Hessenn Group LLC v. InnerScope Hearing Technologies, Inc.

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–DAD–CKD 12 Plaintiff, ORDER AND FINDINGS AND RECOMMENDATIONS 13 v. 14 INNERSCOPE HEARING (ECF No. 25) TECHNOLOGIES, INC., 15 Defendant. 16

17 Plaintiff Hessenn Group LLC moves the Court for default judgment against Defendant 18 InnerScope Hearing Technologies, Inc. (“InnerScope”).1 (ECF No. 25.) Specifically, Plaintiff 19 seeks a default judgment against Defendant for damages in the amount of $2,301,700.83 plus 20 post-judgment interest for breach of contract and account stated. 21 Defendant has neither appeared nor opposed the motion. The Court previously ordered 22 this motion submitted without appearance and argument pursuant to Local Rule 230(c) & (g). 23 (ECF No. 26.) For the reasons set forth below, the Court RECOMMENDS Plaintiff’s motion for 24 default judgment should be GRANTED IN PART, DENIED IN PART. 25 / / / 26 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 BACKGROUND 2 On March 15, 2024, Plaintiff filed a complaint against Defendant for breach of contract 3 and account stated. (ECF No. 1.) Plaintiff alleges that Plaintiff and Defendant entered into a 4 contractual relationship during September 2020. (Id. at ¶ 5.) Plaintiff was to provide goods to 5 defendant. (Id.) Plaintiff alleges that it did supply goods to Defendant and issued invoices for the 6 goods. (Id. at ¶ 6.) Plaintiff states Defendant failed to pay the amounts due pursuant to the 7 invoices. (Id. at ¶ 7.) Plaintiff alleges that it issued a demand letter to Defendant on January 22, 8 2024, and that Defendant did not pay. (Id. at ¶ 8.) Plaintiff seeks payment pursuant to the invoices 9 and storage fees to store the products. (Id. at ¶ 9.) At the time the Complaint was filed, the 10 amount sought for the unpaid invoices was $2,173,700.83 and the amount sought for storage fees 11 was $23,025.00. (Id. at 7, 10.) By the time Plaintiff filed its amended motion for default 12 judgment, Plaintiff sought additional storage fees, totaling $69,075.00, and $5,200.00 of dumping 13 fees. (ECF No. 16 at 3.) Plaintiff requests that the Court enter judgment against Defendant for 14 damages, prejudgment interest totaling $354,265.18, and post-judgment interest. (Id.) On April 9, 15 2025, Plaintiff filed a proof of service indicating that Defendant was served by substituted service 16 on March 25, 2024. (ECF No. 6.) 17 On May 1, 2024, Plaintiff requested Clerk’s Entry of Default as to Defendant (ECF No. 18 7), and on May 3, 2024, the Clerk entered default against Defendant (ECF No. 8). The 19 undersigned recommended denying Plaintiff’s motion for default judgment without prejudice on 20 June 3, 2025. (ECF No. 21.) On July 28, 2025, District Judge Mueller adopted the undersigned’s 21 recommendations in full. (ECF No. 22.) On November 26, 2025, Plaintiff filed a motion for 22 default judgment against Defendant with a hearing set for January 21, 2026. (ECF No. 25.) On 23 December 15, 2025, the undersigned vacated the hearing on the motion for default judgment and 24 took the matter under submission without appearance and argument pursuant to Rule 230(g). 25 (ECF No. 26.) 26 LEGAL STANDARDS 27 Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party 28 against whom a judgment for affirmative relief is sought if that party fails to plead or otherwise 1 defend against the action. See Fed. R. Civ. P. 55(a). The decision to grant or deny an application 2 for default judgment lies within the sound discretion of the district court. Aldabe v. Aldabe, 616 3 F.2d 1089, 1092 (9th Cir. 1980). 4 As a general rule, once default is entered, well-pleaded factual allegations in the operative 5 complaint are taken as true except for the allegations relating to damages. TeleVideo Sys., Inc. v. 6 Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Grp., 7 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); accord Fair Housing of Marin v. Combs, 285 8 F.3d 899, 906 (9th Cir. 2002). “[N]ecessary facts not contained in the pleadings, and claims 9 which are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. of N. Am., 10 980 F.2d 1261, 1267 (9th Cir. 1992). Where the pleadings are insufficient, the court may require 11 the moving party to produce evidence in support of the motion for default judgment. See 12 TeleVideo Sys., 826 F.2d at 917-18. 