Opinion
Case No. 2:18-cv-02009-SU
01-30-2019
SWIFT FINANCIAL, LLC, fka Swift Financial Corporation, a Delaware limited liability company, Plaintiff, v. ALABAR CONSTRUCTION, INC., an Oregon corporation; and JOHN A. FENTON, an individual, Defendants.
FINDINGS AND RECOMMENDATIONS
:
Plaintiff Swift Financial, LLC brings this action to confirm an arbitration award. An arbitrator for the American Arbitration Association ("AAA") made the award August 19, 2018, in favor of plaintiff and against defendants Alabar Construction, Inc. ("Alabar") and John A. Fenton. AAA case no. 01-18-0001-6731; Laurick Nov. 20, 2018, Decl., Ex. 1 (Docket No. 2-1) (the "Arbitration Award"). Plaintiff has filed a Petition for Order to Confirm Arbitration Award. (Docket No. 1). Defendants have not appeared or otherwise taken any action in this matter. The Court entered default on January 29, 2019. (Docket No. 14). Plaintiff has moved for default judgment. (Docket No. 8).
For the following reasons, the Court should GRANT plaintiff's Motion for Default Judgment (Docket No. 8) and GRANT plaintiff's Petition for Order to Confirm Arbitration Award (Docket No. 1).
BACKGROUND
The Court takes these facts from the Arbitration Award as incorporated into plaintiff's Complaint and as uncontested due to defendants' default. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1005 (9th Cir. 2018); Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977).
Effective August 28, 2017, plaintiff entered into a Future Receivables Sale Agreement with Alabar in which plaintiff sold to Alabar $89,175.00 of its future receivables for the sum of $75,000.00. Arbitration Award ¶ 1; see also Laurick Nov. 20, 2018, Decl., Ex. 2 (Docket No. 2-2) (the "Sale Agreement"). Fenton also guaranteed the obligations on the sale. Id., at 2; Arbitration Award ¶ 2. On October 24, 2017, Alabar had insufficient funds for the required remittances under the Sale Agreement and ceased making payments, in violation of the Agreement. Id. ¶¶ 4, 6. Alabar thus defaulted on the Sales Agreement, and Fenton also failed to honor his guaranty obligations. Id. ¶¶ 7-8.
As a result, defendants owe plaintiff $77,205.70 as an advance balance due under the Sales Agreement, plus non-sufficient funds charges of $35.00, for a total of $77,240.70. Id. ¶ 9. The Sales Agreement also requires that defendants reimburse plaintiff for reasonable attorney's fees incurred in seeking enforcement of the Agreement, and plaintiff incurred $1,192.00 in attorney's fees. Id. ¶ 10; see also Laurick Nov. 20, 2018, Decl., Ex. 2, at 2-3 (Docket No. 2-2). The Arbitration Award thus found that defendants Alabar and Fenton were jointly and severally liable for the amount of $77,240.70, id. ¶ A, and for attorney's fees in the amount of $1,192.00, id. ¶ B. The Award also awarded plaintiff AAA fees of $3,000, plus arbitrator compensation of $1,172.50, and so defendants were also jointly and severally liable for $4,172.50. Id. ¶ C. In the aggregate, these total $82,605.20. See also Laurick Jan. 11, 2019, Decl. ¶¶ 3-5 (Docket No. 9).
LEGAL STANDARD
After an entry of default against an unresponsive defendant, a court may grant default judgment in plaintiff's favor and award damages. Fed. R. Civ. P. 55(b)(2). "The district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising its discretion, the court considers the following factors, as articulated in Eitel v. McCool:
(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.782 F.2d 1470, 1471-72 (9th Cir. 1986). Upon entry of default, the non-responding party is deemed to have admitted the factual allegations against him, except allegations of damages. Fed. R. Civ. P. 8(b)(6); Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). Thus, the court accepts plaintiff's pleaded facts as true, but plaintiff must prove damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987).
DISCUSSION
I. Whether to Grant Default Judgment
The Court entered default against defendants on January 29, 2019. (Docket No. 14). Despite plaintiff's failure to discuss the Eitel factors, the Court now analyzes those factors to determine whether to enter default judgment.
A. Factor One: Possibility of Prejudice to Plaintiff
The first Eitel factor considers whether plaintiff will suffer prejudice if the court denies default judgment. Courts have found that this factor favors default judgment where plaintiff's only available legal remedy is default judgment, and where, without such judgment, plaintiff would be left without any recourse for recovery. See, e.g., Garcia v. Pacwest Contracting LLC, No. 3:12-cv-01930-SI, 2016 WL 526236, at *3 (D. Or. Feb. 9, 2016); Joe Hand Prods. v. Holmes, No. 2:12-cv-00535-SU, 2015 WL 5144297, at *3 (D. Or. Aug. 31, 2015).
Defendants have not appeared, pleaded, or otherwise defended this action. If the Court were to deny plaintiff's Motion, plaintiff would be left without recourse to enforce the Arbitration Award. Accordingly, the first Eitel factor supports entry of default judgment.
B. Factors Two and Three: Merits and Sufficiency of the Complaint
Factors two and three, the merits of plaintiff's substantive claims and the sufficiency of the complaint, "are closely related. Both factors require that a plaintiff's allegations state a claim on which the plaintiff may recover." Joe Hand, 2015 WL 5144297, at *3 (quotation omitted); Garcia, 2016 WL 526236, at *3.
