Lynch v. Shrem et al

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Blake Lynch,
Plaintiff,
v.
Joseph Shrem, David Moradi,
Select Home Warranty, LLC,
Defendants.
No. CV 25-04481 PHX DJH (CDB)
REPORT AND
RECOMMENDATION
TO THE HONORABLE DIANE J. HUMETEWA:
This matter was referred for a Report and Recommendation regarding Plaintiff’s
motion seeking judgment by default at ECF No. 11.
On December 4, 2025, Plaintiff filed a pro se complaint alleging Defendant Select
Home Warranty, LLC (“Select Home Warranty”) did not honor the terms of a contract.
Plaintiff alleges claims for “Contractual Fraud, Neglect, Fraudulent Inducement to
Contract,” “willful violations of the terms and conditions of a warranty agreement,” and
“violations of the Magnus-Moss Warranty Act …” (ECF No. 1 at 13) (italics in original).1
Plaintiff asserts the Court’s jurisdiction is pursuant to the diversity of the parties, with
Defendant Moradi being a resident of New Jersey and Select Home Warranty having a
principal place of business in New Jersey; attached to the Complaint is a computer print-
out showing Select Home Warranty is a New Jersey corporation and the statutory agent’s
1 Plaintiff presumably refers to the Magnuson-Moss Warranty Act, a federal consumer
protection statute enacted in 1975 which established minimum disclosure and content requirements
for written consumer product warranties, and also providing consumers with a federal cause of
action for breach of warranty in some circumstances. See 50 U.S.C. §§ 2301-2312.
Case 2:25-cv-04481-DJH Document 17 Filed 01/26/26 Page 1 of 7

- 2 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
address in Florida. (ECF No. 1 at 9). Plaintiff makes no allegation as to the residency of
Defendant Shrem. With regard to the amount in controversy, Plaintiff avers that due to
Defendants’ bad acts he was “forced to pay for third-party NC technicians and for a new
air conditioner out-of-pocket.” (ECF No. 1 at 4). Attached to the Complaint is a
communication from Plaintiff to Defendants Moradi and Select Home Warranty, dated
October 8, 2025, stating: “Your company violated the MMWA when it made refusals to
service my claims, so I was forced to purchase an air conditioning unit in the amount of
$7,340.00 plus a modification in the amount of $480.00 for a total of $7,820.00.” (ECF
No. 1 at 59). This communication further states: “I am now invoicing you and your
company for $100,000.00 for both actual and punitive damages for not only your failure to
honor the policy, but your dishonor of Federal Law…” (Id.). The Complaint seeks
“compensatory and punitive damages” against Defendants in the amount of $300,000, and
“legal costs and fees” and “any further damages, costs and fees the Court deems necessary.”
(ECF No. 1 at 4-5).
On December 8, 2025, Plaintiff docketed a Certificate of Service stating that
Plaintiff had served the Complaint and a summons on Joseph Shrem, David Moradi, and
Select Home Warranty on December 4, 2025, by placing copies of the Complaint and a
summons “in the United States Mail, postage prepaid,” and sent to the Select Home
Warranty corporate address in New Jersey. (ECF No. 6).
On December 30, 2025, Plaintiff sought the entry of default against all Defendants,
which was entered by the Clerk of the Court on January 5, 2026. (ECF Nos. 7 & 8).
Plaintiff filed a motion seeking judgment by default on January 8, 2025, which was
referred to the Magistrate Judge for a Report and Recommendation on January 16, 2025.
(ECF Nos. 11 & 16). In the motion for judgment by default Plaintiff states: “Pursuant to
the Certificate of Dishonor obtained by Plaintiff and dated November 26, 2025, Plaintiff
hereby claims Three Hundred Thousand Dollars … or three times the face value of the
instrument.” (ECF No. 11 at 2).
Case 2:25-cv-04481-DJH Document 17 Filed 01/26/26 Page 2 of 7

