Youlin Wang v. Forensic Professional Group USA, Inc.

Background

The action concerned an arbitration over fees for tax services connected with Wang’s sales of two Palo Alto residences. Wang alleged that his former attorney, Derek Longstaff, created a power of attorney that Wang did not sign and used it to enter agreements with Richard Kahn and Forensic Professionals Group USA, Inc. Those agreements included an arbitration clause. Kahn and Forensic Professionals Group USA, Inc. later initiated arbitration against Longstaff and Wang for unpaid fees.

Wang alleged that, after Longstaff had been terminated as his attorney, Longstaff nevertheless answered the arbitration, filed counterclaims, selected an arbitrator, participated in setting discovery, and scheduled the hearing while purporting to act for Wang. Wang filed this federal action seeking to stop the arbitration and to prevent Longstaff from acting on his behalf. The court had previously enjoined Kahn and Forensic Professionals Group USA, Inc. from continuing the arbitration.

Default and Jurisdiction

Wang served Longstaff electronically at an email address associated with him, and Longstaff affirmatively agreed to accept service by email. Longstaff made no appearance in the federal case. The clerk entered default against him, after which Wang moved for default judgment and a permanent injunction.

The court found that it had general personal jurisdiction over Longstaff because the petition alleged that he was a California resident. It also found subject-matter jurisdiction under 9 U.S.C. § 203 because the arbitration fell under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The court concluded that the prior jurisdictional analysis in this action applied to Wang’s claim against Longstaff as well.

Court’s Analysis

The court applied the seven factors commonly used to decide whether to enter default judgment. It found that Wang could face further injury without an injunction, that his allegations and evidence supported the requested relief, that no money was sought, that a factual dispute about Longstaff’s unauthorized actions was unlikely, and that Longstaff’s failure to respond was not excusable after he accepted electronic service. Although federal procedure generally favors decisions on the merits, the court found that such a decision against Longstaff was impractical because he had not appeared.

The court also determined that the requested permanent injunction was justified. It found that Longstaff’s alleged unauthorized actions caused irreparable injury, that money damages would not adequately prevent further unauthorized actions, that the balance of hardships favored Wang, and that the public interest would not be harmed. The injunction was limited to preventing Longstaff from purporting to represent or act for Wang in the arbitration.

The court concluded that entering judgment against Longstaff would not be unfair while the claims against Kahn and Forensic Professionals Group USA, Inc. continued because those claims rested on different factual allegations. The court expressly stated that it was not deciding Wang’s claims against the non-defaulting respondents, including disputes about the validity of the arbitration agreement or whether Longstaff falsified the power of attorney.

Disposition

The court granted Wang’s motion for default judgment. Under Federal Rule of Civil Procedure 54(b), it directed entry of default judgment in Wang’s favor against Longstaff and permanently enjoined Longstaff from purporting to represent or act on Wang’s behalf in American Arbitration Association Case No. 01-19-0004-1076. The order required personal service of the order and default judgment on Longstaff, followed by Wang’s filing of a certificate of service.