ACFC Delta Holdings, LLC v. Coastal West LLC

Background

ACFC Delta Holdings, LLC brought claims against Coastal West LLC, Cruiser Haven Inc., and Kevin Hinman concerning a loan agreement and commercial guarantees. The loan had a principal amount of $2,300,000 and was secured by property in Contra Costa County. ACFC Delta said that $723,549.12 remained due after it purchased the property at a foreclosure sale for $1,800,000.

Hinman answered the complaint but did not oppose ACFC Delta’s motion for summary judgment. Coastal West LLC and Cruiser Haven Inc. did not answer or appear. The clerk entered defaults against those two entities on December 10, 2018. ACFC Delta then sought default judgment against them and summary judgment against Hinman.

Jurisdiction and default-judgment standard

The court found subject-matter jurisdiction based on diversity of citizenship under 28 U.S.C. § 1332. It also found personal jurisdiction and adequate service on Coastal West LLC and Cruiser Haven Inc. Under Federal Rule of Civil Procedure 55(b)(2), the court explained that entering default judgment is discretionary. It considered the factors from Eitel v. McCool, including potential prejudice, the merits and sufficiency of the claims, the amount at stake, the possibility of factual disputes, excusable neglect, and the policy favoring decisions on the merits.

The court concluded that all of those factors favored default judgment. It found that the requested $723,549.12 was supported by the loan and guarantee documents and was tied to the alleged breach. It also found no evidence that the two nonappearing defendants’ failure to participate resulted from excusable neglect.

Rulings and relief

The court granted ACFC Delta’s motion for summary judgment against Hinman because he did not oppose it and did not dispute the material facts. It also granted ACFC Delta’s motion for default judgment against Coastal West LLC and Cruiser Haven Inc. The court entered judgment against all defendants for $723,549.12.

The court did not award an additional $273,800 described in a declaration because ACFC Delta had not requested that amount in either motion and had not clearly connected it to the claims in the complaint. The court stated that ACFC Delta could move for additional damages arising from the commercial-guaranty breach, as well as attorney’s fees, costs, or interest, if it explained their connection to the pleaded claims.