HOWARD LLOYD, Magistrate Judge
Plaintiff, Softwareworks Group ("SWG"), seeks entry of default judgment against IHosting, Inc. and WebHosting Plus, Inc.
The remaining defendant, Michael Kofman, has filed a petition in bankruptcy and this matter is stayed as to him.
BACKGROUND
This action arose out of a business deal among web-hosting companies. SWG sold nearly all of its assets to IHosting pursuant to an asset purchase agreement ("the Agreement"). Under its terms, IHosting became the noteholder of a secured promissory note ("the Note") in the amount of $724,800. WebHosting Plus guaranteed the Note. IHosting made only the first scheduled installment payment before defaulting under the terms of the Note. As such, the outstanding balance became due immediately. The parties attempted to negotiate repayment of the Note (IHOSTING made two $10,000 payments). However, these attempts failed and SWG sued.
While the parties were engaged in discovery proceedings, Defendants ceased contact with Plaintiff and the court. After several attempts to set the discovery process back on track, this court issued an order to show cause to Defendants. When they did not respond, Defendants' answer was stricken from the record and the counterclaim was dismissed with prejudice. Thereafter, the Clerk entered default against Defendants, who have not moved to set aside the default or responded in any way. SWG requested entry of default judgment and an evidentiary hearing was noticed and conducted in accordance with the requirements of FRCP 55(b).
F.R.C.P. 55:(b)(2) If the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application at least 3 days before the hearing.
ANALYSIS
The decision to enter default judgment is within the discretion of the court. Shanghai Automation Instrument Co., v. Kuei, 194 F.Supp.2d 995, 999-1000 (N.D.Cal., 2001). The following factors are to be considered in exercising this discretion: (1) prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake, (5) potential disputes concerning material facts, (6) whether default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Id. (citing Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986)). When default has been entered, the complaint's factual allegations along with other competent evidence must be taken as true. Shanghai, 194 F.Supp. 2d at 1000.
John Mills, president and member of the board of directors of SWG, testified at the evidentiary hearing to the amount of damages. He also submitted a declaration and other materials supporting the damage calculation. Mills stated that Defendants were accountable for an outstanding balance of $653,029.00 for the Note. Further, SWG asked for prejudgment interest in the amount of $44,074.87. In support, Plaintiff relied on New Jersey law which permits the court, in its discretion, to award prejudgment interest in contract cases on an equitable basis. The amount of interest sought is based on a 5% annual interest rate, which this court deems reasonable under these circumstances. Accordingly, SWG sought a judgment totaling $697,103.87.
Although the Note allows for a one-time downward adjustment if certain conditions are met, Mills testified that the adjustment was not triggered here.
The Agreement includes a New Jersey choice-of-law provision.
In consideration of the Eitel factors, the court notes that Plaintiff has no other remedy available to it, given Defendants' unwillingness to litigate this case. Further, there is no reason to suspect that the evidence submitted by SWG lacks trustworthiness. Given the allegations and the evidence presented, Plaintiff's claims against IHOSTING and WebHosting Plus appear to be meritorious and the amount of money at stake is not excessive given the nature of the transaction. Finally, this court relies heavily on the fact that the default was not due to any excusable neglect. The defendants unilaterally relieved themselves of their obligation to defend against these claims. Thus, while there is a strong policy favoring decisions on the merits, every other Eitel factor favors entry of default judgment for SWG.
Based on the foregoing reasoning, this court grants Plaintiff's motion for default judgment in the amount prayed for.
JUDGMENT
Judgment is entered in favor of Plaintiff and against defendants, IHOSTING and WebHosting Plus, in the amount of $697,103.87. Plaintiff shall also recover reasonable attorney's fees and costs of suit.