BMO Bank, N.A. v. K&M Transport LLC, et al.

• Court: District Court, E.D. California
• Decided: February 4, 2026
• Docket: 1:25-cv-01368
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 BMO BANK, N.A., Case No. 1:25-cv-01368-KES-SKO

9 Plaintiff, FINDINGS AND RECOMMENDATIONS TO GRANT IN PART MOTION FOR v. 10 DEFAULT JUDGMENT AS TO COUNTS ONE & TWO 11 K&M TRANSPORT LLC, et al., (Doc. 14) 12

Defendant. 13 14 15 I. INTRODUCTION 16 On January 13, 2026, Plaintiff BMO Bank N.A. (“Plaintiff”) filed a motion for default 17 judgment (the “Motion”) against Defendants K&M Transport LLC (“K&M Transport”), and 18 Melvyn Martinez (collectively “Defendants”). (Doc. 14). No opposition to the Motion was filed. 19 The undersigned has reviewed the Motion and supporting documentation and determines that the 20 matter is suitable for decision without oral argument pursuant to Local Rule 230(g).1 As such, the 21 hearing on the motion set for February 18, 2026, will be vacated. 22 For the reasons set forth below, the undersigned will recommend that Plaintiff’s motion for 23 default judgment be granted in part, to the extent that Plaintiff requests that the Court enter default 24 judgment against Defendants K&M Transport and Martinez as to counts one and two. The 25 undersigned further recommends denying the motion insofar as Plaintiff requests a default judgment 26 as to counts three to five. 27

28 1 This motion is referred to the undersigned by Local Rule 302(c)(19) for the entry of findings and recommendations. 1 II. FACTUAL BACKGROUND 2 On October 14, 2025, Plaintiff filed a complaint against Defendants alleging claims of 3 breach of contract. (Doc. 1). Defendants were served with the summons and complaint on October 4 15, 2025. (Doc. 2). Plaintiff filed a First Amended Complaint, (Doc. 6), in response to the Court’s 5 order to show cause regarding subject matter jurisdiction, (Doc. 4). The summons was returned 6 executed as to both Defendants on November 8, 2025. (Docs. 8, 9). 7 Plaintiff’s claims in the First Amended Complaint arise from several alleged written 8 contracts in the form of loan and security agreements related to three vehicles: (1) Agreement 5001, 9 (2) Agreement 8001, and (3) Agreement 0001” (“the Agreements”), in addition to a contract as to a 10 “continuing guaranty.” (Doc. 6 ¶¶ 8−10; see also id. at 13–422). Plaintiff alleges that Defendant 11 Martinez “executed in writing Continuing Guaranties” and was therefore indebted to Plaintiff for 12 “all sums due under the Agreements. (Id. ¶¶ 12−13). Plaintiff further alleges that pursuant to these 13 agreements, Defendant K&M Transport, for their part, was required to make regular monthly 14 payments. (Id. ¶ 17; see also id. at 9). Additionally, Plaintiff alleges the Agreements provided for 15 acceleration of the balance on the Agreements and payment in full in the event Defendants failed to 16 make their required payments under the Agreements. (Id. ¶¶ 17−18). (Doc. Because Plaintiff 17 alleges they perfected their first-priority security interest in the three vehicles, they contend they 18 were entitled to recover those vehicles upon Defendants’ non-payment. (Id. ¶¶ 15−16, 19). 19 Plaintiff alleges that after Defendant K&M Transport ceased making payments under each 20 of the Agreements, Plaintiff accelerated and declared the entire remaining balances under the 21 agreement as due on September 26, 2025, and now—in light of Defendant K&M Transport’s non- 22 payment—under the terms of the Agreement, Defendants owe Plaintiff the following sums: 23 1. A principal balance of $41,149.72 under Agreement 5001; 24 2. Late fees pursuant to the terms of Agreement 5001 in the amount of $507.40, plus 25 2 The undersigned recommends the Court take judicial notice of the Agreements, as attached to the First Amended 26 Complaint, (Doc. 6 at 13–38). See United Specialty Ins. Co. v. Certain Underwriters at Lloyd’s of London, No. 18-CV- 07504-SK, 2019 WL 7810813, at *2 (N.D. Cal. Mar. 19, 2019) (“The Court takes judicial notice of the [contract] 27 because it is integral to the allegations presented in the Complaint and because neither party disputes its authenticity . . . . In the context of breach of contract cases, ‘[j]udicial notice of contracts is proper when contracts are 28 integral to the complaint and no party disputes the contracts' identity and accuracy.’” (quoting Am. Zurich Ins. Co. v. 1 any costs associated with repossession3; 2 3. Interest in the amount of $2,143.10 as of September 26, 2025, plus interest in the 3 amount of 18% per annum (the acceleration rate) from September 27, 2025 through 4 the date of judgment; 5 4. Attorney’s fees associated with the costs of this litigation under the terms of 6 Agreement 5001; 7 5. A principal balance of $71,396.01 under Agreement 8001; 8 6. Late fees pursuant to the terms of Agreement 8001 in the amount of $1,479.12, NSF 9 charges of $50.00, plus any costs associated with repossession; 10 7. Interest in the amount of $3,697.02 as of September 26, 2025, plus interest in the 11 amount of 18% per annum (the acceleration rate) from September 27, 2025 through 12 the date of judgment; 13 8. Attorney’s fees associated with the costs of this litigation under the terms of 14 Agreement 8001; 15 9. A principal balance of $44,600.59 under Agreement 0001; 16 10. Late fees pursuant to the terms of Agreement 0001 in the amount of $446.85, NSF 17 charges of $25.00, plus any costs associated with repossession; 18 11. Interest in the amount of $2,227.20 as of September 26, 2025, plus interest in the 19 amount of 18% per annum (the acceleration rate) from September 27, 2025 through 20 the date of judgment; and 21 12. Attorney’s fees associated with the costs of this litigation under the terms of 22 Agreement 0001. 