Crosthwaite et al v. Aposhian Excavating Company, Inc.

Filing 53

ORDER Denying 42 Defendant's Motion to Set Aside Default and Referring 36 Plaintiff's Motion for Default Judgment to Magistrate Judge for Report and Recommendation. Signed by Judge Thelton E. Henderson on 04/10/14. (tehlc2, COURT STAFF) (Filed on 4/10/2014)

1

UNITED STATES DISTRICT COURT

2

NORTHERN DISTRICT OF CALIFORNIA

3
4

F.G. CROSTHWAITE, et al.,
Plaintiffs,

5
6
7
8

v.
APOSHIAN EXCAVATING
COMPANY, INC.,
Defendant.

9

Case No. 13-cv-00363-TEH
ORDER DENYING DEFENDANT’S
MOTION TO SET ASIDE DEFAULT
AND REFERRING MOTION FOR
DEFAULT JUDGMENT TO
MAGISTRATE JUDGE FOR
REPORT AND
RECOMMENDATION

10

United States District Court
Northern District of California

11

This matter came before the Court on March 31, 2014, on the motion of Defendant

12

Aposhian Excavating Company, Inc. (“Defendant”) to set aside entry of default. Plaintiffs

13

had previously moved for entry of default judgment, which the Court took under

14

submission pending resolution of the instant motion. In light of the written and oral

15

arguments made by the parties, the Court DENIES Defendant’s motion to set aside default,

16

and REFERS the pending motion for entry of default judgment to a Magistrate Judge for a

17

Report and Recommendation.

18
19

BACKGROUND

20

Plaintiffs – which are various employee benefit plans as defined by the Employee

21

Retirement Income Security Act of 1974 (“ERISA”) § 3(3), 29 U.S.C. § 1002(3), and the

22

Operating Engineers Local Union No. 3 of the International Union of Operating Engineers,

23

AFL-CIO, see generally Complaint ¶ 1-2 – entered into a collective bargaining agreement

24

with Defendant, a construction company that employed workers and paid for their fringe

25

benefits through the plans. Id. ¶¶ 10-11. On January 25, 2013, Plaintiffs filed a complaint

26

pursuant to ERISA § 502(g)(2)(A), 29 U.S.C. § 1132(g)(2)(A), alleging that Defendant

27

violated the collective bargaining agreement by failing to make regular and timely

28

contributions to the plans; Plaintiffs sought, inter alia, payment of the delinquent

1

contributions, liquidated damages and attorneys’ fees and costs, as provided for in the

2

collective bargaining agreement. Id. at Prayer ¶ 2. As early as October 25, 2012, Plaintiffs

3

demanded payment of delinquent fringe benefit contributions owed for work performed by

4

Defendant’s employees for certain months in 2011 and 2012. Jan. 13, 2014 Nanda Decl. ¶

5

3, Docket No. 38. Plaintiffs filed suit when they were unable to collect payments from or

6

otherwise negotiate an agreement with Defendant based on conversations with Defendant’s

7

President, David Aposhian (“Aposhian”). See id. ¶¶ 3-12. In contrast, Aposhian claims

8

that Plaintiffs did not negotiate in good faith, would increase the figures of previously

9

agreed upon oral settlements by 30% to 50% in follow-up written correspondence, and
generally demanded growing attorneys’ fees. Mar. 12, 2014 Aposhian Decl. ¶ 2, Docket

11
United States District Court
Northern District of California

10

No. 50-1.

12

After filing suit on January 25, 2013, Plaintiffs engaged in numerous attempts to

13

serve Defendant with the Summons and Complaint, and to reach a settlement. These

14

attempts failed. The Court details this history because it is relevant to whether good cause

15

exists to set aside default. On February 4, 2013, a paralegal for Plaintiffs’ counsel emailed

16

and mailed Aposhian a combined Notice and Acknowledgment of the Summons and

17

Complaint and Judgment Pursuant to Stipulation setting forth a payment plan. Jan. 13,

18

2014 Nanda Decl. ¶ 17 & Ex. N. Aposhian indicated that he would agree to acknowledge

19

service of the Summons and Complaint, and sign the Stipulation on behalf of Defendant,

20

and as an individual guarantor, but he did not do so. Id. ¶¶ 18-19. On February 20, 2013,

21

when Aposhian had not returned the signed documents, Plaintiffs’ counsel provided the

