Gustafson et al v. Bowman et al

Filing 22

ORDER granting 13 Motion to Set Aside Default. Bowman shall tender payment of $2,164 to counsel for Plaintiffs within 21 days from the date this order is filed. Signed by Judge John W. Sedwick on 5/28/18. (GMM, CHAMBERS STAFF)

UNITED STATES DISTRICT COURT
DISTRICT OF ALASKA

Aaron Gustafson and Gary Gustafson,
Plaintiffs,
vs.
Jason Bowman and Subsistence
Placers LLC,
Defendants.

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2:18-cv-00001 JWS
ORDER AND OPINION
[Re: Motion at docket 13]

MOTION PRESENTED
At docket 13 defendant Jason Bowman (“Bowman”) moves to set aside his
default which was entered by the Clerk on April 26, 2018, at docket 11. The motion is
supported by the Declaration of Bradley Jameson (“Jameson”) at docket 14. At docket
15 plaintiffs Aaron Gustafson and Gary Gustafson (“Plaintiffs”) oppose the motion. The
opposition is supported by the Declaration of John Joseph Turri (“Turri”) at docket 16
and the Declaration of Brandon C. Marx (“Marx”) at docket 17. Bowman replies at
docket 21. Oral argument was not requested and would not assist the court.

BACKGROUND
Plaintiffs sued Bowman seeking a declaration that Bowman is required by
contract to execute an authorization allowing Plaintiffs to commence mining on a placer
mining claim known as Claim # 611836 which he had purchased from Subsistence
Placers LLC. Plaintiffs also seek compensatory damages from Bowman in an amount
exceeding $150,000. Plaintiffs named Subsistence Placers LLC as a co-defendant but
to date have not served process on that entity.
The complaint was filed on March 2, 2018. Bowman was served in person on
April 3, 2018, in Napa, California. 1 Bowman’s answer to the complaint was due April
24, 2018. He did not file an answer. Plaintiffs moved for the entry of Bowman’s
default on April 25, 2018. The Clerk entered Bowman’s default the next day.
A similar lawsuit was filed by Gary Gustafson, one of the Plaintiffs here, against
Bowman in 2015 in California. In that case Gary Gustafson was represented by Turri,
a California lawyer who is one of the lawyers representing Plaintiffs in this case.
Bowman was represented in the California case by Jameson, another California lawyer.
After being served in the case at bar, Bowman contacted Jameson who helped find an
Alaska lawyer for Bowman. Apparently unfamiliar with the Federal Rules of Civil
Procedure, Jameson assumed that Bowman had 30 days in which to respond to the
complaint, which would have been May 2, 2018. On April 27, Jameson contacted Turri

Both parties mistakenly assert that Bowman was served on April 2, 2018. That is the date a
deputy clerk signed the summons, but the actual date of service as shown on page 2 of docket
6 was April 3, 2018.

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seeking an extension of time in which to respond to the complaint because Bowman still
had not retained an Alaska lawyer. Turri responded on April 28, 2018, advising that
Bowman’s default had already been entered. Jameson suggested that the parties
stipulate to set aside the default. On April 30, 2018, Turri advised Jameson that he
would encourage his clients to agree to set aside the default if Bowman paid the sum of
$700. Jameson neither accepted nor rejected the $700 payment Turri suggested. By
May 3, 2018, Turri had his clients’ consent to set aside the default in exchange for the
$700, but was unable to promptly communicate that information to Jameson as a result
of circumstances beyond Turri’s control.
STANDARD OF REVIEW
A district court may set aside a default pursuant to Fed. R. Civ. P. 55(c) for good
cause. When evaluating a motion to set aside default, the district court should
consider: (1) whether the movant engaged in culpable conduct leading to the entry of
movant’s default; (2) whether the movant possesses a meritorious defense; and (3)
whether granting the motion will prejudice the plaintiff. 2
DISCUSSION
Plaintiffs contend that because Bowman knew he had been sued but did not
timely respond to the complaint, his conduct was culpable. The situation is more
nuanced than Plaintiffs suggest. The Ninth Circuit has explained: “The usual

Franchise Holding II, LLC v. Huntington Rests. Grp., Inc., 375 F.3d 922, 925-26 (9th Cir.
2004). These same three “Falk” factors are applied when a party seeks to set aside a default
judgment. Brandt v. Am. Bankers Ins. Co. of Fla., 653 F.3d 1108, 1111 (9th Cir. 2011).
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articulation of the governing standard, oft repeated in our cases, is that ‘a defendant’s
conduct is culpable if he has received actual or constructive notice of the filing of an
action and intentionally failed to answer.’” 3 Elaborating, the appellate court wrote: “A
neglectful failure to answer as to which a 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 is not
‘intentional’ . . . —although it certainly may be, once the equitable factors are
considered—culpable or inexcusable.”4
Here, there is no evidence that Bowman intended to take advantage of Plaintiffs,
interfere with this court’s decision-making, or manipulate the judicial process. To the
contrary, the purpose of his actions was to afford the court an opportunity to decide the
parties’ dispute on the merits. There are no equitable considerations which operate to
convert Bowman’s purpose into a culpable one.
Plaintiffs rely on Speiser, Krause & Modol PC v. Ortiz5 to support their argument
that Bowman’s conduct was culpable. In Speiser, the defendant, Ortiz, was a lawyer
who had been sued in state court in a dispute about the division of attorneys’ fees
between the plaintiff law firm and Ortiz. The plaintiff sent a letter to Ortiz advising that it

TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir 2001) (emphasis in original)
(quoting Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988), overruling
on other grounds by Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001).

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Id. at 697-98 (emphasis in original).

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271 F.3d 884, 887 (9th Cir. 2001).

