Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_17-cv-00742/USCOURTS-casd-3_17-cv-00742-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

XIFIN, INC.,

Plaintiff,

v.

FIREFLY DIAGNOSTICS, INC.,

Defendant.

Case No.: 3:17-cv-00742-BEN-KSC

ORDER:

1) GRANTING PLAINTIFF’S 

MOTION TO FILE DOCUMENTS 

UNDER SEAL; and

2) GRANTING PLAINTIFF'S 

MOTION FOR ENTRY OF 

DEFAULT JUDGMENT

Plaintiff brought this breach of contract action against Defendant seeking recovery 

of damages. Plaintiff now moves for an entry of default judgment against Defendant. 

Defendant did not respond to Plaintiff’s motion, and has not made an appearance in this 

case. For the reasons set forth below, Plaintiff’s motions are GRANTED.

BACKGROUND

XIFIN, Inc. (“XIFIN”) is a San Diego healthcare information technology company 

incorporated in California that provides its clients with cloud-based billing services. 

(Docket No. 1, “Compl.” ¶¶ 5, 7.) Firefly Diagnostics, Inc. (“Firefly”) is a company that 

provides certain testing and diagnostic goods and services to healthcare providers; it is 

incorporated and maintains its principal place of business in Ohio. (Id. ¶¶ 6, 9.) 

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On June 12, 2015, XIFIN entered into two written contracts with Firefly: (1) the 

“RPM1 Contract,” and (2) the “LIS2 Contract” (together, the “Contracts”). Pursuant to 

the RPM Contract, XIFIN provided Firefly with cloud-based laboratory diagnostic billing 

services and outsourced accounts receivable and billing management services. (Id. ¶ 11.) 

Pursuant to the LIS Contract, XIFIN provided cloud-based laboratory information 

services to Firefly for pathology services “including, but not limited to, histology 

workflow management, web-based remote specimen accessioning, barcode-based 

specimen tracking, integration of digital pathology devices for slide image capturing, and 

clinical history and case review.” (Id. ¶ 119.) 

Beginning in December 2016, Firefly became delinquent in paying service fees 

under both contracts. (Declaration of Tammy Lawrence (“Lawrence Decl.”) ¶ 16.) 

XIFIN advised Firefly’s CEO, Jeff Garshon, on several occasions regarding its 

delinquent account by both email and teleconference. (Id. ¶ 17.) Firefly did not dispute 

the amount of service fees owed or claim that XIFIN itself breached either contract, and 

ultimately failed to pay the amounts due. (Id. ¶¶ 16-17.) On December 13, 2016, XIFIN 

provided notice of Firefly’s material breach of both contracts. (Id. ¶ 18.) On February 

14, 2017, XIFIN terminated both contracts because Firefly had still failed to pay the 

amounts due. (Id. ¶ 19.) 

On April 12, 2017, XIFIN filed this action against Firefly for breach of the 

Contracts. (Docket No. 1.) On April 26, 2017, XIFIN filed a proof of service, indicating 

it had properly served Firefly. (Docket No. 4.) When Firefly failed to respond to its 

Complaint, XIFIN filed a request for entry of default, which the Clerk of Court granted 

 

1 RPM is an acronym for Revenue Performance Management system, which is the 

“proprietary internet-based accounts receivable and billing management system” XIFIN 

developed to provide its cloud-based billing services. (Compl. ¶ 7.)

2 LIS is an acronym for laboratory information system, which is “a separate cloudbased laboratory information system to manage diagnostic, financial, and clinical 

information.” (Compl. ¶ 8.)

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on July 10, 2017. (Docket No. 6.) XIFIN now moves for default judgment against 

Firefly. 

DISCUSSION

A. Motion to Seal

XIFIN files a copy of the RPM and LIS contracts requesting they be filed under 

seal. (Docket No. 7.) “[T]he courts of this country recognize a general right to inspect 

and copy public records and documents, including judicial records and documents.” 

Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978). “Unless a particular court 

record is one ‘traditionally kept secret,’ a ‘strong presumption in favor of access’ is the 

starting point.” Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 

2006) (citing Foltz v. State Farm Mut. Auto Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 

2003)). A party seeking to seal a judicial record bears the burden of overcoming the 

strong presumption of access. Foltz, 331 F.3d at 1135. Since the contracts that XIFIN 

requests to file under seal are “more than tangentially related to the merits of the case,” 

XIFIN must show “compelling reasons” for the request to seal. Ctr. for Auto Safety v. 

Chrysler Grp., LLC, 809 F.3d 1092, 1096-98 (9th Cir. 2016). 

