Inc21.com Corporation v. Flora et al, No. 3:2008cv02967 - Document 29 (N.D. Cal. 2008)
Court Description: ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT [re 12 MOTION for Entry of Default Plaintiff's Request for Entry of Default filed by Inc21.com Corporation]. Signed by Judge William Alsup on 12/4/2008. (whasec, COURT STAFF) (Filed on 12/5/2008)
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Inc21.com Corporation v. Flora et al Doc. 29 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 United States District Court For the Northern District of California 10 INC21.COM CORPORATION d/b/a GLOBAL YP.NET No. C 08-02967 WHA 11 Plaintiff, 12 v. 13 14 15 16 17 MA SHEILA FLORA, TRACY GOMEZ, HUBBUB INC., LKU COMMTECH CENTRAL, 12C-INTELLIGENCE TO COMMUNICATE, INC., INTELCON CALL CENTER, BADOLES, INC., PELAMIS BPO SOLUTIONS, PROLIFIC CONTRACT CENTRAL, TECHNO CALL CORP., DIGICALL INC., SYNERGY SOLUTIONS, and CONTACT CENTRAL SOLUTIONS, INC., ORDER GRANTING PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT 18 Defendants. 19 / 20 INTRODUCTION 21 In this contract dispute, plaintiff Inc21.com Corporation d/b/a GlobalYP.net moves for 22 entry of default judgment against all defendants. Default was entered more than two months 23 ago against defendants, none of whom have filed responsive pleadings or otherwise appeared 24 in this action. This order finds that plaintiff has met its burden in establishing sufficient 25 personal jurisdiction over defendants and that service of defendants was proper. This order 26 further finds that review of the Eitel factors favors entry of default judgment. Accordingly, 27 plaintiff’s motion for default judgment is GRANTED. Plaintiff asks for damages totaling 28 Dockets.Justia.com 1 $9,879,718 ranging from a low of $274,500 to a high of $1,887,000 against the respective 2 thirteen defendants. Plaintiff is awarded damages totaling $2,813,823 ranging from a low of 3 $14,000 to a high of $637,500 against the respective thirteen defendants. 4 5 Plaintiff is a California corporation with its principal place of business in San 6 Francisco, California. Defendants Ma Sheila Flora and Tracy Gomez are alleged individuals 7 and residents of the Philippines. The remaining defendants are each alleged entities located, 8 with their headquarters and principal place of business, in the Philippines (First Amd. Compl. 9 ¶¶ 1–14). 10 United States District Court For the Northern District of California STATEMENT This action concerns agreements for defendants to provide booking and telemarketing 11 services to plaintiff. The action was commenced on June 16, 2008. Plaintiff filed a first 12 amended complaint on June 27 containing the following allegations. 13 Plaintiff is a provider of internet-based services for small businesses including, among 14 other things, maintaining internet yellow pages. Plaintiff contracts with brokers to locate call 15 centers to contact potential subscribers via telephone to sell subscriptions to its internet yellow 16 pages. In June and July 2007, respectively, plaintiff contracted with defendants Gomez and 17 Flora to serve as brokers who would locate call centers in the Philippines. In exchange for 18 their services, plaintiff agreed to pay Gomez and Flora a $1 commission for each valid sale 19 completed by a call center they represented (id. at 19–21; Exh. A, B). 20 Gomez introduced plaintiff to defendant call centers Hubbub Inc., Digicall Inc., and 21 Zynergy Solutions. Flora introduced plaintiff to defendant call centers LKU Commtech 22 Central, 12C-Intelligence to Communicate, Inc., Intelcon Call Center, and Prolific Contract 23 Central. Plaintiff contracted with these call centers. Plaintiff also contracted with defendant 24 call centers Badoles, Inc., Pelatis BPO Solutions, Technocall Corp., and Contact Central 25 Solutions, Inc. Plaintiff agreed to pay each call center a $25 commission per sale for 26 seventy percent of total valid sales. The contracts with the respective call centers each 27 contained a liquidated damages clause of $500 assessed against any fraudulent sale (id. at 23, 28 24; Exh. D). 2 United States District Court For the Northern District of California 1 Plaintiff also contracted with a third-party verification (“TPV”) service provider. 