United States District Court, D. Nevada
ERIC ROUL, individually and as Trustee of the ERIC ROUL TRUST, Plaintiff,
GEORGE C. GEORGE, et al., Defendants.
FINDINGS AND RECOMMENDATION
C. W. HOFFMAN, Jr., Magistrate Judge.
This matter is before the Court on Plaintiff Eric Roul's, individually and as trustee of the Eric Roul Trust, ("Plaintiff") Motion for Default Judgment (#45), filed on December 20, 2013. The Court also considered Defendants Michael Mathias and Dual Dynamics, LLC's Limited Opposition (#46), filed on January 3, 2014. No response was filed by Defendant George C. George ("George"). The Court additionally considered Plaintiff's Reply (#47), filed on January 13, 2014. The Court conducted a hearing on this matter on January 30, 2014 in which George failed to appear. BACKGROUND
Plaintiff commenced this action on September 13, 2013 alleging 14 claims for relief based primarily on fraud and seeking damages plus interest, among other relief. See Compl. # 1. On October 23, 2013, Plaintiff filed an affidavit of service indicating that George was served in accordance with the requirements of Federal Rule of Civil Procedure 4 on October 15, 2013. See Summons Returned Executed #13. On November 8, 2013, Plaintiff notified the Court that he served George with a 3 day notice of intent to take default. See Decl. of Service #32. Plaintiff filed a Motion for Entry of Clerk's Default on November 13, 2013 (#33), which was granted on November 14, 2013. See Clerk's Entry of Default #34. On December 4, 2013, Plaintiff filed notice of entry of default on George. (#40). On December 10, 2013, Plaintiff notified the Court that he served George with notice of the entry of default. See Decl. of Service #43. On December 20, 2013, Plaintiff filed a Motion for Default Judgment requesting $3, 440, 000.00 plus pre-judgment interest and post-judgment interest accruing until the judgment is paid. See Pla.'s Mot. #45. Defendants Michael Mathias and Dual Dynamics, LLC oppose the default judgment only to the extent that it should not be used to establish elements of claims against them or be deemed admissions by them. See Defs' Resp. #46. Plaintiff concedes that the default judgment may not establish facts against Defendants Michael Mathias and Dual Dynamics, LLC, but contend that it should not prevent him from further factual development or amendment of the pleadings. See Pla.'s Resply #47.
The Complaint alleges that Plaintiff met George in March of 2013. See Compl. #1, ¶ 11. George claimed to be a sophisticated real estate investor with extensive experience and knowledge that enabled him to turn large profits. See Compl. #1, ¶¶ 11 and 13. George made multiple false representations in order to encourage Plaintiff to make a number of purported "investments" with George. Compl. #1, ¶¶ 11-14, 18, 23-25, 31-33, 35, 36, and 41-44. Over the course of several months, George obtained a total of $860, 000 from Plaintiff through these fraudulent claims. Id. George maintained that these funds would be used as capital for various real estate programs and also to fund the purchase of a casino property in Las Vegas. Id. In all cases, these claims by George were false. See Compl. #1, ¶ 54. George was aware they were false and George made these claims with the intention of wrongfully obtaining funds from Plaintiff. See Compl. #1, ¶¶ 55-56. Plaintiff justifiably relied on George's misrepresentations and was damaged in the amount $860, 000.00. See Compl. #1, ¶¶ 57-58.
