1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Donna Beson, No. CV-25-00278-PHX-JJT
10 Plaintiff, ORDER
11 v.
12 USA Quality Staffing Incorporated, et al.,
13 Defendants. 14 15 At issue is Plaintiff Donna Beson’s Motion for Default Judgment (Doc. 11, Mot.) 16 against Defendants USA Quality Staffing, Inc. and USA Managed Care Organization, Inc., 17 which is supported by Plaintiff’s Declaration (Docs. 11-1, 11-2). 18 I. BACKGROUND 19 In her Complaint (Doc. 1, Compl.), Plaintiff alleges that she worked as the Human 20 Resources Director for both Defendants jointly from 2016 to 2024. In 2022, she entered 21 into an Employment Agreement with Defendants providing that, within 30 days of 22 resignation or termination, she would be paid one-year’s salary as Severance 23 Compensation if she resigned at least one year after signing the Agreement, or $500,000 24 as Severance Compensation if she was terminated by Defendants with or without cause. 25 (Doc. 11-2, Emp. Agree. § 5.) To care for her fiancé with stage-4 cancer, she tried to resign 26 from her position with a 30-day notice at the end of October 2024. The next day, 27 Defendants’ CEO/President attempted to cancel all compensation agreements within the 28 company, contrary to the express terms of Plaintiff’s Employment Agreement. He then 1 terminated Plaintiff on November 11, 2024, at which time Plaintiff refused to sign a release 2 or accept the offered $10,700 severance compensation because it was inconsistent with the 3 terms of the Employment Agreement. 4 Plaintiff retained legal counsel and made multiple demands on Defendants for 5 Severance Compensation pursuant to the terms of the Employment Agreement, to no avail. 6 As a result, she filed this lawsuit on January 29, 2025, claiming unpaid wages and treble 7 damages under the Arizona Wage Act, A.R.S. § 23-350, et seq., breach of contract, and 8 breach of the implied covenant of good faith and fair dealing. (Compl. ¶¶ 89–128.) She 9 served Defendants’ statutory agent with the Summons and Complaint on February 3, 2025 10 (Docs. 7, 8), and Defendants did not file an Answer or otherwise appear in this lawsuit. 11 The Clerk of Court entered default under Federal Rule of Civil Procedure 55(a) on March 12 7, 2025 (Doc. 10), and Plaintiff now moves for default judgment under Rule 55(b). 13 II. LEGAL STANDARD 14 After the Clerk of Court enters default, the Court may enter default judgment 15 pursuant to Rule 55(b). The Court’s “decision whether to enter a default judgment is a 16 discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Although the 17 Court should consider and weigh relevant factors as part of the decision-making process, 18 it “is not required to make detailed findings of fact.” Fair Housing of Marin v. Combs, 285 19 F.3d 899, 906 (9th Cir. 2002). 20 The Court considers the following factors in deciding whether default judgment is 21 warranted: (1) the possibility of prejudice to the plaintiff, (2) the merits of the claims, (3) 22 the sufficiency of the complaint, (4) the amount of money at stake, (5) the possibility of 23 factual disputes, (6) whether default is due to excusable neglect, and (7) the policy favoring 24 decisions on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). In 25 considering the merits and sufficiency of the complaint, the Court accepts as true the 26 complaint’s well-pled factual allegations, but the plaintiff must establish all damages 27 sought in the complaint. See Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 28 1977). 1 III. ANALYSIS 2 With regard to the Eitel factors, Plaintiff has diligently prosecuted this matter and 3 will be prejudiced in the absence of a judicial remedy for her claims, so Factor One favors 4 entry of default judgment. Moreover, Defendants, both corporations, were properly served, 5 and nothing before the Court indicates their failure to participate in this litigation is due to 6 excusable neglect, so Factor Six also weighs in favor of default judgment. Factual disputes 7 as to Plaintiff’s claims are plausible, but Defendants’ lack of participation precludes any 8 examination thereof, so Factor Five is neutral. Factor Seven, favoring a decision on the 9 merits, always weighs against default judgment. And under Factor Four, the amount of 10 money at stake as claimed by Plaintiff, $1.5 million, weighs neither for nor against entry 11 of default judgment. 