2 Upon a potential customer showing interest in plaintiff’s subscription service, the call center 3 was required to immediately connect the customer with the TPV service provider. The TPV 4 service provider would then record the call and ask the customer a series of questions to 5 consummate the sale. Call center agents were permitted to remain on the line during the TPV 6 process but were required to remain silent unless the customer asked the agent a direct 7 question. Another independent third-party company with whom plaintiff contracted would 8 then review each TPV recording and report to plaintiff those recordings which it deemed to 9 “pass” (sale) or “fail” (no sale) based upon perceived customer responses. Customers with 10 whom sales were consummated were sent welcome letters from plaintiff indicating, inter alia, 11 that they had fifteen days to cancel their subscriptions without charge. Thereafter, the 12 customers were charged the subscription rate (id. at 25–27; Exh. E). 13 Plaintiff maintains it first learned of fraud perpetrated by defendants when it received 14 an influx of customer complaints from actual customers and several state Attorneys General 15 stating customers had not agreed to the subscriptions, had never received telephone calls, or 16 had no recollection of being sent to a TPV service provider. Plaintiff agreed to cancel, credit, 17 or refund the accounts of all complainants (id. at 28). 18 Plaintiff then investigated the complaints and determined it had been defrauded. 19 Plaintiff learned that the call centers employed fraudulent techniques, including using digitized 20 and recorded responses to the questions posed by the TPV service provider. In most instances, 21 no customer was actually on the telephone line during the TPV process. Instead, the call 22 center would simply play the digitized or recorded responses in such a way that the TPV 23 review would classify the call as a valid sale. Plaintiff states this use of “doctored” audio was 24 extremely difficult to detect, particularly given that the sales were deemed valid by the TPV 25 reviewer (id. at 29–30). 26 Plaintiff claims to have paid over $250,000 in commissions on fraudulent sales due 27 to the lag time between when a commission was paid and when a customer could lodge a 28 complaint or cancel a subscription. Plaintiff maintains it also incurred penalties by way of 3 1 charge-back fees assessed by customers’ billing providers for removing charges about which 2 customers had complained. Plaintiff asserts it attempted to contact each defendant about the 3 fraudulent activity and to discuss an opportunity to cure, but received no response. 4 Plaintiff then ceased doing business with defendants (id. at 30–34). United States District Court For the Northern District of California 5 On June 16, 2008, plaintiff filed suit in the Northern District of California against 6 defendants alleging violation of the Telemarketing and Consumer Fraud and Abuse Prevention 7 Act, 15 U.S.C. 6101 et seq., breach of contract, negligence, and fraud. The same day, plaintiff 8 served defendants with the summons and complaint via registered mail. The mailings were 9 all returned. Plaintiff then collaborated with the Philippine law firm, SyCip Salazar Hernandez 10 and Gatmaitan, to effectuate service by publication. On July 27, defendants were served by 11 publication in a newspaper of general circulation in the Philippines, the Philippine Star. 12 A publisher’s affidavit was executed and notice of the publication was mailed to each 13 defendant. To date, no defendant has served or filed a response. 14 On August 29, plaintiff moved for entry of default against defendants. On 15 September 29, default was entered. Now, plaintiff moves for default judgment against 16 defendants. 17 ANALYSIS 18 1. 19 “For a court to exercise personal jurisdiction over a nonresident defendant, that 20 defendant must have at least ‘minimum contacts’ with the relevant forum such that the 21 exercise of jurisdiction ‘does not offend traditional notions of fair play and substantial 22 justice.’” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004) 23 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). California’s 24 long-arm statute authorizes the exercise of jurisdiction on any basis not inconsistent with the 25 state or federal Constitution. Cal. Code Civ. Proc. § 410.10. As such, the analysis of personal 26 jurisdiction collapses into a single inquiry under federal due process. 