Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00393/USCOURTS-caed-1_05-cv-00393-11/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

SHAUKAT “SAL” MAREDIA, et al.,)

 )

Plaintiffs, )

)

v. )

)

PHILIP MORRIS USA INC., et )

al., )

)

 Defendants. )

______________________________)

)

PHILIP MORRIS USA INC., )

 )

 Counterc-laimant, )

 )

v. )

 )

SHAUKAT “SAL” MAREDIA, )

 )

 Counter-Defendant. )

 )

1:05-cv-00393-OWW-SMS

FINDINGS AND RECOMMENDATIONS TO

GRANT THE MOTION OF COUNTERCLAIMANT PHILIP MORRIS USA, INC.

FOR DEFAULT JUDGMENT (Doc. 92)

Defendant and Counter-claimant Philip Morris USA, Inc. is

proceeding with a civil action in this Court. The matter has been

referred to the Magistrate Judge pursuant to 28 U.S.C. § 636(b)

and Local Rules 72-302(c)(19) and 72-303. Counter-claimant has

filed a motion for default judgment on the counterclaim.

I. Background

Defendant and Counter-claimant Philip Morris USA, Inc. (PM),

removed this action from the Tulare County Superior Court on

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March 24, 2005, with jurisdiction based on diversity of

citizenship of the parties. A motion to dismiss was granted with

leave to amend by order dated June 15, 2005. Amended complaints

were filed by Plaintiff Shaukat “Sal” Maredia (Maredia) on July

12, 2005, November 10, 2005, and December 7, 2005. After the

Court granted PM’s motion to compel discovery and for sanctions

in March 2006, and after Maredia failed to comply with the

Court’s order granting the motions, PM moved for discovery

terminating sanctions on May 31, 2006. On July 17, 2006, the

Court granted the motion in part and denied it in part, finding

that Maredia had willfully disobeyed the Court’s order and his

discovery obligations (Order at 7), ordering that Maredia’s

claims against PM be dismissed, denying without prejudice the

request to order that Maredia’s answer to the counter-claim be

stricken because Maredia had not been clearly warned that default

judgment against him might be entered (id. at 8-9), and denying

the request for entry of default against Maredia without

prejudice (id. p. 9). Judgment was entered in favor of Defendant

and against Plaintiff on October 12, 2006. 

The counter-claim before the Court was filed by PM on August

12, 2005, and Maredia’s answer Maredia was filed on September 14,

2005.

On October 30, 2006, PM moved to strike Maredia’s answer to

the counter-claim and to enter default and default judgment on

the counter-claim. Minutes for the hearing date of December 4,

2006, reflect that the motion for default judgment was granted,

and counsel was to prepare and submit a proposed default judgment

to the Court and notice a prove-up hearing to establish the

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amount of damages. On January 22, 2007, the Court ordered that

the default of Maredia on PM’s counter-claim was thereby entered,

and all dates were vacated. The order was served on Maredia on

January 25, 2007.

The instant motion was filed on July 19, 2007, including the

motion, a memorandum in support, and declarations of Leopoldo J.

Chanco and Gerald Henry Schepker, IV, with attachments. The

docket reflects a declaration establishing proof of service of

the moving papers by mail on July 19, 2007, on Maredia at the

address listed in the docket. PM filed a supplemental memorandum

in support of the motion and a certificate of service thereof on

August 13, 2007. 

No opposition or other appearance or response of any sort

was filed by Maredia. 

On August 16, 2007, PM filed a reply noting that pursuant to

Local Rule 78-230(c), the absence of any opposition from Maredia

prevented Maredia from being heard in opposition to the motion.

Counsel for PM represented to the Court that Maredia still had

not complied with either this Court’s previous discovery order or

his discovery obligations. (Reply p. 2.)

Counter-claimant’s motion for default judgment came on

regularly for hearing on August 24, 2007, in Courtroom 7 before

the Honorable Sandra M. Snyder, United States Magistrate Judge.

