Opinion
Case No. 2:15-cv-01334-APG-PAL
09-02-2016
AMERICAN CONTRACTORS INDEMNITY COMPANY, Plaintiff, v. EMERALD ASSETS L.P., Defendant.
ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AND ATTORNEY'S FEES AND COSTS
ECF No. 9
Plaintiff American Contractors Indemnity Company alleges that defendant Emerald Assets L.P. entered into an indemnity agreement (the "Indemnity Agreement") with ACIC, wherein Emerald agreed to hold ACIC "harmless from and against any and all demands, liabilities, losses, costs, damages, attorney's fees and expenses of whatever kind or nature. . . which arise by reason of, or in consequences of, the execution by [ACIC] of any Bond on behalf of the Principal." ECF No. 1 at 2-3. ACIC alleges that in connection with the Indemnity Agreement, ACIC posted a performance bond (the "Bond") with Minden Gateway Center, LLC as principal. It alleges that Minden failed to perform all required work and as a result, ACIC became subject to losses, costs, and expenses which ultimately exceeded the sum of the Bond and required ACIC to secure performance for completion of the work pursuant to the Bond. Id. at 3.
The complaint alleges that in December 2011, Emerald filed for Chapter 11 bankruptcy. Id. Subsequently, a Reorganization Plan (the "Plan") was filed by Emerald and confirmed by the bankruptcy court. Id. Pursuant to the Plan, Emerald promised to pay ACIC monthly payments on the Indemnity Agreement. Id. at 4. ACIC alleges that the last payment it received pursuant to the Plan was in September 2014. Id.
ACIC filed suit on July 14, 2015, asserting claims against Emerald for breach of contract, equitable indemnity, and declaratory relief. Id. Emerald was personally served on August 16, 2015. ECF No. 6. However, Emerald has not appeared or otherwise responded to ACIC's allegations. The Clerk of Court entered default against Emerald on December 11, 2015. ECF No. 8. ACIC now moves for a default judgment on the Bond amount, attorney's fees and costs, and prejudgment interest. I grant the motion in part.
I. LEGAL STANDARD
Obtaining a default judgment under Federal Rule of Civil Procedure 55 is a two-step process. See Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). First, "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Fed. R. Civ. P. 55(a). Then, after the clerk enters default, a party must seek entry of default judgment under Rule 55(b).
Upon entry of default, I take as true the factual allegations in the non-defaulting party's complaint, except those related to the amount of damages. Fed. R. Civ. P. 8(b)(6); TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (quotation omitted). Nonetheless, "[e]ntry of default does not entitle the non-defaulting party to a default judgment as a matter of right." Warner Bros. Entm't Inc. v. Caridi, 346 F. Supp. 2d 1068, 1071 (C.D. Cal. 2004) (citation omitted). The "general rule [is] that default judgments are ordinarily disfavored. Cases should be decided upon their merits whenever reasonably possible." Eitel, 782 F.2d at 1472 (citing Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985)). Whether a default judgment will be granted is within the district court's discretion. Id.
I consider the following factors in determining whether to grant a default judgment: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff's substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Id. at 1471-72.
II. ANALYSIS
1. Default Judgment on the Bond Amount
ACIC has satisfied the procedural requirements for default judgment. Pursuant to Rule 55(a), the clerk properly entered a default against Emerald. ECF No. 8. Because Emerald has neither answered nor otherwise responded to the complaint, the notice requirement of Rule 55(b)(2) is not implicated. Thus, there is no procedural impediment to entering a default judgment.
Turning next to the Eitel factors, the first factor considers whether ACIC will suffer prejudice if a default judgment is not entered. See PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002); Next Gaming, LLC v. Glob. Gaming Grp., Inc., No. 2:14-CV-00071-MMD-CWH, 2016 WL 3750651, at *3 (D. Nev. July 13, 2016). In this case, the clerk entered default against Emerald for its failure to file a responsive pleading or answer the complaint and defend the lawsuit. ECF No. 8. As a result, ACIC will suffer prejudice if default judgment is not entered as it will have no other means to litigate its claims. See PepsiCo, Inc., 238 F. Supp. 2d at 1177 ("Potential prejudice to Plaintiffs favors granting a default judgment. If Plaintiffs' motion for default judgment is not granted, Plaintiffs will likely be without other recourse for recovery."). Thus, this factor weighs in favor of an entry of default judgment.
