Hessenn Group LLC v. InnerScope Hearing Technologies, Inc.

• Court: District Court, E.D. California
• Decided: June 3, 2025
• Docket: 2:24-cv-00794
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 HESSENN GROUP LLC, No. 2:24-cv-00794-KJM-CKD 12 Plaintiff, 13 v. FINDINGS AND RECOMMENDATIONS DENYING PLAINTIFF’S AMENDED 14 INNERSCOPE HEARING MOTION FOR DEFAULT JUDGMENT TECHNOLOGIES, INC., 15 Defendant. (ECF No. 16) 16

17 18 Plaintiff Hessenn Group LLC moves the Court for default judgment against defendant 19 InnerScope Hearing Technologies, Inc. (“InnerScope”).1 (ECF No. 16.) Specifically, plaintiff 20 seeks a default judgment against defendant for damages in the amount of $2,247,975.83 plus 21 post-judgment interest for breach of contract and account stated. 22 Defendant has neither appeared nor opposed the motion. Plaintiff filed an initial motion 23 for default judgment on August 2, 2024 (ECF No. 11), but then filed an amended motion on 24 December 2, 2024 (ECF No. 16). The amended motion is before the Court. The Court previously 25 ordered this motion submitted without appearance and argument pursuant to Local Rule 26 230(c) & (g). (ECF No. 18.) For the reasons set forth below, plaintiff’s motion for default 27 1 This motion is referred to the undersigned pursuant to Local Rule 302(c)(19) and 28 U.S.C. 28 § 636(b)(1)(A). 1 judgment should be DENIED without prejudice. 2 I. BACKGROUND 3 On March 15, 2024, plaintiff filed a complaint against defendant for breach of contract 4 and account stated. (ECF No. 1.) Plaintiff alleges that plaintiff and defendant entered into a 5 contractual relationship during September 2020. (Id. at ¶ 5.) Plaintiff was to provide goods to 6 defendant. (Id.) Plaintiff alleges that it did supply goods to defendant and issued invoices for the 7 goods. (Id. at ¶ 6.) Plaintiff states the defendant failed to pay the amounts due pursuant to the 8 invoices. (Id. at ¶ 7.) Plaintiff alleges that it issued a demand letter to defendant on January 22, 9 2024, and that defendant did not pay. (Id. at ¶ 8.) Plaintiff seeks payment pursuant to the invoices 10 and storage fees to store the products. (Id. at ¶ 9.) At the time the complaint was filed, the amount 11 sought for the unpaid invoices was $2,173.700.83 and the amount sought for storage fees was 12 $23,025.00. (Id. at 7, 10.) By the time plaintiff filed its amended motion for default judgment, 13 plaintiff sought additional storage fees, totaling $69,075.00, and $5,200.00 of dumping fees. (ECF 14 No. 16 at 3.) Plaintiff requests that the Court enter judgment against defendant for damages, 15 prejudgment interest totaling $354,265.18, and post-judgment interest. (Id.) On April 9, 2025, 16 plaintiff filed a proof of service indicating that defendant was served by substituted service on 17 March 25, 2024. (ECF No. 6.) 18 On May 1, 2024, plaintiff requested Clerk’s Entry of Default as to defendant (ECF No. 7), 19 and on May 3, 2024, the Clerk entered default against defendant (ECF No. 8). Plaintiff’s amended 20 motion for default judgment filed December 2, 2024 (ECF No. 16) is now before the Court. On 21 May 8, 2025, the Court requested supplemental briefing from plaintiff. (ECF No. 19.) Plaintiff 22 filed a brief informing the Court that the parties did not enter into a formal written agreement, but 23 rather the contractual relationship was “formed through the issuance and acceptance of invoices 24 accompanied by email confirmations.” (ECF No. 20 at 2.) Plaintiff also informed the Court that 25 all goods except for those listed in Invoice No. HS-20230302INNS were delivered to defendant. 26 (Id.) The goods not delivered were stored by Plaintiff in a leased warehouse. (Id.) Finally, 27 plaintiff informed the Court that no payments have been received from defendant. (Id.) 28 //// 1 II. LEGAL STANDARDS 2 Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party 3 against whom a judgment for affirmative relief is sought if that party fails to plead or otherwise 4 defend against the action. See Fed. R. Civ. P. 55(a). The decision to grant or deny an application 5 for default judgment lies within the sound discretion of the district court. Aldabe v. Aldabe, 616 6 F.2d 1089, 1092 (9th Cir. 1980). 7 As a general rule, once default is entered, well-pleaded factual allegations in the operative 8 complaint are taken as true except for the allegations relating to damages. TeleVideo Sys., Inc. v. 9 Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Grp., 10 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); accord Fair Housing of Marin v. Combs, 285 11 F.3d 899, 906 (9th Cir. 2002). “[N]ecessary facts not contained in the pleadings, and claims 12 which are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. of N. Am., 13 980 F.2d 1261, 1267 (9th Cir. 1992). Where the pleadings are insufficient, the court may require 14 the moving party to produce evidence in support of the motion for default judgment. See 15 TeleVideo Sys., 826 F.2d at 917-18. 16 Default judgments are ordinarily disfavored. Eitel v. McCool, 782 F.2d 1470, 1472 (9th 17 Cir. 1986). In making the determination whether to grant a motion for default judgment, the court 18 considers the following factors: 19 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) 20 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 21 excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 22 Id. at 1471-72. 