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XIFIN, Inc. v. Diagnostic Lab Services, LP

United States District Court, S.D. California

November 18, 2019

XIFIN, INC., a California Corporation, Plaintiff,
DIAGNOSTIC LAB SERVICES, LP, a Texas limited partnership, Defendant.


          Hon. Janis L. Sammartino, United States District Judge.

         Presently before the Court is Plaintiff XIFIN Inc.'s Motion for Default Judgment (“Mot., ” ECF No. 12). After reviewing Plaintiff's briefing and supporting evidence and weighing the relevant factors, the Court GRANTS Plaintiff's Motion for Default Judgment.


         Plaintiff XIFIN, Inc. is a San Diego-based healthcare information technology company that provides clients with cloud-based billing services, which Plaintiff provides through its proprietary Revenue Performance Management (“RPM”) system. ECF No. 1 (“Compl.”) at 3.[1] The RPM system helps medical facilities submit claims to insurance companies, government operated programs, and individuals. Id. Defendant Diagnostic Lab Services, LP is a laboratory that provides diagnostic services to healthcare providers in the United States. Id.

         On August 17, 2016, Plaintiff and Defendant entered into a three-year “Systems and Services Agreement” (“Services Agreement”). Id. Under the Services Agreement, Plaintiff was to configure its RPM system to agreed specifications, provide Defendant system access, and provide ongoing support and services related to the processing and management of Defendant's claims to third parties. Id. at 3-4. Defendant's obligation under the Services Agreement was to pay an implementation fee and ongoing service fees. Id.

         Plaintiff implemented the RPM system on or about January 1, 2017, and Defendant began processing bills through the system. Id. Plaintiff thereafter processed Defendant's billings until, on August 29, 2017, Plaintiff terminated the Services Agreement because Defendant failed to pay any of the service fees that were due. Id. at 5.

         On October 17, 2017, Plaintiff filed a complaint against Defendant for breach of contract. Mot. at 5 (citing XIFIN v. Diagnostic Lab Serv., LP, No. 17-cv-02134-CAB-BLM (S.D. Cal. filed Oct. 17, 2017), ECF No. 1). On December 7, 2017, the Parties entered into a settlement agreement in which the Parties agreed to mutual releases and settlement of all claims in exchange for Defendant paying Plaintiff $200, 000. Id. The agreement required Defendant to pay the amount over the course of ten equal installments of $20, 000, beginning in December 2017 and continuing each month thereafter. Id. Under the settlement agreement, the Parties agreed that if Defendant “fail[ed] to timely make any payment required under . . . this Agreement, [Plaintiff], at its sole discretion, may re-file a breach of contract lawsuit against [Defendant] (and/or its successors, transferees, and assigns) for breach of the [Services Agreement].” Id.; see also Declaration of Tammy Lawrence (“Lawrence Decl.”), Ex. A at 3, ECF No. 12-4.

         Defendant paid Plaintiff $20, 000 on December 8, 2017. Mot. at 5. On the same day, Plaintiff filed with the court a notice of voluntary dismissal without prejudice of all claims against Defendant. Id. (citing XIFIN, Case No. 17-cv-02134-CAB-BLM, ECF No. 6). On January 30, 2018, Defendant paid Plaintiff $10, 000. Id. Since then, Plaintiff has failed to make any further payments. Id.

         After Defendant failed to make timely payments, Plaintiff filed the Complaint in the instant action on May 8, 2018. Id. at 5-6. On June 29, 2018, Plaintiff filed an Affidavit of Due Diligence, stating that its attempt to serve Defendant was unsuccessful because Defendant was no longer at its place of business and there was a sign on the door stating, “the locks have been changed due to tenant default.” ECF No. 3. On August 8, 2018, Plaintiff served the complaint on the State of Texas, Secretary of State. Mot. at 6. Defendant failed to file any responsive pleading, id., and on January 14, 2019, the Clerk entered default against Defendant. ECF No. 10. Plaintiff filed the instant motion now before the Court.


         Federal Rule of Civil Procedure 55 permits a court to enter default judgment upon a party's application. Although default judgments are ordinarily disfavored, a court may grant or deny a motion for default judgment at its discretion. See Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988) (citing Haw. Carpenters' Tr. Funds v. Stone, 794 F.2d 508, 511-12 (9th Cir. 1986); Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980)).

         The Ninth Circuit has set out seven factors, known as the Eitel factors, that a court may consider when exercising its discretion as to whether or not to grant default judgment:

(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.

         When weighing these factors, the well-pleaded factual allegations of the complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987); see also Fed. R. Civ. P. 8(b)(6). To prove damages, a plaintiff may submit declarations, or the Court may hold an evidentiary hearing. See Affinity Grp., Inc. v. Balser Wealth Mgmt., LLC, No. 05CV1555 WQH (LSP), 2007 WL 1111239, at *1 (S.D. Cal. Apr. 10, 2007); see also Taylor Made Golf Co. v. Carsten Sports, 175 F.R.D. 658, 661 (S.D. Cal. 1997) (“In assessing damages, the court ...

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