US Commodity Futures Trading Commission v. American Bullion Exchange Abex Corp et al

Filing 90

MINUTES (IN CHAMBERS): ORDER by Judge David O. Carter: Granting 81 Motion to Set Aside Default Re: Clerks Entry of Default (CV-37) 80 . Denying the Nassbridges' Motion to Reconsider Application for Court to Appoint an Attorney 85 . (See document for further details.) Defendants shall file a responsive pleading on or before November 14, 2011. (rla) Modified on 10/18/2011 (rla).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No. SACV 10-1876 DOC (RNBx)

Date: October 17, 2011

Title: U.S. COMMODITY FUTURES TRADING COMMISSION v. AMERICAN BULLION
EXCHANGE ABEX, CORP., et al.
DOCKET ENTRY
[I hereby certify that this document was served by first class mail or Government messenger service, postage prepaid, to all counsel (or parties) at their
respective most recent address of record in this action on this date.]
Date:____________ Deputy Clerk: ___________________________________

PRESENT:
THE HONORABLE DAVID O. CARTER, JUDGE
Julie Barrera
Courtroom Clerk

Not Present
Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS:
NONE PRESENT

NONE PRESENT

PROCEEDING (IN CHAMBERS): GRANTING THE NASSBRIDGES’ MOTION TO VACATE
AND SET ASIDE THE DEFAULT ENTRY BY THE CLERK
AND DENYING THE NASSBRIDGES’ MOTION TO
RECONSIDER APPLICATION FOR COURT TO APPOINT AN
ATTORNEY
Before the Court is Defendant Ryan A. Nassbridges’ (“R. Nassbridges”) and Relief
Defendant Bita J. Nassbridges’ (“B. Nassbridges”) (jointly, the “Nassbridges”) Motion to Vacate and
Set Aside the Default Entry by the Clerk (“Motion to Vacate”) and the Nassbridges’ Motion to
Reconsider Application for Court to Appoint an Attorney (“Motion to Reconsider”) (Dockets 81 and
85, respectively). The court finds these matters appropriate for decision without oral argument.
Fed.R.Civ. P. 78; Local Rule 7-15. After considering the moving, opposing1, and replying papers, the
Court GRANTS Defendants’ Motion to Vacate and DENIES Defendants’ Motion to Reconsider.

