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Zhang v. Toh

United States District Court, C.D. California

June 24, 2019

LIPING ZHANG
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. 73, 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 Holdings, LLC and Barr Consulting and Holdings, Inc. (the “Barr defendants”), by promising them that these investments would allow them to obtain permanent resident status in the United States. Dkt. 1 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 Liping Zhang (“Zhang”), a citizen of the People's Republic of China, entered into a series of contracts with Toh for immigration services. Dkt. 73-1, Declaration of Liping Zhang (“Zhang Decl.”) ¶¶ 1, 3. Under the agreements, Toh promised Zhang that by investing $250, 000 with the Barr defendants, Zhang 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 Zhang that the $250, 000 investment would be held in an escrow account held by Beverly Hills Escrow (“BHE”) until her immigration status was resolved. Id. ¶ 5. Based on these representations, Zhang deposited $250, 000 into BHE. Id. ¶ 9. Shortly after Zhang made the deposit, BHE distributed her money to the Barr defendants without her authorization. Compl. ¶ 23; Zhang Decl. ¶ 10.

         Over the year that followed, Zhang became concerned about Toh's failure to update her about her immigration status. Id. ¶ 11. Zhang contacted BHE to inquire as to the status of her funds, and BHE provided her with escrow instructions that are materially different than those she had signed in August of 2015. Id. ¶ 11. Zhang became concerned and made several attempts to contact Toh regarding the status of her immigration application and the $250, 000 that she had invested, but Toh did not respond to her requests. Id. ¶ 12. On or about November 2016, Zhang engaged a lawyer to send a demand letter to Toh. Id. ¶ 13. On December 7, 2016, Toh responded to Zhang's attorney, claiming that Zhang's “L-1A petition has been approved and [she had] been well informed of [her] ¶ 1A approval and development of [her] business.” Id. On December 19, 2016, Zhang's attorney sent Toh another letter that included an authorization signed by Zhang to release her information and a request that Toh provide specific information concerning her investment and information relating to her visa application. Id. ¶ 14. Toh did not respond to this letter and over the next year failed to meaningfully respond in any way to any of Zhang's repeated attempts to contact him. Id.

         On October 23, 2017, plaintiff Zhang brought this action against Toh, the Barr defendants, and BHE. Dkt. 1 (“Compl.”). The gravamen of the complaint is that defendants misled plaintiff into believing that by making an investment of $250, 000 with defendant Toh and the Barr defendants, Zhang would qualify for an L-1 Visa and would eventually be able to obtain permanent residence status in the United States. Compl. ¶ 1. Zhang alleges claims against Toh and the Barr defendants 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”). Zhang alleges claims against BHE for (1) aiding and abetting fraud; and (2) breach of fiduciary duty.

         Counsel for Toh and the Barr defendants have since withdrawn from representation. Dkts. 39, 43. Toh's counsel withdrew on August 28, 2018, dkt. 39, and the Court allowed the Barr defendants' counsel to withdraw on September 25, 2018, dkt. 43. The Barr defendants 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 defendants 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. 46. The Barr defendants never responded to the Court's order to show cause. The Court held a status conference on December 17, 2018, which Toh and the Barr defendants failed to attend. Dkt. 47. Zhang's counsel also notified the Court that they had been unable to contact Toh. Id. The Court ordered the Barr defendants' answers stricken and ordered Toh to show cause in writing no later than January 7, 2019 as to why his answer should not be stricken for failure to appear at the Court-ordered hearing. Id. Toh never responded to the Court's order to show cause. On February 6, 2019, Zhang filed an application for an order striking Toh's answer and entering default judgment against Toh and the Barr defendants. Dkt. 48. The Court granted this application on February 7, 2019. Dkt. 49. Pursuant to the Court's order, the Clerk entered default against Toh and the Barr defendants on February 7, 2019. Dkt. 50.

         On May 14, 2019, Zhang filed the instant motion for default judgment against Toh and the Barr defendants on her claims for fraud, conversion, rescission and restitution due to fraud, and violation of the UCL. Dkt. 73 (“Mot.”). Zhang also filed supporting declarations and exhibits.[1] Zhang served the motion for default judgment on defendants and filed proof of service on May 14, 2019. Dkt. 73-6. Zhang's motion is unopposed.

         The Court held a hearing on June 17, 2019. Having carefully considered Zhang'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 ...


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