Nathaniel J. Friedman v. U.S. Bank National Association et al

Filing 105

MINUTES (IN CHAMBERS) - Defendant Veriprise Processing Solutions, LLC's Motion to Set Aside Default 102 by Judge Christina A. Snyder: The Court GRANTS Veriprise's motion to set aside the default entered against it and DENIES plaintiff's request for sanctions. The Court directs Veriprise to file its motion to dismiss forthwith. Court Reporter: Not Present. (gk)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-2265-CAS(FFMx)
Date December 27, 2016
NATHANIEL J. FRIEDMAN v. U.S. BANK NATIONAL ASSOCIATION
ET AL.

Present: The Honorable 

CHRISTINA A. SNYDER 

Attorneys Present for Plaintiffs: 

N/A 

Tape No.

Attorneys Present for Defendants: 

Not Present 

Not Present

Catherine Jeang 
Deputy Clerk 

Proceedings:  

Not Present 
Court Reporter / Recorder

(IN CHAMBERS) - DEFENDANT VERIPRISE PROCESSING
SOLUTIONS, LLC’S MOTION TO SET ASIDE DEFAULT (Dkt.
102, filed December 5, 2016)

The Court finds this motion appropriate for decision without oral argument. See
Fed. R. Civ. P. 78; C.D. Cal. Local Rule 7-15. Accordingly, the hearing date of January
9, 2017 is vacated, and the matter is hereby taken under submission.

I.

INTRODUCTION & BACKGROUND

On April 1, 2016, plaintiff Nathaniel J. Friedman filed this action against
defendants U.S. Bank National Association (“U.S. Bank”); Bank of America, N.A.
(“BANA”); Nationstar Mortgage, LLC (“Nationstar”); Veriprise Processing Solutions,
LLC (“Veriprise”); Aztec Foreclosure Corporation (“Aztec”); and Does 1–10, inclusive.
Plaintiff’s complaint asserts claims for (1) breach of contract; (2) breach of the implied
covenant of good faith and fair dealing; (3) accounting; (4) “injunctive relief for
temporary restraining order, preliminary and permanent injunction”; (5) violation of
California Civil Code § 2924c; and (6) money had and received. See Dkt. 1.
On June 6, 2016, the Court granted without prejudice Nationstar and U.S. Bank
and BANA’s motions to dismiss. Dkt. 61.
On June 20, 2016, plaintiff filed his first amended complaint. Dkt. 63 (“FAC”).
Plaintiff’s FAC reasserted his claims for (1) breach of contract; (2) breach of the implied
covenant of good faith and fair dealing; and (3) and violation of California Civil Code
§ 2924c. Plaintiff also raised a new claim for financial elder abuse. On September 12,

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-2265-CAS(FFMx)
Date December 27, 2016
NATHANIEL J. FRIEDMAN v. U.S. BANK NATIONAL ASSOCIATION
ET AL.

2016, the Court granted without prejudice Nationstar and U.S. Bank and BANA’s
motions to dismiss plaintiff’s FAC. Dkt. 85.
On September 26, 2016, plaintiff filed his second amended complaint. Dkt. 88
(“SAC”). Plaintiff’s SAC reasserts his claims for (1) breach of contract; (2) breach of the
implied covenant of good faith and fair dealing; and (3) financial elder abuse. Id. On
November 14, 2016, the Court granted with prejudice U.S. Bank and Nationstar and
BANA’s motions to dismiss plaintiff’s SAC. Dkt. 98.
Plaintiff served Veriprise with the summons and complaint in this action on April
4, 2016. Dkt. 17. Veriprise does not dispute that it was served with the complaint,
however Veriprise has not filed an answer. On November 14, 2016, the Court issued an
order to show cause why this action should not be dismissed for lack of prosecution as to
Veriprise. Dkt. 99. The Court stated that it would accept as a satisfactory response either
(1) an answer filed by Veriprise by November 29, 2016 or (2) a request for entry of
default filed also by November 29, 2016. Id. Plaintiff requested entry of default on
November 15, 2016. Dkt. 100. On November 17, 2016, the Clerk of the Court entered
default against Veriprise, dkt. 101.
On December 5, 2016, Veriprise moved to set aside the entry of default. Dkt. 102.
(“Motion”). Veriprise also requests leave to file a motion to dismiss plaintiff’s SAC. Id.
at 2–3; see dkt. 102-1. On December 16, 2016, plaintiff filed an opposition to Veriprise’s
motion, dkt. 103 (“Opp’n”), along with evidentiary objections to the declaration filed by
Veriprise’s counsel, dkt. 104.
Having carefully considered the parties’ arguments, the Court finds and concludes
as follows.
II.

LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 55(c), a court may set aside an entry of
default “for good cause.” The Court considers three elements when evaluating whether
“good cause” exists: (1) whether defendant’s culpable conduct led to the default,
(2) whether defendant has a meritorious defense, and (3) whether reopening the default
judgment would prejudice plaintiff. TCI Grp. Life Insurance Plan v. Knoebber, 244 F.3d
691, 696 (9th Cir. 2000) (noting that courts use the same factors to assess “good cause”
under Fed. R. Civ. P. 55(c) as for reviewing default judgments under Fed. R. Civ. P.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-2265-CAS(FFMx)
Date December 27, 2016
NATHANIEL J. FRIEDMAN v. U.S. BANK NATIONAL ASSOCIATION
ET AL.