12 The focus here is on the sufficiency of Plaintiff’s Complaint—Factor Three—and 13 the merits of the claims therein—Factor Two. In her present Motion, Plaintiff argues that 14 she is entitled to $500,000 as Severance Compensation under the terms of the Employment 15 Agreement because Defendants terminated her employment. Further, she invokes the 16 Arizona Wage Act’s provision that, where Defendants failed to pay “nondiscretionary 17 compensation due an employee in return for labor or services rendered by an employee for 18 which the employee has a reasonable expectation to be paid whether determined by a time, 19 task, piece, commission, or other method of calculation” under A.R.S. § 23-350(7), she is 20 entitled to treble damages—$1.5 million—under A.R.S. § 23-355(A). 21 Arizona courts have rejected the proposition that severance compensation provided 22 for by an earlier-negotiated employment contract constitutes earned compensation for labor 23 or services rendered under the Arizona Wage Act. For example, in Serna v. Pima County, 24 916 P.2d 1096, 1097 (Ariz. Ct. App. 1995), where the plaintiff entered into an employment 25 contract providing for a severance payment if his employment was terminated without 26 cause, the court opined: “We reject summarily the argument that severance pay is earned 27 compensation. . . . If one has an enforceable contract of employment, he may receive an 28 award of damages for breach or a pre-agreed severance payment. That payment is for 1 damages for breach, not compensation for previous service.” But in Schade v. Diethrich, 2 760 P.2d 1050, 1053, 1061–62 (Ariz. 1988), the Arizona Supreme Court interpreted a prior 3 version of the Arizona Wage Act to determine that, where the employee intending to resign 4 accepted continued employment in exchange for a separation agreement that included 5 severance pay, the severance compensation was in exchange for services rendered and thus 6 constituted wages under the Arizona Wage Act; damages for the employer’s failure to pay 7 could thus be trebled under A.R.S. § 23-355(A). 8 For her part, Plaintiff cites no Arizona case law supporting the proposition that her 9 contractual Severance Compensation constituted unpaid wages under Arizona Wage Act. 10 The language of A.R.S. § 23-350
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Donna Beson, No. CV-25-00278-PHX-JJT
10 Plaintiff, ORDER
11 v.
12 USA Quality Staffing Incorporated, et al.,
13 Defendants. 14 15 At issue is Plaintiff Donna Beson’s Motion for Default Judgment (Doc. 11, Mot.) 16 against Defendants USA Quality Staffing, Inc. and USA Managed Care Organization, Inc., 17 which is supported by Plaintiff’s Declaration (Docs. 11-1, 11-2). 18 I. BACKGROUND 19 In her Complaint (Doc. 1, Compl.), Plaintiff alleges that she worked as the Human 20 Resources Director for both Defendants jointly from 2016 to 2024. In 2022, she entered 21 into an Employment Agreement with Defendants providing that, within 30 days of 22 resignation or termination, she would be paid one-year’s salary as Severance 23 Compensation if she resigned at least one year after signing the Agreement, or $500,000 24 as Severance Compensation if she was terminated by Defendants with or without cause. 25 (Doc. 11-2, Emp. Agree. § 5.) To care for her fiancé with stage-4 cancer, she tried to resign 26 from her position with a 30-day notice at the end of October 2024. The next day, 27 Defendants’ CEO/President attempted to cancel all compensation agreements within the 28 company, contrary to the express terms of Plaintiff’s Employment Agreement. He then 1 terminated Plaintiff on November 11, 2024, at which time Plaintiff refused to sign a release 2 or accept the offered $10,700 severance compensation because it was inconsistent with the 3 terms of the Employment Agreement. 4 Plaintiff retained legal counsel and made multiple demands on Defendants for 5 Severance Compensation pursuant to the terms of the Employment Agreement, to no avail. 