27 28 PERSONAL JURISDICTION. Personal jurisdiction may be either general or specific to the allegations in the complaint. See Schwarzenegger, 374 F.3d at 801–02 (distinguishing the two types of personal 4 1 jurisdiction). Plaintiff does not argue that general jurisdiction exists over defendants. 2 Rather, plaintiff alleges the Court has specific jurisdiction in this case. The Ninth Circuit 3 applies a three-prong test for analyzing claims of specific jurisdiction: 4 (1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; 5 6 7 (2) The claim must be one which arises out of or relates to the defendant’s forum-related activities; and 8 (3) The exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable. 9 United States District Court For the Northern District of California 10 11 Id. at 802. A. Purposeful Direction and Availment. 12 The first element is sometimes referred to as the “purposeful availment” prong, but 13 “[d]espite its label, this prong includes both purposeful availment and purposeful direction. 14 It may be satisfied by purposeful availment of the privilege of doing business in the forum; 15 by purposeful direction of activities at the forum; or by some combination thereof.” 16 Yahoo! Inc. v. La Ligue Contre Le Racisme Et. L’Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 17 2006). “Evidence of availment is typically action taking place in the forum that invokes the 18 benefits and protections of the laws in the forum. Evidence of direction generally consists of 19 action taking place outside the forum that is directed at the forum.” Pebble Beach Co. v. 20 Caddy, 453 F.3d 1151, 1155 (9th Cir. 2006). 21 Here, plaintiff argues defendants purposefully directed activities at the forum. 22 In purposeful-direction cases, courts normally employ the “effects” test of Calder v. Jones, 23 465 U.S. 783 (1984). The Ninth Circuit construes Calder as imposing three requirements: 24 “the defendant allegedly [must] have (1) committed an intentional act, (2) expressly aimed at 25 the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum 26 state.” Yahoo! Inc., 433 F.3d at 1207. 27 Plaintiff highlights the following facts in support of its contention that defendants 28 purposefully directed activities at the forum. First, defendants contracted with plaintiff, a 5 United States District Court For the Northern District of California 1 California-based company. Second, defendants agreed in those contracts that California law 2 would govern any dispute and that California would be the venue. Third, defendants breached 3 their contracts with plaintiff by collecting commissions on invalid sales. Fourth, defendants 4 orchestrated a fraud directed to a California-based company and made fraudulent 5 representations to a California-based company. Fifth, plaintiff paid defendants commissions 6 on fraudulent sales and defendants improperly accepted those payments from the 7 California-based company. 8 Plaintiff’s allegations are sufficient to satisfy the intentional act requirement, as there 9 is no reason to believe that defendants’ purported acts were done involuntarily. Plaintiff has 10 likewise properly alleged that defendants’ conduct was expressly aimed at California. 11 The express aiming requirement “is satisfied when the defendant is alleged to have engaged 12 in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the 13 forum state.” Bancroft & Masters, Inc. v. Augusta Nat’l, Inc., 223 F.3d 1082, 1087 (9th Cir. 14 2000). Plaintiff alleges defendants engaged in wrongful conduct including fraud and breach 15 of contract targeted at plaintiff, a company defendants knew to be a resident of California. 