Calix, Inc. v. Alfa Consult, S.A.

Filing 29

Order by Magistrate Judge Joseph C. Spero granting 17 Motion for Default Judgment.(jcslc3S, COURT STAFF) (Filed on 6/24/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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CALIX, INC.,

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Case No. 15-cv-00981-JCS
Plaintiff,

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v.
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ALFA CONSULT, S.A.,

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Defendant.

REPORT AND RECOMMENDATION
REGARDING PLAINTIFF'S MOTION
FOR DEFAULT JUDGMENT
Re: Dkt. No. 17

United States District Court
Northern District of California

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I.

INTRODUCTION
This is a breach of contract case by Calix, Inc. (“Calix” or “Plaintiff”) against Alfa

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Consult, S.A. (“Alfa” or “Defendant”) for two unpaid invoices. Calix has filed and served the

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Complaint on Alfa, sought and received an entry of default, and now moves for default judgment.

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Alfa has not appeared in this action. The Motion came on for hearing on June 12, 2015. In

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response to the Court’s requests, Plaintiff’s counsel filed a supplemental declaration on June 12,

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2015 and a second supplemental declaration on June 22, 2015. Since there is no consent to

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magistrate judge jurisdiction from Defendant, the case will be reassigned to a district court judge.

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For the reasons stated below, the undersigned recommends that Plaintiff’s Motion be GRANTED.

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II.

BACKGROUND
Factual Background1

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A.

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Plaintiff Calix is a corporation organized and existing under the laws of Delaware and

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doing business in California. Compl. at 1. Defendant Alfa is a corporation organized and existing

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under the laws of Luxembourg. Id. On December 3, 2012, Calix and Alfa entered into a

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The factual background is based on the allegations in Calix’s Complaint, which is taken as true
for the purposes of this Motion. See Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir.
1977) (upon entry of default, “the factual allegations of the complaint, except those relating to the
amount of damages, will be taken as true”).

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commercial agreement (“Agreement”) for Alfa, the reseller, to sell Calix’s products and services

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in Iraq. See id. Ex. A (Non-Exclusive Reseller Agreement). Alfa purchased a number of products

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from Calix in connection with a project for the Maysan Governorate in Iraq, and Calix issued Alfa

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invoices for these purchases. Id. at 2. On January 27, 2014, Calix issued Alfa an invoice in the

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amount of $120,000.00 with a due date of February 26, 2014 (invoice no. 1052636). Id. On

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February 6, 2014, Calix issued Alfa another invoice in the amount of $805.50 with a due date of

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March 8, 2014 (invoice no. 1053509). Id. These two unpaid, past-due invoices are the subject of

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this lawsuit. Id. Between February 2014 and January 2015, Calix demanded “on multiple

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occasions” that Alfa pay the invoices, and Alfa “repeatedly told Calix that payment would be
forthcoming,” but Calix never received payment. Id. Calix claims entitlement to (1) damages in

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United States District Court
Northern District of California

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the amount of $120,805.50; (2) prejudgment interest on amounts due under the Agreement at the

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rate of 1.5%; (3) post-judgment interest; and (4) attorney’s fees and costs. Compl. at 3.

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B.

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On March 3, 2015, Calix filed the instant Complaint. Dkt. 1. On March 11, 2015, the

Procedural Background

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court clerk Gina Agustine-Rivas served the Summons and Complaint on Alfa using FedEx

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International, requiring a signed receipt. See Declaration of Terry Sterling in Support of the

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Application for Entry of Default Judgment (“Sterling Decl.”) Ex. A (Certificate of Service). The

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package was received and signed for by Lena on March 13, 2015. See Sterling Decl. Ex. B

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(FedEx Proof of Delivery).

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Alfa did not file an answer to the Complaint or otherwise appear in this action. On April

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10, 2015, the clerk entered default against Alfa. Dkt. 12. Calix filed the present Motion on May

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4, 2015, and the Motion remains unopposed.

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C.

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Calix requests default judgment against Alfa and the following relief: (1) payment for the

Requested Relief

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two unpaid purchases in the amount of $120,805.50; (2) prejudgment interest in the amount of

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$28,981.24; (3) post-judgment interest; and (4) attorney’s fees and costs in the amount of

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$15,233.65. Mot. at 5; Supplemental Declaration of Terry Sterling in Support of Request for (1)

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Attorneys’ Fees and Costs and (2) Prejudgment Interest in Connection with Entry of Default
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Judgment (“Sterling Supp. Decl.”) ¶ 8.

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III.

LEGAL STANDARD
After an entry of default by the court clerk, a district court may enter a default judgment.

