Animal Blood Bank, Inc. v. Hale, No. 2:10-cv-02080 KJM KJN

Decision Date16 November 2012
Docket NumberNo. 2:10-cv-02080 KJM KJN
CourtU.S. District Court — Eastern District of California
PartiesANIMAL BLOOD BANK, INC., a California corporation, et al., Plaintiffs, v. ANNE S. HALE, an individual, Defendant.

Plaintiffs filed a Motion for Default Judgment (the "Motion") on September 20, 2012.1 (Mot. for Default J., Dkt. No. 74.) Defendant Anne S. Hale ("defendant") did not file any written opposition to the Motion.

Plaintiffs seek default judgment upon claims for: (1) breach of a "Merger Agreement," (2) breach of a "Shareholder Agreement," (3) breach of fiduciary duty arising from defendant's role as a director and officer of plaintiff Animal Blood Bank, Inc. ("ABB"), (4) misappropriation of trade secrets belonging to ABB, and (5) fraud. (Mot. for Default J. at 10-14.) Plaintiffs' Motion includes a four-page list of damages figures and citations supporting those figures (id. at 18-21), but the Motion did not specify the claim(s) giving rise to eachdamages figure. Instead, plaintiffs prefaced the four-page list with the explanation that "[p]laintiffs are able to demonstrate the following damages as a result of [Defendant] Hale's misconduct." (Id. at 18.) The undersigned requested further clarification from plaintiffs specifying which damages amounts arise from which claim(s). (Dkt. No. 77.) Plaintiffs timely filed the requested supplemental briefing. (Supp'l Br., Dkt. No. 78.) Plaintiffs' motion and supporting declarations, exhibits, and supplemental briefing are currently pending before the undersigned. (Dkt. Nos. 74, 78; Declaration of Patricia Kaufman ("Kaufman Decl."), Dkt. No. 74-3; Declaration of Marc Koenigsberg ("Koenigsberg Decl."), Dkt. No. 74-2.)

The court heard plaintiffs' motion for default judgment on its law and motion calendar on November 1, 2012. Attorneys Marc Koenigsberg appeared at the hearing on behalf of plaintiffs. Plaintiffs Michael and Patricia Kaufman also appeared at the hearing and gave sworn testimony under penalty of perjury. No appearance was made by or on behalf of defendant. For the reasons stated below, the undersigned recommends that plaintiffs' motion for default judgment be granted, that judgment be entered in plaintiffs' favor, and that plaintiffs be awarded $244,541.05 in damages, two permanent injunctions, $385,356.53 in attorneys' fees, and $4,084.70 in litigation costs.

A. Summary Of Plaintiffs' Allegations

In general, this case arises out of the merger of defendant's company, MidWest Animal Blood Services, Inc. ("MABS") with and into ABB. The merger closed on July 16, 2008. (Compl. ¶ 11.) Defendant was the president and chief executive officer of ABB from June of 2008 until her resignation in May of 2010. (Id. ¶ 5.) Over the course of her relationship with ABB, defendant allegedly breached her fiduciary duties to ABB, breached her contracts with ABB and the Kaufmans, defrauded ABB and the Kaufmans, and misappropriated ABB's trade secrets and proprietary information. (Id. ¶¶ 43-74.)

Relevant here, plaintiffs' Prayer For Relief requests damages, injunctive relief, declaratory relief, and "attorneys' fees and costs." (Compl. at 19-20.)

B. Relevant Procedural Background

Plaintiffs filed their complaint on August 4, 2010. (Compl., Dkt. No. 1.)

Defendant was served with process and filed an Answer and Counterclaims on October 8, 2010. (Dkt. No. 8.) On August 3, 2011, plaintiffs' counsel filed a Notice of Filing Bankruptcy as to defendant. (Dkt. No. 44.) On October 24, 2011, the district judge stayed this action due to the pendency of defendant's bankruptcy proceeding. (Dkt. No. 52.)

On February 10, 2012, the district judge lifted the bankruptcy stay. (Dkt. No. 55.) However, since the bankruptcy stay was lifted, defendant has not participated in this action, despite multiple court orders directing her to do so.