1

Where available

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Accordingly, the hearings set for October 24, 2011 at 8:30 a.m. and October 31, 2011 at
8:30 a.m. are removed from the calendar.
I. BACKGROUND
The United States Commodity Futures Trading Commission (“Plaintiff”) alleges that R.
Nassbridges, American Bullion Exchange ABEX, Corp., and American Bullion Exchange, LLC
(collectively, “Defendants”) “fraudulently operated a commodity pool and defrauded at least 80
individuals of approximately $5.5 million.” Complaint, ¶ 2. Defendants allegedly “solicited funds
from individuals for the represented purpose of investing in gold bullion, palladium bullion, gold coins
and silver coins,” but instead used investors’ funds to trade commodity futures and options. Id.
Plaintiff contends that Defendants sustained overall net trading losses of approximately $2.2 million
without disclosing such losses to the investors. Id. at ¶ 3. Additionally, Defendants, through R.
Nassbridges, allegedly misappropriated investors’ funds by transferring investors’ funds into the
Nassbridges’ personal bank account. Id. at ¶ 5. Furthermore, to conceal the allegedly fraudulent
operations and misappropriation, R. Nassbridges allegedly provided false and misleading testimony to
Plaintiff. Id. at ¶ 7.
In light of the alleged wrongdoing, Plaintiff filed a Complaint with this Court on
December 8, 2010, alleging various violations of the Commodity Exchange Act and Commission
Regulations, including (1) fraud by fraudulent solicitation, misappropriation and failure to disclose
trading and losses (both futures and options); (2) fraud as a commodity pool operator; (3) failure to
register as a commodity pool operator; (4) failure to provide pool disclosure documents; and (5) failure
to provide monthly account statements (Docket 1).
On September 13, 2011, Plaintiff filed a request for a Clerk’s Entry of Default, asserting
that Defendants failed to plead as required by the Federal Rules of Civil Procedure (Docket 78). On
September 16, 2011, the Clerk of the Court entered a Default as to the Nassbridges (Docket 80). The
Nassbridges seek to set aside that Entry of Default.
On August 1, 2011, the Nassbridges filed an Application for the Court to Appoint an
Attorney (Docket 69). The Court denied that Application on September 26, 2011 (Docket 83). The
Nassbridges currently move for reconsideration of the Court’s previous order.
II. LEGAL STANDARD
A. Motion to Vacate Clerk’s Entry of Default
Entry of default by a clerk is governed by Federal Rule of Civil Procedure 55.
Fed. R. Civ. P. 55. The decision to set aside an entry of default is at the discretion of the trial court
judge. Ashby v. McKenna, 331 F.3d 1148, 1152 (10th Cir. 2003). A decision to set aside an entry of
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default should "be disturbed only upon a finding of an abuse of discretion." Rasmussen v. Am. Nat’l
Red Cross, 155 F.R.D. 549, 551 (S.D.W.Va. 1994).
According to Federal Rule of Civil Procedure 55(c), "[t]he court may set aside an
entry of default for good cause...." Fed. R. Civ. P. 55(c). The "good cause" standard under Rule 55(c)
is an easier burden for the allegedly defaulting party than the excusable neglect standard required to
obtain relief from default judgment under Rule 60(b). See Dennis Garberg & Assocs., Inc. v.
Pack-Tech Int'l Corp., 115 F.3d 767, 775 n.6 (10th Cir. 1997). The good cause standard is relaxed
because "the preferred disposition of any case is upon its merits and not by default judgment." Gomes
v. Williams, 420 F.2d 1364, 1366 (10th Cir.1970).
To determine whether to vacate the clerk's entry of default, the Court considers the
following factors: (1) whether the defendant's culpable conduct led to the default; (2) whether
defendant has a meritorious defense; and (3) whether plaintiff will be prejudiced by setting aside the
entry of default.2 TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001) (citing Falk
v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)), overruled on other grounds by Egelhoff v. Egelhoff ex rel.
Breiner, 532 U.S. 141, 147-50 (2001). However, "[a] court need not consider all of the factors, and
may consider other factors as well." Guttman v. Silverberg, 167 Fed. Appx. 1, 4 (10th Cir. Dec. 19,
2005) (citing In re Dierschke, 975 F.2d 181, 183-84 (5th Cir.1992), cert. denied 2006 U.S. LEXIS 3460
(May 1, 2006)). Default is not to be freely granted, however, as “a case should, whenever possible, be
decided on the merits.” TCI Group, 244 F.3d at 697.
B. Motion for Reconsideration
Federal Rule of Civil Procedure 60(b) “provides for reconsideration only upon a showing
of (1) mistake, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud; (4) a void
judgment; (5) a satisfied or discharged judgment; or (6) ‘extraordinary circumstances’ which would
justify relief.” School Dist. No. 1J, Multnomah County v. Acands, Inc., 5 F.3d 1255, 1263 (9th Cir.
1993) (quoting Fuller v. M.G. Jewelry, 950 F.2d 1437, 1442 (9th Cir. 1991)).
These grounds are further limited by the Local Rules. Local Rule 7-18 provides that a
motion for reconsideration of a decision on any motion may be made only on the following grounds:
“(a) a material difference in fact or law from that presented to the Court before such decision that in the
exercise of reasonable diligence could not have been known to the party moving for reconsideration at
the time of such decision, or (b) the emergence of new material facts or a change of law occurring after
the time of such decision, or (c) a manifest showing of a failure to consider material facts presented to
the Court before such decision.” L.R. 7-18. Finally, the Local Rule states that “[n]o motion for
reconsideration shall in any manner repeat any oral or written argument made in support of or in
2

