NATHANAEL M. COUSINS, Magistrate Judge.
The Clerk of Court entered default against defendant AVIC after it failed to appear in this case. Dkt. No. 46. Plaintiff Senah moves for default judgment against AVIC for unpaid sales commissions, interest, and fees in the amount of $180,104,603.66. Dkt. No. 47. The Court recommends that the motion for default judgment be granted, but finds that the damages requested are too speculative and unsupported except for the attorney's fees and litigation costs. Therefore, the Court recommends that judgment be entered in favor of Senah and against AVIC in the amount of $35,995.00.
Plaintiff Senah filed this breach of contract suit against defendant AVIC on December 9, 2016. Dkt. No. 1. Senah seeks damages for this breach for the years 2015 onward, having previously been awarded damages in default judgment in another case for breach of the same contract for years 2008-2014. See Case No. 13-cv-04254-BLF.
Senah alleges that it entered a contract with AVIC in March 1999 where Senah was hired as an independent wholesale sales representative to sell AVIC's products in defined territories for defined compensation. Dkt. No. 1 at ¶ 7. Senah alleges that the parties entered a renegotiated contract in August 2004 setting Senah's commission rate at 20% for worldwide sales. Id. at ¶ 8.
After orders to show cause for failure to serve the complaint, the Court granted Senah's request to enter default on February 4, 2019, finding attempts at that service had been sufficient under Article 15 of the Hague Convention. Dkt. Nos. 22, 34, 45. The clerk entered default and Senah filed a motion for default judgment. Dkt. Nos. 46, 47. The Court ordered Senah to serve the motion for default upon the defendant. Dkt. No. 51. The Court then held a hearing on the motion for default judgment and, there, asked Senah to file a supplemental brief on specific questions. Dkt. No. 54. The Court was not satisfied with Senah's supplemental filing and found that the brief was not consistent with its order, so requested another supplemental brief with further detail. Dkt. Nos. 57, 59. Senah filed another supplement. Dkt. No. 60. The Court considers Senah's complaint, original motion for default judgment, the hearing on the motion, and two supplemental briefs in deciding this Order.
Default may be entered against a party who fails to plead or otherwise defend an action and against whom a judgment for affirmative relief is sought. Fed. R. Civ. P. 55(a). After entry of default, the Court has discretion to grant default judgment on the merits of the case. Fed. R. Civ. P. 55(b); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In deciding whether to grant default judgment, the Court considers the following factors:
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The factual allegations of the complaint, except those concerning damages, are deemed admitted by the non-responding parties. Shanghai Automation Instrument Co., Ltd. v. Kueit, 194 F.Supp.2d 995 (N.D. Cal. 2001); see also Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) ("[t]he general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true").
The first two Eitel factors for the court to consider are the merits of the plaintiff's substantive claim and the sufficiency of its complaint. In analyzing these factors, the court accepts as true all well-pleaded allegations regarding liability. See, e.g., HICA Educ. Loan Corp. v. Warne, Case No. 11-cv-04287-LHK, 2012 WL 1156402, at *2 (N.D. Cal. April 6, 2012).
Senah's first claim is for breach of contract. Dkt. No. 1 at ¶¶ 6-36. In California, a breach of contract claim requires: (1) existence of a contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach; and (4) damages to plaintiff as a result of the breach. CDF Firefighters v. Maldonado, 158 Cal.App.4th 1226, 1239 (2008). Senah has alleged that a contract existed between the parties. Dkt. No. 1, Ex. D. Senah states that it performed all obligations owed to AVIC. Dkt. No. 1 at ¶ 11. It alleges that AVIC did not pay what it owed under the contract. Id. at ¶ 19. Finally, Senah alleges that it was damaged. Id. at 17-18.
