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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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ORDER GRANTING MOTION
FOR DEFAULT JUDGMENT

Plaintiff,

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Case No. 17-cv-00617 DMS (JLB)

XIFIN, INC.,

v.
NATIONAL REFERENCE
LABORATORY FOR BREAST
HEALTH, INC.,
Defendants.

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Pending before the Court is Plaintiff XIFIN, Inc.’s motion for default

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judgment. Defendant National Reference Laboratory for Breast Health, Inc. did not

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file an opposition to the motion. For the following reasons, the Court grants the

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motion.

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I.

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BACKGROUND

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Plaintiff is a healthcare information technology company incorporated in

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California that provides its clients with cloud-based billing services and outsourced

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accounts receivable management services. (Compl. ¶¶ 5, 7). Defendant is a

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healthcare diagnosis service provider incorporated in Delaware with its principal

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place of business in Washington. (Id. ¶¶ 6, 8.)
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On June 9, 2011, Plaintiff entered into a service contract (“Contract”) with

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Atossa Genetics, Inc. (“Atossa”), Defendant’s parent company. (Compl. ¶ 9.) On

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December 18, 2015, Atossa assigned the Contract to Defendant. (Id.) Pursuant to

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the Contract, Plaintiff implemented a revenue performance management system for

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Defendant and provided Defendant with outsourced accounts receivable

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management services. (Id. ¶ 14.) Beginning in January 2016, Defendant became

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delinquent in paying service fees due under the Contract. (Declaration of Tammy

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Lawrence (“Lawrence Decl.”) ¶ 13.) Plaintiff informed Defendant’s CEO, Kirk St.

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Johns, on several occasions regarding its delinquent account. (Id.) Defendant,

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however, failed to pay the amounts due, and on September 26, 2016, Plaintiff

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provided notice of Defendant’s material breach of the Contract.1

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Nevertheless, Plaintiff continued to provide services to Defendant until January

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2017, when Plaintiff terminated the Contract due to Defendant’s failure to pay

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amounts due under the Contract.2 (Compl. ¶ 18.)

(Id. ¶ 14.)

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On March 28, 2017, Plaintiff filed a Complaint against Defendant for breach

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of contract. On April 14, 2017, Plaintiff filed a proof of service, showing that it

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properly served Defendant. 3 When Defendant failed to respond to the Complaint,

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Plaintiff filed a request for an entry of default, which the Clerk of Court granted on

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June 27, 2017. Subsequently, on July 27, 2017, Plaintiff moved for default judgment

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against Defendant.

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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.)
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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.)
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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.)
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II.

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DISCUSSION

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A.

Jurisdiction

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“To avoid entering a default judgment that can later be successfully attacked

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as void, a court should determine whether it has the power, i.e., the jurisdiction, to

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enter the judgment in the first place.” In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999).

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The Court has subject natter jurisdiction under 28 U.S.C. § 1332, which gives federal

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district courts “original jurisdiction of all civil actions where the matter in

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controversy exceeds the sum or value of $75,000, exclusive of interest and costs,

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and is between ... citizens of different States and in which citizens or subjects of a

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foreign state are additional parties.” There is complete diversity between the parties

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as Plaintiff is a California corporation with its principle place of business in

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California, and Defendant is a Delaware corporation with its principle place of

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business in Washington. With Plaintiff claiming $258,701.19 in monetary damages,

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the amount in controversy requirement is satisfied.

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Moreover, the Court has personal jurisdiction over Defendant because

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Defendant consented to this Court’s jurisdiction through a forum selection clause in

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§ 10.5 of the Contract, and this forum selection clause is prima facie valid. SEC v.

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Ross, 504 F.3d 1130, 1149 (9th Cir. 2007) (accepting a forum selection clause

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evidences consent to personal jurisdiction in that forum); Bremen v. Zapata Off–

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Shore Co., 407 U.S. 1, 10 (1972) (forum selection clauses “are prima facie valid and

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should be enforced unless enforcement is shown by the resisting party to be

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‘unreasonable’ under the circumstances”). Although Defendant has not appeared in

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this matter, the clause appears reasonable and enforceable, such that the Court may

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exercise personal jurisdiction over Defendant. See Calix, Inc. v. Alfa Consult, S.A.,

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No. 15-CV-00981-JCS, 2015 WL 3902918, at *3 (N.D. Cal. June 24, 2015) (finding

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personal jurisdiction based on consent to forum selection clause even where

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defendant failed to appear).
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B.

Default Judgment

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A court may grant a default judgment upon application of a party. Fed. R.

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Civ. P. 55(b)(2). Granting or denying a default judgment under Rule 55(b) is within

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the court’s discretion. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). In

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making this determination, a court considers the following factors, commonly

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referred to as the Eitel factors: “(1) the possibility of prejudice to the plaintiff, (2)

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the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4)

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the sum of money at stake in the action, (5) the possibility of a dispute concerning

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material facts, (6) whether the default was due to excusable neglect, and (7) the

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strong policy underlying the Federal Rules of Civil Procedure favoring decisions on

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the merits.” Id. at 1471–72. When weighing these factors, the well-pleaded factual

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allegations of the complaint are taken as true, except for those allegations relating to

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damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987);

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see also Fed. R. Civ. P. 8(b)(6).

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Possibility of Prejudice to Plaintiff

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The first factor considers whether a plaintiff will suffer prejudice if a default

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judgment is not entered. PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172,

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1177 (C.D. Cal. 2002). Plaintiff claims Defendant used Plaintiff’s services yet failed

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to pay amounts due under the Contract. Because a denial of default judgment would

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leave Plaintiff without recourse for recovery, the Court finds the first Eitel factor

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favors granting default judgment.

