Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_02-cv-05875/USCOURTS-caed-1_02-cv-05875-4/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1961 Racketeering (RICO) Act

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

JESUS ALBIZU, )

)

Plaintiff, )

)

)

v. )

)

CLYDE A. STROHL, et al., ) 

 )

Defendants. )

)

 

1:02-cv-5875-AWI-SMS 

FINDINGS AND RECOMMENDATIONS RE:

PLAINTIFF’S MOTION FOR DEFAULT

JUDGMENT AGAINST DEFENDANTS

WESLEY E. AMUNDSON AND AMUNDSON

AND ASSOCIATES (Doc. 87)

I. Background

Plaintiff is proceeding with an action commenced on July 19,

2002, by the filing of a verified complaint alleging 1) a RICO

claim in violation of 18 U.S.C. § 1962 (prohibiting specified

activities in the investment of income derived from a pattern of

racketeering activity or through collection of an unlawful debt)

premised upon wire fraud and mail fraud via misrepresentation

regarding an investment of $102,000.00 made by Plaintiff in

Defendants’ firm (seventh claim); and 2) pendent state claims for

intentional and negligent misrepresentation, making a promise

without intent to perform, breach of contract, conversion, and

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breach of fiduciary duty (first through sixth claims). On

September 11, 2002, defaults were entered as to Defendants Wesley

E. Amundson and Amundson and Associates. On December 4, 2002, the

defaults of Defendants Clyde A. Strohl and Strohl’s Financial

Services, Inc., were entered. 

Plaintiff filed a previous application for default judgment

against all four defendants in March 2003, and Defendant Strohl

filed a motion to set aside his default. Hearings on both motions

were vacated, and further proceedings in this matter were stayed

to permit Plaintiff’s counsel to obtain relief from a bankruptcy

stay. On July 14, 2003, counsel for Plaintiff filed a copy of the

bankruptcy Court’s annulment of the automatic stay entered June

10, 2003, in a Chapter 13 proceeding in Case No. 02-17526-A-13.

On September 3, 2003, Defendant Clyde A. Strohl filed in

this Court a notice of reopening a Chapter 7 proceeding, Case No.

01-15866-7, and invoking an automatic stay pursuant to 11 U.S.C.

§ 362(a). 

On September 4, 2003, the Court ordered the case

statistically closed because of the pendency of a bankruptcy

proceeding, and directed the parties to submit a request to reopen case and set scheduling conference should counsel desire to

reopen the case. The order was served on counsel and on Defendant

Strohl. Pursuant to Plaintiff’s request, the case was ordered

reopened on March 26, 2004. A stipulated stay of the proceedings

pending disposition of a criminal action as to defendant Clyde A.

Strohl was filed on December 13, 2004. A status report filed by

Plaintiff on March 2, 2005, included an attached docket of the

criminal case that indicates that the case is still pending.

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1

 Plaintiff’s counsel reported at the hearing on this motion that the criminal action remains pending and that

trial has been set for February 2006; further, Mr. Nunez has revealed that Defendant Strohl anticipates another

bankruptcy proceeding.

3

Thus, the action remains stayed as to Defendant Strohl.1

On January 7, 2005, Plaintiff filed the motion for default

judgment against Defendants Wesley E. Amundson and Amundson &

Associates only (Defendants) with supporting authorities and a

declaration of Plaintiff Albizu and counsel Stephen Drobny.

Pursuant to the Court’s order of January 26, 2005, a supplemental

memorandum and declaration of Drobny with exhibits were filed on

March 11, 2005, along with a proof of service of the materials on

the defaulting defendants against whom judgment is sought.

Through counsel, Defendants filed opposition on March 18,

2005, a motion to set aside default and default judgment as well

as evidentiary objections to the declarations of Drobny and

Albizu. On June 23, 2005, Defendants’ motions were deemed to be a

motion to set aside default only because no default judgment had

been entered; further, the Court denied Defendants Amundson’s

motion to set aside the default on June 23, 2005. 

Defendants’ counsel’s motion to withdraw as attorney, which

was not opposed by Defendants, was granted on August 24, 2005. 

A supplemental brief in support of the motion for default

judgment was filed on September 9, 2005, by Defendant Amundson,

proceeding pro se. The Court by order dated September 23, 2005,

permitted Defendants to file a brief within the limited scope of

permissible opposition; Defendants’ brief was filed on October

14, 2005. Plaintiffs filed a reply on October 28, 2005. 

Plaintiff’s motion came on regularly for hearing on November

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4, 2005, at 9:30 a.m. in Courtroom 4 before the Honorable Sandra

M. Snyder, United States Magistrate Judge. Stephen P. Drobny of

McCormick, Barstow, Sheppard, Wayte, and Carruth appeared on

behalf of Plaintiff; Defendant Wesley E. Amundson appeared pro

se.

II. Requirements for Entitlement to 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 (9th Cir. 1986); the

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

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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.

 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 (9th Cir. 1992); TeleVideo Systems, Inc. v.

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

A. Status of the Parties, Service, Notice,

 and Entry of Default

The proof of personal service of the summons on Defendant

Wesley E. Amundson, which consists of a declaration of a

registered California process server that the summons and other

named documents were personally served on Defendant Amundson on

August 9, 2002, and which was filed here on August 27, 2002, does

not indicate that the complaint was served, but the summons

itself states that the complaint was served with the summons.

(Doc. 4.)

Likewise, the proof of personal service on Defendant Wesley

Amundson and Associates, which consists of the declaration of a

registered process server that the copies were served on Wesley

Amundson as authorized to accept for Amundson & Associates on

August 9, 2002, does not indicate that the complaint was served,

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but the summons itself states that the complaint was served with

the summons. (Doc. 7.)

