Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-04963/USCOURTS-cand-3_15-cv-04963-13/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Fair Labor Standards Act

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

THOMAS E. PEREZ, Secretary of Labor,

United States Department of Labor,

Plaintiff,

 v.

i2a TECHNOLOGIES, INC., a California

Corporation, VICTOR BATINOVICH, an

individual,

Defendants. /

No. C 15-04963 WHA

ORDER GRANTING THE

SECRETARY OF LABOR’S

MOTION FOR DEFAULT

JUDGMENT AND DENYING

VICTOR BATINOVICH’S

MOTION TO SET ASIDE

DEFAULT

INTRODUCTION

In this wage-and-hour action, defendants failed to answer the complaint. The Secretary

of Labor requested entry of default by the Clerk, which request was granted. The Secretary

now moves for default judgment, and one defendant moves to set aside the entry of default. At

this stage after default has been entered, defendant needs to show a meritorious defense but has

failed to do so. The Secretary of Labor’s motion for default is GRANTED, and defendant’s

motion to set aside the default is DENIED.

STATEMENT

Defendant Victor Batinovich was the majority shareholder, chief executive officer, and a

member of the board of directors of i2a Technologies, Inc. i2a manufactured semiconductors. 

In May 2015, the Department of Labor began investigating i2a and Batinovich for failure to pay

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their hourly employees. The investigation revealed that defendants failed to pay $205,323.84 in

wages, covering nine two-week pay periods between August 2014 and June 2015. Furthermore,

the investigation revealed defendants had continuously failed to pay their employees for work

performed between September 21, 2015 and November 17, 2015, resulting in an additional

$56,470.42 in unpaid wages.

Batinovich purportedly abandoned i2a in July 2015, although he returned to the office

intermittently over the following months. He never communicated his departure to i2a’s

employees and never directed them to stop working. Batinovich failed to resign his positions

on the board of directors or as the CEO of the company. He retained his majority stake in the

company, although he sought to sell the company to investors. Batinovich purportedly left the

company under the control of Frederick Solomon, the engineering manager, although Solomon

later testified the company continued to operate without anyone in charge.

The Secretary of Labor commenced this action in October 2015 and moved for a

temporary restraining order requiring defendants to pay their employees’ outstanding wages for

work performed that month — a total of $56,470.42. The Secretary also sought to enjoin the

sale and shipment of so-called “hot goods” that were made by workers who were not paid

minimum wage. The Secretary served defendants with notice of the action and its motion for a

temporary restraining order, but no one appeared for the defendants at the hearing. The Court

issued the requested temporary restraining order and required defendants to show cause at a

later hearing why a preliminary injunction should not issue (Dkt. No. 12).

In November 2015, the Court held a hearing on the Secretary’s motion to convert the

temporary restraining order into a preliminary injunction. Batinovich appeared pro se at the

hearing. He stated that he had not received any service of process in this action, although he

was listed as the agent for the service of process for i2a. At the hearing, counsel for the

Secretary personally served Batinovich with the temporary restraining order, the summons, and

the complaint. Batinovich stated that he could receive further service at the headquarters of

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i2A. An order converted the temporary restraining order to a preliminary injunction (Dkt. No.

19).

At the hearing, the Secretary informed the Court that Batinovich and i2a had failed to

pay any of the outstanding wages required by the temporary restraining order, and that the

employees continued to work without pay. Batinovich turned to the employees in the gallery

and directed them to stop working. They did not return to work at i2a thereafter. Batinovich

and i2a were ordered to show cause why they should not be held in civil contempt for failing to

pay the $56,470.42 as required by the temporary restraining order (Dkt. No. 23).

 After hearing on the issue of contempt, at which Batinovich again appeared pro se, an

order held that Batinovich himself met the definition of an employer under the Fair Labor

Standards Act (in addition to i2a), even though he purportedly abandoned i2a in July 2015. 

Accordingly, that order held both Batinovich and i2a in contempt of the temporary restraining

order. It provided that defendants could purge themselves of contempt by paying the

outstanding $56,470.42 in outstanding wages by December 31, 2015 (Dkt. No. 27).