16 Moreover, the contracts explicitly provided they were governed by California law. While a 17 choice-of-law provision alone would not be sufficient to confer jurisdiction, neither should it 18 be ignored. See AdVideo, Inc. v. Kimel Broadcast Group, Inc., 727 F. Supp. 1337, 1340–41 19 (N.D. Cal. 1989) (Jensen, J.) (further noting that had plaintiff breached the agreement, the 20 defendant in that action “would have been entitled to the protection and benefits afforded by 21 California law”). By the terms of the contracts, defendants could have reasonably expected 22 they might be hauled into a California court. The third part of the “effects test” is also met as 23 to defendants. It requires an allegation that the defendant “caus[ed] harm that the defendant 24 [knew was] likely to be suffered in the forum state.” Dole Food Co., Inc. v. Watts, 303 F.3d 25 1104, 1111 (9th Cir. 2002). Plaintiff’s alleged harm of paying defendants commissions on 26 fraudulent sales was suffered in California, as defendants presumably knew it would be. 27 Accordingly, this prong is met. 28 6 1 2 Connection to Forum-Related Activities. As to the second element of the specific jurisdiction test, plaintiff must show that its 3 claims arise out of or relate to defendants’ forum-related activities. In making this 4 determination, the Ninth Circuit inquires whether plaintiff would have been injured but for 5 defendants’ conduct directed toward the forum state. Ballard v. Savage, 65 F.3d 1495, 1500 6 (9th Cir. 1995); Thomas Weisel Partners LLC v. BNP Paribas, et al., 2008 U.S. Dist. LEXIS 7 65936, *20 (N.D. Cal. 2008) (Patel, J.) (internal citation omitted). 8 9 United States District Court For the Northern District of California B. There is little doubt that plaintiff’s claims arise from defendants’ forum-related activities. First, the complaint alleges that defendants breached their contracts, which were 10 governed by California law. Second, the claims stem from defendants’ sales of subscriptions 11 with plaintiff, a California-based company, which in turn paid defendants commissions on 12 fraudulent sales. Third, but for defendants’ fraudulent conduct, the alleged harm to plaintiff 13 would not have occurred. This prong is satisfied. 14 15 C. Reasonableness. Because plaintiff has satisfied its burden under the first two prongs of the specific 16 jurisdiction test, the burden now shifts to defendants to “‘present a compelling case’ that the 17 exercise of jurisdiction would not be reasonable.” Schwarzenegger, 374 F.3d at 802 (quoting 18 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476–78 (1985)). Here, defendants have failed 19 to plead or otherwise defend; consequently, no compelling reasons have been presented as to 20 why the exercise of jurisdiction over them would be unreasonable. Presumably, had 21 defendants filed a responsive pleading or otherwise appeared in this case, they might have 22 emphasized a lack of geographic connection to the United States. It may be, for example, that 23 no defendants own property in the United States, that all travel here infrequently if ever, and 24 that all live and work exclusively in the Philippines. Even had such a concern been raised, 25 however, it would be insufficient to render jurisdiction unreasonable. If the reasonableness 26 inquiry were dictated by the extent of defendants’ geographic ties to the forum alone, the 27 purposeful availment and purposeful direction inquiries would be meaningless. 28 7 United States District Court For the Northern District of California 1 Although the burden on defendants is a relevant factor, the other fairness and 2 reasonableness factors — the forum state’s interest in adjudicating the dispute, plaintiff’s 3 interest in obtaining convenient and effective relief, judicial efficiency, and the shared interest 4 of states “in furthering fundamental substantive social policies,” Burger King Corp., 471 U.S. 5 at 476–77 (listing the factors) — weigh in favor of reasonableness. Plaintiff certainly has a 6 strong interest in obtaining effective and efficient relief, and the integrity of this nation’s 7 markets would be undermined if foreign businesses could fleece those markets while standing 8 beyond the water’s edge. 9 To be sure, United States companies that outsource American jobs to low-wage 10 countries are easy targets for scams. Laid-off workers in America would likely say that 11 companies who want third-world labor should settle for third-world justice and that they 12 should be required to sue the low-wage workers, if at all, only in the low-wage country rather 13 than being allowed to have it both ways, i.e., to have third-world labor and American justice. 14 But, perhaps unfortunately, that is not the test. 15 16 In sum, the three-prong test for analyzing claims of specific jurisdiction has been met. Accordingly, personal jurisdiction over defendants is proper. 