1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 BAY BREAD, LLC, Case No. 3:21-cv-02979-JD

8 Plaintiff,

ORDER RE DEFAULT JUDGMENT

v. 9

10 LEMONADE RESTAURANT GROUP,

LLC,

11 Defendant.

12 13 Plaintiff Bay Bread, LLC (Bay Bread) signed leases and subleases for retail space in the 14 San Francisco Bay Area. Dkt. No. 1 ¶¶ 3, 6. Four leases that were assigned by Bay Bread to 15 defendant Lemonade Restaurant Group, LLC (Lemonade) are in issue here. In the assignments, 16 Lemonade agreed to “defend and indemnify Bay Bread against all claims, losses, costs, and 17 expense arising out of . . . Lemonade’s tenancy” under the leases. Id. ¶ 8. Bay Bread says that 18 when Lemonade defaulted on the leases for not timely paying rent, it declined to defend and 19 indemnify Bay Bread as required. See id. ¶ 18. Lemonade eventually cured its defaults, but only 20 after Bay Bread (i) assumed the defense of state-court litigation against one landlord, and (ii) 21 initiated this lawsuit against Lemonade for breach of contract. See Dkt. No. 17 ¶¶ 11-12. 22 Lemonade has not appeared in the case, and at Bay Bread’s request, the Clerk of Court has 23 entered default as to Lemonade. Dkt. No. 14. Bay Bread has moved for default judgment, seeking 24 attorneys’ fees and costs allowed by contract. Dkt. No. 16. The motion is granted in part. 25 DISCUSSION 26 I. JURISDICTION & SERVICE 27 “In default judgment proceedings, the Court has an affirmative duty to consider whether it 1 Tech. Inc., No. 13-cv-03688-JD, 2015 WL 1870236, at *1 (N.D. Cal. Apr. 23, 2015) (citing In re 2 Tuli, 172 F.3d 707, 712 (9th Cir. 1999)). 3 Bay Bread invokes the Court’s diversity jurisdiction. Diversity jurisdiction arises when a 4 plaintiff sues a citizen of a different state over an amount in controversy exceeding $75,000. 28 5 U.S.C. § 1332(a). The allegations in the complaint establish that Bay Bread and Lemonade are 6 diverse. Both Bay Bread and Lemonade are limited liability companies, or LLCs. Dkt. No. 1 ¶ 3. 7 An LLC is considered “a citizen of every state of which its owners/members are citizens.” 8 Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). Bay Bread 9 represents that Starbucks Corporation -- a Washington corporation with its principal place of 10 business in Washington -- is its sole member. Dkt. No. 1 ¶ 1. The complaint alleges that all of 11 Lemonade’s members are citizens of California or states other than Washington.1 Id. 12 The amount-in-controversy requirement is also satisfied. At the time that the complaint 13 was filed, Bay Bread estimated that it had “suffered damages in excess of $892,000, the amount of 14 delinquent rent accrued to date” by Lemonade on its leases. Dkt. No. 1 ¶ 19. The fact that Bay 15 Bread was not ultimately liable for that amount does not undermine subject-matter jurisdiction 16 here. See Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 400 (9th Cir. 2010) (“The amount in 17 controversy is simply an estimate of the total amount in dispute, not a prospective assessment of 18 defendant’s liability.”); see also Anderson v. Starbucks Corp., 556 F. Supp. 3d 1132, 1136 (N.D. 19 Cal. 2020). Neither does the fact that Bay Bread seeks a default judgment of only $40,345.65, due 20 to events that transpired after the complaint was filed. See Grupo Dataflux v. Atlas Glob. Grp., 21 L.P., 541 U.S. 567, 570 (2004) (“It has long been the case that ‘the jurisdiction of the court 22 depends upon the state of things at the time of the action brought.’”) (quoting Mollan v. Torrance, 23 9 Wheat. 537, 539 (1824)). 24

25 1 To put a finer point on it, the complaint alleges that Lemonade’s members “are residents of California and/or residents of states other than Washington.” Dkt. No. 1 ¶ 3. While “residency 26 and domicile for citizenship are not, strictly speaking, always the same,” the Court applies the “‘longstanding principle’ that ‘the place where a person lives is taken to be his domicile until facts 27 adduced establish the contrary.’” Boone v. FCA US LLC, No. 21-cv-01591-JD, 2021 WL 1 The Court has personal jurisdiction over Lemonade, which is a limited liability company 2 incorporated in California. See Daimler AG v. Bauman, 571 U.S. 117, 137 (2014). Bay Bread 3 filed a proof of service indicating that the summons and the complaint were personally delivered 4 to Lemonade’s registered agent for service of process on June 18, 2021. Dkt. No. 13. 5 II. DEFAULT JUDGMENT 6 “Under Federal Rule of Civil Procedure 55(b)(2), a party may apply to the Court for entry 7 of judgment by default against a defendant that has failed to defend against the action.” 8 FormFactor, 2015 WL 1870236, at *2. “‘The district court’s decision whether to enter a default 9 judgment is a discretionary one.’” Id. (quoting Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 10 1980)). The decision is based on the following factors:

