Tesoro Refining & Marketing Company LLC v. Petroleum One Inc et al

Filing 30

ORDER by Judge Otis D. Wright, II: granting 23 Plaintiffs Motion for Default Judgment and awards Tesoro a total of $598,874.74. (lc) .Modified on 3/3/2014. (lc).

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United States District Court
Central District of California

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TESORO REFINING & MARKETING
COMPANY LLC,

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FOR DEFAULT JUDGMENT [23]

v.

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ORDER GRANTING APPLICATION

Plaintiffs,

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Case No. 8:13-cv-01713-ODW (RZx)

PETROLEUM ONE, INC; HOSSEIN
WAISIRI; RENNA BAIRAMI; and
DOES 1-10, inclusive,
Defendants.

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I.

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INTRODUCTION

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Before the Court is Plaintiff Tesoro Refining & Marketing Company, LLC’s

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(“Tesoro”) Motion for Default Judgment. (ECF No. 23.) This breach-of-contract case

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was filed on October 1, 2013. Defendants Petroleum One, Hossein Wasiri, and Renna

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Bairami have not answered the Complaint and have failed to appear. The Clerk of

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Court entered default on January 22, 2014, and Tesoro filed this Motion for Default

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Judgment on January 24, 2014. For the reasons discussed below, the Court GRANTS

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Plaintiff’s Motion for Default Judgment.

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II.

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FACTUAL BACKGROUND

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Plaintiff Tesoro filed the Complaint against Defendants on October 30, 2013,

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alleging breach of contract/guaranty, unjust enrichment, fraud, open book account,

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and goods and services rendered. (ECF No.1.) All of the claims stem from Tesoro’s

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allegation that Petroleum One failed to pay $328,401.22 for fuel ordered between

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September 20, 2013 and September 29, 2013. (Id.)

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Defendant Petroleum One, LLC is a California corporation that operates a retail

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gas station in South Gate, California. (Kim Decl. ¶ 2.) Defendant Hossein Waisiri is

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the sole shareholder and President of Petroleum One.

(Grnja Decl. Ex A, C.)

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Defendant Renna Bairami is his wife. (Mot. 3.) Tesoro sells and markets gas under

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the ARCO brand as a franchisor. (Id at 3–4.)

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In June 2011, BP Petroleum West Coast Products, LLC (“BPWCP”), another

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ARCO franchisor, entered into four agreements with the Defendants: (1) a Contract

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Dealer Gasoline Agreement (“Gasoline Agreement”); (2) an Area Bonus Payment

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Reimbursement Agreement (“ABPR Agreement”); (3) an Unconditional Guaranty –

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Franchise Agreement; and (4) an Unconditional Guaranty for the ABPR Agreement.

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(Grnja Decl. ¶¶ 3–6.) In June 2013, BPWCP assigned its rights under all of these

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contracts to Tesoro. (Id.)

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The Gasoline Agreement, between Petroleum One and BPWCP outlined

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Petroleum One’s duties as an ARCO franchisee including: (1) ordering gas from

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BPWCP; (2) paying BPWCP for gas prior to delivery via Electronic Funds Transfer

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(“EFT”); and (3) indemnifying BPWCP for any claims arising out of the breach of the

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Gasoline Agreement. (Id. at Ex. A.) BPWCP could terminate the agreement if

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Petroleum One failed to pay in a timely manner. (Id.)

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In the ABRP Agreement, between Petroleum One and BPWCP, Petroleum One

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agreed to return a $200,000 “Area Bonus Payment” from BPWCP, if the Gasoline

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Agreement was terminated—for any reason—before ten years. (Id. at Ex C.)

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Under the Unconditional Guaranty – Franchise Agreement, Waisiri became

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personally liable to BPWCP for all debts incurred by Petroleum One under the

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Gasoline Agreement.

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attorneys’ fees and costs “incurred by BP in enforcing the Guaranty.” (Id.)

(Id. at Ex B.)

Paragraph 7 holds Waisiri responsible for

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The Unconditional Guaranty – Area Bonus Payment Reimbursement

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Agreement between Waisiri, Bairami, and BPWCP, allowed BPWCP to demand

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immediate payment from Waisiri and Bairami if Petroleum One breached the ABPR

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agreement by failing to pay. (Id. at Ex. D.) Waisiri and Bairami also agreed to pay

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attorneys’ fees and costs that arose from any claim under the agreement. (Id.)

