Elttac, Inc. v. Bouari International Franchise, LLC et al

Filing 48

ORDER Vacating 40 Judgment Default, 39 Order on Report and Recommendation. Signed by Chief Judge Gloria M. Navarro on 11/26/2018. (Copies have been distributed pursuant to the NEF - JM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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ELTTAC, INC.,

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Plaintiff,
vs.

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BOUARI INTERNATIONAL
FRANCHISE, LLC, et al.,
Defendants.

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Case No.: 2:13-cv-02116-GMN-NJK

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Pending before the Court is the Second Motion for Default Judgment, (ECF No. 47), filed

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by Plaintiff Elttac, Inc. (“Plaintiff”). For the reasons discusses below, the Court construes

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Plaintiff’s filing as a Motion for Clerk’s Entry of Default and refers the Motion to the Clerk of

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Court.

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I.

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BACKGROUND
This action arises from allegations that Defendants Bouari International Franchise, LLC

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(“BIF”) and Carol Ann Chaney (“Chaney”) (collectively “Defendants”) induced Plaintiff into

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purchasing a franchise, property, and services based upon fraudulent misrepresentations and

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material omissions of fact. (See Am. Compl. ¶¶ 2–3, 7, ECF No. 7). Initially filed in Texas state

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Court, (ECF No. 1), Defendants removed the case to the United States District Court for the

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Eastern District of Texas and the parties subsequently stipulated to transferring the action to this

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Court. (See Order, ECF No. 16).

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Shortly after the case was transferred here, Defendants’ counsel moved to withdraw from

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representation, (see ECF No. 21). Magistrate Judge Koppe ordered a hearing on the motion and

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expressly required that Chaney and a representative of BIF be present. (See Order, ECF No. 23).

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Despite receiving notice of the hearing, Chaney and BIF failed to attend. (See Mins. of

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Proceedings, ECF No. 26). Judge Koppe granted Defendants’ counsels’ motion to withdraw and

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gave Chaney and BIF twenty-one days to either notify the Court that they intend to proceed pro

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se or have new counsel file a notice of appearance. (Id.).
Upon Defendants’ failure to respond, Judge Koppe ordered the parties to show cause

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“why the case should not be dismissed or default judgment be entered,” under Federal Rule of

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Civil Procedure 16(f) and 41(b). (See Order to Show Cause 1:19–22, ECF No. 33). Defendants

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again failed to respond and Judge Koppe issued a report and recommendation in which she

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recommended that default judgment be entered against Chaney and BIF. (R. & R. 2:4–14, ECF

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No. 38). Defendants failed to file any objection and this Court accordingly adopted Judge

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Koppe’s report and recommendation in full. (See Order, ECF No. 39). The Clerk of Court

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entered default judgment against Defendants on October 7, 2014. (See Clerk’s J., ECF No. 40).
On December 11, 2015, Plaintiff filed a motion for default judgment (“First Motion for

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Default Judgment”) requesting that judgment be entered against Defendants for an array of fees

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and costs. (Mot. for Default J. ¶ 13, ECF No. 41). These include “paid investments and franchise

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fees of $135,000.00, plus $125,000.00 branding costs, $225,000.00 in re-branding costs,

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$100,000.00 in development costs and attorney fees, $450,000.00 for 3 years of lost income for a

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total of $1,035,000.00, plus an amount for exemplary and punitive damages, other amounts

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deemed appropriate by the court, plus costs of court and interest.” (Id.). Because the Court had

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already ordered that default judgment be entered, Judge Koppe denied Plaintiff’s motion as moot.

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(See Order, ECF No. 43).
Plaintiff subsequently filed the instant Motion for Default Judgment (“Second Motion for

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Default Judgment”) on April 30, 2016. (See Mot. for Default J., ECF No. 47).

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II.

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LEGAL STANDARD
Obtaining a default judgment is a two-step process governed by Rule 55 of the Federal

Rules of Civil Procedure. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). First, the

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moving party must seek an entry of default from the clerk of court. Fed. R. Civ. P. 55(a). Then,

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after the clerk of court enters default, a party must separately seek entry of default judgment from

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the court in accordance with Rule 55(b). Upon entry of a clerk’s default, the court takes the

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factual allegations in the complaint as true. Nonetheless, while the clerk’s entry of default is a

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prerequisite to an entry of default judgment, “a plaintiff who obtains an entry of default is not

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entitled to default judgment as a matter of right.” Warner Bros. Entm’t Inc. v. Caridi, 346 F.

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Supp. 2d 1068, 1071 (C.D. Cal. 2004) (citation omitted). Instead, whether to grant a default

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judgment is in the court’s discretion. Id.

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The Ninth Circuit has identified several relevant factors in determining whether to grant

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default judgment including: (1) the possibility of prejudice to the plaintiff; (2) the merits of the

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plaintiff’s substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake

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in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default

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was due to the excusable neglect; and (7) the strong public policy favoring decisions on the

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merits. Eitel, 782 F.2d at 1471–72.

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III.

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DISCUSSION
Here, Plaintiff’s Motion is premature because Plaintiff has not moved for clerk’s entry of

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default. It is well established that entry of default is a prerequisite to the entry of default

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judgment. See Fed. R. Civ. P. 55(a); VonGrabe v. Sprint PCS, 312 F. Supp. 2d 1313, 1318 (S.D.

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Cal. 2004) (“[A] plain reading of Rule 55 demonstrates that entry of default by the clerk is a

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prerequisite to an entry of default judgment.”); Roman v. Travelers Home & Marine Ins. Co., No.

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CV-17-08151-PCT-JAT, 2017 WL 3978706, at *3 (D. Ariz. Sept. 11, 2017) (“Before a party can

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obtain a default judgment from the Court under Federal Rule 55(b), the Clerk of the Court must

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enter default as provided in Federal Rule 55(a).”) (citing 10A, Charles A. Wright, Arthur R.

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Miller & Mary K. Kane, Federal Practice & Procedure § 2682, at 10–11 (4th ed. 2016)).

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However, in light of the procedural posture of this case, and in an effort to ensure a just

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and speedy resolution of this matter, the Court will construe Plaintiff’s instant Motion as a

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Motion for Clerk’s Entry of Default. The Court will refer the First Motion for Default Judgment,

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(ECF No. 41), and Second Motion for Default Judgment, (ECF No. 47), to the Clerk of Court. In

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the event the Clerk of Court enters default, Plaintiff may file a renewed motion for default

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judgment.

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IV.

CONCLUSION

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IT IS HEREBY ORDERED that Plaintiff’s First Motion for Default Judgment, (ECF

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No. 41), as well Plaintiff’s Second Motion for Default Judgment, (ECF No. 47), are construed

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together as a Motion for Clerk’s Entry of Default under Federal Rule of Civil Procedure 55(a)

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and is referred to the Clerk of Court.

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IT IS FURTHER ORDERED that in the event the Clerk of Court enters default, the

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Clerk of Court shall mail a copy of this Order and the entry of default to Defendants at their

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addresses listed on the docket.

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IT IS FURTHER ORDERED that the Court’s Order adopting Judge Koppe’s Report and

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Recommendation, (ECF No. 39), and the Clerk’s Entry of Default Judgment, (ECF No. 40), are

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hereby VACATED.

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DATED this _____day of November, 2018.
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Gloria M. Navarro, Chief Judge
United States District Court