Park Miller, LLC et al v. Durham Group, Ltd. et al

Filing 66

ORDER GRANTING 53 MOTION FOR DEFAULT JUDGMENT by Judge William H. Orrick. (jmdS, COURT STAFF) (Filed on 10/13/2020)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 PARK MILLER, LLC, et al., Plaintiffs, 8 DURHAM GROUP, LTD., et al., Re: Dkt. No. 53 Defendants. 11 United States District Court Northern District of California ORDER GRANTING MOTION FOR DEFAULT JUDGMENT v. 9 10 Case No. 19-cv-04185-WHO 12 Plaintiffs (collectively, “Park Miller”) move for default judgment against defendants 13 Durham Group, Ltd. (“DGL”) and Durham Commercial Capital Corp. (“DCC”) (collectively, “the 14 defendants”) and seek discovery related to damages that they contend is needed to effectuate 15 judgment. I find that Park Miller has satisfied the standard for granting default judgment, and its 16 Motion is GRANTED. However, Park Miller has not adequately provided the specific discovery 17 needed to effectuate judgment, as I previously instructed it to do. In addition, Park Miller has not 18 provided the required support for the damages it requests. Accordingly, Park Miller’s request for 19 damages is DENIED without prejudice. Park Miller’s request for discovery is GRANTED IN 20 PART and DENIED IN PART. BACKGROUND 21 Park Miller filed this action on July 19, 2019 and filed an amended complaint on October 22 23 16, 2019. Dkt. Nos. 1, 19. Defendants moved to dismiss on September 25, 2019, which I granted 24 on December 16, 2019. Dkt. Nos. 13, 24. After Park Miller filed another amended complaint, 25 defendants again moved to dismiss, which I granted in part and denied in part. Dkt. Nos. 29, 33, 26 46. 27 28 Park Miller filed a Motion for Default Judgment on July 27, 2020. Dkt. No. 53 (“Mot.”). The Clerk entered default against the remaining defendants, DCC and DGL, on May 28, 2020. 1 Dkt. No. 51. On July 21, 2020, DCC and DGL’s attorney moved to withdraw. Dkt. No. 52. 2 Following a case management conference on August 18, 2020, I granted the motion to withdraw 3 and provided Park Miller with guidance on its pending motion for default judgment. See Dkt. No. 4 60. I heard Park Miller’s motion for default judgment on September 16, 2020, and again provided 5 counsel further guidance regarding its discovery request. Dkt. No. 63. Park Miller filed a 6 supplemental brief regarding its Motion for Default Judgment on September 30, 2020. Dkt. No. 7 64-1 (“Supp. Mot.”).1 LEGAL STANDARD 8 Pursuant to Federal Rule of Civil Procedure 55(b)(2), a district court may enter a final 9 judgment in a case following a defendant’s default. Whether to enter a judgment lies within the 11 United States District Court Northern District of California 10 court’s discretion. Bd. of Trustees of Laborers Health & Welfare Tr. Fund for N. California v. 12 Cazadores Constr., Inc., No. 17-cv-05242-WHO, 2018 WL 986020, at *2 (N.D. Cal. Feb. 20, 13 2018). In order to exercise this discretion, the court must first confirm that it has subject matter 14 jurisdiction over the case and personal jurisdiction over the parties, as well as ensure the adequacy 15 of service on the defendant. Id. Once these elements are satisfied, the court turns to the following 16 19 factors (the “Eitel factors”) to determine whether it should grant 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 decision on the merits. 20 Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). 21 DISCUSSION 17 18 22 I. MOTION FOR DEFAULT JUDGMENT 23 A. 24 Park Miller properly served the defendants with the complaint and summons, and the Procedural Requirements 25 defendants subsequently appeared in this case. See Dkt. No. 10. Park Miller asserts that I have 26 diversity jurisdiction over this matter pursuant to 28 U.S.C. § 1332. Dkt. No. 29 ¶ 22. Defendants 27 28 1 I find that this motion is suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b) and VACATE the hearing set for October 14, 2020. 2 1 filed multiple motions to dismiss, challenging personal jurisdiction and the substance of the 2 complaint. Dkt. Nos. 13, 33. I granted the motions as to personal jurisdiction for some of the 3 defendants. Dkt. No. 46. Defendants DGL and DCC did not object to personal or subject-matter 4 jurisdiction. See Dkt. No. 33 at 16. Based on these facts, I find that Park Miller has satisfied the 5 procedural requirements for default judgment. 6 B. 7 Park Miller asserts that it will be prejudiced if its Motion is not granted, because it will Eitel Factors 8 otherwise have no remedy. I agree, and find that this factor weighs in favor of granting its 9 Motion. As discussed above, defendants challenged the complaint multiple times. I found that the 10 United States District Court Northern District of California 11 “LCCM” plaintiffs adequately stated a claim for promissory fraud, that all plaintiffs had 12 adequately stated a claim for negligence and negligent misrepresentation, and that Park Miller had 13 stated a claim for interference. Accordingly, as to the remaining claims, the sufficiency of the 14 complaint weighs in favor of granting Park Miller’s Motion. For the same reasons, the merits of 15 Park Miller’s substantive claims also weighs in favor of granting its Motion. 