Upon returning from a vacation in July 2013, Plaintiff learned that George was in jail. George began requesting that Plaintiff provide George with additional funds to allow him to make bail. See Compl. #1, ¶ 51. During the course of these conversations, George acknowledged receiving the $860, 000.00 from Plaintiff and agreed to return it. See Supp. Decl. of Eric Roul #10-3, ¶ 3. During these conversations, George sought to further defraud Plaintiff by promising that Plaintiff's money would "double and more" and indicating that he could not return Plaintiff's money until he got out of jail on bail. George requested Plaintiff to contribute $75, 000 towards George's bail. See Decl. of Eric Roul #5-1, ¶ 39 at lns. 22-23 and ¶ 41 at lns. 22-23. Plaintiff was not willing to send additional funds to George and initiated this action to recover the property wrongfully obtained by Defendants. George's false representations were made with oppression, fraud, and malice. See Compl. #1, ¶ 59.) At all relevant times, from March 2013 through August 2013, Plaintiff was the rightful owner and was entitled to possession of the deposited funds. See Compl. #1, ¶ 93. Plaintiff demanded the return of the deposited funds, but George has refused, thereby denying and depriving Plaintiff of the use of the deposited funds. See Compl. #1, ¶¶ 95-96. George's deprivation of Plaintiff's use of the deposited funds was oppressive, fraudulent, and malicious. See Compl. #1, ¶¶ 98.
I. Default Judgment Standard
Federal Rule of Civil Procedure 55 governs default judgment. Rule 55 provides, in relevant part, that "[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). Upon the entry of default, the defaulted party is deemed to have admitted all well-pleaded allegations of fact contained in the complaint. Benny v. Pipes, 799 F.2d 489, 495 (9th Cir. 1986); see also Fed.R.Civ.P. 8(b)(6) ("An allegation - other than one relating to the amount of damages - is admitted if a responsive pleading is required and the allegation is not denied."). "However, a defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law.'" DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (quoting Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). Rather, in determining whether to enter judgment on the default, the court must determine whether the well-pleaded allegations in the complaint support the relief sought. See 10A Wright, Miller & Kane, Federal Practice and Procedure § 2688 (3d ed. Supp. 2010) ("[L]iability is not deemed established simply because of the default... and the court, in its discretion, may require some proof of the facts that must be established in order to determine liability.").
Ultimately, "[i]f the court determines that the allegations in the complaint are sufficient to establish liability, it must then determine the amount and character' of the relief that should be awarded." Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F.Supp.2d 916, 920 (C.D. Cal. 2010) (citation omitted). A court has wide latitude and discretion in determining the amount of damages to award upon default judgment. Elektra Entertainment Group, Inc. v. Crawford, 226 F.R.D. 388, 394 (C.D. Cal. 2005) (citation omitted). The court must make an independent determination regarding damages, and cannot accept as true factual allegations of damages. Pope v. U.S., 323 U.S. 1, 12 (1944). While the court may conduct an evidentiary hearing to determine damages, it is not required to do so, but may rely instead on affidavits or documentary evidence in the record to determine the appropriate sum. See Fed.R.Civ.P. 55(b). The choice as to whether a default judgment should be entered is within the discretion of the court. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).
A. Discretionary Factors Analysis
Default alone does not entitle a plaintiff to court-ordered judgment. Id. Instead, courts look at seven discretionary factors before rendering a decision on default judgment. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). These factors are: (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning the 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.
Here, each of the factors set forth in Eitel favor entry of default judgment against George. 782 F.2d at 1471-72. The first factor, prejudice to Plaintiff, weighs in favor of the Court granting Plaintiff's motion for a default judgment. Plaintiff is without the use of $860, 000 and George is currently incarcerated. Accordingly, the likelihood of collecting the judgment diminishes with the passage of time. The second and third factors also weigh in favor of the Court granting default judgment against George. The merits of Plaintiff's claims and the sufficiency of the Complaint, which will be discussed subsequently, support entry of default judgment against George.
The Court also considered the fourth factor of the sum of money at stake, which totals $860, 000, not including interest and punitive damages. This is a considerable amount of money and Plaintiff would be prejudiced by being denied the opportunity to recover it. The fifth factor, possible disputed facts, favors default judgment because George admitted that he obtained and kept the deposited funds. There is also no evidence in the record supporting a claim that any of Plaintiff's funds were actually used to fund investments or that George's various "investment programs" actually existed. See Compl. #1. The sixth factor, whether the default was due to excusable neglect favors entry of a default judgment because George failed to file an answer or otherwise raise any defense in this litigation. Moreover, George was provided with notice of Plaintiff's intent to pursue default. See Pla.'s Mot. #45, Exh. 1. The final factor is the policy favoring decisions on the merits. ...