Opinion
CV-22-01093-PHX-SPL
10-18-2022
Monitech LLC, Plaintiff, v. Jeff Nadler, et al., Defendants.
ORDER
HONORABLE STEVEN P. LOGAN, DISTRICT JUDGE
Before the Court is Defendants' Motion to Set Aside Default (Doc. 25) in which Defendants request that the Court set aside the default entered against them, pursuant to Federal Rule of Civil Procedure 55(c). The Motion is fully briefed and ready for review. (Docs. 25, 26 & 27). For the following reasons, Defendants' Motion is denied.
I. BACKGROUND
Plaintiff filed a Complaint in this matter on June 27, 2022. (Doc. 1). Proof of service was filed on July 14, 2022, (Docs. 13-15), declaring that service on Defendants was effected on July 8, 2022. On August 3, 2022, default was entered against Defendants pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. (Doc. 17).
On August 8, 2022, Defendants filed a “Motion in Response to Plaintiff's Motion for Clerk's Default” (Doc. 18), arguing that Defendants waived service and still had until August 22, 2022 to file an answer or otherwise respond to Plaintiff's Complaint. Upon review, the Court found that nothing in the parties' email exchange attached as Exhibit 1 indicated that Defendants had waived service, that Defendants were required to file their answer no later than July 29, 2022, see Fed.R.Civ.P. 4(a)(1)(A)(i), and that because that deadline had passed, default was appropriately entered. (Doc. 20). The Court denied Defendants' Motion and noted that Defendants needed to move to set aside the default before they could proceed with defending in this action. (Id.).
On August 22, 2022, Defendants filed a Motion to Dismiss Plaintiff's claims. (Doc. 22). On August 24, 2022, the Court denied the Motion, finding that Defendants had lost their standing to appear before this Court because default had been entered against them and they had not yet moved to set aside the default. (Doc. 24 at 1-2 (citing Jitrade, Inc. v. Style in USA, Inc., 2017 WL 8185858, at *1 (C.D. Cal. Oct. 2, 2017)). The dismissal was without prejudice, however, and Defendants were given until September 7, 2022 to file a motion to set aside the default. On August 26, 2022, Defendants filed a Motion to Set Aside Default (Doc. 25), the Motion that is presently before the Court.
The Court notes that Defendants titled their Motion to Set Aside Default as a “Motion in Response to Plaintiff's Motion for Default.” (Doc. 25 at 1). Although the Court acknowledges Plaintiff's argument that Defendants therefore filed a procedurally improper motion, (Doc. 26 at 2), the Court will nonetheless treat Defendants' Motion as a Motion to Set Aside Default.
Also pending is Plaintiff's Motion for Default Judgment (Doc. 21), in which Plaintiff moves for default judgment as to liability only against Defendants. In this Court's August 24, 2022 Order, the Court noted that it would proceed with ruling on Plaintiff's Motion for Default Judgment if Defendants failed to file a motion to set aside the default. (Doc. 24 at 2). Given that Defendants timely filed a Motion to Set Aside Default (Doc. 25), the Court now proceeds in ruling on that Motion first and withholds any ruling as to Plaintiff's Motion for Default Judgment at this time.
II. LEGAL STANDARD
Rule 55(c) provides that a court “may set aside an entry of default for good cause.” Fed.R.Civ.P. 55(c). In determining whether good cause exists, courts in the Ninth Circuit consider the three Falk factors: “(1) whether the plaintiff will be prejudiced, (2) whether the defendant has a meritorious defense, and (3) whether culpable conduct of the defendant led to the default.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984); see also Apache Nitrogen Prods., Inc. v. Harbor Ins. Co., 145 F.R.D. 674, 681 (D. Ariz. 1993) (citations omitted) (alternatively stating third factor as “whether good cause exists for the party's default”). “This standard . . . is disjunctive, such that a finding that any one of these factors is true is sufficient reason for the district court to refuse to set aside the default.” United States v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (citation omitted). “Crucially, however, ‘judgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits.'” Id. (citations omitted). “The movant ‘bears the burden of proving the existence of a justification' to set aside the default.” Echols, 2022 WL 4970312, at *2 (quoting Cassidy v. Tenorio, 856 F.2d 1412, 1415 (9th Cir. 1988)).
