Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-00890/USCOURTS-casd-3_18-cv-00890-0/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., a California Corporation,

Plaintiff,

v.

DIAGNOSTIC LAB SERVICES, LP, a 

Texas limited partnership,

Defendant.

Case No.: 18-CV-890 JLS (BLM)

ORDER GRANTING MOTION FOR 

DEFAULT JUDGMENT

(ECF No. 12)

Presently before the Court is Plaintiff XIFIN Inc.’s Motion for Default Judgment 

(“Mot.,” ECF No. 12). After reviewing Plaintiff’s briefing and supporting evidence and 

weighing the relevant factors, the Court GRANTS Plaintiff’s Motion for Default 

Judgment. 

BACKGROUND

Plaintiff XIFIN, Inc. is a San Diego-based healthcare information technology 

company that provides clients with cloud-based billing services, which Plaintiff provides 

through its proprietary Revenue Performance Management (“RPM”) system. ECF No. 1 

(“Compl.”) at 3.

1

 The RPM system helps medical facilities submit claims to insurance 

 

1 For ease of reference, the Court cites to the CM/ECF page numbers stamped at the top of the page.

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companies, government operated programs, and individuals. Id. Defendant Diagnostic 

Lab Services, LP is a laboratory that provides diagnostic services to healthcare providers 

in the United States. Id. 

On August 17, 2016, Plaintiff and Defendant entered into a three-year “Systems and 

Services Agreement” (“Services Agreement”). Id. Under the Services Agreement, 

Plaintiff was to configure its RPM system to agreed specifications, provide Defendant 

system access, and provide ongoing support and services related to the processing and 

management of Defendant’s claims to third parties. Id. at 3–4. Defendant’s obligation 

under the Services Agreement was to pay an implementation fee and ongoing service fees. 

Id. 

Plaintiff implemented the RPM system on or about January 1, 2017, and Defendant 

began processing bills through the system. Id. Plaintiff thereafter processed Defendant’s 

billings until, on August 29, 2017, Plaintiff terminated the Services Agreement because 

Defendant failed to pay any of the service fees that were due. Id. at 5.

On October 17, 2017, Plaintiff filed a complaint against Defendant for breach of 

contract. Mot. at 5 (citing XIFIN v. Diagnostic Lab Serv., LP, No. 17-cv-02134-CABBLM (S.D. Cal. filed Oct. 17, 2017), ECF No. 1). On December 7, 2017, the Parties

entered into a settlement agreement in which the Parties agreed to mutual releases and 

settlement of all claims in exchange for Defendant paying Plaintiff $200,000. Id. The 

agreement required Defendant to pay the amount over the course of ten equal installments 

of $20,000, beginning in December 2017 and continuing each month thereafter. Id. Under 

the settlement agreement, the Parties agreed that if Defendant “fail[ed] to timely make any 

payment required under . . . this Agreement, [Plaintiff], at its sole discretion, may re-file a 

breach of contract lawsuit against [Defendant] (and/or its successors, transferees, and 

assigns) for breach of the [Services Agreement].” Id.; see also Declaration of Tammy 

Lawrence (“Lawrence Decl.”), Ex. A at 3, ECF No. 12-4.

Defendant paid Plaintiff $20,000 on December 8, 2017. Mot. at 5. On the same day,

Plaintiff filed with the court a notice of voluntary dismissal without prejudice of all claims 

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against Defendant. Id. (citing XIFIN, Case No. 17-cv-02134-CAB-BLM, ECF No. 6). On 

January 30, 2018, Defendant paid Plaintiff $10,000. Id. Since then, Plaintiff has failed to 

make any further payments. Id. 

After Defendant failed to make timely payments, Plaintiff filed the Complaint in the 

instant action on May 8, 2018. Id. at 5–6. On June 29, 2018, Plaintiff filed an Affidavit of 

Due Diligence, stating that its attempt to serve Defendant was unsuccessful because 

Defendant was no longer at its place of business and there was a sign on the door stating,

“the locks have been changed due to tenant default.” ECF No. 3. On August 8, 2018, 

Plaintiff served the complaint on the State of Texas, Secretary of State. Mot. at 6. 