23 III. DISCUSSION 24 A. Jurisdiction 25 1. Subject Matter Jurisdiction 26 When default judgment is sought, the “district court has an affirmative duty to look into 27 its jurisdiction over both the subject matter and the parties.” In re Tuli, 172 F.3d 707, 712 (9th 28 1 Cir. 1999) (citations omitted). Plaintiff brought this complaint pursuant to 28 U.S.C. § 1332. 2 District courts have original jurisdiction of all civil actions between citizens of different States in 3 which “the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and 4 costs.” 28 U.S.C. § 1332(a). This requires complete diversity of citizenship and the presence “of a 5 single plaintiff from the same State as a single defendant deprives the district court of original 6 diversity jurisdiction over the entire action.” Abrego v. The Dow Chemical Co., 443 F.3d 676, 679 7 (9th Cir. 2006) (citations omitted). Plaintiff is a Texas limited liability company with its principal 8 place of business in Plano, Texas. (ECF No. 1 at ¶ 1.) Plaintiff is informed and believes that 9 defendant is a Nevada corporation, with its principal place of business in Roseville, California. 10 (Id. at ¶ 2.) The amount in controversy exceeds $75,000. (Id. at ¶ 10.) The parties are completely 11 diverse, and the Court has subject matter jurisdiction over this action by way of diversity of 12 citizenship pursuant to 28 U.S.C. § 1332. 13 2. Personal Jurisdiction 14 To enter default judgment, the court must have a basis for the exercise of personal 15 jurisdiction over the defendants in default. In re Tuli, 172 F.3d at 712. “Without a proper basis for 16 [personal] jurisdiction, or in the absence of proper service of process, the district court has no 17 power to render any judgment against the defendant’s person or property unless the defendant has 18 consented to jurisdiction or waived the lack of process.” S.E.C. v. Ross, 504 F.3d 1130, 1138-39 19 (9th Cir. 2007). 20 In order to subject a non-resident defendant to personal jurisdiction, that defendant must 21 have enough minimum contacts with the forum state that maintenance of the suit does not offend 22 “traditional notions of fair play and substantial justice.” Int’l Shoe Co. v. State of Wash., Office of 23 Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (citation omitted). 24 Here, plaintiff alleges that defendant has its principal place of business in Roseville, 25 California. Accordingly, personal jurisdiction is satisfied. 26 B. Service of Complaint 27 In reviewing a motion for default judgment, the court must determine whether defendant 28 was properly served with the summons and complaint. Fed. R. Civ. P. 4(c). 1 A return of service filed on April 9, 2024, indicates that defendant was served by 2 substituted service at the defendant’s place of business in Roseville, California on a “Mark ‘Doe’” 3 who is allegedly the “chairman.” (ECF No. 6.) Additionally, plaintiff asserts that it mailed a copy 4 of the complaint to the person authorized to accept service. (Id.) Based on the information in the 5 return of service, it appears defendant was properly served. See Fed. R. Civ. P. 4(h) (a corporation 6 must be served in a judicial district of the United States in the matter prescribed by Rule 4(e)(1) 7 or “by delivering a copy of the summons and of the complaint to an officer, a managing or 8 general agent, or any other agent authorized by appointment or by law to receive service of 9 process and—if the agent is one authorized by statute and the statute so requires—by also mailing 10 a copy of each to the defendant”); id. at 4(e)(1) (an individual may be served by following state 11 law in the state where the district court is located); Cal. Civ. Proc. Code §§ 415.20(a) & 416.10 12 (providing for substituted service for a corporation to a person authorized to receive service of 13 process by leaving a copy of the summons and complaint at the person’s usual place of business 14 in the presence of a person apparently in charge of the office and by thereafter mailing copies to 15 the person to be served at the place where the initial copies were left). 16 C. Application of Eitel Factors 17 As an initial matter, the Court notes that plaintiff has not addressed the Eitel factors in its 18 amended motion for default judgment. 19 1. Merits of the Substantive Claim and Sufficiency of Pleading 20 “The second and third Eitel factors both examine the merits and sufficiency of a plaintiff's 21 complaint, and accordingly, are often analyzed together.” Johnson v. Qolor LLC, 2022 WL 22 3348589, at *1 (N.D. Cal. Aug. 12, 2022) (internal quotation marks and citations omitted). The 23 court considers whether the allegations in the complaint are sufficient to state a claim on which 24 plaintiff may recover. See Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978); PepsiCo, 238 25 F. Supp. 2d at 1175. 26 a. Breach of Contract 27 Under California law, “the elements of a cause of action for breach of contract are (1) the 28 existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, 1 (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. 