This service is sufficient pursuant to Fed. R. Civ. P. 4(c),

(e), and the law of California, the state in which this Court is

located. Personal service upon an individual defendant is

sufficient. Fed. R. Civ. P. 4(e)(2). As to Defendant Amundson &

Associates, the complaint alleges that it was a business of

unknown origin. (Complt. at 2.) It is not clear what form of

entity it was. Under California law, service on a corporation or

joint stock company may be effected by delivery to an agent or

other person authorized to receive service of process or an

officer or general manager. Cal. Civ. Proc. Code §§ 416.10,

416.30. Service on an unincorporated association may be effected

by delivery to an agent for service of process, a general

partner, or a general manager if the association is a general or

limited partnership, or by delivery to an agent or other person

authorized for service of process, an officer, or a general

manager. Cal. Civ. Proc. Code § 416.40. The process server

indicated that Amundson was served as an authorized agent. Hence,

service was sufficient under California law. 

There is no indication that either Defendant answered. Thus,

the clerk’s entry of default against the Defendants on September

11, 2002, was proper.

The application for the default judgment was served on

Defendant Wesley E. Amundson on January 7, 2005; the supplemental

submissions were served by mail on March 11, 2005, and September

9, 2005; the reply was also served by mail on Defendants on

October 28, 2005. Thus, Plaintiff is in compliance with Fed. R.

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Civ. P. 55(b)(2), which requires that written notice of an

application for default judgment be served at least three days

prior to the hearing on the defaulting party.

Further, the notice provided by the complaint was 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 alleged in the complaint that Plaintiff sought damages

that included $102,000 in principal, $55,800 in interest from the

May 2001 agreement, plus accrued prejudgment interest of $27.95

per day, with treble damages of $306,000 and reasonable

attorney’s fees pursuant to 18 U.S.C. § 1964(c)$50,000, and

costs. (Complt. at 11, 15-18.) 

Fed. R. Civ. P. 55(d) and 54(c) 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. Here, the amount of

punitive damages was not stated in the complaint, although it was

stated in the motion for default judgment. It has been held that

where a type of damages is requested in the complaint in an

amount to be proved, but the amount was not specified, recovery

in excess of an amount stated is permitted. Henry v. Sneiders,

490 F.2d 315, 317 n. 2 (9th Cir. 1974), cert. denied Sneiders v.

Henry, 419 U.S. 1060 (1974). Here, punitive damages were prayed

for in an amount sufficient to punish Defendants for their

wrongdoing and to deter others from engaging in similar

misconduct, with respect to the first, third, fifth, and sixth

claims. Defendants were given appropriate notice of the amount

sought in the papers seeking the default judgment, and Defendants

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were served with these papers and appeared and defended as to the

amount of punitive damages claimed. Rule 54(c) has been

satisfied. 

In his supplemental declaration, Stephen P. Drobny declares

that neither of the Amundson defendants is an infant,

incompetent, or member of the armed forces.

In summary, there is no defect with respect to notice,

status or interest of the parties, or presence of a member of the

armed forces, which would render entry of default judgment

inappropriate. 

B. Sufficiency of the Complaint

1) First Claim: Intentional Misrepresentation

Plaintiff has asserted three claims of fraud against the

Amundson Defendants: 1)Intentional Misrepresentation; 2)

Negligent Misrepresentation; and 3) Promise without Intent to

perform. These state law claims are codified in sections 1709 and

1710 of the California Civil Code. Civil Code § 1709 provides

that one who willfully deceives another with intent to induce

him to alter his position to his injury or risk is liable for any

damages which he thereby suffers. Civil Code 5 1710 then goes on

to distinguish between the different types of conduct that will

satisfy the first element of "willful deception" by providing in

pertinent part:

A deceit, within the meaning of the last section,

is either:

1. The suggestion, as a fact, of that which

is not true, by one who does not believe it to be

true [intentional misrepresentation];

2. The assertion, as a fact, of that which

is not true by one who has no reasonable ground

for believing it to be true [negligent

misrepresentation];

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...; or

4. A promise, made without any intention of

performing it [promise without intent to perform].

The elements of fraud that will give rise to a tort action

for deceit are misrepresentation, i.e., false representation,

concealment, or nondisclosure; knowledge of falsity, or scienter;

intent to defraud, i.e., to induce reliance; justifiable

reliance; and resulting damage. Engalla v. Permanente Medical

Group, Inc., 15 Cal.4th 951, 974 (1997).

With respect to his allegations of intentional

misrepresentation, Plaintiff has alleged that:

1) on or about September 1999, the Amundson Defendants' agent,

Clyde Strohl, and Defendants, approached Plaintiff with an

investment opportunity whereby it was asserted that Plaintiffs

"investment" would have a guaranteed minimum rate of return of 5%

(Complt. at ¶¶ 12, 22); 2) Amundson thereafter in May 2001

represented to Plaintiff that Plaintiff’s investment funds had in

fact been placed in an investment that would pay monthly returns

of 6% (Complt. at ¶¶ 15, 22); 3) the defendants made these

representations falsely and fraudulently, knowing they were

false, with intent to convert them, and without the intent to

invest them (Complt. at ¶ 23); 4) that defendants made these

representations with the intent to defraud and deceive Plaintiff

and with the intent to induce Plaintiff to tender his investment

of $102,000 (Complt. at ¶ 24); 5) Plaintiff was ignorant of the

falsity and believed these representation to be true and actually

relied on these representation in tendering his investment

(Complt. at ¶ 25). Further, had Plaintiff known the falsity of

these representations, he would not have tendered his investment.

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(Cmplt. at ¶ 25.) Plaintiff also alleged that he has incurred

actual damages in the amount of $102,000 in that defendants have

failed and refused to return Plaintiffs investment

principal. (Complt. at ¶¶ 20, 26.)

Accordingly, it is concluded that in the complaint,

Plaintiff has alleged facts sufficient to state a claim for

intentional misrepresentation.