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intended to seek the entry of default if Ortiz did not timely answer the complaint.
Thereafter, Ortiz removed the case to federal court. The time for Ortiz to respond to
the complaint in the removed case was governed by Fed. R. Civ. P. 81(c). Ortiz did not
timely respond; the law firm moved for entry of default; and the clerk entered Ortiz’s
default. Ortiz admitted he did not read Rule 81(c) well enough to understand it. The
district court held that Ortiz’s failure to timely respond to the complaint was culpable and
entered a default judgment.
On appeal, the Ninth Circuit observed: “Ortiz briefly alludes to the good cause
standard regarding defaults. . . . That standard is less rigorous than excusable neglect.
. . . The distinction, however, is one of degree, which might make a difference at the
margin. But the failure of this lawyer, who was the removing party, to properly read the
clear language of Rule 81(c) does not amount to good cause either.”6 The appellate
court then affirmed the district court’s decision, but also noted: “Here the district court
would not necessarily have erred had it decided that excusable neglect (or good cause)
was shown. But it decided that neither was. That conclusion was certainly not error.”7
Ortiz’s conduct in Speiser is clearly distinguishable from Bowman’s conduct.
Ortiz was warned that a default would be sought before an application for default was
made. Bowman was given no warning. While Ortiz’s first action in response to the
complaint against him in state court was to remove the case to federal court, Bowman’s

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Id.

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Id.

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first action undertaken with Jameson’s help was finding an attorney to represent him in
Alaska. While Ortiz, as the party invoking federal jurisdiction, proceeded to ignore the
Federal Rules of Civil Procedure, Bowman and Jameson overlooked a procedural rule
in a court whose jurisdiction Bowman had not invoked. This court’s decision that
Bowman’s conduct is not culpable is easily reconciled with the Speiser court’s
affirmance of the trial court’s decision that Ortiz’s conduct was culpable.
Plaintiffs contend that Bowman has no meritorious defense to their claims
against him. This contention is overcome by Bowman’s presentation of reasons and
authorities showing that he does have a meritorious defense. 8 The court adopts
Bowman’s reasoning and authorities cited in support thereof as the rationale for
concluding that, for purposes of Rule 55(c), Bowman has a meritorious defense.
Plaintiffs concede that Bowman’s best argument concerns prejudice. They point
to no prejudice save delay and concede that mere delay does not ordinarily amount to
prejudice in a Rule 55(c) analysis. The court agrees and notes that the amount of
delay introduced by the motion to set aside the default in this case is minimal.
Plaintiffs do, however, urge the court to consider the expense to which Plaintiffs
have been put by the need to first seek a default, and then litigate the motion to set
aside the default. The Ninth Circuit has approved a trial court’s decision to condition
setting aside a default upon payment of a plaintiff’s attorneys’ fees. 9 Here, Plaintiffs

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See doc. 21 at pp. 3-4.

Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. Louisiana Hydrolec, 854 F.2d 1538,
1546 (9th Cir. 1988).
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seek a total of $3,179 in fees as an appropriate condition for setting aside the default.
This consists of $900 in fees charged by Turri and $2,279 in fees for Marx. 10
Plaintiffs contend that had Jameson and Bowman acted more reasonably, relief
from default could have been had thru Bowman’s payment of $700. Bowman’s position
is that had Turri and Plaintiffs been more reasonable there would have been no need for
the motion to set aside the default. In the court’s view, the parties are equally
responsible for the circumstances which led to the motion to set aside the default.
Bowman argues that the amount of fees sought is excessive. Bowman cites no
authority for the proposition that an award of fees in the Rule 55(c) context should be
limited to reasonable fees. However, in most, if not all, other contexts an award of fees
is limited to reasonable fees. 11 An award of fees in the matter at hand will be limited to
reasonable fees.
Bowman argues that the fees and costs sought for preparing and filing the
motion for entry of default are excessive. Turri’s declaration states that he prepared
and forwarded the documents needed for the motion seeking entry of default to Marx for
which Turri billed $900. 12 The total sought by Marx relating to the entry of default
consists of $375 in attorney’s fees and $20 in what appears to be paralegal time.

10

Doc. 16 at ¶ 12 (Declaration of Turri); doc. 17-1 (Ex. 1 to Declaration of Marx).

See, e.g., Fed. R. Civ. P. 30(d)(2); Fed. R. Civ. P. 37(a)(5)(A),(B); Fed. R. Civ. P. 37(d)(3);
Fed. R. Civ. P. 37(f).

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Docket 16 at ¶ 12 (Declaration of Turri).

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Thus, between Turri and Marx, Plaintiffs seek a total of $1,295 for the motion seeking
entry of default. The motion consists of a grand total of eleven lines of text. The fees
sought for this work are excessive. The court considers an award of $300 for this work
to be reasonable.
The court has already rejected Bowman’s contention that Turri and Plaintiffs are
responsible for necessitating Bowman’s motion to set aside the default. Bowman
offers no argument that the amount of fees associated with Plaintiffs’ opposition to the
motion is unreasonable. The court sees no basis upon which to conclude the actual
fees for the opposition are unreasonable. It follows that the court will award reasonable
fees of $2,164 consisting of $300 for the motion for entry of default and $1,964 for the
opposition to the motion to set aside the default.
CONCLUSION
For the reasons set forth above, the motion at docket 13 is GRANTED;
Bowman’s default is set aside. It is FURTHER ORDERED that Bowman shall tender
payment of $2,164 to counsel for Plaintiffs within 21 days from the date this order is
filed.
DATED this 28th day of May 2018.
/s/ JOHN W. SEDWICK
SENIOR JUDGE, UNITED STATES DISTRICT COURT

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