Opinion
For YUNLONG U.S.A. WINDOW FASHIONS, INC., a California corporation, Plaintiff: Jonathan D Weiss, Law Offices of Hwang and Weiss, South Pasadena, CA.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT
MARGARET M. MORROW, UNITED STATES DISTRICT JUDGE.
On November 21, 2014, Yunlong U.S.A. Window Fashions, Inc. (" Yunlong") filed this action for breach of contract, open book account, and fraud against Ivan Lourido and Blackstone Window Coverings, Incorporated, doing business as " Windo-Shade Distributors" (" Blackstone"). Yunlong served defendants on November 25, 2014, via certified mail. On December 23, 2014, the court issued an order to show cause regarding dismissal for lack of prosecution; thereafter, on January 2, 2015, at Yunlong's request, the clerk entered defendants' default. On February 9, 2015, Yunlong filed an application for entry of default judgment against Lourido and Blackstone. Defendants have not opposed the application.
Complaint, Docket No. 1 (Nov. 21, 2014).
Proof of Service, Docket No. 9 (Dec. 23, 2014). Service by certified mail is proper under Cal.Code.Civ.Proc. § 415.30.
Order to Show Cause, Docket No. 10 (Dec. 23, 2014).
Default by Clerk Entered, Docket No. 12 (Jan. 2, 2015).
Application for Default Judgment (" Application for Default"), Docket No. 14 (Feb. 9, 2015).
I. BACKGROUND
On July 28, 2010, Lee Burchfield incorporated Blackstone by filing Articles of Incorporation in the State of Texas, where Blackstone also has its principal place of business. Blackstone's Articles of Incorporation listed Lourido as a director of the company. Lourido is a Texas domiciliary, and was an officer and a director of Blackstone at all relevant times. On February 10, 2012, the Texas Secretary of State forfeited Blackstone's corporate status due to the corporation's failure to pay taxes. Under Texas law, the directors of Blackstone are personally liable for any debts incurred by the corporation after its corporate status is forfeited.
Complaint, ¶ 9.
Id., ¶ 2.
Id., ¶ 10.
Id., ¶ 10.
Id., ¶ 11.
Id., ¶ 12, citing Tex. Tax Code § 171.255.
On June 12, 2013, acting on Blackstone's behalf, Lourido applied for a line of credit from Yunlong, a California corporation with its principal place of business in California. On the application, Lourido represented that Blackstone was a Texas corporation, but did not disclose that it had forfeited its corporate status. Yunlong approved Blackstone's application, offered credit to Blackstone, and established an open book account. Lourido accepted the offer of credit and executed a condition-of-sale document in the state of Texas. By executing the condition-of-sale document, Lourido: (1) bound Blackstone to pay for any merchandise received in full; (2) consented to jurisdiction and venue in any court in the state of California; and (3) stipulated that in the event of a dispute between the parties, the prevailing party would be able to recover attorney's fees and costs.
Id., ¶ 13.
Id., ¶ 1.
Id., ¶ 14.
Id., ¶ ¶ 15-16.
Id., ¶ 17.
Id., ¶ ¶ 17-20.
On June 12, 2013, Blackstone ordered $8,501 of merchandise from Yunlong, for which it paid in full by July 26, 2013. On August 30, 2013, Yunlong delivered $72,743.93 worth of merchandise to Blackstone, which Blackstone had purchased on credit. Between August 30, 2013 and January 23, 2014, Yunlong and Blackstone engaged in a series of transactions -- Yunlong sold merchandise to Blackstone, and Blackstone made sporadic payments. At the conclusion of these transactions, Blackstone owed Yunlong $38,795.17.
Id., ¶ ¶ 21-23.
Id., ¶ 24.
Id., ¶ ¶ 25-30.
Yunlong alleges that because Blackstone incurred this debt after its corporate status had been forfeited, Lourido is personally responsible for the debt because he was an officer and director of Blackstone at the time it became liable for the debt.
Id., ¶ 32.