Defendant failed to file any responsive pleading, id., and on January 14, 2019, the Clerk 

entered default against Defendant. ECF No. 10. Plaintiff filed the instant motion now 

before the Court. 

LEGAL STANDARD

Federal Rule of Civil Procedure 55 permits a court to enter default judgment upon a 

party’s application. Although default judgments are ordinarily disfavored, a court may 

grant or deny a motion for default judgment at its discretion. See Alan Neuman Prods., 

Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988) (citing Haw. Carpenters’ Tr. Funds 

v. Stone, 794 F.2d 508, 511–12 (9th Cir. 1986); Eitel v. McCool, 782 F.2d 1470, 1471 (9th

Cir. 1986); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980)). 

The Ninth Circuit has set out seven factors, known as the Eitel factors, that a court 

may consider when exercising its discretion as to whether or not to grant default judgment:

(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, 782 F.2d at 1471–72.

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When weighing these factors, the well-pleaded factual allegations of the complaint 

are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. v. 

Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987); see also Fed. R. Civ. P. 8(b)(6). To 

prove damages, a plaintiff may submit declarations, or the Court may hold an evidentiary 

hearing. See Affinity Grp., Inc. v. Balser Wealth Mgmt., LLC, No. 05CV1555 WQH (LSP), 

2007 WL 1111239, at *1 (S.D. Cal. Apr. 10, 2007); see also Taylor Made Golf Co. v. 

Carsten Sports, 175 F.R.D. 658, 661 (S.D. Cal. 1997) (“In assessing damages, the court 

must review facts of record, requesting more information if necessary, to establish the 

amount to which plaintiff is lawfully entitled upon judgment by default.”).

ANALYSIS

I. Jurisdiction

To enter default judgment against Defendant, the Court must first determine it has

subject-matter jurisdiction. See Twitch Interactive, Inc. v. Johnston, No. 16-cv-03404-

BLF, 2019 WL 3387977, at *3 (N.D. Cal. July 26, 2019). Here, the Court has 

subject-matter jurisdiction under 28 U.S.C. § 1332, because this is a civil action between 

citizens of different states and the amount in controversy exceeds $75,000. Plaintiff is a 

California corporation with its principal place of business in California, while Defendant 

is a Texas limited partnership with its principal place of business in Texas. Mot. at 6. 

Plaintiff seeks contract damages totaling $706,745.67, well above the amount in 

controversy threshold. Id. at 16.

The Court must also have personal jurisdiction over the defendant, or else entry of 

default judgment is void. Veeck v. Commodity Enters., Inc., 487 F.2d 423, 426 (9th Cir. 

1973). For the reasons below, the Court finds that Plaintiff satisfied service of process and 

that Defendant consented to jurisdiction in California.

A. Service of Process

“A federal court is without personal jurisdiction over a defendant unless the 

defendant has been served in accordance with Federal Rule of Civil Procedure 4.”

Travelers Cas. & Sur. Co. of Am. v. Brenneke, 551 F.3d 1132, 1135 (9th Cir. 2009). “Rule 

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4 is a flexible rule that should be liberally construed so long as a party receives sufficient 

notice of the complaint.” United Food & Comm. Workers Union v. Alpha Beta Co., 736 

F.2d 1371, 1382 (9th Cir. 1984). Under Rule 4(e) service of process may be conducted in 

accordance with the state law of where service is made, in this case Texas. Texas law 

permits the Secretary of State to act as “an agent of an entity for purposes of service of 

process, notice, or demand” if “the registered agent of the entity cannot with reasonable 

diligence be found at the registered office of the entity.” Tex. Bus. Orgs. Code Ann. 

§ 5.251.