The second and third Eitel factors favor a default judgment when the "plaintiff state[s] a claim on which the plaintiff may recover." Danning v. Lavine, 572 F.2d 1386, 1389 (9th Cir. 1978); see also Fed. R. Civ. P. 8. ACIC's complaint is well pleaded in that it adequately states a breach of the terms of the Indemnity Agreement and the Plan. A "plaintiff in a breach of contract claim must show (1) the existence of a valid contract, (2) a breach by the defendant, and (3) damage as a result of the breach." Saini v. Int'l Game Tech., 434 F. Supp. 2d 913, 919-20 (D. Nev. 2006). Here, ACIC has provided the Indemnity Agreement signed by Emerald on October 22, 2008, and the Reorganization Plan filed on November 21, 2012 and approved by the bankruptcy court on January 7, 2013. ECF Nos. 9-2; 9-4; 9-5. It has also alleged that Emerald breached the Indemnity Agreement and Plan by failing to pay back the Bond amount through the monthly payment schedule set forth in the Plan. ECF No. 1 at 4. Finally, ACIC alleges that it has suffered harm as a result of Emerald's failure to follow the terms of the Indemnity Agreement and Reorganization Plan. Id. Because ACIC has adequately pleaded its claims against Emerald, the second and third Eitel factors weigh in favor of an entry of default judgment.
In assessing the fourth Eitel factor, I consider "the amount of money requested in relation to the seriousness of the defendant's conduct, whether large sums of money are involved, and whether 'the recovery sought is proportional to the harm caused by [the] defendant's conduct.'" Curtis v. Illumination Arts, Inc., 33 F. Supp. 3d 1200, 1212 (W.D. Wash. 2014) (quoting Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F. Supp. 2d 916, 921 (N.D. Cal. 2010)); PepsiCo., Inc., 238 F. Supp. 2d at 1176. ACIC seeks $218,308.20, the full amount of the Bond that ACIC paid and that Emerald agreed to indemnify. The Indemnity Agreement states that Emerald would:
[I]ndemnify and hold [ACIC] harmless from and against any and all demands, liabilities, losses, costs, damages, attorneys' fees and expenses of whatever kind or nature . . . which arise by reason of, or in consequences of, the execution by [ACIC] of any Bond on behalf of the Principal.ECF No. 9-2 at 2.
Pursuant to the Reorganization Plan, related to this Indemnity Agreement Emerald agreed to pay ACIC $1,000 a month for 60 months beginning on June 5, 2013. ECF No. 9-4 at 20. Beginning on the fifth anniversary of the effective date (month 61), the payment was to increase to $2,500 a month until the debt was paid in full. Id. ACIC has submitted evidence that Emerald failed to pay this amount after June 2014. ECF No. 8 at 3. Thus, Emerald appears to have made payments to ACIC for only one year and thus has failed to comply with the terms of the Plan.
The Plan states that payment is to commence on "the first day of the month following the time the Debtor has leased 70% of its Waterfront Property or June 5, 2013, whichever first occurs." ECF No. 9-4 at 20.
ACIC requests the full Bond amount of $218,308.20. However, the Plan required payment of $1,000 a month for the first 60 months, beginning June 2013. Based on evidence submitted by ACIC, Emerald stopped making its payments after 12 months, in June 2014. See ECF No. 9-1 at 5. Thus, Emerald appears to have paid $12,000 on the debt. ACIC does not explain why Emerald should not get credit for the payments it made prior to June 2014. Therefore, I will deduct $12,000 from the Bond's full amount to account for the payments Emerald has made. After this $12,000 deduction, ACIC's damages appear to be reasonable and proportionate to the harm suffered, and therefore the fourth Eitel factor weighs in favor of default judgment.
The fifth Eitel factor weighs the possibility of a dispute regarding any material facts in the case. PepsiCo., Inc., 238 F. Supp. 2d at 1177. "Upon entry of default, all well-pleaded facts in the complaint are taken as true, except those relating to damages." Id. (citation omitted). There is little possibility of a dispute concerning material facts given both the well-pleaded complaint and the evidence ACIC presented to support its allegations. See Landstar Ranger, Inc. v. Parth Enter., Inc., 725 F. Supp. 2d 916, 921-22 (N.D. Cal. 2010) ("Since [plaintiff] has supported its claims with ample evidence, and defendant has made no attempt to challenge the accuracy of the allegations in the complaint, no factual disputes exist that preclude the entry of default judgment."). Additionally, given Emerald's failure to answer, no dispute has been raised regarding material elements in the complaint. Thus, the fifth Eitel factor weighs in favor of an entry of default judgment.
