Triad Chiropractic & Rehabilitation Clinics LLC v. Black Sheep Consulting Group LLC et al

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Triad Chiropractic & Rehabilitation Clinics
LLC,
Plaintiff,
v.
Black Sheep Consulting Group LLC, et al.,
Defendants.
No. CV-25-02645-PHX-KML
ORDER
Plaintiff Triad Chiropractic & Rehabilitation Clinics LLC requests default judgment
against defendant Black Sheep Consulting Group, LLC. (Doc. 24.) Triad also requests
entry of a stipulated judgment against defendants Michael Wayne Bingham, Judy Lou
Brown, and Master Equity Limited Partnership a/k/a Emerging Solutions. (Doc. 30.) Both
requests are granted.
Default Judgment
The court must consider seven factors when deciding whether to enter default
judgment. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The seven factors are:
(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 the default was due to excusable neglect, and (7) the strong
policy underlying the Federal Rules of Civil Procedure favoring decisions on
the merits.
Id. These factors establish default judgment is appropriate.
Case 2:25-cv-02645-KML Document 31 Filed 05/20/26 Page 1 of 6

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1. Possibility of Prejudice
The first factor regarding the prejudice to Triad weighs in favor of default judgment
because if “default judgment is not granted, [Triad] will likely be without other recourse
for recovery” against Black Sheep. PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172,
1177 (C.D. Cal. 2002).
2. Merits of the Claims and Sufficiency of the Complaint
The second and third factors require assessing the merits of Triad’s claims and the
sufficiency of its complaint. These factors “are often analyzed together and require courts
to consider whether a plaintiff has state[d] a claim on which [he] may recover.” Vietnam
Reform Party v. Viet Tan - Vietnam Reform Party, 416 F. Supp. 3d 948, 962 (N.D. Cal.
2019).
“Triad is a multidisciplinary medical practice that brings together the expertise of
pain management and chiropractic doctors” to provide “innovative treatment options.”
(Doc. 1 at 2.) This case involves Triad’s purchase of a Peripheral Nerve
Stimulator/Peripheral Electrical Neural Stimulator or “PENS device.” (Doc. 1 at 2.) In
2022, defendant Black Sheep “acting as an agent for [defendant] Emerging Solutions
approached Triad to promote and sell Emerging Solutions’ PENS device to the practice.”
(Doc. 1 at 6.) Defendants Bingham (Black Sheep’s sale representative) and Harris (Black
Sheep’s managing partner) provided Triad a falsified document that indicated the PENS
device had been cleared by the FDA for use in treating substance abuse disorders and for
pain relief. (Doc. 1 at 6-7.) In reality, the FDA had only cleared the PENS device for
substance abuse disorders.
While Triad was negotiating the purchase of the PENS device, defendant Brown (an
attorney for Emerging Solutions) provided an analysis to Triad identifying “L8679” as the
appropriate Healthcare Common Procedure Coding System code for in-office PENS
procedures. The correct code was 64555, not L8679. (Doc. 1 at 8.) Black Sheep also
provided to Triad an “Office Reference Guide” that included the same misrepresentation
regarding the appropriate code. (Doc. 1 at 8.) Black Sheep and its employees failed to
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correct the misrepresentations regarding the code as well as the extent of FDA clearance.
(Doc. 1 at 8-9.) Triad purchased the device and began billing Medicare using the incorrect
code.
In August 2023, “Medicare imposed a significant overpayment charge on Triad”
because Triad had used the incorrect code in connection with billing for use of the PENS
device. Triad sought relief through the administrative process and during that process
Brown again represented to Triad that L8679 was the correct code. (Doc. 1 at 9.) The
misrepresentations regarding the extent of FDA clearance and the correct code were
material to Triad’s decision to purchase the PENS device. Triad incurred significant
attorneys’ fees in pursuing the administrative process, but did not prevail.
Triad’s complaint contains six claims against various combinations of defendants.
Focusing on the claims against Black Sheep, Triad asserted claims four claims: violation
of the Arizona Consumer Fraud Act, common-law fraud, “Conspiracy to Commit Fraud,”
and unjust enrichment.
Black Sheep was served (Doc. 16), but did not respond to the complaint and its
default was entered (Doc. 21).1 Triad filed its motion for default judgment against Black
Sheep, but that motion provides no analysis regarding the validity of its four claims against
Black Sheep. Instead, Triad merely argues its complaint “states, and details, four causes of
action.” (Doc. 24 at 3.) It appears the damages Triad seeks under each claim are the same,
so there is no need to assess the validity of all four claims. It is enough to assess whether
Triad has adequately alleged claims under the Arizona Consumer Fraud Act and common-
law fraud. See Beacon Sales Acquisition, Inc. v. S. W. Solar, Inc., No. 2:22-CV-2117, 2022
WL 3574413, at *2 (C.D. Cal. June 7, 2022) (court need not analyze all claims in detail
where one is “a viable and sufficient claim for all of the relief [a plaintiff] seeks”).
“The elements of a private cause of action under the [Arizona Consumer Fraud Act]
1 On January 26, 2026, an attorney for Black Sheep filed a “Suggestion of Bankruptcy.”
(Doc. 27.) That filing appeared to indicate Black Sheep had filed for bankruptcy and
obtained a discharge. (Doc. 27 at 1.) Triad subsequently filed a notice stating the
bankruptcy docket did not reveal any discharge and Black Sheep’s attorney had conceded
as much. (Doc. 29 at 1.) Because it does not appear to have led to a discharge, the
bankruptcy filing does not prevent issuance of default judgment against Black Sheep.
