REQUEST FOR REASSIGNMENT; REPORT AND RECOMMENDATION RE: MOTION FOR DEFAULT JUDGMENT Re: Dkt. No. 34

DONNA M. RYU, Magistrate Judge.

In this breach of contract action, Plaintiff Pumpkin-Package Co., Ltd. ("PPCL") moves pursuant to Federal Rule of Civil Procedure 55(b)(2) for entry of default judgment against Defendant Aliphcom, Inc. dba Jawbone ("Jawbone"). [Docket No. 34.] Jawbone has not appeared and therefore has not filed a declination or consent to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. § 636(c). The court issues this Report and Recommendation and reassigns the case to a district judge for final disposition, with the recommendation that PPCL's motion be granted.

I. BACKGROUND

PPCL is a manufacturing company organized under the laws of China. Its principal place of business is in Suzhou City, China. Compl. ¶¶ 3, 5. PPCL manufactures components that are used in assembling packaging products such as product bags, and works with packaging product managers, including third party Fudy Printing Co., Ltd. ("Fudy"). Id. at ¶ 5. PPCL alleges on information and belief that Jawbone is a "consumer technology and wearable products company that develops and sells wearable technology," including wristbands and portable audio devices. Id. at ¶ 6.

PPCL alleges on information and belief that in June 2014, Jawbone and Fudy entered into an agreement whereby Fudy agreed to supply certain packaging products to Jawbone on a continuing basis. As PPCL manufactured certain components of the packaging products that Fudy was supplying to Jawbone, Jawbone agreed to retain PPCL to manufacture the components of Fudy's packaging products. In July 2015, PPCL and Jawbone entered into an agreement whereby PPCL would send its invoices for the packaging components directly to Jawbone, which Jawbone would pay. Id. at ¶ 7. In September 2015, PPCL began delivering products and issuing regular invoices to Jawbone, pursuant to the parties' agreement. Id. at ¶ 8. PPCL alleges that it performed all of its duties and obligations under the agreement with Jawbone, but that starting in December 2015, Jawbone fell behind in paying PPCL's outstanding invoices. Jawbone last paid PPCL in February 2016. To date, the outstanding balance owed by Jawbone to PPCL is $189,391.20, which Jawbone refuses to pay. Id. at ¶ 9.

On July 7, 2017, PPCL filed the complaint alleging four claims for relief: 1) breach of contract; 2) account stated; 3) quantum meruit; and 4) unjust enrichment. PPCL served Jawbone with the summons and complaint on July 12, 2017. [Docket No. 7.] Jawbone did not file a responsive pleading or otherwise appear. Following four continuances of the initial case management conference at PPCL's request (see Docket Nos. 12, 15, 18, 21) the clerk entered default against Jawbone on August 20, 2018. [Docket No. 27.] PPCL filed the present motion for default judgment on February 7, 2019. [Docket No. 34.] The court ordered PPCL to submit two rounds of supplemental briefing, which PPCL timely filed. [Docket Nos. 36, 38, 41, 43.] The court held a hearing on April 25, 2019 at which Jawbone did not appear. The court ordered PPCL to submit additional evidence in support of its request for damages and a corrected version of a declaration. [Docket No. 48.] PPCL timely filed the additional damages evidence and corrected declaration. [Docket Nos. 49, 50.]

II. LEGAL STANDARDS

Federal Rule of Civil Procedure 55(b)(2) permits a court to enter a final judgment in a case following a defendant's default. Shanghai Automation Instrument Co. v. Kuei, 194 F.Supp.2d 995, 999 (N.D. Cal. 2001). Whether to enter a judgment lies within the court's discretion. Pepsico, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1174 (C.D. Cal. 2002) ("A defendant's default does not automatically entitle the plaintiff to a court-ordered judgment." (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986))).

Before assessing the merits of a default judgment, a court must ensure the adequacy of service on the defendant, as well as confirm that it has subject matter jurisdiction over the case and personal jurisdiction over the parties. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). If the court finds these elements satisfied, it turns to the following factors ("the Eitel factors") to determine whether it should grant a default judgment:

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986) (citation omitted). In this analysis, "the well-pleaded allegations of the complaint relating to a defendant's liability are taken as true." Pepsico, Inc., 238 F. Supp. 2d at 1175 (citing Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987)). Nevertheless, default does not compensate for essential facts not within the pleadings and those legally insufficient to prove a claim. Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992).

III. ANALYSIS

A. Jurisdiction

Federal courts have subject matter jurisdiction over a case when the parties are citizens of a state and citizens of a foreign state and when the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a)(2). PPCL alleges that Jawbone is a California corporation with its principal place of business in San Francisco, California. It further alleges that PPCL is a Chinese company and that the amount in controversy exceeds $75,000. Compl. ¶¶ 1, 3, 4. Therefore, since the parties are diverse and the amount in controversy exceeds the jurisdictional minimum, this court has subject matter jurisdiction over this case.

Traditional bases for personal jurisdiction include a defendant's consent to jurisdiction, personal service of a defendant within the forum state, or a defendant's citizenship or domicile within the forum state. Mulato v. Wells Fargo Bank, N.A., 76 F.Supp.3d 929, 943 (N.D. Cal. 2014) (citing J. McIntyre Mach., Ltd. v. Nicastro, 131 S.Ct. 2780, 2787 (2011)). Here, Jawbone is a California corporation and was served in this state. [Docket No. 7 (Proof of Service).] Therefore, Jawbone is subject to personal jurisdiction in California.