23 (Id. ¶¶ 17−49). 24 Defendants were served with the First Amended Complaint on November 18, 2025. (Docs. 25 8, 9). Neither Defendant responded to the First Amended Complaint. (See Docket). Plaintiff 26

27 3 The undersigned observes that while the First Amended Complaint seeks recovery of any charges associated with repossession per the terms of the Agreements, (see Doc. 6 ¶¶ 23, 29, 35), the Motion does not seek recovery of such 28 amounts, (see Doc. 14). Therefore, the undersigned does not recommend awarding any sum associated with such 1 requested that the Clerk of Court enter default against Defendants on December 3, 2025 and default 2 was entered that day. (Docs. 10, 11, 12). On January 14, 2026, Plaintiff filed a motion for default 3 judgment against Defendants, which is currently pending before Court. (Doc. 14). 4 5 III. DISCUSSION 6 A. Legal Standard 7 Federal Rule of Civil Procedure 55(b) permits a court-ordered default judgment following 8 the entry of default by the clerk of the court under Rule 55(a). It is within the sole discretion of the 9 court as to whether default judgment should be entered. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 10 (9th Cir. 1980). A defendant’s default by itself does not entitle a plaintiff to a court-ordered 11 judgment. See id. Instead, the Ninth Circuit has determined a court should consider seven 12 discretionary factors, often referred to as the “Eitel factors,” before rendering a decision on default 13 judgment. See Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). The Eitel factors include 14 (1) the possibility of prejudice to the plaintiff, (2) the merits of the plaintiff’s substantive claim, (3) 15 the sufficiency of the complaint, (4) the sum of money at stake in the action (5) the possibility of a 16 dispute concerning material facts, (6) whether the default was due to excusable neglect, and (7) the 17 strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. See 18 id. 19 Once the court clerk enters a default, the well-pleaded factual allegations of the complaint 20 are taken as true, except for those allegations relating to damages. See TeleVideo Sys., Inc. v. 21 Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987). 22 B. Analysis 23 1. The Eitel Factors Weigh in Favor of Granting a Default Judgment 24 a. Possibility of Prejudice to Plaintiff 25 The first Eitel factor requires a court to consider the possibility of prejudice to a plaintiff. 26 See Eitel, 782 F.2d at 1471. The undersigned finds that if default judgment is not entered, Plaintiff 27 will effectively be denied a remedy until Defendants participate and make an appearance in the 28 litigation—which may not occur. Denying Plaintiff a means of recourse is, by itself, sufficient to 1 meet the burden imposed by this factor. See Bmo Bank N.A. v. Bring Transp. Inc., No. 1:24-CV- 2 00809-KES-EPG, 2025 WL 2611852, at *3 (E.D. Cal. Sept. 10, 2025) (“If default judgment is not 3 entered, Plaintiff will effectively be denied relief, as it is apparent that Defendants will not defend 4 this action and the Complaint alleges that Defendants are in default of the unpaid amounts owed to 5 Plaintiff under the terms of the agreement and corresponding guaranty.”), report and 6 recommendation adopted sub nom. BMO Bank N.A. v. Bring Transp. Inc., No. 1:24-CV-00809- 7 KES-EPG, 2025 WL 3004099 (E.D. Cal. Oct. 27, 2025). Therefore, the undersigned finds that 8 Plaintiff would be prejudiced if the Court were to deny its motion and this factor weighs in favor of 9 default judgment. 10 b. Merits of Plaintiff’s Substantive Claims and the Sufficiency of the 11 Complaint 12 The next Eitel factor includes an evaluation of the merits of the substantive claims pleaded 13 in the complaint and the general sufficiency of the complaint. See Eitel, 782 F.2d at 1471. In 14 weighing these factors, courts evaluate whether the complaint is sufficient to state a claim that 15 supports the relief sought. See Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978); see also 16 DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (“[A] defendant is not held to admit 17 facts that are not well-pleaded or to admit conclusions of law.”). 