17 2. 18 FRCP 4(f) directs how to effect service on an individual in a foreign country. SERVICE OF PROCESS. 19 An individual may be served at a place not within any judicial district of the United States 20 “by an internationally agreed means of service that is reasonably calculated to give notice, 21 such as those authorized by the Hague Convention on the Service Abroad of Judicial and 22 Extrajudicial Documents.” Fed. R. Civ. P. 4(f)(1). The Philippines is not a party to the Hague 23 Convention. See Hague Convention on the Service Abroad of Judicial and Extra-Judicial 24 Documents in Civil and Commercial Matters, 25 http://travel.state.gov/law/info/judicial/judicial_686.html# (last visited Dec. 1, 2008). 26 Where “there is no internationally agreed means, or if an international agreement 27 allows but does not specify other means, [service may be effectuated] by a method that is 28 reasonably calculated to give notice.” Fed. R. Civ. P. 4(f)(2). One such method is “any form 8 1 of mail that the clerk addresses and sends to the individual and that requires a signed receipt.” 2 Fed. R. Civ. P. 4(f)(2)(C)(ii). On July 16, plaintiff employed this method by serving 3 defendants with the summons and complaint via registered mail using the addresses defendants 4 provided in their contracts with plaintiff. Notice was not effected by these mailings, however, 5 as evidenced by the fact that the mailings were returned to plaintiff. No forwarding addresses 6 were provided. 7 A second method of notice includes those “prescribed by the foreign country’s law 8 for service in that country in an action in its courts of general jurisdiction.” Fed. R. Civ. P. 9 4(f)(2)(A). Philippine Rule of Civil Procedure 14, Section 19 provides for proof of service by United States District Court For the Northern District of California 10 11 12 13 14 15 publication. It states: If the service has been made by publication, service may be proved by the affidavit of the printer, his foreman or principal clerk, or of the editor, business or advertising manager, to which affidavit a copy of the publication shall be attached, and by an affidavit showing the deposit of a copy of the summons and order for publication in the post office, postage prepaid, directed to the defendant by registered mail to his last known address. Plaintiff employed this method of notice by collaborating with the Philippine law firm, 16 SyCip Salazar Hernandez and Gatmaitan. On July 27, defendants were served by publication 17 in a newspaper of general circulation in the Philippines, the Philippine Star. In compliance 18 with Philippine law, a publisher’s affidavit was executed and notice of the publication was 19 mailed to each named defendant in this action. Plaintiff states it is aware that the publication 20 reached defendant Pelatis BPO Solutions, as the law firm representing that defendant contacted 21 plaintiff indicating it had received the “ad clipping” and requesting a copy of the complaint. 22 Plaintiff sent the defendant a copy of its first amended complaint. 23 The common law has long “recognized that, in the case of persons missing or unknown, 24 employment of an indirect and even a probably futile means of notification is all that the 25 situation permits and creates no constitutional bar to a final decree foreclosing their rights.” 26 Mullane v. Cent. Hanover Bank & Trust Co. et al., 339 U.S. 306, 317 (1950) (allowing service 27 by publication); accord Rio Properties, Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1016–17 28 (9th Cir. 2002) (applying the reasoning in Mullane to allow alternative methods of service to 9 United States District Court For the Northern District of California 1 serve “an elusive international defendant”); Lidas, Inc. v. U.S., 238 F.3d 1076, 1084 (9th Cir. 2 2001) (applying Mullane in support of proposition that the IRS more than met the standard to 3 provide notice “reasonably calculated, under all the circumstances, to apprise the interested 4 parties of the pendency of the action”). 5 Because plaintiff employed methods of service reasonably calculated to give notice, 6 including service by publication as prescribed by Philippine law, this order finds service of 7 defendants was proper. 8 3. 