11 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s 12 substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning material facts, (6) 13 whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 14 15 NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 (9th Cir. 2016) (quoting Eitel v. McCool, 782 16 F.2d 1470, 1471-72 (9th Cir. 1986)). 17 The main inquiries under the Eitel factors are the merits of the claim and the sufficiency of 18 the complaint, which are typically considered together, “because after the entry of default, well- 19 pleaded allegations in the complaint are deemed true, except as to the amount of damages.” 20 FormFactor, 2015 WL 1870236, at *2 (citing Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 21 (9th Cir. 2002)). 22 To state a claim for breach of contract, a plaintiff must show “(1) the existence of the 23 contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) 24 the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811, 821 25 (2011). Bay Bread has done so here. The complaint alleges that (1) Bay Bread entered into a 26 purchase and sale agreement (PSA) and an indemnity agreement with Lemonade, (2) Bay Bread 27 fully performed its obligations under the PSA, (3) Lemonade breached the PSA by not providing 1 damages as a result. See Dkt. No. 1 ¶¶ 7, 22-29. Consequently, the main Eitel factors weigh in 2 favor of default judgment. 3 The other Eitel factors also favor entry of default judgment. Bay Bread will be prejudiced 4 if default judgment is not granted because it will be left footing the bill for attorneys’ fees that 5 would not have been incurred but for Lemonade’s breach. The amount of money at stake, roughly 6 $40,000, is not high enough to militate against granting a default judgment. And “[b]ecause 7 defendants have not appeared, there is no indication that their default is due to excusable neglect, 8 that the material facts are subject to dispute, or that a decision on the merits will be possible.” 9 Broad. Music, Inc. v. JMN Rest. Mgmt. Corp., No. 14-cv-01190-JD, 2014 WL 5106421, at *2 10 (N.D. Cal. Oct. 10, 2014). All told, default judgment is warranted in light of the Eitel factors. 11 III. THE RELIEF 12 Bay Bread asks for $40,345.65 in attorneys’ fees and costs that it has incurred in defending 13 itself in state court and suing to enforce its contractual rights in federal court. 14 “Because this is a diversity case, state law governs both the right to fees and the method of 15 calculating the fees.” Close v. Sotheby’s, Inc., 909 F.3d 1204, 1208 (9th Cir. 2018) (internal 16 quotations and citation omitted). Bay Bread asserts that it is entitled to attorneys’ fees by virtue of 17 its lease purchase and indemnity agreements with Lemonade, which are both governed by 18 California law. See Dkt. No. 17-1 ¶ 17.11; Dkt. No. 17-2 ¶ 10. The agreements contain the 19 following language:

20 If any action is brought by either party against the other party, relating to or arising 21 out of this Agreement, the transaction described herein or the enforcement thereof, the prevailing party is entitled to recover from the other party reasonable attorneys’ 22 fees, costs and expenses incurred in connection with the prosecution or defense of such action. 23 24 Dkt. No. 17-1 ¶ 17.12; Dkt. No. 17-2 ¶ 11. Under California law, this provision is enforceable, 25 and so Bay Bread “shall be entitled to reasonable attorney’s fees in addition to other costs” as the 26 prevailing party in this action. Cal. Civ. Code § 1717(a); see also Hjelm v. Prometheus Real Est. 27 Grp., Inc., 3 Cal. App. 5th 1155, 1170 (2016). 1 “(T]he fee setting inquiry in California ordinarily begins with the ‘lodestar,’ 1.e., the 2 || number of hours reasonably expended multiplied by the reasonable hourly rate.” PLCM Grp. v. 3 || Drexler, 22 Cal. 4th 1084, 1095 (2000). “The court may then adjust the lodestar, based on various 4 || factors, to fix the fee at the fair market value for the legal services provided.” Sonoma Land Tr. v. 5 || Thompson, 63 Cal. App. 5th 978, 983 (2021). 6 Bay Bread submits that the hourly rates for attorneys Robert Guite, Suzanne Stafford, and 7 || Khirin Bunker are similar to “the rates charged by comparable attorneys at other law firms,” Dkt. 8 No. 18 4 13, which appears to be true. The records submitted by Bay Bread show that its counsel 9 spent 77.9 hours on the litigation -- this case and the state-court litigation -- through the end of 10 || August 2022. For the most part, these hours have been adequately documented and detailed to the 11 Court by timekeeper, category of work, and number of hours. 12 Even so, a modest reduction of the sought-after award is warranted. Bay Bread seeks 13 $281.00 for “unbilled, closed work-in-progress fees” in September 2022, Dkt. No. 18 □ 14, but 14 || offers no explanation about the work that was performed. It also seeks to recover $562.82 in costs 3 15 || for an initial, unsuccessful attempt to serve Lemonade’s registered agent for service of process. a 16 See Dkt. No. 20-1 at ECF p. 11; Dkt. No. 18 4 15; see also Dkt. Nos. 5, 11. Deducting these 3 17 amounts from Bay Bread’s request, for time and costs that were not reasonably expended, results 18 || in an overall award of $39,501.83. 19 CONCLUSION 20 Bay Bread’s motion for default judgment is granted in part. It is awarded $39,501.83 in 21 attorneys’ fees and costs. Bay Bread will promptly serve Lemonade with this order and file a 22 || proof of service on the docket. 23 IT IS SO ORDERED. 24 Dated: February 7, 2023 25 26

JAMES/#PONATO

27 United Jtates District Judge 28