted by Congress. U.S v.
Sumner, 226 F.3d 1005, 1009 (9th Cir. 2000). Here,
Plaintiff alleges that diversity jurisdiction exists.
District courts have original jurisdiction of all civil
actions between citizens of different States in which
“the matter in controversy exceeds the sum or value of
$75, 000, exclusive of interest and costs.” 28 U.S.C.
§ 1332(a). This requires complete diversity of
citizenship and the presence “of a single plaintiff
from the same State as a single defendant deprives the
district court of original diversity jurisdiction over the
entire action.” Abrego Abrego v. The Dow Chemical
Co., 443 F.3d 676, 679 (9th Cir. 2006) (citations
Plaintiff is a citizen of Colorado. (Compl. at ¶ 1.)
Defendant Telling is a citizen of California. (Id.
at ¶ 2.) Defendant Wakecraft is a California Corporation
with its principal place of business in California.
(Id. at ¶ 2.) A corporation is deemed to be a
citizen of any State by which it has been incorporated and of
the State where it has its principal place of business.
Lincoln Prop. Co. v. Roche, 546 U.S. 81, 94 (2005)
(quoting 28 U.S.C. § 1332(c)(1)). Therefore, Defendant
Wakecraft is a citizen of California. Since Plaintiff is not
a citizen of the same state as Defendants, complete diversity
of citizenship exists.
alleges that the amount in controversy exceeds $75, 000.00.
(Compl. at ¶ 4.) Plaintiff contends that Defendants
breached a contract by failing to deliver the 2017 boat,
failing to return the $85, 000.00 paid for the boat, and
failing to repay the $25, 415.00 loan. (Id. at
¶ 36.) Plaintiff seeks damages of at least $75, 000. The
Court finds that Plaintiff has sufficiently alleged that the
amount in controversy meets the jurisdictional requirement.
Therefore, the Court has original jurisdiction under 28
U.S.C. § 1332(a).
Service of Process
Service on Defendant Telling
of the Federal Rules of Civil Procedure sets forth the
requirements for the manner of service on an individual. Rule
4(e) provides that an individual may be served by personally
delivering a copy of the summons and a complaint.
Defendant Telling was personally served with the summons, the
cover sheet, and new case documents. (ECF No. 8.) However,
the proof of service does not indicate that the complaint was
served. Rule 4 is flexible and should be liberally construed
so long as it gives the party to be served sufficient notice
of the complaint. Direct Mail Specialists, Inc. v. Eclat
Computerized Technologies, Inc., 840 F.2d 685, 688 (9th
Cir. 1988). While the proof of service does not indicate that
Defendant Telling was served with the complaint, his counsel,
Cyril Lawrence, corresponded with Plaintiff's counsel
regarding an extension of time to file an answer which
indicates that the complaint was served. (February 23, 2018
Declaration of Robert J. Berens (“Berens Decl.”)
at ¶ 8.) Therefore, the Court finds that Defendant
Telling was served sufficiently.
Service on Defendant Wakecraft
Federal Rules of Civil Procedure provide for two ways to
effectuate service on a corporation. Pursuant to Federal Rule
of Civil Procedure 4(h), a corporation must be served
“in a manner prescribed by Rule 4(e)(1) for serving an
individual; or . . . by delivering a copy of the summons and
of the complaint to an officer, a managing or general agent
or any agent, authorized by appointment or by law to receive
service of process. . . .” Here, Defendant Wakecraft
was served by personal service on Cyril Lawrence, the person
authorized to receive service of process for Defendant
Wakecraft. (ECF No. 7 at 1, Berens Decl. at ¶ 6.) The
proof of service indicates that Defendant Wakecraft was
personally served with the summons, the cover sheet, and new
case documents. While the proof of service does not indicate
that Defendant Wakecraft was served with the complaint, the
fact that its counsel, Mr. Lawrence, contacted
Plaintiff's counsel regarding an extension of time to
file an answer indicates that it was served with the
complaint. Therefore, the Court finds that Defendant
Wakecraft was sufficiently served.
The Eitel Factors Weigh in Favor of Default
discussed below, consideration of the Eitel factors
weigh in favor of granting default judgment in this instance
Possibility of Prejudice to Plaintiff
first factor weighs in favor of entry of default judgment. If
default judgment is not entered, Plaintiff is effectively
denied a remedy for the violations alleged in this action
unless Defendants appear. Defendants may never appear to
defend this action. Therefore, this factor weighs heavily in
favor of granting default judgment.
The Merits of Plaintiff's Substantive Claims and
Sufficiency of Complaint
next relevant Eitel factors include an evaluation of
the merits of the substantive claims alleged in the complaint
as well as the sufficiency of the complaint itself. This
requires the Court to look to the complaint to determine if
the allegations contained within are sufficient to state a
claim for the relief sought. Danning v. Lavine, 572
F.2d 1386, 1388 (9th Cir. 1978). “[F]acts which are not
established by the pleadings of the prevailing party, or
claims which are not well-pleaded, are not binding and cannot
support the judgment.” Alan Neuman Prods., Inc. v.
Albright, 862 F.2d 1388, 1392 (9th Cir. 1988) (finding
it error to award default judgment where the complaint was
insufficient to state a claim).
Plaintiff's motion for default judgment, he states that
counts one through four allege that Defendants breached the
Agreement by not timely delivering the 2017 boat and not
repaying the loan that Plaintiff made to Defendants.
Plaintiff also states that he has demonstrated the merits of
his substantive claim against Defendants.
brings a claim for breach of contract under California law.
The elements of a cause of action for breach of contract are:
(i) existence of the contract, (ii) plaintiff's
performance or excuse for nonperformance, (iii)
defendant's breach, and (iv) resulting damages to the
plaintiff. See CDF Firefighters v. Maldonado, 158
Cal.App.4th 1226, 1239 (2008) (citation omitted).
Court first determines whether a valid contract existed.
Plaintiff's complaint alleges that he and Defendants
entered into a Boat Delivery Agreement on October 15, 2015,
and an Amendment on or about June 20, 2016. Plaintiff alleges
that the Boat Delivery Agreement, as amended by the
Amendment, was a valid contract. Plaintiff attaches the
Purchase Agreement, Boat Delivery Agreement, and Amendment to
the complaint. Plaintiff alleges that Defendants have
breached the terms of the Boat Delivery Agreement, which was
amended by the Amendment.
Boat Delivery Agreement was signed by both parties and
provided that Plaintiff was willing to hold off on bringing a
civil complaint against Defendants pursuant to the Boat
Delivery Agreement and Defendants would manufacture the boat
and deliver the boat to Plaintiff's home address or
return the $85, 000.00 to Plaintiff on or before March 15,
2016. Therefore, the Boat Delivery Agreement is a valid
contends that the Amendment was a valid amendment to the
original Boat Delivery Agreement. However, Section 3d of the
Boat Delivery Agreement states that “[t]his Agreement
may only be modified or amended if the amendment is made in
writing and is signed by both parties.” (ECF No. 1-2.)
A review of the Amendment reveals that it was not signed by
Plaintiff. (ECF No. 1-4.)
the express language of the Boat Delivery Agreement makes it
clear that it can only be amended if the amendment is made in
writing and is signed by both parties. Plaintiff does not
present any argument or evidence that this was not what was
intended by the parties or that this should be interpreted
differently. When a court is determining the meaning of a
written contract, the court first decides whether the
language is ambiguous and reasonably susceptible to the
interpretation urged. See Winet v. Price, 4