Barg Coffin Lewis & Trapp, LLP v. Arlie & Company
Filing
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ORDER granting 14 Motion to Vacate Clerk's Entry of Default; denying as moot 10 Motion for Default Judgment; and denying 9 application to strike Answer. (lblc1S, COURT STAFF) (Filed on 12/22/2014)
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UNITED STATES DISTRICT COURT
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Northern District of California
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San Francisco Division
BARG COFFIN LEWIS & TRAPP, LLP,
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For the Northern District of California
UNITED STATES DISTRICT COURT
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v.
Plaintiff,
No. 14-cv-4740 LB
ORDER SETTING ASIDE
ENTRY OF DEFAULT
ARLIE & COMPANY,
Defendant.
_____________________________________/
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INTRODUCTION
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This is a dispute over unpaid attorney’s fees. Defendant Arlie & Company failed to file a timely
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response to the plaintiff’s complaint. On November 5, 2014, the clerk entered Arlie’s default. (ECF
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No. 6.)1 The only issue is whether the court should set aside that default. (See ECF No. 14); Fed. R.
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Civ. P. 55(c). The court finds this matter suitable for determination without oral argument and so
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vacates the January 15, 2015 hearing. See Civ. L.R. 7-1(b). Both parties have consented to the
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undersigned’s jurisdiction. (ECF Nos. 11, 12.) The court grants the defendant's motion to set aside
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the default.
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Record citations are to documents in the Electronic Case File (“ECF”); pinpoint citations
are to the ECF-generated page numbers at the top of the documents.
ORDER - 14-4740 LB
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STATEMENT
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The background facts relevant to this motion are mainly those that constitute this young case’s
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procedural history. Plaintiff Barg Coffin Lewis & Trapp, LLP filed this lawsuit on September 26,
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2014, in the Superior Court of San Francisco, seeking unpaid attorney’s fees from its former client,
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defendant Arlie & Company. (ECF No. 1 at 6-10.) On October 10, 2014, Arlie’s counsel wrote to
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Barg Coffin’s counsel and asked for ten days’ written notice before Barg Coffin sought a default.
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(Markley Decl. S ECF No. 15 at 1-3, ¶ 3 and Ex. 2.) Barg Coffin’s lawyer agreed to give Arlie that
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notice. (Id. and Ex. 3.) Arlie removed the case to this court on diversity grounds on October 24.
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(ECF No. 1 at 1.) It did not file an answer or responsive motion. On November 3, Barg Coffin
5.) Two days later ― on November 5, 2014 ― the clerk entered that default. (ECF No. 6.) Two
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notified the clerk of court that it would seek the entry of Arlie’s default on November 13. (ECF No.
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days after that, Arlie filed an answer. (ECF No. 7.) Barg Coffin then filed an “application” asking
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the court to strike this answer. (ECF No. 9.) Barg Coffin also moved for a default judgment (ECF
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No. 10) but has since said that it will withdraw that motion as moot if the court sets aside the default
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(ECF No. 16 at 4 n. 1). Under Rule 55(c) of the Federal Rules of Civil Procedure, Arlie now moves
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to set its default aside. (ECF Nos. 14, 16-17); see Fed. R. Civ. P. 55(c).
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ANALYSIS
I. LEGAL STANDARDS
Under Rule 55(c), a court may set aside an entry of default for “good cause.” See United States
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v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010)
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(“Mesle”). To determine whether a defendant has shown good cause to justify vacating entry of
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default, a court considers three factors: (1) whether the defendant engaged in culpable conduct that
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led to the default; (2) whether the defendant lacked a meritorious defense; and (3) whether reopening
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the default would prejudice the plaintiff. See Mesle, 615 F.3d at 1091 (citing Franchise Holding II,
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LLC v. Huntington Rests. Group., Inc., 375 F.3d 922, 925 (9th Cir. 2004)). This standard is
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disjunctive, meaning, the court may deny the request to vacate default if any of the three factors is
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true. See Mesle, 615 F.3d at 1091 (citing Franchise Holding II, 375 F.3d at 925). “Crucially,
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however, ‘[j]udgment by default is a drastic step appropriate only in extreme circumstances; a case
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should, whenever possible, be decided on the merits.’” Mesle, 615 F.3d at 1091 (quoting Falk v.
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Allen, 739 F.2d 461, 463 (9th Cir. 1984)).
