Lehman Brothers Holdings, Inc. v. Shasta Financial Services, Inc.
Filing
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FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Craig M. Kellison on 4/29/11 RECOMMENDING that pltf's motion for default judgment against dft 16 be granted; and judgment be entered against dft in the amount of $1,993.605.03 with post-judgment interest to accrue pursuant to 28:1961. REFERRED to Judge John A. Mendez. Parties may file objections within 14 days.(Carlos, K) Modified on 5/2/2011 (Carlos, K).
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IN THE UNITED STATES DISTRICT COURT
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FOR THE EASTERN DISTRICT OF CALIFORNIA
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LEHMANL BROTHERS HOLDINGS, INC.,
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Plaintiff,
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No. CIV S-10-3083 JAM CMK (TEMP)
v.
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SHASTA FINANCIAL SERVICES, INC.
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Defendant.
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Plaintiff’s motion for default judgment was submitted on the papers. The court’s
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docket reflects that defendant has not filed any opposition to plaintiff’s motion for entry of
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default judgment despite being served with the motion and supporting exhibits. For the reasons
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set forth below, the undersigned recommends that plaintiff’s motion be granted and that default
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judgment be entered against defendant.
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BACKGROUND
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In the complaint filed November 16, 2010, plaintiff alleges mortgage loans were
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purchased by Lehman Brothers Bank, FSB (“LBB”) from defendant pursuant to a series of
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written contracts and that the rights of LBB were subsequently assigned to plaintiff. Plaintiff
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further alleges that with respect to certain of the mortgages, defendant breached provisions of the
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contracts that required it to repurchase those mortgage loans for which the borrower failed to
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make payments on the mortgage.
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The record reflects that defendant was properly served with process on December
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5, 2010 and default was entered on January 13, 2011. (Doc. Nos. 9, 13.) On March 18, 2011,
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plaintiff filed a motion for default judgment. (Doc. No. 16.)
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LEGAL STANDARDS
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Federal Rule of Civil Procedure 55(b)(2) governs applications to the court for
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entry of default judgment. Upon entry of default, the complaint’s factual allegations regarding
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liability are taken as true, while allegations regarding the amount of damages must be proven.
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Dundee Cement Co. v. Howard Pipe & Concrete Prods., 722 F.2d 1319, 1323 (7th Cir. 1983)
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(citing Pope v. United States, 323 U.S. 1 (1944); Geddes v. United Fin. Group, 559 F.2d 557 (9th
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Cir. 1977)); see also DirectTV v. Huynh, 503 F.3d 847, 851 (9th Cir. 2007); TeleVideo Sys., Inc.
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v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987).
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Where damages are liquidated, i.e., capable of ascertainment from definite figures
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contained in documentary evidence or in detailed affidavits, judgment by default may be entered
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without a damages hearing. Dundee, 722 F.2d at 1323. Unliquidated and punitive damages,
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however, require “proving up” at an evidentiary hearing or through other means. Dundee, 722
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F.2d at 1323-24; see also James v. Frame, 6 F.3d 307, 310-11 (5th Cir. 1993).
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Granting or denying default judgment is within the court’s sound discretion.
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Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986); Aldabe v. Aldabe, 616 F.2d. 1089,
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1092 (9th Cir. 1980). The court is free to consider a variety of factors in exercising its discretion.
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Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Among the factors that may be
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considered by the court are
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(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
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Federal Rules of Civil Procedure favoring decisions on the merits.
Eitel, 782 F.2d at 1471-72 (citing 6 Moore’s Federal Practice ¶ 55-05[2], at 55-24 to 55-26).
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ANALYSIS
I. Whether Default Judgment Should Be Entered
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The factual allegations of plaintiff’s complaint, taken as true pursuant to the entry
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of default against defendant, and the affidavits submitted in support of the motion for summary
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judgment establish that plaintiff is entitled to the relief requested. The repurchase price of each
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loan has been appropriately calculated according to the formula set forth in the Seller’s Guide
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that governs the parties’ respective rights and responsibilities. Baker Decl., Exh. A-G. From the
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business records submitted by plaintiff, damages in a sum certain are calculable according to a
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set formula and the amount of damages is $1,993,605.63.
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After weighing the Eitel factors, the undersigned finds that the material
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allegations of the complaint support plaintiff’s claims. Plaintiff will be prejudiced if default
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judgment is denied because plaintiff has no other recourse for recovery of the damages suffered
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due to the defendants’ failure to repurchase the subject loans.
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In light of the entry of default against the defendant, there is no apparent
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possibility of a dispute concerning the material facts underlying the action. Nor is there any
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indication that the defendant’s default resulted from excusable neglect, as defendant has been
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properly notified of the pendency of the lawsuit and was served with a copy of the pending
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motion.
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Although public policy generally favors the resolution of a case on its merits, the
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defendant’s failure to make a proper appearance and defend against plaintiff’s claims has made a
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decision on the merits impossible in this case. Because most of the Eitel factors weigh in
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plaintiff’s favor, the undersigned, while recognizing the public policy favoring decisions on the
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merits, will recommend that default judgment be entered against the defaulted defendant.
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II. Terms of Judgment to Be Entered
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After determining that entry of default judgment is warranted, the court must next
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determine the terms of the judgment. Upon consideration of all of plaintiff’s briefing, the
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undersigned will recommend that damages be awarded in the amount requested. By its motion
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for default judgment, plaintiff seeks a judgment in the amount of $1,993,605.63 with post-
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judgment interest to accrue pursuant to 28 U.S.C. § 1961. The declaration of John Baker and
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exhibits attached thereto support the entry of judgment in the amount requested.
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CONCLUSION
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For the reasons set forth above, IT IS RECOMMENDED that:
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1. Plaintiff’s motion for default judgment (Doc. No. 16) against defendant be
granted;
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2. Judgment be entered against defendant in the amount of $1,993,605.63 with
post-judgment interest to accrue pursuant to 28 U.S.C. § 1961.
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These findings and recommendations will be submitted to the United States
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District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within
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fourteen days after these findings and recommendations are filed, any party may file written
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objections with the court. A document containing objections should be titled “Objections to
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Magistrate Judge’s Findings and Recommendations.” The parties are advised that failure to
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file objections within the specified time may, under certain circumstances, waive the right to
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appeal the District Court’s order. See Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).
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DATED: April 29, 2011
______________________________________
CRAIG M. KELLISON
UNITED STATES MAGISTRATE JUDGE
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JMM
lehman-shasta.def.cmk
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