9 Under FRCP 55(b)(2), a plaintiff can apply to the district court for a default 10 judgment against a defendant that has failed to otherwise plead or defend against the action. 11 Default judgments are generally disfavored as “cases should be decided upon their merits 12 whenever reasonably possible.” Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986). In the 13 Ninth Circuit, a district court must consider the following factors when deciding whether or 14 not to use its discretion in granting a motion for default judgment: (i) the possibility of 15 prejudice to the plaintiff; (ii) the merits of plaintiff’s substantive claims; (iii) the sufficiency 16 of the complaint; (iv) the sum of money at stake in the action; (v) the possibility of a dispute 17 concerning material facts; (vi) whether the default was due to excusable neglect; and (vii) the 18 strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 19 Id. at 1471–72. Here, these factors favor entry of default judgment against defendants. 20 DEFAULT JUDGMENT. A. Merits and Sufficiency of the Complaint. 21 After entry of default, well-pleaded allegations in the complaint regarding liability and 22 entry of default judgment are taken as true, except as to the amount of damages. Fair Housing 23 of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). Thus, there can be no dispute as to the 24 material facts. Additionally, the district court is “not required to make detailed findings of 25 fact.” Id. at 906. The merits of plaintiff’s substantive claims are therefore considered together 26 with the sufficiency of the complaint. Because plaintiff alleges that defendants breached their 27 contracts and brings this motion for default judgment to obtain damages against defendants 28 under those contracts, this is a breach of contract claim for the purpose of determining the 10 1 merits and sufficiency of the complaint. The second, third, and fifth Eitel factors weigh in 2 favor of granting a default judgment. United States District Court For the Northern District of California 3 In order to prevail in an action for breach of contract, plaintiff must show that (i) there 4 is a contract, (ii) plaintiff performed, (iii) defendants breached, and (iv) there is resulting 5 damage. See Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1399 6 (1990). Here, the complaint establishes each of these elements. The complaint sufficiently 7 alleges that plaintiff entered into written contracts with defendants for broker and 8 telemarketing services and the declaration attached to the motion for default judgment suffices 9 to show the parties’ signatures on these contracts. The complaint further alleges that plaintiff 10 performed all of its required obligations under the contracts, including paying commissions to 11 defendants, or was excused from performing due to defendants’ conduct. The complaint also 12 properly alleges that defendants Gomez and Flora breached their contracts by referring 13 plaintiff to unsuitable call centers who defrauded plaintiff by accepting commissions for 14 fraudulently obtained sales and that defendant call centers breached their contracts by 15 collecting commissions on those invalid sales. Finally, the complaint sufficiently alleges harm 16 to plaintiff by contending that plaintiff paid commissions on invalid sales and incurred 17 penalties by way of charge-back fees after customers complained to their billing providers 18 about unauthorized subscription charges. Taking these well-pled allegations as true, plaintiff 19 has sufficiently pled the elements necessary to state a breach of contract claim. 20 21 B. Remaining Factors. The remaining Eitel factors likewise favor entry of default judgment. If this motion is 22 not granted, plaintiff will be prejudiced as it will be denied its right to adjudicate its claims and 23 will be left without a remedy. In general, the fact that a large sum of money is at stake 24 disfavors default judgment. Cf. Eitel, 782 F.2d at 1472 (stating that the fact that three million 25 dollars was at stake, when considered in light of the parties’ dispute as to material facts, 26 supported the court’s decision not to enter judgment by default). Here, plaintiff asks for a 27 large amount of damages: over nine million dollars. As stated earlier, however, whereas 28 plaintiff’s well-pleaded allegations as to liability are taken as true, those as to damages are not; 11 1 accordingly, the determination of relief discussed below finds plaintiff is entitled to amounts 2 ranging from a low of $14,000 to a high of $637,500 as to the respective defendants. These 3 amounts pale beside the three million dollars at stake as against the single defendant in Eitel. 