One Hour Air Conditioning Franchising SPE LLC v. Bigham Services, Inc.

Background

The plaintiffs sought default judgment based on allegations that Bigham Services breached its franchise agreements by abandoning operations in the agreed-upon territory. The court also granted the plaintiffs’ request for judicial notice of a statement of information from the California Secretary of State’s website.

Jurisdiction and service

The court held that it had subject-matter jurisdiction and personal jurisdiction. The plaintiffs did not perfectly comply with California’s service requirements for entity defendants because the proof of service did not state that Ohayon was being served on behalf of Bigham Services and individually. The court nevertheless held that substantial compliance was sufficient. The summons listed both defendants, and later communications between the parties and their lawyers showed that both sides understood Ohayon to have been served in both capacities.

Default judgment

The court applied the factors identified in Eitel v. McCool and found that they favored default judgment. The complaint sufficiently alleged that Bigham Services breached the franchise agreements, and the Dawson declaration supported those allegations. The plaintiffs would be prejudiced without a judgment because of the approaching deadline to submit a claim in Bigham Services’ General Assignment for the Benefit of Creditors proceedings. The court also stated that, because counsel for the assignment-for-the-benefit-of-creditors entity knew about the pending proceedings, it could not presume that Bigham Services’ failure to defend was excusable neglect. Although the amount at stake and the general preference for decisions on the merits weighed against default judgment, those considerations did not outweigh the other factors.

Damages

The court awarded pre-termination damages and prejudgment interest at 18% per year, as provided in the operating agreement. Those amounts were $69,850.32 for One Hour Air Conditioning and $21,078.44 for Mister Sparky.

The court found that much of the requested future damages was too speculative. It could not assume that Bigham Services’ average net sales during the 13 months before the breach would have continued for the remaining eight years of the contracts. The court also was not reasonably certain that the plaintiffs would be unable to resell at least part of the relevant territories by November 2029.

The court nevertheless found that the agreements provided a non-speculative minimum measure of future damages: $1,500 per month for each franchise agreement through the agreements’ expiration in November 2029. That produced $1,034,250 in future damages, consisting of $738,750 for One Hour Air Conditioning and $295,500 for Mister Sparky. The court subtracted $24,625 in plaintiffs’ cost savings and the $90,000 Ohayon paid to settle the case against him. The final awards were $722,840.42 to One Hour Air Conditioning and $287,713.34 to Mister Sparky.

Disposition

Judge Vince Chhabria granted the motion for default judgment.