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Yang v. Toh

United States District Court, C.D. California

June 24, 2019

FAN YANG
v.
HUNG ERN TOH ET AL.

          Present: The Honorable CHRISTINA A. SNYDER, J.

          CIVIL MINUTES - GENERAL

         Proceedings: (IN CHAMBERS) - PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AGAINST DEFENDANTS HUNG ERN TOH, BARR CONSULTING AND HOLDINGS, INC., AND BARR HOLDINGS, LLC. (Dkt. 83, filed May 14, 2019)

         I. INTRODUCTION AND BACKGROUND

         This case concerns an allegedly fraudulent scheme orchestrated by Hung Ern Toh (“Toh”), wherein Toh convinced Chinese nationals to invest substantial sums of money in his entities, Barr Consulting and Holdings, Inc. and Barr Holdings, LLC (the “Barr entities”), by promising them that these investments would allow them to obtain permanent resident status in the United States. Dkt. 15 at ¶ 1. Toh then allegedly misappropriated these funds for his own use. Id. This scheme has resulted in the filing of several related cases in this Court.

         Plaintiff Fan Yang (“Yang”), a citizen of the People's Republic of China, entered into a series of contracts with Toh for immigration services. Dkt. 83-1, Declaration of Fan Yang (“Yang Decl.”) ¶ 3. Under the agreements, Toh promised Yang that by investing $250, 000 with the Barr entities, Yang would qualify for an L-1 visa for travel to and from the United States and would eventually be able to obtain permanent residence status in the United States. Id. ¶ 4. Toh also assured Yang that the $250, 000 investment would be held in an escrow account held by Beverly Hills Escrow (“BHE”) until his immigration status was resolved. Id. ¶ 6. Based on these representations, Yang deposited $250, 000 into BHE's escrow account. Id. ¶ 3.

         Thereafter, BHE distributed Yang's $250, 000 to Toh and the Barr entities without Yang's authorization. Id. ¶ 10. On or about September 2016, Yang contacted BHE to inquire about the status of the $250, 000 and received materially different escrow instructions from BHE than the ones he had signed. Id. ¶ 12. Yang made several attempts to contact Toh, but Toh thereafter engaged in delay tactics and refused to return Yang's $250, 000 investment. Id. ¶ 13.

         On August 18, 2017, Yang brought this action against defendants BHE, Toh, and the Barr entities. Dkt. 1. Yang subsequently filed an amended complaint on October 18, 2017. Dkt. 15 (“FAC”). The gravamen of the complaint is that defendants misled Yang into believing that, by making an investment of $250, 000 with defendant Toh and his Barr entities, Yang would qualify for an L-1 Visa, and would eventually be able to obtain permanent residence status in the United States. FAC ¶ 1. Yang alleges claims against Toh and the Barr entities for: (1) fraud; (2) conversion; (3) rescission and restitution due to fraud; and (4) violation of the California Business & Professions Code § 17200 et seq. (“UCL”). Yang alleges claims against BHE for (1) aiding and abetting; and (2) breach of fiduciary duty.

         Counsel for Toh and the Barr entities have since withdrawn from representation. Dkts. 47, 53. Toh's counsel withdrew on August 28, 2018, dkt. 47, and the Court allowed the Barr entities' counsel to withdraw on September 25, 2018, dkt. 53. The Barr entities were ordered to obtain new counsel within thirty days of the date of that order. Id. On November 7, 2018, the Court ordered the Barr entities to show cause in writing no later than December 7, 2018 as to why their answers should not be stricken and default be entered against them for failure to retain new counsel. Dkt. 56. The Court held a status conference on November 26, 2018, which Toh failed to attend. Dkt. 57. Yang's counsel also notified the Court that they had been unable to contact Toh. Id. The Court ordered Toh to show cause in writing no later than December 14, 2018, as to why his answer should not be stricken for failure to appear at the Court-ordered telephone hearing. Id. Toh and the Barr entities never responded to the Court's orders. On February 6, 2019, Yang filed an ex parte application to strike Toh and the Barr entities' answers to the complaint. Dkt. 60. The Court granted this request on February 7, 2019 and ordered the default of Toh and the Barr entities. Dkt. 61. Pursuant to the Court's order, the Clerk entered default against Toh and the Barr entities on February 7, 2019. Dkt. 62. On May 14, 2019, Yang filed the instant motion for default judgment against Toh and the Barr entities on his claims for fraud, rescission and restitution due to fraud, conversion, and violation of the UCL. Dkt. 83 (“Mot.”). Yang also filed supporting declarations and exhibits.[1] Yang served the motion for default judgment on Toh and the Barr entities and filed proof of service on May 14, 2019. Dkt. 83-6. Yang's motion is unopposed.

         The Court held a hearing on June 17, 2019. Having carefully considered Yang's motion and supporting exhibits, the Court finds and concludes as follows.

         III. LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 55, when a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and the plaintiff does not seek a sum certain, the plaintiff must apply to the court for a default judgment. Fed.R.Civ.P. 55.

         As a general rule, cases should be decided on the merits as opposed to by default, and therefore, “any doubts as to the propriety of a default are usually resolved against the party seeking a default judgment.” Judge Beverly Reid O'Connell & Judge Karen L. Stevenson, California Practice Guide: Federal Civil Procedure Before Trial ¶ 6:11 (The Rutter Group 2017) (citing Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985)). Granting or denying a motion for default judgment is a matter within the court's discretion. Elektra Entm't Grp. Inc. v. Crawford, 226 F.R.D. 388, 392 (C.D. Cal. 2005).

         The Ninth Circuit has directed that courts consider the following factors in deciding whether to enter default judgment: (1) the possibility of prejudice to plaintiff; (2) the merits of plaintiff's substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning the material facts; (6) whether defendant's default was the product of excusable neglect; and (7) the strong policy favoring decisions on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986); see also Elektra, 226 F.R.D. at 392.

         IV. ...


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