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are a false promise or misrepresentation made in connection with the sale or advertisement
of merchandise and the hearer’s consequent and proximate injury.” Castle v. Barrett-
Jackson Auction Co., LLC, 276 P.3d 540, 542 (Ariz. Ct. App. 2012) (simplified). The
elements of a common-law fraud claim are: (1) a representation; (2) its falsity; (3) its
materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) his intent
that it should be acted upon by and in the manner reasonably contemplated; (6) the hearer’s
ignorance of its falsity; (7) his reliance on the truth; (8) his right to rely thereon; and (9) his
consequent and proximate injury.” Navajo Health Found.-Sage Mem’l Hosp. Inc. v.
Razaghi Dev. Co. LLC, 800 F. Supp. 3d 955, 983 (D. Ariz. 2025) (simplified). Triad’s
factual allegations sufficiently establish these elements.
Triad has identified false representations made to it by Black Sheep and its
employees regarding FDA clearance and the appropriate billing code, those representations
were material to Triad’s decision to purchase the PENS device, Black Sheep intended for
Triad to rely on the representations, Triad did not know the representations were false, and
Triad suffered damages in the form of penalties and charges from Medicare as a result of
Black Sheep’s actions. Triad has adequately alleged fraud-based claims so the second and
third default judgment factors support entry of default judgment.
3. Amount in Controversy
The fourth default judgment factor “requires that the court assess whether the
recovery sought is proportional to the harm caused by defendant’s conduct.” Landstar
Ranger, Inc. v. Parth Enterprises, Inc., 725 F. Supp. 2d 916, 921 (C.D. Cal. 2010). When
a large sum is at stake, this factor may weigh against default judgment. Curtis v.
Illumination Arts, Inc., 33 F. Supp. 3d 1200, 1212 (W.D. Wash. 2014). Triad is seeking
$267,072.87 in damages. That amount is calculated as the amount Medicare demanded, the
attorneys’ fees Triad occurred in pursuing the administrative appeals process, and an
amount in additional administrative and staff time. This harm is directly tied to Black
Sheep’s actions and supports entry of default judgment.
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4. Dispute Over Material Facts
The fifth factor is whether there are any disputes over material facts. Black Sheep’s
decision to not participate means there is no indication of such disputes. This factor weighs
in favor of default judgment.
5. Excusable Neglect
There is no indication Black Sheep’s failure to participate is the result of excusable
neglect. See Shanghai Automation Instrument Co. v. Kuei, 194 F. Supp. 2d 995, 1005 (N.D.
Cal. 2001) (defendants’ failure to respond to complaint could not “be attributable to
excusable neglect” because “[a]ll were properly served with the Complaint, the notice of
entry of default, as well as the papers in support of the instant motion.”). This factor
supports entry of default judgment.
6. Policy Favoring Decisions on the Merits
The seventh factor recognizes a preference for resolving matters on their merits.
This factor, as always, weighs against entry of default judgment. “However, the mere
existence of Fed.R.Civ.P. 55(b) indicates that this preference, standing alone, is not
dispositive.” PepsiCo, 238 F. Supp. 2d at 1177 (simplified).
7. Default Judgment is Merited
Under the seven factors, default judgment is appropriate.
8. Damages
It is Triad’s burden to prove the amount of its damages. Blumenthal Distrib., Inc. v.
Comoch Inc., 652 F. Supp. 3d 1117, 1131 (C.D. Cal. 2023). Triad provided a declaration
from its owner and operator attesting to the damages Triad incurred because of Black
Sheep’s fraudulent behavior. (Doc. 24-2 at 2.) That declaration is sufficient evidence that
Black Sheep “cost plaintiff-Triad at least $267,072.87 in direct expenses.” (Doc. 24-2 at
3.) Judgment in that amount is appropriate.
Stipulated Judgment
The defendants other than Black Sheep were also served, and their defaults were
entered, but Triad and those defendants entered into a settlement agreement. (Doc. 30-1.)
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The settlement agreement required payment of $60,000 but if that amount was not paid,
the defendants other than Black Sheep agreed to entry of judgment against them in the
amount of $500,000. (Doc. 30-1 at 4.) The other defendants did not perform under the
settlement agreement and Triad filed a motion seeking entry of the agreed-upon judgment
against them. (Doc. 30.) The defendants did not oppose Triad’s motion, and it is granted.
See Local Rule 7.2(i).
Accordingly,
IT IS ORDERED the Motion for Default Judgment (Doc. 24) is GRANTED.
IT IS FURTHER ORDERED the Motion for Entry of Judgment (Doc. 30) is
GRANTED.
IT IS FURTHER ORDERED the Clerk of Court shall enter judgment in favor of
plaintiff and against defendant Black Sheep Consulting Group, LLC, in the amount of
$267,072.87. That judgment shall also reflect plaintiff shall recover from defendants
Michael Wayne Bingham, July Lou Brown, and Master Equity Limited Partnership a/k/a
Emerging Solutions the principal sum of $500,000.00 plus interest, less any amount paid
pursuant to the Settlement Agreement filed at Doc. 30-1.
IT IS FURTHER ORDERED plaintiff may file a motion for attorneys’ fees that
complies with Local Rule 54.2.
Dated this 20th day of May, 2026.
Case 2:25-cv-02645-KML Document 31 Filed 05/20/26 Page 6 of 6