18 Before evaluating the merits of the substantive claims and sufficiency of the First Amended 19 Complaint, the undersigned notes that the parties’ contract contains a choice of law provision for 20 Illinois law. (See Doc. 6 at 17, 25, 34 (“Anything in this Agreement to the contrary notwithstanding, 21 the transactions contemplated by this Agreement shall be deemed approved and entered into within 22 ·the State of Illinois and all credit or other financial accommodations extended by Lender under this 23 Agreement shall be deemed extended from and subject to the laws of the State of Illinois (without 24 regard to the conflicts of law principles of such State) regardless of the location of Debtor or any of 25 the Equipment.”)). Federal courts sitting in diversity generally apply the substantive law of the 26 forum state. E.g., Nelson v. Int’l Paint Co., 716 F.2d 640, 643 (9th Cir. 1983). This includes the 27 forum’s choice-of-law rules, id., and California law generally enforces contractual choice-of-law 28 terms. E.g., Smith, Valentino & Smith, Inc. v. Superior Court, 551 P.2d 1206 (Cal. 1976) (In Banc); 1 Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1028 (9th Cir. 2016). Therefore, the undersigned will 2 apply Illinois law as to Plaintiff’s contract claims. 3 Turning to Plaintiff’s breach of contract claims—specifically count one against Defendant 4 K&M Transport and count two against Defendant Martinez—the elements of breach of contract 5 under Illinois law are “(1) the existence of a valid and enforceable contract; (2) performance by the 6 plaintiff; (3) breach of contract by the defendant; and (4) resultant injury to the plaintiff.” Sherwood 7 Commons Townhome Owners Ass’n, Inc. v. Dubois, 148 N.E.3d 900, 912 (Ill. App. Ct. 2020) 8 (quoting Henderson-Smith & Assocs., Inc. v. Nahamani Fam. Serv. Ctr., Inc., 752 N.E.2d 33, 43 9 (Ill. App. Ct. 2001)). The undersigned finds that Plaintiff has alleged sufficient facts for a breach 10 of contract claim against Defendants. As alleged in Plaintiff’s First Amended Complaint, Plaintiff 11 and Defendants agreed to certain terms contained in three loans and security agreements and the 12 guaranty agreement that are alleged to be valid contracts, Plaintiff performed its obligations, 13 Defendants failed to make required installment payments or the balance upon acceleration as they 14 were obligated by the Agreements, and Plaintiff suffered damages as a result of the breach. (See 15 Doc. 6 ¶¶ 8−49). 16 The First Amended Complaint therefore sufficiently sets forth Plaintiff’s claims for breach 17 of contract against both Defendants, and the substantive allegations appear to have merit. See Bmo 18 Bank N.A., 2025 WL 2611852, at *3; Christofferson v. All Pure Pool Serv. of Cent. Cal., Inc., No. 19 118CV01370AWISAB, 2020 WL 3249323, at *14 (E.D. Cal. June 16, 2020), report and 20 recommendation adopted sub nom. No. 118CV01370AWISAB, 2020 WL 3819413 (E.D. Cal. July 21 8, 2020). The undersigned therefore finds that the second and third Eitel factors are satisfied as to 22 the breach of contract claims and weigh in favor of default. See, e.g., Rolex Watch U.S.A., Inc. v. 23 Watch Empire LLC, No. CV1309221SJOFFMX, 2015 WL 9690322, at *3 (C.D. Cal. Sept. 29, 24 2015) (stating that the second and third Eitel factors together “require that a plaintiff state a claim 25 on which the plaintiff may recover” (quoting PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 26 1175 (C.D. Cal. 2002))). 27 The undersigned notes that the First Amended Complaint requests injunctive relief related 28 to Defendants’ continued use of the vehicles operating as collateral under the Agreements. (Doc. 6 1 ¶¶ 50−56). Based on the representations in Plaintiff’s motion in which Plaintiff represents having 2 recovered each of the three vehicles at issue, (Doc. 14 at 7), the undersigned finds that Plaintiff’s 3 request for an injunction enjoining Defendants “from continuing to use the Vehicles,” ordering 4 Defendants “to advise Plaintiff of the location of the Vehicles,” and ordering Defendants “to 5 surrender the Vehicles to Plaintiff,” (Doc. 6 ¶ 55), is now moot. Accordingly, the undersigned 6 recommends denying Plaintiff’s request for injunctive relief as requested in count three. The First 7 Amended Complaint also includes count four, in which Plaintiff seeks specific performance as to 8 the return of the vehicles as required under the Agreements (count four), (Doc. 6 ¶¶ 57−62), as well 9 as count five for “claim and delivery,” in which Plaintiff seeks a writ of possession, (id. ¶¶ 63−75). 10 As set forth above, based on Plaintiff’s representations, the undersigned recommends denying the 11 relief requested in counts four and five as moot. 12 c. The Sum of Money at Stake in the Action 13 The fourth Eitel factor requires the court to consider the sum of money at stake. See Eitel, 14 782 F.2d at 1471. The undersigned acknowledges that “[d]efault judgment is disfavored when a 15 large amount of money is involved or is unreasonable considering the defendant’s actions.” See 16 Moore v. Cisneros, No. 1:12-CV-00188-LJO, 2012 WL 6523017, at *4 (E.D. Cal. Dec. 13, 2012). 17 However, as will be discussed in detail below, Plaintiff requests a total of $182,965.044—which 18 includes the remaining principal of the loan amount, interest, costs, and fees. (See Doc. 14 at 14; 19 Doc. 21 at 2). The undersigned finds this amount is not excessive as it is based upon Defendants’ 20 obligations under the terms of the Agreement. 21 Accordingly, the undersigned finds that the fourth Eitel factor weighs in favor of granting 22 default judgment. 23 d. The Possibility of a Dispute Concerning the Material Facts 24 The fifth Eitel factor is whether there is a possibility of a dispute concerning the material 25 facts. See Eitel, 782 F.2d at 1471–72. Regarding this factor, the undersigned finds that no genuine 26 issues of material fact are likely to exist because the allegations in the complaint are taken as true, 27

