Wirum v. 0713401 B.C. Ltd et al

Filing 106

ORDER re: Entry of Default and Order to Show Cause. Signed by Judge Samuel Conti on 12/17/2012. (sclc2, COURT STAFF) (Filed on 12/17/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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PLUSFIVE CLAIMS, LLC,
Plaintiff,

United States District Court

For the Northern District of California

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v.

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0713401 B.C. LTD, a foreign
entity, SHARRIE CUTSHALL, an
individual,

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Defendants.
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) Case No. 10-cv-1561-SC
)
) ORDER RE: ENTRY OF DEFAULT
) AND ORDER TO SHOW CAUSE
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I.

INTRODUCTION
For the reasons set forth below, the Court enters the default

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of Defendant Sharrie Cutshall in the above-captioned matter.

The

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Court will separately enter judgment, jointly and severally,

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against Ms. Cutshall and her co-defendant 0713401 B.C. LTD (the

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"Numbered Entity") (collectively, "Defendants") in the amount of

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$854,110.81, plus prejudgment interest, pending Plaintiff's

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submission of a calculation of the prejudgment interest.

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pending Order to Show Cause why sanctions should not be imposed

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against Ms. Cutshall for her failure to comply with the Court's

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orders concerning ex parte communications, the Court declines to

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impose sanctions at this time.

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///

As to the

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II.

BACKGROUND
This case is an action to recover money allegedly owed to a

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ECF No. 1 ("Compl.").1

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Chapter 7 bankruptcy trustee by Defendants.

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The Numbered Entity is alleged to be Ms. Cutshall's corporate alter

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ego.

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interest, and costs, and seeks to make Defendants jointly and

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severally liable.

The Complaint seeks $854,110.81, prejudgment

Id. at 3.

Defendants, acting through counsel, moved to dismiss the

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Id. ¶¶ 18-21.

Complaint on January 14, 2011.

ECF No. 29.

On March 14, 2011, the

United States District Court

For the Northern District of California

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Court denied the motion.

ECF No. 40 ("Order Denying MTD").

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March 29, 2011, both Defendants answered the Complaint.

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On

41, 42.

ECF Nos.

On May 25, 2012, the Court permitted counsel for Defendants to

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withdraw after they presented credible evidence that Ms. Cutshall

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had ceased to pay them or maintain contact with them.

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At the Court's behest, former defense counsel notified Ms. Cutshall

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multiple times that her failure to appear or defend in the action

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would result in her default; that she faced an alter ego

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allegation; and that, while she could appear pro se, the Numbered

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Entity could not and thus required representation by counsel to

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avoid default.

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Court also set the case for trial.

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pretrial conference for September 7, 2012 and trial for September

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17, 2012.

See ECF No. 86 ("Sept. 7 Order").
ECF No. 71.

ECF No. 70.

On May 25, the

The Court set the

Id.

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The bankruptcy trustee was Andrea A. Wirum, for the estate of
PlusFive Holdings, L.P. The trustee assigned the estate's interest
to Plaintiff PlusFive Claims, LLC, pursuant to an Order of the
United States Bankruptcy Court entered May 4, 2010. ECF No. 6
("RJN") Ex. 1. On August 25, 2010, this Court substituted PlusFive
Claims, LLC as Plaintiff in place of the bankruptcy trustee. ECF
No. 13.
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On September 7, 2012, the Court held the pretrial conference.

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Neither Ms. Cutshall nor counsel for either Defendant appeared.

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Sept. 7 Order at 2.

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advise Ms. Cutshall once more that her failure to appear for trial

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or the Numbered Entity's failure to appear for trial through

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counsel would result in their default.

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The Court ordered former defense counsel to

Id. at 2-3.

On the morning of September 17, 2012, mere hours before trial

Cutshall filed for Chapter 7 bankruptcy in Salt Lake City, Utah.

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United States District Court

was scheduled to begin before this Court in San Francisco, Ms.

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For the Northern District of California

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Ms. Cutshall informed the Court of this development by a letter

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filed in the Court's electronic case filing system ("ECF").

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No. 91.

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pursuant to 11 U.S.C. § 362(a) and also exercised its discretion to

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stay the case as to the Numbered Entity.

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set a status conference for March 2013.

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ECF

The Court stayed the instant action as to Ms. Cutshall

ECF No. 93.

The Court

Id.

On October 24, 2012, however, Plaintiff notified the Court

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that Ms. Cutshall's bankruptcy case had been dismissed due to Ms.

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Cutshall's failure to comply with the pre-filing requirements of 11

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U.S.C. § 109(h).