16 As discussed further below, the amount at stake is substantial, and this factor also weighs 17 in favor of granting Park Miller’s motion. With regard to a possible dispute of material facts, the 18 defendants’ prior motions to dismiss did not raise any dispute, and their failure to further appear 19 after my Order on their motion suggests that a dispute of material facts is unlikely. Accordingly, 20 this factor weighs in favor of granting Park Miller’s Motion. Next, the defendants’ default was not due to excusable neglect. Defendants appeared in 21 22 this case and challenged the complaint. According to their attorney, they then indicated that they 23 would not further respond to this lawsuit. Dkt. No. 52 at 5. Because the defendants declined to 24 further appear in this matter, a decision on the merits is not possible, and the policy favoring 25 decision on the merits does not weigh against default. Taken together, the Eitel factors weigh in favor of granting Park Miller’s Motion. 26 27 28 II. DAMAGES REQUESTED In its supplemental motion, Park Miller provides further information regarding three 3 1 categories of damages sought. 2 A. 3 Park Miller calculates the damages resulting from breach of each of the promissory notes, Contract Damages 4 including interest after default. See Supp. Mot. 4-6. Based on these assumptions, Park Miller 5 correctly calculated that the total unpaid principals on the loans amount to $4,200,000. Based 6 upon its statements regarding default, Park Miller calculated the interest rates on the loans from 7 default until October 1, 2020, $1,521,666.67.2 Together, the contract damages equal 8 $5,721,666,67. Park Miller provided the underlying notes and a declaration of John Miller, a Principal at 9 Park Miller. Dkt. No. 64-3. These documents support Park Miller’s assertions as to the amount of 11 United States District Court Northern District of California 10 principal for each note and the interest rates. See id. However, Park Miller provides no 12 evidentiary support for its assertions that (i) none of the sums loaned had been repaid as of the 13 default, (ii) the defendants defaulted on all of the notes on December 1, 2018, and (iii) as of the 14 default, the principal on every note had been transferred to the “Operating Account,” which 15 triggered a higher interest rate. Park Miller must provide a declaration certifying that this 16 information is true. 17 B. 18 Park Miller also asserts that it suffered damages as a result of the defendants’ intentional Tort Damages 19 interference with contractual relations and negligent interference with prospective economic 20 relations. Supp. Mot. 7. It asserts that it lost eight clients due to these wrongful actions, resulting 21 in $1,065,407.49 in damages. Id. at 8. It also lost $60,675.00 as a result of refunding fees to its 22 clients associated with the defendants’ investment accounts. Id. In addition, it faces threatened 23 lawsuits from former clients as a result of the defendants’ actions in the amount of $5,350,000.00. 24 Id. 25 In support of these statements, Park Miller again relies upon Miller’s declaration. He 26 states that “[t]he lost revenue Park Miller has suffered due to this loss [of eight clients] totals 27 28 2 Park Miller’s individual calculations are correct; however, the total of these sums equals $1,521,666.67 and not $1,851,666.67. 4 1 $1,065,407.49.” Dkt. No. 64-3 ¶ 15. This sum is a result of lost revenue of $126,819.48 per year 2 for 8.59 years, along with the federal mid-term discount rate of .58%. Id. Miller also affirms that 3 Plaintiffs lost $60,675.00 in lost or refunded fees to clients. Id. ¶ 16. 4 Finally, Miller asserts that Park Miller had contracts with six clients that invested 5 $5,350,000 in “similar promissory notes” to the contracts at issue here. Id. ¶ 10. He states that 6 “[t]hese clients either are or are threatening to seek recovery from Park Miller for their losses, for 7 which Park Miller is entitled to indemnity.” Id. ¶ 17. 8 9 “The moving party has the burden to ‘prove up’ the amount of damages” requested in a default judgment. Frazier v. Am. Credit Resolution, Inc., No. 18-CV-07729-TSH, 2019 WL 5310718, at *8 (N.D. Cal. Oct. 21, 2019); see also Cent. California IBEW/NECA Pension Tr. v. 11 United States District Court Northern District of California 10 Ozzimo Elec., Inc., No. C 13-03800 JSW, 2015 WL 1883906, at *2 (N.D. Cal. Apr. 22, 2015) 12 (“To recover damages after securing a default judgment, a plaintiff must prove the relief it seeks 13 through testimony or written affidavit.”). Park Miller’s short assertions as to its tort damages do 14 not satisfy this burden. In order to justify an award of such damages, Park Miller must provide 15 evidentiary support for its statements that it lost clients, refunded fees to existing clients, and faces 16 lawsuits from clients stemming from the defendants’ wrongful conduct. General assertions of 17 total damages will not suffice; Park Miller must explain how each amount was calculated, provide 18 evidentiary support for its losses, and provide