22

Summons, Complaint, related documents, and Stipulation to a process server with

23

instructions to serve the documents upon Defendant. Id. ¶ 20. On March 1, 2013,

24

Aposhian emailed Plaintiffs’ counsel’s paralegal and stated that he “received the papers

25

and will return them asap.” Id. ¶ 21 & Ex. Q. As discussed below, the process server was

26

unable to find and serve Defendant, so Aposhian presumably received the documents by

27

different means, such as from the emails Plaintiffs’ counsel sent. On March 14, 2013,

28

Aposhian emailed Plaintiffs’ counsel’s paralegal stating that he had called and emailed
2

1

Plaintiffs’ counsel with questions about the payment plan but she refused to respond; he

2

also stated that his attorney was reviewing the Stipulation, and as soon as he was finished

3

reviewing, Aposhian would be in touch. Id. ¶ 23 & Ex. R. Plaintiffs never received the

4

signed Stipulation from Aposhian, and he refused to formally acknowledge receipt of the

5

Summons and Complaint. Id. ¶ 24.

6

Meanwhile, the process server made seven attempts to serve Defendant at the
address of record listed on the Utah Secretary of State website, but without success. Id. ¶

8

25 & Ex. S. Plaintiffs then retained a private investigator to locate and personally serve

9

Defendant. The investigator advised Plaintiffs’ counsel that the address of record for

10

Defendant designated with the Utah Secretary of State for service of process was not

11
United States District Court
Northern District of California

7

accurate, as Aposhian had relocated from that address some time ago. Plaintiffs’

12

investigator identified several other potential addresses for Defendant, but was unable to

13

confirm the addresses or otherwise locate Defendant. Id. ¶¶ 26-27. Plaintiffs’ counsel

14

avers that she then asked the Union representative in that area to try to find an address for

15

Aposhian, but the representative too was unsuccessful. Mar. 5, 2014 Stafford Decl.

16

¶ 9, Docket No. 48-3. On June 4, 2013, Plaintiffs moved for permission to serve

17

Defendant by publication. Docket Nos. 15-17. The Court denied this motion because it

18

was unclear at that time whether the proposed newspaper was one of “general circulation,”

19

as required by the Utah statute governing service by publication. Docket No. 18.

20

Plaintiffs’ counsel avers that she told Aposhian that Plaintiffs would seek to serve him by

21

publication, and that this “upset and concerned” him, but that he still “would not accept

22

service.” Mar. 5, 2014 Stafford Decl. ¶ 9.

23

In mid-July, 2013, Plaintiffs’ attorneys spoke with Aposhian by telephone in an

24

attempt to resolve the matter and to obtain his address. Id. ¶ 10. Plaintiffs’ counsel avers

25

that she “asked him repeatedly during [the] conversation to provide his address, and he

26

repeatedly ignored [her] and/or changed the subject,” and opines that “[t]here was no doubt

27

in [her] mind that he was intentionally avoiding service, although again, he had advised

28

that he would accept.” Id. She avers that Aposhian then gave her an address in Heber,
3

Utah, for an office building for 3 different businesses, one of which was his wife’s, and

2

said that “the receptionist could get mail for him” and “accept mail,” although Aposhian

3

“refused to agree that the receptionist could accept service for Defendant.” Id. Plaintiffs

4

did not attempt to serve Defendant here because, according to Plaintiffs’ counsel, “there

5

was no way that [she] was going to allow improper and/or questionable service of

6

process.” Id. Aposhian contests this account. He avers that he “told Plaintiffs’ attorneys

7

[he] could be served with the Summons and Complaint at [the Heber City address] where a

8

receptionist is available Monday through Friday, 9:00 a.m. to 5:00 p.m,” but neither he nor

9

the receptionist were ever served there. Feb. 19, 2014 Aposhian Decl. ¶ 2, Docket No. 42-

10

1. He further avers that “[w]hen [he] gave Plaintiffs’ counsel the address of [his] office in

11
United States District Court
Northern District of California

1

Heber City, Utah as a location where [he] could receive the Summons and Complaint, [he]

12

informed them that the receptionist there worked for both [his] wife and [him], not just

13

[his] wife.” Mar. 12, 2014 Aposhian Decl. ¶ 4, Docket No. 50-1.

