KMS LLC v. Major League Trucking Inc

Opinion

1 2 3

4 5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 MAJOR LEAGUE TRUCKING, INC., CASE NO. C23-1119-KKE 8

Third-Party Plaintiff/ ORDER GRANTING IN PART MOTION 9 Counter-Defendant, FOR DEFAULT JUDGMENT

10 v.

11 FORSLA LLC,

12 Third-Party Defendant/ Counter Claimant. 13

14 The Court entered an order of default as to Counter-Defendant Major League Trucking, 15 Inc. (“MLT”) on May 17, 2024. Dkt. No. 104. Counter Claimant Forsla LLC has now moved for 16 entry of default judgment against MLT. Dkt. No. 106. Because Forsla has shown that it is entitled 17 to default judgment on its claim against MLT, the Court will grant Forsla’s motion and award 18 Forsla most of the amounts it has requested, with a minor reduction in attorney’s fees. 19 I. BACKGROUND 20 KMS LLC, an importer of air conditioning equipment from China, filed a lawsuit in the 21 U.S. District Court for the Central District of California in September 2022, alleging that MLT 22 agreed to transport six ocean shipping containers of KMS cargo from MLT’s facility to KMS’s 23 facility, but then refused to deliver the cargo. Dkt. No. 1 ¶¶ 6, 11. KMS alleged that this breach 24 1 of contract caused $973,544.40 in damages. Id. ¶ 14. KMS’s complaint also lists causes of action 2 for conversion, replevin, and attachment of pre-judgment interest. Id. ¶¶ 16–27. 3 In September 2022, default was entered against MLT after it failed to appear or otherwise

4 respond to the complaint. See Dkt. No. 17. MLT subsequently appeared and moved to set aside 5 the default. Dkt. No. 23. In March 2023, the court granted that motion on the condition that MLT 6 reimburse KMS for its attorney’s fees and costs incurred as a result of MLT’s default. Dkt. No. 7 44. 8 MLT subsequently filed an answer (Dkt. No. 46) and a third-party complaint (Dkt. No. 47), 9 alleging that it had a contract with third-party Defendant Forsla whereby MLT would provide 10 delivery services for Forsla customers. MLT alleged that on certain occasions, Forsla requested 11 that MLT store containers while Forsla awaited delivery instructions, and that MLT agreed to do 12 so only if Forsla would pay the storage facility’s per diem fee. Dkt. No. 47 ¶ 9. MLT alleged that

13 Forsla requested that MLT store the containers referenced in KMS’s complaint while it awaited 14 instructions, but that Forsla has refused to pay the per diem fee. Id. ¶¶ 13–17. MLT asserts that 15 Forsla owes it more than $1 million in such charges. Id. ¶ 31. MLT states that it cannot release 16 the containers to KMS until Forsla pays the per diem fees. Id. ¶ 14. 17 In April 2023, Forsla filed a motion to dismiss for improper venue and on the same day, 18 KMS filed a motion for partial judgment on the pleadings. Dkt. Nos. 57, 58. The court denied 19 KMS’s motion for partial judgment on the pleadings (Dkt. No. 72), and granted in part/denied in 20 part Forsla’s motion to dismiss, thereby transferring the third-party complaint to the U.S. District 21 Court for the Western District of Washington based on a forum-selection clause in Forsla’s 22 contract with MLT. Dkt. No. 73.

23 The case was transferred to this Court on July 27, 2023. Dkt. No. 74. Forsla filed an 24 answer to the third-party complaint and asserted a counterclaim against MLT in November 2023, 1 alleging that MLT overcharged Forsla for transportation and storage of cargo. Dkt. No. 92. MLT 2 filed its answer to the counterclaim in December 2023. Dkt. No. 94. 3 In April 2024, MLT’s attorneys filed a motion to withdraw representation, indicating that

4 MLT had stopped communicating with them and has refused to pay its attorney’s fees. Dkt. No. 5 95. The Court granted the motion to withdraw and instructed MLT, as an unrepresented business 6 entity, to obtain representation no later than May 7, 2024. Dkt. No. 99. MLT did not obtain 7 representation, and the Court entered an order in May 2024 striking MLT’s third-party complaint 8 for failure to prosecute. Dkt. No. 102. The clerk thereafter entered default against MLT (Dkt. No. 9 104), and Forsla’s motion for default judgment against MLT is now ripe for resolution. Dkt. No. 10 106. 11 II. ANALYSIS 12 A. Jurisdiction

