Farnam Street Financial, Inc. v. Aesthetics Biomedical, Inc.

Background

Farnam Street Financial, Inc., a Minnesota corporation, brought this breach-of-contract action against Aesthetics Biomedical, Inc., a Delaware corporation. The dispute centers on an equipment lease agreement originally entered into on November 10, 2022 (the complaint alleged November 4, 2022, but the agreement itself is dated November 10), and a lease schedule executed on February 26, 2024.

Under the schedule, Farnam Street leased business equipment to Aesthetics Biomedical for an initial 15-month term beginning February 1, 2024, and ending April 30, 2025. Aesthetics Biomedical agreed to monthly payments of $9,721.26 plus taxes and was required to pay a pre-existing past-due balance of $26,755.12 from a prior lease schedule before the February 2024 schedule terminated. To exit the lease at the end of any term, Aesthetics Biomedical had to give at least 120 days' written notice and return the equipment within ten days of expiration; otherwise, the lease automatically renewed for 12 months.

Aesthetics Biomedical failed to terminate at the end of the initial term and again at the end of the next term, triggering automatic renewals on May 1, 2025, and May 1, 2026. It stopped making payments after November 2024. Farnam Street's summons and complaint were served on Aesthetics Biomedical on February 20, 2026, but Aesthetics Biomedical never responded or appeared. The Clerk entered default (ECF No. 9). Farnam Street then moved for default judgment. Aesthetics Biomedical did not appear at the July 13, 2026 hearing on that motion.

Legal Standard for Default Judgment

Once default is entered, the factual allegations of the complaint (other than those relating to the amount of damages) are taken as true. The court must still determine whether those allegations state a legitimate cause of action, because a defaulting party does not admit mere legal conclusions. If a valid cause of action is established, the court must then ascertain the amount of damages to a reasonable degree of certainty.

Liability: Breach of Contract

Applying Minnesota law (as specified in the lease agreement's choice-of-law clause), the court found all three elements of breach of contract satisfied: (1) the lease agreement and schedule constituted a valid contract; (2) Farnam Street performed — the lease imposed no conditions precedent on its right to seek remedies upon an Event of Default; and (3) Aesthetics Biomedical breached by failing to make timely payments, which under the lease constituted an "Event of Default" once payment was more than ten days late. Farnam Street was therefore entitled to default judgment.

Damages

The court reviewed each of three itemized categories of damages, totaling $469,665.02.

(a) Past-Due Monthly Lease Charges — $210,498.74

This amount includes the $26,755.12 carryover balance from a prior lease, monthly charges of $9,721.26 from February 2024 through April 2026 plus applicable taxes, a previously billed late-charge fee of $2,271.32 (due September 11, 2024), minus payments actually received. The court found this amount warranted by the lease agreement and schedule.

(b) Late Fees — $43,364.91

The lease authorized a late charge of 1.5% on any past-due amount on the date payment was due and every 30 days thereafter until paid in full. This $43,364.91 figure represents those accrued late fees, net of the $2,271.32 already included in the past-due monthly charges to avoid double-counting. Late fees also accrued on the $26,755.12 carryover balance, as expressly provided in the schedule. The court awarded this amount.

(c) Casualty Loss Value — $215,801.37

The lease defined "Casualty Loss Value" as 100% of the original equipment cost during the installation period or the first nine months of the initial term, and thereafter the original cost amortized by monthly payments received, using an amortization rate of 890 basis points (8.90%) over the three-year U.S. Treasury Note rate as reported by the Federal Reserve on the commencement date (February 1, 2024). The three-year Treasury rate on that date was 3.96%, yielding a combined rate of 12.86%. The original equipment cost was $220,937.15. Aesthetics Biomedical made one payment of $7,504.10 in November 2024 after the first nine months; of that, $2,367.72 was applied to interest and $5,136.38 to principal, reducing the casualty loss value to $215,801.37. The court awarded this amount.

Disposition

Chief Judge Tostrud granted Farnam Street's Motion for Entry of Default Judgment (ECF No. 10) and ordered the Clerk of Court to enter judgment in favor of Farnam Street Financial, Inc., and against Aesthetics Biomedical, Inc., in the amount of $469,665.02.