Accordingly, after a hearing on a motion to compel on May 3, 2012, having determined that neither defendant nor the Chapter 7 Bankruptcy trustee who "owns" defendant's counterclaims intends to participate in this litigation, the undersigned entered an order to show cause directing defendant to show cause why: (1) her answer should not be stricken; (2) her default should not be entered; and (3) her counterclaims should not be dismissed with prejudice. (See Order & Order to Show Cause ("OSC"), May 8, 2012, at 3-4, Dkt. No. 66.) The undersigned ordered the Chapter 7 bankruptcy trustee, Michael A. Mason, to similarly show cause in regards to dismissal of defendant's counterclaims. (Id. at 3.) Neither defendant nor Mr. Mason filed a response to the OSC. Accordingly, the undersigned recommended that: (1) the Clerk of Court be directed to strike defendant's answer to plaintiffs' complaint and enter defendant's default; and (2) defendant's counterclaims be dismissed with prejudice. (Dkt. No. 68.) The OSC warned that defendant's and Mason's failures to respond to the OSC constituted consent to these recommendations. (Id. at 4.)

On July 2, 2012, the district judge issued an order dismissing defendant's counterclaim in this action, pursuant to the parties' stipulation. (Dkt. No. 70.)

On August 21, 2012, the district judge issued an order partially adopting the undersigned's Findings and Recommendations.2 (Order, Dkt. No. 72.) Therein, the district judge directed the Clerk of the Court to: (a) strike defendant's answer (Dkt. No. 8) to plaintiffs' complaint; and (b) enter defendant's default with respect to plaintiffs affirmative claims. (Order at 2.)

On October 3, 2012, the Clerk of the Court entered defendant's default pursuant to the district judge's order at Docket Number 72. (Clerk's Cert. of Entry of Default, Dkt. No. 76.)

On September 20, 2012, plaintiffs filed the pending motion for default judgment against defendant and served a copy of the motion on defendant by U.S. mail and by overnight courier. (Cert. of Serv., Sept. 20, 2012, Dkt. No. 74-1 at 28.) A review of the court's docket reveals that defendant has not filed a response to the motion for default judgment.


Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend against the action. See Fed. R. Civ. P. 55(a). However, "[a] defendant's default does not automatically entitle the plaintiff to a court-ordered judgment." PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)). Instead, the decision to grant or deny an application for default judgment pursuant to Federal Rule of Civil Procedure 55(b)(2) lies within the district court's sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court considers the following factors:

(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 v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily disfavored. Id. at 1472.

As a general rule, once default is entered, well-pleaded factual allegations in the operative 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) (per curiam) (citing Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); accord Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). In addition, although well-pleaded allegations in the complaint are admitted by a defendant's failure to respond, "necessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)); accord DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (for default judgment purposes, a defendant is not held to admit facts that are not well-pled or conclusions of law); Abney v. Alameida, 334 F. Supp. 2d 1221, 1235 (S.D. Cal. 2004) ("[A] default judgment may not be entered on a legally insufficient claim.").

A party's default conclusively establishes that party's liability, but it does not establish the amount of damages. Geddes, 559 F.2d at 560. Upon moving for default judgment, the plaintiff is required to provide evidence of its damages, and the damages sought must not be different in kind or amount from those set forth in the complaint. Amini Innovation Corp. v. KTY Intern. Mktg., 768 F. Supp. 2d 1049, 1054 (C.D. Cal. 2011) (citing Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003). When "proving-up" damages, admissible evidence (including witness testimony) supporting damage calculations, is usuallyrequired. Id. "The court may conduct hearings or make referrals . . . when, to enter or effectuate judgment, it needs to . . . determine the amount of damages." Fed. R. Civ. P. 55(b)(2)(B). Entry of a default judgment for money is appropriate without a hearing if "the amount claimed is a liquidated sum or capable of mathematical calculation." Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir. 1981) (no hearing necessary when documents show that the judgment amount is based upon a definite figure); Microsoft Corp. v. Nop, 549 F. Supp. 2d 1233, 1235-36 (E.D. Cal. 2008) ("Where damages are liquidated (i.e., capable of ascertainment from definite figures contained in the documentary evidence or in detailed affidavits), judgment by default may be entered without a damages hearing.") (citing Dundee Cement Co. v....

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