Opinion
3:22-cv-00696-AR
11-02-2022
MCMURTRIE FARMS, LLC, an Oregon limited liability company, Plaintiff, v. EQUISAFE GLOBAL, LLC, a Florida limited liability company, and JAMES CHRISTOPHER ROBERTS, a New York resident, Defendants.
FINDINGS AND RECOMMENDATION
ARMISTEAD, MAGISTRATE JUDGE
Plaintiff McMurtrie Farms, LLC sues defendants EquiSafe Global, LLC and James Christopher Roberts for breach of contract, unjust enrichment, fraud, and negligent misrepresentation after EquiSafe and Roberts failed to timely provide and install fencing at its equestrian boarding and training facility in Canby, Oregon. Before the court are McMurtrie's 1 motions for orders of default judgment against EquiSafe and Roberts. ECF Nos. 8, 19. The court recommends that McMurtrie's motions be granted.
BACKGROUND
McMurtrie Farms owns an equestrian boarding and training facility in Canby, Oregon. Compl. ¶ 8, ECF No. 1. EquiSafe markets and sells fencing products specifically for use in equestrian facilities. Id. ¶ 9. Roberts is EquiSafe's chief executive officer. Id. In mid-February 2021, McMurtrie approached EquiSafe to obtain a bid for purchasing and installing new fencing at its Canby facility. Id. ¶ 10. On February 17, 2021, EquiSafe sent McMurtrie a proposed invoice for the fencing totaling $158,250, which included materials, installation, and shipping. Id.; see also Decl. Peter Fisher Supp. Pl.'s Mot. Default Ex. A, ECF No. 10-1. EquiSafe's representative explained in a March 1, 2021 email exchange, that upon acceptance, McMurtrie would have to pay 50 percent of the invoiced materials costs ($42,985) and $5,000 in shipping costs. Fisher Decl. Ex. B. at 2-3, ECF No. 10-2. EquiSafe explained that orders are typically delivered within 60 days and that “[i]f delivery is not made for any reason that is the fault of EquiSafe Global, LLC directly, we will absolutely issue a refund.” Id. at 3-4. McMurtrie questioned being unable to reserve a time for installation. Id. To address this concern, McMurtrie proposed paying 25 percent of the installation costs ($16,820) upfront, and another 25 percent of installation when the materials arrived in the United States. Id. at 6. EquiSafe agreed to McMurtrie's proposal. Id. at 4. On March 3, 2021, McMurtrie paid $64,805 to EquiSafe via wire transfer, comprising 50 percent materials ($42,985), 25 percent installation ($16,820), and $5,000 for shipping. Fisher Decl. Ex. B at 1 & Ex. C, ECF No. 10-3. McMurtrie expected delivery of the fencing by May 1, 2021. Compl. ¶ 13. 2
EquiSafe failed to deliver and install the fencing by May 1, 2021. Compl. ¶ 15. When McMurtrie contacted EquiSafe for an update, EquiSafe informed McMurtrie that the delay was due to “supply chain constraints.” Compl. ¶ 15. After many more inquiries by McMurtrie, Roberts informed McMurtrie that the fencing materials had arrived in port, triggering a second payment of the remaining 50 percent of materials ($42,985) and 25 percent installation costs ($16,820). Compl. ¶12; Fisher Decl. Ex. B at 4 (describing payment of installation costs to secure scheduling of installation). Based on conversations with Roberts, on August 19, 2021, McMurtrie sent EquiSafe $59,805 via wire transfer. Fisher Decl. Ex. D, ECF No. 10-4. But the fencing was not delivered. Compl. ¶ 18. On February 4, 2022, McMurtrie again contacted Roberts and EquiSafe to demand performance. Id. ¶ 10; Decl. Nicholas Cody Ex. A, ECF No. 16-1. In a February 8, 2022, email, Roberts stated that EquiSafe was experiencing ongoing delays and difficulties with third-party suppliers. Id. Roberts also stated that EquiSafe was switching to Flying W Plastics to supply its hot-wire equestrian fencing, and that after testing was completed, EquiSafe would begin shipping orders. Id.; Compl. ¶ 19. McMurtrie contends that Roberts' representation that the materials were in port was clearly false and was made intentionally, recklessly, or negligently to induce McMurtrie to make the second payment. Id. ¶ 19. After receiving the February 8 email from Roberts, McMurtrie gave notice of its intent to rescind the contract and demanded repayment of the $124,610 it paid. Compl. ¶ 20.
