1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Triad Chiropractic & Rehabilitation Clinics No. CV-25-02645-PHX-KML LLC, 10 ORDER Plaintiff, 11 v. 12 Black Sheep Consulting Group LLC, et al., 13 Defendants. 14 15 Plaintiff Triad Chiropractic & Rehabilitation Clinics LLC requests default judgment 16 against defendant Black Sheep Consulting Group, LLC. (Doc. 24.) Triad also requests 17 entry of a stipulated judgment against defendants Michael Wayne Bingham, Judy Lou 18 Brown, and Master Equity Limited Partnership a/k/a Emerging Solutions. (Doc. 30.) Both 19 requests are granted. 20 Default Judgment 21 The court must consider seven factors when deciding whether to enter default 22 judgment. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The seven factors are: 23 (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 24 at 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 25 policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 26 27 Id. These factors establish default judgment is appropriate. 28 1 1. Possibility of Prejudice 2 The first factor regarding the prejudice to Triad weighs in favor of default judgment 3 because if “default judgment is not granted, [Triad] will likely be without other recourse 4 for recovery” against Black Sheep. PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 5 1177 (C.D. Cal. 2002). 6 2. Merits of the Claims and Sufficiency of the Complaint 7 The second and third factors require assessing the merits of Triad’s claims and the 8 sufficiency of its complaint. These factors “are often analyzed together and require courts 9 to consider whether a plaintiff has state[d] a claim on which [he] may recover.” Vietnam 10 Reform Party v. Viet Tan - Vietnam Reform Party, 416 F. Supp. 3d 948, 962 (N.D. Cal. 11 2019). 12 “Triad is a multidisciplinary medical practice that brings together the expertise of 13 pain management and chiropractic doctors” to provide “innovative treatment options.” 14 (Doc. 1 at 2.) This case involves Triad’s purchase of a Peripheral Nerve 15 Stimulator/Peripheral Electrical Neural Stimulator or “PENS device.” (Doc. 1 at 2.) In 16 2022, defendant Black Sheep “acting as an agent for [defendant] Emerging Solutions 17 approached Triad to promote and sell Emerging Solutions’ PENS device to the practice.” 18 (Doc. 1 at 6.) Defendants Bingham (Black Sheep’s sale representative) and Harris (Black 19 Sheep’s managing partner) provided Triad a falsified document that indicated the PENS 20 device had been cleared by the FDA for use in treating substance abuse disorders and for 21 pain relief. (Doc. 1 at 6-7.) In reality, the FDA had only cleared the PENS device for 22 substance abuse disorders. 23 While Triad was negotiating the purchase of the PENS device, defendant Brown (an 24 attorney for Emerging Solutions) provided an analysis to Triad identifying “L8679” as the 25 appropriate Healthcare Common Procedure Coding System code for in-office PENS 26 procedures. The correct code was 64555, not L8679. (Doc. 1 at 8.) Black Sheep also 27 provided to Triad an “Office Reference Guide” that included the same misrepresentation 28 regarding the appropriate code. (Doc. 1 at 8.) Black Sheep and its employees failed to 1 correct the misrepresentations regarding the code as well as the extent of FDA clearance. 2 (Doc. 1 at 8-9.) Triad purchased the device and began billing Medicare using the incorrect 3 code. 4 In August 2023, “Medicare imposed a significant overpayment charge on Triad” 5 because Triad had used the incorrect code in connection with billing for use of the PENS 6 device. Triad sought relief through the administrative process and during that process 7 Brown again represented to Triad that L8679 was the correct code. (Doc. 1 at 9.) The 8 misrepresentations regarding the extent of FDA clearance and the correct code were 9 material to Triad’s decision to purchase the PENS device. Triad incurred significant 10 attorneys’ fees in pursuing the administrative process, but did not prevail. 11 Triad’s complaint contains six claims against various combinations of defendants. 12 Focusing on the claims against Black Sheep, Triad asserted claims four claims: violation 13 of the Arizona Consumer Fraud Act, common-law fraud, “Conspiracy to Commit Fraud,” 14 and unjust enrichment. 15 Black Sheep was served (Doc. 16), but did not respond to the complaint and its 16 default was entered (Doc. 21).1 Triad filed its motion for default judgment against Black 17 Sheep, but that motion provides no analysis regarding the validity of its four claims against 18 Black Sheep. Instead, Triad merely argues its complaint “states, and details, four causes of 19 action.” (Doc. 24 at 3.) It appears the damages Triad seeks under each claim are the same, 20 so there is no need to assess the validity of all four claims. It is enough to assess whether 21 Triad has adequately alleged claims under the Arizona Consumer Fraud Act and common- 22 law fraud. See Beacon Sales Acquisition, Inc. v. S. W. Solar, Inc., No. 2:22-CV-2117, 2022 23 WL 3574413, at *2 (C.D. Cal. June 7, 2022) (court need not analyze all claims in detail 24 where one is “a viable and sufficient claim for all of the relief [a plaintiff] seeks”). 25 “The elements of a private cause of action under the [Arizona Consumer Fraud Act]
