United States for the Use and Benefit of Abukar Abdullahi Addo v. RMA Land Construction, Inc. et al

Filing 33

MINUTE ORDER IN CHAMBERS by Judge David O. Carter: Granting in Part Denying in Part MOTION for Default Judgment against Defendants 22 . See Minute Order for default judgment amount. (Made JS-6. Case Terminated.) (twdb)

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JS-6

CIVIL MINUTES – GENERAL
Case No. SACV 14-0516-DOC (ANx)

Date: September 3, 2014

Title: UNITED STATES FOR THE USE AND BENEFIT OF ABUKAR ABDULLAHI
RABUKA d/b/a RABUKA FIRE PROTECTION, et al. v. RMA LAND
CONSTRUCTION, INC., et al.

PRESENT:

THE HONORABLE DAVID O. CARTER, JUDGE
Julie Barrera
Courtroom Clerk

Not Present
Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFF:

ATTORNEYS PRESENT FOR DEFENDANT:

None Present

None Present

PROCEEDINGS (IN CHAMBERS): ORDER GRANTING DEFAULT
JUDGMENT [22]
Before the Court is Plaintiffs’ Motion for Default Judgment (“Motion” or “Mot.”)
(Dkt. 22). After reviewing the Motion, the Court GRANTS IN PART and DENIES IN
PART the Motion.
I. BACKGROUND
A. Facts
Sometime prior to March 2013, Defendant RMA Land Construction (“RMA”)
contracted with the United States Navy division NAVFAC SOUTHWEST, Coast
IPT/Code ROPMA, Naval Station San Diego (“USN”) to work on a construction project
to renovate several buildings on a naval base in Ventura County, California (“Prime
Contract” for the “Project”). Compl. (Dkt. 1) ¶ 12. Previously, on July 11, 2012, RMA
had obtained a Miller Act payment bond (the “Bond”) from Defendant Edmund
Scarborough (“Scarborough”) in the amount of $9,209,700, as required by the
government. “In the Bond, Scarborough agreed to be bound jointly and severally with
RMA to make payment to all persons having a direct contractual relationship with RMA
or to any subcontractor of RMA who furnished labor, material or both in the prosecution

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 14-0516-DOC (ANx)

Date: September 3, 2014
Page 2

of the work provided for in the Prime Contract in the event that RMA failed to make
prompt payment to such persons.” Id. ¶ 13.
On or about March 29, 2013, Plaintiffs (“RFP”) entered into a written subcontract
with RMA to provide fire protection systems and wet pipe fire sprinklers in the Project
pursuant to Prime Contract and Project specifications. Id. ¶ 14. Under the Subcontract,
RMA was entitled to withhold 10% of the total value of RFP’s labor, materials, and
services as “retention,” to be paid to RFP when RFP’s work under the Subcontract was
completed. The Subcontract also contained a provision under which the prevailing party
in any dispute would be entitled to attorneys’ fees and costs. Id. ¶ 15.
RFP completed its work in full compliance with the Subcontract on or about
October 15, 2013. Id. ¶ 17. However, neither RMA nor Scarborough has yet paid RFP
$19,025 due under the Subcontract as retention, despite attempts by RFP to collect
payment. Id. ¶¶ 18-19.
B. Procedural History
RFP filed suit against Defendants in this Court on April 3, 2014. Compl. Neither
Defendant has appeared in this case. RFP filed the present Motion for Default Judgment
on July 22, 2014.
II. LEGAL STANDARD
The decision to grant or deny a motion for default judgment is within the district
court’s discretion. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). After the clerk
enters a default against the defendant, the factual allegations of the complaint, except
those relating to damages, are taken as true, except allegations concerning the amount of
damages. Fed. R. Civ. P. 8(b)(6); Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th
Cir. 1977). However, “necessary facts not contained in the pleading, 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). The district court considers seven factors when
deciding whether to grant the motion: “(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

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 14-0516-DOC (ANx)

Date: September 3, 2014
Page 3

underlying the Federal Rules of Civil Procedure favoring decisions on the merits.” Eitel,
782 F.2d at 1471-72.
If a plaintiff seeks money damages, “[t]he 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. Fed. R. Civ. P. 54(c). When ‘proving-up’
damages, admissible evidence (including witness testimony) supporting . . . damage
calculations is usually required.” Amini Innovation Corp. v. KTY Int’l Mktg., 768 F.
Supp. 2d 1049, 1054 (C.D. Cal. 2011).
III.