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The standard to set aside an entry of default is the same standard used to determine whether a
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default judgment should be set aside under Federal Rule of Civil Procedure 60(b), except that in the
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Rule 55(c) context, courts have greater discretion and can apply the standard more liberally to grant
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relief from entry of default because there is no interest in the finality of a judgment. See Mesle, 615
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F.3d at 1091 n.1 (citations omitted); TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th
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Cir. 2001); Hawaii Carpenters’ Trust Fund v. Stone, 794 F.2d 508, 513 (9th Cir. 1986); Mendoza v.
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Wight Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir. 1986). When considering whether to vacate
is some possibility that the outcome of the suit after a full trial will be contrary to the result achieved
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entry of default under Rule 55(c), the court’s “underlying concern . . . is to determine whether there
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by the default.” Hawaii Carpenters’ Trust Fund, 794 F.2d at 513. The inquiry “is at bottom an
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equitable one, taking account of all relevant circumstances surrounding the party’s omission.”
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Brandt v. Am. Bankers Ins. of Florida, 653 F.3d 1108, 1111 (9th Cir. 2011) (quoting Pioneer Inv.
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Servs. Co. v. Brunswick Ass’n Ltd., 507 U.S. 380, 395 (1993)). The decision ultimately lies in the
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discretion of the court. See Brandt, 653 F.3d at 1111-12.
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As the party seeking to set aside entry of default, a defendant bears the burden of showing good
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cause under this test. Hawaii Carpenters’ Trust Fund, 794 F.2d at 513. To ensure that cases are
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decided on the merits whenever possible, the court resolves any doubt regarding whether to grant
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relief in favor of vacating default. O’Connor v. Nevada, 27 F.3d 357, 364 (9th Cir. 1994).
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II. APPLICATION
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A. The Defendant Did Not Act Culpably
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The first question under Rule 55(c) is “whether the defendant engaged in culpable conduct that
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led to the default.” Mesle, 615 F.3d at 1091. “[A] defendant’s conduct is culpable if he has received
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actual or constructive notice of the filing of the action and intentionally failed to answer.” Id. at 1092
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(quoting TCI, 244 F.3d at 697 (emphasis in original)). From this point the analysis divides into two
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streams.
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Where a party is not represented by counsel, and is itself legally unsophisticated, its default is
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intentional only if it “acted with bad faith.” Mesle, 615 F.3d at 1092 (quoting TCI, 244 F.3d at 697).
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Bad faith would include an “intention to take advantage of the opposing party, interfere with judicial
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decisionmaking, or otherwise manipulate the judicial process.” Mesle, 615 F.3d at 1092 (quoting
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TCI, 244 F.3d at 698). The Ninth Circuit has “typically held” that a defendant’s conduct was
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culpable under this inquiry where the defendant’s conduct can be explained only as a “devious,
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deliberate, willful, or bad faith failure to respond.” Mesle, 615 F.3d at 1092 (quoting TCI, 244 F.3d
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at 698).
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Culpability under Rule 55(c) is more readily found where the defaulting defendant was legally
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sophisticated or was, as here, represented by counsel. See Mesle, 615 F.3d at 1093. There is then
party’s culpability in a default, an understanding of the consequences of its actions may be assumed,
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no need to show that the defendant acted in bad faith. Id. “When considering a legally sophisticated
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and with it, intentionality.” Mesle, 615 F.3d at 1093. With notice of the lawsuit, in other words, a
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represented party who defaults is culpable under Rule 55(c). See id.
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Barg Coffin filed suit on September 26, 2014. (See ECF No. 1 at 6.) The defendant received the
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complaint and summons on September 29. (Id. at 2.) After removal to this court (ECF No. 1), the
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defendant’s answer was due by October 31, 2014. Fed. R. Civ. P. 81(c)(2). The defendant did not
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answer until November 10, 2014 ― after the clerk had entered default. (ECF Nos. 6, 7.) The
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plaintiff rightly observes that, if the defendant needed more time to respond, then it could have
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followed normal practice to seek an extension of its deadline. See Civ. L.R. 6-1 to -3. That being
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said, Arlie explains that the two members of its firm with the most information about the contract
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with Barg Coffin died. (Markley Decl., ECF No. 15 at 3, ¶ 10.)
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The court can choose to set aside the default. “A district court may exercise its discretion to
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deny relief to a defaulting defendant based solely upon a finding of defendant's culpability, but need
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not.” Brandt, 653 F.3d at 1112. The Ninth Circuit has explained that, even where a defendant has
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acted culpably in defaulting, a court deciding a Rule 55(c) motion must consider all three factors
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(culpability, meritorious defense, and prejudice), “taking account of all relevant circumstances
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surrounding the party’s omission,” in view of the law’s strong preference for trying cases on their
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merits. See id. at 1111-12.