26 1 On January 26, 2026, an attorney for Black Sheep filed a “Suggestion of Bankruptcy.” (Doc. 27.) That filing appeared to indicate Black Sheep had filed for bankruptcy and 27 obtained a discharge. (Doc. 27 at 1.) Triad subsequently filed a notice stating the bankruptcy docket did not reveal any discharge and Black Sheep’s attorney had conceded 28 as much. (Doc. 29 at 1.) Because it does not appear to have led to a discharge, the bankruptcy filing does not prevent issuance of default judgment against Black Sheep. 1 are a false promise or misrepresentation made in connection with the sale or advertisement 2 of merchandise and the hearer’s consequent and proximate injury.” Castle v. Barrett- 3 Jackson Auction Co., LLC, 276 P.3d 540, 542 (Ariz. Ct. App. 2012) (simplified). The 4 elements of a common-law fraud claim are: (1) a representation; (2) its falsity; (3) its 5 materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) his intent 6 that it should be acted upon by and in the manner reasonably contemplated; (6) the hearer’s 7 ignorance of its falsity; (7) his reliance on the truth; (8) his right to rely thereon; and (9) his 8 consequent and proximate injury.” Navajo Health Found.-Sage Mem’l Hosp. Inc. v. 9 Razaghi Dev. Co. LLC, 800 F. Supp. 3d 955, 983 (D. Ariz. 2025) (simplified). Triad’s 10 factual allegations sufficiently establish these elements. 11 Triad has identified false representations made to it by Black Sheep and its 12 employees regarding FDA clearance and the appropriate billing code, those representations 13 were material to Triad’s decision to purchase the PENS device, Black Sheep intended for 14 Triad to rely on the representations, Triad did not know the representations were false, and 15 Triad suffered damages in the form of penalties and charges from Medicare as a result of 16 Black Sheep’s actions. Triad has adequately alleged fraud-based claims so the second and 17 third default judgment factors support entry of default judgment. 18 3.
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Triad Chiropractic & Rehabilitation Clinics No. CV-25-02645-PHX-KML LLC, 10 ORDER Plaintiff, 11 v. 12 Black Sheep Consulting Group LLC, et al., 13 Defendants. 14 15 Plaintiff Triad Chiropractic & Rehabilitation Clinics LLC requests default judgment 16 against defendant Black Sheep Consulting Group, LLC. (Doc. 24.) Triad also requests 17 entry of a stipulated judgment against defendants Michael Wayne Bingham, Judy Lou 18 Brown, and Master Equity Limited Partnership a/k/a Emerging Solutions. (Doc. 30.) Both 19 requests are granted. 20 Default Judgment 21 The court must consider seven factors when deciding whether to enter default 22 judgment. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The seven factors are: 23 (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 24 at 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 25 policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 26 27 Id. These factors establish default judgment is appropriate. 28 1 1. Possibility of Prejudice 2 The first factor regarding the prejudice to Triad weighs in favor of default judgment 3 because if “default judgment is not granted, [Triad] will likely be without other recourse 4 for recovery” against Black Sheep. PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 5 1177 (C.D. Cal. 2002). 6 2. Merits of the Claims and Sufficiency of the Complaint 7 The second and third factors require assessing the merits of Triad’s claims and the 8 sufficiency of its complaint. These factors “are often analyzed together and require courts 9 to consider whether a plaintiff has state[d] a claim on which [he] may recover.” Vietnam 10 Reform Party v. Viet Tan - Vietnam Reform Party, 416 F. Supp. 3d 948, 962 (N.D. Cal. 11 2019). 12 “Triad is a multidisciplinary medical practice that brings together the expertise of 13 pain management and chiropractic doctors” to provide “innovative treatment options.” 