Super Mario Plumbing et al v. Belodedov et al

Filing 37

FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Allison Claire on 11/14/2018 RECOMMENDING that 28 Motion to Set Aside Default be granted, that 25 Motion for Default Judgment be denied as moot, and that defendants be ordered to file a proper answer to the complaint within 14 days of entry of the District Judge's order on this matter. Referred to Judge Troy L. Nunley. Objections due within 14 days after being served with these findings and recommendations. (Huang, H)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

FOR THE EASTERN DISTRICT OF CALIFORNIA

10
11

SUPER MARIO PLUMBING, et al.,

12
13
14
15

No. 2:17-cv-02545 TLN AC

Plaintiffs,
v.

FINDINGS AND RECOMMENDATIONS

OLEG BELODEDOV, et al.,
Defendants.

16
17

This matter is before the court on plaintiffs’ motion for default judgment (ECF No. 25)

18

and defendants’ motion to set aside default (ECF No. 28). These motions were referred to the

19

undersigned pursuant to E.D. Cal. R. 302(c)(19). Plaintiffs and defendants attended a hearing on

20

November 14, 2018 at 10:00 a.m. ECF No. 36. For the reasons stated below, the court

21

recommends defendants’ motion to set aside default be GRANTED and plaintiffs’ motion for

22

default judgment be DENIED as moot.

23
24

I.

Background

Plaintiffs, Super Mario Plumbing and Dimitar Dechev, filed this action on December 1,

25

2017. ECF No. 1. Defendants were served on December 6, 2017. ECF Nos. 3, 4. Plaintiffs filed

26

a first amended complaint on December 13, 2017. ECF No. 8. On December 18, 2017, plaintiffs

27

filed an ex parte motion for a temporary restraining order and preliminary injunction. ECF No. 9.

28

On December 27, 2017, District Judge Troy L. Nunley denied a TRO, set a briefing schedule for
1

1

the motion for preliminary injunction, and ordered plaintiffs to serve defendants with a copy of

2

the order within 3 days. ECF No. 11. Judge Nunley set a hearing for January 17, 2018. Id. On

3

January 8, 2018, defendants Oleg Belodedov and Petru Verhovetchi, acting in pro se, filed a letter

4

denying the accusations in the complaint and stating “[a]s all of these accusations are false, we do

5

not see a point of going to court – it is a waste of time and energy. We have families to provide

6

for and we will not waste our time answering to false accusations and inaccurate information.”

7

ECF No. 13 at 1. The date and address on the letter indicates that it had originally been sent to

8

plaintiffs’ counsel shortly after the lawsuit was filed, on December 12, 2017. Id. On January 11,

9

2018, Judge Nunley took the matter under submission on the papers, and vacated the hearing

10

date. ECF No. 16. On February 14, 2018, he denied plaintiffs’ request for a preliminary

11

injunction. ECF No. 21.

12

On January 30, 2018, plaintiffs applied for entry of default against all defendants. ECF

13

Nos. 17, 18, 19. On January 31, 2018, the Clerk of Court entered default against all three

14

defendants. ECF No. 20. On August 1, 2018, six months after entry of default, Judge Nunley sua

15

sponte issued a minute order noting the lack of action in this case following the clerk’s entry of

16

default, and ordered plaintiffs’ counsel to file a declaration on the status of this case or file a

17

motion for default judgment. ECF No. 22. On August 14, 2018, plaintiffs filed a motion for

18

default judgment and noticing the hearing before District Judge Nunley. ECF No. 23. Pursuant

19

to Local Rule 302(c)(19), Judge Nunley vacated the motion with instructions to bring it before the

20

Magistrate Judge. ECF No. 24. On August 31, 2018, plaintiffs filed the present motion for

21

default judgment. ECF No. 25. On September 10, 2018, counsel appeared on behalf of

22

defendants. ECF No. 27. That same day, defendants moved to set aside default. ECF No. 28.

23

Now pending before the court are plaintiffs’ motion for default judgment (ECF No. 25)

24

and defendants’ motion to set aside the entries of default (ECF No. 28).

25

II.

Analysis

26

A.

27

The Federal Rules provide that a “court may set aside an entry of default for good cause.”

28

Legal Standard

Fed. R. Civ. P. 55(c). To determine “good cause,” a court must “consider[ ] three factors: (1)
2

1

whether [the party seeking to set aside the default] engaged in culpable conduct that led to the

2

default; (2) whether [it] had [no] meritorious defense; or (3) whether reopening the default

3

judgment would prejudice” the other party. See Franchise Holding II, LLC. v. Huntington

4

Restaurants Grp., Inc., 375 F.3d 922, 925–26 (9th Cir. 2004). This standard, which is the same as

5

the one used to determine whether a default judgment should be set aside under Rule 60(b), is

6

disjunctive, such that a finding that any one of these factors is true is sufficient reason for the

7

district court to refuse to set aside the default. See id. Crucially, however, “judgment by default

8

is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be

9

decided on the merits.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984); see also Latshaw v.