Turner Anderson Broughton and Leopoldo J. Chanco appeared

telephonically on behalf of Counter-claimant Philip Morris, USA,

Inc. There was no appearance by the Counter-defendant Shaukat Sal

Maredia. Counsel for PM represented to the Court that they had

not had any contact from Maredia since earlier in the action when

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Maredia had counsel. The matter was argued and submitted to the

Court.

II. Default Judgment

A court has the discretion to enter a default judgment

against one who is not an infant, incompetent, or member of the

armed services where the claim is for an amount that is not

certain on the face of the claim and where 1) the defendant has

been served with the claim; 2) the defendant’s default has been

entered for failure to appear; 3) if the defendant has appeared

in the action, the defendant has been served with written notice

of the application for judgment at least three days before the

hearing on the application; and 4) the court has undertaken any

necessary and proper investigation or hearing in order to enter

judgment or carry it into effect. Fed. R. Civ. P. 55(b); Alan

Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392 (9th

Cir. 1988). Factors that may be considered by courts in

exercising discretion as to the entry or setting aside of a

default judgment include the nature and extent of the delay,

Draper v. Coombs, 792 F.2d 915, 924-925 (9 Cir. 1986); the th

possibility of prejudice to the plaintiff, Eitel v. McCool, 782

F.2d 1470, 1471-72 (9th Cir.1986); the merits of plaintiff's

substantive claim, id.; the sufficiency of the allegations in the

complaint to support judgment, Alan Neuman Productions, Inc., 862

F.2d at 1392; the amount in controversy, Eitel v. McCool, 782

F.2d at 1471-1472; the possibility of a dispute concerning

material facts, id.; whether the default was due to excusable

neglect, id.; and the strong policy underlying the Federal Rules

of Civil Procedure that favors decisions on the merits, id.

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 The Court notes that pursuant to counsel’s motion, counsel for Maredia was permitted to withdraw on 1

March 2, 2006, and Plaintiff’s pro se status was noted in the docket; Plaintiff was also informed that he was expected

to comply with all the requirements and deadlines of the Court’s scheduling order, and that a failure to comply with

an order of the Court might result in a recommendation that the action be dismissed, or other sanctions. The docket

reflects that the Court’s order was served by mail on Maredia.

5

 III. Notice, Status of the Parties, Default

Review of the docket reflects that Maredia, through his

counsel, answered the counter-claim on September 14, 2005; thus,

Maredia received notice of the action.1

As previously noted, the notice of motion and motion for

default judgment were served on Maredia, who had appeared in the

action.

The counter-claim reflects that PM expressly sought judgment

against Maredia in an amount in excess of $150,00.00, consisting

of compensatory damages, according to proof, as well as

prejudgment interest, costs, expenses, and attorney’s fees

incurred in investigating Maredia’s breach of contract claim and

in prosecuting the counter-claim. (Ctr-clm. pp. 5-6.) Therefore,

Maredia received notice from the face of the counterclaim of the

sum sought by PM here, namely, $150,000.00. The notice was also

adequate pursuant to Fed. R. Civ. P. 55(d) and 54(c), which

require that a judgment by default shall not be different in kind

from or exceed in amount that prayed for in the demand for

judgment. Plaintiff expressly sought in the counter-claim the

amount and types of relief sought by the instant application for

default judgment.

Finally, the Court implicitly granted the motion to strike

Maredia’s answer when it ordered that the default of Maredia be

entered on January 22, 2007. Thus, the case is in a proper

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procedural posture for the entry of default judgment.

The Court notes that in the present case, Counter-claimant

has not filed with the Court an affidavit stating whether or not

the Counter-defendant is in military service and showing the

necessary facts to support the affidavit, or claiming an

inability to determine if the Counter-defendant is in military

service. See, 50 App. § 521(b). However, the Servicemembers Civil

Relief Act (50 App. § 501 et seq.) expressly states that the

section concerning default judgments applies to “any civil action

or proceeding in which the defendant does not make an

appearance.” 50 App. § 521(a). Here, the Counter-defendant has

appeared. Thus, under the plain terms of the statute, the

Servicemembers Civil Relief Act does not apply. Therefore, the

omission of an affidavit concerning Maredia’s status should not

preclude the entry of default judgment.