14

On August 27, 2013, Plaintiffs again moved for service by publication. Docket

15

Nos. 21-23. The Court granted the motion and authorized service by publication on

16

September 6, 2013. Docket No. 25. Pursuant to the Court’s order, Plaintiffs published the

17

summons in the Salt Lake Tribune, a newspaper of general circulation published in the

18

State of Utah, once a week for four weeks beginning on September 13, 2013, with the final

19

publication on October 4, 2013. Docket No. 26.

20

Aposhian wrote a letter to the Court, dated October 20, 2013, stating that he was in

21

the process of paying Plaintiffs, had made a “good faith” payment of $12,883.91, and was

22

looking to secure local counsel, and asked the Court to “give [him] time to secure local

23

counsel to defend [him] before granting a judgment against [his company].” Docket No.

24

31 (filed Oct. 30, 2013). On October 31, 2013, Plaintiffs moved for entry of default,

25

Docket No. 30, which the Clerk granted on November 5, 2013. Docket No. 32.

26

Notwithstanding Aposhian’s letter to the Court, Defendant thereafter failed to file

27

an answer, enter the appearance of an attorney, move to set aside default, or otherwise

28

make any contact with the Court for the next three-and-a-half months. On January 13,
4

1

2014, Plaintiffs moved for entry of default judgment. Docket No. 36. Defendant did not

2

timely oppose the motion. However, five days before the February 24, 2014 hearing on

3

the motion for default judgment, Defendant filed the instant motion to set aside default,

4

Docket No. 42, and filed an untimely opposition to the pending motion for default

5

judgment. Docket No. 44. At the February 24, 2014 hearing, the Court took the motion

6

for default judgment under submission pending resolution of the instant motion to set aside

7

default.

8
9

LEGAL STANDARD
When a party against whom a judgment for affirmative relief is sought has failed to

10

United States District Court
Northern District of California

11

plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk

12

must enter the party’s default. Fed. R. Civ. P. 55 (a).1 In determining whether to set aside

13

default for good cause under Rule 55(c), the court must consider three factors: (1) whether

14

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

15

default; (2) whether it had no meritorious defense; or (3) whether setting aside the default

16

would prejudice the other party. United States v. Signed Pers. Check No. 730 of Yubran S.

17

Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010). “This standard, which is the same as is used

18

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

19

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

20

the district court to refuse to set aside the default.” Id. Importantly, “judgment by default

21

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

22

possible, be decided on the merits.” Id. at 1091.

23
24

DISCUSSION

25

A.

26

As a preliminary matter, Defendant raises several procedural challenges to the

Entry of Default Was Procedurally Proper.

27
28

1

All references to “Rule” hereinafter refer to the Federal Rules of Civil Procedure.
5

1

Clerk’s entry of default under Rule 55(a), none of which have merit.

2

1.

Service of Process.

3

Defendant argues that the default is void due to a defect in service of process. Mot.

4

at 3, Docket No. 42-6. A default or default judgment can be rendered void by failure to

5

properly serve a defaulting defendant. Mason v. Genisco Tech. Corp., 960 F.2d 849, 851

6

(9th Cir. 1992). Defendant, as the party moving to set aside default on the basis of

7

improper service, bears the burden to prove that he is entitled to relief. Cf. E.C. v. Internet

8

Solutions for Bus. Inc., 509 F.3d 1161, 1166 (9th Cir. 2007) (burden on defendant moving

9

to vacate default judgment). The Court finds that service by publication was proper here.
Rule 4(h) governs service of process on corporations. It provides that a corporation

11
United States District Court
Northern District of California

10

may be served, inter alia, pursuant to the law of the state where the district court is located

12

– here, California – or where service is to be made – here, Utah. See Fed. R. Civ. P.

13

4(h)(1)(A) (referring to service under Rule 4(e)(1), which provides for service pursuant to

14

state law). California law provides that a summons may be served by publication if, upon

15

affidavit, a court is satisfied “the party to be served cannot with reasonable diligence be

16

served in another manner specified” by statute. Cal. Civ. Proc. Code § 415.50. Utah law

17

provides for service by publication on several grounds, including where, upon affidavit,

18

“the identity or whereabouts of the person to be served are unknown and cannot be

19

ascertained through reasonable diligence.” Utah R. Civ. P. 4(d)(4)(A). Here, Plaintiffs

20

moved to serve Defendant by publication under both California and Utah law. Docket No.

