United States Commodity Futures Trading Commission v. Frank J. Collins, et al

Filing 53

MINUTES (IN CHAMBERS) by Judge Andrew J. Guilford: denying 49 APPLICATION for Default Judgment Without Prejudice. The Court VACATES the September 11, 2017 hearing on this motion. (twdb)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 16-01461 AG (JCGx)

Title

UNITED STATES COMMODITY FUTURES TRADING COMMISSION
v. FRANK J. COLLINS, ET AL.

Present: The Honorable

September 5, 2017

ANDREW J. GUILFORD

Lisa Bredahl
Deputy Clerk
Attorneys Present for Plaintiffs:
Proceedings:

Date

Not Present
Court Reporter / Recorder

Tape No.

Attorneys Present for Defendants:

[IN CHAMBERS] ORDER DENYING APPLICATION FOR
DEFAULT JUDGMENT WITHOUT PREJUDICE

This matter is appropriate for resolution without oral argument. See Fed. R. Civ. P. 78(b).
The Court VACATES the September 11, 2017 hearing on this motion.
The U.S. Commodity Futures Trading Commission filed this civil action against Defendants
Frank J. Collins, Gerard Suite (also known as “Rawle Gerard Suite,” “Jerry Suite,” or “Jerry
Snead”), and STA Opus NR LLC for alleged violations of the of the Commodity Exchange
Act (the “CEA”), see 7 U.S.C. § 1 et seq. According to the allegations in the complaint, Collins
and Suite, operating through STA Opus, “fraudulently solicited and accepted at least $1.6
million from at least 30 customers for operating a commodity pool to trade commodity
futures contracts on their behalf.” (Compl., Dkt. No. 1 at 2.) For those alleged unlawful acts,
among others, the Commission charged Defendants with numerous violations of the antifraud and registration provisions of the CEA, along with its associated regulations. (Id. at
14–23.) See 7 U.S.C. §§ 6b(a)(1)(A)–(C), 6o(1), 9(1), and 17 C.F.R. § 180.1(a); see also 7 U.S.C.
§§ 6m(1), 6k(2).
Defendant Collins is represented by counsel, has filed an answer, and appears determined to
litigate this case on the merits. Although Defendants Suite and STA Opus were served with
process, they failed to make an appearance, file an answer, or otherwise present a defense by
CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 16-01461 AG (JCGx)

Date

September 5, 2017

Title

UNITED STATES COMMODITY FUTURES TRADING COMMISSION
v. FRANK J. COLLINS, ET AL.

motion. The Clerk accordingly entered default in October 2016, see Fed. R. Civ. P. 55(a), and
now, the Commission has applied for judicial entry of default judgment, see Fed. R. Civ. P.
55(b)(2).
But default judgment isn’t awarded as a matter of right. See PepsiCo v. Triunfo-Mex, Inc., 189
F.R.D. 431, 432 (C.D. Cal. 1999). As the Ninth Circuit has long held, “judgment by default is
a drastic step appropriate only in extreme circumstances; a case should, whenever possible,
be decided on the merits.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). Before granting an
application for default judgment, courts in this district must enforce the procedural
safeguards of Federal Rule of Civil Procedure 55(b)(2), ensure the plaintiff’s compliance with
Local Rule 55-1, and apply the various court-created factors listed in Eitel v. McCool, 782 F.2d
1470, 1471–72 (9th Cir. 1986). Even after granting an application for default judgment,
courts are sometimes asked to set aside the default at the eleventh hour. See Fed. R. Civ. P.
55(c), 60(b). Ultimately, a district court’s authority in this area is highly discretionary. See
Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (per curiam).
On top of all that, this Court often has concerns about lengthy proposed orders that contain
permanent injunctions, require the payment of civil monetary penalties, and provide other
equitable relief. The parties are encouraged to review those concerns, discussed in United
States Commodity Futures Trading Comm’n v. Intelligent Trades, LLC, SACV 16-00020 AG
(DFMx), 2016 WL 6078718, at *1 (C.D. Cal. Oct. 12, 2016). Remember that an order or
judgment may be enforced though contempt proceedings, which may lead to escalating
sanctions and, eventually, imprisonment.
The Court is mindful that “the adversary process has been halted because of an essentially
unresponsive party,” and default judgment is designed to protected diligent plaintiffs from
“interminable delay and continued uncertainty.” See H. F. Livermore Corp. v. Aktiengesellschaft
Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir. 1970). But after reviewing the application and
supporting papers in this case, the Court isn’t convinced that the Commission has engaged
with all of the requirements just described. For example, it appears that the Commission has
failed to discuss the Eitel factors, or provide the declaration required by Local Rule 55-1.
These concerns are heightened because Suite is incarcerated and representing himself.
CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 16-01461 AG (JCGx)

Date

September 5, 2017

Title

UNITED STATES COMMODITY FUTURES TRADING COMMISSION
v. FRANK J. COLLINS, ET AL.

The irregularities discussed in this order preclude an entry of default judgment at this time.
The Court thus DENIES the Commission’s application for default judgment WITHOUT
PREJUDICE. (Dkt. No. 49.) The Commission may re-file its application for default
judgment consistent with the Court’s concerns.
:
Initials of
Preparer

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