14 (Doc. 1 at 2.) This case involves Triad’s purchase of a Peripheral Nerve 15 Stimulator/Peripheral Electrical Neural Stimulator or “PENS device.” (Doc. 1 at 2.) In 16 2022, defendant Black Sheep “acting as an agent for [defendant] Emerging Solutions 17 approached Triad to promote and sell Emerging Solutions’ PENS device to the practice.” 18 (Doc. 1 at 6.) Defendants Bingham (Black Sheep’s sale representative) and Harris (Black 19 Sheep’s managing partner) provided Triad a falsified document that indicated the PENS 20 device had been cleared by the FDA for use in treating substance abuse disorders and for 21 pain relief. (Doc. 1 at 6-7.) In reality, the FDA had only cleared the PENS device for 22 substance abuse disorders. 23 While Triad was negotiating the purchase of the PENS device, defendant Brown (an 24 attorney for Emerging Solutions) provided an analysis to Triad identifying “L8679” as the 25 appropriate Healthcare Common Procedure Coding System code for in-office PENS 26 procedures. The correct code was 64555, not L8679. (Doc. 1 at 8.) Black Sheep also 27 provided to Triad an “Office Reference Guide” that included the same misrepresentation 28 regarding the appropriate code. (Doc. 1 at 8.) Black Sheep and its employees failed to 1 correct the misrepresentations regarding the code as well as the extent of FDA clearance. 2 (Doc. 1 at 8-9.) Triad purchased the device and began billing Medicare using the incorrect 3 code. 4 In August 2023, “Medicare imposed a significant overpayment charge on Triad” 5 because Triad had used the incorrect code in connection with billing for use of the PENS 6 device. Triad sought relief through the administrative process and during that process 7 Brown again represented to Triad that L8679 was the correct code. (Doc. 1 at 9.) The 8 misrepresentations regarding the extent of FDA clearance and the correct code were 9 material to Triad’s decision to purchase the PENS device. Triad incurred significant 10 attorneys’ fees in pursuing the administrative process, but did not prevail. 11 Triad’s complaint contains six claims against various combinations of defendants. 12 Focusing on the claims against Black Sheep, Triad asserted claims four claims: violation 13 of the Arizona Consumer Fraud Act, common-law fraud, “Conspiracy to Commit Fraud,” 14 and unjust enrichment. 15 Black Sheep was served (Doc. 16), but did not respond to the complaint and its 16 default was entered (Doc. 21).1 Triad filed its motion for default judgment against Black 17 Sheep, but that motion provides no analysis regarding the validity of its four claims against 18 Black Sheep. Instead, Triad merely argues its complaint “states, and details, four causes of 19 action.” (Doc. 24 at 3.) It appears the damages Triad seeks under each claim are the same, 20 so there is no need to assess the validity of all four claims. It is enough to assess whether 21 Triad has adequately alleged claims under the Arizona Consumer Fraud Act and common- 22 law fraud. See Beacon Sales Acquisition, Inc. v. S. W. Solar, Inc., No. 2:22-CV-2117, 2022 23 WL 3574413, at *2 (C.D. Cal. June 7, 2022) (court need not analyze all claims in detail 24 where one is “a viable and sufficient claim for all of the relief [a plaintiff] seeks”). 25 “The elements of a private cause of action under the [Arizona Consumer Fraud Act]
26 1 On January 26, 2026, an attorney for Black Sheep filed a “Suggestion of Bankruptcy.” (Doc. 27.) That filing appeared to indicate Black Sheep had filed for bankruptcy and 27 obtained a discharge. (Doc. 27 at 1.) Triad subsequently filed a notice stating the bankruptcy docket did not reveal any discharge and Black Sheep’s attorney had conceded 28 as much. (Doc. 29 at 1.) Because it does not appear to have led to a discharge, the bankruptcy filing does not prevent issuance of default judgment against Black Sheep. 1 are a false promise or misrepresentation made in connection with the sale or advertisement 2 of merchandise and the hearer’s consequent and proximate injury.” Castle v. Barrett- 3 Jackson Auction Co., LLC, 276 P.3d 540, 542 (Ariz. Ct. App. 2012) (simplified). The 4 elements of a common-law fraud claim are: (1) a representation; (2) its falsity; (3) its 5 materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) his intent 6 that it should be acted upon by and in the manner reasonably contemplated; (6) the hearer’s 7 ignorance of its falsity; (7) his reliance on the truth; (8) his right to rely thereon; and (9) his 8 consequent and proximate injury.” Navajo Health Found.-Sage Mem’l Hosp. Inc. v. 9 Razaghi Dev. Co. LLC, 800 F. Supp. 3d 955, 983 (D. Ariz. 2025) (simplified). Triad’s 10 factual allegations sufficiently establish these elements. 