In this case, Plaintiff first attempted to serve Defendant at Defendant’s principal 

place of business, which was permanently closed. ECF No. 5 at 1. After attempting to 

find a current address for Defendant but failing to do so, Plaintiff sought an extension of 

time to serve, which the Court granted. Id. After the extension, Plaintiff successfully 

served The State of Texas, Secretary of State. ECF No. 6 at 1; Mot. at 6. The initial attempt 

to serve Defendant at Defendant’s principal place of business and the subsequent attempt 

to find a current address constitutes “reasonable diligence”; therefore, service to the 

Secretary of State was proper under Texas law. Accordingly, the Court finds that Plaintiff 

has complied with the requirements of Rule 4.

B. Personal Jurisdiction

“[P]arties to a contract may agree in advance to submit to the jurisdiction of a given 

court.” Nat’l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 316 (1964). By agreeing to a 

forum selection clause, a party consents to personal jurisdiction in that forum. Twitch, 

2019 WL 3387977, at *4. When parties agree to submit to a certain jurisdiction, that 

agreement should be enforced and does not violate due process unless the agreement is 

“unreasonable and unjust.” See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 

(1972). 

Here, the Parties entered into the Services Agreement, which contains a forum 

selection clause. Section 10.5 of the Services Agreement states, “The parties agree that all 

actions or proceedings arising in connection with this Agreement shall be tried and litigated 

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exclusively in the federal or state courts located in the County of San Diego, California.”

Mot. at 6. Defendant therefore consented to jurisdiction in this Court. The Court finds no 

evidence that enforcement of the agreement would be unreasonable or unjust. 

Accordingly, the Court finds that it has personal jurisdiction over Defendant.

II. Entry of Default Judgment 

Having determined the Court has jurisdiction, the Court now turns to the merits of 

Plaintiff’s Motion for Default Judgment, addressing each of the Eitel factors in turn. 

A. Factor I: Prejudice to Plaintiff

The first factor weighs in favor of entering default judgment. Plaintiff states a valid 

breach of contract claim against Defendant, and Defendant has failed to appear or 

otherwise participate in this action. Plaintiff has therefore suffered and continues to suffer 

injury from Defendant’s breach of both the Services Agreement and the Settlement 

Agreement. Without a default judgment, Plaintiff lacks any other recourse to recover 

damages. This constitutes prejudice that favors default judgment. See PepsiCo, Inc. v. 

Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002) (noting that “[i]f Plaintiffs’ 

motion for default judgment is not granted, Plaintiffs will likely be without other recourse 

for recovery” and will suffer prejudice); see also Moroccanoil, Inc. v. Allstate Beauty 

Prods., Inc., 847 F. Supp. 2d 1197, 1200–01 (C.D. Cal. 2012) (“[A plaintiff] will generally 

be prejudiced if a court declines to grant default judgment where, as here, it lacks other 

recourse to recover damages for its injury or means to prevent [the defendant] from causing 

it further harm.”). 

B. Factors II and III: Claim Merits and Sufficiency of Complaint

To warrant entering a default judgment, the complaint’s allegations must be 

sufficient to state a claim upon which relief can be granted. Danning v. Lavine, 572 F.2d 

1386, 1388 (9th Cir. 1978). A complaint satisfies this standard when the claims “cross the 

line from conceivable to plausible.” Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009) (citing 

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). A default concedes the truth of the 

allegations in the complaint, except those relating to damages. TeleVideo, 826 F.2d at

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917–18 (quoting Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977)); Taylor 

Made, 175 F.R.D. at 661 (noting that “[i]n assessing liability, the complaint’s allegations 

are taken as true” because “a defendant’s default functions as an admission of the plaintiff’s 

well-pleaded allegations of fact”).

Plaintiff brings a claim for breach of contract. To state a valid cause of action for 

breach of contract a plaintiff must show: “(1) existence of a contract; 

(2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and 

(4) damages as a result of the breach.” Shue v. Optimer Pharm., Inc., No. 