The sixth Eitel factor considers whether the defendant's default is due to excusable neglect. PepsiCo., Inc., 238 F. Supp. 2d at 1177. In the instant case, ACIC properly served Emerald with the summons and the complaint on August 26, 2015 (ECF No. 6), but Emerald failed to respond. Subsequently, the Clerk of Court filed an entry of default on December 11, 2015, almost four months later. There is no evidence before me that Emerald's failure to respond is due to excusable neglect. United States v. High Country Broad. Co., 3 F.3d 1244, 1245 (9th Cir. 1993) (per curiam) (holding that it was "perfectly appropriate" for the district court to enter default judgment against a corporation that failed to appear in the action). Given the time period during which Emerald had notice of the action against it and in which it failed to answer or otherwise respond to the complaint, it is unlikely that it failed to respond due to excusable neglect. See Produce All., LLC v. Lombardo Imports, Inc., No. 2:12-CV-00433-MMD-CWH, 2013 WL 129428, at *4 (D. Nev. Jan. 9, 2013) (concluding that defendants' failure to respond was likely not from excusable neglect where defendants received service nearly two months before the clerk's entry of default). Thus, the sixth Eitel factor weighs in favor of an entry of default judgment.
The process server's affidavit states in the comments section that the resident was "uncooperative" and that before the door was answered, the server "clearly heard a male's voice say 'I'm not here.'" ECF No. 6 at 2. The female who answered the door also refused to give her name and stated "he's not here" when she answered the door. Id.
Finally, the seventh Eitel factor takes into account the policy favoring a decision on the merits. "Cases should be decided on their merits whenever reasonably possible." Eitel, 782 F.2d at 1472. However, Emerald's failure to respond to the complaint "makes a decision on the merits impractical, if not impossible." PepsiCo, Inc., 238 F. Supp. 2d at 1177. Thus, while this final Eitel factor always weighs against an entry of default judgment, it does not preclude me from entering a default judgment. While a decision on the merits is desirable, Emerald has abandoned its defense, failed to file a responsive pleading or answer the complaint, and failed to defend the lawsuit. Under these circumstances, default judgment in favor ACIC and against Emerald is warranted.
2. Attorney's Fees and Costs
ACIC also seeks $4,675 in attorney's fees and $455.66 in costs incurred in relation to the Bond and enforcing ACIC's rights under the Indemnity Agreement and Plan. The Indemnity Agreement provides that Emerald agreed to indemnify and hold ACIC harmless from "all demands, liabilities, losses, costs, damages, attorneys' fees and expenses . . . which arise by reason of . . . the execution of [ACIC] on any Bond." ECF No. 9-2 at 2. The Indemnity Agreement states that such expenses include attorney's fees and costs. Id. The Indemnity Agreement also states that, "[i]n any claim or suit hereunder, an itemized statement of . . . expenses paid and incurred, declared under penalty of perjury to be true and correct by an officer of [ACIC], . . . shall be prima facie evidence of the fact and extent of the liability hereunder of [Emerald]." Id. at 2-3.
Reasonable attorney's fees are based on the "lodestar" calculation set forth in Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). See also Fischer v. SJB-P.D., Inc., 214 F.3d 1115, 1119 (9th Cir. 2000) (applying Hensley). The court must first determine a reasonable fee by multiplying "the number of hours reasonably expended on the litigation" by "a reasonable hourly rate." Hensley, 461 U.S. at 433. Next, the court decides whether to adjust the lodestar calculation based on an evaluation of the factors articulated in Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975), which have not been subsumed in the lodestar calculation. See Fischer, 214 F.3d at 1119 (citation omitted).
The factors set forth in Kerr are:
(1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill requisite to perform the legal service properly, (4) the preclusion of other employment by the attorney due to acceptance of the case, (5) the customary fee, (6) whether the fee is fixed or contingent, (7) time limitations imposed by the client or the circumstances, (8) the amount involved and the results obtained, (9) the experience, reputation, and ability of the attorneys, (10) the "undesirability" of the case, (11) the nature and length of the professional relationship with the client, and (12) awards in similar cases.Kerr, 526 F.2d at 70. Factors one through five are subsumed in the lodestar calculation. See Morales v. City of San Rafael, 96 F.3d 359, 364 n. 9 (9th Cir. 1996). Additionally, the sixth factor, whether the fee is fixed or contingent, may not be considered in the lodestar calculation. See Davis v. City & Cnty. of S.F., 976 F.2d 1536, 1549 (9th Cir. 1992), vacated in part on other grounds, 984 F.2d 345 (9th Cir. 1993). Once calculated, the lodestar is presumptively reasonable. See Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 728 (1987). Only in "rare and exceptional cases" should a court adjust the lodestar figure. Van Gerwen v. Guar. Mut. Life Co., 214 F.3d 1041, 1045 (9th Cir. 2000) (internal quotations omitted). See also Fischer, 214 F.3d at 1119 n. 4 (stating that the lodestar figure should only be adjusted in rare and exceptional cases).
