Shanghai Win-Wing Imp. & Exp. Co, Ltd v. Watanabe et al

Filing 18

ORDER by Judge Samuel Conti denying 14 Motion for Default Judgment (sclc2, COURT STAFF) (Filed on 11/12/2008)

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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

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SHANGHAI WIN-WING IMPORT AND EXPORT) CO., LTD., ) ) ) Plaintiff, ) ) ) v. ) TETSUYA WATANABE, OAKHILLS HARDWOOD) FLOORS, INC., K&T ASSOCIATES, INC.,) ) ) ) Defendants. ) )

Case No. 08-2031 SC ORDER DENYING PLAINTIFF'S APPLICATION FOR DEFAULT JUDGMENT

I.

INTRODUCTION The present matter comes before the Court on the Application

for Default Judgment ("Application") filed by the plaintiff Shanghai Win-Wing Import and Export Co., LTD. ("Plaintiff"). Docket No. 14. Pursuant to Federal Rule of Civil Procedure 55(a),

the Clerk of the Court entered default against the defendants Tetsuya Watanabe ("Mr. Watanabe"), Oakhills Hardwood Floors, Inc. ("Oakhills"), and K&T Associates ("K&T") (collectively "Defendants"). Docket No. 12. For the following reasons, the

Court DENIES without prejudice Plaintiff's Application. ///

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II.

BACKGROUND This action arises out of money allegedly owed to Plaintiff

for goods purchased, but not paid for, by Defendants. Docket No. 1, at 1.

Compl.,

Plaintiff is a manufacturer and exporter of

wood flooring and is located in the People's Republic of China. Id. ¶ 1. K&T was a corporation registered in the State of

Washington with its principal place of business at 8911 NE 151st Place, Bothell, WA 98011. Id. ¶ 2. K&T imported wood flooring Id.

from Plaintiff and was owned and operated by Mr. Watanabe.

Oakhills was also owned by Mr. Watanabe and is a corporation registered in California. Id. ¶ 3. The principal place of

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business for Oakhills was 6650 Goodyear Road, Benicia, CA 94510. Id. Mr. Watanabe is a resident of California with a last-known Id. ¶ 4. This

address of 6650 Goodyear Road, Benicia, CA 94510.

Court has jurisdiction as diversity exists between the parties and the amount in controversy exceeds $75,000. Id. ¶ 6.

Between June 9 and June 27, 2006, K&T issued several orders to purchase wood flooring products from Plaintiff. Id. ¶ 9. From

August 27 through September 17, 2006, Plaintiff shipped the wood flooring products from China to California, where they were received by K&T. Id. ¶ 10. Payments for these shipments were due

within sixty days, and, as of November 17, 2006, K&T still had an outstanding balance of $394,995.20 for the orders. Id. ¶ 12.

In February 2007, Mr. Watanabe executed a settlement agreement on behalf of K&T and a guaranty on behalf of Oakhills whereby K&T agreed to pay $352,717.15 to Plaintiff. Id. ¶ 13.

Under this agreement, Oakhills guaranteed the payment plan in the 2

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event K&T was unable to make payments.

Id.; Compl. Ex. 1.

Although Mr. Watanabe signed the agreement, Plaintiff alleges that Mr. Watanabe was aware that neither K&T nor Oakhills would be able to satisfy the agreed-upon payments. Id. ¶ 17. Only one payment

of $10,000 was made by Mr. Watanabe towards the agreement, thereby leaving an outstanding balance of $342,717.15. Id. ¶ 19.

Plaintiff subsequently filed the present action, alleging six causes of action: (1) breach of contract against K&T; (2) action on account against K&T; (3) unjust enrichment against K&T; (4) breach of settlement agreement against K&T; (5) breach of guaranty against Oakhills; and (6) fraudulent and intentional misrepresentation against Mr. Watanabe. On the first three causes

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of action, Plaintiff sought damages of $384,995.20, which was the residual amount owed on the orders before the settlement agreement was executed. Under the fourth and fifth causes of action,

Plaintiff sought only $342,717.15, which is the amount due after the settlement agreement. On the sixth cause of action, Plaintiff

initially sought "punitive damages likely in excess of $685,434.30." Compl. ¶ 57. Prior to filing the present Motion,

however, Plaintiff dismissed its claim for punitive damages. Docket No. 13. Furthermore, in its Application, Plaintiff

clarifies its request for damages, stating: "In this case, WinWing is requesting default judgment in the sum certain amount of $342,717.15." /// /// /// 3 Application at 5.