IV. Legal Sufficiency of the Counter-claim

A default judgment generally bars the defaulting party from

disputing the facts alleged in the complaint, but the defaulting

party may argue that the facts as alleged do not state a claim.

Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392.

Thus, well pleaded factual allegations, except as to damages, are

taken as true; however, necessary facts not contained in the

pleadings, and claims which are legally insufficient, are not

established by default. Cripps v. Life Ins. Co. of North America,

980 F.2d 1261, 1267 (9 Cir. 1992); TeleVideo Systems, Inc. v. th

Heidenthal, 826 F.2d 915, 917 (9 Cir. 1987). th

In a diversity case, the substantive law applied by the

federal court is generally state law, and the federal courts

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generally must follow the conflict of laws rules prevailing in

the states in which they sit. Klaxon Co. v. Stentor Electric Mfg.

Co., 313 U.S. 487, 496-97 (1941). If state law governs a

particular issue in a diversity case, the court must then

determine the content of the applicable state law; the decision

of the state’s highest court is generally the definitive

statement of the state’s law. Commissioner v. Estate of Bosch,

387 U.S. 456, 465 (1967). Absent a contractual provision

governing choice of law or a litigant’s invocation of the law of

a foreign state, under California choice-of-law rules, the Court

presumes that California law applies unless there exists a

compelling reason to displace state law with the law of a foreign

jurisdiction. Hurtado v. Superior Court, 11 Cal.3d 574, 581

(1974); Shanghai Automation Instrument Co. v. Kuei, 194 F.Supp.2d

995 (N.D.Cal. 2001). 

Here, no contractual provision governing choice of law has

been brought to the attention of the Court, and no party has

invoked in connection with this motion the law of any other

state. Here, the sales in question occurred within California.

There is no basis for application of the law of another state.

Counter-claimant cites to California law concerning the law

of contracts. 

"A contract is an agreement to do or not to do a certain

thing." Cal. Civ. Code § 1549. "It is essential to the existence

of a contract that there should be: 1) Parties capable of

contracting; 2) Their consent; 3) A lawful object; and 4) A

sufficient cause or consideration." Cal. Civ. Code § 1550. The

elements of a claim for breach of contract are the existence of a

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contract, Plaintiff’s performance thereof, Defendant’s breach,

and damages resulting therefrom. Acoustics, Inc. v. Trepte

Construction Co., 14 Cal.App.3d 887, 913 (1971).

Review of the counter-claim (Decl. of Chanco, Ex. B) reveals

that it gave notice that pursuant to a retail leaders agreement

executed in February 2001, Maredia was required to adhere to the

terms of the agreement in order to receive $.25 for every carton

of PM USA cigarettes that Maredia or his business entity sold in

a face-to-face transaction to an adult consumer. The agreement

was revised in September 2001 to provide for $.75 per carton and

again in January 2002 to provide for a payment of $.90 per

carton. With respect to PM USA price promotions, Plaintiff was

required to participate in them and to execute retailer

understanding forms (RUF’s), which contained further terms

governing PM’s making of merchandising payments. (Ctr-clm. at 2-

4.) Maredia expressly agreed to be bound by the terms of the

agreements and RUF’s. The RUF’s expressly provided that PM would

not pay Maredia an allowance for products sold to other retail,

wholesale, or trade accounts; any sale that exceeded five

cartons; and products that were not sold to an adult consumer in

a face-to-face transaction (i.e., mail order and internet sales

were not qualified sales). Maredia also agreed to indemnify and

hold harmless PM from all claims, liabilities, and expenses and

costs, including attorney’s fees, that arose from or might be

attributable to any error, omission, or fault of Maredia. (Ctrclm. at 4.)