6 As a result, she filed this lawsuit on January 29, 2025, claiming unpaid wages and treble 7 damages under the Arizona Wage Act, A.R.S. § 23-350, et seq., breach of contract, and 8 breach of the implied covenant of good faith and fair dealing. (Compl. ¶¶ 89–128.) She 9 served Defendants’ statutory agent with the Summons and Complaint on February 3, 2025 10 (Docs. 7, 8), and Defendants did not file an Answer or otherwise appear in this lawsuit. 11 The Clerk of Court entered default under Federal Rule of Civil Procedure 55(a) on March 12 7, 2025 (Doc. 10), and Plaintiff now moves for default judgment under Rule 55(b). 13 II. LEGAL STANDARD 14 After the Clerk of Court enters default, the Court may enter default judgment 15 pursuant to Rule 55(b). The Court’s “decision whether to enter a default judgment is a 16 discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Although the 17 Court should consider and weigh relevant factors as part of the decision-making process, 18 it “is not required to make detailed findings of fact.” Fair Housing of Marin v. Combs, 285 19 F.3d 899, 906 (9th Cir. 2002). 20 The Court considers the following factors in deciding whether default judgment is 21 warranted: (1) the possibility of prejudice to the plaintiff, (2) the merits of the claims, (3) 22 the sufficiency of the complaint, (4) the amount of money at stake, (5) the possibility of 23 factual disputes, (6) whether default is due to excusable neglect, and (7) the policy favoring 24 decisions on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). In 25 considering the merits and sufficiency of the complaint, the Court accepts as true the 26 complaint’s well-pled factual allegations, but the plaintiff must establish all damages 27 sought in the complaint. See Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 28 1977). 1 III. ANALYSIS 2 With regard to the Eitel factors, Plaintiff has diligently prosecuted this matter and 3 will be prejudiced in the absence of a judicial remedy for her claims, so Factor One favors 4 entry of default judgment. Moreover, Defendants, both corporations, were properly served, 5 and nothing before the Court indicates their failure to participate in this litigation is due to 6 excusable neglect, so Factor Six also weighs in favor of default judgment. Factual disputes 7 as to Plaintiff’s claims are plausible, but Defendants’ lack of participation precludes any 8 examination thereof, so Factor Five is neutral. Factor Seven, favoring a decision on the 9 merits, always weighs against default judgment. And under Factor Four, the amount of 10 money at stake as claimed by Plaintiff, $1.5 million, weighs neither for nor against entry 11 of default judgment. 12 The focus here is on the sufficiency of Plaintiff’s Complaint—Factor Three—and 13 the merits of the claims therein—Factor Two. In her present Motion, Plaintiff argues that 14 she is entitled to $500,000 as Severance Compensation under the terms of the Employment 15 Agreement because Defendants terminated her employment. Further, she invokes the 16 Arizona Wage Act’s provision that, where Defendants failed to pay “nondiscretionary 17 compensation due an employee in return for labor or services rendered by an employee for 18 which the employee has a reasonable expectation to be paid whether determined by a time, 19 task, piece, commission, or other method of calculation” under A.R.S. § 23-350(7), she is 20 entitled to treble damages—$1.5 million—under A.R.S. § 23-355(A). 21 Arizona courts have rejected the proposition that severance compensation provided 22 for by an earlier-negotiated employment contract constitutes earned compensation for labor 23 or services rendered under the Arizona Wage Act. For example, in Serna v. Pima County, 24 916 P.2d 1096, 1097 (Ariz. Ct. App. 1995), where the plaintiff entered into an employment 25 contract providing for a severance payment if his employment was terminated without 26 cause, the court opined: “We reject summarily the argument that severance pay is earned 27 compensation. . . . If one has an enforceable contract of employment, he may receive an 28 award of damages for breach or a pre-agreed severance payment. That payment is for 1 damages for breach, not compensation for previous service.” But in Schade v. Diethrich, 2 760 P.2d 1050, 1053, 1061–62 (Ariz. 1988), the Arizona Supreme Court interpreted a prior 3 version of the Arizona Wage Act to determine that, where the employee intending to resign 4 accepted continued employment in exchange for a separation agreement that included 5 severance pay, the severance compensation was in exchange for services rendered and thus 6 constituted wages under the Arizona Wage Act; damages for the employer’s failure to pay 7 could thus be trebled under A.R.S. § 23-355(A). 