XIFIN asserts both contracts “contain commercially sensitive business information 

including . . . Plaintiff’s pricing structure for the rendition of services under the contracts

and proprietary protocols and processes.” (Docket No. 9.) Counsel for XIFIN explains 

that “[p]ublic release of this information would harm . . . XIFIN, if those terms were to be 

obtained by either current or future clients or competitors in the same market as XIFIN.” 

(Declaration of John D. Hershberger in Support of Motion to Seal, Docket No. 7-2 ¶ 3.) 

The Court finds the potential harm to XIFIN’s competitive standing constitutes 

“compelling reasons,” and therefore GRANTS Plaintiff’s Motion to Seal. See Nixon, 

435 U.S. at 598.

B. Motion for Default Judgment

Federal Rule of Civil Procedure 55(b)(2) provides for the entry of default 

judgment by the court. “The district court’s decision whether to enter a default judgment 

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is a discretionary one.” Microsoft Corp. v. Ricketts, No. C 06-06712 WHA, 2007 WL 

1520965, at *1 (N.D. Cal. May 24, 2007) (quoting Aldabe v. Aldabe, 616 F.2d 1089, 

1092 (9th Cir. 1980)). A district court considers the following factors:

(1) the possibility of prejudice to 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 the 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.

Microsoft Corp., 2007 WL 1520965, at *1-2 (quoting Eitel v. McCool, 782 F.2d 1470, 

1471-72 (9th Cir. 1986)). 

In determining the merits of a motion for default judgment “well-pleaded factual 

allegations are taken as true, except as to the amount of damages.” Id. at *2 (citing Fair 

Hous. Of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). The Court has considered 

the Eitel factors and finds these factors favor entry of default against Firefly.

1. Possibility of Prejudice to Plaintiff

XIFIN claims Firefly used its services without paying amounts due under the 

Contracts. Firefly has refused to participate in these proceedings. If a default judgment 

is not entered, XIFIN will suffer prejudice because it will be without other recourse for 

recovery. See Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 499 

(C.D. Cal. 2003) (finding that without a default judgment, plaintiff would have no other 

recourse and suffer prejudice). Therefore, this factor weighs in favor of granting default 

judgment against Firefly.

2. Merits of Plaintiff's Claim & Sufficiency of Complaint

The second and third Eitel factors look to the merits of the plaintiff’s substantive 

claim, and the sufficiency of the complaint. Eitel, 782 F.2d at 1471-72. The Ninth 

Circuit has suggested that these two factors require that a plaintiff “state a claim on which 

the [plaintiff] may recover.” Kloepping v. Fireman’s Fund, No. C 94-2684 TEH, 1996 

WL 75314, at *2 (N.D. Cal. Feb. 13, 1996) (citing Danning v. Lavine, 572 F.2d 1386, 

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1388 (9th Cir. 1978)). In its complaint, XIFIN asserts two breach of contract claims, one 

for the RPM Contract and one for the LIS Contract. XIFIN attached a copy of each 

contract, and alleges that it fully performed on the contracts, that Firefly failed to 

perform, and it was damaged as a result. Therefore, XIFIN alleges sufficient allegations 

in the Complaint, and the allegations appear to have merit. See Reichert v. Gen. Ins. Co. 

of Am., 68 Cal. 2d 822, 830 (1968) (elements of breach of contract include: existence of a 

contract, plaintiff’s performance, defendant’s breach, and resulting damages to the 

plaintiff). Thus, these two factors also favor entry of default judgment.

3. Amount of Money at Stake

Under the fourth Eitel factor, a court considers the amount of money at stake in 

relation to the seriousness of a party’s conduct. PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. 

Supp. 2d 1172, 1176-77 (C.D. Cal. 2002). Here, Plaintiff seeks an award of 

$696,132.013in damages for breach of the RPM Contract, and $195,190.134for breach of 

the LIS Contract. The amount requested is supported by the evidence and proportionate 

to the harm caused by Firefly’s purported breach of the contracts. Accordingly, this 

factor weighs in favor of granting default judgment. 

4. Possibility of Dispute Over Material Facts

Firefly has not filed an answer or responded to XIFIN’s Complaint, or filed an 

opposition or responded to the instant motion or XIFIN’s motion for the clerk’s entry of 

default judgment. As a result, no dispute concerning material facts has arisen. Therefore,

this factor also weighs in favor of granting default judgment against Firefly.

///

 

3 This amount consists of $256,758.94 in service fees, $19,373.07 in finance 

charges, and $420,000 in Minimum Service Fees pursuant to the RPM Contract. 