On May 12, 2022, McMurtrie filed this action asserting three claims: (1) breach of contract against EquiSafe; (2) unjust enrichment against EquiSafe; and (3) fraud and negligent misrepresentation against EquiSafe and Roberts. Compl., ECF No. 1. On July 26, 2022, McMurtrie filed an Affidavit of Service showing that EquiSafe was served with the Complaint, 3 Summons, and Civil Case Assignment Order on May 23, 2022. Aff. of Service, ECF No. 7. On July 28, 2022, the Clerk issued an Entry of Default against EquiSafe. ECF No. 12. Concurrently, McMurtrie moved for an Order of Default Judgment against EquiSafe on the breach of contract claim. ECF No. 8.
On August 19, 2022, McMurtrie filed a Motion for Alternative Service on Roberts. Mot. Alternative Service, ECF No. 15. In the motion, McMurtrie stated it attempted to personally serve Roberts at an address in New York and three separate addresses in Florida, to no avail. Decl. Nicholas Cody ¶¶ 4-8, ECF No. 16. McMurtrie attested that it was unable to personally serve Roberts and that its investigation had not uncovered a current address. Id. ¶ 9. On August 22, 2022, the court approved substitute service for Roberts via two email addresses and certified mail to the last-known address Roberts provided in EquiSafe's 2021 Florida Limited Liability Company Annual Report. Order, ECF No. 17; Cody Decl. ¶¶ 12-13, Ex. B, ECF No. 16. On September 23, 2022, McMurtrie moved for Entry of Default against Roberts and for an Order of Default Judgment against Roberts on the fraud claim. ECF No. 19. On September 26, the Clerk issued an Entry of Default against Roberts. ECF No. 21.
LEGAL STANDARD
Under Rule 55(a), the clerk of court is required to enter an order of default if a party against whom affirmative relief is sought has failed to timely plead or otherwise defend an action. See FED. R. CIV. P. 55(a) (“When 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.”). Upon default, the court accepts “the well-pleaded factual allegations” of the complaint “as true.” DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 4 (9th Cir. 2007) (quotation omitted); see also TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (providing the general rule that “the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true”). When the plaintiff's claim is not for a sum certain or a sum that can be made certain by computation, the court may conduct hearings to effectuate a judgment as needed to conduct an accounting, determine damages, establish the truth of any allegation by evidence, or investigate any other matter. FED. R. CIV. P. 55(b)(2)(A-D). A sum is certain when “no doubt remains as to the amount to which a plaintiff is entitled as a result of the defendant's default.” Franchise HoldingII, LLC v. Huntington Rests. Grp., Inc., 375 F.3d 922, 929 (9th Cir. 2004).
“Rule 55 provides that ‘after the clerk's entry of default against a defendant, a court may enter default judgment against that defendant.'” Glacier Films (USA), Inc., v. Tenorio, Case No. 3:15-cv-01729-SB, 2016 WL 3766465, at *1 (D. Or. June 22, 2016) (quoting FirstBank P.R. v. Jaymo Properties, LLC, 379 Fed.Appx. 166, 170 (3d Cir. 2010)). “The district court's decision whether to enter a default judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising this discretion, courts in this circuit consider the factors discussed in Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986). Glacier Films, 2016 WL 3766465, at *1. The Eitel factors are: (1) the possibility of prejudice to plaintiffs; (2) the merits of plaintiffs' substantive claims; (3) the sufficiency of the operative complaint; (4) the sum of money at stake in the litigation; (5) the possibility of dispute over material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy favoring decisions on the merits. Eitel, 782 F.2d at 1471-72. The court's analysis begins with “the general rule that default judgments are ordinarily disfavored.” Id. at 1472 (citation omitted). 5
DISCUSSION
A. Jurisdiction
As a preliminary matter, the court is satisfied that it has personal jurisdiction over defendants based on the facts alleged in the record. A district court “has an affirmative duty” to determine whether it has subject matter jurisdiction and personal jurisdiction over the defendant before entering a default judgment. Allstream Bus. US, LLC v. Carrier Network Sols., LLC, Case No. 3:20-cv-01970-IM, 2021 WL 3488086, at *3 (D. Or. Aug. 9, 2021); In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). The court “may dismiss an action sua sponte” where personal jurisdiction does not exist. Id. But it must first give the plaintiff moving for a default judgment the opportunity to show facts supporting the exercise of personal jurisdiction. Id. at 712-13.