2) Second Claim: Negligent Misrepresentation

The elements of a claim for negligent misrepresentation are

1) a defendant’s representation of a material fact; 2) falsity of

the fact; 3) knowledge by the defendant that it was false, or

negligent or reckless lack of reasonable grounds to believe the

representation to be true; 4) intent to induce the other party to

act on the representation; and 5) injurious reliance by the other

party on the representation. Howell v. Courtesy Chevrolet, Inc.,

16 Cal.App.3d 391, 402 (1971).

With respect to his allegations of negligent

misrepresentation, Plaintiff has alleged in the complaint that:

1) the Amundson Defendants' agent, Clyde Strohl, approached

Plaintiff with an investment opportunity whereby it was asserted

that Plaintiffs "investment" would have a guaranteed

minimum rate of return of 5%; 2) Amundson thereafter

represented that Plaintiffs Investment had in fact been placed in

an investment that would pay monthly returns of 6%; 3) the

defendants made these representations without any reasonable

grounds for believing them to be true; 4) defendants made these

representations with the intent to defraud and deceive Plaintiff

and with the intent to induce Plaintiff to tender his investment

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of $102,000; 5) Plaintiff believed these representation to be

true and actually relied on these representation in tendering his

investment; 6) Had Plaintiff known the falsity of these

representations, he would not have tendered his investment; and

7) Plaintiff has incurred actual damages in the amount of

$102,000 in that defendants have failed and refused to return

Plaintiff’s investment principal. (Complt. at ¶¶ 12, 15, 22, 23,

29, 30, 31, 32, 33.)

Accordingly, it is concluded that Plaintiff has sufficiently

pled the elements of negligent misrepresentation.

3) Third Claim: Promise without Intent to Perform

Further, the Court concludes that Plaintiff has sufficiently

alleged a claim of fraud based on promise without intent to

perform. In addition to the allegations set forth above,

Plaintiff has alleged that the promises described hereinabove

were made without any intent to perform. (Cmplt. at ¶¶ 34-40.) 

4) Fourth Claim: Breach of Contract

"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

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).

Here, Plaintiff has alleged a written agreement between

Plaintiff and Amundson entered into on or about May 14, 2001,

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whereby Defendants agreed to: 1) place Plaintiffs

investment funds in an investment that would pay a monthly return

of at least 6% for ten months; and 2) return Plaintiffs

investment principal of $102,000 on or about May 13, 2002 (the

"Agreement"). (Complt. at ¶ 43.) It appears from the allegations

of the complaint that Plaintiff was to continue to keep his

investment with Defendants. (Id. at p. 4.)

Accordingly, it is concluded that Plaintiff has alleged an

agreement to do a certain thing, i.e., place Plaintiffs funds in

an investment that would provide the represented return; there

was an exchange of valuable performances and a lawful object.

Plaintiff has sufficiently pled the existence of a contract.

Plaintiff further alleged that the Amundson Defendants breached

the terms of the Agreement by: 1) failing to make nine out of the

ten monthly interest payments; and 2) failing to return

Plaintiff’s investment principal of $102,000 on or about May 13,

2002. (Complt. at ¶ 45.) Plaintiff further alleged that he

incurred actual damages in the amount of $157,800, consisting of

Plaintiff’s principal investment of $102,000 and nine months of

the promised 6% monthly return of $6,200 per month as a result of

such breach. (Id. at 11.)

The Court thus concludes that Plaintiff properly pled a

cause of action for breach of contract.

5) Fifth Claim: Conversion

"Conversion is the wrongful exercise of dominion over the

property of another. The elements of a conversion are the

plaintiff’s ownership or right to possession of the property at

the time of the conversion; the defendant’s conversion by a

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wrongful act or disposition of property rights; and damages."

Spates v. Damaron Hospital Association, 114 Cal.App.4th 208, 211

(2003). It is not necessary that there be a manual taking of the

property; rather, it is sufficient to show an assumption of

control or ownership over the property, or that the alleged

converter has applied the property to his own use. Id. "To

establish a conversion, it is incumbent upon the plaintiff to

show an intention or purpose to convert the goods and to exercise

ownership over them, or to prevent the owner from taking

possession of the property." Zaslow v. Kroenert, 29 Cal.2d 541,

550 (1946). Failure to deliver property upon demand is sufficient

conduct. Id. While it is true that money cannot be the subject

of an action for conversion unless there is a specific sum

capable of identification, it is not necessary that each coin or

bill be earmarked. It is established that when an agent is

required to turn over to his principal a definite sum received by

him on his principal's account, the remedy of conversion is

proper. Fischer v. Machado, 50 Cal.App.4th 1069, 1072 (1996).

Here, Plaintiff alleged that tendered his property, the sum

of $102,000, to defendants based on representations made by the

defendants, and with an understanding that he would be entitled

to return of his principal upon demand. Plaintiff has further

alleged that once he became aware that defendants’

representations were false, he made numerous demands to

defendants that they return his funds, all to no avail. Finally,

Plaintiff has alleged that he has incurred damages in the amount

of his lost principal. (Complt. at ¶¶ 47-50, 12, 15.)

Plaintiff has pled a right to ownership of the investment

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principal, the defendants' conversion by the wrongful retention

of such principal, and actual damages in the amount of the lost

principal. Accordingly, the Court concludes that Plaintiff

adequately pled a cause of action for conversion.

6) Sixth Claim: Breach of Fiduciary Duty

The elements of a cause of action for breach of fiduciary

duty are: 1) the existence of a fiduciary duty; 2) the breach of

that duty; and 3) damages proximately caused by that breach.

Mosier v. Southern Cal. Physicians Ins. Exchange, 63 Cal.App.5th

1022, 1044 (1998).

With respect to the first element, the principal

transactional allegations have been previously set forth.