- 3 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Rule 55 does not require the entry of judgment against a defaulting party and the
entry of a judgment by default is completely within the Court’s discretion. See, e.g.,
DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 852 (9th Cir. 2007); Draper v. Coombs, 792
F.2d 915, 924-25 (9th Cir. 1986); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).
Default judgments are disfavored because public policy favors the resolution of civil cases
on their merits. E.g., NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 (9th Cir. 2016);
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).
When default judgment is sought against a non-appearing party the Court has “an
affirmative duty to look into its jurisdiction over both the subject matter and the parties.”
In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999) (“To avoid entering a default judgment that
can later be successfully attacked as void, a court should determine whether it has the
power, i.e., the jurisdiction, to enter judgment in the first place.”). The Court has a similar
duty with respect to service of process. See Fishman v. AIG Ins. Co., No. 07-cv-0589, 2007
WL 4248867, at *3 (D. Ariz. Nov. 30, 2007) (“Because defendant has not been properly
served, the court lacks jurisdiction to consider plaintiff’s motions for default judgment.”).
These considerations are “critical because ‘[w]ithout a proper basis for jurisdiction, or in
the absence of proper service of process, the district court has no power to render any
judgment against the defendant’s person or property unless the defendant has consented to
jurisdiction or waived the lack of process.’” Id., quoting Securities & Exch. Comm’n v.
Ross, 504 F.3d 1130, 1138-39 (9th Cir. 2007) (“Ross”).
A federal court is without personal jurisdiction over a defendant unless the
defendant has been served in accordance with Rule 4 fo the Federal Rules of Civil
Procedure. See, e.g., Jackson v. Hayakawa, 682 F.2d 1344, 1347 (9th Cir. 1982). Although
Rule 4 “is a flexible rule that should be liberally construed so long as a party receives
sufficient notice of the complaint,” United Food & Com. Workers Union v. Alpha Beta Co.,
736 F.2d 1371, 1382 (9th Cir. 1984) (emphasis added), neither actual notice nor simply
naming the defendant in the complaint will provide personal jurisdiction absent
“substantial compliance with Rule 4.” Jackson, 682 F.2d at 1347. See also Benny v. Pipes,
Case 2:25-cv-04481-DJH Document 17 Filed 01/26/26 Page 3 of 7

- 4 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
799 F.2d 489, 492 (9th Cir. 1986), as amended, 807 F.2d 1514 (9th Cir. 1987); Williams
v. Bellagio Hotel & Casino, 728 F. Supp. 3d 1166, 1168 (D. Nev. 2024).
Plaintiff failed to serve the Defendants in a manner consistent with Rule 4 of the
Federal Rules of Civil Procedure. Rule 4(b)(c)(2) provides that service on an individual or
corporate defendant must be effected by someone other than a party to the action, and
pursuant to Rule 4(h) service on a corporation may not be made by mail. In the absence of
proper service of process, the Court has no power to render any judgment against the
Defendants. See Ross, 504 F.3d at 1138-39.
Moreover, on January 8, 2026, at the time that he moved for judgment by default in
this matter, Plaintiff was aware that service by mail was not valid and that any entry of
default against a defendant served by Plaintiff by mail could be vacated for want of proper
service. See Lynch v. American Express, 2:25-cv-04671, at ECF No. 7 (D. Ariz. Jan. 6,
2026); Lynch v. Navy Fed. Credit Union, 2:25-cv-4883, at ECF No. 10 (D. Ariz. Jan. 5,
2026).
Additionally, Plaintiff’s motion for judgment by default is insufficient. The
following factors should be considered when deciding whether default judgment is
appropriate:
(1) the possibility of 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 in the action, (5) the possibility of a dispute 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.
Eitel, 782 F.2d at 1471-72. See also New Gen, LLC, 840 F.3d at 616. The second and third
factors, i.e., the merits of the claim and the sufficiency of the complaint, are often analyzed
in concert and require the Court to consider whether Plaintiff has adequately stated
sufficient facts in support of each element of the claim for relief. See Arizona Bd. of Regents
v. Doe, 555 F. Supp. 3d 805, 816 (D. Ariz. 2021), aff’d, 2022 WL 1514649 (9th Cir.
May 13, 2022), citing Vietnam Reform Party v. Viet Tan-Vietnam Reform Party, 416 F.
Case 2:25-cv-04481-DJH Document 17 Filed 01/26/26 Page 4 of 7

