Allstream Business US, LLC v. Carrier Network Solutions, LLC
3:20-cv-01970
| D. Or. | Aug 9, 2021Background
- Allstream Business US, LLC (plaintiff) contracted with Carrier Network Solutions, LLC (CNS), a South Carolina LLC whose sole member is Eric Mostrom, for toll-resale telecommunications services in November 2018; parties executed two addenda extending the term and creating a monthly minimum and line of credit.
- CNS repeatedly failed to pay monthly invoices; by late 2019 unpaid balances exceeded $4.13 million and, after addenda, CNS acknowledged owing over $2 million; Allstream incurred large unexpected costs because CNS’s traffic deviated from its submitted profile.
- Allstream suspended service December 19, 2019, served notice of breach, and terminated the contract January 21, 2020; Allstream sued for breach of contract, account stated, unjust enrichment, violations of the SC LLC Act and Oregon’s Uniform Fraudulent Transfer Act (OUFTA), and sought piercing the corporate veil.
- Defendants were served but did not appear; the Clerk entered default March 12, 2021, and Allstream moved for default judgment under Fed. R. Civ. P. 55(b); the court treated the motion under Rule 55(b)(2).
- The court found jurisdiction (forum-selection clause and diversity), applied the Eitel factors, found liability on contract, account stated, and OUFTA claims, rejected unjust enrichment and the SC LLC Act claim, validated the contract’s liquidated-damages clause, awarded $13,717,047.41, and pierced CNS’s veil to hold Mostrom personally liable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Appropriateness of default judgment under Fed. R. Civ. P. 55(b) / Eitel factors | Default judgment warranted due to defendants’ nonappearance and uncontested evidence of breach and damages | No response; defendants failed to appear | Court granted default judgment after weighing Eitel factors in plaintiff’s favor |
| Breach of contract / account stated liability | Contract existed, CNS breached by not paying invoices; repeated acknowledgments and partial payments created account stated | No response | Court found breach and account stated adequately pled and supported by invoices and records |
| Validity/enforceability of liquidated damages (early termination fee) | §2.3 set monthly MRC ($150,000); plaintiff seeks liquidated damages for remaining term ($9,585,000) | No response/challenge | Court treated clause as liquidated damages, found it reasonable under ORS 72.7180, and awarded $9,585,000 |
| OUFTA fraudulent transfer claim against Mostrom | Mostrom (insider) received transfers while CNS insolvent and for less than reasonably equivalent value | No response | Court found OUFTA elements sufficiently alleged and supported; claim sustained |
| Piercing the corporate veil to hold Mostrom personally liable | Mostrom exercised actual control, engaged in improper conduct (misleading traffic data, indebting CNS, distributions), and caused plaintiff’s inability to collect | No response | Court pierced the veil under Oregon law and held Mostrom personally liable |
| Unjust enrichment and SC LLC Act claim | Plaintiff sought alternative remedies; unjust enrichment and SC statutory breach alleged | No response; court noted contract governs and standing issues for SC statute | Court dismissed unjust enrichment (contract remedy governs) and declined to enforce SC LLC Act claim (likely standing problem) |
Key Cases Cited
- TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915 (9th Cir. 1987) (after default, factual allegations are taken as true except as to damages)
- Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986) (seven-factor framework for default-judgment discretion)
- Franchise Holding II, LLC v. Huntington Restaurants Grp., Inc., 375 F.3d 922 (9th Cir. 2004) (a sum certain means no doubt remains as to the amount due following default)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S. 1985) (forum-selection clauses support personal jurisdiction by consent)
- Simonoff v. Expedia, Inc., 643 F.3d 1202 (9th Cir. 2011) (distinction between “courts of” and “courts in” a state for forum-selection clauses)
- Larisa’s Home Care, LLC v. Nichols-Shields, 404 P.3d 912 (Or. 2017) (analysis of unjust-enrichment claims requires established legal categories and is limited where valid contract exists)
- Amfac Foods, Inc. v. Int’l Sys. & Controls Corp., 654 P.2d 1092 (Or. 1982) (veil-piercing factors: control, improper conduct, and causal nexus)
- DiTommaso Realty, Inc. v. Moak Motorcycles, Inc., 785 P.2d 343 (Or. 1990) (definition and treatment of liquidated-damages provisions)
- Oregon Pub. Emps.’ Ret. Bd. v. Simat, Helliesen & Eichner, 83 P.3d 350 (Or. Ct. App. 2004) (LLC veil piercing applies same as for corporations)