When the amount of money at stake in the action is substantial or unreasonable, default judgment is discouraged. BMW of North Am., LLC v. Zahra, Case No. 15-cv-2924-CRB, 2016 WL 215983, at *4 (N.D. Cal. Jan. 19, 2016). There is a very large sum of money at stake in this action: Senah requests a total of $180,104,603.66. Dkt. No. 60 at 2. The Court's two requests for supplemental briefing were borne out of a concern about this large sum. Dkt. Nos. 54, 59. The Court has had difficulty discerning the calculations underlying this sum and is still not satisfied by Senah's explanations for how the sum was reached. This factor weighs against the entry of default judgment.
Without entry of default, a plaintiff has no other means of recourse for a defendant's breach of contract. Wilamette Green Innovation Ctr., LLC v. Quartis Capital Partners, Case No. 14-cv-0848-JCS, 2014 WL 5281039, at *6 (N.D. Cal. 2014). Here, Senah will have no other means of recourse without an entry of default judgment, and therefore this factor favors entry of default judgment.
The Court next considers whether there is a possibility of dispute over any material fact. BMW, 2016 WL 215983 at *4. The defendant, having not appeared, has raised no dispute over any material fact. The Court's concern about the sufficiency of the damages contentions relates to this factor. While the pleading is facially sufficient to state Senah's claims, Senah has not provided coherent, reliable calculations to explain its requested damages. Even though AVIC has not appeared in this action, the Court is concerned that that material facts underlying the damages claim could be disputed. This factor weighs against entry of default judgment.
The Court finds that the default here is unlikely due to excusable neglect, because the plaintiff provided proof of its service attempts upon defendant which the Court found sufficient under Article 15 of the Hague Convention. Dkt. No. 45. Moreover, the defendant previously appeared in a similar action in this district and then "inexplicably, terminated its counsel and stopped defending the action." Case No. 13-cv-4254-BLF, Dkt. No. 171, at 5. The Court there warned the defendant of the consequences of its failure to defend the action and concluded that the defendant's default in that case was therefore not due to excusable neglect. Here, too, this factor weighs in favor of granting default judgment.
"[C]ases should be decided upon their merits whenever reasonably possible." Eitel, 782 F.2d at 1472. Nevertheless, when a defendant refuses to litigate, Federal Rule of Civil Procedure 55(b)(2) permits entry of default judgment. Because the defendant has not appeared here and has indicated unwillingness to litigate a previous similar action, this factor weighs in favor of default judgment.
Overall, the Court finds that the Eitel factors narrowly indicate that default judgment is warranted. The Court therefore recommends that Senah's motion for default judgment is GRANTED.
The Court now reviews Senah's claims for damages. "It has been long settled in California that the proof must establish with reasonable certainty and probability that damages will result in the future to the person wronged." Vestar Development II, LLC v. General Dynamics Corp., 249 F.3d 958, 961 (9th Cir. 2001). California Civil Code § 3301 provides that damages for breach of contract claims must be certain: "no damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin." California's civil jury instruction for damages in a breach of contract case state that a jury "must not speculate or guess in awarding damages." Judicial Council of California Civil Jury Instructions No. 350 (2010). Similarly, the Ninth Circuit's model jury instruction for damages states that an award "must be based upon evidence and not upon speculation, guesswork or conjecture." Manual of Model Civil Jury Instructions No. 5.1 (2017). Damages that are too speculative or remote are not compensable as a matter of law. Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist., 34 Cal.4th 960, 976 (2004); see also Auerbach v. Great Western Bank, 74 Cal.App.4th 1172, 1191-1192 (1999) (reversing damages awarded by a jury for breach of contract because the award was "the result of pure speculation").
Senah moves for the following damages:
Senah provided a number of exhibits to support these claims. The Court will examine each of these categories in turn.
Senah alleges that AVIC owed it $52.9 million in commissions pre-termination
Senah also alleges $50,522,964.06 of "procuring cause" commissions, again voluntarily capped at $29 million, which account for AVIC's future sales (from the time of this judgment and onward) for which Senah was the procuring cause. Dkt. No. 60, Ex. 9. Senah supports this amount with calculations from an "expert," Dr. Walter Ochynski. Dkt. No. 48, Ex. 2. But Senah never proffers Dr. Ochynski's training, education, or specialized knowledge to show that he is an expert under Federal Rule of Evidence 702. Nor does Senah supply a declaration from Dr. Ochynski under penalty of perjury.
