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Sutherland v. Kaanapali Tours, LLC

United States District Court, D. Hawaii

March 28, 2018

WILLIAM SUTHERLAND, ET AL., Plaintiffs,
v.
KAANAPALI TOURS, LLC, Defendant.

          FINDINGS AND RECOMMENDATION TO GRANT IN PART AND DENY IN PART PLAINTIFFS' APPLICATION OF ENTRY OF DEFAULT JUDGMENT BY CLERK [1]

          Richard L. Puglisi United States Magistrate Judge.

         Before the Court is Plaintiffs' Application of Entry of Default Judgment by Clerk, filed February 23, 2018. ECF No. 20. Because Plaintiffs included a request for reasonable attorneys' fees in their Application, the Court must treat Plaintiffs' Application as a motion for default judgment pursuant to Rule 55(b)(2). See Branded Online Inc. v. Holden LLC, No. SACV150390DOCDFMX, 2016 WL 8849024, at *1 (C.D. Cal. Jan. 8, 2016) (denying request for clerk to enter default judgment where the plaintiff sought attorney's fees in connection with the default judgment); Phillips 66 v. Grainer, No. 1:13cv1890LJOBAM, 2015 WL 3797396, at *2 (E.D. Cal. June 18, 2015) (holding that the calculation of reasonable attorneys' fees is not a sum certain calculation and rejecting clerk's entry of default judgment). Plaintiffs filed a supplemental declaration regarding attorneys' fees on March 16, 2018. ECF No. 24. The Court found the Motion suitable for disposition without a hearing pursuant to Rule 7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawaii. ECF No. 22. After careful consideration of the Motion, the declarations, exhibits, and the record established in this action, the Court FINDS AND RECOMMENDS that the Motion be GRANTED IN PART and DENIED IN PART.

         BACKGROUND

         Plaintiffs filed this action against Defendant Kaanapali Tours, LLC alleging breach of promissory note on September 28, 2017. ECF No. 1. In their Complaint, Plaintiffs allege that Defendant entered into a loan agreement with Plaintiffs on or about December 15, 2010, in order to purchase a new vessel. Id. ¶ 9. Defendant concurrently executed a promissory note for $950, 000. Id. ¶ 10. Defendant took possession of the new vessel, a 64-foot catamaran named the Queen's Treasure, in May 2011. Id. ¶ 11. On January 30, 2014, Defendant executed a second promissory note in the amount of $1, 610, 000, with interest accruing at the rate of 1.75% and a maturity date of December 31, 2022 (“Promissory Note”), which replaced the prior promissory note issued on December 15, 2010. Id. ¶ 13; ECF No. 1-4.

         The Promissory Note provides that Defendant will be in default if Defendant “becomes unable, or admits in writing its inability to pay its debts as they fall due.” Id. ¶ 14. The Promissory Note also provides that Defendant will be in default if Defendant “applies for or consents to the appointment of a receiver, trustee, or liquidator of itself, or of all or substantial part of its assets.” Id. ¶ 15. In the event of a default, pursuant to the Promissory Note, Plaintiffs had the right to declare the entire outstanding principal balance and any accrued but unpaid interest to be immediately due and payable, without notice, “whereupon the same shall become forthwith due and payable.” Id. ¶ 16.

         In early 2017 a dispute arose between the member-managers of Defendant, Janice Nolan and Amy Sutherland, concerning the operation of Defendant. Id. ¶ 17. Amy Sutherland subsequently made a demand for the dissolution of Defendant. Id. On September 18, 2017, Amy Sutherland filed an action against Janice Nolan, the only other member-manager of Defendant, in state court seeking dissolution of Defendant and the appointment of a receiver. Id. ¶¶ 20-21 ECF No. 1-5.

         Under the terms of the Promissory Note, Defendant is in default because it has applied for the appointment of a receiver of all of its assets and is unable to pay its debts. ECF No. 1 ¶ 24. Pursuant to the Promissory Note, Plaintiffs have made a demand for the entire principal balance and any accrued interest to be immediately due and payable, but have not received payment or any response from Defendant. Id.

         Pursuant to Rule 55(a) of the Federal Rules of Civil Procedure, the Clerk entered default against Defendant on November 6, 2017. ECF No. 14. Plaintiff then filed the instant Motion, seeking default judgment against Defendant for $1, 346, 904.51, the amount due on the Promissory Note including interest, and for $6, 262.00 in attorneys' fees. ECF No. 20.

         ANALYSIS

         Default judgment may be entered against a party from whom affirmative relief is sought and the claim is for a “sum certain or for a sum which can by computation be made certain[.]” Fed.R.Civ.P. 55(b)(1), (2). The granting or denial of a motion for default judgment is within the discretion of the court. Haw. Carpenters' Trust Funds v. Stone, 794 F.2d 508, 511-12 (9th Cir. 1986). Entry of default does not entitle the non-defaulting party to a default judgment as a matter of right. Valley Oak Credit Union v. Villegas, 132 B.R. 742, 746 (9th Cir. 1991). Default judgments are ordinarily disfavored, and cases should be decided on their merits if reasonably possible. Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986). The court should consider the following factors in deciding whether to grant a motion for default judgment:

(1) the possibility of prejudice to the moving party;
(2) the merits of the 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 material facts;
(6) whether the default was due to excusable neglect; and
(7) the strong policy underlying the Federal Rules of Civil Procedure favoring ...

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