XIFIN, Inc. v. National Reference Laboratory for Breast Health, Inc.

Filing 10

ORDER Granting 8 Motion for Default Judgment. The Court grants Plaintiff's motion for default judgment and orders the Clerk of Court to enter judgment in favor of Plaintiff in the amount of $258,701.19 in damages. The Court also grants Plaintiff's Motion to File Documents Under Seal. Signed by Judge Dana M. Sabraw on 9/11/2017. (aef)(sjt).

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 14 15 ORDER GRANTING MOTION FOR DEFAULT JUDGMENT Plaintiff, 12 13 Case No. 17-cv-00617 DMS (JLB) XIFIN, INC., v. NATIONAL REFERENCE LABORATORY FOR BREAST HEALTH, INC., Defendants. 16 17 18 Pending before the Court is Plaintiff XIFIN, Inc.’s motion for default 19 judgment. Defendant National Reference Laboratory for Breast Health, Inc. did not 20 file an opposition to the motion. For the following reasons, the Court grants the 21 motion. 22 I. 23 BACKGROUND 24 Plaintiff is a healthcare information technology company incorporated in 25 California that provides its clients with cloud-based billing services and outsourced 26 accounts receivable management services. (Compl. ¶¶ 5, 7). Defendant is a 27 healthcare diagnosis service provider incorporated in Delaware with its principal 28 place of business in Washington. (Id. ¶¶ 6, 8.) –1– 17-cv-00617 DMS (JLB) 1 On June 9, 2011, Plaintiff entered into a service contract (“Contract”) with 2 Atossa Genetics, Inc. (“Atossa”), Defendant’s parent company. (Compl. ¶ 9.) On 3 December 18, 2015, Atossa assigned the Contract to Defendant. (Id.) Pursuant to 4 the Contract, Plaintiff implemented a revenue performance management system for 5 Defendant and provided Defendant with outsourced accounts receivable 6 management services. (Id. ¶ 14.) Beginning in January 2016, Defendant became 7 delinquent in paying service fees due under the Contract. (Declaration of Tammy 8 Lawrence (“Lawrence Decl.”) ¶ 13.) Plaintiff informed Defendant’s CEO, Kirk St. 9 Johns, on several occasions regarding its delinquent account. (Id.) Defendant, 10 however, failed to pay the amounts due, and on September 26, 2016, Plaintiff 11 provided notice of Defendant’s material breach of the Contract.1 12 Nevertheless, Plaintiff continued to provide services to Defendant until January 13 2017, when Plaintiff terminated the Contract due to Defendant’s failure to pay 14 amounts due under the Contract.2 (Compl. ¶ 18.) (Id. ¶ 14.) 15 On March 28, 2017, Plaintiff filed a Complaint against Defendant for breach 16 of contract. On April 14, 2017, Plaintiff filed a proof of service, showing that it 17 properly served Defendant. 3 When Defendant failed to respond to the Complaint, 18 Plaintiff filed a request for an entry of default, which the Clerk of Court granted on 19 June 27, 2017. Subsequently, on July 27, 2017, Plaintiff moved for default judgment 20 against Defendant. 21 22 23 24 25 26 27 28 1 In October 2016, Defendant proposed a payment plan for the amounts then outstanding. Defendant, however, never followed through on its proposal nor did it pay the amounts due. (Lawrence Decl. ¶ 15.) 2 Prior to terminating the Contract, Plaintiff notified Defendant in writing on September 26, 2016 that Defendant was delinquent with respect to payments owed under the Contract. (Compl. ¶ 18.) 3 On June 20, 2017, prior to requesting an entry of default, Plaintiff informed Defendant by e-mail and letter that it would request an entry of default if Defendant did not respond to the Complaint. (Declaration of John D. Hershberger (“Hershberger Decl.”) ¶ 5, Exs. 2–3.) –2– 17-cv-00617 DMS (JLB) 1 II. 2 DISCUSSION 3 A. Jurisdiction 4 “To avoid entering a default judgment that can later be successfully attacked 5 as void, a court should determine whether it has the power, i.e., the jurisdiction, to 6 enter the judgment in the first place.” In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). 7 The Court has subject natter jurisdiction under 28 U.S.C. § 1332, which gives federal 8 district courts “original jurisdiction of all civil actions where the matter in 9 controversy exceeds the sum or value of $75,000, exclusive of interest and costs, 10 and is between ... citizens of different States and in which citizens or subjects of a 11 foreign state are additional parties.” There is complete diversity between the parties 12 as Plaintiff is a California corporation with its principle place of business in 13 California, and Defendant is a Delaware corporation with its principle place of 14 business in Washington. With Plaintiff claiming $258,701.19 in monetary damages, 15 the amount in controversy requirement is satisfied. 