13 Default judgments are ordinarily disfavored. Eitel v. McCool, 782 F.2d 1470, 1472 (9th 14 Cir. 1986). In making the determination whether to grant a motion for default judgment, the court 15 considers the following factors: 16 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s 17 substantive claim, (3) the sufficiency of the complaint, (4) the sum of money 18 at stake in the action; (5) the possibility of a dispute concerning material 19 facts; (6) whether the default was due to excusable neglect, and (7) the 20 strong policy underlying the Federal Rules of Civil Procedure favoring 21 decisions on the merits. 22 Id. at 1471-72. 23 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 Cir. 1999) (citations omitted). Plaintiff brought this complaint pursuant to 28 U.S.C. § 1332. 1 District courts have original jurisdiction of all civil actions between citizens of different States in 2 which “the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and 3 costs.” 28 U.S.C. § 1332(a). This requires complete diversity of citizenship and the presence “of a 4 single plaintiff from the same State as a single defendant deprives the district court of original 5 diversity jurisdiction over the entire action.” Abrego v. The Dow Chemical Co., 443 F.3d 676, 679 6 (9th Cir. 2006) (citations omitted). Plaintiff is a Texas limited liability company with its principal 7 place of business in Plano, Texas. (ECF No. 1 at ¶ 1.) Plaintiff is informed and believes that 8 Defendant is a Nevada corporation, with its principal place of business in Roseville, California. 9 (Id. at ¶ 2.) The amount in controversy exceeds $75,000. (Id. at ¶ 10.) The parties are completely 10 diverse, and the Court has subject matter jurisdiction over this action by way of diversity of 11 citizenship pursuant to 28 U.S.C. § 1332. 12 2. Personal Jurisdiction 13 To enter default judgment, the court must have a basis for the exercise of personal 14 jurisdiction over the defendants in default. In re Tuli, 172 F.3d at 712. “Without a proper basis for 15 [personal] jurisdiction, or in the absence of proper service of process, the district court has no 16 power to render any judgment against the defendant's person or property unless the defendant has 17 consented to jurisdiction or waived the lack of process.” S.E.C. v. Ross, 504 F.3d 1130, 1138-39 18 (9th Cir. 2007). 19 In order to subject a non-resident defendant to personal jurisdiction, that defendant must 20 have enough minimum contacts with the forum state that maintenance of the suit does not offend 21 “traditional notions of fair play and substantial justice.” Int’l Shoe Co. v. State of Wash., Office of 22 Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). 23 Here, Plaintiff alleges that Defendant has its principal place of business in Roseville, 24 California. Accordingly, personal jurisdiction is satisfied. 25 B. Service of Complaint 26 In reviewing a motion for default judgment, the court must determine whether Defendant 27 was properly served with the summons and complaint. Fed. R. Civ. P. 4(c). 28 A return of service filed on December 30, 2025, indicates that Defendant was served by 1 substituted service at the Defendant’s place of business in Las Vegas, Nevada on a “Rosa Selina” 2 who is allegedly an authorized agent. (ECF No. 27.) Additionally, Plaintiff asserts that it mailed a 3 copy of the complaint to the person authorized to accept service. (Id.) Based on the information in 4 the return of service, it appears Defendant was properly served. See Fed. R. Civ. P. 4(h) (a 5 corporation must be served in a judicial district of the United States in the matter prescribed by 6 Rule 4(e)(1) or “by delivering a copy of the summons and of the complaint to an officer, a 7 managing or general agent, or any other agent authorized by appointment or by law to receive 8 service of process and—if the agent is one authorized by statute and the statute so requires—by 9 also mailing a copy of each to the defendant”); id. at 4(e)(1) (an individual may be served by 10 following state law in the state where the district court is located); Cal. Civ. Proc. Code §§ 11 415.20(a), 416.10 (providing for substituted service for a corporation to a person authorized to 12 receive service of process by leaving a copy of the summons and complaint at the person’s usual 13 place of business in the presence of a person apparently in charge of the office and by thereafter 14 mailing copies to the person to be served at the place where the initial copies were left). 