Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-04301/USCOURTS-cand-5_06-cv-04301-8/pdf.json

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

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United States District Court

For the Northern District of California

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 The remaining defendant, Michael Kofman, has filed a petition in bankruptcy and

this matter is stayed as to him.

 *E-filed 7/27/07*

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

SOFTWAREWORKS GROUP, INC.,

Plaintiff,

 v.

IHOSTING, INC., WEBHOSTING PLUS,

INC., and MICHAEL KOFMAN,

Defendants.

_____________________________________/

Case No. C06-04301 HRL

ORDER GRANTING

PLAINTIFF'S APPLICATION

FOR DEFAULT JUDGMENT AND

JUDGMENT

Re: Docket No. 66

Plaintiff, Softwareworks Group ("SWG"), seeks entry of default judgment against

IHosting, Inc. and WebHosting Plus, Inc.1

BACKGROUND

This action arose out of a business deal among web-hosting companies. SWG sold

nearly all of its assets to IHosting pursuant to an asset purchase agreement ("the Agreement"). 

Under its terms, IHosting became the noteholder of a secured promissory note ("the Note") in

the amount of $724,800. WebHosting Plus guaranteed the Note. IHosting made only the first

scheduled installment payment before defaulting under the terms of the Note. As such, the

outstanding balance became due immediately. The parties attempted to negotiate repayment of

Case 5:06-cv-04301-HRL Document 74 Filed 07/27/07 Page 1 of 4
United States District Court

For the Northern District of California

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2 F.R.C.P. 55:(b)(2) If the party against whom a default judgment is sought has

appeared personally or by a representative, that party or its representative must be served

with written notice of the application at least 3 days before the hearing. 

3

 Although the Note allows for a one-time downward adjustment if certain conditions

are met, Mills testified that the adjustment was not triggered here. 

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the Note (IHOSTING made two $10,000 payments). However, these attempts failed and SWG

sued. 

While the parties were engaged in discovery proceedings, Defendants ceased contact

with Plaintiff and the court. After several attempts to set the discovery process back on track,

this court issued an order to show cause to Defendants. When they did not respond, Defendants'

answer was stricken from the record and the counterclaim was dismissed with prejudice.

Thereafter, the Clerk entered default against Defendants, who have not moved to set aside the

default or responded in any way. SWG requested entry of default judgment and an evidentiary

hearing was noticed and conducted in accordance with the requirements of FRCP 55(b). 2

ANALYSIS

The decision to enter default judgment is within the discretion of the court. Shanghai

Automation Instrument Co., v. Kuei, 194 F.Supp.2d 995, 999-1000 (N.D.Cal., 2001). The

following factors are to be considered in exercising this discretion: (1) 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, (5) potential disputes concerning material facts, (6) whether default was due to

excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure

favoring decisions on the merits. Id. (citing Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th

Cir.1986)). When default has been entered, the complaint's factual allegations along with other

competent evidence must be taken as true. Shanghai, 194 F.Supp. 2d at 1000. 

John Mills, president and member of the board of directors of SWG, testified at the

evidentiary hearing to the amount of damages. He also submitted a declaration and other

materials supporting the damage calculation. Mills stated that Defendants were accountable for

an outstanding balance of $653,029.00 for the Note.3

 Further, SWG asked for prejudgment

Case 5:06-cv-04301-HRL Document 74 Filed 07/27/07 Page 2 of 4
United States District Court

For the Northern District of California

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interest in the amount of $44,074.87. In support, Plaintiff relied on New Jersey law4

 which

permits the court, in its discretion, to award prejudgment interest in contract cases on an

equitable basis. The amount of interest sought is based on a 5% annual interest rate, which this

court deems reasonable under these circumstances. Accordingly, SWG sought a judgment

totaling $697,103.87.

In consideration of the Eitel factors, the court notes that Plaintiff has no other remedy

available to it, given Defendants' unwillingness to litigate this case. Further, there is no reason

to suspect that the evidence submitted by SWG lacks trustworthiness. Given the allegations and

the evidence presented, Plaintiff's claims against IHOSTING and WebHosting Plus appear to be

meritorious and the amount of money at stake is not excessive given the nature of the

transaction. Finally, this court relies heavily on the fact that the default was not due to any

excusable neglect. The defendants unilaterally relieved themselves of their obligation to defend

against these claims. Thus, while there is a strong policy favoring decisions on the merits,

every other Eitel factor favors entry of default judgment for SWG. 

Based on the foregoing reasoning, this court grants Plaintiff's motion for default

judgment in the amount prayed for. 

JUDGMENT

Judgment is entered in favor of Plaintiff and against defendants, IHOSTING and

WebHosting Plus, in the amount of $697,103.87. Plaintiff shall also recover reasonable

attorney's fees and costs of suit. 

Dated: 7/27/07 

HOWARD R. LLOYD

UNITED STATES MAGISTRATE JUDGE

Case 5:06-cv-04301-HRL Document 74 Filed 07/27/07 Page 3 of 4
United States District Court

For the Northern District of California

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THIS IS TO CERTIFY THAT A COPY OF THIS ORDER WILL BE ELECTRONICALLY

MAILED TO:

Lael D. Andara landara@ropers.com, aslanlair@ropers.com, lkoozmin@ropers.com,

mmcpherson@ropers.com 

Robert P. Andris randris@ropers.com, lkoozmin@ropers.com, mmcpherson@ropers.com 

Robert Lloyd Maines maines@robertmaineslaw.com, jmills@OMM.com 

Counsel are responsible for transmitting this order to co-counsel who have not signed up

for e-filing.

Dated: 7/27/07 /s/ KRO 

 Chambers of Magistrate Judge Howard R. Lloyd

Case 5:06-cv-04301-HRL Document 74 Filed 07/27/07 Page 4 of 4