December 31 passed, and the $56,470.42 remained unpaid. In January 2016, the

Secretary moved to incarcerate Batinovich for failing to purge his civil contempt. An order

held that if Batinovich failed to purge his contempt by March 1, 2016, he would be incarcerated

until he purged the contempt (Dkt. No. 40). Less than two hours before the deadline to purge

his contempt, Batinovich paid the outstanding $56,470.42, and the custody order was rescinded

(Dkt. Nos. 44–45).

Meanwhile, at some point after December 2015, Batinovich discussed the sale of i2a or

its assets with an investor named Tri Hoang and Hoang’s company, AIPAC, Inc. Throughout

his correspondence with Hoang, Batinovich frequently complained about the challenges he

faced with this litigation, although he only referred to the $56,470.42 that was the subject of the

injunction and contempt orders. Batinovich never mentioned the $205,323.84 in unpaid wages

dating back to 2014. 

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Batinovich avers that he understood Hoang and AIPAC would assume all liability

arising from this lawsuit in connection with their eventual purchase of i2a. He further avers that

he understood Hoang and AIPAC’s corporate counsel to represent him in this action, although

he offers no basis for that belief. Nevertheless, in February 2016, Batinovich retained Attorney

Dan Ko Obuhanych, purportedly at the recommendation of AIPAC’s counsel in this action. 

Attorney Obuhanych appeared for Batinovich at the hearing on the Secretary’s motion to

incarcerate Batinovich. Batinovich avers he believed AIPAC would be covering Attorney

Obuhanych’s fees but again offers no basis for that belief. It appears that Batinovich completed

a sale of i2a, or at least its assets, to AIPAC but that his relationship with Hoang and AIPAC

fell apart after that sale (Batinovich Decl. ¶¶ 4–5).

In April 2016, nearly two months after Attorney Obuhanych appeared as counsel for

Batinovich, the Secretary moved for the entry of default against both defendants, inasmuch as

neither had answered the complaint. The Clerk entered the default (Dkt. No. 48). 

In July 2016, the Secretary moved for default judgment. Neither defendant responded to

the motion, but four weeks later, Batinovich sought leave to substitute Attorney Steven Paul

Cohn as counsel, which leave was granted (Dkt. No. 52). One week before the hearing on the

motion for default judgment was scheduled, Batinovich then moved to set aside the default and

filed a proposed answer. His answer included third-party claims against Hoang and AIPAC

(Dkt. No. 54). An order continued the hearing on the Secretary’s motion for default judgment

so that it could be considered in conjunction with Batinovich’s motion to set aside the default. 

The Secretary opposed Batinovich’s motion, and Batinovich failed to reply. This order follows

two briefs from the Secretary (one on each motion), Batinovich’s opening brief in support of his

motion to set aside the default, and oral argument at which no one appeared for either

defendant.

ANALYSIS

In evaluating a motion for default judgment, we must consider:

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1

 Batinovich contends the Clerk lacked authority to enter default in this action, because he had already

appeared, citing Rule 55(b)(1). That rule relates to the Clerk’s entry of default judgment, not of default. Rule

55(a) plainly authorizes the Clerk to enter default against any party that failed to answer a complaint.

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(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 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 underlying the

Federal Rules of Civil Procedure favoring decisions on the merits.

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In considering whether to enter

default judgment, the factual allegations of a complain are accepted as true. See Fair Hous. Of

Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). 

On the other hand, Rule 55(c) provides that a court “may set aside an entry of default for

good cause.” Good cause is analyzed pursuant to three “Falk factors”:

(1) whether the plaintiff will be prejudiced, (2) whether the

defendant has [no] meritorious defense, and (3) whether culpable

conduct of the defendant led to the default.

Brandt v. Am. Bankers Ins. Co. of Fla., 653 F.3d 1108, 1111 (9th Cir. 2011) (quoting Falk v.

Allen, 739 F.2d 461, 463 (9th Cir. 1984)). A request to set aside default may be denied if any

one of the three Falk factors applies. Franchise Holding II, LLC v. Huntington Restaurants

Grp., Inc., 375 F.3d 922, 925–26 (9th Cir. 2004).1

The factors to consider on each motion overlap, so this order addresses them in

conjunction.