Plaintiff has further alleged that he entered investment

agreements with defendants in or about September 1999, and with

Defendants Amundson on or about May 14, 2001. Plaintiff has

alleged that by virtue of these agreements, defendants

were held in a position of trust and confidence by Plaintiff and,

thus, each owed fiduciary duties to Plaintiff. (Complt. at ¶¶ 52-

54.) Plaintiff alleged that Defendants breached their fiduciary

duties to Plaintiff by making misrepresentations, failing and

refusing to return Plaintiffs funds upon repeated requests to do

so, and by converting Plaintiffs funds to their own personal use.

(Id. at ¶55.) With respect to the final element, Plaintiff has

asserted that the breaches of these duties proximately caused

damages in the amount of his lost investment principal. (Id. at ¶

56.)

The Court thus concludes that Plaintiff properly pled a

claim for breach of fiduciary duty.

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7) Seventh Claim: RICO

Plaintiffs allege a claim pursuant to 18 U.S.C. § 1962(c),

which provides:

 It shall be unlawful for any person employed by

or associated with any enterprise engaged in, or the

activities of which affect, interstate or foreign

commerce, to conduct or participate, directly or

indirectly, in the conduct of such enterprise's affairs

through a pattern of racketeering activity or

collection of unlawful debt.

To allege a civil claim under RICO, Plaintiffs must allege 1)

conduct 2) of an enterprise 3) through a pattern 4) of

racketeering activity 5) causing injury to plaintiffs’ business

or property. 18 U.S.C. § 1964(c); Ove v. Gwinn, 264 F.3d 817, 824

(9th Cir. 2001). An enterprise is defined as “any individual,

partnership, corporation, association, or other legal entity, and

any union or group of individuals associated in fact although not

a legal entity.” 18 U.S.C. § 1961(4). The enterprise may be a

group of individuals associated in fact for wholly unlawful ends;

however, Plaintiff must show that the enterprise has an existence

separate and apart from the alleged pattern of racketeering

activity in which it engages. United States v. Turkette, 452 U.S.

576, 583 (1981). Plaintiff must further allege an ongoing

organization, formal or informal, in which the various members

operate as a continuing unit. United States v. Turkette, 452 U.S.

at 583; Chang v. Chen, 80 F.3d at 1297. RICO thus requires the

enterprise to be more than a conspiracy and to have an

ascertainable structure separate and apart from the structure

inherent in the conduct of the pattern of racketeering activity.

Chang v. Chen, 80 F.3d at 1299.

Here, Plaintiffs allege that Defendant Strohl Financial was

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a California corporation and that Defendant Amundson and

Associates was a business of unknown origin but doing business

within California. Plaintiff alleges that Strohl Financial and

Amundson and Associates were enterprises within the meaning of 18

U.S.C. §§ 1961(4) and 1962(a-c) and that they were engaged in

activities which affected interstate commerce; Defendants Strohl

and Amundson used the mails and interstate telephone and

facsimile lines in engaging in the fraudulent and unlawful

activity alleged above, and thereby affected interstate commerce;

and Defendants Strohl and Amundson were employed by or associated

with the enterprises alleged above and conducted or participated

in the conduct of the affairs of the enterprises through a

pattern of racketeering activity within the meaning of 18 U.S.C.

§§ 1961(1)(B), 1961(E), 1961(5), and 1962(a-c), to wit, engaging

in multiple instances of wire fraud in violation of 18 U.S.C. §

1341 and multiple instances of mail fraud in violation of 18

U.S.C. § 1343. By reason of Defendants’ violations of § 1962(ac), Plaintiff was injured by way of loss of $102,000 in unpaid

principal , accrued prejudgment interest, and post-judgment

interest at 10 per cent per annum. (Complt. at p. 14-15.) The

fraud was specifically set forth in portions of the complaint

which were incorporated into the RICO claim and which have been

previously discussed herein. 

It appears that Plaintiff’s complaint alleged that

Defendants Amundson engaged in fraudulent conduct as part of

enterprises and a pattern of racketeering activity that caused

injury to Plaintiff’s property, all within the meaning of the

statute. Accordingly, it appears that Plaintiff has adequately

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 The Court has previously denied a motion to set aside the default of Defendants Amundson.

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stated a civil RICO claim.

C. Propriety of Default Judgment

The Court finds that Defendants have not answered the

complaint, and that their failure to do so was culpable.2 They

have received notice of the action and of this application for

default judgment. Considering the nature and extent of the delay

and the possibility of prejudice to the plaintiff, entry of

default is appropriate if the presence of another defendant is

not considered.

The opposition of Defendants submitted by counsel Henry D.

Nunez does not support denial of default judgment. Any concerns

regarding the entry of default have already been considered by

the Court in connection with the motion to set aside default,

which was denied on June 23, 2005. The Court routinely issues

briefing orders to parties seeking default judgment in order to

obtain input on the issues needed to be addressed in findings and

recommendations to be filed for review by the District Judge;

thus, the Court rejects any assertion that evaluation of the

propriety of default need be made solely upon the initial motion

for default judgment, or that permitting supplemental briefing

was unfair or unwarranted. Further, there is no showing of a

genuine controversy as to the material facts of this case;

Defendants Amundson had an opportunity to submit factual or

evidentiary material regarding the presence of a defense, and the

Court concluded that Defendants did not make a showing sufficient

to warrant setting aside the default.

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The Court has considered the objections to the initial

declarations of Plaintiff Jesus Albizu. The Court will not

consider statements made upon information and belief; otherwise

the objections are overruled. Plaintiff had sufficient knowledge

of the checks and the joint venture agreement, copies of which he

submitted as exhibits to his declaration, in order to provide a

foundation. Further, the Court notes that with respect to

liability, it has relied primarily on the uncontroverted

allegations of the complaint as distinct from evidentiary matter

submitted by the parties. Statements of Defendant Amundson

regarding reasons for failure to return the principal are

admitted to show that they were made, not for the truth of the

matters asserted therein.

