Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-07809/USCOURTS-cand-3_06-cv-07809-1/pdf.json

Nature of Suit Code: 196
Nature of Suit: Franchise
Cause of Action: 28:1332 Diversity-Breach of Contract

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United States District Court

For the Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CENTURY 21 REAL ESTATE,

LLC., 

 Plaintiff,

 v.

HERITAGE REAL ESTATE, INC.,

et al. 

 Defendants.

_____________________________/

No. C 06-7809 WDB

ORDER FOR SUPPLEMENTAL

SUBMISSIONS RE APPLICATION

FOR DEFAULT JUDGMENT

On April 18, 2007, plaintiff filed its Application for Entry of Default Judgment

by Court Against Defendant Heritage Real Estate, Inc., ("Application").

The Court ORDERS plaintiff to file supplemental submissions that address the

following issues.

1. Plaintiff seeks $31,457.50 for attorneys' fees and costs. See, Lorch

Declaration, filed April 18, 2007. However, plaintiff has not proffered evidence that

would support this request. In order to obtain reimbursement of its reasonable

attorneys' fees and costs plaintiff must submit copies of its counsel's billing records

demonstrating the tasks that counsel performed and the number of hours expended for

each task. Plaintiff also must itemize the costs for which it seeks reimbursement. In

addition, plaintiff must submit evidence about each attorney's and paralegal's

Case 3:06-cv-07809-SC Document 49 Filed 05/07/07 Page 1 of 4
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The language relied on by plaintiff appears to apply only to interest relating to "products,

supplies, or services furnished [by plaintiff]." Iuliano Decl., Ex.C. at 16.

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experience and qualifications to support the requested hourly rates as well as evidence

that those rates are commensurate with the prevailing market rate in this community

for similarly experienced counsel working on these kinds of matters.

2. Plaintiff appears to seek prejudgment interest as to "all fees and

contributions" due under the Franchise Agreements "at the lower rate of either the

highest rate allowed by law or a rate that is five (5) percentage points per annum

higher than the 'prime rate' then currently established by the largest bank . . .

headquartered in the state in which Franchisee's Approved Location is situated."

Application at 15-16 (emphasis added). Defendant is located in California, and

plaintiff represents that Wells Fargo Bank provides the applicable prime rate.

As we read the governing Franchise Agreements, royalty fees and "NAF" fees

are to bear interest "at the lower rate of either the highest rate allowed by law or a rate

that is five (5) percentage points per annum higher than the 'prime rate' then currently

established by Mellon Bank, N.A. Pittsburgh, PA. E.g., Iuliano Decl., filed April 18,

2007, Ex. C at 6 and 11 (emphasis added).1

 Plaintiff must (1) explain why it is

appropriate to use Wells Fargo Bank rather than Mellon Bank or (2) identify the

appropriate rate using Mellon Bank and submit evidence recalculating the interest

sought.

Additionally, plaintiff's current interest calculation purports to use the prime

rate "currently in effect." Application at 16:13. The language of the contract (under

both the California and Mellon Bank provisions) provides for use of the prime rate

"then currently established." We think a natural reading of these provisions suggests

that "then" refers to the point in time at which defendant defaults on the obligation

(i.e., when the payment is late). What is the basis for plaintiff's apparent conclusion

that the phrase "then currently established" refers to now (i.e., the date when plaintiff

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By way of example, and without limitation, does California law require, inter alia, that

the Security Agreement identify the location of the property with specificity? If so, does the

Security Agreement, dated September 1, 2000, satisfy this requirement in light of the fact that

it does not specify the street address at which the subject property is located? Iuliano Decl., at

Ex. H ("all furniture, etc... located at ...the residential real estate brokerage business conducted

by Debtor"). Plaintiff has provided no legal authority on which to evaluate its request for

foreclosure of the security.

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seeks default judgment)? Plaintiff must address whether the contracts contemplate

that it will use the prime rate in effect at the time defendant defaulted on its

obligations or the prime rate in effect today.

3. As we understand it, plaintiff does not seek prejudgment interest with

respect to the amounts sought as "liquidated damages." Lorch Decl., at Ex. BB. If

this understanding is incorrect plaintiff must notify the Court. Given that plaintiff's

requested liquidated damages purport to represent lost future profits (i.e., money to

which plaintiff would be entitled in the future as opposed to money that is owing and

past due), if plaintiff claims it is entitled to prejudgment interest with respect to

"liquidated damages" plaintiff must set forth authority for its position.

4. Plaintiff seeks an order "compelling Heritage to turn over the collateral

subject of the Security Agreements." Application at 18. These agreements are subject

to California law. Iuliano Decl., at Ex. H. Plaintiff's Application sets forth no

California law pertaining to the requirements for foreclosing on property that is

subject to security agreements of this kind at this juncture. Accordingly, plaintiff also

has not established that each of the Security Agreements satisfies the requirements of

California law.2

5. Finally, we note that the "court's decision whether to enter a default

judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089 (9th Cir. 1980).

Plaintiff's Application does not explicitly address the factors considered by courts in

the Ninth Circuit when determining whether it is appropriate to enter default

judgment. E.g., Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). See also,

Schwarzer, et al, Federal Civil Procedure Before Trial, ¶6:100-6:101 (TRG).

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By Monday, May 21, 2007, plaintiff must file with the Court and serve on

defendant Heritage Real Estate, Inc., its supplemental argument and evidence

addressing the issues identified above.

By, Wednesday, June 6, 2007, defendant Heritage must file its response, if

any, to any matters raised by the original Application and supporting papers and any

matters addressed in plaintiff's May 21st supplemental submissions.

By Wednesday, June 13, 2007, plaintiff must file its Reply, if any, to

defendant's June 6th response.

On Wednesday, June 27, 2007, at 1:30 p.m., the Court will conduct a hearing

in connection with plaintiff's Application for Default Judgment Against Defendant

Heritage Real Estate, Inc. The hearing will take place in Courtroom 4, 3rd Floor,

United States Courthouse, 1301 Clay Street, Oakland, California, 94612.

Heritage Real Estate, Inc., may appear at the hearing through counsel. See,

Local Rules for the Northern District of California, Civil Local Rule 3-9(b).

The Court ORDERS plaintiff to promptly serve a copy of this order on

Heritage Real Estate, Inc.

IT IS SO ORDERED.

Dated: May 4, 2007 WAYNE D. BRAZIL

United States Magistrate Judge

Copies to:

Plaintiff with instructions to serve defendant, 

WDB, Stats.

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