2 Goldman, 51 Cal. 4th 811, 821 (2011). The essential elements for a contract are: (1) parties 3 capable of contracting; (2) the parties’ consent; (3) a lawful object; and (4) sufficient cause or 4 consideration. U.S. ex rel. Oliver v. Parsons Co., 195 F.3d 457, 462 (9th Cir. 1999) (citing Cal. 5 Civ. Code § 1550). “Contract formation requires mutual consent, which cannot exist unless the 6 parties ‘agree upon the same thing in the same sense.’” Bustamante v. Intuit, Inc., 141 7 Cal.App.4th 199, 208 (2006) (quoting Cal. Civ. Code §§ 1580, 1550, 1565). Mutual assent is 8 typically demonstrated by an offer and acceptance communicated to the offeror. Donovan v. RRL 9 Corp., 26 Cal.4th 261, 270-71 (2001). “The existence of mutual consent is determined by 10 objective rather than subjective criteria, the test being what the outward manifestations of consent 11 would lead a reasonable person to believe. Accordingly, the primary focus in determining the 12 existence of mutual consent is upon the acts of the parties involved.” Meyer v. Benko, 55 13 Cal.App.3d 937, 942-43 (1976) (citation omitted). 14 Here, plaintiff has not sufficiently alleged that there is a valid contract between the parties. 15 Plaintiff states that the parties entered into a contractual relationship in or about September 2020. 16 (ECF No. 1 at ¶ 5.) Plaintiff further states that there was no formal written agreement, but that the 17 contractual relationship was formed “through the issuance and acceptance of invoices 18 accompanied by email confirmations.” (ECF No. 20 at 2.) However, plaintiff has not provided the 19 Court with any documentation showing that defendant agreed to or accepted the contract. Plaintiff 20 states that defendant accepted invoices and that there are email confirmations, but plaintiff has not 21 provided the Court with these emails, and there is no evidence that the invoices were signed by 22 defendant. The Court does not have enough information to determine whether there was a valid 23 contract between the parties. Accordingly, plaintiff has not sufficiently stated a claim for breach 24 of contract. 25 b. Account Stated 26 The elements of an account stated claim are: “(1) previous transactions between the 27 parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, 28 express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, 1 express or implied, to pay the amount due.” Leighton v. Forster, 8 Cal. App. 5th 467, 491 (2017) 2 (quoting Zinn v. Fred R. Bright Co., 271 Cal. App. 2d 597, 600 (1969)). A defendant’s consent to 3 an account may be implied where the defendant, after receiving the account, “waits for an 4 unreasonable time before making or without making any objection” to it. Cal. Bean Growers 5 Ass'n v. Williams, 82 Cal. App. 434, 442 (1927). 6 Here, plaintiff issued invoices along with each order to defendant, detailing the goods 7 ordered and the amount due and owing on each invoice. (ECF No. 1 at ¶¶ 17, 18; see ECF No. 1- 8 1.) Plaintiff also issued a demand letter to defendant on January 22, 2024. (ECF No. 1-2.) 9 However, plaintiff has not adequately shown that there was an “agreement between the parties.” 10 Plaintiff has not shown that defendant agreed to pay the amount due on the invoices. As 11 previously stated, plaintiff states that the contractual relationship was formed “through the 12 issuance and acceptance of invoices accompanied by email confirmations.” (ECF No. 20 at 2.) 13 However, plaintiff has not shown that defendant accepted the invoices, or provided the Court with 14 the email confirmations. 15 Plaintiff has not sufficiently pleaded its claims of breach of contract and account stated. 16 Accordingly, the second and third Eitel factors support denying default. See Akrura Pte. Ltd. v. 17 Apero Tech. Grp., 2024 WL 2982971, at *1 (C.D. Cal. Apr. 16, 2024). Therefore, plaintiff’s 18 motion should be denied without prejudice to the extent plaintiff can provide additional facts 19 demonstrating that there was a valid contract between the parties. 20 IV. CONCLUSION AND RECOMMENDATION 21 For the reasons set forth above, it is HEREBY RECOMMENDED that plaintiff’s motion 22 for default judgment (ECF No. 11) be denied without prejudice. 23 These findings and recommendations are submitted to the United States District Judge 24 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen (14) 25 days after being served with these findings and recommendations, any party may file written 26 objections with the court and serve a copy on all parties. Such a document should be captioned 27 “Objections to Magistrate Judge’s Findings and Recommendations.” Any reply to the objections 28 shall be served on all parties and filed with the court within fourteen (14) days after service of the 1 | objections. The parties are advised that failure to file objections within the specified time may 2 || waive the right to appeal the District Court’s order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 3 | 1998); Martinez v. YIst, 951 F.2d 1153, 1156-57 (9th Cir. 1991). 4 | Dated: June 3, 2025 Cad □ ke yy a 5 CAROLYNK. DELANEY 6 UNITED STATES MAGISTRATE JUDGE 7 || 5, hess.0794.24 8 9 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28