McMurtrie has alleged sufficient facts supporting the exercise of specific personal jurisdiction. EquiSafe contracted with and assumed obligations to an Oregon company, McMurtrie, and their dispute arises out of the parties' contractual relationship. Allstream, 2021 WL 3488086, at *3. The fencing contract requires EquiSafe to provide and install fencing at McMurtrie's equestrian facility in Canby, Oregon. Fisher Decl. Ex. B at 3. Thus, through EquiSafe's actions, it created a substantial connection with Oregon. Id. (citing Shedrain Corp v. Bonvi Sales Corp., 132 F.Supp.2d 1299, 1303 (D. Or. 2001)).
The court is also satisfied that it has subject matter jurisdiction. Diversity jurisdiction exists in an action between “citizens of different states” when “the matter in controversy exceeds the sum or value of $75,000.” 28 U.S.C. § 1332(a). Diversity jurisdiction “requires complete diversity of citizenship, meaning that the citizenship of each plaintiff is diverse from the citizenship of each defendant.” Demarest v. HSBC Bank USA, N.A., 920 F.3d 1223, 1226 (9th 6 Cir. 2019) (internal quotations omitted). A limited liability company has the citizenship of each of its members. Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). McMurtrie is an Oregon limited liability company whose sole member is a citizen of New Hampshire. Corp. Disclosure Statement, ECF No. 2. EquiSafe Global is alleged to be a Florida limited liability company, and Roberts, one of its members, is alleged to be a citizen of Florida and a New York resident. Compl. ¶ 4. It is unknown whether there are other members of EquiSafe. Based on the allegations in the complaint, complete diversity exists between the parties and the amount in controversy exceeds $75,000.
B. Procedural Requirements
McMurtrie has satisfied the procedural requirements for entry of a default judgment under Rules 55(a), 55(b), and 54(c). The Clerk of Court properly entered default against EquiSafe and Roberts under Rule 55(a), ECF Nos. 12, 21, and McMurtrie's default judgment request does not differ in kind from, or exceed in amount, the remedy pleaded in the Complaint. Compl. ¶ 27. Defendants have not appeared personally or by a representative and are not entitled to written notice of the application for default judgment. FED. R. CIV. P. 55(b); Allstream, 2021 WL 3488086, at *4. McMurtrie provides that it has not served written notice of the motion for default judgment on EquiSafe or Roberts. Decl. Phillip J. Haberthur ¶ 3, ECF No. 9; Decl. Nicholas Cody ¶ 4, ECF No. 20.
C. The Eitel Factors
The first Eitel factor favors McMurtrie, which will be prejudiced if default judgment is not entered, as it does not have another way to resolve its claim against defendants. See, e.g., Craigslist, Inc. v. Naturemarket, Inc., 694 F.Supp.2d 1039, 1061 (N.D. Cal. 2010) (“[W]here a 7 defendant's failure to appear makes a decision on the merits impracticable, if not impossible, entry of default judgment is warranted.”) (Internal quotations omitted).
The second and third Eitel factors “require that a plaintiff state a claim on which [it] may recover” and are often analyzed together. PepsiCo, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1175 (C.D. Cal. 2002); Allstream, 2021 WL 3488086, at *5. The court must consider whether the allegations in the complaint state a claim that supports the relief sought. McMurtrie seeks default judgment against EquiSafe on its breach of contract claim. McMurtrie must prove: (1) a contract existed; (2) the relevant terms of the contract; (3) its full performance and lack of breach; and (4) EquiSafe's breach resulting in damages to McMurtrie. See Olmstead v. ReconTrust Co., N.A., 852 F.Supp.2d 1318, 1322 (D. Or. 2012) (stating elements of breach of contract claim). McMurtrie has shown these elements by providing the invoice and email exchange setting forth the terms of the contract, banking records showing it paid EquiSafe according to the contract, and it attests that the fencing has yet to be delivered or installed by EquiSafe. Based on the evidence provided, the court finds that McMurtrie has properly stated a claim for breach of contract and that factors two and three favor entering default judgment against EquiSafe.