13 Before entering default judgment, a court must confirm that it has both subject matter and 14 personal jurisdiction. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999) (“When entry of judgment 15 is sought against a party who has failed to plead or otherwise defend, a district court has an 16 affirmative duty to look into its jurisdiction over both the subject matter and the parties.”). 17 Here, the Court has both diversity jurisdiction under 28 U.S.C. § 1332 and original 18 jurisdiction under 28 U.S.C. § 1337 because the cargo at issue was in interstate transportation. See 19 Dkt. Nos. 84, 85. 20 The Court also has personal jurisdiction over MLT by virtue of its carrier agreement with 21 Forsla, a Washington company, which provides that any legal actions arising under the contract 22 will be governed by Washington law and resolved in the courts of Seattle, Washington. See Dkt.

23 No. 73 (Central District of California order transferring MLT’s third-party complaint to this 24 district); Dkt. No. 107-1 at 12 (carrier agreement). 1 B. Legal Standards 2 A court’s decision to enter a default judgment is discretionary. Aldabe v. Aldabe, 616 F.2d 3 1089, 1092 (9th Cir. 1980). Default judgment is “ordinarily disfavored” because “[c]ases should

4 be decided upon their merits whenever reasonably possible.” Eitel v. McCool, 782 F.2d 1470, 5 1472 (9th Cir. 1986). In considering a motion for default judgment, the court takes “the well- 6 pleaded factual allegations” in the pleadings “as true[,]” but “necessary facts not contained in the 7 pleadings, and claims which are legally insufficient, are not established by default.” Cripps v. Life 8 Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). 9 When considering whether to exercise its discretion to enter a default judgment, courts may 10 consider various factors, including: 11 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at 12 stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy 13 underlying the Federal Rules of Civil Procedure favoring decisions on the merits.

14 Eitel, 782 F.2d at 1471–72. “The merits of the plaintiff’s substantive claim and the sufficiency of 15 the complaint are often treated by courts as the most important Eitel factors.” Fed. Nat’l Mortg. 16 Ass’n v. George, No. EDCV 14-01679-VAP (SPx), 2015 WL 4127958, at *3 (C.D. Cal. July 7, 17 2015). 18 This district also requires a party seeking default judgment to provide “a declaration and 19 other evidence establishing plaintiff’s entitlement to a sum certain and to any nonmonetary relief 20 sought.” Local Rules W.D. Wash. LCR 55(b)(2). “A default judgment must not differ in kind 21 from, or exceed in amount, what is demanded in the pleadings.” Fed. R. Civ. P. 54(c). 22 C. Forsla is Entitled to Default Judgment Against MLT. 23 The Court now turns to apply the Eitel factors to this case, and finds that they support entry 24 of default judgment against MLT on Forsla’s counterclaim. 1 The first factor—prejudice to Forsla—supports entry of default judgment because Forsla 2 would suffer prejudice if default judgment were denied. Because MLT has failed to defend, Forsla 3 would “be denied the right to judicial resolution of the claims presented, and would be without

4 other recourse for recovery” if default judgment were not entered. Elektra Ent. Grp. Inc. v. 5 Crawford, 226 F.R.D. 388, 392 (C.D. Cal. 2005). 6 “The second and third Eitel factors—the substantive merits of the claim and the sufficiency 7 of the complaint—are often analyzed together.” Curtis v. Illumination Arts, Inc., 33 F. Supp. 3d 8 1200, 1211 (W.D. Wash. 2014). Forsla’s counterclaim alleges that MLT invoiced Forsla 9 $64,485.68 more than MLT was entitled to invoice for rental and use of cargo chassis, and that 10 Forsla paid MLT that amount; and that MLT invoiced Forsla $61,000 more than MLT was entitled 11 to invoice for storage charges, and that Forsla paid MLT that amount. See Dkt. No. 92 at 7. 12 Forsla’s counterclaim also alleges that, as provided in the carrier agreement between Forsla and