II. DISCUSSION
A. Standard Governing Motions for Entry of Default Judgment
A court may enter judgment against parties whose default has been taken pursuant to Rule 55(b). See PepsiCo, Inc. v. California Security Cans, 238 F.Supp.2d 1172, 1174 (C.D. Cal. 2002); Kloepping v. Fireman's Fund, No. C 94-2684 TEH, 1996 WL 75314, *2 (N.D. Cal. Feb. 13, 1996). Granting or denying a motion for default judgment is a matter within the court's discretion. Elektra Entertainment Group Inc. v. Bryant, No. CV 03-6381 GAF (JTLx), 2004 WL 783123, *1 (C.D. Cal. Feb. 13, 2004); see also Sony Music Entertainment Inc. v. Elias, No. CV 03-6387 DT (RCx), 2004 WL 141959, *3 (C.D. Cal. Jan. 20, 2004). 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 public policy favoring decisions on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986); see also Bryant, 2004 WL 783123 at *1-2.
Once a party's default has been entered, the factual allegations in the complaint, except those concerning damages, are deemed to have been admitted by the non-responding party. See Fed.R.Civ.Proc. 8(b)(6); see also, e.g., Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (stating the general rule that " upon default[, ] the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true"). The court, however, must still " consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law." 10A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure: Civil 3d § 2688, at 63 (1998) (footnote omitted); see also Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (" [N]ecessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default"); Doe v. Qi, 349 F.Supp.2d 1258, 1272 (N.D. Cal. 2004) (" [Although] the factual allegations of [the] complaint together with other competent evidence submitted by the moving party are normally taken as true . . . this Court must still review the facts to insure that the Plaintiffs have properly stated claims for relief").
If the court determines that the allegations in the complaint are sufficient to establish liability, it must then determine the " amount and character" of the relief that should be awarded. 10A Wright, Miller, & Kane, supra, § 2688, at 63; see also Elektra Entertainment Group Inc. v. Crawford, 226 F.R.D. 388, 394 (C.D. Cal. 2005) (stating that the district court has " wide latitude" and discretion in determining the amount of damages to award upon default judgment, quoting James v. Frame, 6 F.3d 307, 310 (5th Cir. 1993)).
B. Procedural Requirements
Before a court can enter default judgment against a defendant, the plaintiff must satisfy the procedural requirements for default judgments set forth in Rules 54(c) and 55 of the Federal Rules of Civil Procedure, as well as in Local Rule 55-1. Rule 54(c) states that " judgment by default shall not be different in kind from or exceed in amount that prayed for in the demand for judgment." Fed.R.Civ.Proc. 54(c). Rule 55(a) provides that the clerk must enter default " [w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise." Fed.R.Civ.Proc. 55(a). Rule 55(b)(2) requires service of any motion for default judgment on the defaulting party if that party has appeared in the action. Id., 55(b)(2) (" If the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application at least 3 days before the hearing"); see also, e.g., In re Roxford Foods, Inc., 12 F.3d 875, 879 (9th Cir. 1993) (stating that Rule 55(b)(2) notice " is only required where the party has made an appearance").
Additionally, Local Rule 55-1 requires that a party moving for default judgment submit a declaration (1) indicating when and against what party default has been entered; (2) identifying the pleading as to which default has been entered; (3) indicating whether the defaulting party is an infant or incompetent person, and if so, whether that person is represented by a general guardian, committee, conservator or other representative; (4) stating that the Servicemembers Civil Relief Act, 50 App. U.S.C. § 521, does not apply; and (5) affirming that notice has been served on the defaulting party if required by Rule 55(b)(2). CA CD L.R. 55-1, 55-2; PepsiCo, Inc., 238 F.Supp.2d at 1174.
Yunlong has satisfied these requirements. Yunlong served a copy of the summons and complaint on Blackstone and Lourido on November 25, 2014; that complaint seeks judgment for the balance on the account, exemplary damages for fraud, prejudgment interest, and attorneys' fees. When neither party responded, the clerk entered Blackstone's and Lourido's default as to the complaint on January 2, 2015. As support for its application for default judgment, Yunlong has proffered a declaration and supporting documentation, demonstrating that neither Blackstone nor Lourido is a minor, infant, incompetent person, in the military, or otherwise exempt under the Servicemenbers' Civil Relief Act. Furthermore, Yunlong's application seeks the same types of relief sought in the complaint. Finally, although defendants have not appeared and Yunlong was not required to serve the motion for default judgment on them, Yunlong did serve them with the motion. Consequently, Yunlong has complied with the procedural prerequisites to the entry of default judgment. The court thus turns to the merits of the motion.