11 Triad has identified false representations made to it by Black Sheep and its 12 employees regarding FDA clearance and the appropriate billing code, those representations 13 were material to Triad’s decision to purchase the PENS device, Black Sheep intended for 14 Triad to rely on the representations, Triad did not know the representations were false, and 15 Triad suffered damages in the form of penalties and charges from Medicare as a result of 16 Black Sheep’s actions. Triad has adequately alleged fraud-based claims so the second and 17 third default judgment factors support entry of default judgment. 18 3. Amount in Controversy 19 The fourth default judgment factor “requires that the court assess whether the 20 recovery sought is proportional to the harm caused by defendant’s conduct.” Landstar 21 Ranger, Inc. v. Parth Enterprises, Inc., 725 F. Supp. 2d 916, 921 (C.D. Cal. 2010). When 22 a large sum is at stake, this factor may weigh against default judgment. Curtis v. 23 Illumination Arts, Inc., 33 F. Supp. 3d 1200, 1212 (W.D. Wash. 2014). Triad is seeking 24 $267,072.87 in damages. That amount is calculated as the amount Medicare demanded, the 25 attorneys’ fees Triad occurred in pursuing the administrative appeals process, and an 26 amount in additional administrative and staff time. This harm is directly tied to Black 27 Sheep’s actions and supports entry of default judgment. 28 1 4. Dispute Over Material Facts 2 The fifth factor is whether there are any disputes over material facts. Black Sheep’s 3 decision to not participate means there is no indication of such disputes. This factor weighs 4 in favor of default judgment. 5 5. Excusable Neglect 6 There is no indication Black Sheep’s failure to participate is the result of excusable 7 neglect. See Shanghai Automation Instrument Co. v. Kuei, 194 F. Supp. 2d 995, 1005 (N.D. 8 Cal. 2001) (defendants’ failure to respond to complaint could not “be attributable to 9 excusable neglect” because “[a]ll were properly served with the Complaint, the notice of 10 entry of default, as well as the papers in support of the instant motion.”). This factor 11 supports entry of default judgment. 12 6. Policy Favoring Decisions on the Merits 13 The seventh factor recognizes a preference for resolving matters on their merits. 14 This factor, as always, weighs against entry of default judgment. “However, the mere 15 existence of Fed.R.Civ.P. 55(b) indicates that this preference, standing alone, is not 16 dispositive.” PepsiCo, 238 F. Supp. 2d at 1177 (simplified). 17 7. Default Judgment is Merited 18 Under the seven factors, default judgment is appropriate. 19 8. Damages 20 It is Triad’s burden to prove the amount of its damages. Blumenthal Distrib., Inc. v. 21 Comoch Inc., 652 F. Supp. 3d 1117, 1131 (C.D. Cal. 2023). Triad provided a declaration 22 from its owner and operator attesting to the damages Triad incurred because of Black 23 Sheep’s fraudulent behavior. (Doc. 24-2 at 2.) That declaration is sufficient evidence that 24 Black Sheep “cost plaintiff-Triad at least $267,072.87 in direct expenses.” (Doc. 24-2 at 25 3.) Judgment in that amount is appropriate. 26 Stipulated Judgment 27 The defendants other than Black Sheep were also served, and their defaults were 28 entered, but Triad and those defendants entered into a settlement agreement. (Doc. 30-1.) 1 || The settlement agreement required payment of $60,000 but if that amount was not paid, || the defendants other than Black Sheep agreed to entry of judgment against them in the amount of $500,000. (Doc. 30-1 at 4.) The other defendants did not perform under the 4|| settlement agreement and Triad filed a motion seeking entry of the agreed-upon judgment 5 || against them. (Doc. 30.) The defendants did not oppose Triad’s motion, and it is granted. 6|| See Local Rule 7.2(i). 7 Accordingly, 8 IT IS ORDERED the Motion for Default Judgment (Doc. 24) is GRANTED. 9 IT IS FURTHER ORDERED the Motion for Entry of Judgment (Doc. 30) is 10|| GRANTED. 11 IT IS FURTHER ORDERED the Clerk of Court shall enter judgment in favor of plaintiff and against defendant Black Sheep Consulting Group, LLC, in the amount of 13 || $267,072.87. That judgment shall also reflect plaintiff shall recover from defendants Michael Wayne Bingham, July Lou Brown, and Master Equity Limited Partnership a/k/a 15 |) Emerging Solutions the principal sum of $500,000.00 plus interest, less any amount paid pursuant to the Settlement Agreement filed at Doc. 30-1. 17 IT IS FURTHER ORDERED plaintiff may file a motion for attorneys’ fees that 18 |} complies with Local Rule 54.2. 19 Dated this 20th day of May, 2026. 20
Honorable Krissa M. Lanham 23 United States District Judge 24 25 26 27 28
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