4 There is no evidence that defendants’ failure to respond was the result of excusable neglect. 5 They were properly served, have filed no responsive pleadings, and have never appeared in 6 this action. Although federal policy favors decisions on the merits, FRCP 55(b) permits entry 7 of default judgment in situations, such as this, where the defendants have failed to plead or 8 otherwise defend. On balance, the Eitel factors weigh in favor of granting default judgment. 9 United States District Court For the Northern District of California 10 11 C. Determination of Relief. Plaintiff seeks a grand total of $9,879,718 from defendants. To calculate this amount, plaintiff took three steps. 12 First, plaintiff estimated the total number of fraudulent calls. It did so by adding 13 together the number of calls made by each call center during approximately June 2007 to 14 September 2007 that it could classify into one of four mutually exclusive categories: (i) 15 termed “Post Failed” comprising calls that originally passed the TPV review but that plaintiff 16 later learned were fraudulent; (ii) termed “Cancel” comprising calls that were canceled by the 17 subscriber and that plaintiff believes were fraudulent; (iii) termed “Failed (status)/ Failed 18 (TPV)/ Cancellation Reason” comprising calls that failed the TPV review with a reason for 19 failure described by the TPV provider; and (iv) termed “Failed (Status)/ Failed (TPV)” 20 comprising calls that failed the TPV review with no reason for failure described by the TPV 21 22 23 24 25 26 27 28 12 1 provider. Plaintiff found a total of 19,754 calls that fit in these four categories, broken down as 2 follows with respect to each call center: 3 4 CALL CENTER FAILED (STATUS)/ FAILED POST FAILED (TPV)/ (STATUS)/ FAILED CANCEL CANCELLATION REASON FAILED (TPV) 5 Hubbub Inc. 80 22 122 652 6 LKU Commtech Central 224 73 153 491 7 I2C-Intelligence to Communicate, Inc. 242 79 96 888 Intelcon Call Center 29 15 58 776 Badoles, Inc. 1275 349 298 1852 Pelatis BPO Solutions 1014 382 249 2504 28 14 65 442 Technocall Corp. 1181 509 0 1247 Digicall Inc. 1148 243 63 819 Zynergy Solutions 95 31 134 383 Contact Central Solutions, Inc. 309 115 56 949 8 9 United States District Court For the Northern District of California 10 11 Prolific Contract Central 12 13 14 15 16 17 Second, plaintiff multiplied the number of estimated fraudulent calls by the $500 18 liquidated damages amount provided for in the contracts with defendant call centers. 19 The liquidated damages provision provided: 20 21 22 23 24 All fraudulent sales found, which are proven by the customers and/or the PROVIDER’s QCD, are grounds for five hundred dollars ($500.00) liquidated damages assessment against MARKETER for each fraudulent claim, which will be deducted from the weekly commissions. Such liquidated damages do not function as a punishment to MARKETER, but merely cover some of the costs associated with the consequences that fraudulent sales have upon PROVIDER. PROVIDER also reserves the right to seek prosecution and/or tortious claims of the individual(s) or PARTIES involved in the fraudulent activity mentioned above. 25 (First Amd. Compl. ¶ 24; Exh. D). 26 27 28 13 1 2 3 4 Third, plaintiff added the amount it paid in commission to defendant brokers pursuant to the terms of the broker agreements which provided: For all referred call centers which perform the GYP [i.e. Inc21] program Commission payments to the BROKER is one dollars [sic] ($1) per each approved valid sale completed by the center to which the BROKER represents. 5 (id. at ¶ 21; Exh. A, B). This amount was $2,718 as to Gomez and $0 as to Flora who was 6 never paid any commission. 7 Plaintiff requests that judgment be entered in its favor against (i) each call center in the 8 amount equal to the number of estimated fraudulent calls attributed to that call center 9 multiplied by the $500 liquidated damages amount, (ii) each broker, jointly and severally with United States District Court For the Northern District of California 10 the call centers they represented, for the amount of damages attributed to those call centers, 11 and (iii) Gomez, severally, for the $2,718 in commission paid to her for allegedly fraudulent 12 sales by the call centers she represented. 