i. Reasonable Hourly Rate
When determining the reasonableness of an hourly rate, I consider the experience, skill, and reputation of the attorney requesting fees. Webb v. Ada Cnty., 285 F.3d 829, 840 & n.6 (9th Cir. 2002). A reasonable hourly rate should reflect the prevailing market rates of attorneys practicing in the forum community for "similar services by lawyers of reasonably comparable skill, experience and reputation." See id.; see also Blum v. Stenson, 465 U.S. 886, 895-96 n.11 (1984). To inform and assist me in exercising my discretion, "[t]he party seeking an award of fees should submit evidence supporting the . . . rates claimed." Hensley, 461 U.S. at 433; see also Jordan v. Multnomah Cnty., 815 F.2d 1258, 1263 (9th Cir. 1987). ACIC's attorneys seek, and have submitted an affidavit to support, hourly rates of $250 for a partner and $125 for an associate. ECF No. 9-8. These rates are reasonable and within the prevailing rates for the Las Vegas legal market. See Next Gaming, LLC v. Glob. Gaming Grp., Inc., No. 2:14-CV-00071-MMD-CWH, 2016 WL 3750651, at *5 (D. Nev. July 13, 2016) (granting fees at $350/hour for a partner and $255/hour for an associate); Boliba v. Camping World, Inc., No. 2:14-CV-01840-JAD-NJK, 2015 WL 5089808, at *4 (D. Nev. Aug. 27, 2015) (granting fees at $250/hour for a partner, $200/hour for an associate, and $125/hour for a paralegal).
ii. Reasonable Hours Expended
In addition to evidence supporting the rates claimed, "[t]he party seeking an award of fees should submit evidence supporting the hours worked." Hensley, 461 U.S. at 433. "Where the documentation of hours is inadequate, the district court may reduce the award accordingly." Id. "The district court also should exclude from this initial fee calculation hours that were 'not reasonably expended'." Id. at 433-34 (citation omitted). "In other words, the court has discretion to 'trim fat' from, or otherwise reduce, the number of hours claimed to have been spent on the case." Edwards v. Nat'l Business Factors, Inc., 897 F. Supp. 458, 460 (D. Nev. 1995) (quotation omitted).
Based on the affidavits and timesheets provided by ACIC, its attorneys spent 16 hours on the case. ECF Nos. 9-7; 9-8. This is a reasonable amount of hours in relation to a case of this nature. ACIC's request for attorney's fees is therefore granted in the amount of $4,675. / / / /
iii. Costs
ACIC seeks $455.66 in costs incurred for service of process expenses, filing fees, and printing costs. ECF No. 9-8 at 6, 10. However, only the printing costs of $7.40 are reimbursable through a motion for attorney's fees and costs.
Rule 54(d) contains two separate provisions for costs. To request taxable costs, the prevailing party must file a bill of costs with the clerk. LR 54-1. Taxable costs are taxed by the clerk rather than the Court. Fed. R. Civ. P. 54(d)(1); LR 54-1. The categories of taxable costs are circumscribed by 28 U.S.C. § 1920. See also LR 54-1. For example, filing fees and service of process expenses are taxable costs. See 28 U.S.C. § 1920(1).
By contrast, nontaxable costs are recoverable on a motion to the Court, along with attorney's fees Fed. R. Civ. P. 54(d)(2) ("claim for attorney's fees and related nontaxable expenses"); see also LR 54-16(b)(2) (a motion for attorney's fees must include "[a]n itemization of all costs sought to be charged as part of the fee award and not otherwise taxable pursuant to LR 54-1 through 54-15"). For example, copy, postage, travel, research, and Pacer expenses are nontaxable costs.
Thus, ACIC's request for taxable costs such as filing fees and service of process expenses are properly recovered through a bill of costs filed with the clerk, pursuant to Local Rule 54-1. Therefore, only ACIC's copy costs are recoverable through this motion and I award nontaxable costs in the amount of $7.40.
3. Prejudgment Interest
ACIC has requested prejudgment interest of $3,051.83, for the period July 14, 2015 (the date the complaint was filed) to December 18, 2015. ECF No. 9-1 at 6. However, ACIC has not given me any information about how this number was calculated, what rate was used, or why its calculation is reasonable. I therefore deny its motion with respect to this amount.
III. CONCLUSION
IT IS THEREFORE ORDERED that plaintiff American Contractors Indemnity Company's motion for default judgment (ECF No. 9) is GRANTED in part. The clerk of the court is directed to enter default judgment in favor of plaintiff American Contractors Indemnity Company and against defendant Emerald Assets L.P. in the amount of $210,990.60 ($206,308.20 on the Bond, $4,675 in attorney's fees, and $7.40 in nontaxable costs).
DATED this 2nd day of September, 2016.
/s/_________
ANDREW P. GORDON
UNITED STATES DISTRICT JUDGE