21

22. Plaintiffs’ counsel averred in the declaration in support of the motion to serve by

22

publication that: Aposhian, as President of Defendant, had received via email the Notice

23

and Acknowledgment of Receipt of the Summons and Complaint, and a draft stipulated

24

settlement, but had refused to acknowledge service of process; the process server hired by

25

Plaintiffs to serve Defendant at the address designated by the Utah Secretary of State for

26

service of process tried unsuccessfully to serve Defendant seven times; Plaintiffs hired a

27

private investigator who advised that the address provided for Defendant was no longer

28

accurate, and could not confirm any other potential addresses for Aposhian; Plaintiffs’
6

1

counsel, in fact, spoke to Aposhian as late as August 13, 2013, advising him that Plaintiffs

2

would seek permission from the Court to serve by publication; and Plaintiffs’ counsel

3

again sent him a Notice and Acknowledgment of Receipt of the Summons and Complaint

4

via email, but he neither responded nor executed the Notice and Acknowledgment of

5

Receipt. Aug. 27, 2013 Nanda Decl., ¶¶ 3-7, 11, Docket No. 23. In light of this evidence,

6

the Court found on September 6, 2013, that Defendant could not be served with reasonable

7

diligence in any other manner set forth under the Federal Rules of Civil Procedure,

8

California Code of Civil Procedure sections 415.10 through 415.30, or Utah Rules of Civil

9

Procedure 4(d)(1) or 4(d)(2), and authorized service by publication. Docket No. 25.

10

Defendant now argues that Plaintiffs did not exercise reasonable diligence in

United States District Court
Northern District of California

11

attempting to serve or locate him because he told Plaintiffs’ counsel that he could be

12

served with the Summons and Complaint at an office in Heber City, Utah via a receptionist

13

who worked for him and his wife, and that Plaintiffs never availed themselves of this

14

opportunity to properly serve him there before resorting to service by publication. Feb. 19,

15

2014 Aposhian Decl. ¶ 2; Mar. 12, 2014 Aposhian Decl. ¶ 4. Plaintiffs’ counsel avers that

16

although Aposhian agreed that the receptionist could “accept mail” for him, he refused to

17

agree that the receptionist could accept service on behalf of Defendant, and thus Plaintiffs

18

did not serve him there due to concerns about defects in such service of process. Mar. 5,

19

2014 Stafford Decl. ¶ 10. Resolution of this factual dispute, however, is unnecessary

20

because the Court finds that service by publication, which the Court approved, was

21

ultimately proper.

22

In addition to a showing of “reasonable diligence,” Utah law specifically allows

23

service by publication “where there exists good cause to believe that the person to be

24

served is avoiding service of process.” Utah R. Civ. P. 4(d)(4)(A). In light of what

25

appears to have been multiple refusals to sign the Notice of Acknowledgment and Receipt

26

of the Summons and Complaint between the filing of the lawsuit in January 2013, and as

27

late as August 2013, the Court finds that service by publication would have also been

28

proper on the basis that Aposhian evaded service of process. Thus, that Plaintiffs may
7

1

have been able to serve Defendant via other theoretical means does not defeat the validity

2

of Plaintiffs’ service by publication here. This conclusion is strengthened by the absence

3

of concern “that service by publication rarely results in actual notice,” Watts v. Crawford,

4

10 Cal. 4th 743, 749, n.5 (1995), because Aposhian was well-aware of the existence of the

5

lawsuit. Cf. Internet Solutions for Bus. Inc., 509 F.3d at 1166 n.6 (observing relevance of

6

defaulting defendant’s acknowledgment that he knew the suit had been filed). Plaintiffs’

7

counsel exchanged emails with Aposhian that discuss the filed lawsuit and request his

8

signature of the Acknowledgment and Receipt of the Summons and Complaint. See, e.g.,

9

Jan. 13, 2014 Nanda Decl. Ex. N (Feb. 4, 2013 email enclosing letter from Plaintiffs’
counsel to Aposhian attaching Notice and Acknowledgement of Summons and

11
United States District Court
Northern District of California

10

Complaint); see also id. ¶¶ 17-19, 21 & Ex. R (Aposhian writing in response to Feb. 4,

12

2013 email: “I received the papers and will return them ASAP” and “my attorney is

13

reviewing” the payment plan included with the papers). Moreover, Aposhian included the

14

case number for the instant action in his October 20, 2013 letter to this Court, further

15

indicting that he had actual notice of the lawsuit. 2 Docket No. 31. Defendant has failed to

16

meet its burden to show a defect in service of process. Accordingly, as service by

17

publication was proper, the default entered by the Clerk is not void.