The Court finds that these damage requests are too speculative and unsupported. The proof of damages is unreliable. The evidence provided is unclear. Even Mr. Hanes acknowledges these issues. Hanes Decl. at 3. The Court cannot award the damages sought without engaging in speculation and guesswork. Therefore, the Court recommends that the request for commissions damages be DENIED.
Senah requests that its commissions damages be tripled under California Civil Code § 1738.15, which states that "a manufacturer, jobber, or distributor who willfully fails to enter into a written contract as required by this chapter or willfully fails to pay commissions as provided in the written contract shall be liable to the sales representative in a civil action for treble the damages proved at trial." For treble damages under § 1738.15, Senah must show that AVIC's conduct was willful. See Baker v. American Horticulture Supply, Inc., 186 Cal.App.4th 1059, 1072-1076 (2010).
Senah provides no argument in its motion for why treble damages are appropriate here. The complaint simply states the legal conclusion that AVIC's failure to pay commissions was willful but contains no facts to support that conclusion. Dkt. No. 1 at ¶ 18. The Court here is not convinced that there is sufficient evidence of willfulness. Id. Moreover, this issue is not discussed in any of the supplemental briefing that the Court ordered on this motion. The Court recommends that the request for treble damages under § 1738.15 be DENIED.
When jurisdiction is based on diversity, California state law controls on the awarding of prejudgment interest. Gentek Media, Inc. v. Media Servs. Omaha, Case No. 17-cv-7015-DSF, 2009 WL 1606157, at *2 (C.D. Cal. June 2, 2009). California law provides that the prejudgment interest rate where none is set by the parties' contract should be 10% per year. Id.
Senah requests $6,068,608.66 in prejudgment interest. This amount was reached by dividing the capped commission by the full commission, multiplied by the full interest. Dkt. No. 60, Ex. E. Because the Court found that the plaintiff's proof for the commissions amount was insufficient, the Court cannot accurately or reliably calculate prejudgment interest. Without any basis by which to determine an appropriate amount of prejudgment interest, the Court recommends that the request for prejudgment interest be DENIED.
Senah requests $32,160 in attorney's fees for 107.2 hours worked at $300 per hour. Dkt. No. 60 at 2. The Court finds that upon reviewing the records and qualification of Senah's attorney, Anthony Santucci, this amount is appropriate. Under the lodestar analysis, the Court determines that Mr. Santucci's billing rate of $300 is more than reasonable in light of the rates charged by similarly situated counsel in this District. See Blum v. Stenson, 465 U.S. 886 (1984); see also Case No. 13-cv-04254-BLF, Dkt. No. 171, at 8. The Court also reviews Mr. Santucci's billing entries and finds that the total number of hours spent was reasonable. The Court recommends approving 102.7 hours at $300 per hour for a total of $32,160.
Finally, Senah requests in costs its $400 filing fee and $3,435 in service fees for the Legal Language Services's address research, translation, and international service of process attempts on the defendants in China. Dkt. No. 60, Ex. 8. The Court recommends approving these costs.
Under 28 U.S.C. § 636, all parties must consent to the jurisdiction of a magistrate judge before a magistrate judge may enter judgment in a case. This includes parties who have not appeared. Williams v. King, 875 F.3d 500 (9th Cir. 2017). Because AVIC has not consented to magistrate jurisdiction, the undersigned cannot enter judgment in this case. Therefore, the undersigned REQUESTS that the clerk reassign this case to a district court judge. The undersigned RECOMMENDS the following under Federal Rule of Civil Procedure 72: that the motion for default judgment is GRANTED; and that the Court enter judgment in favor of the plaintiff and against the defendant in the amount of $35,995 for costs and fees as detailed above. Any party may object to this report and recommendation within 14 days of it being served. Fed. R. Civ. P. 72(b)(2). Senah is ordered to serve this order on AVIC and to file proof of that service.