The same three factors apply to both the lifting of entries of default under Fed. R.
Civ. P. 55(c) and the vacating of a default judgment under Rule 60(b).
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opposition to the original motion.” Id.
III. DISCUSSION
A. Motion to Vacate Clerk’s Entry of Default
Courts can deny a motion to vacate the clerk’s entry of default if any of the following
three factors are present: (1) culpable conduct that led to the default, (2) the lack of any meritorious
defense, and (3) prejudice to the plaintiff. Plaintiff has conceded that setting aside the entry of default
would not prejudice its case. Response to Motion to Vacate Default, 5. The Court’s consideration of the
first two factors weighs in favor of granting the Nassbridges’ Motion to Vacate.
The first factor weighs in favor of granting the Motion to Vacate. Culpable conduct tends
to mean that a defendant has read and understood and complaint but intentionally taken no steps to meet
the deadline for filing a responsive pleading. TCI Group, 244 F.3d at 697. Defendants’ failure to
respond to Plaintiffs’ Complaint is not culpable because there is no direct evidence of bad faith or
intent. For example, a failure to respond may be considered culpable when there is “an intention to take
advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the
legal process.” Id. Plaintiff’s best argument on this point is that the Nassbridges have submitted “a
multitude of filings.” Response to Motion to Vacate Default, 3. Simply because the Nassbridges have
frequently sought reconsideration of the Court’s decisions does not necessarily mean that they are
litigating in bad faith. While it is possible that a party who files frequent motions without answering a
complaint is trying to game the system, that inference seems a stretch in the present case. Rather, it
appears that the Nassbridges believed their frequent filings should have been sufficient to protect
against the entry of default. Motion to Vacate, 2. The Nassbridges appear to genuinely believe the entry
of default was in error. Id. Given the Defendants’ pro se status, the Court is inclined to give them the
benefit of the doubt at the present time.
Similarly, the Court does not at present possess enough information regarding the merits
of Defendants’ defenses. This second factor does not weigh strongly in either direction. Plaintiff
correctly observes that the Motion to Vacate does not present any defenses. Response to Motion to
Vacate Default, 4. The Court is aware that its decisions on the Nassbridges’ Application for Court’s
Appointment of Counsel (Docket 69) and Motion to Reconsider the Stricken Documents (Docket 70)
have no impact on their obligation to file a responsive pleading. Yet, the Court can understand why the
Nassbridges, as laypersons, believed that the existence of pending motions would preclude the entry of
default against them. The Court is particularly concerned with the plight of pro se defendants, as they
have not chosen of their own free will to commence litigation in federal court. Accordingly, the Court
will give Defendants one final chance to file a responsive pleading pursuant to Federal Rule of Civil
Procedure 12(a). Defendants should be aware, however, that the Court is not inclined to give any
further extensions and will not tolerate attempts to “game the system” by either licensed attorneys or
parties appearing pro se. Any future actions suggesting bad faith will not be met with the Court’s
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present leniency.
Defendants shall file a responsive pleading by November 14, 2011. Failure to do so may
result in an entry of default against Defendants.
B. Motion for Reconsideration
The Nassbridges have failed to establish grounds for reconsideration provided by Fed. R.
Civ. P. 60(b) or Local Rule 7-18 for reconsideration. The Nassbridges make no statement to show that
there has been a mistake, surprise, excusable neglect, newly discovered evidence, fraud, a void
judgment, a satisfied or discharged judgment, or extraordinary circumstances which would justify
relief. Nor do the facts set out in the Motion for Reconsideration indicate that any of these factors have
been met. Although Defendants argue that it is “unjust to speculate on the chances of success” before
providing counsel, there is unfortunately no civil right to counsel. The Court has sympathy for the
plight of the pro se, but there is simply not sufficient evidence demonstrating the merits of success or
showing that this case is particularly complex.
IV. DISPOSITION
For the foregoing reasons, the Motion to Vacate is GRANTED and the Motion for
Reconsideration is hereby DENIED. Defendants shall file a responsive pleading on or before November
14, 2011.
The Clerk shall serve this minute order on all parties to the action.

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