18
19
2

20
21
22
23
24
25
26
27
28

Defendant’s citation to Mennonite Board of Missions v. Adams, 462 U.S. 791 (1983), for
the proposition that service by publication is insufficient where a defendant’s location is
known is inapposite. In that case, the Court held that notice by publication and posting of
an intended tax sale of property did not satisfy the requirements of the Due Process Clause,
because it could not “be expected to lead to actual notice to the mortgagee” on the basis
that such notices are meant to attract prospective purchasers and mortgagees are unlikely
to make “special efforts to keep abreast of such notices.” Id. at 799. Accordingly, the
Court held that “[n]otice by mail or other means as certain to ensure actual notice is a
minimum constitutional precondition to a proceeding which will adversely affect the
liberty or property interests of any party, whether unlettered or well versed in commercial
practice, if its name and address are reasonably ascertainable.” Id. at 800. Mennonite did
not hold that in all circumstances service by publication can be defeated by the theoretical
existence of a reasonably ascertainable address, especially where circumstances indicate
that a defendant has evaded service of process. Here, service by publication was proper
under Utah law, Defendant had actual notice of the existence of the suit, and thus the
possibility that he may have been served at an alternative address does not defeat the
Court-approved service by publication.
8

1

2.

Response Indicating Intent to Defend Prior to Entry of Default.

2

The Court finds unpersuasive Defendant’s argument that the Clerk improperly

3

entered default because Aposhian’s October 20, 2013 letter to the Court constitutes a

4

pleading or otherwise shows an intention to defend the action. Under Rule 55(a) of the

5

Federal Rules of Civil Procedure, the clerk must enter a party’s default when shown by

6

affidavit that the defaulting party has “failed to plead or otherwise defend” against the

7

action. Fed. R. Civ. P. 55(a). Defendant directs the Court to authority interpreting Rule

8

55(b)(1) – governing entry of default judgment against a party who has failed to appear –

9

for the proposition that courts generally find that “an appearance in an action ‘involves
some presentation or submission to the court’ . . . [b]ut because judgments by default are

11
United States District Court
Northern District of California

10

disfavored, ‘a court usually will try to find that there has been an appearance by

12

defendant.’” Direct Mail Specialists, Inc. v. Eclat Computerized Technologies, Inc., 840

13

F.2d 685, 689 (9th Cir. 1988) (citing 10 C. Wright, A. Miller & M. Kane, Federal Practice

14

& Procedure § 2683, at 415, 430 (2d ed. 1983)). While judgments by default are

15

disfavored, the practice of liberally interpreting an appearance or finding an intent to

16

defend is not without limitation. For example, in Wilson v. Moore and Associates, Inc.,

17

564 F.2d 366, 369 (9th Cir. 1977), the court held that the president of corporation’s

18

informal letter to plaintiff’s counsel (a copy of which was sent to the clerk of the district

19

court) was not the equivalent of a formal court appearance where the plaintiff provided

20

actual, unqualified notice that a delay in answering the complaint would result in default.

21

Id. at 367. Similarly, in Direct Mail Specialists, the court held default judgment could not

22

be vacated on the basis that defendants “appeared” in the action. There, “settlement

23

negotiations” conducted before and on the day the summons was served, and an oblique

24

mention of referring the case to an attorney, did not demonstrate an appearance or “a clear

25

purpose to defend the suit.” 840 F.2d at 689 (citations omitted). These cases show that in

26

the context of attempting to void a default judgment, courts require more than a colorable

27

appearance and a mere inference of an intention to defend.