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On August 1, 2013—after BPWCP had assigned its contractual rights to

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Tesoro—Tesoro entered into a Continuing Guaranty with Waisiri, which personally

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obligated Waisiri for any debt Petroleum One owed Tesoro whether the liability arose

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from a direct interaction with or a right assigned to Tesoro. (Id. at Ex F.) The

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Guaranty mandated that Waisiri pay all costs, including attorneys’ fees, incurred by

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Tesoro to enforce the Guaranty. (Id.)

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Petroleum One placed fuel orders from September 20, 2013 to September 29,

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2013 totaling $382,401.22. (Compl. ¶¶ 19–30.) From September 20, 2013 to October

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4, 2013, Tesoro received five unpaid invoices for the gasoline it delivered to

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Petroleum One. (Id. at ¶¶ 31, 33–35.) Tesoro sent four emails to Waisiri between

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September 30, 2013 and October 4, 2013 advising him that the invoices were returned

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and demanding payment. (Id. at ¶¶ 32–35.) On October 7, 2013, Tesoro sent Waisiri

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a Demand Notice informing him that Petroleum One was in default of the Gasoline

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Agreement and demanding immediate payment of $382,401.22. (Id. at ¶ 36.)

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On October 11, 2013, Tesoro sent Petroleum One a Notice of Termination

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advising Petroleum One that (1) the relationship was being terminated because

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Petroleum One breached the Gasoline Agreement; (2) the termination of the Gasoline

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Agreement triggered the repayment of the $200,000 Area Bonus Payment; and

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(3) Tesoro was demanding a total of $582,401.22 for the returned invoices and the

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Area Bonus Payment. (Id. at ¶ 37–39.)

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Waisiri and Bairami were personally served the Summons and Complaint on

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December 21, 2013. (Kim Decl. Ex D, E.)

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Petroleum One, the Court granted Tesoro’s request to serve process on the Secretary

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of State, which was completed on November 20, 2013.

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Defendants were required to answer the Complaint by January 13, 2014. They failed

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to do so and default was entered on January 22, 2014. (ECF Nos. 19, 20.) Tesoro

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now moves for entry of default judgment against all Defendants. (ECF No. 23.)
III.

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After numerous attempts to serve
(Kim Decl. ¶¶ 3–4.)

LEGAL STANDARD

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Federal Rule of Civil Procedure 55(b) authorizes a district court to grant default

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judgment after the default is entered under Rule 55(a). Local Rule 55-1 requires that

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the movant submit a declaration establishing (1) when and against which party default

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was entered; (2) identification of the pleading to which default was entered;

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(3) whether the defaulting party is a minor, incompetent person, or active service

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member; and (4) that the defaulting party was properly served with notice if required

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by Federal Rule of Civil Procedure 55(b)(2).

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A district court has discretion whether to enter default judgment. Aldabe v.

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Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Upon default, the defendant’s liability

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generally is conclusively established and the well-pleaded factual allegations in the

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complaint are accepted as true. Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-

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19 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Grp., 559 F.2d 557, 560

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(9th Cir. 1977)).

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In exercising its discretion, a court must consider several factors: (1) the

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possibility of prejudice to plaintiff; (2) the merits of plaintiff’s substantive claim; (3)

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the sufficiency of the complaint; (4) the sum of money at stake; (5) the possibility of

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dispute concerning material facts; (6) whether the defendants default was due to

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excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil

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Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72

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(9th Cir. 1986).
IV.

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A.

DISCUSSION

Notice

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The Court finds that Tesoro has complied with all the requirements of Local

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Rule 55-1. Waisiri and Bairiami were personally served on December 21, 2013.

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(ECF No. 11, 12.) Per court order, Petroleum One was served via the Secretary of

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State on November 20, 2013. (ECF No. 8.)

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B.

Eitel Factors

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1.

Possibility of Prejudice to the Plaintiff

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The possibility of prejudice to the plaintiff exists when denying default

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judgment would leave the plaintiff without a proper remedy or alternate recourse for

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recovery. See PepsiCo Inc. v. Cal.Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal.

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2002); Landstar Ranger v. Parth Enter., Inc. 725 F. Supp. 2d 916, 920 (C.D. Cal.

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2010).

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appear or offer a defense in this case, so the only way Tesoro can enforce the terms of

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the contract is through default judgment.

This factor favors default judgment because the defendants have failed to

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2.

Merits of Plaintiff’s Substantive Claim and Sufficiency of the Complaint

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The second and third Eitel factors require plaintiff to “state a claim upon which

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they may recover.” See Phillip Morris USA, Inc. v. Castworld Prod., Inc., 219 F.R.D.