“Courts ‘consistently' refer to these factors as the ‘Falk factors.'” Echols v. SafeRent Sols. LLC, No. CV-22-00788-PHX-DWL, 2022 WL 4970312, at *2 n.2 (D. Ariz. Oct. 4, 2022) (citing Brandt v. Am. Bankers Ins. Co. of Fla., 653 F.3d 1108, 1111 (9th Cir. 2011)).
Defendants refer to the Falk factors as “supposed . . . factors” and appear to imply that the Falk standard has been overturned or otherwise contradicted by the United States Supreme Court. (Doc. 27 at 2). Having reviewed the cases cited by Defendants, the Court is entirely unpersuaded. The Falk factors represent the controlling, Ninth Circuit standard as it relates to ruling on a party's motion to set aside default.
III. DISCUSSION
As an initial matter, Defendants' Motion largely repeats the same arguments that they made in their “Motion in Response to Plaintiff's Motion for Clerk's Default” (Doc. 18). Specifically, Defendants argue that they waived formal service when Defendants' counsel agreed, via email, to accept service on Defendants' behalf. (Doc. 25 at 2-3). Thus, Defendants contend that their responsive deadline was extended to August 22, 2022, and that default was improperly entered against them because they had not yet failed to timely respond. (Id.). However, as this Court previously held (see Doc. 24 at 1), nothing in the email exchange submitted by Defendants indicates that Defendants waived service. In a June 28, 2022 email, Plaintiff's counsel merely asked if Defendants' counsel was authorized to accept service on Defendants' behalf; Plaintiff's counsel made no mention of waiver. (Doc. 25-1 at 2). Defendants' counsel responded on June 30, 2022, by stating “I will accept service on behalf of the Defendants,” but he did not make any mention of waiver either. (Id. at 6). That same day, Plaintiff's counsel concluded the email exchange by responding, “Thank you for accepting service for all three Defendants. I am calendaring their response deadline as July 21, 2022, accordingly.” (Id. at 11). Again, Plaintiff's counsel made no mention of waiver; indeed, the fact that Plaintiff's counsel calendared the response deadline as July 21, 2022 is evidence that Plaintiff had no intent of requesting waiver from Defendants because such a deadline aligns with the standard, 21-day timeframe for a response. See Fed.R.Civ.P. 12(a)(1)(A)(i).
Defendants' waiver argument relies on the fact that Plaintiff's counsel failed to attach the summons to his June 28, 2022 email. (Doc. 25 at 3). Plaintiff's counsel did, however, attach the Complaint, civil coversheet, and certain exhibits to the email. (Id.). Thus, according to Defendants, the parties' email exchange shows a mutual understanding between the parties that Defendants' counsel had accepted service on behalf of Defendants and that no service of the summons would be necessary. (Id. at 4). Even if that were true- that is, that both parties believed service was completed on June 30, 2022 without any summons being necessary-the Court still could not find that waiver occurred. The subjective belief of the parties as to whether waiver occurred is wholly irrelevant. Rather, Rule 4(d) expressly provides the steps that must be taken for waiver of summons to occur.For example, a plaintiff's waiver request must “be in writing and be addressed to the individual defendant.” Fed.R.Civ.P. 4(d)(1)(A). Here, Plaintiff's email did not mention “waiver” whatsoever, let alone include any request that Defendants waive the service of summons. Rule 4(d) further requires a request for waiver to be accompanied by the Complaint, “two copies of the waiver form appended to this Rule 4, and a prepaid means for returning the form.” Fed.R.Civ.P. 4(d)(1)(C). Here, although the email attached a copy of the Complaint, it did not attach copies of the Rule 4 waiver form, let alone any prepaid means for returning such form. Rule 4(d) also requires a plaintiff to “inform the defendant, using the form appended to this Rule 4, of the consequences of waiving and not waiving service.” Fed.R.Civ.P. 4(d)(1)(D). Again, Plaintiff's email in this case did not even mention waiver, let alone inform Defendants of any consequences related to waiving service. In sum, the email exchange between the parties' counsel in this case contains no indications that waiver of summons was requested by Plaintiff or made by Defendants.