13 Allegations of damage are not deemed true simply because of the defendant’s default. 14 Some proof of the amount is required. Geddes v. United Fin. Group, 559 F.2d 557, 560 15 (9th Cir. 1977). Plaintiff acknowledges that “[i]t is possible that a small number of the calls in 16 the four categories were not fraudulent” but states that the aggregate number nonetheless does 17 not capture the total number of fraudulent calls and that it is therefore a conservative estimate. 18 The estimated number of fraudulent calls is key to proving plaintiff’s damages calculation. 19 This order finds that only the first category of calls proved-up by plaintiff indicate fraud and 20 that the remaining categories do not. 21 The first category comprises calls that originally passed the TPV review but that 22 plaintiff later learned were fraudulent. Because plaintiff learned that these sales were 23 fraudulent it was justified in including them in its calculation of fraudulent sales. The second 24 category comprises calls canceled by the subscriber which plaintiff believes were fraudulent. 25 That a subscriber cancelled, however, does not in and of itself suggest fraud. Presumably, had 26 the subscriber indicated that it never approved the sale in the first place, plaintiff would have 27 included the call in the first rather than the second category as it would have learned rather that 28 simply believed that the cancellation was due to fraud. The third and fourth categories 14 United States District Court For the Northern District of California 1 comprise calls that failed the TPV review with a reason for failure either stated or unstated by 2 the TPV reviewer. Because these calls failed the TPV review they never became 3 consummated sales. Because these calls never became sales they can hardly be deemed 4 “fraudulent sales” so as to warrant $500 in liquidated damages assessed against each 5 “fraudulent sale.” 6 Accordingly, this order awards liquidated damages in the amount of $500 per 7 fraudulent sale including only those calls attributed to the first category. Defendants Gomez 8 and Flora are jointly and severally liable for those liquidated damages assessed against the call 9 centers they represented. Gomez is also severally liable for the $1 commission she collected 10 for each fraudulent sale attributed to the first category made by the call centers she represented. 11 CONCLUSION 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 For all of the above-stated reasons, plaintiff’s motion for default judgment against defendants is GRANTED. IT IS HEREBY ORDERED: 1. Defendant Hubbub Inc. shall pay, jointly and severally with defendant Gomez, liquidated damages of $40,000; 2. Defendant LKU Commtech Central shall pay, jointly and severally with defendant Flora, liquidated damages of $112,000; 3. Defendant I2C-Intelligence to Communicate, Inc. shall pay, jointly and severally with defendant Flora, liquidated damages of $121,000; 4. Defendant Intelcon Call Center shall pay, jointly and severally with defendant Flora, liquidated damages of $14,500; 5. Defendant Badoles, Inc. shall pay, severally, liquidated damages of $637,500; 6. Defendant Pelatis BPO Solutions shall pay, severally, liquidated damages of $507,000; 7. Defendant Prolific Contract Central shall pay, jointly and severally with defendant Flora, liquidated damages of $14,000; 15 1 2 3 4 5 6 7 8 9 8. Defendant Technocall Corp. shall pay, severally, liquidated damages of $590,500; 9. Defendant Digicall Inc. shall pay, jointly and severally with defendant Gomez, liquidated damages of $574,000; 10. Defendant Zynergy Solutions shall pay, jointly and severally with defendant Gomez, liquidated damages of $47,500; 11. Defendant Contact Central Solutions, Inc. shall pay, severally, liquidated damages of $154,500; 12. Defendant Gomez shall pay, severally, $1,323. United States District Court For the Northern District of California 10 11 IT IS SO ORDERED. 12 13 Dated: December 4, 2008. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16
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