8 For her part, Plaintiff cites no Arizona case law supporting the proposition that her 9 contractual Severance Compensation constituted unpaid wages under Arizona Wage Act. 10 The language of A.R.S. § 23-350(7) ties “wages” to “compensation due an employee for 11 labor or services rendered” as “determined by a time, task, piece, commission or other 12 method of calculation.” Although Severance Compensation is due Plaintiff under the 13 Employment Agreement, by its express terms the Severance Compensation is not tied to 14 labor or services rendered. Plaintiff’s allegation, which the Court accepts as true, is that 15 Defendants terminated her, and the Employment Agreement provides she is entitled to 16 $500,000 in Severance Compensation for any termination, with or without cause, and 17 without regard for her length of service, that is, the labor or services rendered. (Emp. Agree. 18 § 5.) As such, the Severance Compensation is not wages under A.R.S. § 23-350(7), and the 19 Arizona Wage Act does not apply to Plaintiff’s claim for payment of Severance 20 Compensation under the Employment Agreement. See In re Sneva, 605 B.R. 201, 209 21 (Bankr. D. Ariz. 2019) (concluding the claimant’s severance pay as provided for in her 22 employment agreement was not “wages” under A.R.S. § 23-350(7) and noting that the 23 Arizona Legislature removed “severance pay” from the definition of “wages” in a 2016 24 revision to the statute). 25 Under Eitel Factors Two and Three, the Court agrees that Plaintiff has a meritorious 26 claim for $500,000 in breach of contract damages. As for her breach of the covenant of 27 good faith and fair dealing claim, in her Motion for Default Judgment, Plaintiff neither 28 makes an argument in support of a finding of bad faith on the part of Defendants nor shows 1 || the damages she would be entitled to on a bad faith finding. Plaintiff argues only that her 2|| “recovery of treble damages for wages [under the Arizona Wage Act] subsumes her || damages claims for Breach of Contract and Breach of the Duty of Good Faith and Fair Dealing.” (Mot. at 5.) She thus fails to meet her burden to establish damages for her bad || faith claim. Geddes, 559 F.2d at 560. 6 Weighing the Fite! Factors, Plaintiff is entitled to default judgment on her breach of || contract claim with damages of $500,000. She has failed to state a meritorious claim under 8 || the Arizona Wage Act, and she has failed to establish damages for her bad faith claim. 9|| Plaintiffis entitled to seek attorneys’ fees under A.R.S. § 12-341.01, and she may file a bill || of costs under LRCiv 54.1 and application for attorneys’ fees and non-taxable expenses 11 || under LRCiv 54.2 within 14 days of the date of this Order. 12 IT IS THEREFORE ORDERED granting in part and denying in part □□□□□□□□□□□ 13} Motion for Default Judgment against Defendants USA Quality Staffing, Inc. and USA 14|| Managed Care Organization, Inc. (Doc. 11). 15 IT IS FURTHER ORDERED that, pursuant to Rule 55(b)(2) of the Federal Rules || of Civil Procedure, the Clerk of the Court shall enter Judgment in favor of Plaintiff Donna Beson and against Defendants USA Quality Staffing, Inc. and USA Managed Care 18 || Organization, Inc., jointly and severally, in the total principal amount of $500,000.00. This 19 || amount shall bear post-judgment interest at the federal rate from the date of Judgment until || paid. The Clerk of Court shall also close this case. 21 IT IS FURTHER ORDERED that Plaintiff shall file any bill of costs and || application for attorneys’ fees and non-taxable expenses in compliance with Local Rules || 54.1 and 54.2 within 14 days of the date of this Order. 24 Dated this 17th day of June, 2025. CN
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