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III. DISCUSSION A. Legal Standard

After entry of default, the Court may enter a default judgment. Fed. R. Civ. P. 55(b). "However, entry of default does

not automatically entitle the non-defaulting party to entry of a default judgment regardless of the fact that the effect of entry of a default is to deem allegations admitted." 132 B.R. 742, 746 (9th Cir. BAP 1991). In re Villegas,

Rather, "the decision to Alan Neuman Prods., First, the

enter a default judgment is discretionary."

Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988).

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Court must "assess the adequacy of service of process on the party against whom default is requested." Bd. of Trs. of the N. Cal.

Sheet Metal Workers v. Peters, No. C-00-0395 VRW, 2000 U.S. Dist. LEXIS 19065, at *2 (N.D. Cal. Jan. 2, 2001). Once the Court

determines that service was sufficient, it may consider the following factors when exercising its discretion to enter a default judgment: (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. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). "The

general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true." Geddes v. United Fin. Group, 559 F.2d 4

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557, 560 (9th Cir. 1977). B. Analysis

Federal Rule of Civil Procedure 4 provides the standards for service upon individuals, corporations, associations, or partnerships. Due to various inconsistencies, contradictions, and

questions relating to the service of process, the Court is prevented from entering default judgment and the Eitel factors need not be reached. To begin, in the Complaint, Plaintiff asserts that the K&T is "an inactive corporation that was registered in the State of Washington, with its principle [sic] place of business at 8911 NE 151st Pl., Bothell, WA 98011." Compl. ¶ 2. In its Application,

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however, Plaintiff states that "K&T Associates Inc. . . . was a corporation registered in the State of California, with its principle [sic] place of business at 8625 Central Ave., #A, Stanton, CA 90680." Mot. at 2.1

Although worth noting, this discrepancy alone is not especially troubling. More significant are the differences in Plaintiff executed

addresses relating to the service of process.

three summons: one to Tetsuya Watanabe, 1655 Galindo Street, Apartment 1155, Concord, CA 94520; one to Oakhills Hardwood Floors, Inc., c/o Agent for Service of Process Tetsuya Watanabe, 6650 Goodyear Road, Benicia, CA 94510; and one to K&T Associates, Inc., c/o its Officer and Managing or General Agent Tetsuya Watanabe, 1655 Galindo Street, Apartment 1155, Concord, CA 94520. The Court notes that the summons for K&T was sent to neither of the above addresses. 5
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See Docket Nos. 4, 5, 6.

Only one summons was returned executed.

According to the proof of service, the party served on the executed summons was Tetsuya Watanabe. No. 7. Proof of Service, Docket

This summons, however, was served on a person named "Donny

Smith - Person in Charge of Office," at the address of 1647 Willow Pass Road, Concord, CA 94520. Id. Nowhere in the Complaint or Rather, according to

the Application does this address appear.

the Complaint, the address for Tetsuya Watanabe is 6650 Goodyear Rd., Benicia, CA 94510. Compl. ¶ 4.

In an attempt to cure this discrepancy, in the Application, counsel for Plaintiff included a declaration stating: "Upon information and belief, and as confirmed by skip tracing, 1647 Willow Pass Road, Concord, CA 94520, is the current residential address of Tetsuya Watanabe." Corey Decl., Docket No. 10, ¶ 4.

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Aside from the fact that this was not the address provided in the Complaint nor the address listed on the summons for Tetsuya Watanabe, counsel for Plaintiff states that this address is a "residential address," yet the service of process states that the summons was left with "Donny Smith - Person in Charge of Office." See Proof of Service. The cumulative effect of these discrepancies leads the Court to conclude that "the adequacy of service of process on the party against whom default is requested" is not sufficient. Bd. of Trs.

of the N. Cal. Sheet Metal Workers, 2000 U.S. Dist. LEXIS 19065, at *2. /// /// 6

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IV.

CONCLUSION For the reasons stated above, Plaintiff's Application is

DENIED without prejudice.

Plaintiff has 90 days from the date of

this Order to cure the above-discussed defects and refile the Application.

IT IS SO ORDERED.

Dated: November 12, 2008

United States District Court

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