Summons Issued re: Complaint (" Summons"), Docket No. 7 (Nov. 24, 2014).
Complaint at 8.
Default by Clerk Entered, Docket No. 12 (Jan. 2, 2015).
Application for Default at 2-3; see also id., Exh. 3, Declaration of Jonathan Weiss in support of application for default judgment. .
Id. at 3-5.
Application for Default, Exh. B.
C. The Eitel Factors
1. Possibility of Prejudice to Plaintiff
The first Eitel factor considers whether the plaintiff will suffer prejudice if a default judgment is not entered. PepsiCo, Inc., 238 F.Supp.2d at 1177; see also Eitel, 782 F.2d at 1471-72. Yunlong alleges that defendants breached the parties' contract, failed to pay the balance due on the open book account, and committed fraud. Defendants have failed to appear and defend. Yunlong has adduced evidence that it made repeated demands that Blackstone pay the balance owed but Blackstone failed to do so. Absent the entry of a default judgment, Yunlong will most likely be left without recourse against Blackstone and Lourido, given their unwillingness to cooperate and defend. Because Yunlong will suffer prejudice if it is left without recourse against defendants, the first Eitel factor favors the entry of default judgment. See PepsiCo, Inc., 238 F.Supp.2d at 1177 (stating that absent the entry of default, plaintiff would likely have no other recourse for recovery).
2. Substantive Merits and Sufficiency of the Claims
The second and third Eitel factors assess the substantive merit of the movant's claims and the sufficiency of its pleadings. These factors " require that a [movant] 'state a claim on which [it] may recover.'" PepsiCo, Inc., 238 F.Supp.2d at 1175 (quoting Kloepping, 1996 WL 75314 at *2); see also Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978) (stating that the issue is whether the allegations in the pleading state a claim upon which plaintiff can recover); Discovery Communications, Inc. v. Animal Planet, Inc., 172 F.Supp.2d 1282, 1288 (C.D. Cal. 2001) (" The Ninth Circuit has suggested that the [ ] two Eitel factor[s] involving the substantive merits of Plaintiff's claims and the sufficiency of the complaint [ ] 'require that plaintiff's allegations state a claim on which [it] may recover, '" quoting Danning, 572 F.2d at 1388). Yunlong's complaint alleges claims for breach of contract, failure to pay the balance on the open book account, and fraud (concealment).
a. Whether Yunlong's Complaint Adequately Pleads a Breach of Contract Claim
The elements of a claim for breach of contract are the existence of a contract, performance by the plaintiff, breach by the defendant; and damage to plaintiff as a result of defendant's breach. See Great American Insurance Co. v. MIVCO Packing Co., LLC, No. 08-05454, 2009 WL 942390, *3 (N.D. Cal. Apr. 6, 2009) (citing Amelco Electric v. City of Thousand Oaks, 27 Cal.4th 228, 243, 115 Cal.Rptr.2d 900, 38 P.3d 1120 (2002)). Yunlong's complaint adequately alleges all of the elements of a breach of contract claim. Yunlong alleges that it entered into a contract with Blackstone, through Lourido, its agent, by executing an " Application for Credit" in June 2013; it attaches a copy of the application to its complaint. Yunlong also alleges that it performed its obligations under the contract by extending credit and shipping merchandise to Blackstone before the company had paid for the merchandise. Yunlong contends that although defendants made some payments. they breached the agreement by failing to pay the outstanding balance of $38.795.17. Yunlong claims that Blackstone made its last payment on January 23, 2014 and that, despite repeated demands, Blackstone has failed to pay the remaining balance. Yunlong asserts that it has been damaged as a result of defendants' breach in the amount of $38,795.17. These allegations suffice to state a claim for breach of contract. Because Louido is liable for obligations Blackstone incurred as it forfeited its corporate status, he is liable even though he was not a party to the contract. As defendants have failed to appear and defend, they have admitted the truth of the allegations, except as to the amount of Yunlong's damages, which the court discusses infra .