support for its contention that these losses resulted 19 from the defendants’ conduct as alleged in the complaint. In addition, Park Miller must provide 20 further information regarding the lawsuits that it faces and why damages resulting from such 21 lawsuits would not run afoul of the election of remedies doctrine. Attorneys’ Fees and Costs 22 C. 23 Finally, Park Miller asserts that it has incurred $131,937.50 in attorneys’ fees and 24 $4,577.80 in costs in this action. Supp. Mot. 8. In support of these assertions, it provides a 25 declaration of its attorney, Alexandra Tomp. Dkt. No. 64-2. Tomp asserts only that “Plaintiffs 26 have incurred $ 131,937.50 of attorney’s fees to date and have paid $4,577.80 in court costs to 27 date,” but provides no further break-down of these fees and costs. Id. ¶ 11. In order to recover 28 these fees, Park Miller must provide a legal basis for the attorneys’ fees and costs, as well as 5 detailed information regarding this request, including what costs were incurred, attorney billing 2 rates, and the hours worked on particular tasks for this matter. Mountz, Inc. v. Ne. Indus. Bolting 3 & Torque, LLC, No. 15-CV-04538-JD (MEJ), 2017 WL 780585, at *3 (N.D. Cal. Jan. 27, 2017), 4 report and recommendation adopted, No. 3:15-CV-04538-JD, 2017 WL 766598 (N.D. Cal. Feb. 5 28, 2017) (“To allow the undersigned to assess whether the number of hours billed is reasonable, 6 Plaintiff must submit detailed records justifying the hours that have been expended”); Operating 7 Engineers' Health & Welfare Tr. Fund for N. California v. Breneman, Inc., No. 17-CV-05172- 8 EDL, 2018 WL 5099250, at *8 (N.D. Cal. Aug. 15, 2018), report and recommendation adopted, 9 No. C 17-CV-05172 WHA, 2018 WL 6822624 (N.D. Cal. Oct. 9, 2018) (“The party requesting 10 fees must provide detailed time records documenting the tasks completed and the time spent”). 11 United States District Court Northern District of California 1 III. 12 REQUEST FOR DISCOVERY In my August 18 Order, I stated that “I am particularly interested in knowing exactly what 13 discovery plaintiffs believe is necessary prior to presenting the court with a specific form of 14 judgment that is supported by sufficient evidence.” Dkt. No. 60 at 2. Park Miller requests 15 discovery related to punitive damages, as well as to DGL and DCC’s assertions that they are 16 insolvent. Mot. 3. After I instructed Park Miller to provide further detailed discovery requests, it 17 did so in its supplemental brief. See Dkt. No. 64-1. However, the requested discovery is far from 18 narrowly tailored. It includes 50 interrogatories and 71 requests for production of documents, 19 which request broad information such as the identity of all of the defendants’ employees for the 20 past ten years, all financial records for the past ten years, and all documents related to 21 communications that the defendants had with any person affiliated with 1-800 SOLAR. See id. 22 Park Miller also seeks to subpoena Craig McGrain and includes 47 document requests. Id. 23 Park Miller’s discovery requests are overbroad and its request for discovery is DENIED IN 24 PART. The cases that it cites reflect narrowly-tailored discovery requests that differ from the 25 requests here. See Oakley, Inc. v. Moda Collection, LLC, No. SACV16160JLSJCGX, 2016 WL 26 7495835, at *7 (C.D. Cal. June 9, 2016) (granting plaintiff discovery into profits made as a result 27 of infringing products); Sugarfina, Inc. v. Sweitzer LLC, No. 217CV07950ODWJCX, 2018 WL 28 6265074, at *10 (C.D. Cal. Mar. 8, 2018) (same); Tech. LED Intellectual Prop., LLC v. Revogi, 6 1 LLC, No. 18-CV-03827-JSC, 2019 WL 2716610, at *6 (N.D. Cal. June 27, 2019) (permitting 2 limited discovery regarding sales information and denying request for enhanced damages). 3 When Park Miller responds to this Order, it should resubmit proposed limited discovery in 4 support of the specific form of judgment it seeks. I am inclined to allow Park Miller’s request to 5 subpoena Craig McGrain for deposition with no more than five document requests that are 6 narrowly tailored to the defendants’ financial state and/or its request for punitive damages, and to 7 propound up to five interrogatories and five document requests to DGL and DCC, similarly 8 narrowly tailored. If Park Miller asserts that more discovery than that is required, it must explain 9 why and limit it substantially from what was attached to the subject motion. CONCLUSION 11 United States District Court Northern District of California 10 For the above reasons, Park Miller’s Motion for Default Judgment is GRANTED. 12 However, in order to obtain a judgment in the amount sought, Park Miller must provide further 13 information, as described above, to support its request for damages and attorneys’ fees. Park 14 Miller’s request for discovery is GRANTED IN PART. Park Miller may request discovery 15 consistent with the views expressed in the penultimate paragraph of this Order. 16 IT IS SO ORDERED. 17 Dated: October 13, 2020 18 19 William H. Orrick United States District Judge 20 21 22 23 24 25 26 27 28 7

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