15 C. Application of Eitel Factors 16 1. Possibility of Prejudice to Plaintiff 17 The Court considers whether Plaintiff would suffer prejudice if default judgment is not 18 entered. Such potential prejudice to Plaintiff militates in favor of granting a default judgment. See 19 PepsiCo, Inc. v. California Security Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). Plaintiff 20 filed the Complaint against the Defendant on March 14, 2024, and Defendant has failed to 21 respond to Plaintiff’s complaint or otherwise put forth a defense in this action. See Docket. The 22 present litigation cannot move forward, leaving Plaintiff no recourse other than to seek a default 23 judgment. Accordingly, the first factor weighs in favor of entering default judgment 24 2. Merits of the Substantive Claim and Sufficiency of Pleading 25 “The second and third Eitel factors both examine the merits and sufficiency of a plaintiff's 26 complaint, and accordingly, are often analyzed together.” Johnson v. Qolor LLC, 2022 WL 27 3348589, at *1 (N.D. Cal. Aug. 12, 2022) (internal quotation marks and citations omitted). The 28 court considers whether the allegations in the complaint are sufficient to state a claim on which 1 plaintiff may recover. See Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978); PepsiCo, 238 2 F. Supp. 2d at 1175. 3 a. Breach of Contract 4 Under California law, “the elements of a cause of action for breach of contract are (1) the 5 existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) 6 defendant's breach, and (4) the resulting damages to the plaintiff.” Oasis West Realty, LLC v. 7 Goldman, 51 Cal. 4th 811, 821, 124 Cal.Rptr.3d 256, 250 P.3d 1115 (2011). The essential 8 elements for a contract are: (1) parties capable of contracting; (2) the parties’ consent; (3) a lawful 9 object; and (4) sufficient cause or consideration. U.S. ex rel. Oliver v. Parsons Co., 195 F.3d 457, 10 462 (9th Cir. 1999) (citing Cal. Civ. Code § 1550). “Contract formation requires mutual consent, 11 which cannot exist unless the parties ‘agree upon the same thing in the same sense.’” Bustamante 12 v. Intuit, Inc., 141 Cal.App.4th 199, 208 (2006) (quoting Cal. Civ. Code §§ 1580, 1550, 1565). 13 Mutual assent is typically demonstrated by an offer and acceptance communicated to the offeror. 14 Donovan v. RRL Corp., 26 Cal.4th 261, 270-71 (2001). “The existence of mutual consent is 15 determined by objective rather than subjective criteria, the test being what the outward 16 manifestations of consent would lead a reasonable person to believe. Accordingly, the primary 17 focus in determining the existence of mutual consent is upon the acts of the parties involved.” 18 Meyer v. Benko, 55 Cal.App.3d 937, 942-43 (1976) (citation omitted). 19 Plaintiff alleges that it entered into a contractual relationship with Defendant on or about 20 September 2020. (ECF No. 1 at ¶ 5.) Plaintiff further alleges that it performed its obligations 21 under the contract by supplying the goods and issuing corresponding invoices. Id. at ¶ 13. 22 Plaintiff alleged Defendant breached its contract with Plaintiff when it failed to pay the amounts 23 due on the issued invoices. Id. at ¶ 14. 24 In the findings and recommendations issued on June 3, 2025, the undersigned found that 25 Plaintiff had not sufficiently alleged that it had entered into a contract with Defendant. (ECF No. 26 21 at 6.) There was no formal written agreement between the parties, and the only evidence 27 offered by Plaintiff to establish a contractual agreement was “through the issuance and acceptance 28 of invoices accompanied by email confirmations,” and Plaintiff did not provide the Court with 1 email confirmations Id. 2 Here, unlike Plaintiff’s first motion for default judgment, Plaintiff sufficiently alleges that 3 there is a valid contract between the parties for the transactions occurring on 12/06/2022, 4 12/07/2022, 12/09/2022, 02/06/2023, 03/02/2023, and 04/11/2023. Per the Court’s findings and 5 recommendations on June 3, 2025, Plaintiff has provided the requested email confirmations to aid 6 the Court in establishing a contractual relationship. (ECF Nos. 25-1 at 13, 18, 22-23, 27-28, 34- 7 35, 41, 47-48.) These emails include interactions with Plaintiff and Matthew Moore, the CEO of 8 Defendant, and other officers. Id. Several of these emails are requests for items by Defendant’s 9 officers and an agreement to ship by Plaintiff. Id. These emails provide sufficient evidence of 10 mutual assent for those specific transactions. See Donovan, 26 Cal.4th 261, at 270-71; Cal. Com. 11 Code § 2204. 