1. MERITS.

Several of the factors set forth above concern the merits of the Secretary’s case and

defendants’ responses. Here, Batinovich does not dispute that he was in charge of i2a until July

2015. Nor does he dispute the amount owed to the employees — $205,323.84. Batinovich

simply argues that he has raised several meritorious defenses that warrant setting aside the

default. He has not.

First, Batinovich “believed he was not personally liable because he had, essentially,

abandoned the company’s operations in July of 2015” (Def.’s Mtn. at 6). As stated, the only

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unpaid wages still in our case were incurred before July 2015, so Batinovich’s abandonment of

i2a did not absolve him of the liability asserted herein. Moreover, the order holding Batinovich

in civil contempt found that Batinovich remained an employee even after his purported

abandonment (though before any sale of the company), so this argument has already been

rejected.

Second, Batinovich argues that the Court’s determination that Batinovich was an

employer under the FLSA relied on testimony from a hearing at which Batinovich was not

represented by counsel. Batinovich makes no substantive arguments challenging that finding,

he simply asserts that he was not represented by counsel, and thus could not effectively crossexamine Frederick Solomon, whose testimony. Again, the only outstanding wages were

incurred before Batinovich purportedly put Solomon in charge. Moreover, the order finding

Batinovich in civil contempt expressly acknowledged the possibility that Solomon could also be

an employer under the FLSA. Batinovich’s arguments are meritless. 

Third, Batinovich argues that he does not understand why Attorney Obuhanych failed to

answer the complaint, but that is not a defense. Batinovich may feel that Attorney Obuhanych

violated his duties as counsel, but that has no bearing on our action. 

Finally, Batinovich argues that he believed AIPAC assumed i2a’s wage liabilities.. 

Perhaps Batinovich is entitled to indemnification from AIPAC, but that is not a defense to his

own liability, nor should we delay judgment in the interest of the employees who have been

denied. Every penny of unpaid wages at issue in this case came due while Batinovich was at

the helm of i2a, and he must bear that liability in the first instance.

2. AMOUNT OF THE JUDGMENT.

The Secretary has established, with sworn evidence based on i2a’s wage records, that

the amount of wages owed up to July 2015 amount to $205,323.84. Neither Batinovich nor i2a

has ever disputed that amount. The Secretary also seeks the same amount in liquidated

damages under Sections 216(b) and 260 of Title 29 of the United States Code for a total

recovery of $410,647.68. Those sections provide that the Secretary may recover liquidated

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damages in the same amount of the unpaid wages unless defendants can establish that its failure

to pay “was in good faith and that [they] had reasonable grounds” to believe their conduct

complied with the FLSA. Batinovich and i2a have never contended that they failed to pay

wages in good faith. 

This order finds that the Secretary is entitled to judgment in the amount of $410,647.68,

comprising the unpaid wages and liquidated damages. 

3. CULPABLE CONDUCT.

A defendant’s conduct is culpable if he received actual or constructive notice of the

filing of the action and intentionally failed to answer. TCI Group Life Ins. Plan v. Knoebber,

244 F.3d 691, 697 (9th Cir. 2000), overruled on other grounds by Egelhoff v. Egelhoff ex. rel.

Breiner, 532 U.S. 141 (2001). “When considering a legally sophisticated party’s culpability in

a default, an understanding of the consequences of its actions may be assumed, and with it,

intentionality.” United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d

1085, 1093 (9th Cir. 2010). 

Batinovich has been aware of this action for more than eight months. As the CEO and

majority shareholder of i2a (and as a former defendant in federal court), Batinovich plainly has

the sophistication to understand the gravity of this action, and the importance of responding to

it. Yet, whether intentionally, or through willful ignorance, he has brushed it aside at every

turn, reciting his theory that he could avoid responsibility for his actions simply by walking

away from it. As this Court has warned Batinovich repeatedly and held in the various orders

throughout this case, that is simply not the case. Batinovich’s indifference even pervaded the

instant motions. He failed to respond to the Secretary’s motion, he failed to reply to the

opposition to his own motion, and he failed to appear at the hearing on those motions.