10

Trainer Wortham & Co., Inc., 452 F.3d 1097, 1103 (9th Cir. 2006); Speiser, Krause & Madole

11

P.C. v. Ortiz, 271 F.3d 884, 890 (9th Cir. 2001); TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d

12

691, 695–96 (9th Cir. 2001), as amended on denial of reh’g and reh’g en banc (May 9, 2001).

13

Additionally, “[w]hile the same test applies for motions seeking relief from default judgment

14

under both Rule 55(c) and Rule 60(b), the test is more liberally applied in the Rule 55(c) context.”

15

Cracco v. Vitran Exp., Inc., 559 F.3d 625, 631 (7th Cir. 2009) (quotations and citations omitted).

16

This is because in the Rule 55 context there is no interest in the finality of the judgment with

17

which to contend. See Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir.

18

1986).

19

B.

20

Entry of default in this case should be set aside because it is clear that (1) defendants did

There is Ample Good Cause to Set Aside Default in This Case

21

not engage in culpable conduct that lead to the default; (2) defendants have potentially

22

meritorious defenses which they are entitled to litigate; and (3) setting aside default would not

23

prejudice plaintiffs. See Franchise Holding II, LLC, 375 F.3d at 925–26. First, the docket itself

24

makes clear that, prior to retaining counsel, defendants believed they were doing what they

25

needed to do to respond to this action. Although their response was misguided in that it indicated

26

they would not defend the case on the grounds that they believed it was meritless, defendants did

27

in fact file documents responsive to plaintiffs’ motion for a temporary restraining order. ECF No.

28

13. Defendants Belodedov and Verhovetchi have declared that when they received Judge
3

1

Nunley’s orders denying plaintiffs’ motion for a preliminary injunction, they believed they had

2

nothing left to do in this case. ECF Nos. 28-3, 28-4. When defendants became aware that the

3

case was not in fact over, they retained counsel. ECF No. 27. Defendants’ unfamiliarity with the

4

legal system does not constitute culpable conduct, especially in light of the fact that they have

5

now retained an attorney and are prepared to fully participate in this action.

6

Defendants have articulated multiple potential defenses that deserve to be heard in this

7

case, including the theories that defendants Belodedov and Verhovetchi are wrongfully named,

8

and that this court lacks jurisdiction. ECF No. 28-1 at 2, 3.

9

Finally, lifting the entry of default will not prejudice defendants. To the extent plaintiffs

10

argue they are harmed by delay to this case, see ECF No. 31 at 15, their argument is

11

unpersuasive. Plaintiffs, not defendants, are the ones who waited seven months to move for entry

12

of default judgment after default was entered; the major delay in this case can only reasonably be

13

attributed to plaintiffs. ECF Nos. 20, 25. Once plaintiffs made a proper motion for entry of

14

default judgment, defendants swiftly retained counsel and moved to set aside default. ECF No.

15

28. The fact that counsel was retained and the motion was made within 10 days of plaintiffs’

16

motion clearly demonstrates that defendants did not unduly delay.1 There is no prejudice to

17

defendants if default is set aside.

18

For all these reasons, this case does not present circumstances which overcome the

19

general policy favoring adjudication on the merits. Accordingly, the motion to set aside default

20

should be granted.

21

C.

22

Because defendants’ motion to set aside default judgment should be granted, plaintiffs’

23

Plaintiffs’ Motion for Default Judgment is Moot

motion for default judgment (ECF No. 25) must necessarily be denied as moot.

24

D.

25

In their motion to set aside default, defendants argue that the court should construe their

26
27
28

1

Defendants Must Answer

Accordingly, defendants’ motion is not untimely, contrary to plaintiffs’ suggestion. ECF No.
31 at 15. Fed. R. Civ. P. 55(c); Meadows v. Dominican Republic, 817 F.2d 517, 521 (9th Cir.
1987)(motion for relief from default judgment timely when made less than one year after
judgment was entered).
4

1

opposition to plaintiffs’ motion for a temporary restraining order, ECF No. 13, as an answer. In

2

light of counsel’s appearance in this case, the court should decline to do so and instead order

3

counsel to file a proper answer within 14 days of entry of District Judge Nunley’s final order on

4

these motions.

5

III.

6

Conclusion

For the reasons set forth above, IT IS HEREBY RECOMMENDED defendants’ motion to

7

set aside default (ECF No. 28) be GRANTED and plaintiffs’ motion for default judgment (ECF

8

No. 25) be DENIED as moot. Further, it is recommended that defendants be ordered to file a

9

proper answer to the complaint within 14 days of entry of the District Judge’s order on this

10
11

matter.
These findings and recommendations are submitted to the United States District Judge

12

assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within fourteen days

13

after being served with these findings and recommendations, any party may file written

14

objections with the court and serve a copy on all parties. Id.; see also Local Rule 304(b). Such a

15

document should be captioned “Objections to Magistrate Judge’s Findings and

16

Recommendations.” Any response to the objections shall be filed with the court and served on all

17

parties within fourteen days after service of the objections. Local Rule 304(d). Failure to file

18

objections within the specified time may waive the right to appeal the District Court’s order.

19

Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153, 1156-57

20

(9th Cir. 1991).

21

DATED: November 14, 2018

22
23
24
25
26
27
28
5