Kolb v. Telling, Case No. 1:17-cv-00957-DAD-SAB

CourtU.S. District Court — Eastern District of California
PartiesKYLE KOLB, Plaintiff, v. DAVID TELLING, et al., Defendants.
Decision Date25 May 2018
Docket NumberCase No. 1:17-cv-00957-DAD-SAB

KYLE KOLB, Plaintiff,
v.
DAVID TELLING, et al., Defendants.

Case No. 1:17-cv-00957-DAD-SAB

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

May 25, 2018


FINDINGS AND RECOMMENDATIONS RECOMMENDING GRANTING IN PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT

(ECF Nos. 12, 19)

OBJECTIONS DUE WITHIN FOURTEEN DAYS

Currently 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 recommendations.

I.
BACKGROUND

On or 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

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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.

On or 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 Plaintiff and Defendants entered into an agreement entitled "Boat Delivery Agreement," which provided that it superseded all prior written or oral agreements between the parties.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.

However, 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.

On July 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.

The 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

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of Court enter default against Defendants because they had not filed a responsive pleading. (ECF No. 9.)1 On December 15, 2017, the Clerk of Court entered default against Defendants. (ECF No. 10.)

On February 23, 2018, Plaintiff filed a motion for default judgment against Defendants. (ECF No. 12.) The motion was served on Defendants.

On 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.)

II.
LEGAL STANDARD

Pursuant 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."

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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.

III.
DISCUSSION

In the motion for default judgment and supplement, Plaintiff seeks default judgment and requests monetary damages, prejudgment interest, post-judgment interest, attorneys' fees, and costs.2

A. Jurisdiction

1. Subject Matter Jurisdiction

Federal 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 omitted).

Here, Plaintiff is a citizen of Colorado. (Compl. at ¶ 1.) Defendant Telling is a citizen of

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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.

Plaintiff 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).

2. Service of Process

a. Service on Defendant Telling

Rule 4 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. Fed. R. Civ. P. 4(e)(2).

Here, 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.

/ / /

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b. Service on Defendant Wakecraft

The 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...

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