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Fed. R. Civ. P. 55(b)(2). Provided that jurisdiction is proper and service of process on the

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defendant was adequate, the court considers several factors to determine whether default judgment

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is appropriate:
(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.

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Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). In making its decision, the court takes

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United States District Court
Northern District of California

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all factual allegations in the complaint, except those relating to damages, as true. See Geddes, 559

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F.2d at 560. If the court finds that default judgment is appropriate, it must then determine the

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proper amount and character of the relief. See id; Landstar Ranger, Inc. v. Parth Enterprises, Inc.,

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725 F. Supp. 2d 916, 920 (C.D. Cal. 2010).

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IV.

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ANALYSIS
A.

Jurisdiction
When entry of judgment is sought against a party who has failed to plead or otherwise

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defend, a district court has the affirmative duty to determine whether it has jurisdiction. In re Tuli,

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172 F.3d 707, 712 (9th Cir. 1999).

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1. Subject Matter Jurisdiction

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The Complaint asserts diversity jurisdiction under 28 U.S.C. § 1332. Under § 1332, a

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court has subject matter jurisdiction over a case where the parties are a citizen of a State and a

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citizen of a foreign state and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a)(2).

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For purposes of diversity jurisdiction, a corporation is a citizen of both its state of incorporation

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and the state where it has its principal place of business. 28 U.S.C. §1332(c)(1).

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Here, the Complaint alleges that Calix is a corporation “organized and existing under the

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laws of the State of Delaware, and authorized to do business and doing business in the State of

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California.” Compl. at 1. Thus, Calix is a “citizen of a State.” 28 U.S.C. §§ 1332(a)(2), (c)(1).
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Alfa is a “corporation organized and existing under the laws of Luxembourg,” and thus a citizen

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“of a foreign state.” Compl. at 1; 28 U.S.C. § 1332(a)(2), (c)(1). The alleged amount in

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controversy exceeds $75,000. Compl. at 1–3. Hence, subject matter jurisdiction is established §

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1332(a)(2).

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2. Personal Jurisdiction

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The Complaint asserts that there exists personal jurisdiction over Alfa because Alfa

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consented to federal court jurisdiction through a forum selection clause in the Agreement. Compl.

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at 2, Ex. A (“The parties consent to the exclusive jurisdiction of, and venue in, the state and

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federal courts within San Francisco County, California”).

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Consent is a ground for exercising personal jurisdiction over a non-resident defendant. See

United States District Court
Northern District of California

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Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) (“because the personal jurisdiction

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requirement is a waivable right, there are a variety of legal arrangements by which a litigant may

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give express or implied consent to the personal jurisdiction of the court”). A contract’s forum

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selection clause is by itself sufficient to establish consent and confer personal jurisdiction. Chan

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v. Soc'y Expeditions, Inc., 39 F.3d 1398, 1406-07 (9th Cir. 1994) (holding that forum selection

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clause on passenger cruise ticket could by itself confer personal jurisdiction); SEC v. Ross, 504

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F.3d 1130, 1149 (9th Cir.2007) (accepting a forum selection clause evidences consent to personal

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jurisdiction in that forum). Forum selection clauses are presumed to be valid, even in default

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judgment cases. Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 10 (1972) (forum selection clauses

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“are prima facie valid and should be enforced unless enforcement is shown by the resisting party

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to be ‘unreasonable’ under the circumstances”); Craigslist, Inc. v. Kerbel, No. C-11-3309 EMC,

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2012 WL 3166798, at *6 (N.D. Cal. Aug. 2, 2012) (finding personal jurisdiction based on consent

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to forum selection clause even where defendant failed to appear).

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Here, the Agreement signed by Calix and Alfa provides that the parties “consent to the

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exclusive jurisdiction of, and venue in, the state and federal courts within San Francisco County,

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California.” Compl. Ex. A at 10–11. This forum selection clause is prima facie valid. See

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Bremen, 407 U.S. at 10. The party disputing the validity of the forum selection clause bears the

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burden of proving that the clause is unenforceable. Craigslist, Inc. v. Naturemarket, Inc., 694 F.
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Supp. 2d 1039, 1052-53 (N.D. Cal. 2010). Here, where Defendant has not appeared and the

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undersigned sees no indication that the clause is unreasonable or otherwise unenforceable, the

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forum selection clause may be enforced to exercise personal jurisdiction over Defendant. See

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Craigslist, Inc., No. C-11-3309 EMC, 2012 WL 3166798, at *6.

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B.

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Adequate service is governed by Fed. R. Civ. P. 4. In particular, Rule 4(f) dictates the

Adequacy of Service

methods of serving a foreign corporation when service is effected outside the United States. Fed.