Defendants fail to provide-and this Court is itself unaware of-any caselaw or other legal authority providing that waiver of summons may occur in any other manner aside from that expressly provided by Rule 4(d).
The fact that the summons was not attached to the emails sent by Plaintiff's counsel goes to the sufficiency of service, not to any waiver of service. Under Rule 4(c), service is effectuated when a copy of the complaint and the summons is timely served on a defendant. See Fed.R.Civ.P. 4(c). In this case, only the Complaint was included in Plaintiff's counsel's June 28, 2022 email to Defendants' counsel. Thus, the email exchange did not constitute service in this case. Rather, as this Court has consistently recognized (see Docs. 20 & 24), the service date in this case was July 8, 2022, when Plaintiff effected formal service of the Complaint and summons on each Defendant. (Docs. 12-15). This meant that the corresponding responsive deadline was July 29, 2022. To the extent that Plaintiff's counsel's June 30, 2022 email indicates that Plaintiff mistakenly believed that service occurred on June 30, 2022 and that the responsive deadline was July 21, 2022, the Court can only note that Plaintiff apparently realized its mistake because it decided to effect formal service on Defendants one week later. Moreover, in moving for default on August 2, 2022, Plaintiff did not rely upon the July 21, 2022 deadline, but rather asserted that Defendants failed to respond before their July 29, 2022 deadline. (Doc. 16).
Defendants' Motion contends that “[n]o default should have been filed in this matter since these issues could have been cleared up in a single phone call.” (Doc. 25 at 3). If that is true, Defendants' counsel could have followed his own advice and picked up the phone. Instead, he assumed that waiver had occurred and that he had 60 days to respond. The Court is unpersuaded by Defendants' attempt to point the finger at Plaintiff. Even if Plaintiff's first attempt at service failed-because Plaintiff failed to attach the summons to the email-Plaintiff effected formal, in-person service on Defendants one week later. At that point, it was Defendants' responsibility to timely respond to the Complaint.
In sum, the Court finds the parties' email exchange to be entirely irrelevant to whether default should be set aside in this case. The emails contain no evidence that Defendants waived formal service because Plaintiff never requested that Defendants waive formal service in the first place. A simple reading of Rule 4(d) should have made it clear to Defendants' counsel that waiver had not occurred. In the absence of waiver, Defendants' responsive deadline was 21 days after Plaintiff formally served Defendant: July 29, 2022. Defendants failed to respond by that date and, as this Court has previously found, an entry of default against Defendants was appropriate.
Defendants' counsel makes at least two other arguments related to Rule 4 that not only fail to persuade the Court, but also underline the need for Defendants' counsel to read the Rule more closely. First, Defendants assert that Rule 4(d) “required Defendant to waive service to avoid the sanctions found in [Rule] 4(d)(2).” (Doc. 25 at 2 (emphasis added)). It is true that Rule 4(d)(2) provides for sanctions whenever a defendant, without good cause, “fails . . . to sign and return a waiver requested by a plaintiff.” Fed.R.Civ.P. 4(d)(2). Here, however, Defendants were under no such duty to waive service to avoid sanctions because there was no waiver for Defendants to “sign and return” given that Plaintiff never requested a waiver from Defendants in the first place. Second, Defendants' counsel asserts that “[e]ven the clerk signed the default without the Plaintiff complying with Federal Rule of Civil Procedure 55(b)(1), specifically the requirement that ‘plaintiff's claim is for a sum certain or a sum that can be made certain by computation.'” (Doc. 27 at 2). Rule 55(b)(1) relates to entry of default judgment, not entry of default. Default judgment has not been entered in this case and Rule 55(b)(1)'s sum certain requirement is entirely irrelevant.