28

The Court rejects Defendant’s argument that the Clerk’s entry of default pursuant to
9

1

Rule 55(a) must be set aside based on Aposhian’s October 20, 2013 letter or retention of

2

counsel three months after entry of default. First, “[c]orporations and other unincorporated

3

associations must appear in court through an attorney.” In re Am. W. Airlines, 40 F.3d

4

1058, 1059 (9th Cir. 1994) (citing C.E. Pope Equity Trust v. United States, 818 F.2d 696,

5

697-98 (9th Cir. 1987)). As Aposhian is not an attorney, his letter cannot constitute a

6

formal appearance or a pleading filed on behalf of Defendant Aposhian Excavating

7

Company, Inc. Additionally, to the extent Defendant argues that his letter constitutes an

8

appearance or a pleading, entry of default could have been rendered as a sanction because

9

of Defendant’s failure to comply with Civil Local Rule 3-9(b), which requires that “a
corporation, unincorporated association, partnership or other such entity may appear only

11
United States District Court
Northern District of California

10

through a member of the bar of this Court.” Civil L.R. 3-9(b); see Employee Painter’

12

Trust v. Ethan Enterprises, Inc., 480 F.3d 993, 998 (9th Cir. 2007) (recognizing default as

13

a permissible sanction for failure to comply with local rules requiring representation by

14

counsel).
Second, Defendant nevertheless maintains that because the Clerk entered default six

15
16

days after the letter was received without warning, it should now be set aside. The

17

authorities3 cited by Defendant do not impose a requirement that the Court order

18

Defendant to retain counsel before the Clerk enters default, or otherwise suggest that the

19

Clerk violated Rule 55(a) by entering default, which the Clerk was required to do when it

20

appeared, upon affidavit, that Defendant failed to plead or otherwise defend the suit.

21

Third, the October 20, 2013 letter – in light of the history of the case both before

22

and after Aposhian sent it –does not evince a clear purpose to plead or otherwise defend

23

the suit sufficient to void the Clerk’s default. Here, Aposhian had knowledge of the

24

lawsuit as early as January, 2013. He did not retain an attorney, despite writing to

25

Plaintiffs’ counsel that he was having his attorney review the Notice and Acknowledgment

26

of the Summons and Complaint and Stipulated Settlement in March, 2013. Jan. 13, 2014

27
3

28

See Employee Painter’ Trust, 480 F.3d at 998 & United States v. High Country Broad.
Co., Inc., 3 F.3d 1244, 1245 (9th Cir. 1993).
10

Nanda Decl. ¶¶ 21-23 & Ex. R. Defendant did not enter an appearance for counsel and

2

Aposhian did not answer the complaint or even sign the Acknowledgment of Receipt of

3

the Summons and Complaint, despite clearly having possession of it. The Court is

4

unaware of any evidence in the record whereby Defendant communicated a clear intention

5

to defend itself in the lawsuit prior to October, 2013. While Aposhian wrote to the Court

6

on October 20, 2013, and asked the Court to “give [him] time to secure local counsel to

7

defend [him] before granting a judgment against [his company],” Docket No. 31,

8

Defendant then failed to enter an appearance of counsel or otherwise defend the suit over

9

the next three months. Thus, given this inaction both before and after Aposhian sent the

10

letter, the Court cannot infer a clear purpose by Defendant to defend the suit. Cf. Direct

11
United States District Court
Northern District of California

1

Mail Specialists, 840 F.2d at 689. Accordingly, the Court finds that the Clerk’s entry of

12

default was not procedurally defective in this regard.

13

3.

Complaint Seeking Amount in Excess of That Demanded in Pleadings.

14

Defendant argues that entry of default was improper because Plaintiffs seek

15

damages in excess of the amount pleaded in the complaint. The authorities cited by the

16

parties, however, pertain to Rule 54(c), which provides that a “default judgment must not

17

differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed. R. Civ.

18

P. 54(c) (emphasis added). At issue here is whether the Clerk properly entered default

19

pursuant to Rule 55(a). Rule 55(a) requires that the clerk enter the party’s default “[w]hen

20

a party against whom a judgment for affirmative relief is sought has failed to plead or

21

otherwise defend, and that failure is shown by affidavit or otherwise.” Defendant argues

22

that because Plantiffs in their Complaint do not list the actual amount of contributions,

23

liquidated damages, and attorneys’ fees and costs sought, it “would be manifestly unfair if

24

the court were then to award relief not previously specified – relief that, perforce, could

25

not have been included in the defendant’s decisional calculus.” Hooper-Haas v. Ziegler

26

Holdings, LLC, 690 F.3d 34, 40 (1st Cir. 2012). However, the Court notes that in the