60(b)), overruled on other grounds by Egelhoff v. Egelhoff Ex rel. Breiner, 532 U.S. 141,
147 (2001). As a general rule, cases should be decided on the merits as opposed to by
default, and therefore “any doubts as to the propriety of a default are usually resolved
against the party seeking a default judgment.” James M. Wagstaffe, Federal Civil
Procedure Before Trial § 6-A (citing Pena v. Seguros La Comercial, S.A., 770 F.2d 811,
814 (9th Cir. 1985)). As such, the Court has broad discretion to overturn an entry of
default. Mendoza v. Wight Vineyard Management, 783 F.2d 941, 945–46 (9th Cir.
1986). This discretion is “more liberally applied” where a defendant seeks to set aside an
entry of default pursuant to Rule 55(c) rather than a default judgment pursuant to Rule
60(b). United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085,
1091, n.1 (9th Cir. 2010). Moreover, the rules governing motions to set aside defaults
“are solicitous towards movants, especially those whose actions leading to the default
were taken without the benefit of legal representation.” Id. at 1089. Nonetheless, the
defaulting party carries the burden to demonstrate that the default should be set aside.
TCI Grp. Life Ins. Plan, 244 F.3d at 696.
III.

DISCUSSION
A.

Culpable Conduct

It appears that the default was not the result of Veriprise’s culpable conduct. A
movant’s conduct is culpable if he or she acted with bad faith, such as an “intention to
take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise
manipulate the legal process.” TCI Grp. Life Ins. Plan, 244 F.3d at 697. However,
where a defendant presents a “good faith explanation,” failure to respond does not, on its
own, amount to culpable conduct. Id.
Veriprise contends that it failed to answer plaintiff’s complaint because it believed
that counsel for Nationstar and U.S. Bank also represented Veriprise. Motion at 2–3.
However, counsel for Nationstar and U.S. Bank, Parisa Jassim, believed that Veriprise
would retain its own counsel. Id. at 2. Jassim has stated that Veriprise’s mistaken belief
was a result of her own “excusable mistake.” Dkt. 102-2 (“Jassim Decl.”) ¶ 7. Plaintiff
objects to Jassim’s statement as self-serving and because Jassim does not provide the
basis for her “reasonable belief” that she was retained to represent only Nationstar and
U.S. Bank in this action. Dkt. 104. However, Veriprise’s failure to respond did not
evidence any intent to take advantage of plaintiff or to otherwise manipulate the legal
process. Therefore, the Court finds that Veriprise did not act culpably.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-2265-CAS(FFMx)
Date December 27, 2016
NATHANIEL J. FRIEDMAN v. U.S. BANK NATIONAL ASSOCIATION
ET AL.

B.

Meritorious Defense

Veriprise likely has a meritorious defense in this action. “A defendant seeking to
vacate a default judgment must present specific facts that would constitute a defense. But
the burden on a party seeking to vacate a default judgment is not extraordinarily heavy.”
TCI Grp. Life Ins. Plan, 244 F.3d at 700 (citations omitted); see also Hawaii Carpenters’
Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986) (A defendant moving to set aside
a default must show that “there is some possibility that the outcome of the suit after a full
trial will be contrary to the result achieved by the default.”). Plaintiff asserts only his
elder abuse claim against Veriprise. See SAC. The Court has previously concluded that
plaintiff has failed to adequately plead his claim for financial elder abuse against
Nationstar and U.S. Bank because plaintiff’s loan has been reinstated and plaintiff does
not allege that any real or personal property has been taken from him. Dkt. 98 at 11.
There is no reason that the same logic does not apply to Veriprise. Therefore, Veriprise
likely has a meritorious defense to plaintiff’s claim.
C.

Prejudice to Plaintiff

Finally, the Court cannot discern any reason why vacating the default would
prejudice plaintiff. “To be prejudicial, the setting aside of a judgment must result in
greater harm than simply delaying resolution of the case. Rather, ‘the standard is whether
[plaintiff’s] ability to pursue his claim will be hindered.’” TCI Grp. Life Ins. Plan, 244
F.3d at 701 (quoting Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). Examples of
tangible harm to a non-movant include loss of evidence or heightened discovery burdens.
Id. (citing Thompson v. American Home Assurance Co., 95 F.3d 429, 433–34 (6th Cir.
1996)). No such hardship exists here. Plaintiff is not prejudiced simply because he is
deprived of a “quick victory” and must litigate his claims on the merits. Bateman v.
United States Postal Service, 231 F.3d 1220, 1225 (9th Cir. 2000). Nothing suggests that
plaintiff’s pursuit of this action will be hindered or prejudicially delayed should the Court
set aside the default.
Accordingly, at this stage, and in light of the principle that cases should be decided
on their merits, the Court finds that Veriprise has satisfied all three of the elements
required to set aside the default.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-2265-CAS(FFMx)
Date December 27, 2016
NATHANIEL J. FRIEDMAN v. U.S. BANK NATIONAL ASSOCIATION
ET AL.

D.

Plaintiff’s Request for Sanctions

In the event that the Court sets aside the default, plaintiff requests sanctions in the
amount of $5,000 for reasonable costs and fees associated with opposing this motion.
Opp’n at 6. The imposition of sanctions is a matter within the discretion of the court.
See L.R. 11-9. Because the Court finds that Veriprise’s failure to answer the complaint
was not in bad faith, the Court concludes that sanctions are not appropriate.
V.

CONCLUSION

In accordance with the foregoing, the Court GRANTS Veriprise’s motion to set
aside the default entered against it and DENIES plaintiff’s request for sanctions. The
Court directs Veriprise to file its motion to dismiss forthwith.
IT IS SO ORDERED.
Initials of Preparer

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