The above discussion merely expands on this Court's previous findings that no evidence of waiver exists in this case, that Defendants' counsel was incorrect to simply assume that waiver had occurred, and that default was appropriately entered against Defendants. Setting that aside, the sole question on this Motion is whether Defendants have met their burden of demonstrating that the entry of default in this case should be set aside.
phone. Instead, he assumed that waiver had occurred and that he had 60 days to respond. The Court is unpersuaded by Defendants' attempt to point the finger at Plaintiff. Even if Plaintiff's first attempt at service failed-because Plaintiff failed to attach the summons to the email-Plaintiff effected formal, in-person service on Defendants one week later. At that point, it was Defendants' responsibility to timely respond to the Complaint.
The Court finds that Defendants have not done so because their Motion fails to even set forth the relevant standard, let alone meaningfully argue that the standard weighs in their favor. As to the first Falk factor-whether the plaintiff will be prejudiced-Defendants make the brief argument that no prejudice to Plaintiff will occur because “this matter has just begun, no disclosures have been exchanged, and no discovery has been conducted.” (Doc. 25 at 5). The Court finds this argument to be conclusory and lacking analysis. Defendants fail to cite any relevant caselaw or meaningfully respond to the legitimate arguments raised by Plaintiff as it relates to the first factor. (See Doc. 26 at 7).
As to the second Falk factor-whether the defendant has a meritorious defense- Defendants make the conclusory assertion that “a meritorious defense has been presented in support of the set aside motion,” (Doc. 25 at 4), but fail to actually explain what that meritorious defense is. Defendants also refer to their Motion to Dismiss (Doc. 22) and their “original Motion to Set Aside” (Doc. 19), asserting that those Motions “lay out numerous arguments why Plaintiff['s] case has no merit.” (Doc. 27 at 3). However, it is Defendants' burden to show that they have met the Falk factors; it is not this Court's job to comb through Defendants' previous filings in search of meritorious defenses.
Finally, as to the third Falk factor-whether culpable conduct of the defendant led to the default-Defendants would presumably argue that their default was not the result of culpable conduct but rather miscommunication between the parties and the honest mistake of Defendants' counsel as to when the responsive deadline was. However, Defendants do not explicitly make such an argument. While Defendants assert miscommunication and attempt to explain why Defendants' counsel honestly believed the deadline was August 22, 2022 rather than July 29, 2022, Defendants do so to justify why they believe that waiver occurred in this case and that default was incorrectly entered. The Court has already rejected these arguments. It would have been far more effective for Defendants to admit that Defendants' counsel made a mistake and to cite caselaw providing that parties who default under similar circumstances are not found to be culpable. Defendants also could have responded to the Ninth Circuit caselaw offered by Plaintiff, (see Doc. 26 at 6), relating to the culpability of legally sophisticated parties in the context of a default, as it seems that such caselaw is particularly relevant here. Instead, Defendants' Motion offers nothing close to meaningful argument as to the third factor.
In conclusion, Defendants' Motion is more focused on justifying Defendants' mistake than it is on meaningfully addressing why default should be set aside. This Court cannot find that Defendants are anywhere close to meeting their burden of showing that the Falk factors weigh in favor of setting aside the default against them. Thus, the Court must deny Defendants' Motion. The Court recognizes, however, that default judgment is an extreme measure appropriate only in rare circumstances and that cases should be decided on the merits whenever possible. See Mesle, 615 F.3d at 1091. Therefore, the Court's denial of Defendants' Motion is without prejudice, and the Court declines to rule on Plaintiff's Motion for Default Judgment (Doc. 21) at this time. If Defendants choose to file another motion to set aside the default, the Court strongly advises Defendants to meaningfully address the controlling, Ninth Circuit standard for setting aside a default and to avoid going down the path of justifying their mistaken belief that the responsive deadline in this case was anything other than July 29, 2022.
Accordingly, IT IS ORDERED that Defendants' Motion to Set Aside Default (Doc. 25) is denied without prejudice. Defendants shall have until no later than October 25, 2022 to file a renewed Motion to Set Aside Default that meaningfully addresses the relevant Ninth Circuit standard for setting aside a default. Defendants are advised that if they fail to file such Motion-or if they do file such Motion but again fail to meaningfully address the relevant standard-the Court will proceed with ruling on Plaintiff's Motion for Default Judgment.