12 However, Plaintiff has failed to demonstrate that there was a valid contract between the 13 parties for the transactions occurring on 01/04/23, 03/01/2023, 03/07/2023, 04/17/2023, 14 05/05/2023, 06/19/2023, 07/10/2023, and 12/15/2023. The only evidence Plaintiff offers to 15 establish the existence of a contract is an invoice unsigned by Defendant. As stated in the Court’s 16 June 3, 2025, findings and recommendations, such invoices were “not enough information to 17 determine whether there was a valid contract between the parties.” (ECF No. 21 at 6.) 18 Accordingly, Plaintiff has failed to state a claim for breach of contract for these transactions by 19 failing to provide sufficient evidence of a contractual relationship. 20 b. Account Stated 21 The elements of an account stated claim are: “(1) previous transactions between the 22 parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, 23 express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, 24 express or implied, to pay the amount due.” Leighton v. Forster, 8 Cal. App. 5th 467, 491 (2017) 25 (quoting Zinn v. Fred R. Bright Co., 271 Cal. App. 2d 597, 600 (1969)). A defendant's consent to 26 an account may be implied where the defendant, after receiving the account, “waits for an 27 unreasonable time before making or without making any objection” to it. Cal. Bean Growers 28 Ass'n v. Williams, 82 Cal. App. 434, 442 (1927). 1 Here, Plaintiff issued invoices along with each order to Defendant, detailing the goods 2 ordered and the amount due and owing on each invoice. (ECF No. 1 at ¶¶ 17, 18; see ECF No. 1- 3 1.) Plaintiff also issued a demand letter to Defendant on January 22, 2024. (ECF No. 1-2.) As 4 stated above, Plaintiff has only demonstrated that there has been an agreement among the parties 5 for some but not all of the alleged transactions with Defendant for which it seeks recovery. See 6 Leighton v. Forester, 8 Cal.App.5th 467, 492-493 (2017) (finding that a plaintiff’s account stated 7 claim failed due to failure to produce evidence of enforceable contract). Because not every 8 transaction contains an email from an officer of Defendant confirming the transaction and the 9 invoices contain the same defects as noted in the prior findings and recommendations, the Court 10 will recommend granting Plaintiff’s motion for default in part and denying it in part. 11 3. The Sum of Money at Stake 12 Under the fourth factor cited in Eitel, “the court must consider the amount of money at 13 stake in relation to the seriousness of [d]efendant’s conduct.” PepsiCo, Inc., 238 F. Supp. 2d at 14 1176-77; see also Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 500 (C.D. 15 Cal. 2003). This requires the court to assess whether recovery sought is proportional to the harm 16 caused by defendants’ conduct. See Vogel v. Rite Aid Corp., 992 F. Supp. 2d 998, 1012 (C.D. Cal. 17 2014) (“Default judgment is disfavored where the sum of money at stake is too large or 18 unreasonable in relation to defendant’s conduct.”). 19 Here, Plaintiff seeks damages in the form of $2,301,700.83 comprised of: $2,036,997.53 20 as the amount due for the purchase of products and related shipping costs; $164,703.30 as to the 21 storage fees and dumping fees incurred due to Defendant’s failure to provide timely shipping 22 instructions; and $100,000 as to late fees incurred due to Defendant’s failure to make timely 23 payment. (ECF No. 25 at 8.) The amount for the purchase of products and shipping costs for the 24 invoices accompanied by an email from an officer of Defendant is $1,278.175.81. Id. This 25 amount is reasonable considering it is the amount owned based on the unpaid invoices and 26 storage fees of what the Court deems valid contracts. This factor weighs in favor of granting the 27 default judgment. 