EDJX, Inc. v. 6x7 Networks, LLC

Background

EDJX, Inc. moved for default judgment against 6X7 Networks, LLC and Benjamin P.D. Cannon. The court found the motion suitable for decision without oral argument and vacated the hearing scheduled for October 4, 2021. Because the defendants had not consented to a magistrate judge’s authority to enter judgment, the court stated that the matter had to be reassigned to a district judge. The order is a report and recommendation rather than a final ruling by the district judge.

Service of process

The court found defects in EDJX’s attempted substitute service. The proofs of service stated that the summons and complaint were left with John Doe, described as Cannon’s resident or co-occupant and as the agent for service for 6X7 Networks, at an address in San Francisco, followed by mailing to that address. But the proofs did not include or identify a declaration showing the required reasonable diligence—generally two or three prior attempts—to personally serve Cannon. They also did not state that John Doe was informed of the contents of the documents. EDJX did not explain whether the address was residential or a business address. The court therefore found service on Cannon, both individually and as 6X7 Networks’ service agent, defective.

Damages and liability

The court explained that even when default is entered, the plaintiff must still establish that the requested relief is proper and prove its damages. EDJX did not explain how both defendants caused the damages requested or state the actual damages amount in the motion and supporting declarations. Its chief executive officer stated that EDJX paid $36,074 in invoices from 6X7 Networks, while the proposed order sought $33,125. The invoice dates also did not match all of the dates provided by the chief executive officer.

The court also found that EDJX had not adequately alleged the elements needed for damages under the Racketeer Influenced and Corrupt Organizations Act, commonly called RICO. Those elements include conduct involving an enterprise through a pattern of racketeering activity. The court found insufficient facts showing an enterprise or the required predicate acts. EDJX also did not adequately explain its request for punitive damages or why Cannon, rather than only 6X7 Networks, should be liable.

Attorney fees and recommendation

EDJX’s counsel requested $10,000 plus one-sixth of EDJX’s recovery. Although counsel stated that his hourly rate of $400 was reasonable, the court found that he had not shown why the total requested fees would be reasonable if EDJX obtained all of the requested damages. The court also noted counsel’s statement that he had represented 6X7 Networks in the recent past and found insufficient information to evaluate whether that representation violated California’s professional-responsibility rules.

The court recommended that EDJX’s motion for default judgment be denied. It stated that a party could file specific written objections within 14 days after being served with the recommendation. Magistrate Judge Sallie Kim signed the order on September 20, 2021.