With respect to the objections filed on March 21, 2005, to

the declaration of Drobny submitted in March 2005, the Court

notes that with respect to Court orders referred to therein, the

Court takes judicial notice of those orders. 

The presence of another defendant with an unclear status as

to the merits of the case creates a potential for dispute as to

the material facts of the case on the merits. Further analysis

with respect to Fed. R. Civ. P. 54(b) is set forth below.

D. Damages

Plaintiff has shown by his declaration and exhibits thereto

that in September 1999, he tendered $102,000 to Defendants in the

form of a cashier’s check made out to Wesley E. Amundson as

trustee of the T.I. Group Trust (Decl., Ex. A), and an $800

investment fee (Ex. C). Although the joint venture agreement

entered into in September 1999 specified that there was no

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liquidity of deposit during the term of the joint venture

agreement (Ex. B), there was no term specified in the agreement,

and Plaintiff alleged in the verified complaint that on May 14,

2001, Defendant Amundson sent to Plaintiff an agreement

purporting to bind him for another year of investment to expire

on May 13, 2002, with respect to which a six per cent monthly

return of $6,2000 per month was guaranteed.

1) Fraud Claims

On the claims concerning intentional misrepresentation and

promise without intent to perform, Plaintiff claims entitlement

to actual damages in the amount of $102,000 pursuant to Cal. Civ.

Code § 3281, which provides that every person who suffers

detriment from the unlawful act or omission of another may

recover compensation therefor in money, which is called damages,

and § 3283, which permits an award of damages for detriment

resulting after the commencement of suit or certain to result in

the future. These sections do not provide a measure of damages,

and despite having been requested to provide such authority,

Plaintiff does not cite to authority for the measure of damages.

Cal. Civ. Code § 3333 provides that for the breach of an

obligation not arising from contract, the measure of damages,

except where otherwise expressly provided by this code, is the

amount which will compensate for all the detriment proximately

caused thereby, whether it could have been anticipated or not.

Plaintiff is thus entitled to $102,000, his initial contribution.

Pursuant to Cal. Civ. Code § 3288, which provides for

interest in the discretion of the trier of fact in an action for

the breach of an obligation not arising from contract, and in

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every case of oppression, fraud, or malice, Plaintiffs are

entitled to interest (prejudgment). The Court finds reasonable

Plaintiff’s proposal to use the rate of ten per cent per annum,

the statutory rate for a state claim of breach of contract that

does not stipulate a rate of interest pursuant to Cal. Civ. Code

§ 3289(b), from May 13, 2002, the date upon which the principal

was due to be returned.

Finally, Plaintiff is entitled to exemplary and punitive

damages pursuant to Cal. Civ. Code § 3294, which provides for

damages for the sake of example and by way of punishing the

defendant in an action for breach of an obligation not arising

from contract, where it is proven by clear and convincing

evidence that the defendant has been guilty of oppression, fraud,

or malice. “Fraud” within the meaning of § 3294 means an

intentional misrepresentation, deceit, or concealment of a

material fact known to the defendant with the intention on the

part of the defendant of thereby depriving a person of property

or legal rights or otherwise causing injury. The uncontroverted

allegations of the complaint are sufficient to establish to the

requisite degree the fraud of Defendant.

Punitive damages are designed to serve the purposes of

deterrence and retribution. The Due Process Clause prohibits the

imposition or arbitrary or grossly excessive punitive damages;

factors to consider in determining the amount of punitive damages

include to consider three guideposts: 1) the degree of

reprehensibility of the defendant's misconduct; 2) the disparity

between the actual or potential harm suffered by the plaintiff

and the punitive damages award (multipliers of a single digit

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generally should not be exceeded); and 3) the difference between

the punitive damages awarded by the jury and the civil penalties

authorized or imposed in comparable cases. State Farm v.

Campbell, 538 U.S. 408, 418, 425 (2003). Here, there was clear

evidence of fraud; however, there are no circumstances otherwise

rendering the Defendant’s conduct egregious, and no evidence of a

potential penalty amounting to the $918,000 sought by Plaintiff.

A multiplier of three appears to be appropriate to set an example

and deter others.

Accordingly, the Court concludes that $306,000 in punitive

damages should be awarded on claims one and three. 

2) Negligent Misrepresentation

Plaintiff is entitled to general damages of $102,000;

however, punitive damages are recoverable for intentional, but

not negligent, misrepresentation. Alliance Mortgage Co. v.

Rothwell, 10 Cal.4th 1226, 1241 (1995). The jury also has

discretion to award prejudgment interest on the plaintiff's loss

"from the time the plaintiff parted with the money or property on

the basis of the defendant's fraud." Id. (citing Nordahl v. Dept.

of Real Estate, 48 Cal.App.3d 657, 665 (1975)). The Court finds

reasonable Plaintiff’s proposal to use the rate of ten per cent

per annum, the statutory rate for a state claim of breach of

contract that does not stipulate a rate of interest pursuant to

Cal. Civ. Code § 3289(b).

3. Breach of Contract

Plaintiff alleged that in May 2001, Defendants executed a

written contract in favor of Plaintiff pursuant to which

Defendants agreed to invest Plaintiff’s $102,000, return the

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investment in a year, and pay six per cent monthly return on the

principal for ten months. Subtracting the one payment of monthly

return received by Plaintiff, Plaintiff is entitled to $157,880,

representing principal and nine months of a return of six per

cent of principal monthly, and the $800.00 investment fee

pursuant to the governing California law which permits recovery

in contract actions of as nearly as possible the equivalent of

performance, or “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.” Cal. Civ. Code § 3300; see also Cal. Civ. Code

§ 3302, providing that the detriment caused by the breach of an

obligation to pay money only is deemed to be the amount due by

the terms of the obligation, with interest thereon. Plaintiff is

further entitled to prejudgment interest in the amount of ten per

cent per annum after May 13, 2002. Cal. Civ. Code § 3289(b).