28 4 This amount has been adjusted based on Attorney Jennifer Witherell Crastz’s supplemental declaration regarding 1 Televideo Sys., 826 F.2d at 917–18, and Defendants have submitted nothing to contradict the well- 2 pleaded allegations in the complaint. See United Specialty Insurance Co. v. Saleh, No. 1:16-cv- 3 00632-DAD-MJS, 2016 WL 4434479, at *2 (E.D. Cal. Aug. 22, 2016) (“Inasmuch as default serves 4 as an admission of Plaintiff’s well-pled allegations of fact, it must be concluded that there is no 5 dispute as to any material fact.”) (internal citation omitted). Accordingly, the undersigned finds this 6 factor favors entry of default judgment. 7 e. Whether Default Was Due to Excusable Neglect 8 The sixth Eitel factor requires a court to evaluate whether the default of Defendants was due 9 to excusable neglect. See Eitel, 782 F.2d at 1472. Defendants failed to file responsive pleadings or 10 oppose Plaintiff’s motion for default judgment. Therefore, the undersigned has no evidence before 11 it to demonstrate Defendants’ failure to participate in the litigation is due to excusable neglect. See 12 Protective Life Ins. Co. v. Phillips, No. CIV S-08-0035 JAM EFB, 2008 WL 4104284, at *3 (E.D. 13 Cal. Aug. 26, 2008) (stating that a defendant’s “failure to respond cannot be deemed ‘excusable 14 neglect’”). Thus, the undersigned finds that this factor also weighs in favor of granting default 15 judgment. 16 f. Policy Favoring Decision on the Merits 17 The final Eitel factor requires a court to take into account the policy that default judgments 18 are disfavored because “[c]ases should be decided upon their merits whenever reasonably possible.” 19 Eitel, 782 F.2d at 1472. However, “the policy favoring decisions on the merits does not weigh 20 against entering default judgment where, as here, the Defendants’ failure to appear has made a 21 decision on the merits impossible at this juncture.” Arroyo v. J.S.T. LLC, No. 1:18-CV-01682- 22 DAD-SAB, 2019 WL 4877573, at *11 (E.D. Cal. Oct. 3, 2019), report and recommendation 23 adopted, 2020 WL 32322 (E.D. Cal. Jan. 2, 2020). Accordingly, the undersigned finds that the 24 seventh Eitel factor does not preclude default judgment. 25 In sum, six of the Eitel factors weigh in favor of default judgment, while the seventh factor 26 does not weigh in favor—but does not preclude or weigh against—default judgment. For these 27 reasons, the undersigned recommends the Court grant in part Plaintiff’s Motion for Default 28 Judgment, (Doc. 23), to the extent Plaintiff requests that the Court enter default judgment against 1 Defendants K&M Transport and Martinez on Plaintiff’s breach of contract claims, counts one and 2 two. 3 2. Terms of the Judgment and Proof of Relief 4 The undersigned next turns to the damages requested by Plaintiff. “A plaintiff seeking 5 default judgment ‘must . . . prove all damages sought in the complaint.’” HICA Educ. Loan Corp. 6 v. Warne, No. 11-CV-04287-LHK, 2012 WL 1156402, at *4 (N.D. Cal. Apr. 6, 2012). Plaintiff’s 7 complaint seeks the unpaid principal, interest, various fees (including attorney’s fees) and costs. 8 (Doc. 6 ¶¶ 44, 49; see also Doc. 14 at 9−11, 14). 9 Under Federal Rule of Civil Procedure 54(c), “[a] default judgment must not differ in kind 10 from, or exceed in amount, what is demanded in the pleadings.” Fed. R. Civ. P. 54(c). The First 11 Amended Complaint seeks “judgment in its favor and against K&M [Transport and Martinez] in the 12 amount due under the Agreements, the exact amount to be proven at or before trial, plus its 13 attorneys’ fees, costs, late fees and interest, together with such other and further relief as shall be 14 just and equitable” (Doc. 6 ¶¶ 44, 49). 15 In determining the appropriate sum for a default judgment, a court may rely on the affidavits 16 or documentary evidence submitted by a plaintiff or order an evidentiary hearing. See Fed. R. Civ. 17 P. 55(b)(2); Microsoft Corp. v. Nop, 549 F.Supp.2d 1233, 1235 (E.D. Cal. 2008) (“Where damages 18 are liquidated (i.e., capable of ascertainment from definite figures contained in the documentary 19 evidence or in detailed affidavits), judgment by default may be entered without a damages hearing.” 20 (citation omitted)). 