13 MLT, Forsla is entitled to recover its attorney’s fees and costs incurred as a result of MLT’s 14 misconduct. Id. (referencing Dkt. No. 107-1 at 12). Forsla has adequately supported these 15 allegations with copies of the invoices in question, as well as an accounting of the amounts 16 overcharged to Forsla by MLT. See Dkt. No. 107-2, 107-3, 107-4. Forsla has likewise submitted 17 a spreadsheet detailing the hours expended by its attorneys and invoices for litigation costs to 18 support its request for fees and costs. See Dkt. Nos. 108-1, 108-2. Because Forsla’s allegations 19 are assumed to be true for purposes of resolving this motion, and Forsla’s counterclaim and 20 documentation sufficiently allege and support its request for relief, the Court finds that the second 21 and third Eitel factors support entry of default judgment. 22 The fourth Eitel factor is the sum of money at stake, and in this action, Forsla seeks an

23 award totaling $184,462.73. See Dkt. No. 106-1. Forsla acknowledges that this amount is 24 “relatively high,” but contends that it is nonetheless “directly proportional to the harm alleged in 1 the counterclaim[,]” namely the overcharged amounts for transportation and storage of cargo, and 2 the interest, fees, and costs allowable under Washington law and the agreement between the 3 parties. Dkt. No. 106 at 6 (citing Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F. Supp. 2d

4 916, 921 (N.D. Cal. 2010) (explaining that this Eitel factor “requires that the court assess whether 5 the recovery sought is proportional to the harm caused by defendant’s conduct”)). Because, as 6 explained earlier, Forsla has traced the amounts it seeks to specific invoices and its accounting 7 spreadsheet identifies the overcharged amounts, the fourth Eitel factor supports entry of default 8 judgment. 9 The fifth Eitel factor—the possibility of dispute over material facts—also favors entry of 10 default judgment. Generally, after “default has been entered, courts find that there is no longer the 11 possibility of a dispute concerning material facts because the court must take the plaintiff’s factual 12 allegations as true.” Curtis, 33 F. Supp. 3d at 1212.

13 The sixth Eitel factor—whether default is due to excusable neglect—favors entering 14 default judgment because MLT has failed to defend in this action by failing to obtain counsel, 15 despite having ample opportunity to do so. See Dkt. Nos. 99, 102 (the Court’s order to show cause 16 why MLT’s pleadings should not be stricken for failure to prosecute, and the Court’s order finding 17 that MLT failed to respond to the order to show cause). 18 The seventh Eitel factor—the policy favoring resolution of disputes via contested 19 litigation—weighs against entry of default judgment. This factor is outweighed by the other 20 factors, however, and default judgment is not precluded based on this policy. See Empl. Painters’ 21 Trust v. Dahl Constr. Servs., Inc., No. C19-1541-RSM, 2020 WL 3639591, at *4 (W.D. Wash. 22 July 6, 2020) (finding “that in instances where a defendant’s failure to appear makes a decision on

23 the merits ‘impractical, if not impossible,’ any preference for deciding cases on the merits ‘does 24 1 not preclude a court from granting default judgment.’” (quoting PepsiCo, Inc. v. Cal. Sec. Cans, 2 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002))). 3 Because the Eitel factors on balance favor entry of default judgment, the Court will grant

4 Forsla’s motion. 5 D. Most of the Amounts Sought by Forsla are Reasonable and Appropriate, Although the Attorney’s Fees Requested for Associate Attorneys are Unreasonably High. 6 As explained above, Forsla has adequately supported its requests for $125,495.98 in 7 principal damages via invoices and accounting spreadsheets. See Dkt. Nos. 107-2, 107-3, 107-4. 8 Forsla also adequately supported its request for costs ($7.62) via invoices. See Dkt. No. 108-2. 9 Forsla did not fully support its request for attorney’s fees ($50,346.50), however. To 10 determine the total amount of fees requested (Dkt. No. 108 ¶ 3), Forsla used the “lodestar” method, 11 which involves multiplying the number of hours reasonably expended on the claim or motion by 12 a reasonable hourly rate. See, e.g., Jordan v. Multnomah Cnty., 815 F.2d 1258, 1262 (9th Cir. 13 1987). The Court is satisfied, based on a review of the timesheets provided, that the hours 14 expended were reasonable. See Dkt. No. 108-1. The Court, however, finds that the hourly rates 15 billed by Forsla’s associate attorneys appear to be above market rate. Although one of Forsla’s 16 attorneys (a shareholder with 31 years of experience practicing transportation and logistics law) 17 billed $560/hour, the billing rates for three associate attorneys with an undisclosed number of years 18 (between $435/hour and $530/hour) are relatively close to the shareholder’s rate. See Dkt. No. 19 108 ¶¶ 2–3. Forsla submitted no evidence to support its contention that the associate rates are 20 consistent with market rates in this district, and the Court is aware of authority suggesting that the 21 associate attorneys’ rates are unreasonably high. See, e.g., Dermer v. SaltWorks, Inc., C23-0443- 22 JCC, 2024 WL 895128, at *2 (W.D. Wash. Mar. 1, 2024) (finding that the hourly rate for an 23 associate should be adjusted down from $350 to $300, because $350 is not the market rate for 24 1 attorneys with comparable experience); Little v. Edward Wolff & Assocs. LLC, No. 2:21-cv-00227- 2 LK, 2023 WL 6196863, at *7 (W.D. Wash. Sep. 22, 2023) (finding $425 to be a reasonable hourly 3 rate for a managing associate attorney with multiple years of experience and extensive training in