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R. Civ. P. 4(h)(2), (f). One method is using “any form of mail that the clerk addresses and sends

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to the individual and that requires a signed receipt,” provided that such method is not prohibited

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by an applicable international agreement or by the foreign country. Fed. R. Civ. P. 4(f)(2)(C)(ii).

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United States District Court
Northern District of California

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Where the Hague Convention applies and the receiving country does not object to service by

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postal channels directly to persons abroad under Article 10(a) of the Convention, service of

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process may be effected under Rule 4(f)(2)(C)(ii). See Brockmeyer v. May, 383 F.3d 798, 804–05

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(9th Cir. 2004) (finding that where the validity of service is controlled by the Hague Convention

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and the receiving country does not object to the “service of process by international mail” under

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Article 10(a), the court “must look outside the Hague Convention for affirmative authorization of

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the international mail service” and that Rule 4(f)(2)(C)(ii) gives such “explicit, affirmative

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authorization for service by international mail”).
Here, the Hague Convention applies because Luxembourg is a signatory to the

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Convention.2 In addition, at the time of service, Luxembourg was not opposed to service by postal

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channels.3 Pursuant to Rule 4(f)(2)(C)(ii), the court clerk mailed the Summons and Complaint to

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Alfa via FedEx international mail requiring a signed receipt. Sterling Decl. Ex. A (Certificate of

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Service), Ex. B (FedEx Proof of Delivery). FedEx international mail is an acceptable form of mail

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See Status Table for the Convention of 15 November 1965 on the Service Abroad of Judicial and
Extrajudicial Documents in Civil or Commercial Matters, available at
http://www.hcch.net/index_en.php?act=conventions.status&cid=17; Gidding v. Anderson, No. C
07-04755 JSW, 2008 WL 4065814, at *3 (N.D. Cal. Aug. 27, 2008) (Luxembourg has signed the
Hague Convention); see also Sterling Decl. ¶ 5, Ex. C (Status Table).
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See Luxembourg’s Declarations and Reservations to the Convention, available at
http://www.hcch.net/index_en.php?act=status.comment&csid=690&disp=resdn (withdrawing its
objection in 1978); see also Sterling Decl. ¶ 6, Ex. D (Declarations Reservations).
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under Rule 4(f)(2)(C)(ii) as well as an acceptable postal channel under Article 10(a). See Power

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Integrations, Inc. v. Sys. Gen. Corp., C 04-02581 JSW, 2004 WL 2806168, at *2 (N.D. Cal. Dec.

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7, 2004) (holding that plaintiff made a prima facie showing of adequate service under Rule

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4(f)(2)(C)(ii), where the court clerk served papers on foreign corporation via Federal Express); R.

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Griggs Grp. Ltd. v. Filanto Spa, 920 F. Supp. 1100 (D. Nev. 1996) (denying motion to quash

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Federal Express service on foreign corporation because service by Federal Express comported

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with Article 10(a) of the Hague Convention). Thus, Alfa was properly served.
C.

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Under the Eitel factors, default judgment is appropriate. First, Calix would suffer

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prejudice if a default judgment were not entered: Calix has delivered $120,805.50 of products to

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United States District Court
Northern District of California

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Alfa that remain uncompensated and has demanded payment from Alfa on multiple occasions but

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without success. See Landstar Ranger, Inc. v. Parth Enterprises, Inc., 725 F. Supp. 2d 916, 920

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(C.D. Cal. 2010) (finding that plaintiff in a breach of contract claim would suffer prejudice “given

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that plaintiff has delivered sixty shipments to Parth, and has only received partial payment for its

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services” and “denying default judgment here would leave [plaintiff] without a proper remedy”).

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Next, the Complaint sufficiently alleges each element in a breach of contract claim. The

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elements are: (1) the existence of a contract; (2) performance by the plaintiff; (3) breach by the

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defendant; and (4) damage to the plaintiff as a result of defendant’s breach. See Amelco Elec. v.

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City of Thousand Oaks, 27 Cal. 4th 228, 243 (2002). Here, Calix alleges that Alfa failed to pay

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Calix for two purchases made under their Agreement, and as a result, Calix incurred a loss of

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$120,805.50 from Alfa’s failure to pay for its purchases. Compl. at 2. Accepting these allegations

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as true, Calix has stated a meritorious and sufficient claim for breach of contract. See Landstar

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Ranger, Inc., 725 F. Supp. 2d at 921 (second and third Eitel factors support granting default

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judgment where the complaint sufficiently stated a claim for breach of contract). Therefore, the

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second and third Eitel factors–merits of the claim and sufficiency of the pleadings–support

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granting default judgment.