16 Moreover, the Court has personal jurisdiction over Defendant because 17 Defendant consented to this Court’s jurisdiction through a forum selection clause in 18 § 10.5 of the Contract, and this forum selection clause is prima facie valid. SEC v. 19 Ross, 504 F.3d 1130, 1149 (9th Cir. 2007) (accepting a forum selection clause 20 evidences consent to personal jurisdiction in that forum); Bremen v. Zapata Off– 21 Shore Co., 407 U.S. 1, 10 (1972) (forum selection clauses “are prima facie valid and 22 should be enforced unless enforcement is shown by the resisting party to be 23 ‘unreasonable’ under the circumstances”). Although Defendant has not appeared in 24 this matter, the clause appears reasonable and enforceable, such that the Court may 25 exercise personal jurisdiction over Defendant. See Calix, Inc. v. Alfa Consult, S.A., 26 No. 15-CV-00981-JCS, 2015 WL 3902918, at *3 (N.D. Cal. June 24, 2015) (finding 27 personal jurisdiction based on consent to forum selection clause even where 28 defendant failed to appear). –3– 17-cv-00617 DMS (JLB) 1 B. Default Judgment 2 A court may grant a default judgment upon application of a party. Fed. R. 3 Civ. P. 55(b)(2). Granting or denying a default judgment under Rule 55(b) is within 4 the court’s discretion. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). In 5 making this determination, a court considers the following factors, commonly 6 referred to as the Eitel factors: “(1) the possibility of prejudice to the plaintiff, (2) 7 the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) 8 the sum of money at stake in the action, (5) the possibility of a dispute concerning 9 material facts, (6) whether the default was due to excusable neglect, and (7) the 10 strong policy underlying the Federal Rules of Civil Procedure favoring decisions on 11 the merits.” Id. at 1471–72. When weighing these factors, the well-pleaded factual 12 allegations of the complaint are taken as true, except for those allegations relating to 13 damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987); 14 see also Fed. R. Civ. P. 8(b)(6). 15 1. Possibility of Prejudice to Plaintiff 16 The first factor considers whether a plaintiff will suffer prejudice if a default 17 judgment is not entered. PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 18 1177 (C.D. Cal. 2002). Plaintiff claims Defendant used Plaintiff’s services yet failed 19 to pay amounts due under the Contract. Because a denial of default judgment would 20 leave Plaintiff without recourse for recovery, the Court finds the first Eitel factor 21 favors granting default judgment. 22 2. Substantive Merits and Sufficiency of the Complaint 23 The second and third Eitel factors are the merits of a plaintiff’s substantive 24 claim and the sufficiency of the complaint. Eitel, 782 F.2d at 1471–72. The Ninth 25 Circuit has suggested these two factors require a plaintiff to “‘state a claim on which 26 the [plaintiff] may recover.’” Kloepping v. Fireman’s Fund, No. C 94-2684 TEH, 27 1996 WL 75314, at *2 (N.D. Cal. Feb. 13, 1996) (quoting Danning v. Lavine, 572 28 F.2d 1386, 1388 (9th Cir. 1978)). Here, Plaintiff asserts one claim for breach of –4– 17-cv-00617 DMS (JLB) 1 contract. Accepting the factual allegations as true, as the Court must in deciding the 2 present motion, the Court finds that Plaintiff sufficiently pleaded all the requisite 3 elements of a breach of contract claim. Plaintiff alleges the existence of the Contract, 4 Plaintiff’s performance, Defendant’s breach, and resulting damages. See Reichert v. 5 General Ins. Co. of America, 68 Cal. 2d 822, 830 (1968). Therefore, these two 6 factors favor entry of default judgment. 7 3. Sum of Money at Stake 8 The fourth Eitel factor considers the sum of money at stake. Default judgment 9 is disfavored where the sum of money at stake is too large or unreasonable in relation 10 to defendant’s conduct. Truong Giang Corp. v. Twinstar Tea Corp., No. C 06– 11 03594 JSW, 2007 WL 1545173, at *12 (N.D. Cal. May 29, 2007) (citation omitted). 