21 The Agreements entered by the parties provide the following relevant terms: 22 SECURITY INTEREST. Debtor hereby grants to Lender a first priority security interest in the Equipment to secure (a) payment of the Total Amount and all other 23 obligations or Debtor to Lender under this Agreement, (b) the payment and performance of all other debts, liabilities and obligations of Debtor of every kind and 24 character, whether now existing or hereafter arising, to Lender, whether under this Agreement or any other agreement, and (c) the payment and performance of all debts, 25 liabilities and obligations of Debtor of every kind and character, whether now existing or hereafter arising, to each of Lender’s Affiliates. 26 RETURNED PAYMENTS. If a check, draft or other remittance sent by Debtor or 27 a Debit Transaction authorized by Debtor is returned unpaid or rejected for any reason other than the lack of a proper endorsement by Lender, the application of such 28 payment to Debtor’s Liabilities will be reversed and Debtor shall immediately pay 1 as the result of such reversal. Debtor shall further pay Lender any amount charged to Lender by any depositary institution because of such return and an additional 2 handling charge in the amount of $25, or if applicable law limits or restricts the amount of such reimbursement and/or handling charge, the amounts chargeable 3 under this provision will be limited and/or restricted in accordance with applicable law. 4 EVENTS OF DEFAULT. Time is of the essence. An event of default shall occur 5 if: (a) Debtor fails to pay when due any amount owed by it to Lender or any Affiliate of Lender under this Agreement; (b) Debtor or a Guarantor fails to pay any Liabilities 6 when due to Lender or any Affiliate of Lender or is otherwise in default under any other document, agreement or instrument . . . 7 REMEDIES. Upon the occurrence of an event of default, and at any time thereafter 8 as long as the default continues, Lender may, at its option, with or without notice to Debtor (i) declare this Agreement to be in default, (ii) declare the indebtedness 9 hereunder to be immediately due and payable, (iii) declare all other debts then owing by Debtor to Lender lo be immediately due and payable, and (iv) exercise all of the 10 rights and remedies of a secured party under the Uniform Commercial Code and any other applicable laws, including the right to require Debtor to assemble the 11 Equipment and deliver it to Lender at a place to be designated by Lender and to enter any premises where the Equipment may be without judicial process and take 12 possession thereof. Any property other than Equipment that is in or upon the Equipment at the time of repossession may be taken and held without liability. Any 13 requirement that Lender give reasonable notice regarding the sale or other disposition of Equipment will be met if such notice is mailed to Debtor at its last known address 14 at least ten days before such sale or other disposition. Lender may dispose of any Equipment at a public or private sale or at auction. Lender may buy at any sale and 15 become the owner of the Equipment. Debtor agrees that Lender may bring legal proceedings to enforce the payment and performance of Debtor’s obligations 16 hereunder in any court in the State shown in Lender’s address set forth herein, and service of process may be made upon Debtor by mailing a copy of the summons for 17 Debtor at its address shown herein. Debtor shall also pay to Lender all expenses of retaking, holding, preparing for sale, selling and the like, including without limitation 18 (a) the reasonable fees of any attorneys retained by lender, and (b) all other legal expenses incurred by Lender. Debtor agrees that Debtor is liable for any deficiency 19 remaining after any disposition or Equipment after default. Lender may sell the Equipment without giving any warranties as to the Equipment. Lender may disclaim 20 any warranties of title, possession, quiet enjoyment, or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of 21 the Equipment. 22 ACCELERATION INTEREST. Debtor agrees to pay Lender, upon acceleration of the above indebtedness, interest on all sums then owing hereunder at the rate of 23 1 1/2% per month if not prohibited by law, otherwise at the highest rate Debtor can legally obligate itself to pay or Lender can legally collect under applicable law. 24 GOVERNING LAW / CHOICE OF VENUE. Anything in this Agreement to the 25 contrary notwithstanding, the transactions contemplated by this Agreement shall be deemed approved and entered into within the State of Illinois and all credit or other 26 financial accommodations extended by Lender under this Agreement shall be deemed extended from and subject to the laws of the State of Illinois (without regard to the 27 conflicts of law principles of such State) regardless of the location of Debtor or any of the Equipment. Any legal action or proceeding with respect to this Agreement or 28 the transactions contemplated by this Agreement shall be brought exclusively in the 1 and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts; provided, however, that nothing in this Agreement shall limit or 2 restrict the right of Lender to commence any proceeding in the federal or state courts located in the state in which the Equipment is located to the extent Lender deems 3 such proceeding necessary or advisable to exercise remedies available under this Agreement or to commence legal proceedings or otherwise proceed against Debtor 4 in any other Jurisdiction. Lender and Debtor hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non 5 conveniens that any of them may now or hereafter have to the bringing of any such action or proceeding in such jurisdictions. 