27

context of default judgment motions, “[c]ourts have awarded damages not specifically

28

mentioned in complaints in ERISA cases where the defaulting defendants were on notice
11

1

of the post-complaint amounts sought.” Bd. of Trustees v. Tim Kruse Constr., Inc., No. C

2

12-05322 JSW, 2013 WL 5487368, at *3 (N.D. Cal. Oct. 2, 2013) (collecting cases).4

3

Even though Rule 55(b)(1) is not squarely before the Court here, the complaint indicates

4

that Defendant owed “a sum that can be made certain by computation,” based on the

5

collective bargaining agreement and records of payments, which undermines Defendant’s

6

argument. Moreover, consistent with Tim Kruse Construction, Plaintiffs submitted

7

evidence that indicates multiple communications with Aposhian that apprised Defendant of

8

the amounts owed. Thus, on Defendant’s motion to set aside default, there is no indication

9

that the Clerk’s entry of default with respect to this issue was procedurally improper. To
the extent Defendant argues that there is a factual dispute about the amounts owed,

11
United States District Court
Northern District of California

10

Defendant may raise those arguments in the context of the motion for default judgment,

12

discussed below.

13
14

B.

Defendant’s Culpable Conduct Led to Entry of Default.
The Court declines to exercise its discretion to vacate the default entered against

15
16

Defendant because the record reflects culpable conduct by Aposhian, Defendant’s

17

President, leading to entry of default. Brandt v. Am. Bankers Ins. Co. of Florida, 653 F.3d

18

1108, 1110 (9th Cir. 2011). “[A] defendant’s conduct is culpable if he has received actual

19

or constructive notice of the filing of the action and intentionally failed to answer.”

20

Yubran S. Mesle, 615 F.3d at 1092 (citing TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d

21

691, 697 (9th Cir. 2001) (emphasis in TCI Group)). As the Ninth Circuit explained:
in this context the term “intentionally” means that a movant
cannot be treated as culpable simply for having made a
conscious choice not to answer; rather, to treat a failure to
answer as culpable, the movant must have acted with bad faith,
such as an “intention to take advantage of the opposing party,
interfere with judicial decisionmaking, or otherwise manipulate
the legal process.” We have “typically held that a defendant’s
conduct was culpable for purposes of the [good cause] factors

22
23
24
25
26
27
28

4

Defendant’s attempt to distinguish Tim Kruse Construction on the basis that the
defendant there had been properly served fails because, here, Plaintiffs properly served
Defendant by publication.
12

1
2
3

where there is no explanation of the default inconsistent with a
devious, deliberate, willful, or bad faith failure to respond.
Id. (citing TCI Group, 244 F.3d at 697-98).
First, Aposhian had actual notice of the filing of the action, as indicated from the

4

multiple email correspondences and phone calls between Plaintiffs’ counsel and Aposhian.

5

Aposhian knew Plaintiffs filed suit against him as early as February 4, 2013, when a

6

paralegal for Plaintiffs’ counsel emailed him a Notice and Acknowledgement of the

7

Summons and Compliant, and attached those and related documents. Jan. 13, 2014 Nanda

8

Decl. ¶ 17 & Ex. N. On March 1, 2013, Aposhian emailed Plaintiffs’ counsel’s paralegal

9

and stated that he “received the papers and will return them asap.” Id. ¶ 21 & Ex. Q. He
failed to do so. On March 14, 2013, Aposhian emailed Plaintiffs’ counsel and

11
United States District Court
Northern District of California

10

acknowledged that his attorney was reviewing the Stipulation, which was part of a Notice

12

and Acknowldgement of the Summons and Complaint; this admission raises the question

13

of why he did not subsequently accept service or defend the action if he was in contact

14

with an attorney at this early procedural stage. Id. ¶ 23 & Ex. R.

15

Second, the Court finds that this conduct shows an intentional failure to answer.

16

Plaintiffs hired a process server, and when attempts to serve Defendant failed, resorted to

17

hiring a private investigator to track down a valid address. Aposhian had knowledge that

18

Plaintiffs were going to serve him via publication, and did not appear or otherwise defend

19

against the suit at that time. In fact, he only sent a letter to the Court after the Salt Lake

20

Tribune published and republished the summons over a four-week period. In fact, despite

21

Aposhian’s October 20, 2013 letter to the Court – wherein he states for the first time that

22

he needed time to secure local counsel before a grant of default against his company – he

23

then waited over three additional months after default was entered before retaining

24

counsel. This long delay further supports the inference that this conduct was willful.