ANALYSIS

A. Eitel Factors
The Court considers each Eitel factor in turn.
1.

Possibility of Prejudice to the Plaintiff

The first Eitel factor supports granting default judgment because Defendants have
not appeared in this case. Plaintiffs have no other means to recover from Defendant,
leaving Plaintiffs without a remedy absent default judgment. See Landstar, 725 F. Supp.
2d 916, 920 (C.D. Cal. 2010); PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172,
1176 (C.D. Cal. 2002).
2. & 3.
The Merits of the Claims and Sufficiency of the
Complaint
The second and third Eitel factors look to whether a plaintiff’s complaint
sufficiently states a claim for relief. PepsiCo, 238 F. Supp. 2d at 1175. These two
factors require that a plaintiff “state a claim on which the [plaintiff] may recover.”
Danning v. Lavine, 575 F.2d 1386, 1388 (9th Cir. 1978). Judgment by default cannot be
entered if the complaint fails to state a claim. See Moore v. United Kingdom, 384 F.3d
1079, 1090 (9th Cir. 2004). RFP seeks default judgment on two of its claims: (1) breach
of written contract, against RMA; and (2) recovery against Miller Act Payment Bond,
against Scarborough. Mot. ¶ 4.
Under California law, the essential elements of a breach of contract action are:
“(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 14-0516-DOC (ANx)

Date: September 3, 2014
Page 4

defendant’s breach, and (4) the resulting damages to plaintiff.” Reichert v. Gen. Ins. Co.
of Am., 68 Cal. 2d 822, 830 (1968). Here, the Complaint states that RFP and RMA
entered into a written agreement for RFP to provide fire protection systems and wet pipe
fire sprinklers for RMA’s project under its Prime Contract with the government, that
RFP fully performed its obligations under the Subcontract, and yet RMA failed to pay
RFP the 10% retention payment that RMA had initially withheld pursuant to a provision
of the contract. Thus, the Complaint adequately states a claim for breach of contract.
The Miller Act, 40 U.S.C. §§ 3131-3134, governs surety bonds on federal
construction projects that cost more than $100,000. Under the Miller Act, a contractor
must post both a performance bond and a payment bond for the project. 40 U.S.C. §
3131. Under 40 U.S.C. § 3133, “[e]very person that has furnished labor or material in
carrying out work” on a project covered by the Miller Act, “and that has not been paid in
full within 90 days after the day on which the person did or performed the last of the
labor” may bring suit on the payment bond for the amount still due. Here, the Complaint
alleges that RMA obtained a Miller Act payment bond from Scarborough in the amount
of $9,209,700 for RMA’s Prime Contract with the government and that Scarborough
agreed to be jointly and severally liable with RMA in the event that RMA failed to
promptly pay its subcontractors. Compl. ¶ 13. The Complaint alleges that RFP worked
on RMA’s Project with the government by providing fire protection systems and wet
pipe fire sprinklers. Id. ¶ 14. It also alleges that RFP completed its work on October 15,
2013, and was not paid the retention payment, representing 10% of the total value of
RFP’s labor, material, and services, within 90 days of that date. Id. ¶¶ 17-19. Thus, the
Complaint adequately states a claim under the Miller Act.
Therefore, the third factor is satisfied.
4.

The Sum of Money at Stake in the Action

The fourth Eitel factor requires that the damages sought be “proportional to the
harm caused by defendant’s conduct.” Landstar, 724 F. Supp. 2d at 921; see also Joe
Hand Promotions, Inc. v. Meola, 2011 WL 2111802, at *4 (N.D. Cal. Apr. 22, 2011)
(finding that the amount must not be disproportionate to the harm alleged). When the
money at stake in the litigation is substantial or unreasonable, default judgment is
discouraged. Crosthwaite v. Brennan, 2011 WL 589821, at *5 (N.D. Cal. Jan. 25,
2011). On the other hand, where the sum of money at issue is reasonably proportionate
to the harm caused by the defendant’s actions, then default judgment is warranted.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 14-0516-DOC (ANx)

Date: September 3, 2014
Page 5

See Board of Trustees of Cal. Metal Trades v. Pitchometer Propeller, 984 F. Supp. 978,
978 (N.D. Cal. 1997).
Here, Plaintiffs seek a total of $24,068.28. Plaintiffs have adequately pled and
shown through evidence that Plaintiffs are due $19,025 principal due on the contract and
attorney’s fees. The only questionable amount of damages sought is $3,144.89 in
penalties for failure to pay retention payment and a corresponding portion of the
attorney’s fees. See infra. However, these portions are not sufficient to make the total
amount of damages sought disproportionate to the harm suffered. Thus, the fourth factor
is met.
5.

The Possibility of a Dispute Concerning the Material
Facts
Where the plaintiff’s complaint is well-pleaded and the defendant makes no effort
to properly respond, the facts will likely be undisputed. See Landstar, 725 F. Supp. 2d
at 921-22. Plaintiffs’ claim is well-pleaded, and Defendants have not challenged its
allegations with a proper answer or a motion challenging the sufficiency of the
complaint. This factor weighs in favor of default judgment.
6.