Complaint, Exh.C (" Application for Credit").
b. Whether Yunlong Has Adequately Alleged a Claim for Money Due on an Open Book Account
Yunlong's second claim for relief is for money due on an open book account. An open book account is a " detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor." In re Roberts Farms, Inc., 980 F.2d 1248. 1252 (9th Cir. 1981) (citing Cal. Code Civ. Proc. § 337a). The detailed statement must be kept " (1) in a bound book, or (2) on a sheet or sheets fastened in a book or to backing but detachable therefrom, or (3) on a card or cards of a permanent character, or . . . in any other reasonably permanent form and manner." Cal. Code Civ. Proc. § 337a. This cause of action arises when there has been a failure to pay monies due as reflected in the open book account. In re Roberts Farms, Inc., 980 F.2d at 1250.
As support for its motion, Yunlong has submitted a copy of a statement of account dated November 16, 2014, which outlines the amounts owed and the payments made. It also proffers a copy of the completed Application for Credit, as well as a copy of the Condition of Sale agreement, which extended a line of credit to Blackstone. These documents reflect the principal record of transactions between plaintiff and defendants and were kept in reasonably permanent form. See In re Roberts Farms, 980 F.2d at 1252-53 (finding that ledger cards, time sheets and billing statements constituted detailed permanent records that reflected the ongoing relationship between plaintiff/creditor and defendant/debtor); Dreyer's Grand Ice Cream, Inc. v. Ice Cream Distributors of Evansville, LLC, No. 10-00317 CW, 2010 WL 1957423, *5 (N.D. Cal. May 14, 2010) (finding that plaintiff/creditor's introduction of a written contractual agreement and invoices were sufficient to support a claim for money due on an open book account). Therefore, Yunlong has adequately alleged a claim for money due on an open book account.
Complaint, Exh. E (" Yunlong Financial Statement").
Application for Credit.
Complaint, Exh. D (" Condition of Sale Agreement").
c. Whether Yunlong Has Adequately Alleged a Claim for Fraud
Yunlong's final claim for relief alleges fraudulent concealment. To plead a fraud claim, a party must allege a knowingly false representation or omission by the defendant; intent to deceive or induce reliance; justifiable reliance by the plaintiff; and resulting damage. See, e.g., Small v. Fritz Cos., Inc., 30 Cal.4th 167, 173, 132 Cal.Rptr.2d 490, 65 P.3d 1255 (2003) (stating that in California, fraud claims have five elements: " (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage"); Croeni v. Goldstein, 21 Cal.App.4th 754, 758, 26 Cal.Rptr.2d 412 (1994) (" To plead a cause of action for fraud the plaintiff must allege (1) a knowingly false representation by the defendant, (2) an intent to defraud or to induce reliance, (3) justifiable reliance, and (4) resulting damages"); see also City Solutions Inc. v. Clear Channel Communications, Inc., 365 F.3d 835, 839 (9th Cir. 2004).
" Claims for fraud and negligent misrepresentation must meet the heightened pleading requirements of Rule 9(b)." Glen Holly Entertainment, Inc. v. Tektronix, Inc., 100 F.Supp.2d 1086, 1093 (C.D. Cal. 1999); see also U.S. Concord, Inc. v. Harris Graphics Corp., 757 F.Supp. 1053, 1058 (N.D. Cal. 1991). Under Rule 9(b), " a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.Proc. 9(b). " Rule 9(b) demands that, when averments of fraud are made, the circumstances constituting the alleged fraud be specific enough to give defendants notice of the particular misconduct so that they can defend against the charge[.]" Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (emphasis added and internal citations omitted). Under Rule 9(b), fraud allegations must include the " time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." See Swartz v . KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (citing Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)); see also Schreiber Distributing Co. v. Serv--Well Furniture Co., Inc., 806 F.2d 1393, 1401 (9th Cir. 1986) (" [T]he pleader must state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation"); Miscellaneous Serv. Workers Local # 427 v. Philco--Ford Corp., 661 F.2d 776, 782 (9th Cir. 1981) (holding that Rule 9(b) requires a pleader to set forth the " time, place and specific content of the false representations as well as the identities of the parties to the misrepresentation").