6 (Doc. 6 at 15–18, 23−25, 32−34). 7 The Agreements also include the following interest rates associated with each Agreement’s 8 corresponding payment schedules: 9 1. Agreement 5001: 12.93% per annum, (id. at 14) 10 2. Agreement 8001: 10.90% per annum, (id. at 22) 11 3. Agreement 0001: 12.40% per annum, (id. at 31) 12 a. Damages 13 Both Plaintiff’s complaint and motion for default judgment seek damages. (Doc. 6 ¶¶ 44, 14 49; see also Doc. 14 at 9−11, 14). Generally, “[t]he proper measure of damages for a breach of 15 contract is the amount of money necessary to place the plaintiff in a position as if the contract had 16 been performed.” In re Illinois Bell Tel. Link-Up II, 994 N.E.2d 553, 558 (Ill. App. Ct. 2013). 17 Moreover, while the Illinois Interest Act limits the annual interest rate on which a borrower and 18 lender may agree at 9%, there is an exception allowing for borrowers and lenders to agree to any 19 annual interest rates on business loans, see 815 Ill. Comp. Stat. 205/4(1) (“It is lawful to charge, 20 contract for, and receive any rate or amount of interest or compensation . . . with respect to . . . any 21 business loan to a business association or copartnership or to a person owning and operating a 22 business as sole proprietor or to any persons owning and operating a business”). The undersigned 23 finds the business loan exception applies here, and, therefore, the undersigned finds that the 24 Agreements’ term setting a 1.5% monthly interest rate (equivalent to an 18% annual interest rate) 25 to all sums upon the acceleration of the indebtedness under the Agreement on September 26, 2025 26 is not contrary to Illinois law. 27 The following table illustrates the monetary relief sought in this case. 28 1 Agreement Description Amount Principal $41,149.72 2 Agreement Late Fees $507.40 5001 Pre-Acceleration Interest (at a rate of 12.93%) $2,143.10 3 Post-Acceleration Interest (at a rate of 18%) $20.57 per day 4 Principal $71,396.01 Agreement Late Fees & NSF Charges $1,529.12 5 8001 Pre-Acceleration Interest (at a rate of 10.90%) $3,697.02 6 Post-Acceleration Interest (at a rate of 18%) $35.70 per day Principal $44,600.59 7 Agreement Late Fees & NSF Charges $471.85 8 0001 Pre-Acceleration Interest (at a rate of 12.40%) $2,227.20 Post-Acceleration Interest (at a rate of 18%) $22.30 per day 9 $167,722.01 Total 10 (plus daily interest rates) 11 The undersigned will address the request for attorney’s fees ($2,535.00)5 and costs ($596.74) 12 separately below. 13 The undersigned finds that Plaintiff has adequately identified the specific amount of 14 damages requested and provided sufficient declarations and other documentation to meet its burden 15 of establishing an amount of damages. The combined principal amount of $157,146.32, combined 16 late fees and NSF charges of $2,508.37, pre-acceleration interest in the amount of $8,067.32, and 17 post-acceleration interest at a rate of $78.57 per day after September 26, 2025, are all supported by 18 the declaration of Whitney Oliver and the Agreements. (See Doc 6 at 14–38; Doc. 15). Accordingly, 19 the undersigned recommends that Plaintiff’s requests for the principal amount ($157,146.32), late 20 fees and NSF charges ($2,508.37), pre-acceleration interest ($8,067.32), and post-acceleration 21 interest at a rate of $78.57 per day after September 26, 2025 be granted. 22 b. Attorney’s Fees 23 Plaintiff seeks attorney’s fees in the amount of $2,530 for work performed at the hourly rate 24 of $325 per hour for attorney Jennifer Witherell Crastz’s time. (See Doc. 14 at 14; Doc. 16 at 4−5, 25

26 5 The associated invoices provided as an offer of proof reflect a total amount of 7.8 hours, which at a rate of $325 per hour amounts to $2,535.00. However, the supplemental declaration, itself responding to the undersigned’s order inviting 27 Plaintiff to correct Attorney Crastz’s original declaration that contained mathematical inconsistencies between the request for attorney’s fees and the offer of proof, (see Doc. 20), again includes inaccurate math, (see Doc. 21 at 2 (stating 28 the sum of $1,787.50 + $97.50 + $650 = $2,534.50 instead of $2,535)). In light of the offer of proof, the undersigned 1 9−13). In support of the fee request, Plaintiff submits the declaration of Attorney Crastz. (See id. 2 at 4–5, 9−11). 3 In a diversity action, federal law governs procedural questions and state law governs 4 substantive questions. Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). Because this is a 5 diversity case and “state law on attorney’s fees is substantive” for Erie purposes, for the same 6 reasons cited above as to the application of Illinois law to Plaintiff’s substantive claims, Illinois law 7 applies in determining the substance of any attorney’s fees. Alaska Rent-A-Car, Inc. v. Avis Budget 8 Group, Inc., 738 F.3d 960, 973 (9th Cir. 2013); see Nedlloyd Lines B.V. v. Superior Ct., 834 P.2d 9 1148, 1155 (Cal. 1992). (“For the reasons stated above, we hold a valid choice-of-law clause, which 10 provides that a specified body of law “governs” the “agreement” between the parties, encompasses 11 all causes of action arising from or related to that agreement, regardless of how they are 12 characterized.”). 13 Here, the Agreements provide for attorney’s fees. (See Doc. 6 at 16, 24, 33 (“Debtor shall 14 also pay to Lender all expenses of retaking, holding, preparing for sale, selling and the like, including 15 without limitation (a) the reasonable fees of any attorneys retained by lender, and (b) all other legal 16 expenses incurred by Lender.”)). Under Illinois law, although contract provisions for awards of 17 attorney’s fees are permissible, only those fees which are reasonable are allowed, and the 18 determination of reasonableness is left to the trial court’s discretion. Kaiser v. MEPC Am. Props., 19 Inc., 518 N.E.2d 424, 427 (Ill. App. Ct. 1987). The burden is on the party seeking the fees to present 20 the court with sufficient evidence from which it can determine the reasonableness of the fees. Id. 21 A party attempting to justify a fee must show more than a compilation of hours multiplied by a fixed 22 hourly rate, or copies of the bills issued to the client, because this data, alone, does not provide 23 sufficient information as to reasonableness. Id. A determination of reasonableness cannot be made 24 based on conjecture or the opinion or conclusions of the attorney seeking the fees. Id. A fee petition 25 must specify “the services performed, by whom they were performed, the time expended thereon 26 and the hourly rate charged therefor.” Id. The party seeking fees must present the court with 27 “detailed records maintained during the course of litigation containing facts and computations upon 28 which the charges are predicated.” Id. at 427–28. 1 The undersigned finds that the records provided by Plaintiff are adequately detailed and 2 reflect the number of hours spent on this matter with corresponding descriptions of the work 3 performed during those hours. (See Doc. 16 at 9−13); see also Cont’l W. Ins. Co. v. Country Mut. 4 Ins. Co., No. 3:17-CV-1231-NJR-GCS, 2020 WL 5441113, at *5 (S.D. Ill. Sept. 10, 2020) (“each 5 entry included a description of the work performed, the attorney’s name, the amount of time spent, 6 and the hourly rate charged. That is all that is required under Illinois law”), aff’d, 3 F.4th 308 (7th 7 Cir. 2021); In re Marriage of Yelton, 676 N.E.2d 993, 998 (Ill. App. Ct. 1997) (“Our review of the 8 record reveals that the timesheets included a concise explanation of the work undertaken and 9 services performed, as well as the name, amount of time, and hourly rate of the attorneys involved. 10 Therefore, the trial court properly admitted them.”). 11 In addition to a party’s detailed records, in determining an award of attorney’s fees, under 12 Illinois law, the trial court should consider additional factors, 13 such as the skill and standing of the attorneys, the nature of the case, the novelty and/or difficulty of the issues and work involved, the importance of the matter, the degree of 14 responsibility required, the unusual and customary charges for comparable services, the benefit to the client [citation omitted], and whether there is a reasonable connection between 15 the fees and the amount involved in the litigation. 16 Kaiser, 518 N.E.2d at 428. 17 With these principles in mind, Attorney Crastz’s declaration states that she has been licensed 18 to practice law in California since 1996 “working in the areas of complex business and commercial 19 litigation for almost 30 years,” (Doc. 16 at 3), and is a partner at the Law Offices of Hemar, Rousso 20 & Heald, LLP, (id. at 2). This case also appears to be a relatively straightforward contract dispute 21 in which Plaintiff achieved success early in the litigation. The requested rates of $325 for Attorney 22 Crastz is in line with the hourly rates awarded in the Eastern District for comparable services. See 23 Bmo Bank N.A. v. Bring Transp. Inc, 2025 WL 2611852, at *8. Upon review of the fee request and 24 associated offer of proof, there is also a reasonable connection between the fees requested and the 25 amount involved in the litigation. Accordingly, the undersigned recommends that the presiding 26 district court judge approve the requested figure of $2,535 as Plaintiff’s total recoverable attorney’s 27 fees for this matter. 