- 5 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Supp. 3d 948, 962 (N.D. Cal. 2019). Plaintiff “bears the burden of demonstrating to the
Court that the complaint is sufficient on its face and that the Eitel factors weigh in favor of
granting default judgment.” Norris v. Shenzhen IVPS Tech. Co., No. 20-cv-01212, 2021
WL 4844116, at *5 (D. Ariz. Oct. 18, 2021). Plaintiff also bears the burden of
demonstrating entitlement to the amount of damages he seeks. E.g., Assaf v. Carp, No. 17-
cv-01883, 2018 WL 6051514, *1 (C.D. Cal. 2018). Detailed affidavits and supporting
exhibits are required to prove the amount of damages if the amount sought is substantial.
See Board of Directors of the Motion Picture Indus. Pension Plan v. AnEFX, Inc., No.
2:17–cv–2621, 2018 WL 1635234, at *5 (C.D. Cal. Apr. 2, 2018).
When considering the merits and sufficiency of the complaint, the Court must take
as true all well-pled factual allegations in the Complaint, except for those related to the
amount of Plaintiff’s damages. NewGen LLC, 840 F.3d at 617; Geddes v. United Fin. Grp.,
559 F.2d 557, 560 (9th Cir. 1977); Twentieth Century Fox Film Corp. v. Streeter, 438 F.
Supp. 2d 1065, 1070 (D. Ariz. 2006). The Court should not accept as true legal conclusions
or facts that are not well-pled, and necessary facts not contained in the pleadings and claims
which are legally insufficient are not established by a defendant’s default. See Hester v.
Vision Airlines, Inc., 687 F.3d 1162, 1171 (9th Cir. 2012); DIRECTV, Inc., 503 F.3d 854;
Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992); Arizona Bd. of
Regents, 555 F. Supp. 3d at 815; Solano v. Preciado, 738 F. Supp. 3d 1356, 1362 (D. Or.
2024). The Court should not accept as true information pled as “facts” which are actually
only unsupported conclusory allegations, or “facts” that are indefinite, erroneous, contrary
to judicially noticed facts, or not susceptible to proof by legitimate evidence. See Solano,
738 F. Supp. 3d at 1362; Gottschalk v. City & Cnty. of San Francisco, 964 F. Supp. 2d
1147, 1165 (N.D. Cal. 2013). See also In re McGee, 359 B.R. 764, 772 (B.A.P. 9th Cir.
2006). Additionally, a motion for judgment by default
… should be a fully-fleshed motion that enables the Court to grant relief.
Szabo v. Sw. Endocrinology Assocs. PLLC, 2021 WL 3411084, *1 (D. Ariz.
2021). To prevail on a motion, the moving party must apply the law to the
facts of the case. LRCiv 7.2(b) (the moving party must “set[] forth the points
and authorities relied upon in support of the motion”). A motion for default
Case 2:25-cv-04481-DJH Document 17 Filed 01/26/26 Page 5 of 7

- 6 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
judgment is a case-dispositive motion which requires the Court to undertake
an in-depth analysis.
Norris, 2021 WL 4844116, at *1. See also Long v. Okopny, No. CV-20-02211, 2021 WL
3410916, at *1 (D. Ariz. July 27, 2021).
Plaintiff’s Complaint does not state an adequate factual basis for relief against
Defendant Shrem, and arguably does not state an adequate factual basis for his claims for
relief against Defendants Moradi and Select Home Warranty. The motion for judgment by
default is not a “fully-fledged” pleading applying the law, i.e., the law regarding contracts,
fraudulent inducement, and the Magnusson-Moss Warranty Act, to the facts stated in the
Complaint, and the motion does not contain citation to any statute or legal opinion.
Additionally, neither the Complaint nor the motion for judgment by default (which is in
the form of an affidavit) supply an adequate factual basis for the amount of the judgment
sought by Plaintiff, or an amount of damages sufficient to invoke diversity jurisdiction.
Plaintiff asserts actual damages in the amount of of $7,820, and notes he “invoiced”
Defendants for $100,000, and Plaintiff asks the Court to award him $300,000. Although
the Court could exercise subject matter jurisdiction over Plaintiff’s claims pursuant to the
Magnusson-Moss Warranty Act rather than on the basis of diversity, Plaintiff’s statements,
alone, do not meet the requisite standard for establishing he is entitled to the amount of
damages he seeks.
Accordingly,
IT IS RECOMMENDED that the motion at ECF No. 11, asking the Court to enter
a judgment of $300,000 in favor of Plaintiff and against Defendants, be denied.
IT IS FURTHER RECOMMENDED that the entry of default at ECF No. 8 be
vacated.
This recommendation is not an order that is immediately appealable to the Ninth
Circuit Court of Appeals. Pursuant to Rule 72(b)(2), Federal Rules of Civil Procedure,
Plaintiff shall have fourteen (14) days from the date of service of this recommendation
within which to file specific written objections with the Court. Thereafter, the parties have
Case 2:25-cv-04481-DJH Document 17 Filed 01/26/26 Page 6 of 7

- 7 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
fourteen (14) days within which to file a response to the objections. Pursuant to Rule
7.2(e)(3) of the Local Rules of Civil Procedure for the United States District Court for the
District of Arizona, objections to the Report and Recommendation may not exceed ten (10)
pages in length. Failure to timely file objections to any factual or legal determinations of
the Magistrate Judge will be considered a waiver of a party’s right to de novo appellate
consideration of the issues. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th
Cir. 2003) (en banc).
Dated this 26th day of January, 2026.
Case 2:25-cv-04481-DJH Document 17 Filed 01/26/26 Page 7 of 7