Opinion
Case No.: CV-02-09508 CAS (JWJx)
February 27, 2004, Decided . March 3, 2004, Filed. March 5, 2004, Entered
For Times Media Private Limited, Plaintiff: George W Nowell, Paul B Arenas, Raelyn Mari Ohira, LEAD ATTORNEYS, George W Nowell Law Offices, San Francisco, CA.
For FTS International, FTS International Express Inc, Defendants: Mattaniah Eytan, LEAD ATTORNEY, Mattaniah Eytan Law Offices, Corte Madera, CA.
MINUTE ORDER
PROCEEDINGS: DEFENDANT'S MOTION TO SET ASIDE DEFAULT AND VACATE DEFAULT JUDGEMENT
(filed January 7, 2004)
I. INTRODUCTION
This action arises out of alleged damage to goods shipped from Singapore to Minneapolis. Plaintiff Times Media Private Limited ("Times Media") alleges that defendant FTS International Express, Inc. ("FTS") breached its duties as a common carrier, as well as its contract, causing damage to plaintiff's goods. fn1 Plaintiff commenced this action on December 13, 2002, seeking damages in the amount of $ 4,995.00. Defendant failed to answer plaintiff's complaint and a default judgment was subsequently entered on September 29, 2003. Defendant now moves to vacate the default judgment.
II. FACTUAL AND PROCEDURAL BACKGROUND
The events underlying this dispute began in or about November 2001, when Times Media entered into an agreement with FTS for the shipment of printed materials from Singapore to Minneapolis. The materials were shipped by sea from Singapore to Los Angeles, and were subsequently placed onto trucks for transfer by land from Los Angeles to Minneapolis. Defendant's Motion ("Mot.") at 2.
On December 31, 2002, Times Media requested that FTS waive notice of service of summons by mailing the waiver to David Park ("Park"), the listed agent for service of process for FTS. Ohira Declaration ("Ohira Decl."), Ex. A (Proof of Service). The request for waiver was sent to 1031 W. Manchester Boulevard, Suite 3; Inglewood, California 90301 ("Defendant's Address"), defendant's proper address for service according to the California Secretary of State. Plaintiff's Opposition' ("Opp.") at 2. FTS declined to waive service of process. Mot. at 2. Times Media then personally served Park at Defendant's Address on March 31, 2003. Palash Declaration ("Palash Decl."), Ex. A (Proof of Service).
Park asserts that he does not recall being served on March 31, 2003, and that when he searched the office following learning about the entry of the default judgment, he could not locate the copies of the summons and/or complaint purportedly left with him. Mot. at 2-3.
On May 6, 2003, Times Media served Park by mail with the request for entry of default at Defendant's Address. Ohira Decl., Ex. B (Proof of Service). Upon FTS' failure to respond to the complaint, Times Media requested and obtained an entry of service).- default on May 9, 2003. On May 23, 2003, Times Media served Park with a copy of the clerk's entry of default at Defendant's Address. Id., Ex. C (Proof of Service).
On September 8, 2003, Times Media served Park by mail with its application for default judgment at Defendant's Address. Id., Ex. D (Proof of Service). Subsequently, Times Media requested and obtained a default judgment from this Court on September 29, 2003. On October 1, 2003, Times Media served Park by mail with a copy of the default judgment. Service was again directed to Defendant's Address. Id ., Ex. F (Proof of Service). On October 14, 2003, Times Media served the general manager of FTS, Rigo Hernandez, who resides in Illinois, with a copy of the default judgment. A copy of the default judgment was also faxed to Park. Id'., Ex. G (Facsimile Cover Sheet) .
On January 7, 2004, FTS filed the present motion on the grounds that service of process was not effective, that FTS' failure to respond was attributable to "excusable neglect" pursuant to Rule 60 (b), and that various affirmative defenses were available. Mot. at 2;.Schenk Declaration ("Schenk Decl.")., Ex. A. On January 16, 2004, Times Media filed its memorandum in opposition to defendant's motion, asserting that Times Media validly served FTS and that FTS had failed to demonstrate "excusable neglect." Opp. at 2, 6. On January 27, 2004, FTS filed its reply, raising for the first time the argument that this Court lacks subject matter jurisdiction over the case, thereby voiding the default judgment. Defendant's Reply ("Reply") at 4. On February 9, 2004, Times Media filed a supplemental brief, asserting that this Court does, in fact, have subject matter jurisdiction based in admiralty. Plaintiff's Brief ("Brief") at 2.
III. SUBJECT MATTER JURISDICTION
A. Admiralty Jurisdiction
28 U.S.C. § 1333, provides:
The district courts shall have original jurisdiction, exclusive of the courts of the State, of: (1) Any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled. (2) Any prize brought into the United States and all proceedings for the condemnation of property taken as prize."