316CV02566BENJLB, 2018 WL 1116567, at *2 (S.D. Cal. Feb. 27, 2018) (citing Miles v. 

Deutsche Bank Nat’l Tr. Co., 236 Cal. App. 4th 394, 402 (2015)).

Here, Plaintiff has shown: (1) the Parties entered into a contract, the Service 

Agreement, Compl. at 3–4; (2) Plaintiff performed its obligation under the Service 

Agreement by implementing the RPM system, id. at 4–5; (3) Defendant breached by failing 

to make payments due under the Service Agreement, id. at 5; and (4) Plaintiff suffered 

damages in the form of the unpaid service fees and other costs due under the Services

Agreement, id. Accordingly, the Court finds that these factors guide in favor of granting 

default judgment. 

C. Factor IV: Sum of Money at Stake

Under this factor, the Court considers whether the damages sought are proportional 

to the alleged harm. Landstar Ranger, Inc. v. Parth Enter., Inc., 725 F. Supp. 2d 916, 921 

(N.D. Cal. 2010). When a plaintiff seeks only to recover the amount of money owed to it

pursuant to a contract, “the sum of money at stake is reasonably proportionate to the harm 

caused to [it] by [the d]efendant[’s] breach.” Walters v. Statewide Concrete Barrier, Inc., 

No. C–04–2559 JSW MEJ, 2006 WL 2527776, at *5 (N.D. Cal. Aug. 30, 2006). 

Here, Plaintiff seeks to recover as damages the amount owed to it under the Services 

Agreement. To support these damages, Plaintiff submitted copies of invoices sent to 

Defendant, a calculation of late fees, and a calculation of unpaid minimum service fees. 

See generally Lawrence Decl. Therefore, “[b]ased on the evidence presented, the [C]ourt 

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concludes that the damages [Plaintiff] seeks are consistent with the terms of the contract[]

and are otherwise appropriate.” Landstar Ranger, 725 F. Supp. 2d at 921. 

D. Factor V: Possibility of Factual Dispute

This factor turns on the degree of possibility that a dispute concerning material facts 

exists or may later arise. Eitel, 782 F.2d at 1471–72. Here, Plaintiff’s allegations must be 

taken as true because of the default, see TeleVideo, 826 F.2d at 917–18, and therefore any 

purported factual dispute appears settled as there is no indication that Defendant will 

defend against the action. Accordingly, this factor favors default.

E. Factor VI: Reason for Default

If a defendant’s default may have been the product of excusable neglect, this factor 

weighs against granting default judgment. Eitel, 782 F.2d at 1471–72. Here, there is no 

evidence of excusable neglect. Thus, this factor weighs in favor of default judgment.

F. Factor VII: Policy Favoring Merits Decisions

Although this factor, by its nature, generally weighs against default judgments

because it encourages merits decisions, “[t]he fact that Rule 55(b) has been 

enacted . . . indicates that ‘this preference, standing alone, is not dispositive.’” Landstar 

Ranger, 725 F. Supp. 2d at 922 (citing Pepsico, 238 F. Supp. 2d at 1177 (quoting Kloepping 

v. Fireman’s Fund, No. 94–2684, 1996 WL 75314, at *3 (N.D. Cal. 1996))). In the present 

case, there is no indication that a merits decision is practicable; Defendant has yet to answer 

Plaintiff’s complaint. See PepsiCo, Inc., 238 F. Supp. 2d at 1177 (“Defendant’s failure to 

answer Plaintiffs’ Complaint makes a decision on the merits impractical, if not 

impossible.”). The Court therefore concludes that the timely administration of justice 

outweighs the strong preference for merits decisions in this case.

Based on the above, the Court finds that the Eitel factors weigh in favor of default 

judgment in this case. Accordingly, the Court GRANTS Plaintiff’s Motion for Default 

Judgment.