Whether the Default was Due to Excusable Neglect

The sixth Eitel factor favors default judgment when the defendant has been
properly served or the plaintiff demonstrates that the defendant is aware of the lawsuit.
Id. at 911. Here, Plaintiffs have properly served Defendants with the complaint as well
as the motion for default judgment. Yet, neither Defendant has appeared in this case.
Thus, Defendants’ failure to appear is not due to excusable neglect and the sixth factor is
met.
B. Damages
1.

$19,025 Principal Due on Contract

Based on Plaintiffs’ complaint and evidence provided with their Motion, the
Court finds that Plaintiffs have adequately shown that, under the Subcontract, they are
entitled to $19,025 principal due on the contract. See Declaration of Mohamed Lazrag in
Support of Plaintiff’s Application for Entry of Default Judgment by Court (Dkt. 24), Ex.
C. Thus, the Court GRANTS Plaintiffs’ request for $19,025 as principal due on the
contract.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 14-0516-DOC (ANx)

Date: September 3, 2014
Page 6

2.

Penalties Under California Civil Code § 8818(a)

Plaintiffs seek $3,144.89 in penalties for non-payment of the retention payment
pursuant to California Civil Code § 8818(a). Under California Civil Code § 8814(a), “If
a direct contractor has withheld a retention from one or more subcontractors, the direct
contractor shall, within 10 days after receiving all or part of a retention payment, pay to
each subcontractor from whom retention has been withheld that subcontractor’s share of
the payment.” If the direct contractor violates § 8814(a), § 8818(a) makes the direct
contractor liable for an additional penalty of 2% each month on the amount wrongfully
withheld, in lieu of interest otherwise due.
Plaintiffs’ Complaint contains no allegation that RMA received any retention
payment. Without that allegation, Defendants were not on notice that they would be
admitting to that fact and thus to a violation of § 8814 if they failed to contest the fact.
Plaintiffs have submitted with this Motion a declaration by Bill Davis, which states that,
on or about May 23, 2014, Mr. Davis heard from Tim Buchanan, a contract specialist for
the United States Navy, that the Navy had released the withheld retention payment to
RMA. Declaration of Bill Davis in Support of Plaintiff’s Application for Entry of
Default Judgment by Court (Dkt. 26) ¶ 4. The Court is aware that Federal Rule of Civil
Procedure 55 generally contemplates that affidavits may be used to prove damages. See
Fed. R. Civ. P. 55(b)(1). However, in this case, Mr. Davis’s declaration is being used to
prove a fact that was not alleged in the Complaint and which must be constructively
admitted by Defendants before we reach the issue of damages. Moreover, proving
damages usually requires admissible evidence and Mr. Buchanan’s statement is
inadmissible as hearsay. Accordingly, the Court DENIES Plaintiffs’ request for §
8818(a) penalties.
3.

Attorney’s Fees

Plaintiffs also seek $1,928.39 in attorneys’ fees based on California Civil Code
§§ 1717 and 8818(b). Section 8818(b) entitles the prevailing party in any action to
collect any amount wrongfully withheld under § 8814(a) to costs and reasonable
attorney’s fees. For the same reason that penalties are not appropriate under California
Civil Code § 8818(a), attorney’s fees are not available to Plaintiffs under § 8818(b).
However, attorney’s fees are available under California Civil Code § 1717.
Plaintiffs have adequately pled and shown that the Subcontract provided for the
prevailing party in any dispute over the Subcontract to be awarded attorneys’ fees and

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 14-0516-DOC (ANx)

Date: September 3, 2014
Page 7

costs. Compl. ¶ 15; Lazrag Decl., Ex. D. Under California Civil Code § 1717, when a
contract has such a provision, the prevailing party is entitled to reasonable attorney’s
fees. Here, Plaintiffs are unquestionably the prevailing party. Under Local Rule 55-3, a
reasonable attorney’s fee for a $19,025 default judgment is $1,200 plus 6% of the
amount over $10,000; here, $1,741.50. Thus, the Court GRANTS IN PART and
DENIES IN PART Plaintiffs’ request for attorney’s fees and awards attorney’s fees to
Plaintiffs in the amount of $1,741.50.
IV.

DISPOSITION

For the reasons discussed above, the Court GRANTS IN PART and DENIES IN
PART the Motion for default judgment. The Court hereby:
1. GRANTS Plaintiffs’ Motion for an Entry of Default Judgment.
2. GRANTS Plaintiffs’ request for damages of $19,025 principal due on the
contract.
3. DENIES Plaintiffs’request for $3,114.89 in penalties under California Civil
Code § 8818(a).
4. GRANTS IN PART and DENIES IN PART Plaintiffs’ request for attorney’s
fees. The Court awards attorney’s fees to Plaintiffs in the amount of $1,741.50.
The Clerk shall serve this minute order on the parties.
MINUTES FORM 11
CIVIL-GEN

Initials of Deputy Clerk: jcb