Conclusory allegations are insufficient, and the facts constituting the fraud must be alleged with specificity. See Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989) (" A pleading is sufficient under Rule 9(b) if it identifies the circumstances constituting fraud so that a defendant can prepare an adequate answer to the allegations. While statements of the time, place and nature of the alleged fraudulent activities are sufficient, mere conclusory allegations of fraud are insufficient" (citation omitted)); see also Swartz, 476 F.3d at 764 (" Federal Rule of Civil Procedure 9(b) requires more specificity including an account of the 'time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.' 'To comply with Rule 9(b), allegations of fraud must be specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong, '" citing Edwards, 356 F.3d at 1066, and Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)); Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997) (to satisfy Rule 9(b), " the complaint [must] identif[y] the circumstances of the alleged fraud so that defendants can prepare an adequate answer" (internal quotation marks omitted)); Flowers v. Wells Fargo Bank, N.A., No. C 11-1315 PJH, 2011 WL 2748650, *6 (N.D. Cal. July 13, 2011) (explaining that " [f]raud allegations must be specific enough to give defendants notice of the particular misconduct that is alleged to constitute the fraud so that they can defend against the claim. For corporate defendants, a plaintiff must allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written" (citations omitted)).
Where a fraudulent omission is at issue, the requirements of Rule 9(b) are relaxed, but not eliminated. Waldrup v. Countrywide Financial Corp., No. 2:13--cv--08833--CAS (CWx), 2014 WL 3715131, *5 (C.D. Cal. July 23, 2014). See also Huntair, Inc.v. Gladstone, 774 F.Supp.2d 1035, 1044 (N.D. Cal. 2011) (stating that the Rule 9(b) standard is somewhat relaxed when a claim rests on an alleged fraudulent omission because " a plaintiff cannot plead either the specific time of [an] omission or the place, as he is not alleging an act, but a failure to act"); In re Apple & AT & TM Antitrust Litig., 596 F.Supp.2d 1288, 1310 (N.D. Cal. 2008) (" Where the claim is one of fraud by omission . .., the pleading standard is lowered on account of the reduced ability in an omission suit 'to specify the time, place, and specific content' relative to a claim involving affirmative misrepresentations").
As support for its fraud claim, Yunlong alleges that it negotiate an extension of credit to Blackstone with Lourido, who was acting on Blackstone's behalf as its president. During the negotiations, Lourido allegedly disclosed that Blackstone was a Texas corporation, but did not disclose that its corporate status had been forfeited in February 2012. Yunlong alleges that it relied on Lourido's representations, including his omission concerning Blackstone's forfeited status. These allegations are insufficient to satisfy Rule 9(b). Although Yunlong alleges the name of Blackstone's agent -- Lourido -- and his authority to negotiate with Yunlong on Blackstone's behalf, the other required elements of a fraud claim against a corporate defendant under Rule 9(b) are not met. short. Yunlong does not allege its agent or agents with whom Lourido purportedly " negotiated." See Mat-Van, Inc. v. Sheldon Good & Co. Auctions, LLC, No.07-CV-912-IEG, 2007 WL 2206946, *5 (S.D. Cal. July 27, 2007) (" Corporations speak through agents and, therefore plaintiffs must identify the agent who made the fraudulent statement, their authority to speak, and to whom the agent spoke. . . . Plaintiffs' allegations do not place defendants on notice as to who in their organizations may have made the statements or to whom the statements were made").
Complaint, ¶ ¶ 13, 14, 49.
Complaint, Exh. B (" Certificate of Forfeiture").
Complaint, ¶ ¶ 50, 52.
Moreover, Yunlong does not allege with sufficiently particularity " when" the concealment occurred. It pleads only that " [d]uring negotiations, Lourido disclosed to Yunlong some facts -- that Blackstone was a Texas Corporation -- but intentionally failed to disclose other important facts -- that Blackstone's corporate status had been forfeited -- making the initial disclosure deceptive." Yunlong does not plead when this representation was made or where its representative was when the statement was made. If the negotiations were oral, Yunlong must know who its representative was and where the negotiations took place. If the negotiations were via email, Yunlong must be able to determine its representative, and where he or she was when the email was received. If Yunlong had specific emails and conversations in mind, it could have pled them in detail, and adequately alleged the " who" and " when" of the fraud. This is the level of specificity Rule 9(b) requires, and Yunlong's complaint fails to provide it.