It was alleged upon information and belief that in 2001 and

2002, Maredia submitted and received payment for cigarettes that

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were not sold to an adult consumer in a face-to-face transaction,

payment for sales that exceeded five cartons, and submitted

noncomplying requests for payments while falsely representing to

PM that all payments he sought were for cigarette sales that

complied with the express terms of the agreements. (Id. at 4-5.)

PM sued for breach of contract that occurred when Maredia

sought payments under the agreements and RUF’s that did not

comply with the terms and conditions and thereby breached the

retail leaders agreements and RUF’s. PM alleged that it relied on

Maredia’s misrepresentations and paid Maredia in excess of

$150,000.00 to which he was not entitled; PM suffered damages in

that amount because of the breach of the parties’ agreements.

(Id. p. 5.)

The counter-claim sufficiently alleges the existence of a

contract, a lawful object, Counter-claimant’s performance of the

contract, Maredia’s breach of the contract, and the suffering by

Counter-claimant of some damages from the breach.

V. Damages

Generally, the scope of proceedings on an application for

default judgment involves a determination of damages, which

Plaintiff must prove by evidence, whether by affidavits where an

evidentiary hearing is waived, Davis v.Fendler, 650 F.2d 1154,

1161-62 (9 Cr. 1981), or by other evidence, Fed. R. Civ. P. th

55(b)(2). Fed. R. Civ. P. 55(b)(2) provides in pertinent part:

If, in order to enable the court to enter judgment or to 

 carry it into effect, it is necessary to take

an account or to determine the amount of damages or

to establish the truth of any averment by evidence or

to make an investigation of any other matter, the court

may conduct such hearing or order such references as it 

deems necessary and proper and shall accord a right of 

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trial by jury to the parties when and as required by

any statute of the United States.

Cal. Civ. Code § 3300 provides that for the breach of an

obligation arising from contract, the measure of damages, except

where otherwise expressly provided by the code, is the amount

which will compensate the party aggrieved for all the detriment

proximately caused thereby, or which, in the ordinary course of

things, would be likely to result therefrom. Further, equitable

principles provide that where consistent with public policy, the

remedy of restitution of benefits is available to recoup an

advantage unjustly received, retained, or appropriated. Dunkin v.

Boskey, 82 Cal.App.4th 171, 195 (2000).

The amount of damages must be shown with reasonable

certainty. Steelduct Co. v. Henger-Seltzer Co., 26 Cal.2d 634,

651 (1945). Where the promisor by a wilful breach of contract has

given rise to a difficulty in proof of damages, it is proper to

require of the promisee only that he show the amount of damages

with reasonable certainty, to resolve uncertainties against the

promisor, and to permit the promisee to furnish a reasonable

basis for estimating the amount of damages that constitutes the

best and most convincing evidence of damages under the

circumstances. Id.

PM offers the declaration of Gerald Henry Schepker, IV, as a

demonstration of how PM arrived at the $150,000.00 figure of

compensatory damages. Schepker, who holds a bachelor of science

degree in accounting and has been a certified public accountant

since 1994, is the director of payment integrity in the finance

department at PM; he also worked for PM as a regional finance

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director from 2000 through 2002, a period coinciding roughly with

the interval in 2001 and 2002 during which in the counter-claim

it is alleged that Maredia engaged in sales covered by the

agreements. In that capacity he worked to identify entities that

were reporting false or erroneous sales of PM products in an

effort to obtain payments to which they were not entitled under

various promotional programs. Schepker does not claim to have

personal knowledge stemming from his own observation of any of

Maredia’s sales conduct during that time. As director of payment

integrity since August 2002, Schepker has been responsible for

ensuring that the retailers participating in PM’s promotional

programs earned the payments that they received; his job involves

analyzing purchase and sale documentation that PM receives from

its wholesalers, who are required to report to PM, as well as

reviewing documentation received from participating retailers.

(Decl. ¶¶ 1, 4-5.)