In determining whether a tort is based in admiralty, courts apply a "location test" and a "connection test." A claim that satisfies both is based in admiralty. Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 534, 130 L. Ed. 2d 1024, 115 S. Ct. 1043 (1995). Under the location test, the alleged tort must have occurred over navigable waters or have been caused by a vessel. Id. Under the connection test, two conditions must be met: first, considering the general features of the incident involved, the incident must have a potentially disruptive effect on maritime commerce; and second, the general character of the activity giving rise to the incident must show a substantial relationship to traditional maritime activity. Id.
1. Location test
FTS argues that this Court may not exercise admiralty jurisdiction because Times Media cannot establish that the alleged cargo damage occurred on navigable waters. Reply at 4. Times Media responds that, by virtue of the default, FTS must accept as true Times Media's allegation that the cargo damage occurred on navigable waters. Brief at 2.
Generally, upon default, the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true. Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). Further, well-pleaded allegations of fact in the complaint are to be construed in the light most favorable to the plaintiff. Zimmerman v. City of Oakland, 255 F.3d 734, 737 (9th Cir. 2001). Thus, if Times Media alleged in its complaint that the cargo damage occurred on navigable waters, the location test is satisfied.
In the present case, however, Times Media does not expressly allege that the alleged cargo damage occurred at sea. Instead, Times Media directs the Court to certain portions of its complaint: (1) paragraphs 2, 7, 8, 12, and Exhibit A; (2) the allegation that this is a "case of admiralty and maritime jurisdiction, within the provisions of 28 U.S.C. § 1333;" and (3) the bill of lading attached as Exhibit B ("Exhibit B"). Brief at 2-3.
Paragraphs 2, 7, 8, 12, and Exhibit A are ambiguous, in that they do not make a distinction between what part of the shipment occurred at sea and what occurred on land. Further, the conclusory statement that this is a "case of admiralty and maritime jurisdiction" is not a factual allegation. Generally, conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to defeat a motion to dismiss. Epstein v. Washington Energy Co., 83 F.3d 1136, 1139 (9th Cir. 1996). Further, allegations that are so conclusory that they fail to give notice of the basic events and circumstances of which the plaintiff complains are insufficient as a matter of law. Clegg v. Cult Awareness Network, 18 F.3d 752, 754-755 (9th Cir. 1994). As such, these two arguments fail.
However, Exhibit B appears to be dispositive. Exhibit B, which is attached to the complaint and incorporated therein by reference, is the portion of the bill of lading that relates to the shipping of goods from Singapore to Los Angeles. Times Media's exclusion from Exhibit B of the land portion of the trip is sufficient to constitute a factual allegation that it asserts that the damage occurred on navigable waters. The Court concludes that Times Media successfully alleges that the cargo damage occurred at sea, thereby satisfying the location test.
2. Connection test
In satisfying the first element of the connection test, the Court must first determine whether the incident had a potentially disruptive effect on maritime commerce. In this regard, a court should consider the general features of the incident and whether it was likely to disrupt commercial activity. Grubart, 513 U.S. at 527.
An incident which results in cargo damage affects maritime commerce because it serves to delay the transfer of goods to its desired destination. See Poret ex. rel. Alyson, Seth Poret v. Louisiana Lift & Equipment, Inc., 2003 U.S. Dist. LEXIS 4159, 2003 A.M.C. 1724 (E.D. La. 2003) (delay of the transfer of cargo to and from a vessel had a potentially disruptive impact on maritime commerce); see also Hall v. Environmental Chem. Corp., 64 F. Supp. 2d 638, 640 (S.D.Tex. 1999)(an injury to a barge crane operator had a potentially disruptive impact on maritime commerce, in that it could delay the transfer of goods, material and cargo to and from the barge). Consequently, the case law demonstrates that damage to cargo had the potential to disrupt maritime commerce.
In satisfying the second element of the connection test, a court considers whether the activity had a substantial relationship to maritime activity. Accordingly, the Court considers whether FTS' activity "is so closely related to activity traditionally subject to admiralty law that the reasons for applying special admiralty rules would apply at the suit at hand." Grubart, 513 U.S. at 539-40.
Here, there can be little doubt that the shipment of goods by sea is an activity traditionally subject to admiralty law. See Genetics International v. Cormorant Bulk Carriers, Inc., 877 F.2d 806, 808 (9th Cir. 1989)("The shipment of goods by sea is the sort of traditional maritime activity which falls squarely within the district court's admiralty jurisdiction."). Accordingly, the Court finds that the second element of the connection test is also satisfied.
Because Times Media satisfies both the location and connection tests, the Court finds that it has jurisdiction over plaintiff's negligence claim.
B. Supplemental Jurisdiction
28 U.S.C. § 1367(a), in relevant part, provides:
Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.
Having determined that it has subject matter jurisdiction over the negligence claim, the Court may exercise supplemental jurisdiction over Times Media's breach of contract claim if it forms part of the same case or controversy as Times Media's negligence claim.