12 Nevertheless, when “the sum of money at stake is tailored to the specific misconduct 13 of the defendant, default judgment may be appropriate.” Bd. of Trustees v. Core 14 Concrete Const., Inc., No. C 11-02532 LB, 2012 WL 380304, at *4 (N.D. Cal. Jan. 15 17, 2012). Plaintiff seeks damages in the amount of $258,701.19, consisting of 16 service fees of $136,646.24, associated finance charges of $12,054.95, and 17 accelerated minimum service fees of $110,000. The amount requested is supported 18 by the evidence and reasonably proportionate to the harm caused by Defendant’s 19 purported breach of the Contract. This factor thus weighs in favors of granting 20 default judgment. 21 4. Possibility of Dispute 22 The fifth Eitel factor considers the possibility that material facts are disputed. 23 Because Defendant has refused to participate in this lawsuit, no possibility of dispute 24 concerning material facts has been presented. In any event, the Court takes all 25 factual allegations in the Complaint as true in light of the entry of default. See Fair 26 Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). Therefore, this factor 27 also favors entry of default judgment. 28 /// –5– 17-cv-00617 DMS (JLB) 1 5. 2 The sixth Eitel factor considers whether a defendant’s default may have 3 resulted from excusable neglect. Here, Defendant has been on notice of its material 4 breach since September 26, 2016. (Lawrence Decl. ¶ 14.) Thereafter, Defendant 5 was properly served on April 7, 2017. Despite awareness of the lawsuit, Defendant 6 has not appeared in this matter, and nothing in the record suggests failure to appear 7 is based on excusable neglect. Therefore, this factor weighs in favor of default 8 judgment. 6. 9 Possibility of Excusable Neglect Policy Favoring Decision on the Merits 10 “Cases should be decided upon their merits whenever reasonably possible.” 11 Eitel, 782 F.2d at 1472. The mere enactment of Rule 55(b) indicates, however, that 12 “this preference, standing alone, is not dispositive.” PepsiCo, 238 F. Supp. 2d at 13 1177 (quoting Kloepping, 1996 WL 75314, at *3) (“Defendant’s failure to answer 14 Plaintiffs’ Complaint makes a decision on the merits impractical, if not 15 impossible.”). Considering Defendant’s failure to participate in the proceedings, this 16 factor does not preclude default judgment. After weighing the Eitel factors, the Court finds that default judgment is 17 18 appropriate. Accordingly, Plaintiff’s motion for default judgment is granted. 19 C. Damage 20 Under Rule 8(a)(3), a plaintiff’s demand for relief must be specific, and he 21 “must ‘prove up’ the amount of damages.” Philip Morris USA Inc. v. Banh, No. CV 22 03–4043 GAF (PJWx), 2005 WL 5758392, at *6 (C.D. Cal. Jan. 14, 2005); Elektra 23 Entmn’t Grp., Inc. v. Bryant, No. CV 03–6371 GAF(JTLX), 2004 WL 783123, at 24 *5 (C.D. Cal. Feb. 13, 2004) (“Plaintiffs must ‘prove up’ the amount of damages 25 that they are claiming.”). 26 Plaintiff seeks an award of monetary damages in the amount of $258,701.19, 27 consisting of (1) service fees in the amount of $ 136,646.24, which is calculated 28 based on § 3.1 and Schedule 1 of the Contract; (2) the finance charges in the amount –6– 17-cv-00617 DMS (JLB) 1 of $12,054.95 pursuant to § 3.4 of the Contract; and (3) acceleration of minimum 2 service fees in the amount of $110,000 according to § 9.4.2 of the Contract. In 3 support of its request, Plaintiff has submitted the Contract, the Declaration of 4 Plaintiff’s Associate Vice President of Financial Operations, and copies of invoices 5 reflecting the outstanding balance. Based on the evidence presented, the Court 6 concludes the Plaintiff has sufficiently demonstrated that it is entitled to the 7 requested damages. 8 III. 9 CONCLUSION 10 For these reasons, the Court grants Plaintiff’s motion for default judgment and 11 orders the Clerk of Court to enter judgment in favor of Plaintiff in the amount of 12 $258,701.19 in damages.4 IT IS SO ORDERED. 13 14 Dated: September 11, 2017 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 The Court also grants Plaintiff’s Motion to File Documents Under Seal. The Court finds that the Contract and its Amendment contain commercially sensitive business information, which could expose Plaintiff to a competitive disadvantage if revealed. See In re Electronic Arts, 298 Fed. App’x 568, 569 (9th Cir. 2008) (finding a compelling reason to exist where disclosure would reveal “sources of business information that might harm a litigant’s competitive standing.”). –7– 17-cv-00617 DMS (JLB)

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