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Tilted Kilt Franchise Operating LLC v. Falinason Incorporated

United States District Court, D. Arizona

December 21, 2018

Tilted Kilt Franchise Operating LLC, Petitioner,
Falinason Incorporated, et al., Respondents.



         Petitioner Tilted Kilt Franchise Operating, LLC moves for default judgment against Respondents Falinason, Inc., Nirav Patel, and Lina Patel pursuant to Federal Rule of Civil Procedure 55(b). (Docs. 14, 23.) No. response has been filed and the time for filing one has passed. For reasons stated below, Petitioner's motion is granted.

         I. Background

         On November 22, 2016, Petitioner filed for arbitration before the American Arbitration Association. Respondents appeared through counsel and participated in the arbitration. On August 30, 2017, however, the parties entered into a settlement agreement resolving all claims asserted in the arbitration. As part of the settlement agreement, Respondents agreed to pay to Petitioners: (1) a sum certain, and (2) in the event they breached the payment terms of the settlement agreement, liquated damages owed pursuant to the franchise agreement. It also was agreed that the arbitration would be held in abeyance until Respondents made all payments due under the settlement agreement.

         Respondents failed to make the required payments, breaching the settlement agreement. As a result, Petitioner resumed the arbitration and amended its claim to add a count for breach of the settlement agreement. On December 19, 2017, Petitioner filed a motion for summary judgment. On February 1, 2018, the arbitrator held a telephonic hearing on the motion, at which all parties appeared and participated.

         On February 14, 2018, the arbitrator issued an interim arbitration award in favor of Petitioner and against Respondents on the breach of the settlement agreement claim. On March 22, 2018, the arbitrator issued a final award, finding Respondents jointly and severally liable for $1, 486, 811.55 in damages and $22, 941.39 in attorneys' fees and costs. To date, this award has not been vacated, modified, or corrected, and the time to do so has long since expired.

         On June 25, 2018, Petitioner initiated this case to confirm the arbitration award under the Federal Arbitration Act. (Doc. 1.) Respondents were properly served[1] but failed to answer or otherwise defend within the time prescribed by the Federal Rules of Civil Procedure. Upon application by Petitioner, the Clerk entered default against Respondents. (Docs. 11-12, 21-22.) Petitioner now seeks entry of a default judgment. (Docs. 14, 22.)

         II. Default Judgment Standard

         After default is entered by the clerk, the district court may enter default judgment pursuant to Rule 55(b). The court's “decision whether to enter a default judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Although the court should consider and weigh relevant factors as part of the decision-making process, it “is not required to make detailed findings of fact.” Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002).

         The following factors may be considered in deciding whether default judgment is appropriate: (1) the possibility of prejudice to the plaintiff, (2) the merits of the claims, (3) the sufficiency of the complaint, (4) the amount of money at stake, (5) the possibility of factual disputes, (6) whether default is due to excusable neglect, and (7) the policy favoring decisions on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In considering the merits and sufficiency of the complaint, the court accepts as true the complaint's well-pled factual allegations, but the plaintiff must establish all damages sought in the complaint. See Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977).

         III. Discussion

         A. Possible Prejudice to Petitioner

         The first Eitel factor weighs in favor of default judgment. Respondents failed to respond to the petition or otherwise appear in this action despite being served with the complaint, the application for default, and the motion for default judgment. If default judgment is not granted, Petitioner “will likely be without other recourse for recovery.” PepsiCo, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002). The prejudice to Petitioner in this regard supports the entry of default judgment.

         B. Merits of the Claims and Sufficiency ...

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