4. Conversion

Cal. Civ. Code § 3336 provides:

The detriment caused by the wrongful conversion of

personal property is presumed to be:

First--The value of the property at the time of

conversion, with the interest from that time, or 

an amount sufficient to indemnify the party injured

for the loss which is the natural, reasonable 

and proximate result of the wrongful act complained

of and which a proper degree of prudence on his part

would not have averted; and

Second--A fair compensation for the time and money

properly expended in pursuit of the property.

Plaintiff is thus entitled to $102,000 in unpaid principal.

Although Plaintiff is entitled to prejudgment interest from the

time of conversion, and Plaintiff further has alleged that

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Plaintiff is entitled to interest accruing from the first date

Plaintiff demanded the return of his funds (Complt. at ¶ 50),

Plaintiff has not established that date. Thus, the Court finds

that an award of prejudgment interest is not appropriate on this

claim. See Stan Lee Trading, Inc. v. Holtz, 649 F.Supp. 577, 581-

82 (C.D.Cal.1986).

Plaintiff alleged that Defendants’ conversion was

accomplished pursuant to fraudulent misrepresentations upon which

Plaintiff justifiably relief; further, Plaintiff alleged that

Defendants’ conduct was intentional, despicable, and such taht

subjected Plaintiff to a cruel and unjust hardship in conscious

disregard of Plaintiff’s rights. “Oppression” within the meaning

of Cal. Civ. Code § 3294, which permits the recovery of exemplary

damages, means despicable conduct that subjects a person to cruel

and unjust hardship in conscious disregard of the person’s

rights. Cal. Civ. Code § 3294(c)(2). Thus, Plaintiff is entitled

to exemplary damages on this claim, and the Court finds that

$306,000 is appropriate for the purposes of deterrence and

punishment. However, solely because the Court has already awarded

$306,000 in punitive damages for essentially the same conduct, 

it does not appear that any further award of punitive damages is

necessary to deter others and to punish the Defendants. Cf.

Stevens v. Owens-Corning Fiberglas Corp., 49 Cal.App.4th 1645,

1661 (1996), rev. denied January 15, 1997. 

5) Breach of Fiduciary Duty

Plaintiff seeks his $102,000 investment; he is entitled to

at least this out-of-pocket loss. Fragale v. Faulkner, 110

Cal.App.4th 229, 238 (2003). He also seeks prejudgment interest

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pursuant to Cal. Civ. Code § 3288, permitting interest in the

discretion of the jury in an action for the breach of an

obligation not arising from contract in every case of oppression,

fraud, or malice. In light of his allegations that Defendants’

breach of duty was despicable and subjected Plaintiff to a cruel

and unjust hardship in conscious disregard of Plaintiff’s rights

and thus was oppressive within the meaning of Cal. Civ. Code §

3294, he is entitled to interest. Further, he is entitled to

exemplary damages pursuant to § 3294, and $306,000 is an

appropriate amount to achieve the purposes of punitive damages.

Michelson v. Hamada, 29 Cal.App.4th 1566, 1582 (1994). Again,

however, in light of the previous award of punitive damages in

the amount of $306,000, no further award is necessary.

6) RICO Treble Damages

Title 18 U.S.C. § 1964(c) provides that any person injured

in his business or property by reason of a violation of section

1962 may sue in district court and recover threefold damages,

including the cost of suit and a reasonable attorney’s fee.

Plaintiff seeks his actual damages of $102,000 trebled to

$306,000. This is appropriate pursuant to the statute.

Plaintiff states that an award of prejudgment interest,

which is not provided for in the statute, is committed to the

sound discretion of the Court, citing Frederick County Fruit

Growers Ass’n v. Martin, 968 F.2d 1265, 1275 (D.C.Cir. 1992)

(regarding discretion to award interest on funds to be paid as

restitution. However, it is not shown that an award of

prejudgment interest is necessary to compensate the Plaintiff in

light of the treble damages already awarded. Cf. In re Crazy

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Eddie Securities Litigation, 948 F.Supp. 1154, 1167 (E.D.N.Y.

1996).

7) RICO Attorney’s Fees

Drobny’s declaration of March 2005 includes attached

billings; however, the declaration states, and review of a

portion of the billings confirms, that the billings concern not

only this action, but also litigation stemming from the

investment scam, including this case and related litigation

necessitated by Mr. Strohl’s bankruptcies. There are references

to motions and proceedings which did not occur in this action.

The billings are not segregated to identify efforts undertaken in

this case alone. There is no stated total of attorney’s fees

requested in the declaration; there is only a statement of what

the hourly rates were. There is no itemization of the tasks

undertaken in this case alone or the time spent on those tasks

that would permit assessment of the amount of reasonable

attorney’s fees. The motion itself seeks only a reasonable

attorney’s fee pursuant to 18 U.S.C. § 1964(c). No briefing

regarding how the fee should be computed, and no statement of

totals or how those totals have been reached, is submitted.

Plaintiff has not submitted materials designed to establish

entitlement to any particular amount of fees. 

In the supplemental brief in support of the motion,

Plaintiff expressly acknowledges that some of the fees were

generated in other cases but that all of the entries were billed

to one file, and that it would be “quite difficult to segregate

out those entries that relate to services performed for the

above-captioned case from those that services that were performed

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for the related matters.” (Supp. Memo. March 11, 2005 at 15 n.

5.) Plaintiff further acknowledges that several unspecified

billable entries relate to both this case and the related

matters; Plaintiff acknowledges that the Court might view only a

portion of these attorney’s fees as appropriately awarded on

Plaintiff’s RICO claim. Pursuant to the supplemental declaration

of Stephen Drobny, over $46,000 in attorney’s fees is claimed,

but no straightforward basis for the Court to determine which

hours or tasks relate to this case is given. 