Id. , ¶ 49.
For these reasons, Yunlong fails to adequately plead a fraud claim under Rule 9(b). The the court therefore cannot enter default judgment in Yunlong's favor on this claim.
d. Conclusion Regarding Second and Third Eitel Factors
For the reasons stated, the substantive merit of the claims and the sufficiency of the complaint weigh in favor of the entry of default judgment on Yunlong's breach of contract and open book account claims. The insufficiency of the fraud claim, however, prevents the court from entering default judgment for Yunlong on that claim.
3. Sum of Money at Stake in the Action
The fourth Eitel factor balances " the amount of money at stake in relation to the seriousness of the [defaulting party's] conduct." PepsiCo, Inc., 238 F.Supp.2d at 1176; see also Eitel, 782 F.2d at 1471-72. This determination requires a comparison of the recovery sought and the nature of defendant's conduct to determine whether the remedy is appropriate. See Walters v. Statewide Concrete Barrier, Inc., No. C-04-2559 JSW (MEJ), *9-10, 2006 WL 2527776, *4 (N.D. Cal. Aug. 30, 2006) (" If the sum of money at issue is reasonably proportionate to the harm caused by the defendant's actions, then default judgment is warranted").
Having established that Yunlong's fraud claim is insufficient, the court considers only Yunlong's claims for breach of contract and open book account. Yunlong seeks to recover $38,795.17 on its breach of contract claim, $7,258.00 in prejudgment interest through February 9, 2015, and $19 a day thereafter, and attorneys' fees. The damages Yunlong seeks are the monies defendants agreed to pay, but did not. Yunlong has proffered an invoice statement outlining the balance owed as of November 16, 2014, five days before it filed this action. The damages sought are therefore reasonably proportionate to the harm caused by defendants' actions. Prejudgment interest, moreover, is recoverable in California where, as here, a party seeks to recover liquidated damages. See Cal. Civ. Code § 3287(a) (" A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is also entitled to recover interest thereon from that day. . . . This section is applicable to recovery of damages and interest from any debtor").
It appears that the compensatory damages Yunlong seeks on the fraud claim are the same as it seeks on the breach of contract and open book account claims. In addition, it seeks to have the court award $100,000 in punitive damages against Lourido based on the fact that he owns real property valued at $196,010. (See Weiss Decl., Exh. D.) Even had Yunlong adequately alleged a claim for fraud, the court could not award punitive damages as Yunlong requests. First, it appears that the real property in question is owned jointly by Lourido and his wife. TEX. FAM. CODE ANN. § 3.003 (West 2006). Thus, at most, Lourido's interest in the property is half the amount of its value, or essentially the amount Yunlong seeks to have the court award in punitive damages. Second, the tax statement Weiss has proffered states that a mortgage company had recently requested a copy of the statement. This suggests that the Louridos' equity in the property is less than its value. Because Yunlong adduces no evidence concerning the amount of the mortgage loan on the property, or any other aspect of Lourido's financial position, it has proffered insufficient evidence to warrant a punitive damages award of the type it seeks or of any other type. Under California law, plaintiff bears the burden of producing evidence of the defendant's financial condition. Adams v. Murakami, 54 Cal.3d 105, 123, 284 Cal.Rptr. 318, 813 P.2d 1348 (1991); see also Kelly v. Haag 145 Cal.App.4th 910, 915, 52 Cal.Rptr.3d 126 (2006) (" To ensure a punitive damages award has a '" deterrent effect -- without being excessive, " ' a plaintiff has the burden to establish the defendant's financial condition at trial"). Yunlong did not carry that burden here.
Yunlong Statement of Account.
Based on the evidence presented, the court concludes that the damages Yunlong seeks are consistent with the terms of the contract and are otherwise appropriate. This factor therefore weighs in entry of default judgment.