McMurtrie seeks default judgment against Roberts on its fraud claim. McMurtrie must prove: (1) Roberts made a material representation that was false; (2) Roberts knew that the representation was false; (3) Roberts intended McMurtrie to rely on the misrepresentation; (4) McMurtrie justifiably relied on the misrepresentation; and (5) McMurtrie was damaged by its reliance. Horton v. Nelson, 252 Or.App. 611, 616 (2012) (citing Strawn v. Farmers Ins. Co., 350 Or. 336, 352, adh'd to on recons., 350 Or. 521, 256 (2011); see also Knepper v. Brown, 345 Or. 320, 329 8 (2008) (noting that more recent Oregon cases use five-element list rather than older nine-element list, and that historical references to proximate cause are subsumed in the fifth element of abbreviated list). “State law claims sounding in fraud must be pleaded with particularity.” Great Am. Ins. Co. v. Linderman, 116 F.Supp.3d 1183, 1187 (D. Or. 2015). To prevail on a fraud claim, a plaintiff must establish each element with clear and convincing evidence. Riley Hill Gen. Contractor, Inc. v. Tandy Corp., 303 Or. 390, 392 (1987) (en banc).
“[G]enerally a member of an LLC is not personally liable for the debts, obligations, or liaiblities of the LLC.” Foster v. Beber, 3:16-cv-02294-BR, 2021 WL 3698904, at *5 (D. Or. June 14, 2021) (discussing O.R.S. § 63.165(1) in context of default judgment). That said, “the Oregon Supreme Court has made clear that a member or manager of an LLC remains responsible for its own acts or omissions to the extent that those acts or omissions would be actionable against the member or manager if that entity acted in an individual capacity.” Id. at *6; Nebulae, Inc. v. Taylor, No. 3:20-cv-00946-JR, 2020 WL 8474587, at *3 (D. Or. Oct. 19, 2020) (citing Cortez v. Nacco Material Handling Grp., Inc., 356 Or. 254, 268-69 (2014)). “This is true even if the allegedly tortious actions were taken in the individual's capacity as member of the LLC in furtherance of the LLC's business.” Nebulae, 2020 WL 8474587, at *3; see also Horton, 252 Or.App. at 619 (holding plaintiff stated fraud claim based on joint liability against individual who made misrepresentations and against company that he controlled).
The court finds that McMurtrie has adequately pleaded a fraud claim against Roberts in his individual capacity. McMurtrie alleges that Roberts falsely represented that fencing materials for its job had arrived at port in the United States; Roberts knew his representation was false as EquiSafe's chief executive officer; Roberts intended that McMurtrie would rely on his statement 9 to induce it to make another payment; McMurtrie reasonably relied on Roberts' statement based on Roberts' status as an EquiSafe executive; and McMurtrie was damaged by its reliance on Roberts' statement because it made another payment that was not yet due. Pl.'s Mot. Default at 5, ECF No. 19. To support its fraud claim, McMurtrie provides an email from Roberts on February 8, 2022, holding himself out as its chief executive officer. Decl. Cody Ex. A, ECF No. 16-1. Roberts' email reveals that the fencing was not in port as previously represented, that the fencing was unlikely manufactured at the time of Roberts' prior representations, and that the materials were not ready for shipping to McMurtrie in August 2021. Id. This evidence supports McMurtrie's allegations that Roberts intentionally misled it about the status of its order to induce it to pay $59,805 that was not yet due. This evidence also supports McMurtrie's assertion that, but for Roberts statements, it would not have wired the second payment. Compl. ¶ 37. Based on these allegations and evidence, the court finds that the second and third Eitel factors favor entering default judgment against Roberts.
