Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_07-cv-00927/USCOURTS-casd-3_07-cv-00927-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1391 Personal Injury

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 1 - 07cv0927

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SOUTHERN CALIFORNIA BREAKFAST

CLUBS, INC., a California corporation,

Plaintiff,

CASE NO. 07 CV 0927 JM (POR)

ORDER GRANTING MOTION

FOR DEFAULT JUDGMENT

AGAINST DEFENDANT

BREAKFAST CLUB AMERICA,

LLC

Doc. No. 43

vs.

BREAKFAST CLUB AMERICA, LLC, a

North Carolina limited liability corporation;

SCOTT CRITES, an individual; CAROL

CRITES, an individual; and DOES 1 through

50, inclusive,

Defendants.

Pending before the court is a motion by plaintiff Southern California Breakfast Clubs, Inc., a

California corporation (“Plaintiff”), to enter default judgment against Defendant Breakfast Club

America, LLC (“BCA”). (Doc. No. 43.) Although Plaintiff served defendants with notice of the

motion, Defendants have not responded and the time for response has expired. After reviewing

Plaintiff’s papers, the court hereby GRANTS the motion for the reasons set forth below.

I. BACKGROUND

This action arises out of franchise agreements entered into by plaintiff Southern California

Breakfast Clubs, Inc. and defendant Breakfast Club America, LLC (“BCA”). BCA is a franchisor of

networking clubs for professionals called “Breakfast Clubs.” Defendant Scott Crites founded and

Case 3:07-cv-00927-JM-POR Document 46 Filed 11/03/08 Page 1 of 3
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

The state-law claims are for declaratory relief, violation of Cal. Corp. Code §§ 31300, 3119,

31201, fraud in the inducement, breach of contract, breach of the implied covenant of good faith and

fair dealing, and violation of Cal. Bus. and Prof. Code § 17200.

- 2 - 07cv0927

formerly acted as BCA’s President/Managing Member. His wife, defendant Carol Crites, formerly

acted as BCA’s Vice President of Franchise Operations. Plaintiff purchased four BCA franchises in

March 2006. Plaintiff sued on a variety of state-law grounds, asserting diversity jurisdiction.1

Plaintiff filed its complaint on May 22, 2007. (Doc. Nos. 1.) All defendants filed a motion

to compel arbitration and motion to stay the action, which was denied by the court on March 10, 2008.

(Doc. No. 36.) In the interim, Defendants Scott and Carol Crites notified the court they had filed for

Chapter 7 bankruptcy, which operates as a stay of this judicial proceeding against them. (Doc. No.

28.) On March 10, 2008, the court ordered remaining defendant BCA to respond to the complaint

within 30 days. (Doc. No. 36.) When BCA failed to so respond, Plaintiff moved the clerk to enter

default and gave notice to Defendants of the same. (Doc. Nos. 36, 39.) The clerk entered default

against BCA on June 9, 2008. (Doc. No. 40.) This motion for default judgment followed.

II. DISCUSSION

Pursuant to Federal Rule of Civil Procedure 55(b), once an entry of default has been entered

against a defendant, the plaintiff must apply to the court for a default judgment. Although policy

considerations militate in favor of resolving cases on their merits rather than through default judgment

procedures, the decision to grant or deny a request for such a judgment falls within the court’s sound

discretion. Schwab v. Bullock's, Inc., 508 F.2d 353, 355 (9th Cir. 1974); Draper v. Combs, 792 F.2d

915 (9th Cir. 1986). Courts consider the following factors in making the determination: the

substantive merits of the plaintiff’s claim; the sufficiency of the complaint; the amount of money at

stake; the possibility of prejudice to plaintiff if relief is denied; and the possibility of dispute as to any

material facts in the case. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

The amount of damages entered in a default judgment may be determined from the allegations

of the complaint or other documentary evidence. Dundee Cement Co. v. Howard Pipe & Concrete

Products, 722 F.2d. 1319, 1323-24 (3rd Cir. 1983). In its Complaint, Plaintiff requested various forms

of relief, including rescission of the franchise agreement, compensatory damages for franchise fees,

Case 3:07-cv-00927-JM-POR Document 46 Filed 11/03/08 Page 2 of 3
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 - 07cv0927

start up expenses and other consequential damages according to proof, attorney’s fees and costs, and

injunctive relief. (Doc. No. 1 at 15-16.) However, in pursuing default judgment, Plaintiff has

narrowed its claim to cover only the amount of the franchise fees paid to BCA. (Doc. No. 43 at 1.)

In its Complaint, Plaintiff alleged that, on or about March 14, 2006, it purchased four BCA

franchises, covering San Diego County, Orange County, Los Angeles County, and Las Vegas

territories, for $65,000 each, totaling $260,000. (Doc. No. 1 at 3.) However, contrary to BCA’s

representations, BCA had failed to register in California as a valid franchisor. (Doc. No. 1 at 3.)

Thereafter, in June 2007, BCA ceased corporate operations, and later failed to issue invitations to

Plaintiff’s July 20, 2007 Las Vegas kick-off event. (Doc. No. 43 at 4.) Plaintiff seeks a return of its

$260,000 investment.

III. CONCLUSION

Upon consideration of the Eitel factors and Plaintiff’s allegations regarding damages, the court

GRANTS the motion for default judgment (Doc. No. 43). The Clerk shall enter judgment for plaintiff

in the amount of $260,000. 

IT IS SO ORDERED.

DATED: November 3, 2008

 Hon. Jeffrey T. Miller

 United States District Judge

cc: All parties

Case 3:07-cv-00927-JM-POR Document 46 Filed 11/03/08 Page 3 of 3