25

Lastly, Defendant moved to set aside default five days before the scheduled hearing on

26

Plaintiffs’ motion for default judgment, which indicates that Defendant waited until the

27

last possible opportunity to take action and respond to the lawsuit.

28

Based on this record, the Court concludes that Defendant evaded service of process
13

and engaged in delay tactics over a nearly ten month period. These actions are consistent

2

with an “intention to take advantage of” Plaintiffs and “manipulate the legal process,” and

3

the Court finds that “there is no explanation of the default inconsistent with a . . .

4

deliberate, willful, or bad faith failure to respond.” TCI Group, 244 F.3d at 697-98.

5

Moreover, “were the Court to vacate the default against Defendant it would prejudice

6

Plaintiffs by encouraging a continued pattern of conduct that is a burden to Plaintiffs and

7

the Court and is contrary to the purposes of ERISA.” Bd. of Trustees of the Bay Area

8

Roofers Health & Welfare Trust Fund v. Westech Roofing, No. 12-CV-05655-JCS, 2014

9

WL 46633, at *2 (N.D. Cal. Jan. 6, 2014). Because of Defendant’s culpable conduct

10

leading to entry of default, the Court DENIES Defendant’s motion to set aside default

11
United States District Court
Northern District of California

1

because he has failed to show good cause pursuant to Rule 55(c).

12
13
14
15

C.

The Court Refers Plaintiffs’ Motion for Default Judgment to a Magistrate
Judge for a Report and Recommendation.
Presently before the Court is Plaintiffs’ motion for default judgment, filed on

16

January 13, 2014. Defendant, once he retained counsel, filed an untimely opposition

17

requesting a continuance of the hearing on the motion for default judgment and asserting

18

that factual disputes exist regarding the amount of contributions and liquidated damages

19

owed. Docket No. 44; see also Feb. 19, 2014 Aposhian Decl. ¶ 3(b) (presenting evidence

20

in support of his contention that his accounting of unpaid contributions and liquidated

21

damages is no more than $7,424.60 versus Plaintiffs’ figure of $21,670). The Court finds

22

that resolution of Plaintiffs’ motion for default judgment, and in particular any factual

23

findings with respect to the amount of money at stake and the possibility of a dispute

24

regarding material facts in this regard, is appropriate for adjudication by a Magistrate

25

Judge. Accordingly,

26

1) Pursuant to Civil Local Rule 72-1, all matters concerning Plaintiffs’ motion for

27

default judgment – including the amount of contributions, damages, reasonable attorneys’

28

fees and costs owed to Plaintiffs – are referred to a randomly assigned Magistrate Judge.
14

1

2) The Magistrate Judge shall supervise and issue findings and recommendations

2

regarding this referred motion for default judgment, and may make any order for

3

supplemental briefing or hold an evidentiary hearing on all matters connected thereto. The

4

Magistrate Judge shall file the findings and recommendations with the Clerk of Court and

5

serve a copy on the parties in this action.

6

3) Unless otherwise provided, within 14 days of the service of the findings and

7

recommendations, any party may serve and file objections thereto, together with notice

8

setting the objections for hearing before this Court. The objecting party shall note each

9

particular finding and recommendation to which an objection is made, shall note the legal

10

authority for the objection, and shall propose alternative findings or recommendations.

United States District Court
Northern District of California

11

4) Unless otherwise provided, within 14 days of the service of the objections, any

12

party may serve and file a response thereto. Within 5 days of the service of the response,

13

the objecting party may file a reply thereto.

14
15
16
17

5) The memoranda and other papers filed in support of the objections, in opposition
thereto, and reply shall conform with Civil Local Rule 7.
6) This Court’s review of the findings and recommendations and objections thereto
will conform with Civil Local Rule 72-3.

18
19
20
21

CONCLUSION
For the foregoing reasons, Defendant’s motion to set aside default is DENIED, and
Plaintiffs’ motion for entry of default judgment is REFERRED to a Magistrate Judge.

22
23

IT IS SO ORDERED.

24
25
26

Dated: 04/10/14

_____________________________________
THELTON E. HENDERSON
United States District Judge

27
28

15