Safeco Insurance Company of America v. Pederson et al

Filing 37

ORDER Setting Aside Default as to Defendant James Pederson, signed by Magistrate Judge Christopher D. Baker on 03/04/2025. (Deputy Clerk CM)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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SAFECO INSURANCE COMPANY OF
AMERICA,
Plaintiff,

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v.

Case No. 1:24-cv-01299-CDB
ORDER SETTING ASIDE DEFAULT AS TO
DEFENDANT JAMES PEDERSON
(Docs. 30, 31)

JAMES PEDERSON,
Defendant.

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Plaintiff Safeco Insurance Company of America (“Plaintiff”) initiated this action with the filing

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of a complaint on October 24, 2024, against Defendants James Pederson and Flyers Energy, LLC, as

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well as pseudonymous Defendant Jane Doe. (Doc. 1). Upon stipulated requests, the latter two

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Defendants were dismissed. (Docs. 21-24). Plaintiff filed proof of service of the summons and

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complaint on Defendant Pederson on November 14, 2024. (Doc. 7).

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On January 6, 2025, the Court granted the parties’ stipulated request to extend Pederson’s

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deadline to respond. (Docs. 11, 12). The parties represented that Pederson needed additional time to

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obtain counsel. (Doc. 11). On January 22, 2025, the Court granted the parties’ second stipulated

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request to extend. (Docs. 17, 18). The parties represented that Pederson had not been able to obtain

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counsel and intended to proceed pro se. (Doc. 17).

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Pederson failed to file an answer by the extended deadline of February 4, 2025. On February
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18, 2025, Plaintiff filed a motion for judgment on the pleadings. (Doc. 25). The Court terminated the

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motion, noting that Plaintiff could not file a motion for judgment on the pleadings prior to the filing of

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an answer, and directed Plaintiff to request entry of default. (Doc. 28). Plaintiff requested default on

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February 27, 2025. (Doc. 30). The Clerk of the Court entered default the next day (Doc. 31) and

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immediately afterwards, filed on Pederson’s behalf his answer, dated February 4, 2025 (Doc. 33).

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Noting that it was unclear whether Pederson’s answer comported with Rule 8 of the Federal

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Rules of Civil Procedure, the Court directed Plaintiff to file a report setting forth its intention to either

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request the Court to set a scheduling conference, file a motion to strike Pederson’s answer, or renew

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its previous motion for judgment on the pleadings. (Doc. 34). On March 3, 2025, Plaintiff filed a

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renewed motion for judgment on the pleadings and an accompanying request for judicial notice.

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(Docs. 35, 36).

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Legal Standard

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A clerk’s entry of default may be set aside for “good cause.” Fed. R. Civ. P. 55(c). Where

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good cause exists, a district court has the authority to set aside an entry of default sua sponte. See A.F.

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Holdings LLC v. Skoda, No. 2:12-CV-1663 JAM JFM, 2013 WL 460431, at *2 n.1 (E.D. Cal. Feb. 5,

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2013) (citing Judson Atkinson Candies, Inc. v. Latini–Hohberger Dhimantec, 529 F.3d 371, 385–86

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(7th Cir. 2008) & Investcorp Retirement Specialists, Inc. v. Ohno, Civ. No. 07-1304, 2007 WL

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2462122, at *2 (N.D. Cal. Aug. 28, 2007) (“The court may set aside entries of default sua sponte.”)).

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“To determine ‘good cause,’ a court must ‘consider three factors: (1) whether [the party seeking to set

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aside the default] engaged in culpable conduct that led to the default; (2) whether [it] had [no]

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meritorious defense; or (3) whether reopening the default judgment would prejudice the other party.”

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United States v. Signed Pers. Check No. 730 of Yubran S. Mesle (hereinafter, “Mesle”), 615 F.3d 1085,

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1091 (9th Cir. 2010). Although the “good cause” standard is the same that applies to motions to set

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aside default judgment under Rule 60(b), “the test is more liberally applied in the Rule 55(c) context.”

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Id. at 1091 n.1 (internal quotations and citations omitted); see Brady v. United States, 211 F.3d 499,

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504 (9th Cir. 2000) (finding the district court’s discretion is “especially broad” when setting aside

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entry of default, rather than default judgment).

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“[D]efault judgments are generally disfavored; whenever it is reasonably possible, cases should

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be decided on their merits.” Schwab v. Bullock’s Inc., 508 F.2d 353, 355 (9th Cir. 1974); see Falk v.

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Allen, 739 F.2d 461, 463 (9th Cir. 1984) (“[J]udgment by default is a drastic step appropriate only in

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extreme circumstances; a case should, whenever possible, be decided on the merits.”).