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Defendants and set trial for November 15, 2012 and reminding Ms.

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Cutshall once more that her failure to appear would result in her

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default.

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ECF No. 94.

The Court lifted the stay as to both

See ECF No. 97.

On November 14, 2012, the day before the rescheduled trial,

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Ms. Cutshall again filed for Chapter 7 bankruptcy in Utah, and

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again informed the Court informally and ex parte by email.

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Order at 2.

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for only thirty days, pursuant to 11 U.S.C. § 362(c)(3)(A).

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statute provides for a stay of only thirty days when a person files

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The Court stayed the case as to Ms. Cutshall only, and

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That

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for bankruptcy for the second time in a twelve-month period,

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subject to a narrow exception not relevant here.
On November 15, 2012, the Court held trial as to the Numbered

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Entity.

No one appeared on its behalf and its default was entered.

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Id. at 3.

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the thirty-day bankruptcy stay was set to lift): (1) a prove-up

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hearing as to the Numbered Entity and (2) a status conference as to

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Ms. Cutshall.

The Court set two matters for December 17, 2012 (the day

Id. at 4.

Later on November 15, Ms. Cutshall, again communicating ex

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United States District Court

For the Northern District of California

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parte, emailed the Court another letter.

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Cutshall's letter to contain a motion to continue the December 17,

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2012 hearing, and denied the motion.

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Ms. Cutshall to refrain from further ex parte communication with

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the Court and to file her previous ex parte letters in ECF by noon

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Pacific time on November 30, 2012.

Id.

The Court construed Ms.

The Court also ordered

Id. at 3.

The November 30 deadline came and went without Ms. Cutshall

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filing anything.

However, on December 7, 2012, Ms. Cutshall sent

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the Court yet another ex parte letter, in which she again sought a

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continuance of the December 17 hearing, purportedly because her son

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was about to leave on a two-year mission for the Church of Jesus

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Christ of Latter-Day Saints.

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to the Court that she did not wish to let Plaintiff's counsel know

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the reasons why she sought a continuance because the reasons were

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personal and private.2

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request for a continuance.

In her letter, Ms. Cutshall explained

The Court again denied Ms. Cutshall's
The Court also construed her letter as

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The attorney who specially appeared on Ms. Cutshall's behalf at
the December 17 hearing, as explained infra, mentioned Ms.
Cutshall's reasons for seeking a continuance in open court, so the
Court takes Ms. Cutshall to have waived her previous objections to
making those reasons known.
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a request for relief from the Court's order that she desist from ex

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parte communication, and denied that request as well.

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Order.

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she should not be sanctioned for her continued failure to comply

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with the Court's orders regarding ex parte communication and

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advised her that the sanction could include a fine.

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set the OSC hearing for December 17, the same time as the prove-up

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hearing and status conference.

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See Dec. 7

Lastly, the Court ordered Ms. Cutshall to show cause why

Id.

The Court

Id. at 3.

On December 17, 2012, the Court conducted: (1) the prove-up

United States District Court

For the Northern District of California

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hearing on damages as to the Numbered Entity; (2) the status

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conference as to Ms. Cutshall; and (3) the OSC hearing.

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attorney appeared at the hearing on behalf of Ms. Cutshall.

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attorney represented that Ms. Cutshall had retained her for the day

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of December 17 only, and solely for the limited purposes of (1)

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explaining Ms. Cutshall's reasons for seeking a continuance of the

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December 17 hearing and (2) representing Ms. Cutshall for the OSC

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hearing.

An
The

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III. DISCUSSION
Federal Rule of Civil Procedure authorizes entry of default

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against a party who "has failed to plead or otherwise defend" when

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"that failure is shown by affidavit or otherwise."

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55(a) (emphases added).

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answer to the Complaint, she has failed to "otherwise defend," as

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shown by her repeated failures to appear, either in person or

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through counsel authorized to represent her on the merits of her

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case (as opposed to the purely collateral matters in which the

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attorney retained for December 17 represented her).

Fed. R. Civ. P.

Here, although Ms. Cutshall has filed an

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Accordingly,

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the Court ORDERS the Clerk to enter the default of Defendant

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Sharrie Cutshall.

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Further, since default has been entered against both

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Defendants, the Court deems Ms. Cutshall to have admitted the

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Complaint's allegations, including the allegations that the

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Numbered Entity is Ms. Cutshall's corporate alter ego.

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TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir.

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1987) ("The general rule of law is that upon default the factual

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allegations of the complaint, except those relating to the amount

United States District Court

For the Northern District of California

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of damages, will be taken as true.").