4. Possibility of Dispute
The fifth Eitel factor considers the possibility that material facts may be in dispute. PepsiCo, Inc., 238 F.Supp.2d at 1177; see also Eitel, 782 F.2d at 1471-72. As defendants failed to respond to the complaint, the court accepts as true Yunlong's allegations that defendants breached the contract by failing to make payments toward the overdue balance of $38,795.17. See PepsiCo, Inc., 238 F.Supp.2d at 1177 (" Upon entry of default, all well-pleaded facts in the complaint are taken as true, except those relating to damages, " citing Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987)).
Yunlong, moreover, has supported its claims with evidence. In support of its request that the clerk enter defendants' default, it submitted Yunlong's statement of account, which outlined the past due balance of $38,795.17. As a result, there is little possibility of dispute concerning the material facts. This factor therefore weighs in favor of granting Yunlong's motion.
Id.
5. Possibility of Excusable Neglect
The sixth Eitel factor considers whether defendant's default may have been the product of excusable neglect. See PepsiCo, Inc., 238 F.Supp.2d at 1177; see also Eitel, 782 F.2d at 1471-72. Here, the possibility of excusable neglect is small. Even before filing the complaint, Yunlong made " repeated demands" that Blackstone pay the outstanding balance on the account. Yunlong served defendants Lourido and Blackstone, via certified mail, on November 25, 2014. It also served the motion for default judgment on both Blackstone and Lourido via first-class mail on February 9, 2015. Nonetheless, defendants did not file a responsive pleading and have not otherwise appeared. It is highly unlikely, therefore, that their default was the result of excusable neglect. This factor, too, weighs in favor of the entry of default judgment. See PepsiCo, Inc., 238 F.Supp.2d at 1177 (finding no excusable neglect where plaintiffs made numerous attempts to contact defendant to settle the matter).
Complaint at ¶ 30.
Application for Default Judgment, Exh. 2, Proof of Service.
6. Policy in Favor of Decisions on the Merits
" Cases should be decided upon their merits whenever reasonably possible." Eitel, 782 F.2d at 1472. The fact that Rule 55(b) has been enacted, however, indicates that " this preference, standing alone, is not dispositive." PepsiCo, Inc., 238 F.Supp.2d at 1177 (quoting Kloepping, 1996 WL 75314 at *3). Rule 55(a) allows a court to decide a case before the merits are heard if defendants fail to appear and defend. See PepsiCo, Inc., 238 F.Supp.2d at 1177 (" Defendant's failure to answer plaintiffs' complaint makes a decision on the merits impractical, if not impossible"). Since defendants failed to appear and defend, the seventh Eitel factor does not preclude the entry of default judgment against them.
7. Conclusion Regarding the Eitel Factors
Other than the general policy of deciding the cases on the merits and the insufficiency of Yunlong's allegations that defendants fraudulently concealed Blackstone's corporate status, all of the Eitel factors weigh in favor of entering default judgment in Yunlong's favor. Consequently, the court finds it appropriate to grant Yunlong's motion for default judgment against defendants on its breach of contract and open book account claims. The court denies the motion as to Yunlong's fraudulent concealment claim.
D. The Character and Amount of Plaintiff's Recovery
As noted, Yunlong seeks monetary damages of $38,795.17, which is the amount of the outstanding balance on the contract and open book account, as well as $7,258.00 in prejudgment interest through February 9, 2015, and $19 a day thereafter, under the terms of the parties' contract. Rule 54(c) " allows only the amount prayed for in the [pleadings] to be awarded to the plaintiff in a default." Bryant, 2004 WL 783123 at *5; see also Fong v. United States, 300 F.2d 400, 413 (9th Cir. 1962) (stating that a default judgment may not be different in kind from or exceed in amount that prayed for in the complaint); PepsiCo, Inc., 238 F.Supp.2d at 1175 (stating that a default judgment " shall not be different in kind from or exceed in amount that prayed for in the [complaint], " citing Fed.R.Civ.Proc. 54(c) (alteration original)). Under Rule 8(a)(3), a plaintiff's demand for relief must be specific, and it " must 'prove up' the amount of damages." Philip Morris USA Inc. v. Banh, No. CV 03-4043 GAF (PJWx), 2005 WL 5758392, *6 (C.D. Cal. Jan. 14, 2005); Bryant, 2004 WL 783123 at *5 (" Plaintiffs must 'prove up' the amount of damages that they are claiming"). Yunlong sought the same forms of relief in its complaint that it does in its motion. The only remaining question, therefore, is whether it has proved an entitlement to these forms of relief.