It is the burden of the party seeking the award to submit

evidence supporting the hours worked and rates claimed, and when

the documentation of hours is inadequate, a court may reduce an

award accordingly. Hensley, 461 U.S. at 433, 437. A party

requesting a fee award has the burden of presenting detailed

records of the time spent, so that the judge can make a fair

evaluation of the amount of fees warranted. The records should be

comparable to those that a private attorney would present to a

client to substantiate a fee. Evers v. Custer County, 745 F.2d

1196, 1205 (9th Cir. 1984), citing Hensley v. Eckerhart, 461 U.S.

424. The minimum required for satisfaction of this burden is to

list hours and identify the general subject matter of the time

expenditures. Fischer v. SJB-P.D. Inc., 214 F.3d 1115, 1121 (9th

Cir. 2000). Fee awards will be set aside where summaries make it

very difficult to ascertain whether the time devoted to

particular tasks was reasonable and whether there was improper

overlapping of hours. Intel Corp. v. Terabyte Intern., Inc., 6

F.3d 614, 623 (9th Cir. 1993). 

Here, the tasks and time relating solely to this litigation

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were not adequately identified. The Court will not pick through

stacks of billing summaries in order to isolate the data needed

to reach a computation of reasonable attorney’s fees. Plaintiff

has not shown what a reasonable attorney’s fee would consist of

in this action.

Accordingly, the Court finds that Plaintiff has not shown

entitlement to any sum as a reasonable attorney’s fee, and the

Court thus finds that Plaintiff is not entitled to an award of

fees.

E. Costs

No claim for costs is made in this motion.

F. Judgment as to Defendants Amundson Only

Fed. R. Civ. P. 54(b) provides:

When more than one claim for relief is presented in an

action, whether as a claim, counterclaim, cross-claim,

or third-party claim, or when multiple parties are

involved, the court may direct the entry of a final

judgment as to one or more but fewer than all of the

claims or parties only upon an express determination

that there is no just reason for delay and upon an 

express direction for the entry of judgment. In the 

absence of such determination and direction, any order

or other form of decision, however designated, which

adjudicates fewer than all the claims or the rights

and liabilities of fewer than all the parties shall

not terminate the action as to any of the claims or 

parties, and the order or other form of decision is

subject to revision at any time before the entry of

judgment adjudicating all the claims and the rights

and liabilities of all the parties.

The policy concerns underlying Rule 54(b), namely, finality,

severability, and avoidance of piecemeal litigation, arise

principally in the context of the availability of appellate

recourse. See Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 432-

48 (1956); W. L. Gore & Associates, Inc. v. International Medical

Prosthetics Research Association, Inc., 975 F.2d 858, 862-65

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(Fed. Cir. 1992). However, considerations of fairness and the

sound administration of justice are also applicable to the entry

of a default judgment in a case involving multiple parties or

claims. Further, default judgment should not be entered against a

defendant who is alleged to be liable jointly with other

defendants until the case is adjudicated against all defendants,

or all defendants have defaulted; the possibility of inconsistent

judgments must be avoided. Frow v. La Vega, 15 Wall. 552, 554-55

(1872) (default judgment against one defendant charged with joint

participation in fraud held to be improper until judgment against

the other defendants was adjudicated). It has been held that

despite the absence of an allegation of joint liability, entry of

default judgment against a single defaulting defendant is

improper where the defendants are similarly situated defendants,

even if not jointly and severally liable, and where delay is

necessary to avoid an inherently inconsistent result. In re First

T.D. & Investment, Inc., 253 F.3d 520, 532 (9th Cir.2001)

(holding that default judgment should not be entered where other

there were defendants in similar transactions such that it was

not logically possible that one defendant could be liable without

another being liable); see Shanghai Automation Instrument Co. Ltd

v. Kuei, 194 F.Supp.2d 995 1005-10 (N.D.Cal. 2001) (collecting

cases and suggesting that the unifying principle is that the risk

of inconsistent judgments is too high, and entry of default

judgment against a defendant is inappropriate, where other

answering defendants remain in the case without their liability

being adjudicated, and where under the theory of the complaint,

liability of all the defendants must be uniform.

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It is not clear that given the posture of this action, the

nature of the liability of the various parties in this case is a

consideration. However, if it is, Plaintiff alleges in his

declaration that Defendants Strohl and Amundson together engaged

in collusion with respect to Plaintiff’s initial investment;

Plaintiff alleged that Strohl was acting as an agent for the

Amundson Defendants in presenting the initial investment and at

all other relevant times thereafter. (Decl. at ¶ 1.) The initial

representation was that Strohl represented that he and the

Amundson Defendants would invest the funds in various off-shore

concerns that would act as a tax-shelter and provide a rate of

return of five per cent per month, and that the investment could

be cancelled. (Id. at ¶ 2-3.) The initial investment was tendered

to Strohl and Amundson together.(Id. at ¶ 4.) 

The complaint is consistent, containing allegations that

each Defendant was the agent and co-conspirator of each other and

in taking actions alleged in the complaint was acting within the

course and scope of the agency and conspiracy. (Complt. at ¶ 10.)

Plaintiff gave the initial investment to Strohl, who in turn

transferred it to Defendants Amundson. (Id. at ¶ 13.) It was

Amundson, however, who prepared and sent the May 14, 2001

agreement to bind the initial investment for another year with a

six per cent monthly return, and to return the initial $102,000

principal by May 13, 2002. (Id. at 15.) Both Amundson and Strohl

are alleged to have failed to have responded to Plaintiff’s

demands for return of the principal, and to have given excuses.

(Id. at 17-20.) The allegations of the various claims with

respect to the conduct of the defendants, whether relating to the

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1999 initial investment, or the 2001 representations, are made in

terms of the “Defendants” plural. (Id. at ¶¶ 22 -27 (fraud

claim), ¶¶ 28-33 (negligent misrepresentation), ¶¶ 34-39 (promise

without intent to perform), ¶¶ 47-51 (conversion), ¶¶ 52-57

(breach of fiduciary duty), and ¶¶ 58-67 (RICO). The contract

claim is slightly different in that it is based on the May 2001

agreement which Amundson is alleged to have drafted and breached.