Entry of Default Judgment is Appropriate

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Further, the sum of money at stake here–which includes the invoice amount, prejudgment

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interest, post-judgment interest, attorney’s fees, and costs–is reasonably proportional to the harm
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caused by Alfa’s failure to pay. See JBR, Inc. v. Cafe Don Paco, Inc., No. 12-CV-02377 NC,

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2014 WL 5034640, at *14 (N.D. Cal. Aug. 25, 2014) report and recommendation adopted as

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modified sub nom. JBR, Inc v. Cafe Don Paco, Inc, No. 12-CV-02377-JD, 2014 WL 5034292

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(N.D. Cal. Sept. 30, 2014) (finding that the amount at stake including the unpaid principle of the

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loan, interest as required by the promissory note, consequential damages for plaintiff’s cover,

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attorney’s fees and costs–though significant–is reasonably proportionate to the harm caused by

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defendant’s breach and thus warrants default judgment).

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Finally, given that Defendant, after being properly served, failed to appear, there is no
indication of any dispute over material facts or any excusable neglect. See JBR, Inc. v. Cafe Don

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Paco, Inc., No. 12-CV-02377 NC, 2014 WL 5034640, at *14 (“because the defendants have not

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United States District Court
Northern District of California

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made an effort to challenge the complaint, there is nothing to suggest that a dispute in the facts

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exists”); United States v. Approximately $45,860 in U.S. Currency, No. 14-CV-03801-JCS, 2015

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WL 1387468, at *4 (N.D. Cal. Mar. 24, 2015) (“there is no likelihood of any dispute of material

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fact where the only likely claimant has decided not to appear”); Landstar Ranger, Inc., 725 F.

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Supp. 2d at 922 (finding little possibility of excusable neglect where Defendant was properly

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service through the California Secretary of State and still failed to appear). In addition, given that

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Alfa “repeatedly told Calix that payment would be forthcoming” in response to Calix’s demands

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for payment, there is no likely dispute over the shipment or prices charged; given Alfa’s repeated

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failure to pay, the possibility of excusable neglect is remote. Compl. at 2; Landstar Ranger, Inc.,

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725 F. Supp. 2d at 921–22 (possibility of excusable neglect is “remote” where despite plaintiff’s

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demands, defendant failed to pay remaining balance).

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Although the general policy favoring decisions on the merits will always weigh against

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default judgment, a decision on the merits “is impractical, if not impossible,” where, as here, the

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defendant fails to respond to the complaint. See Penpower Tech. Ltd. v. S.P.C. Tech., 627 F.

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Supp. 2d 1083, 1093 (N.D. Cal. 2008). Thus, the preference to decide cases on the merits “does

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not preclude a court from granting default judgment.” Id. Here, taken as a whole, the Eitel factors

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support granting default judgment.

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D.

Damages

Plaintiff has the burden to prove its damages. See Geddes, 559 F.2d at 560. Here, Calix
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requests (1) payment for the two purchases in the invoices; (2) prejudgment interest; (3) post3

judgment interest; and (4) attorney’s fees and costs. Compl. at 3. A review of Calix’s

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declarations and exhibits shows that Calix is entitled to its requested invoice payments,
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prejudgment interest, post-judgment interest, attorney’s fees, and costs.

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1. Unpaid Purchases
Calix’s request for the unpaid purchases in the amount of $120,805.50 is supported by

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copies of the invoices. See Declaration of Denis Quinlan in Support of Application for Entry of
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Default Judgment (“Quinlan Decl.”) Exs. B (invoice reflecting total charges of $805.50), C

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(invoice reflecting total charges of $120,000.00); Landstar Ranger, Inc., 725 F. Supp. 2d at 923
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United States District Court
Northern District of California

(Invoice summary, copies of invoices, and shipping documents supported claim for nonpayment in
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the amount of $243,817.34).
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2. Prejudgment Interest
Calix claims prejudgment interest in the amount of $28,981.24, which is consistent with

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the 1.5% interest rate specified in the Agreement. Quinlan Decl. Ex. A (“Late payments will
accrue interest at the lesser of 1.5% per month and the highest rate allowed by applicable law”).