Schepker details the retail leaders agreements entered into

by Defendant in February 2001, September 2001, and January 2002, 

and RUF’s executed by Defendant during eight specific promotional

periods during the life of the agreements. (Decl. ¶¶ 8-12.)

Maredia expressly stated that he understood that payment would be

made only for products sold in accordance with the terms of the

RUF’s. (Decl. ¶ 17, Ex. B.) The RUF’s provided that PM would not

pay promotional allowances for cigarettes that were not sold to

an adult consumer in a face-to-face transaction or that were sold

in transactions that exceeded five cartons. (Decl. ¶¶ 12-13, Ex.

B.) Maredia also promised in each RUF that in order to receive

the promotional allowances, he would maintain accurate records

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documenting the number of packs and cartons sold in the store to

adult smokers at the reduced prices during the periods and, upon

request, to submit such records to PM. PM reserved the right to

audit compliance at any time, to obtain upon request the

documentation that the retailer was required to maintain, and to

withhold payment for any noncompliance. (Decl. ¶ 17, Ex. B.)

Retailers such as Maredia received payments based on their

own reporting of their sales volume by completing a payment

worksheet on the front of each RUF documenting their qualifying

sales, and recording the number of cartons in inventory at the

commencement of a promotional period and at the end. The

difference between the two inventory counts, plus the number of

cartons of cigarettes that the retailer purchased from

wholesalers or other vendors, minus any unqualified sales, was

the basis for determining the number of cartons on which the

retailer was entitled to receive promotional payments. (Id. ¶

12.)

Schepker declared that in estimating damages, he referred to

STARS, a database maintained by a third-party vendor; PM’s

wholesale customers reported to the third-party vendor the number

of PM products sold by the wholesalers to retailers; the

wholesalers who sold to Maredia at the relevant times were

required by the terms of their contracts with PM to report their

sales to Maredia and other retailers to the STARS database.

(Decl. ¶ 20.) PM used STARS to verify the number of cartons

purchased by Defendant from the wholesalers. It also used STARS

to “compare a retailer’s purchasing patterns and, by extension,

his or her sales patterns, to that of his or her “Trade Class

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Average,” the average number of cartons of PM product sold by

retailers that sell the same types of goods. (Decl. ¶¶ 20-21.)

Maredia was in a distinct trade class of tobacco stores. (Id. ¶

21.) PM was able to compare a retailer’s PM purchases to those of

other retailers in the same trade class on a local (district),

regional (one of five regions in the United States), and national

basis during the specific promotional periods. (Id. ¶¶ 22, 24.)

PM states that it reasonably estimated the number of PM cartons

sold by Maredia to adult consumers in face-to-face transactions

based on the STARS record of the volume of purchases by Maredia

of PM products, the type of products purchased and sold by

Maredia, and the purchase and sales patterns of other retailers

in Maredia’s trade class. 

A spreadsheet prepared at Schepker’s direction and attached

to the declaration provides a breakdown of how the amount was

calculated. (Decl. ¶¶ 27-28.) The spreadsheet reveals

calculations of variances between the amount actually paid to

Maredia by PM, and amounts estimated to be amounts of average

sales in the various areas or the amount of estimated payment

based on STARS. Schepker states that PM analyzed Maredia’s

Marlboro promotional payments and compared them to his district,

regional, and national Marlboro trade class averages. PM found

that Maredia’s payments were grossly inflated when compared to

his district, regional, and national trade class averages;

Maredia received PM promotional payments that were $252,203.86

greater than his national trade class average, $222,563.48

greater than his regional trade class average, and $152,611.35

greater than his district trade class average. PM has used the

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lowest of the three trade class average numbers, which

constitutes the most conservative estimate of the amount of

damages to which PM is entitled, and exceeds the $150,000.00

claimed. (¶¶ 29- 31.)