However, that claim incorporates the allegations of joint action,

conspiracy, agency, and fraudulent intent alleged in the general

paragraphs of the complaint (¶ 42), and it depends upon some of

the same conduct and factual transactions as the other claims,

namely, misrepresentations in connection with the 2001 agreement

regarding investment, monthly returns, and ultimate return of

principal. It differs only in that the breach of contract action

does not require proof of the actions of the Defendants in 1999

or of fraud or wrongful intent in order to establish a right to

recover. Nevertheless, by virtue of the incorporation of the

allegations of agency and conspiratorial action in the claim, it

appears that all defendants are alleged to have participated in

the formation and breach of contract jointly. 

Thus, if the nature of the liability is considered, it is

not true, as Plaintiff asserts, that there is no risk of

logically inconsistent adjudications as to liability. Tortfeasors

who are alleged to have conspired and to have both acted with

intent are jointly liable for the alleged torts regardless of the

degree of their individual activity. Revert v. Hesse, 184 Cal.

295, 301 (1920); Kesmodel v. Rand, 119 Cal.App.4th 1128, 1141-43

(2004). With respect to the contract action, all rights and

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liabilities that accrue to an agent from transactions the agent

enters into on his own accrue to the principal. Cal. Civ. Code §

2330. Even if the principal is undisclosed in a contract,

ordinarily either the principal or agent may be held liable on

the contract. Marr v. Postal Union Life Ins. Co., 40 Cal.App.2d

673, 678-79 (1940). Thus, the liability of the Defendants in this

case is joint or dependent.

Here, however, there are no other answering defendants;

Defendants Strohl and Strohl Financial Services, the other

defendants, have not answered, and indeed, default has been

entered against those defendants. A motion to set aside default

has been filed based on the Court’s entry of default being void

due to the pendency of a bankruptcy proceeding of which the Court

had no notice. However, this motion was taken off calendar and

was not re-noticed by Defendant Strohl after the cessation of the

bankruptcy stay. The Court takes judicial notice of the filing in

this action of a copy of the bankruptcy court’s order of June 9,

2003, in which the bankruptcy court annulled the automatic stay

imposed by 11 U.S.C. § 362 as of August 16, 2002, through the

date of the order, and validated all actions taken by the Court

in this action, including the Clerk’s entry of the default of

Defendant Strohl in December 2002 and the subsequent application

for default judgment in 2003. (Doc. 51 and attachments filed in

this action on July 14, 2003.)

In summary, it is not clear that there is any risk at all of

inconsistent judgments because at this point, there is no other

answering defendant, and no defenses have been interposed by any

other defendant. There is at most a bare logical possibility that

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3The Court may take judicial notice of court records. Fed. R. Evid.

201(b); United States v. Bernal-Obeso, 989 F.2d 331, 333 (9th Cir. 1993);

Valerio v. Boise Cascade Corp., 80 F.R.D. 626, 635 n. 1 (N.D. Cal. 1978),

aff’d, 645 F.2d 699 (9th Cir. 1981).

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Defendant Strohl will have his default set aside and will

interpose defenses at some time after the voluntary stay in this

action is dissolved. However, there is no real likelihood of this

because the basis of the motion to set aside default appears to

have been undercut by the action of the bankruptcy court in

annulling the automatic stay and validating the actions which

Defendant Strohl claimed were void due to the automatic

bankruptcy stay.

There does not appear to be any other basis for delay.

Plaintiff argues that in view of Defendant Strohl’s multiple

bankruptcies (of which the Court takes judicial notice from its

own docket)3, and considering the criminal proceedings, the

Plaintiff’s chance of recovering from Defendants Strohl is slim;

Defendants Amundson are the best chance of recovery for

Plaintiff’s loss, and thus Plaintiff would be prejudiced if

relief is denied. Further, Defendants have engaged in

manipulation or have been responsible for undue and lengthy

delays in the resolution of this case.

Defendant Wesley Amundson has submitted opposition in which

he revisits his argument made on the motion to set aside his

default to the effect that he believed that he was being

represented by Mr. Nunez when his default was entered and

thereafter; he submits a declaration to the effect that he was

led to believe that the matter was being taken care of; however,

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this argument has been considered on the motion to set aside the

default, and the Court’s ruling on that motion was not the

subject of a motion for reconsideration before the District

Judge. The time for Mr. Amundson to submit a statement of facts

regarding such matters has passed. 

Likewise, Amundson’s declaration to the effect that he

merely tried to help Plaintiff recoup lost funds and had no

fraudulent intent is not within the scope of permissible input.

The scope of a defaulting defendant’s participation in a motion

for default judgment is quite limited. Defendant is barred from

disputing the facts alleged in the complaint because averments in

a pleading to which a responsive pleading is required, other than

those as to the amount of damage, are admitted when not denied in

the responsive pleading. Fed. R. Civ. P. 8(d); Fed. R. Civ. P.

55(b). Defendant’s input does not go to the legal sufficiency of

the allegations of the complaint, which include allegations of

fraud, or to the appropriate sum of actual damages.

Accordingly, it is concluded that there is no just reason

for delay, and the Clerk should be directed to enter judgment in

favor of Plaintiff against Defendants Amundson. 

III. Recommendation

Accordingly, it IS RECOMMENDED that:

1. Plaintiff’s motion for entry of a default judgment BE

GRANTED; and

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

Plaintiff Jesus Albizu, and against Defendants Wesley E. Amundson

and Amundson and Associates, for $157,880.00 in damages;

prejudgment interest at the rate of ten per cent per annum from

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May 13, 2002; punitive damages in the sum of $306,000.00; and

treble damages in the amount of $306,000.00.

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: November 10, 2005 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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