4 the relevant area of law, even though this rate was “slightly above rates deemed reasonable in 5 similar contexts in this district”). 6 Because the Court is not persuaded that the rates billed by Forsla’s associate attorneys are 7 reasonable within the relevant market, and Forsla has not submitted any evidence to support its 8 assertion of reasonableness or to explain why each associate’s billing rate was unique, the Court 9 finds that a reduction of the associates’ rates to $350/hour is appropriate. See Roberts v. City of 10 Honolulu, 938 F.3d 1020, 1024 (9th Cir. 2019) (explaining that a reasonable hourly rate is the 11 “prevailing market rate” in the community for similar services by a lawyer of reasonably 12 comparable skill, experience, and reputation). This reduction results in an overall fee award of

13 $46,627.00: $10,955.00 for the associates, and $35,672.00 for the shareholder. 14 E. Forsla Is Entitled to Pre- and Post-Judgment Interest. 15 In Washington, pre-judgment interest is available when an amount claimed is “liquidated,” 16 meaning that it is “possible to compute the amount with exactness, without reliance on opinion or 17 discretion.” Prier v. Refrigeration Eng’g Co., 442 P.2d 621, 626 (Wash. 1968). Here, Forsla’s 18 claim is liquidated because the amount overcharged by MLT is documented via invoices and an 19 accounting spreadsheet. The Court therefore finds that Forsla is entitled to an award of pre- 20 judgment interest. Forsla requests that the Court set the pre-judgment interest rate at 12% per 21 annum (Dkt. No. 106 at 9–10), and the Court finds no reason to depart from the statutory rate here. 22 See WASH. REV. CODE § 19.52.010. The Court will therefore award $11,551.59 in pre-judgment

23 interest, calculated from the date that Forsla’s counterclaim was filed through the date of this 24 judgment. See Pub. Util. Dist. No. 2 of Pac. Cnty. v. Comcast of Wash. IV, Inc., 336 P.3d 65, 91 1 (Wash. Ct. App. 2014) (“Prejudgment interest compensates a plaintiff for the ‘use value’ of 2 damages incurred from the time of the loss until the date of judgment.” (quoting Humphrey Indus., 3 Ltd. v. Clay Street Assocs., LLC, 295 P.3d 231, 236 (Wash. 2013)).

4 Forsla is also entitled to an award of post-judgment interest, as required under 28 U.S.C. § 5 1961. See Air Separation, Inc. v. Underwriters at Lloyd’s of London, 45 F.3d 288, 290 (9th Cir. 6 1995). 7 III. CONCLUSION 8 For these reasons, the Court GRANTS IN PART and DENIES IN PART Forsla’s motion 9 for entry of default judgment. Dkt. No. 106. 10 Forsla is entitled to $125,485.98 in principal damages, $11,551.59 in pre-judgment interest, 11 $46,627.00 in attorney’s fees, and $7.82 in costs. Forsla is also entitled to post-judgment interest 12 under 28 U.S.C. § 1961.

13 Dated this 5th day of September, 2024. 14 A 15 Kymberly K. Evanson 16 United States District Judge 17

19 20 21 22 23 24