28 c. Litigation Expenses and Costs 1 Plaintiff also seeks a total of $596.74 in costs, which consists of the filing fee and service of 2 process. (Doc. 16 at 5). Unlike the issue of attorney’s fees, which are governed by state law, “the 3 award of costs is governed by federal law under Rule 54(d).” In re Merrill Lynch Relocation Mgmt., 4 Inc., 812 F.2d 1116, 1120 n.2 (9th Cir. 1987); see, e.g., United States v. Safeco Ins. Co. of Am., 116 5 F.3d 487, at *2 (9th Cir. 1997) (“As a general proposition, an award of costs is governed by federal 6 law under Rule 54(d).” (citations omitted)); United Cal. Bank v. THC Fin. Corp., 557 F.2d 1351, 7 1361 (9th Cir. 1977) (applying federal law as to costs and California state law on the issue of 8 attorney’s fees); Bmo Harris Bank N.A. v. Singh, Case No. 1:16-cv-00482-DAD-SAB, 2016 WL 9 5798841, at *14 (E.D. Cal. Oct. 4, 2016) (“In a diversity action, federal not state law controls the 10 issue of costs.” (citing Aceves v. Allstate Ins. Co., 68 F.3d 1160, 1167 (9th Cir. 1995))); Am. Boat 11 Racing Ass’n v. Richards, No. 2:14–cv–1909–KJM–KJN, 2015 WL 1320956, at *8 (E.D. Cal. Mar. 12 24, 2015) (“[F]ederal law governs the award of costs even in a diversity action.” (citing DCI Sols. 13 Inc. v. Urban Outfitters, Inc., No. 10cv0369–IEG (BGS), 2012 WL 1409610, at *2 (S.D. Cal. Apr. 14 23, 2012))). 28 U.S.C. § 1920 “define[s] the full extent of a federal court’s power to shift litigation 15 costs absent express statutory authority.” Grove v. Wells Fargo Fin. Cal., Inc., 606 F.3d 577, 579 16 (9th Cir. 2010) (citation omitted). The costs that are taxable under Section 1920 “are limited to 17 relatively minor, incidental expenses,” including “clerk fees, court reporter fees, expenses for 18 printing and witnesses, expenses for exemplification and copies, docket fees, and compensation of 19 court-appointed experts.” Taniguchi v. Kan Pac. Saipan, Ltd., 132 S. Ct. 1997, 2006 (2012). 20 Plaintiff requests reimbursement in the amount of $596.74 for the following costs: (1) $405 21 for the filing of the complaint, (2) $140.24 spent on the service of process on Defendant K&M 22 Transport, and (3) $51.50 spent on the service of process on Defendant Martinez. (Doc. 14 at; Doc. 23 16 at 5, 12). “[B]ecause federal law permits the court filing fee and service of process expenses to 24 be recovered as costs,” the undersigned recommends that Plaintiff be awarded the $596.74 in costs. 25 See Am. Boat Racing Ass’n v., 2015 WL 1320956, at *8; see also, e.g., Direct Connect Logistix, Inc. 26 v. Road Kings Trucking Inc., Case No. 1:16-cv-01006-AWI-SKO, 2016 WL 6608924, at *10 (E.D. 27 Cal. Nov. 9, 2016) (“The costs associated with filing this action and serving [the defendants] are 28 properly recoverable by [the plaintiff].” (citations omitted)); Family Tree Farms, LLC v. Alfa 1 Quality Produce, Inc., No. 1:08–cv–00481–AWI–SMS, 2009 WL 565568, at *10 (E.D. Cal. Mar. 2 5, 2009) (“Marshal’s fees and fees for service by a person other than the Marshal under [Federal 3 Rule of Civil Procedure] may be recovered; private process servers’ fees are properly taxed as 4 costs.” (citing Alflex Corp. v. Underwriters Labs., Inc., 914 F.2d 175, 178 (9th Cir. 1990))). 5 IV. RECOMMENDATION 6 Based on consideration of the declarations, pleadings, and exhibits to the present motion, it 7 is HEREBY ORDERED that the hearing on Plaintiff’s motion for default judgment, (Doc. 14), set 8 for February 18. 2026, is VACATED. 9 Further, the undersigned RECOMMENDS that the Court: 10 1. GRANT IN PART Plaintiff’s motion for default judgment (Doc. 14), insofar as 11 Plaintiff requests that the Court enter default judgment against Defendants K&M 12 Transport, LLC and Melvyn Martinez as to counts one and two of the First Amended 13 Complaint only; 14 2. Enter judgment against Defendants K&M Transport, LLC and Melvyn Martinez in 15 the amount of $167,722.01, plus additional interest being awarded at the rate of 16 $78.57 per day after September 26, 2025; 17 3. Award attorney’s fees to Plaintiff in the amount of $2,535; and 18 4. Award costs to Plaintiff in the amount of $596.74. 19 Furthermore, Plaintiff is HEREBY ORDERED to mail a copy of these findings and 20 recommendations to each of the defendants at the defendant’s last known address. 21 These findings and recommendations are submitted to the district judge assigned to this 22 action, pursuant to 28 U.S.C. § 636(b)(1)(B) and this Court’s Local Rule 304. Within twenty-one 23 (21) days of service of these findings and recommendations, any party may file written objections 24 to these findings and recommendations with the Court and serve a copy on all parties. Such a 25 document should be captioned “Objections to Magistrate Judge’s Findings and Recommendations.” 26 The district judge will review the magistrate judge’s findings and recommendations pursuant to 27 28 U.S.C. § 636(b)(1)(C). The parties are advised that failure to file objections within the specified 28 time may waive the right to appeal the district judge’s order. Wilkerson v. Wheeler, 772 F.3d 834, 1 839 (9th Cir. 2014). 2 IT IS SO ORDERED. 3

4 Dated: February 3, 2026 /s/ Sheila K. Oberto . UNITED STATES MAGISTRATE JUDGE 5

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