Batinovich has been a model of culpability throughout this litigation, and it is time for

him to face the consequences. 

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4. PREJUDICE TO THE PLAINTIFF.

The Secretary commenced this action on behalf of hourly employees who missed more

than a dozen paychecks. Any delay in the resolution of this action prevents those employees

from receiving the wages owed to them for more than two years. Meanwhile, as stated, any

delay would only serve the purpose of apportioning liability among various parties, and it

would allow Batinovich to continue his dilatory efforts to shift the blame, prejudicing the

Secretary and the workers on whose behalf he brought this action. Thus, setting aside the

default would cause substantial to the Secretary and the employees he represents. 

5. INJUNCTIVE RELIEF.

Finally, the Secretary requests two forms of injunctive relief. First, The Secretary

requests that the Court issue a restitutionary injunction requiring defendants to pay the back

wages directly to the employees, which request is GRANTED. Second, it requests a prospective

injunction that converts the present preliminary injunction into a permanent injunction.

In deciding whether to grant injunctive relief, a district court must

weigh the finding of violations against factors that indicate a

reasonable likelihood that the violations will not recur. A

dependable, bona fide intent to comply, or good faith coupled with

extraordinary efforts to prevent recurrence, are such appropriate

factors. An employer’s pattern of repetitive violations or a finding

of bad faith are factors weighing heavily in favor of granting a

prospective injunction.

Brock v. Big Bear Mkt. No. 3, 825 F.2d 1381, 1383 (9th Cir. 1987). Here, i2a and Batinovich

have missed thirteen payroll periods and they have shown no intent to comply with the law in

the future. However, it appears, albeit vaguely, that Batinovich has sold his interest in i2a to

AIPAC and so should not be held liable for any prospective FLSA violations by that company. 

Thus, this order CONVERTS the preliminary injunction in this action as to i2a, but not as to

Batinovich, into a permanent injunction. This is without prejudice to the Secretary seeking to

extend the prospective injunction to Batinovich supported by proof that he retains some interest

in i2a.

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Both Batinovich and i2a, however, are hereby bound to a restitutionary injunction

requiring payment of back wages totaling $205,323.84 as detailed in Exhibit A of the

Declaration of Mary Pham and appended as Exhibit A to this order (Dkt. No. 49-1). 

CONCLUSION

To the extent stated above, the Secretary’s motion for default judgment is GRANTED,

and Batinovich’s motion to set aside the default is DENIED. Victor Batinovich and i2a

Technologies, Inc., are hereby ordered and enjoined to pay back wages totaling $205,323.84. 

They must also pay liquidated damages in the same amount, for a total of $410,647.68. 

Payment shall be made as follows:

Within 21 DAYS of the entry of this order, defendants shall deliver

to District Director Susana Blanco, Wage and Hour Division,

United States Department of Labor, 90 7th Street, Suite 12-100,

San Francisco, CA 94103-6719 a schedule containing the last

known home address, social security number, and telephone

number (if known) for each person named on Exhibit A appended

to this order.

Within 84 DAYS of the entry of this order, defendants shall pay the

full amount of back wages and liquidated damages due pursuant to

this order and the accompanying judgment by delivering two

separate cashier’s checks or money orders, each in the amount of

$205,323.84 made payable to “Wage & Hour Div., Labor.” One

remittance shall be allocated to back wages, which shall be shown

by writing “i2a-BWs” in the subject line; the other remittance shall

be allocated to liquidated damages, which shall be shown by

writing “i2a-LDs” in the subject line. Both remittances shall be

delivered to Wage and Hour Division District Director Susana

Blanco at the address listed in the above paragraph.

The Secretary shall distribute the back wages and liquidated

damages and shall file a status report on the distribution by

DECEMBER 15 AT NOON.

i2a is further permanently enjoined according to the same terms as the preliminary

injunction already in place (Dkt. Nos. 12, 19). Judgment will follow. 

IT IS SO ORDERED.

Dated: September 9, 2016. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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