Condition of Sale Agreement.
1. Monetary Damages
In support of its request for $38,795.17 in damages, Yunlong has submitted the parties' condition of sale agreement. Under the contract, defendants were required to pay for merchandise on the terms shown on each invoice. Yunlong has also submitted the statement for its account with Blackstone, which shows an unpaid balance of $38,795.17. In addition to the balance owed for merchandise that was delivered, Yunlong seeks prejudgment interest. It asserts that because Blackstone made its last payment on January 23, 2014, interest on the unpaid balance should accrue from that date at the annual eighteen percent rate specified in the condition of sale agreement. See Cal. Civ. Code § 3289(a) (" any legal rate of interest stipulated by a contract remains chargeable after a breach"); see also Cal. Civ. Code § 3287(a) (stating that a plaintiff may recover interest from the day on which his right to recover damages vests). The agreement requires that Blackstone pay 11/2 percent per 30 days retroactive on all delinquent balances, or an annual rate of 18 percent. As Yunlong correctly observes, the annualized rate " result[s] in a daily rate of .00049, which, when multiplied by the amount due, results in daily interest of $19.00." Yunlong sought prejudgment interest in the complaint, and thus provided meaningful notice to Blackstone and Lourido that such sums might be awarded. As a consequence, the court concludes that Yunlong is entitled to recover prejudgment interest. Xerox Corp. v. A & M Printing, No. 12-CV-00043, 2013 WL 2180927, *7 (C.D. Cal. May 20, 2013); see Fed.R.Civ.Proc. 54(c) (" A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings"); Silge v. Merz, 510 F.3d 157, 160-61 (2d Cir. 2007) (affirming the denial of prejudgment interest in connection with the entry of default judgment where plaintiff did not expressly seek prejudgment interest in the prayer in his complaint). Yunlong seeks interest from the date of Blackstone's last payment, January 23, 2014, to the date of this order; the total interest that accrued during this 488 day period is $9,272. Accordingly, the court grants Yunlong's request for prejudgment interest in this amount.
Id.
Id.
Application for Default at 4.
2. Attorneys' Fees
Finally, Yunlong requests an award of attorneys' fees, as authorized by the condition of sale agreement. Yunlong cites the fee schedule provided in Local Rule 55-3. Here, the amount of the judgment is $48,067.17. This supports an award of attorney's fees in the amount of for $1,200, plus 6 percent of the amount over $10,000. Cal. C.D. Civ. L.R. 55-3. This formula yields a total award of attorney's fees of $3,484.03.
Condition of Sale Agreement. The relevant portion of the contract states: " The Undersigned/Company shall be responsible for all collection costs and attorney's fees in connection with any delinquent amount. . . . [T]he Undersigned/Company agrees to pay all collection costs or attorney fees and costs through final dispensation." (Id. )
III. CONCLUSION
For the reasons stated, the court grants in part and denies in part Yunlong's motion for entry of default judgment. It grants the motion with respect to Yunlong's breach of contract and open book account claims. It denies the motion with respect to Yunlong's fraudulent concealment claim. The court awards Yunlong damages of $38,795.17 on its breach of contract and open book account claims. It also grants Yunlong's request for prejudgment interest, awarding $9,272 pursuant to the agreement between Yunlong and Blackstone. Finally, the court awards attorneys' fees of $3,484.03.
JUDGMENT FOR PLAINTIFF
On May 26, 2015, the court entered an order granting plaintiffs Yunglong U.S.A Window Fashions, Inc.'s (" Yunglong") motion for entry of default judgment against defendants Ivan Lourido and Blackstone Window Coverings, Inc. (d/b/a Window-Shade Distributors) (" defendants"). Consequently, IT IS ORDERED AND ADJUDGED
1. That Yunglong recover $38,795.17 on its breach of contract and open book account claims from defendants;
2. That Yunlong recover $9,272 in prejudgment interest from defendants;
3. That Yunlong recover $3,484.03 in attorneys' fees from defendants; and
4. That the action be, and is hereby, dismissed.