(Lawrence Decl. ¶ 35.)

4

 This amount consists of $83,862.50 in service fees, $6,327.63 in finance charges, 

and $105,000 in accelerated Subscription Fees, pursuant to the LIS Contract. (Lawrence 

Decl. ¶ 46.)

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5. Whether Default was Due to Excusable Neglect

A court may consider whether there are circumstances surrounding a party’s failure 

to respond constitutes excusable neglect. See Eitel, 782 F.2d at 1472. However, a court 

may find excusable neglect to be lacking where a defendant was properly served with the 

complaint and notice of default judgment. See Shanghai Automation Instrument Co. v. 

Kuei, 194 F. Supp. 2d 995, 1005 (N.D. Cal. 2001). Here, the possibility of excusable 

neglect is remote. Firefly was properly served with the Complaint, the motion for clerk’s 

default judgment, the Clerk of the Court’s entry of default, and the instant motion for this 

Court’s entry of default judgment. (Docket Nos. 4, 5-6, 9). Yet Firefly failed to answer 

the Complaint and did not oppose the above-referenced motions or object to the Clerk of 

the Court’s entry of default. Accordingly, this factor also weighs in favor of granting 

default judgment against Firefly.

6. Policy Favoring Decisions on the Merits

The policy favoring resolution of the case on the merits always weighs against 

default judgment. In this case, however, the other Eitel factors outweigh this general 

policy because of Firefly’s “failure to answer Plaintiff's [c]omplaint makes decision on 

the merits impractical, if not impossible.” PepsiCo, 238 F. Supp. 2d at 1177. 

In sum, other than the policy of deciding cases on the merits, the totality of the 

Eitel factors weigh in favor of default judgment against Firefly. Therefore, Plaintiff’s 

motion for default judgment is GRANTED.

C. Damages

XIFIN seeks damages due under the RPM and LIS Contracts. Under Rule 8(a)(3), 

a plaintiff’s demand for relief must be specific, and he “must ‘prove up’ the amount of 

damages.” Philip Morris USA Inc. v. Banh, No. CV 03–4043 GAF (PJWx), 2005 WL 

5758392, at *6 (C.D. Cal. Jan. 14, 2005); Elektra Entmn’t Grp., Inc. v. Bryant, No. CV 

03–6371GAF(JTLX), 2004 WL 783123, at *5 (C.D. Cal. Feb. 13, 2004) (“Plaintiffs must 

‘prove up’ the amount of damages that they are claiming.”). Rule 54(c) limits the relief 

that can be sought in a motion for entry of default judgment to that identified in the 

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complaint. Fed. R. Civ. P. 54(c) (“A default judgment must not differ in kind from, or 

exceed in amount, what is demanded in the pleadings.”). See also PepsiCo, 238 F. Supp. 

2d at 1174 (stating that a default judgment “shall not be different in kind from or exceed 

in amount that prayed for in the [complaint]”). Also, as noted, a defaulting defendant is 

not deemed to have admitted facts concerning damages alleged in the complaint. See id. 

at 1177 (“Upon entry of default, all well pleaded facts in the complaint are taken as true, 

except those relating to damages.”) (citing TeleVideo Sys., 826 F.2d at 917-18). 

XIFIN seeks an award of monetary damages in the amounts of $696,132.01 for the 

RPM Contract and $195,190.13 for the LIS Contract. To support its damages, XIFIN 

attached copies of the Contracts, the Declaration of XIFIN’s Associate Vice President of 

Financial Operations, and copies of the invoices reflecting the outstanding balances, 

which establishes $256,758.94 in service fees are due under the RPM Contract, and 

$83,862.50 in service fees are due under the LIS Contract. (Lawrence Decl. ¶¶ 20-35, 

36-46.) XIFIN also points to the clauses in the Contracts that allow finance charges in 

the amount of 1.5% per month on overdue balances, which in this case totals $19,373.07

for the RPM Contract and $6,327.63 for the LIS Contract. (Id.) XIFIN further identifies 

the clauses in the Contracts that provide for acceleration of minimum service fees, which 

amount to $420,000 for the RPM Contract and $105,000 for the LIS Contract. (Id.) 

Thus, XIFIN has sufficiently proven up the amount of damages it is claiming.

CONCLUSION

For the foregoing reasons, Plaintiff’s motions to seal and for default judgment are 

GRANTED. The Clerk of Court shall enter judgment in favor of Plaintiff in the amount 

of $891,322.14 in total damages.

IT IS SO ORDERED.

Dated: March 9, 2018

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