Schepker also declares that Maredia had already received

Marlboro promotional payments from PM totaling $434,731 and yet

filed three suits in California state court claiming entitlement

to an additional $355,516 in promotional payments, most of which

related to Marlboro promotions. Further, an unannounced one-day

in-store audit of Maredia’s stores at an unspecified date in 2002

by unidentified members of PM’s sales force who sat in the store

in an effort to estimate Maredia’s general sales volume raised

serious concerns regarding Maredia’s promotional payment claims,

causing PM to withhold promotional payments subject to Maredia’s

providing documentation supporting his claimed sales. (Decl. ¶

30.) Schepker does not claim to have any personal knowledge of

the audit.

Schepker declared that before this lawsuit was initiated and

later during discovery, PM demanded that Maredia produce

documents and records to substantiate his claimed volume, but

Maredia declined, even though he is the only person in possession

of his records, and even though this Court has ordered him to

produce such records. (Decl. ¶ 25.) Indeed, the Court granted

default judgment in favor of PM on the counterclaim. Id.

PM states in its memorandum that promotional payments of

over $600,000.00 were made to Defendant in 2001 and 2002, but the

portion of the declaration of Schepke cited to (Memo. p. 3, ll.

22-24, Decl. ¶ 18) does not state that fact. PM also cites to the

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first amended complaint in which Maredia as Plaintiff alleged

that he earned in excess of $935,112.00 in promotional payments

and acknowledged receiving over $670,475.00 from PM. (Decl.

Chanco ¶ 3, Ex. A, attachment showing amounts paid for six

stores.) Thus, the amount paid is established by a judicial

admission on the part of Maredia.

With respect to the certainty, PM argues that because

Maredia has breached his contractual obligation to provide the

documentation that would establish damages with certainty, and

further because Maredia has consistently failed and refused to

perform his obligation to produce the documentation in the course

of discovery in this action, it is appropriate to assign to

Maredia the burden of proof as to damages. PM cites Shanghai

Automation Instrument Co. v. Kuei, 194 F.Supp.2d 995, 1004

(N.D.Cal. 2001), in which in connection with a conversion claim

in an action proceeding to default judgment, the court applied

California law and shifted the burden of proof from the plaintiff

to the tortious defendant regarding which portion of converted

money was converted to the use of the defendant; the burden was

shifted because the defendant there had sole possession of the

records, and the matter in question was peculiarly within the

knowledge or control of the defendant. 

In its supplemental brief, PM also cites to Sanchez v.

Unemployment Ins. Appeals Bd., 20 Cal.3d 55, 71 (1977), where the

California Supreme Court shifted the normal burden of proof

pursuant to Cal. Evid. Code § 500 from an applicant for

unemployment insurance benefits to the department of unemployment

with respect to whether or not an applicant who had good cause

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not to work on weekends was available for a substantial field of

employment. The court reasoned that the data concerning the size

and character of the labor market was peculiarly within the

knowledge and competence of the department and could not be

expected to be provided by the average unemployed claimant;

further, it would be inefficient to require such data in every

case. Id. In the pertinent part of a footnote, the court

described the factors to be considered in determining whether the

normal allocation of the burden of proof should be altered:

Moreover, “In determining whether the normal

allocation of the burden of proof should be altered,

the courts consider a number of factors: the knowledge

of the parties concerning the particular fact, the

availability of the evidence to the parties, the most

desirable result in terms of public policy in the

absence of proof of the particular fact, and the

probability of the existence or nonexistence of the

fact.” (Cal. Law Revision Com. com. to Evid. Code, §

500, 29B West's Annot. Evid. Code (1966 ed.) p. 431.)

supra, 67 Cal.2d 733, 760; see also Garcia v.

Industrial Accident Com. (1953) 41 Cal.2d 689, 694 [263

P.2d 8].

20 Cal.3d at 71, n. 16. 

PM also relies on Wolf v. Superior Court, 107 Cal.App.4th

25, 35-36 (2003) (approving shifting the burden in a case

involving an author’s claim to contingent compensation from gross

receipts of sales of from merchandising a novel’s characters,

where the financial records essential to the claim to

compensation were in the exclusive possession of the studio, and

noting that in such profit-sharing type cases where essential

records are in the exclusive control of the defendant who would

benefit from any incompleteness, public policy is best served by

shifting the burden of proof to the defendant). The Court notes

that fundamental fairness is a primary consideration in

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determining whether or not to shift the burden of proof. Adams v.