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The court will not refuse to set aside the default on this ground alone. The defendant was
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And, given its agreement with the plaintiff, Arlie seems to have anticipated defaulting. Nonetheless,
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the default has not caused much harm, if it has caused any. This case is still at a very early juncture;
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it is not even three months old. Arlie did file an answer — though a rather threadbare one. And this
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case can easily be put back on track toward a disposition on its merits.
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B. The Defendant Has Not Shown A Meritorious Defense
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With respect to the second factor — whether the defendant lacked a meritorious defense — a
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defendant must allege “specific facts” that, if true, would constitute a defense. See Mesle, 615 F.3d
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at 1094 (citing TCI Group, 244 F.3d at 700). Although in this regard the burden on the defendant is
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“not extraordinarily heavy,” Mesle, 615 F.3d at 1094 (citing TCI Group, 244 F.3d at 700), “[a] ‘mere
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represented by counsel at the time of the default. (See e.g., ECF No. 15 at 3, ¶ 10; ECF No. 5 at 2.)
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general denial without facts to support it’ is not enough to justify vacating a default,” Franchise
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Holdings II, 375 F.3d at 926.
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A “mere general denial” without supporting facts is all that Arlie offers. The whole substance of
Arlie’s answer consists of this:
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1. Defendant admits the allegations contained in paragraphs 2 through 6.
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2. [Defendant] does not have sufficient information to respond to the allegations in
paragraphs 7 through 16, and therefore denies those allegations.
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3. Defendant denies each and every other allegation contained in the complaint and the
whole thereof except as expressly admitted above.
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(ECF No. 7 at 1.)
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This is thin stuff. Even given the death of its partners, if this is all that Arlie intended as its
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answer, then it is impossible to understand why it was not filed on time. Arlie could have gotten
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more time to compile whatever facts a fuller answer required by seeking to extend its deadline.
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Moreover, if Arlie’s present answer is passable under basic pleading standards, it is nonetheless
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boilerplate, and does not supply the “specific facts” needed to show a meritorious defense under
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Rule 55(c). This factor militates for leaving the default in place. See Franchise Holdings II, 375
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F.3d at 926.
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C. The Plaintiff Would Not Be Unfairly Prejudiced By Setting Aside the Default
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Finally, the court does not see how Barg Coffin would be prejudiced by the default being set
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aside. Barg Coffin agreed to give Arlie ten days’ notice before moving for a default. Those ten days
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were cut short by the clerk’s entering a default ― perhaps before either party expected that. Arlie
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did file its answer within ten days of Barg Coffin notifying the court of its intention to seek a
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default. Arlie answered, in other words, within the time that, given the parties’ agreement, Barg
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Coffin might have expected it to. Setting aside the default would of course deny Barg Coffin an
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unexpectedly easy victory. But that is not the sort of prejudice that will justify preserving a default
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under Rule 55(c). It is not prejudicial to deny Barg Coffin a pure windfall, especially in view of the
“whenever possible,” to try cases on their merits, and where the court’s final obligation is to
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parties’ agreement and the early stage of this case ― and certainly not where the law urges,
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consider “all relevant circumstances” and then do equity. See Mesle, 615 F.3d at 1091 (merits);
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Brandt, 653 F.3d at 1111 (equity); Pioneer Investment, 507 U.S. at 395 (same).
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CONCLUSION
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The court’s decision to set aside the entry of default is driven mainly by two factors. First, this
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case is not even three months old; allowing it to proceed normally would not seriously prejudice
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Barg Coffin. Second, the law has a strong preference to determine cases on their merits whenever
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possible. Arlie’s conduct alone might have prompted a different answer. Arlie failed to answer by its
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original October 31 deadline, sought no extension of that deadline, and, when it did answer, offered
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a thumbnail response. And it seems to have anticipated defaulting. Nevertheless, the court cannot
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say that all this amounts to “extreme circumstances” that justify ending this case by default rather
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than on its merits.
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The court accordingly grants Arlie’s motion to set aside the default. It denies as moot Barg
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Coffin’s motion for a default judgment. To the extent that Barg Coffin’s “application” to strike
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Arlie’s answer constitutes a motion, the court denies that motion as well.
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This disposes of ECF Nos. 9, 10, and 14.
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IT IS SO ORDERED.
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ORDER - 14-4740 LB
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Dated: December 22, 2014
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_______________________________
Laurel Beeler
United States Magistrate Judge
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For the Northern District of California
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