Carlson v. Clapper

Background

Carlson Produce, LLC sued Rock Clapper for fraud and ScanX, Inc. for breach of contract, fraud, promissory estoppel, and quantum meruit/unjust enrichment. The only claims remaining against ScanX were breach of contract, promissory estoppel, quantum meruit/unjust enrichment, and fraud. The fraud claim also remained pending against Clapper.

Carlson Produce and ScanX entered a four-year services agreement in July 2016. The agreement provided for annual compensation of $210,000, a 35% annual bonus, 5.5% of ScanX stock vesting over four years, and reimbursement of certain expenses. Carlson Produce alleged that ScanX paid for only the first two months and then failed to pay despite Carlson Produce’s full performance.

ScanX’s counsel withdrew after the court warned that a corporation could not appear without counsel and that ScanX’s failure to obtain counsel could lead to default judgment. ScanX did not obtain new counsel, did not oppose the motion, and did not appear at the hearing. The clerk entered default against ScanX, after which Carlson Produce moved for default judgment.

Court’s analysis

The court found that it had subject-matter jurisdiction based on the parties’ alleged citizenship and that it had personal jurisdiction over ScanX because ScanX was headquartered in California. The court also found that ScanX had been properly served.

Applying the factors used to decide whether to enter default judgment, the court concluded that Carlson Produce would likely be left without a remedy against ScanX on its contract claim if judgment were not entered. The court also found that Carlson Produce adequately stated a breach-of-contract claim, that ScanX had received ample warning of the consequences of failing to defend, and that there was no indication that ScanX’s default resulted from excusable neglect.

The court declined to enter default judgment on the promissory-estoppel and quantum-meruit/unjust-enrichment claims because Carlson Produce described them as fallback claims and acknowledged that they duplicated the breach-of-contract claim. The court stated that those claims were dismissed.

The court also declined to enter default judgment on fraud. Carlson Produce sought to hold ScanX and Clapper jointly and separately responsible for the same alleged conduct, and the fraud claim against Clapper remained pending. The court concluded that entering judgment against ScanX alone could create an inconsistent result.

Damages and fees

The court awarded $298,776.02 in unpaid compensation, $129,229.11 in unpaid bonuses, and $13,044.74 in unreimbursed expenses, totaling $441,049.87 in actual damages. Carlson Produce withdrew its request for ScanX stock.

The court denied prejudgment interest because Carlson Produce did not adequately support its calculation. The court found that the agreement permitted reasonable attorneys’ fees and costs, but reduced the requested fees by 50% because the submitted work covered both the contract and fraud claims and was not divided between them. The court awarded $41,604.75 in attorneys’ fees and 50% of the requested costs, or $4,473.74.

Disposition

The court granted in part and denied in part Carlson Produce’s motion for default judgment against ScanX. It granted the motion as to the breach-of-contract claim and ordered judgment against ScanX for $487,128.36. It denied the motion as to the promissory-estoppel and quantum-meruit/unjust-enrichment claims, which it dismissed, and declined default judgment on the fraud claim.