Opinion
NO. CIV. S-08-CV-00799 FCD-EFB.
August 11, 2008
MEMORANDUM AND ORDER
This matter is before the court on defendants Dr. Harold Dawley, Jr. ("Dawley"), Wellness Institute/Self-Help Books, LLC, and Wellness Institute, Inc.'s (collectively "defendants") motion for relief from entry of default pursuant to Federal Rule of Civil Procedure 55(c). Plaintiff Teresa Williams ("plaintiff") opposes the motion. For the reasons set forth below, defendants' motion is granted.
All further references to a "Rule" are to the Federal Rules of Civil Procedure.
Because oral argument will not be of material assistance, the court orders this matter submitted on the briefs. E.D. Cal. L.R. 78-230(h).
BACKGROUND
On April 11, 2008, plaintiff filed a complaint against defendants alleging various claims for relief arising from copyright and trademark infringement relating to her self-help book entitled She Must Like It. (Compl., filed Apr. 4, 2008, ¶ 1.) Plaintiff served process on defendant Dawley, both personally and as the authorized representative for all other defendants on April 19, 2008. (Decl. of Kathleen M. Kerekes ("Kerekes Decl."), filed May 21, 2008, Ex. D at 8-12.) Pursuant to the timing requirements set forth in Rules 6(a) and 12(a)(1)(A)(i), defendants' deadline for response was May 9, 2008.On May 5, 2008, defendants' counsel issued a letter to plaintiff's counsel discussing the merits of the complaint, venue, malicious prosecution, and defendants' intention to contest the allegations. (Pl.'s Opp'n to Mot. to Set Aside Default, filed July 7, 2008, ("Opp'n") at 3:1-4; Def.'s P. A. at 2:15-19.) Plaintiff's counsel responded on May 8. (Opp'n at 2:5-5.) Defendants' counsel sent a second letter to plaintiff's counsel on May 13, further discussing defendants' opposition to the claims. (Def.'s Mem. of P. A. in Supp. of Mot. for Relief, filed May 21, 2008, ("Def.'s P. A.") at 2:25-27.) On May 15, defendants' counsel obtained a hearing date for these defense motions. (Id. at 2:28-3:2.) On the same day, plaintiff filed a request for default based on defendant's failure to respond. (Id. at 3:2-4; Opp'n at 3:13-17.) Upon receiving an email notice of the request of default, defendants' counsel sent a third letter on May 16, requesting that plaintiff withdraw the request for entry of default. (Def.'s P. A. at 3:5-6.) However, the clerk of the court entered default against defendants that day. Defendants' filed the present motion for relief from plaintiff's request for default on May 21, 2008.
STANDARD
Default is properly set aside where a party acts within a reasonable amount of time and establishes a valid basis for relief. S.E.C. v. Internet Solutions for Bus. Inc., 509 F.3d 1161, 1164-65 (9th Cir. 2007). Under Rule 55(c), the court may set aside entry of default by the Clerk of the Court for "good cause" shown. The Ninth Circuit has identified three relevant factors for determining "good cause": (1) whether the defendant's culpable conduct led to the default; (2) whether the defendant has a meritorious defense; and (3) whether setting aside default would prejudice the plaintiff. TCI Group Life Insurance Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001) (citing Faulk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). These three factors are the same as those used to address a Rule 60(b) motion to set aside a final default judgment. Id. However, the factors should be applied more liberally when addressing a Rule 55(c) motion to set aside entry of default. Hawaii Carpenters' Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986) ("Rule 60(b) grounds are liberally interpreted when used on a motion for relief from an entry of default.") Furthermore, the court has broad discretion in resolving a Rule 55(c) motion to set aside an entry of default. Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945-46 (9th Cir. 1986) (stating that, "doubt, if any, should be resolved in favor of the motion to set aside the [default] so that cases may be decided on their merits.") (internal citation omitted).
ANALYSIS
Defendants argue that they have filed their motion for relief from default within a reasonable time. Plaintiff does not contest the timeliness of defendants' motion. Defendants asked plaintiff to withdraw her default request the day after it was submitted and filed the instant motion within the same week. As such, the court finds that defendants' request relief was made within a reasonable time.
Plaintiff contends that by failing to respond, defendants engaged in culpable conduct, which is, by itself, sufficient to show lack of "good cause." Defendants argue that their conduct was not culpable, but rather the result of mistake, inadvertence, or excusable neglect. Defendants' allege that their counsel mistakenly entered the wrong response deadline into his calender.
Plaintiff does not contest defendants' ability to satisfy the other two factors relevant to finding "good cause," namely, whether defendants are able to allege meritorious defenses or whether plaintiff will not be prejudiced by granting defendants' request. Further, defendants have submitted sufficient argument to satisfy these factors at this stage in the litigation.
A defendant's conduct is culpable when that defendant "has received actual or constructive notice of the filing of the action and intentionally failed to answer." Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988) (emphasis added). The Ninth Circuit has clarified that in this context "intentional" is "something more like . . . `willful, deliberate, or evidence of bad faith.'" TCI, 244 F.3d at 697 (quoting Am. Alliance Ins. Co. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996)). "Neglectful failure to answer as to which the defendant offers a credible, good faith explanation negating any intention to take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal process is not "intentional" under default cases [in the Ninth Circuit], and is therefore not necessarily . . . culpable or inexcusable." Id. at 697-98 (original emphasis).
The court does not find that defendants intentionally failed to respond to the complaint. Rather, defendants present evidence that their counsel was not cognizant of the proper deadline, nor of her failure to meet it. Defense counsel's letter to plaintiff's counsel on May 13, 2008, four days after the response deadline, is inconsistent with the conduct of a party intentionally delaying her response. Additionally, defense counsel's letter to plaintiff's counsel, sent the day after she received notice of plaintiff's request for entry of default, is also inconsistent with a willful, deliberate, or bad faith delay. Accordingly, the court does not find any ill motive or deliberate action by defendants in failing to respond that meets the standard of culpable conduct. Rather, the court finds that defendants acted diligently in responding to plaintiff's complaint after service and in seeking to remove entry of default. Therefore, there is good cause to remove the entry of default and allow the parties to litigate this case on the merits.
Plaintiff relies primarily on Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685, 690 (9th Cir. 1988), to support its argument that defendants' engaged in culpable conduct by failing to respond after receiving actual or constructive notice of the filing of the action. However, the facts underlying the court's decision in Direct Mail are materially distinguishable from the facts of this case. in Direct Mail, there was no contact between the parties from the day after process was served on the defendant. 840 F.2d at 689. Moreover, defendant did not file a motion to remove default for months, after default judgment had been entered, the court had issued a writ of execution, and the plaintiff had levied on the defendant's bank account. Id. at 686. Under these facts, the district court found that the lack of communication and knowing delay caused by the defendant justified the entry of default and default judgment and that good cause to vacate the default judgment had not been shown. Id. at 690. In this case, there is no dispute as to the ongoing communication between the opposing counsel. Defendants communicated with plaintiff's counsel on at least three occasions after the complaint was served and before the entry of default. Defendant discussed the merits of plaintiff's suit and its intention to defend. Defendants also communicated with the court prior to the entry of default regarding hearing dates. As such, plaintiff's reliance on the court's analysis in Direct Mail is misplaced.
CONCLUSION
For the foregoing reasons, defendants' motion for relief from entry of default is GRANTED. Defendants shall file a response to plaintiff's complaint within ten (10) days of the date of this order.IT IS SO ORDERED.