28 /// 1 4. The Possibility of a Dispute Concerning Material Fact 2 The Court may assume the truth of well-pleaded facts in the Complaint following the 3 clerk’s entry of default. Here, the Clerk entered default on May 3, 2024, and Defendant has not 4 appeared. (ECF No. 8.) Thus, the Court finds no likelihood that any genuine issue of material fact 5 exists. See, e.g., Elektra Entm’t Group Inc. v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005) 6 (“Because all allegations in a well-pleaded complaint are taken as true after the court clerk enters 7 default judgment, there is no likelihood that any genuine issue of material fact exists.”); accord 8 Philip Morris USA, Inc., 219 F.R.D. at 500; PepsiCo, Inc., 238 F. Supp. 2d at 1177. This factor 9 favors the entry of a default judgment 10 5. Whether the Default Was Due to Excusable Neglect 11 The record contains no indication that Defendant’s default was due to excusable neglect. 12 Due process requires that interested parties be given notice of the pendency of the action and be 13 afforded an opportunity to present their objections before a final judgment is rendered. Mullane v. 14 Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). While there is always a possibility 15 that a defendant might appear and claim excusable neglect, where the defendant “w[as] properly 16 served with the Complaint, the notice of entry of default, as well as the papers in support of the 17 instant motion,” this factor favors entry of default judgment. Shanghai Automation Instrument 18 Co. Ltd. v. Kuei, 194 F. Supp. 2d 995, 1005 (N.D. Cal. 2001). As set forth above, on the record 19 currently before the Court, it appears Defendant was properly served with summons and the 20 Complaint. Despite having been served with the summons and the complaint, Defendant has 21 failed to respond. The lack of any indication of excusable neglect favors entry of a default 22 judgment. 23 6. Policy Favoring Decisions on the Merits 24 “Cases should be decided upon their merits whenever reasonably possible.” Eitel, 782 25 F.2d at 1472. But the mere existence of Rule 55(b) “indicates that this preference, standing alone, 26 is not dispositive.” PepsiCo, Inc., 238 F. Supp. 2d at 1177 (citation omitted); see also Craigslist, 27 Inc. v. Naturemarket, Inc., 694 F. Supp. 2d 1039, 1061 (N.D. Cal. 2010). Rule 55 allows a court 28 to decide a case before the merits are heard if defendant fails to appear and defend. See PepsiCo, 1 Inc., 238 F. Supp. 2d at 1177. Although the Court is cognizant of the policy in favor of decisions 2 on the merits, that policy does not, by itself, preclude the entry of default judgment. 3 7. Recommendation 4 Taken together, the remaining Eitel factors support granting the request for default 5 judgment. It is therefore recommended that a default judgment be entered for the transactions 6 with which Defendants have supplied confirmatory emails. 7 In accordance with the above, IT IS ORDERED as follows: 8 1. Within 5 days after these findings and recommendations are filed, Plaintiff shall serve a 9 copy on Defendant by mail at the address where service of process was effected or at any 10 more recent address known to Plaintiff, and shall file proof of such service 11 It is HEREBY RECOMMENDED that: 12 1. Plaintiff’s motion for default judgment (ECF No. 25) is GRANTED IN PART and 13 DENIED IN PART. 14 2. Judgment be entered in favor of Plaintiff Hessenn Group LLC, and against Defendant 15 InnerScope Hearing Technologies, Inc. for breach of contract and account stated for the 16 transactions that took place on 12/06/2022, 12/07/2022, 12/09/2022, 02/06/2023, 17 03/02/2023, and 04/11/2023 for the sum of $1,278.175.81. 18 These findings and recommendations are submitted to the United States District Judge 19 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen (14) 20 days after being served with these findings and recommendations, any party may file written 21 objections with the court and serve a copy on all parties. Such a document should be captioned 22 “Objections to Magistrate Judge’s Findings and Recommendations.” Any reply to the objections 23 shall be served 24 ///// 25 ///// 26 ///// 27 ///// 28 ///// 1 | parties and filed with the court within fourteen (14) days after service of the objections. 2 || The parties are advised that failure to file objections within the specified time may waive the right 3 || to appeal the District Court’s order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); 4 || Martinez v. Yist, 951 F.2d 1153, 1156-57 (9th Cir. 1991). 5 | Dated: March 19, 2026 Card ft 4 by ae

7 UNITED STATES MAGISTRATE JUDGE 8 || 7.hess.0794 9 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1]