A party may apply for judicial confirmation of an arbitration award by serving and filing in federal court a petition to confirm. 9 U.S.C. § 6; see also JuiceMe, LLC v. Booster Juice Ltd., No. 09-cv-1506 BR, 2013 WL 3229804, at *1 (D. Or. June 24, 2013). The party seeking confirmation must file the arbitration agreement and the award. 9 U.S.C. §§ 9, 13. The movant must serve notice of the confirmation application on the adverse party. Id. § 9. The application to confirm an arbitration award is a summary proceeding, and the court does not hold an evidentiary hearing. Id. § 6. If the court confirms the award, the court dockets a judgment, which has the same force, effect, and enforceability as a judgment in an action. Id. § 13.
Plaintiff has provided the proper documentation to be entitled to summary judgment, and for the Court to confirm the Arbitration Award. See Arbitration Award (Docket No. 2-1); Sales Agreement (Docket No. 2-2); Laurick Jan. 11, 2019, Decl., Ex. 2 (costs calculations) (Docket No. 9-2). This establishes that plaintiff has satisfied its burden to show the merits of its substantive claims and of the complaint. These factors favor entry of default judgment.
C. Factor Four: Money at Stake
"The fourth Eitel factor is the sum of money at stake in the action. Under this factor, a court considers the sum of money in relation to the seriousness of the defendant's conduct." Garcia, 2016 WL 526236, at *3 (alteration and quotation omitted); Joe Hand, 2015 WL 5144297, at *7.
Here, plaintiff has presented uncontested evidence that it is owed $82,605.20 under the Arbitration Award. Arbitration Award (Docket No. 2-1); Sales Agreement (Docket No. 2-2); Laurick Jan. 11, 2019, Decl., Ex. 2 (costs calculations) (Docket No. 9-2). This is a substantial sum for defendants to have failed to pay due to default on the sales agreement and due to the subsequent arbitration. This factor favors entry of default judgment.
D. Factor Five: Possibility of Dispute Concerning Material Facts
"The fifth Eitel factor is the possibility of a dispute concerning material facts. Upon entry of default, the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true." Garcia, 2016 WL 526236, at *4 (quotation and citation omitted); Joe Hand, 2015 WL 5144297, at *7.
There is no dispute concerning material facts. The Court takes all of plaintiff's allegations as true upon entry of default, except as to damages. Here, these facts are contained in the Arbitration Agreement, which is incorporated into plaintiff's Complaint. Defendants have taken no action to put any facts into dispute. Thus, this factor favors entry of default judgment.
E. Factor Six: Whether Default Is Due to Excusable Neglect
"The sixth Eitel factor inquires whether defendant's default might have resulted from excusable neglect." Joe Hand, 2015 WL 5144297, at *8; Garcia, 2016 WL 526236, at *4.
The possibility of excusable neglect here is minimal. Defendants have been served with plaintiff's Petition, Motion for Default, and Motion for Default Judgment. (Docket Nos. 2, 9, 11, 13). This factor favors entry of default judgment.
F. Factor Seven: Decision on the Merits
The seventh Eitel factor is the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel, 782 F.2d at 1472. Although "cases should be decided upon their merits whenever reasonably possible," id., "the mere existence of Fed. R. Civ. P. 55(b) indicates that this preference, standing alone, is not dispositive." Garcia, 2016 WL 526236, at *4 (quotation omitted). "[C]ourts have consistently concluded that this policy, standing alone, is not dispositive, especially where a defendant fails to appear or defend itself in an action. Where defendants have failed to appear or respond in a given matter, a decision on the merits is impossible." Joe Hand, 2015 WL 5144297, at *8 (quotation and citations omitted). "Thus, the preference to decide cases on the merits does not preclude a court from granting default judgment." Garcia, 2016 WL 526236, at *4.
Given defendants' failure to appear, plead, or defend this action, a decision on the merits is impossible. This factor does not preclude entry of default judgment.
* * *
Six of the Eitel factors favor entry of default judgment. This analysis strongly supports entry of default judgment. II. Damages
Following an entry of default, the facts in the complaint are taken as true, but "neither the default nor the allegations in the complaint can establish the amount of damages." Lasheen v. Embassy of the Arab Republic of Egypt, 625 F. App'x 338, 341 (9th Cir. 2015); see TeleVideo Sys., 826 F.2d at 917-18. Thus, before the court can enter a default judgment on a sum uncertain, the plaintiff must prove its damages. Joe Hand, 2015 WL 5144297, at *3; Rubicon Glob. Ventures, Inc. v. Chongqing Zongshen Grp., 226 F. Supp. 3d 1141, 1148 (D. Or. 2016).
As discussed above, plaintiff has provided uncontested evidence that the Arbitration Award held defendants jointly and severally liable for the amount of $77,240.70, id. ¶ A; for attorney's fees of $1,192.00, id. ¶ B; for AAA fees of $3,000; and for arbitrator compensation of $1,172.50, id. ¶ C; see also Arbitration Award (Docket No. 2-1); Sales Agreement (Docket No. 2-2); Laurick Jan. 11, 2019, Decl., Ex. 2 (costs calculations) (Docket No. 9-2). This totals $82,605.20. The Court should award plaintiff this amount in damages as against defendants.
RECOMMENDATIONS
For these reasons, the Court should GRANT plaintiff's Motion for Default Judgment (Docket No. 8) and GRANT plaintiff's Petition for Order to Confirm Arbitration Award (Docket No. 1).
SCHEDULING ORDER
The above Findings and Recommendations will be referred to a United States District Judge for review. Objections, if any, are due February 13, 2019. If objections are filed, a response to the objections is due fourteen days after the date the objections are filed and the review of the Findings and Recommendations will go under advisement on that date.
IT IS SO ORDERED.
DATED this 30th day of January, 2019.
/s/ Patricia Sullivan
PATRICIA SULLIVAN
United States Magistrate Judge