Here, both Times Media's negligence and breach of contract claims arise out of FTS' shipment of goods from Singapore to Minneapolis. Because there appears to be a common nexus of operative fact, the Court finds that both claims form part of the same case and controversy and that it may exercise supplemental jurisdiction over Times Media's breach of contract claim.
IV. MOTION TO VACATE DEFAULT
Federal Rule of Civil Procedure 55(c) provides that the district court may set aside the entry of default "for good cause shown." Fed. R. Civ. P. 55(c). If, however, a default judgment has been entered, relief from the judgment may only be granted in accordance with Federal Rule of Civil Procedure 60(b). Id.
Rule 60(b)(1) grants district courts discretion to relieve a party from a judgment for reason of "mistake, inadvertence, surprise, or excusable neglect," provided that the party moves for such relief within one year of the entry of default judgment. A court has discretion to deny a motion to vacate a default judgment if: (1) culpable conduct by the defaulting party caused the default; (2) the defendant has no meritorious defense; or (3) the plaintiff would be prejudiced if the default is set aside. TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). Because this tripartite test is disjunctive, the district court is free to deny the motion if any of the three factors is shown to exist. American Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108-1109 (9th Cir. 2000).
Relief from default will be denied where the default resulted from defendant's "culpable conduct." Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). The rationale for this standard is that a defendant should not be able to cause the default and then later seek relief from it. Meadows v. Dominican Republic, 817 F.2d 517, 521-522 (9th Cir. 1987). Failing to respond to a lawsuit of which the defaulting party has actual knowledge may or may not be "culpable" conduct. Such failure is not "culpable" where defendant offers " a credible, good faith explanation negating any intention to take advantage of the opposing party, interfere with judicial decision making, or otherwise manipulate the legal process." TCI Group Life Ins. Plan, 244 F.3d at 697 (emphasis added).
FTS argues that its failure to respond is excusable because despite Park's "carefully developed system" for organizing incoming documents, Park misplaced the papers served to him on March 31, 2003. fn2 Mot. at 4. FTS argues that this misplacement was the result of isolated human error, rather than that of systematic failure. Mot. at 5, citing Owens-Illinois, Inc. v. T & N Ltd., 191 F.R.D. 522, 527-528 (E.D. Tex. 2000) ("excusable neglect" was shown by the fact that "the mislaid complaint was the product of isolated human error, rather than a result of a prolonged and systematic failure to establish minimum procedural safeguards)(emphasis added). As such, defendant asserts that its failure to respond was excusable.
Plaintiff responds that FTS' conduct is not excusable. Opp. at 4. In support of its contention, plaintiff points to the personal service of FTS on March 31, 2003, plaintiff's repeated mailings to defendant, FTS' untimely response, and the resultant prejudice to plaintiff. Id. Accordingly, plaintiff requests that the Court deny the present motion.
The Court finds that defendant has failed to offer a legally credible explanation for its failure to respond. Although Park misplaced the documents served to him on March 31, 2003, this error does not appear to be an isolated incident. On five separate occasions, plaintiff mailed documents to Defendant's Address. FTS does not contend that Defendant's Address is incorrect. Further, FTS concedes that plaintiff requested that it waive service of summons on December 31, 2002. This waiver was sent via mail to Defendant's Address. FTS offers no explanation as to why it was able to receive the waiver of service of summons on or about December 31, 2002, yet was unable to respond to any of the four subsequent mailings sent to the same address. Further, FTS does not deny receiving any of the subsequent mailings. This failure to acknowledge or deny receipt of four separately mailed documents strongly suggests that FTS' failure to respond or appear before this Court is not the result of isolated human error.
In addition, some courts have held that a defendant's conduct is culpable if the defendant has received actual notice of the filing of an action and failed to answer. See Meadows, 817 F.2d at 521 ("A defendant's conduct is culpable if he has received actual or constructive notice of the filing of the action and failed to answer"). Here, FTS concedes that Park received the waiver of service of summons on December 31, 2002. Mot. at 3. Because it had actual knowledge of the filing of the action, the Court finds that FTS' failure to answer constitutes culpable conduct.
Finally, even assuming, arguendo. that the failure to respond was not culpable, the Court finds that FTS offers no "credible, good faith explanation negating any intention to take advantage of the opposing party, interfere with judicial decision making, or otherwise manipulate the legal process." See TCI Group Life Ins. Plan, 244 F.3d at 697.
Because the Court finds that FTS' conduct led to the default, the Court need not address the issues of whether plaintiff has suffered prejudice or whether plaintiff offers meritorious defenses. See Meadows, 817 F.2d at 521 ("If a default judgment is entered as the result of a defendant's culpable conduct … we need not consider whether a meritorious defense was shown, or whether the plaintiff would suffer prejudice if the judgment were set aside.").
V. CONCLUSION
For the foregoing reasons, the motion to set aside and vacate the default judgment is DENIED.
IT IS SO ORDERED.