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See

Order denying Defendants' motion to dismiss:

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As the Court recited in its

The Complaint alleges that prior to the
bankruptcy proceedings, PlusFive Holdings and
Numbered
Entity
entered
into
two
loan
agreements under which PlusFive Holdings loaned
Numbered Entity $1,404,110.81; the Complaint
alleges that $854,110.81 of this amount remains
unpaid.
Compl. ¶¶ 10-16.
Cutshall is also
named as a defendant individually under an
alter ego theory of liability. Id. ¶ 18. The
Complaint alleges that real property owned by
Numbered Entity serves as Cutshall's personal
residence; that Cutshall exercises complete
control over Numbered Entity; that there is a
unity
of
interest
and
ownership
between
Numbered Entity and Cutshall; that Cutshall
withdrew funds from Numbered Entity's bank
accounts for her personal use; and that
Numbered Entity is a "mere shell and sham
without
capital,
assets,
stock,
or
stockholders." Id. ¶¶ 17-20.

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Order Denying MTD at 2.
The Court construes Plaintiff's appearance at the December 17

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hearing as Plaintiff's application for default judgment pursuant to

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Federal Rule of Civil Procedure 55(b)(2).

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application and will separately enter default judgment against both

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The Court GRANTS the

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Defendants.3

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December 17 hearing as to the amount of damages.

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determines that the evidence justifies the Complaint's request for

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$854,110.81, plus prejudgment interest.

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money judgment against Defendants, jointly and severally, after

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receiving and reviewing Plaintiff's calculation of prejudgment

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interest.

The Court

The Court will enter a

As to the pending OSC regarding sanctions, the Court declines

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The Court received documentary evidence at the

to impose a sanction on Ms. Cutshall.

Though Ms. Cutshall sent

United States District Court

For the Northern District of California

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counsel for the limited purpose of representing her at the OSC

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hearing, Ms. Cutshall is, in essence, an unrepresented party, a

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fact which the Court gives considerable weight.

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the Court has entered Ms. Cutshall's default and this litigation is

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complete but for the entry of final judgment, any deterrent effect

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that sanctions might have is largely moot.

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that Plaintiff's request that its counsel's attorney fees be

Moreover, because

The Court also notes

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In doing so, the Court is mindful of the Eitel factors. See
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In this
case, the possibility of prejudice to Plaintiff if default judgment
does not issue is high, given the difficulty Plaintiff has already
experienced in prosecuting the case to the default stage, despite
the absence of any substantive dispute. Plaintiff's substantive
claim has merit and the complaint is legally sufficient, as
demonstrated by its already having survived a motion to dismiss.
The sum of money at stake in the action -- roughly $847,000 -- is
high, but it is an amount amenable to documentary proof, and it
represents only a fraction of the total indebtedness of Defendants
to the original bankruptcy trustee, which exceeded $1.4 million.
See Compl. Exs. A-C. There is no dispute as to the material facts
of the case, which are established by admissions Ms. Cutshall made
in the underlying bankruptcy proceeding. As to the sixth Eitel
factor, Defendants' default is due to neglect, but the neglect, for
the reasons explained herein, is not excusable. Lastly, the policy
in favor of decisions on the merits does not overcome Plaintiff's
and the judicial system's strong interest in speedy resolution of
this case, which, despite the absence of any substantive dispute,
has been drawn out beyond reason by Ms. Cutshall's dilatory
tactics.
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awarded as part of a sanction is not well-taken.

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counsel acknowledged at the hearing, the request seeks to obtain an

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attorney fee award that is otherwise unavailable due to the absence

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of a contract or statute that would entitle Plaintiff to such an

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award.

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understandable, but the OSC dealt only with Ms. Cutshall's ex parte

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communications with the Court.

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parte communications and Plaintiff's attorney fees, if any, is not

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substantial enough to warrant imposing Plaintiff's attorney fees as

United States District Court

For the Northern District of California

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As Plaintiff's

Plaintiff's desire to recover its attorney fees is

The connection between those ex

a sanction.

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IV.

CONCLUSION
The Court ORDERS the Clerk to enter the default of Defendant

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Sharrie Cutshall.

The Court shall separately enter default

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judgment against Ms. Cutshall and Defendant 0713401 B.C. LTD,

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jointly and severally, in the amount of $854,110.81, plus

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prejudgment interest in an amount to be ascertained.

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declines to impose a sanction against Ms. Cutshall in connection

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with the Court's December 10, 2012 Order to Show Cause.

The Court

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IT IS SO ORDERED.

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Dated: December 17, 2012
UNITED STATES DISTRICT JUDGE

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