Murakami, 54 Cal.3d 105, 119-20 (1991).

Here, it has been established that Maredia was required to

keep financial records with data that would permit the

computation of damages with certainty. Thus, the Court finds that

Maredia would have the best and sole source of knowledge

concerning the amount of qualifying sales. Further, to the extent

that any such records exist, the records are in the possession

and control of Maredia, and Maredia has denied PM access to the

records. 

At this stage in the litigation, it would be Maredia who

would benefit should the Court find the proof of his sales

incomplete. Further, the efforts of both PM and the Court to have

the case determined on the merits and have been delayed and

obstructed. Thus, the most desirable result in terms of public

policy in the absence of proof of the precise amount of carton

sales is to place the burden on Maredia. 

Finally, as to the probability of the existence or

nonexistence of the fact, the Court considers PM’s demonstration

of the payments made to Maredia and the likelihood of a

substantial disparity between the actual sales of PM cartons and

the claimed sales. PM has demonstrated that it is more probable

than not that Maredia’s claimed sales were grossly inflated. It

does not appear to be probable that Maredia was underpaid for his

sales. 

Accordingly, the Court concludes that it is appropriate to

shift the burden of proof of the precise amount of damages to

Maredia.

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The Court is mindful that PM does not seek merchandising

payments under the merchandising contracts executed by Maredia;

rather, it seeks only overpayments pursuant to the RUF’s.

(Schepker Decl. ¶ 31.) Further, it does not seek return of all of

the promotional payments that it made; rather, it seeks only

$150,000.00. 

Considering the foregoing, the Court finds that PM has

established to the extent required that it suffered $150,000.00

in damages.

VI. Propriety of Default Judgment

In the case before the Court, it does not appear that there

is any risk of mistake or excusable neglect on the part of anyone

with a potential interest in the subject matter of the instant

action. Further, there is no apparent likelihood of a dispute as

to a material fact essential to the Counter-claimant’s case. No

just cause for delay appears. Because Maredia has appeared, it is

not necessary to establish that Maredia is not a member of the

armed services. There is no basis for concluding that Maredia is

an infant or incompetent. There does not appear to be any reason

why the general policy in favor of a decision on the merits would

warrant refusing to enter the requested default judgment. 

Accordingly, the Court finds that Counter-claimant has shown

its entitlement to a default judgment.

VII. Recommendation

Accordingly, it IS RECOMMENDED that

1) The motion of Counterclaimant Philip Morris USA, Inc. for

default judgment in the amount of $150,000.00 BE GRANTED; and

2) The Clerk BE DIRECTED to enter judgment in favor of

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Counterclaimant Philip Morris USA, Inc., and against

Counterdefendant Shaukat “Sal” Maredia, for $150,000.00 in

damages.

This report and recommendation is submitted to the United

States District Court Judge assigned to the case, pursuant to the

provisions of 28 U.S.C. § 636 (b)(1)(B) and Rule 72-304 of the

Local Rules of Practice for the United States District Court,

Eastern District of California. Within thirty (30) days after

being served with a copy, any party may file written objections

with the Court and serve a copy on all parties. Such a document

should be captioned “Objections to Magistrate Judge’s Findings

and Recommendations.” Replies to the objections shall be served

and filed within ten (10) court days (plus three days if served

by mail) after service of the objections. The Court will then

review the Magistrate Judge’s ruling pursuant to 28 U.S.C. § 636

(b)(1)(C). The parties are advised that failure to file

objections within the specified time may waive the right to

appeal the District Court’s order. Martinez v. Ylst, 951 F.2d

1153 (9th Cir. 1991).

IT IS SO ORDERED.

Dated: August 24, 2007 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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