///

///

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III. Assessment of Damages

“Under Rule 8(a)(3), plaintiff’s demand for relief must be specific, and it must prove 

up the amount of damages.” Landstar Ranger, 725 F. Supp. 2d at 923 (internal citations 

omitted). Additionally, “[r]ule 54(c) ‘allows only the amount prayed for in the complaint 

to be awarded to the plaintiff in default.’” Id. (quoting Fong v. United States, 300 F.2d 

400, 413 (9th Cir. 1962)). In its Motion, Plaintiff seeks contract damages totaling 

$706,745.67. Mot. at 16. This total includes unpaid service fees, unpaid finance charges, 

reimbursable expenses, and unpaid minimum monthly service fees, all of which Plaintiff 

prayed for in the Complaint. Id.; see generally Compl. 

First, Plaintiff claims entitlement to $139,396.21 in unpaid service fees. Id. at 11, 

16. This amount is supported by the seven unpaid invoices of $21,320 for monthly service 

fees. Lawrence Decl., Ex. B. Plaintiff reduces the price owed for the February 1, 2017, 

invoice by applying “$9,843.79 of the $10,000 payment made by [Defendant] on 

January 20, 2018 under the Settlement Agreement.” Mot. at 14. Plaintiff does not explain 

why the entire $10,000 payment was not remitted from the damages sought or where the 

remaining $156.21 was applied. Additionally, Plaintiff does not indicate where, if at all, it 

reduced its claim for damages for the $20,000 settlement payment that Plaintiff received

from Defendant on December 8, 2017. See Mot. at 5. Without this information, the Court 

cannot conclude the amount of damages requested is correct. 

Next, Plaintiff claims entitlement to $23,120.92 of unpaid finance charges and 

$4,228.54 in reimbursable expenses. Id. at 16. Plaintiff supports its claim for the unpaid 

finance charges with calculations located in an attached table of late fees. Lawrence Decl., 

Ex. D. The table appears to be an accurate reflection of the “1.5% per month late fee on 

insufficient funds” allowed for in the Services Agreement. Mot. at 15. The claim for 

$4,228.54 in costs is similarly well supported. Plaintiff provides two invoices for

reimbursable expenses, which total $4,228.54. Lawrence Decl., Ex. C. 

Finally, Plaintiff seeks $540,000 for twenty-seven months of minimum monthly 

service fees. Mot. at 16. Section 9.4.2 of the Services Agreement states: “If Plaintiff 

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terminates the RPM Contract as the result of an uncured material breach by Defendant, 

Defendant agrees to immediately pay Plaintiff the Minimum Service Fee as set forth in 

Schedule 1 – Fees & Payments, for the remainder of months for the then-current Term.”

Compl. at 4. Because the contract was terminated in August 2017, and was set to continue 

until November 1, 2019, Defendant is obligated to pay the $20,000 minimum monthly

service fee for the twenty-seven months remaining in the term. Mot. at 16. Plaintiff’s

request for $540,000 accurately reflects $20,000 times twenty-seven. See Lawrence Decl., 

Ex. G. 

Although Plaintiff sufficiently supports its request for damages with evidence the 

Court finds reliable, the Court cannot approve the amount requested on the current record. 

The Court cannot account for the $20,000 from the December 2017 payment or the 

remaining $156.21 from the $10,000 January 2018 payment. Therefore, the Court 

ORDERS Plaintiff to submit a statement and any supporting evidence regarding these 

payments and whether they were accounted for in Plaintiff’s claim for damages within

fourteen (14) days from the date on which this Order is electronically docketed.

CONCLUSION

For the reasons stated above, the Court GRANTS Plaintiff’s Motion for Default 

Judgment. Regarding the amount of damages, Plaintiff SHALL SUBMIT a statement and 

evidence regarding the $20,000 January 2018 settlement payment and the remaining 

$156.21 from the December 2017 settlement payment on or before fourteen (14) days from 

the date on which this Order is electronically docketed.

IT IS SO ORDERED.

Dated: November 18, 2019

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