Department 58

Hearing Date: November 25, 2024

Case Name: Li v. Yu

Case No.: 24STCV04168

Matter: Default Judgment prove-up

Moving Party: Plaintiff Fei Li

Responding Party: Unopposed

Tentative Ruling: The request for default judgment is denied.

This is a breach of contract and fraud action. The Complaint alleges that Plaintiff Fei Li (Plaintiff) entered into an agreement with Defendant Dong Yu (Defendant Yu). Under the agreement, Plaintiff was to invest $200,000 into a Robinhood account, with Defendant Yu managing the account as Plaintiff’s stockbroker for a commission. Over time, Plaintiff invested a total of $620,000 at Defendant Yu’s urging, but alleges that Defendant Yu, in conspiracy with Defendant Kundi Li, manipulated Plaintiff’s investments for their own profit without adequately disclosing the risks involved. Plaintiff also paid $123, 300 as commissions to Defendant Golden Baby Inc.

In July 2022, Defendants agree to compensate Plaintiff’s loss with 4 installments of payments for a total of $725,000; in consideration, Plaintiff agreed he would not pursue any damage claim to Defendants.

Plaintiff filed his Complaint on February 20, 2024. The Request for Entry of Default against Defendants was entered on August 30, 2024. Plaintiff has not dismissed DOES 1-20. (CRC 3.1800, subd. (a)(7).)

The request for entry of default judgment is denied.

DISCUSSION

Plaintiff requests entry of default judgment in the amount of $725,000 plus $957.26 in costs.

Plaintiff does not seek attorney fees and does not provide an amount for prejudgment interest as required in the CIV-100 Form. In the proposed judgment, Plaintiff seeks “prejudgment interest accruing at a rate of $198.63 per day from January 1, 2024, to the date of entry of judgment.” No interest calculation is provided. (CRC 3.1800, subd. (a)(3).)

In support of the request for damages, Plaintiff submits evidence that he invested a total amount of $620,000 into the Robinhood account under the solicitation of Defendant Yu, who acted as his stockbroker for commissions. (Li Decl., ¶¶ 1-2; Yang Decl., ¶¶ 5-6, 14, Ex. 1.) Plaintiff also paid to pay commissions to Defendant Golden Baby Inc. in the amount of $123,000, which was an entity owned by Defendant Kundi Li, who is allegedly an employee of Defendant Yu. (Li Decl., ¶¶ 3-5; Yang Decl., ¶¶ 7, 15, Ex. 2.)

Based on a declaration from Plaintiff’s counsel, Plaintiff states, as a result of Defendant Dong Yu’s lack of due diligence and failure to fulfill his fiduciary duty, Plaintiff missed the opportunity to withdraw from the stock market and suffered substantial financial losses. (Yang Decl., ¶¶ 9-11.)

Thereafter, in July 2022, Plaintiff and Defendant Yu reached an agreement whereby Defendants promised to compensate Plaintiff with $725,000, payable in four installments: $185,000 on January 1, 2023, $180,000 on May 1, 2023, $180,000 on September 1, 2023, and $180,000 on December 1, 2023. (Li Decl., ¶ 7; Yang Decl., ¶¶ 12, 18.) However, after the agreement was reached, Plaintiff was unable to contact Defendants, and they have failed to make any payments under the compensation agreement. (Li Decl., ¶ 8.)

The evidence, however, only supports (at most) damages as to Defendant Yu under a breach of contract theory for the alleged contract entered into in July 2022. (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 288 [“ ‘[p]laintiffs in a default judgment proceeding must prove they are entitled to the damages claimed’ ”].)

The Complaint -- which alleges only the conversion, promissory estoppel, and unjust enrichment against “all Defendants” -- does not support any legal theory of recovery against Defendant Golden Baby Inc. or Defendant Kundi Li.

In the context of a default proceeding, A defendant's default operates as an admission of the matters well-pleaded in a complaint. (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 281.) “The ‘well-pleaded allegations’ of a complaint refer to ‘ “ ‘all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.’ ” ’ [Citation.]” (Ibid.) As a result of the well-pleaded complaint rule, a plaintiff at a prove-up hearing under section 585 need not introduce evidence in support of the complaint's allegations of liability. (Carlsen v. Koivumaki (2014) 227 Cal.App.4th 879, 899–900.)

However, as courts have long recognized, in considering whether to enter a default judgment, “it is the duty of the court to act as gatekeeper, ensuring that only appropriate claims get through.” (Hediary v. Yadollahi (2002) 99 Cal.App.4th 857, 868.) In performing this gatekeeping duty, trial courts must determine whether plaintiffs seeking default judgments have stated valid causes of action and, if they have not, deny judgment. (See, e.g., Grappo v. McMills (2017) 11 Cal.App.5th 996, 1014; Kim, supra, 201 Cal.App.4th at p. 282; Falahati v. Kondo (2005) 127 Cal.App.4th 823, 829.)

Based on the foregoing, the request for default judgment is denied.