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Such interest provisions are enforceable. See Family Tree Produce, Inc. v. Bautista, No. SA CV
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13-00364-DOC, 2013 WL 6733576, at *5 (C.D. Cal. Dec. 13, 2013) (enforcing 1.5% per month
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prejudgment interest rate in contract).
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3. Post-judgment Interest
Plaintiff is entitled to post-judgment interest on the entire judgment. 28 U.S.C. § 1961

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(“Interest shall be allowed on any money judgment in a civil case recovered in a district court”);

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Perkins v. Standard Oil Co., 487 F.2d 672, 674 (9th Cir. 1973).
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4. Attorney’s Fees and Costs
Section 3.4 of the Agreement provides for “all costs, expenses and fees, including
reasonable attorney’s fees” incurred by Calix to enforce the Agreement. Quinlan Decl. Ex. A.
Contractual agreements providing for reasonable attorney’s fees are enforceable. Cal. Code Civ.

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Proc. § 1021; In re Bennett, 298 F.3d 1059, 1070 (9th Cir. 2002).

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Attorney’s fees are reasonable where the hourly rates charged and number of hours

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expended are reasonable and adequately supported. See Hensley v. Eckerhart, 461 U.S. 424, 434

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(1983). Here, the hourly rates charged and number of hours expended are reasonable and

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adequately supported by counsels’ declarations and the submitted timesheets. See Sterling Decl.

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Ex. E (Timesheets); Second Supplemental Declaration of Terry Sterling in Support of Request for

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(1) Attorneys’ Fees and Costs and (2) Prejudgment Interest in Connection with Entry of Default

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Judgment (“Sterling Second Supp. Decl.”); Declaration of Willard A. Carle, III in Support of

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Plaintiff’s Request for Attorneys’ Fees. As an attorney with over 30 years of experience in
business litigation, Ms. Sterling’s rate of $375 per hour was reasonable. Sterling Second Supp.

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United States District Court
Northern District of California

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Decl. ¶ 4, Exs. B–C (Laffey matrix and locality adjustments); US Foods, Inc. v. Lalla Holding

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Corp., No. 5:13-CV-02328 HRL, 2014 WL 4809073, at *2 (N.D. Cal. Sept. 25, 2014) report and

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recommendation adopted sub nom. US Foods, Inc. v. Lalla Holding Corp, No. 13-CV-02328-

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BLF, 2014 WL 5281058 (N.D. Cal. Oct. 15, 2014) (in a default judgment case arising from breach

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of contract, finding $450 per hour reasonable for an attorney with seven years of experience). As

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a partner who practiced law for more than 20 years, Mr. Dranit’s rate of $400 per hour was also

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reasonable. See id. In addition, the total of 38.5 hours billed was adequately documented and

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reasonable given the work performed (researching and drafting of the Complaint and Motion,

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preparing and appearing for a hearing on the Motion, and drafting emails). See Sterling Supp.

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Decl. Exs. A–D; Sterling Second Supp. Decl. Ex. A. The undersigned thus recommends granting

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Calix’s request for attorney’s fees.

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Costs are allowed under the Agreement as well as Fed. R. Civ. P. 54(d). See Quinlan Decl.

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Ex. A at 4. Plaintiff counsel’s declaration and exhibits indicate filing fees and Fed Ex service

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costs totaling $731.15 and “Phone, Postage, In-house Photocopies” costs totaling $169.58. See

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Sterling Decl. Ex. E (Bills to Client); Sterling Supp. Decl. Exs. A–D. At the hearing, Plaintiff’s

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counsel indicated that costs for “Phone, Postage, In-house Photocopies” are non-itemized

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overhead expenses. Overhead is not recoverable. See Abad v. Williams, Cohen & Gray, Inc., No.

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C-06-2550 SBA (JCS), 2007 WL 1839910, at *3 (N.D. Cal. Apr. 23, 2007) report and
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recommendation adopted as modified, No. C 06-2550 SBA, 2007 WL 1839914 (N.D. Cal. June

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25, 2007). Therefore, the undersigned recommends granting costs in the amount of $731.15 only.

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V.

CONCLUSION

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For the reasons stated above, the undersigned recommends that Plaintiff’s Motion be

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GRANTED and that judgment be entered in the amount of $165,020.39 for (1) the principal

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amount on the unpaid invoices totaling $120,805.50; (2) prejudgment interest totaling $28,981.24;

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(3) attorney’s fees totaling $14,502.50 and (4) costs totaling $731.15. In addition, it is

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recommended that accrual of post-judgment interest be imposed on Defendant.

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This case shall be reassigned to a United States district judge for action on this Report and
Recommendation. Any party may file objections to the recommendations above no later than

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United States District Court
Northern District of California

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fourteen days after the party is served with a copy of this report. See 28 U.S.C. § 636(b)(1).

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Dated: June 24, 2015
______________________________________
JOSEPH C. SPERO
Chief Magistrate Judge

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