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2.

Substantive Merits and Sufficiency of the Complaint

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The second and third Eitel factors are the merits of a plaintiff’s substantive

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claim and the sufficiency of the complaint. Eitel, 782 F.2d at 1471–72. The Ninth

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Circuit has suggested these two factors require a plaintiff to “‘state a claim on which

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the [plaintiff] may recover.’” Kloepping v. Fireman’s Fund, No. C 94-2684 TEH,

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1996 WL 75314, at *2 (N.D. Cal. Feb. 13, 1996) (quoting Danning v. Lavine, 572

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F.2d 1386, 1388 (9th Cir. 1978)). Here, Plaintiff asserts one claim for breach of
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contract. Accepting the factual allegations as true, as the Court must in deciding the

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present motion, the Court finds that Plaintiff sufficiently pleaded all the requisite

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elements of a breach of contract claim. Plaintiff alleges the existence of the Contract,

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Plaintiff’s performance, Defendant’s breach, and resulting damages. See Reichert v.

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General Ins. Co. of America, 68 Cal. 2d 822, 830 (1968). Therefore, these two

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factors favor entry of default judgment.

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3.

Sum of Money at Stake

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The fourth Eitel factor considers the sum of money at stake. Default judgment

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is disfavored where the sum of money at stake is too large or unreasonable in relation

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to defendant’s conduct. Truong Giang Corp. v. Twinstar Tea Corp., No. C 06–

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03594 JSW, 2007 WL 1545173, at *12 (N.D. Cal. May 29, 2007) (citation omitted).

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Nevertheless, when “the sum of money at stake is tailored to the specific misconduct

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of the defendant, default judgment may be appropriate.” Bd. of Trustees v. Core

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Concrete Const., Inc., No. C 11-02532 LB, 2012 WL 380304, at *4 (N.D. Cal. Jan.

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17, 2012). Plaintiff seeks damages in the amount of $258,701.19, consisting of

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service fees of $136,646.24, associated finance charges of $12,054.95, and

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accelerated minimum service fees of $110,000. The amount requested is supported

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by the evidence and reasonably proportionate to the harm caused by Defendant’s

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purported breach of the Contract. This factor thus weighs in favors of granting

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default judgment.

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4.

Possibility of Dispute

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The fifth Eitel factor considers the possibility that material facts are disputed.

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Because Defendant has refused to participate in this lawsuit, no possibility of dispute

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concerning material facts has been presented. In any event, the Court takes all

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factual allegations in the Complaint as true in light of the entry of default. See Fair

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Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). Therefore, this factor

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also favors entry of default judgment.

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5.

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The sixth Eitel factor considers whether a defendant’s default may have

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resulted from excusable neglect. Here, Defendant has been on notice of its material

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breach since September 26, 2016. (Lawrence Decl. ¶ 14.) Thereafter, Defendant

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was properly served on April 7, 2017. Despite awareness of the lawsuit, Defendant

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has not appeared in this matter, and nothing in the record suggests failure to appear

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is based on excusable neglect. Therefore, this factor weighs in favor of default

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judgment.
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Possibility of Excusable Neglect

Policy Favoring Decision on the Merits

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“Cases should be decided upon their merits whenever reasonably possible.”

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Eitel, 782 F.2d at 1472. The mere enactment of Rule 55(b) indicates, however, that

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“this preference, standing alone, is not dispositive.” PepsiCo, 238 F. Supp. 2d at

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1177 (quoting Kloepping, 1996 WL 75314, at *3) (“Defendant’s failure to answer

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Plaintiffs’ Complaint makes a decision on the merits impractical, if not

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impossible.”). Considering Defendant’s failure to participate in the proceedings, this

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factor does not preclude default judgment.
After weighing the Eitel factors, the Court finds that default judgment is

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appropriate. Accordingly, Plaintiff’s motion for default judgment is granted.

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C.

Damage

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Under Rule 8(a)(3), a plaintiff’s demand for relief must be specific, and he

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“must ‘prove up’ the amount of damages.” Philip Morris USA Inc. v. Banh, No. CV

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03–4043 GAF (PJWx), 2005 WL 5758392, at *6 (C.D. Cal. Jan. 14, 2005); Elektra

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Entmn’t Grp., Inc. v. Bryant, No. CV 03–6371 GAF(JTLX), 2004 WL 783123, at

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*5 (C.D. Cal. Feb. 13, 2004) (“Plaintiffs must ‘prove up’ the amount of damages

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that they are claiming.”).

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Plaintiff seeks an award of monetary damages in the amount of $258,701.19,

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consisting of (1) service fees in the amount of $ 136,646.24, which is calculated

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based on § 3.1 and Schedule 1 of the Contract; (2) the finance charges in the amount
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of $12,054.95 pursuant to § 3.4 of the Contract; and (3) acceleration of minimum

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service fees in the amount of $110,000 according to § 9.4.2 of the Contract. In

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support of its request, Plaintiff has submitted the Contract, the Declaration of

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Plaintiff’s Associate Vice President of Financial Operations, and copies of invoices

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reflecting the outstanding balance. Based on the evidence presented, the Court

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concludes the Plaintiff has sufficiently demonstrated that it is entitled to the

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requested damages.

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III.

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CONCLUSION

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For these reasons, the Court grants Plaintiff’s motion for default judgment and

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orders the Clerk of Court to enter judgment in favor of Plaintiff in the amount of

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$258,701.19 in damages.4
IT IS SO ORDERED.

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Dated: September 11, 2017

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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.”).
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