B. Adequacy of Service

Under the Federal Rules of Civil Procedure, a corporation may be served by delivering a copy of the summons and complaint to an agent "authorized by appointment or by law to receive service of process." Fed. R. Civ. P. 4(h)(1)(B). PPCL submitted evidence that CT Corporation was Jawbone's registered agent for service of process as of the date of service in July 2017. PPCL served CT Corporation by personally delivering the summons and complaint to its Service of Process Intake Coordinator Associate. [Docket Nos. 7 (Proof of Service), 43 (Sohal Decl., Apr. 4, 2019, ¶¶ 2, 5, Ex. 3.] Therefore, PPCL properly effected service in this case.

C. Application of the Eitel Factors

Turning to the first Eitel factor, PPCL will suffer prejudice if the court does not enter a default judgment against Jawbone because PPCL otherwise has no means to recover the loss it suffered. Pepsico, Inc., 238 F. Supp. 2d at 1177.

PPCL also meets the second and third Eitel factors. PPCL's complaint pleads the elements for breach of contract. California law applies to federal diversity cases arising in California. Allstate Ins. Co. v. Smith, 929 F.2d 447, 449 (9th Cir. 1991). To establish a breach of contract under California law, PPCL must show "(1) the existence of the contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) the resulting damages to the plaintiff." Oasis W. Realty, LLC v. Goldman, 51 Cal. 811, 821 (2011) (citation omitted). Here, PPCL alleges that it entered into an agreement with Jawbone in July 2015 whereby PPCL agreed to produce the components of the products that Fudy was to deliver to Jawbone. The parties further agreed that PPCL would directly invoice Jawbone and that Jawbone would pay the same. Compl. ¶ 7. PPCL alleges that it performed its duties and obligations under the parties' agreement but that Jawbone breached the agreement for failing to pay for the products it received. Jawbone has refused to pay the outstanding sums due to PPCL. Id. at ¶¶ 8, 9. PPCL has submitted a legally sufficient complaint for breach of contract.1

The fourth factor also turns in favor of PPCL. "When the money at stake in the litigation is substantial or unreasonable, default judgment is discouraged." Bd. of Trs. v. Core Concrete Const., Inc., No. 11-2532 LB, 2012 WL 380304 at *4 (N.D. Cal. Jan. 17, 2012) (citing Eitel, 782 F. 2d at 1472). However, "when the sum of money at stake is tailored to the specific misconduct of the defendant, default judgment may be appropriate." Id. (citations omitted). Here, PPCL seeks money damages of $181,391.20, which represents the value of the products for which Jawbone did not pay under the contract. Pl.'s Mot. 4. The court finds that this amount is neither unwarranted nor unreasonable.

Moving to the fifth factor, Jawbone has not appeared in this action, nor has it contested any of PPCL's material facts. Shanghai Automation Instrument Co., 194 F. Supp. 2d at 1005. Finally, nothing in the record demonstrates that Jawbone defaulted due to excusable neglect. PPCL served Jawbone with the summons and complaint and have continued serving Jawbone with submissions relating to the case throughout the pendency of this action. [Docket Nos. 7, 17, 25, 29, 35, 37, 39, 42, 44.] See Shanghai Automation Instrument Co., 194 F. Supp. 2d at 1005 (finding no excusable neglect because defendant was properly served with the complaint and subsequent submissions relating to the case).

On balance, the court finds that the first six Eitel factors outweigh the seventh factor—the Federal Rules of Civil Procedure's strong preference for a decision on the merits. The court therefore recommends that PPCL's motion for default judgment be granted.

D. Remedies

Although the factual contentions of the operative complaint are accepted as true when determining the liability of a defaulting defendant, this rule does not apply to statements regarding damages. See TeleVideo, 826 F.2d at 917-18. To recover damages after securing a default judgment, a plaintiff must prove the relief it seeks through testimony or written affidavit. Bd. of Trs. of the Boilermaker Vacation Trust v. Skelly, Inc., 389 F.Supp.2d 1222, 1226 (N.D. Cal. 2005); see PepsiCo, Inc., 238 F. Supp. 2d at 1175 (citing Televideo Sys., Inc., 826 F.2d at 917-18).

PPCL seeks damages of $189,391.20, which is the total outstanding balance owed by Jawbone pursuant to its agreement with PPCL. In support, PPCL submitted declarations by Hung Chi-Lun, a PPCL employee, to which PPCL attached copies of the 11 invoices PPCL issued to Jawbone "that Jawbone did not fully pay." [Docket Nos. 50 (Chi-Lun Decl., Feb. 6, 2019) ¶ 6, Ex. 1; 49 (Chi-Lun Decl., May 17, 2019) ¶ 3, Ex. A.] The court finds that PPCL has submitted sufficient evidence of its damages and recommends that PPCL be awarded $189,391.20.

IV. CONCLUSION

For the foregoing reasons, the court recommends that PPCL's motion for default judgment be granted. The court further recommends that PPCL be awarded $189,391.20.

Immediately upon receipt of this order, PPCL shall serve a copy of this order on Jawbone and file proof of service with the court. Any party may file objections to this report and recommendation with the District Judge within 14 days of being served with a copy. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(a); N.D. Civ. L.R. 72-2.

IT IS SO ORDERED.