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494, 499 (C.D. Cal. 2003). To prevail on a breach-of-contract or breach-of-guaranty

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claim, plaintiff must prove (1) the contract, (2) plaintiff’s performance or excuse for

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nonperformance, (3) defendant’s breach under the contract, and (4) damages. Wall

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Street Network, Ltd. v. New York Times Co., 164 Cal.App. 4th 1171, 1178 (2008).

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Tesoro has offered evidence of the contracts listed above, its rights under the

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contracts as assigned by BPWCP, and that it performed its contractual duties by

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delivering fuel to Petroleum One and paying Petroleum One $200,000. Tesoro’s

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evidence establishes that collectively Defendants breached the Gasoline Agreement

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and ABPR Agreement by failing to pay for fuel, and failing to repay the Area Bonus

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Payment upon Tesoro’s rightful termination of the Gasoline Agreement.

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Tesoro has shown damages of $382,401.22 under the Gasoline Agreement, and
$200,000 under the ABPR Agreement. This factor favors default judgment.

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3.

Sum of Money at Stake and Possibility of Disputed Material Facts

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The next Eitel factor favors default judgment when “the sum of money is

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reasonably proportionate to the harm caused by the defendant’s actions” and the

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likelihood of a dispute over material facts is low.

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at 921–922; See also WeCoSign, Inc. v. IFG Holdings, 845 F. Supp. 2d. 1072, 1082

Landstar, 725 F. Supp. 2d

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(C.D. Cal. 2012).

Money that “naturally flows” as a result of the defendant’s

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contractual breach is considered reasonably proportionate to the harm. See Walters v.

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Statewide Concrete Barrier, Inc., No. C-04-2559 JSW (MEJ), 2006 WL 2527776, at

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*4 (N.D. Cal. 2006). When the plaintiff in a “relatively straightforward” case has

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filed a well-pleaded complaint with strong supporting documentation, it is unlikely

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material facts will be in dispute.

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HICA Educ. Loan Corp. v Warne, No. 11-CV-04287-LHK, 2012 WL 1156402, at *3

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(N.D. Cal. 2012).

See, e.g., WeCoSign, 845 F. Supp. 2d. at 1082;

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Both factors favor granting default judgment here. Damages of $582,401.22

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and $16,473.52 of attorneys’ fees and costs flow naturally from Defendants breach of

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the Gasoline Agreement and ABRP Agreement. Tesoro offers strong supporting

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documentation in this straightforward breach-of-contract case, including signed

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contracts and guaranties, invoices, and the demand letter sent to Waisiri.

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4.

The Possibility of Excusable Neglect

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There is little possibility of excusable neglect and default judgment is favored

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when the defendant fails to respond after being properly served. See WeCoSign, 845

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F. Supp. 2d. at 1082. When the Secretary of State is properly served instead of the

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defendant in a breach-of-contract case default judgment is favored if the plaintiff has,

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made numerous attempts to locate the defendant, made a demand for payment due

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under the contract, and defendant fails to respond to the complaint. See Landstar, 725

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F. Supp. 2d at 922.

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This factor favors default judgment. Waisiri and Bariami were properly served.

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While Petroleum One was served through the Secretary of State, Tesoro made

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numerous attempts to serve an agent, and sent Petroleum One’s president, Waisiri,

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numerous emails and a letter demanding payment.

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5.

Policy for Deciding Cases on the Merits

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There is a strong preference for deciding each case on its merits whenever

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“reasonably possible.” See Id. However, this preference alone is not dispositive and a

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defendant’s “failure to answer plaintiff’s complaint makes a decision on the merits

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impractical if not impossible.” See PepsiCo, 238 F. Supp. 2d at 1177. This factor

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favors default judgment because defendants have failed to respond to Tesoro’s

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Complaint.

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C.

Remedies

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Tesoro offers evidence to support a total award of $598,874.74, including

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damages of $382,401.22 under the Gasoline Agreement/Guaranty, $200,000 under

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ABPR Agreement/Guaranty, (3) $15,248.02 for attorneys’ fees in accordance with

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Local Rule 55-3, and (4) $1,225.50 for costs.
The

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Court

finds

Tesoro’s

evidence

including

declarations,

signed

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contracts/guaranties, fuel invoices, demand letter to Waisiri and an accounting of

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costs, sufficient to prove its damages.

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V.

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CONCLUSION

For the reasons discussed above, the Court GRANTS Plaintiff’s Motion for
Default Judgment and awards Tesoro a total of $598,874.74. (ECF No. 23.)
IT IS SO ORDERED.

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March 3, 2014

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____________________________________
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE

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