Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-03127/USCOURTS-cand-3_14-cv-03127-1/pdf.json

Parties Involved:
AmeriCom Automation Services, Inc.
Defendant
McMillan Data Communications, Inc.
Plaintiff
Traci Pelayo
Defendant
Justin L. Pelayo
Defendant

Document Text:

Case No.:14-cv-03127-JD 

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MCMILLAN DATA 

COMMUNICATIONS, INC.,

Plaintiff,

v.

AMERICOM AUTOMATION 

SERVICES, INC., TRACI PELAYO,

JUSTIN L. PELAYO,

Defendants.

Case No.14-cv-03127-JD (NC)

ORDER TO SHOW CAUSE

Re: Dkt. No. 27

Plaintiff McMillan Data Communciations seeks to collect money that it claims it is 

owed from defendants AmeriCom Automation Services, Traci Pelayo, and Justin L. 

Pelayo, in connection with three documents: a subcontract to renovate a federal building in 

San Francisco, a personal guarantee for that contract, and a subsequent promissory note for 

the debt incurred under the subcontract. McMillan filed suit with the district court on July 

10, 2014, alleging breach of contract claims. Dkt. No. 1. None of the defendants 

appeared, and the clerk entered default against AmeriCom on August 19, 2014, Dkt. No. 

17, and against Traci Pelayo and Justin Pelayo on August 28, 2014, Dkt. No. 23. On 

October 24, 2014, McMillan moved for default judgment. Dkt. No. 27.

I. Debt Owed

McMillan claims that $308,459.40 of its total work invoice remains unpaid. Dkt. 

Case 3:14-cv-03127-JD Document 36 Filed 06/03/15 Page 1 of 3
Case No.:14-cv-03127-JD 2

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United States District Court

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No. 1 at 17. The sum of McMillan’s requested damages, however, totals $918,792.05:

$308,459.40 from AmeriCom, $308,459.40 from Traci Pelayo, and $301,873.25 from 

Justin Pelayo (excluding prejudgment interest and attorney’s fees and costs).

Because of the apparent discrepancy between established debt and damages 

requested, the Court orders McMillan to show cause why it is entitled to triple the amount 

owed. Financial relief sought on default judgment is more likely to be considered 

reasonable if “the operative purchase order supports [the relief requested].” Triumph 

Furniture Processings-Export Joint Stock Co. v. Everest Furniture Co., No. 13-cv-07129

NC, 2013 U.S. Dist. WL 9600372, at *5 (N.D. Cal. Aug. 29, 2013) (granting requested 

damages because purchase order receipt supported the figure). Here, an award of 

$918,792.05 based on a maximum remaining debt of $308,459.40 would appear to result 

in a windfall.

II. Attorney’s Fees

Additionally, McMillan requests $37,961.00 in attorney’s fees and costs under the 

subcontract and the promissory note, though the cost of pursuing this action was 

$18,980.50. Dkt. No. 27-1 at 21-22, Dkt. No. 27-4 at 4. This also appears to be a 

windfall. Accordingly, the Court orders McMillan to show cause why it is entitled to

double its attorney’s fees.

III. Novation

Finally, McMillan must show cause why the promissory note issued by Justin 

Pelayo and AmeriCom has not superseded prior payment agreements, including the 

subcontract with AmeriCom and the personal guarantee signed by Traci Pelayo. See 

Fanucchi & Limi Farms v. United Agri Products, 414 F.3d 1075, 1084-85 (2005) (finding 

novation where differences between new and old contract were drastically different and 

parties’ conduct indicated extinguishment and replacement of old contract); Alexander v. 

Angel, 37 Cal. 2d 856, 861 (1951) (finding novation and not “mere assumption of a 

preexisting obligation” where new contract had “entirely different method of payment,” 

and added interest payment and acceleration clauses).

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Case No.:14-cv-03127-JD 3

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United States District Court

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Indeed, if the Court finds that the AmeriCom subcontract and Traci’s personal 

guarantee were novated, it would only grant default judgment in part against Justin Pelayo 

and AmeriCom in the amount of $301,873.25 in damages, $18,980.50 in attorney’s fees 

and costs, and $19,998.07 in prejudgment interest, for a total judgment of $340,851.82. If 

McMillan believes the Court should hold AmeriCom (under the subcontract) or Traci 

Pelayo (under the guarantee) liable with Justin Pelayo and AmeriCom (under the 

promissory note) for a certain amount, it must explain why and provide legal support.

McMillan must file its response to this order within 14 days. The response must not 

exceed 15 pages.

IT IS SO ORDERED.

Dated: June 3, 2015 _____________________________________

NATHANAEL M. COUSINS

United States Magistrate Judge

Case 3:14-cv-03127-JD Document 36 Filed 06/03/15 Page 3 of 3