Under the fourth Eitel factor, the court must balance the sum of money at stake in relation to the seriousness of the defaulting party's conduct. PepsiCo, 238 F.Supp.2d at 1176; see also Walter v. Statewide Concrete Barrier, Inc., No. 04-cv-02559-JSW, 2006 WL 2527776, at *4 (N.D. Cal. Aug. 30, 2016) (“If the sum of money at issue is reasonably proportionate to the harm caused by the defendant's actions, then default judgment is warranted.”). McMurtrie provides that it has paid $124,610 for fencing it has not received and has provided documentation and declarations supporting the sums expended. Thus, the court finds the amount sought is reasonable in relation to defendants' failure to provide the promised fencing and favors entry of default judgment. 10
The fifth Eitel factor considers the possibility that material facts are disputed. PepsiCo, 238 F.Supp.2d at 1177. When default is entered, well-pleaded facts in the complaint are taken as true, except those relating to damages. TeleVideo Sys., 826 F.2d at 917-18. McMurtrie has alleged facts necessary to support its claim for breach of contract and fraud and has submitted evidentiary support. Because defendants have not responded, there is no genuine dispute of material fact that precludes granting McMurtrie's motion. PepsiCo, 238 F.Supp.2d at 1177.
The sixth Eitel factor is whether default was due to excusable neglect. Eitel, 782 F.2d at 1472. EquiSafe was served with the Complaint, yet it failed to respond. There is no sign that EquiSafe's default resulted from excusable neglect. McMurtrie has since made numerous attempts to serve Roberts with the complaint, including attempts to serve him with the complaint at every known address associated with EquiSafe and Roberts, to no avail. The court also approved service of the complaint via email, which appears to have successfully been delivered and opened, and to date, no response has been received. Haberthur Decl. Ex. A at 1-3, ECF No. 18-1. Given that Roberts is alleged to be the chief executive officer and agent of EquiSafe, it appears unlikely that his default is due to excusable neglect. The court notes that the motions for entry of default and default judgment have not been served on EquiSafe or Roberts. Service of the motions is the court's preference, yet is not required under Rule 55. On balance, the court finds this factor is neutral.
The seventh Eitel factor reminds the court that judgment on the merits is preferred over judgment by default. Westchester Fire Ins. Co. v. Mendez, 585 F.3d 1183, 1189 (9th Cir. 2009). Courts recognize, however, that “this preference, standing alone, is not dispositive.” PepsiCo, 238 F.Supp.2d at 1177. Despite this, when a party completely fails to respond, a decision on the 11 merits is impracticable, and default judgment is warranted. Craigslist, 694 F.Supp.2d at 1061. EquiSafe's failure to defend this action makes a ruling on the merits not feasible and denying default judgment would in turn deny McMurtrie any relief. This factor is either neutral or favors default judgment.
In short, the court finds that nearly all the Eitel factors support entering a default judgment on the breach of contract claim against EquiSafe and the fraud claim against Roberts.
D. Damages
The court does not accept as true the complaint's allegations of damages. TeleVideo Sys., 826 F.2d at 917-18. To support its damages figures, McMurtrie has provided copies of the invoice and emails reflecting the amounts owed on the contract, and bank statements reflecting the money McMurtrie wired from its account to EquiSafe's account. Fisher Decl. Exs. A, C.
McMurtrie seeks damages equal to the payments it made for the fencing, $124,601, plus prejudgment interest at the statutory rate of nine percent. McMurtrie calculates the prejudgment interest owed for each payment separately. McMurtrie calculates interest for the first payment of $64,805 from May 1, 2021, the date it was promised the fencing would be delivered and installed. Pl. Mot. Default J. at 6 n.4-6. It calculates interest for the remaining $59,805 from August 19, 2021, the date it wired the second payment. The combination of the amounts owed and the procedure for calculating damages is adequate proof of damages and interest. Because these amounts are “sum certain,” default judgment should be entered. Franchise HoldingII, 375 F.3d at 928-29. \ \ \ \ \ \ \ \ \ \ 12
CONCLUSION
As explained above, the court recommends McMurtrie's motion for default judgment against EquiSafe (ECF No. 8) and motion for default judgment against Roberts (ECF No. 19) be GRANTED and McMurtrie be awarded the following in damages:
1. Against EquiSafe on claim one: $64,805 in damages, plus 9% per annum in prejudgment interest from May 1, 2021 through entry of judgment; and $59,805 in damages, plus 9% per annum in prejudgment interest from August 19, 2021 through entry of judgment;
2. Against Roberts on claim three: $59,805 in damages, plus 9% per annum in prejudgment interest from August 19, 2021 through entry of judgment.
SCHEDULING ORDER
The Findings and Recommendation will be referred to a district judge. Objections, if any, are due within fourteen days. If no objections are filed, the Findings and Recommendation will go under advisement on that date. If objections are filed, a response is due within fourteen days. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement. 13