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Discussion

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1. Culpable Conduct

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“[A] defendant’s conduct is culpable if he has received actual or constructive notice of the

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filing of the action and intentionally failed to answer.” Mesle, 615 F.3d at 1092 (emphasis in original)

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(quoting TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001), overruled on other

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grounds as stated in Delgado v. Dempsey’s Adult Care Homes, LLC, No. 22-15176, 2023 WL

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3034263, at *1 (9th Cir. Apr. 21, 2023)). “Intentional” conduct in this sense means “willful,

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deliberate, or … [in] bad faith,” rather than neglectful. TCI Grp., 244 F.3d at 697-98. A “[n]eglectful

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failure to answer as to which the defendant offers a credible, good faith explanation negating any

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intention to take advantage of the opposing party, interfere with judicial decision-making, or otherwise

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manipulate the legal process is not ‘intentional.’” Id. at 697.

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Here, Pederson was granted two extensions to his deadline in which to respond to the

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complaint. (Docs. 12, 18). Although the Clerk of the Court filed Pederson’s answer several weeks

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after the extended deadline for his filing, the answer is dated February 4, 2025. (Doc. 33). Despite

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this delay, the Court cannot conclude based on the record that such Pederson’s delay was willful or in

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bad faith. See Falk, 739 F.2d at 464 (declining to find five-month delay in moving to set aside default

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culpable in light of the defendant’s difficulty in obtaining assistance from legal services).

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Additionally, the Court notes that while delayed, Pederson has appeared in this action and has

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displayed a willingness to cooperate. (Doc. 33). Accordingly, the Court finds that this factor weighs

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in favor of setting aside the entry of default.

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2. Meritorious Defense
In order to have an entry of default set aside, a defendant must also present specific facts that

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would constitute a meritorious defense. TCI Grp., 244 F.3d at 700. However, the burden on

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defendant is not extraordinarily heavy. Id. Indeed, a defense is considered meritorious if “there is
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some possibility that the outcome of the suit after a full trial will be contrary to the result achieved by

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the default.” Haw. v. Carpenters' Tr. Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986) (“Stone”); see

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Audio Toys, Inc. v. Smart AV Pty Ltd., No. CV 06-6298-SBA, 2007 WL 1655793, at *3 (N.D. Cal.

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June 7, 2007) (movant “need only assert a factual or legal basis that is sufficient to raise a particular

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defense; the question of whether a particular factual allegation is true is resolved at a later stage.”)

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(citing TCI Grp., 244 F.3d at 700).

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In his answer, Pederson asserts that Plaintiff is obligated to provide him insurance coverage

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unless specific exclusions outlined in the policy apply, as pursuant to state law. He asserts that lack of

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criminal charges negates the application of the exclusions related to criminal acts. (Doc. 33 at 2).

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Given the low burden a party must satisfy to demonstrate entitlement to setting aside default (Stone,

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794 F.2d at 513), the Court finds that this factor weighs in favor of setting aside the entry of default.

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3. Prejudice

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“To be prejudicial, the setting aside of an entry of default must result in greater harm than

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simply delaying the resolution of the case.” TCI Grp., 244 F.3d at 701 (quoting Falk, 739 F.2d at

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463); Thompson v. Am. Home Assur. Co., 95 F.3d 429, 433-34 (6th Cir. 1996). “Merely being forced

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to litigate on the merits cannot be considered prejudicial” for purposes of setting aside the default.

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TCI Grp., 244 F.3d at 701. Rather, the standard is “whether [a plaintiff’s] ability to pursue his claim

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will be hindered.” Falk, 739 F.2d at 463; see Thompson, 95 F.3d at 433-34 (to be considered

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prejudicial, “the delay must result in tangible harm such as loss of evidence, increased difficulties of

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discovery, or greater opportunity for fraud or collusion”).

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Prejudice such as loss of a “quick victory” is insufficient to justify denial of relief. Bateman v.

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U.S. Postal Serv., 231 F.3d 1220, 1225 (9th Cir. 2000). “Having to try a case on the merits is not by

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itself sufficient prejudice” - the delay must result in tangible harm, such as loss of evidence or more

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difficult discovery. Audio Toys, 2007 WL 1655793, at *3. Here, the delay was a relatively short three

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weeks from the date of the extended deadline for Pederson to respond and the date on which the

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answer was received and filed. Pederson’s answer was filed on the same day default was entered and

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there is no indication of loss of evidence or harm otherwise. Thus, the Court finds that this factor

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weighs in favor of setting aside the entry of default.
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On balance, given the disfavor generally accorded to resolving actions on default and given

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that the Mesle factors weigh in Pederson’s favor, the Court finds that default should be set aside.

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Conclusion and Order

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For the forgoing reasons, it is HEREBY ORDERED that entry of default as to Defendant

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James Pederson (Doc. 31) is set aside.

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IT IS SO ORDERED.

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Dated:

March 4, 2025

___________________

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UNITED STATES MAGISTRATE JUDGE

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