Joe Hand Promotions, Inc. v. Angulo et al

Filing 36

ORDER by Judge Hamilton Denying 16 Dismissal; Granting 30 31 Motions to Set Aside Default (pjhlc2, COURT STAFF) (Filed on 12/21/2011)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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JOE HAND PROMOTIONS,
Plaintiff,

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v.
EFRAIN FONSECA ANGULO, et al.,

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For the Northern District of California

United States District Court

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No. C 10-5578 PJH
ORDER DENYING DISMISSAL;
GRANTING MOTION TO SET
ASIDE DEFAULT

Defendants.
_______________________________/

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On November 4, 2011, the court granted defendant Francisco Montecino’s (“F.

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Montecinos”) motion to set aside the default entered against him on April 14, 2011, and

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placed on calendar defendant F. Montecinos’ motion to dismiss plaintiff’s complaint. By the

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same order, the court also instructed that plaintiff’s pending motion for default judgment

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could go forward as to the remaining two defendants, Ephrain Angula (“Angula”) and Idalia

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Montecinos (“I. Montecinos”). The court allowed plaintiff until November 18, 2011 to file a

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renewed motion for default judgment, if it so wished. On November 17, however, one day

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prior to the expiration of the foregoing deadline, defendants Angulo and I. Montecinos each

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filed a “motion to dismiss default judgment,” which the court – as does plaintiff – construes

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as a motion to set aside the default entered against these defendants (in addition to F.

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Montecino) on April 14, 2011. Thus, now before the court are: (1) defendant Francisco

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Montecino’s motion to dismiss; and (2) defendant Angulo’s and defendant I. Montecinos’

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motions to set aside the default.

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Having read the defendants’ papers and plaintiff’s oppositions thereto, and carefully

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considered their arguments, and good cause appearing, the court hereby DENIES the

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motion to dismiss, and GRANTS the motions to set aside the default, for the following

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reasons.
As a preliminary matter, the court notes that plaintiff’s complaint asserts four causes

distribution and exhibition of “Ultimate Fighting Championship 107: BJ Penn v.

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DiegoSanchez” that took place at El Amigo Taqueria, a restaurant in San Leandro,

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California, that is purportedly owned by defendants. See Complaint, ¶¶ 7-9. Plaintiff, who

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alleges that it had exclusive nationwide commercial distribution rights to the program,

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asserts: (1) that defendants unlawfully exhibited the program in violation of 47 U.S.C. §

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605; (2) that defendants unlawfully exhibited the program in violation of 47 U.S.C. § 553;

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(3) that defendants are liable for conversion; and (4) that defendants unlawfully exhibited

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For the Northern District of California

of action against all defendants, stemming from the allegedly unauthorized television

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United States District Court

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the program in violation of Cal. Bus. & Prof. Code § 17200. See generally id.

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Against this backdrop, and turning to F. Montecinos’ motion to dismiss, defendant

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appears to seek dismissal of plaintiff’s complaint in its entirety. As a basis for its motion,

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defendant argues that the declarations of two separate individuals – Robert Gage and

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Mercedes Montecinos – establishes that both worked at El Amigo on the date that the

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allegedly unauthorized viewing of the program took place, and that El Amigo did not display

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the program according to these individuals. Mot. Dismiss at 3. Defendant also contends

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that “El Amigo is not suitable or equipped for organized commercial viewing of televised

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events,” and furthermore, that the present lawsuit is part of “an extensive pattern on the

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part of” plaintiff’s law firm to “target small businesses” through the use of paid

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“investigators” who swear out affidavits (falsely, defendant appears to be intimating) stating

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that the investigators witnessed businesses illegally displaying sporting events.

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As plaintiff notes in opposition, however, defendant’s argument is more akin to a

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denial of liability, or a merits-based argument, than it is an argument for dismissal under

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Federal Rule of Civil Procedure 12(b)(6). Defendant’s argument does not challenge the

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legal sufficiency of any cause of action asserted by plaintiff (indeed, nor does defendant

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even name any specific cause of action), nor does defendant otherwise challenge plaintiff’s

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ability or standing to bring suit against defendant, as is required for a successful motion to

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dismiss. Furthermore, a cursory review of plaintiff’s complaint suggests that plaintiff has

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done an adequate job of setting forth a short and plain statement of its claims, and the facts

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entitling plaintiff to relief. No glaring or blatant deficiency is apparent from the face of

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plaintiff’s papers, from which to infer any argument in favor of dismissal on defendant’s

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behalf. Accordingly, the court DENIES defendant’s motion to dismiss, on grounds that

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defendant has failed to adequately set forth a basis for dismissal pursuant to Rule 12(b)(6).

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Turning to defendant Angulo’s and defendant I. Montecinos’ motions to set aside the

motions are essentially identical to the earlier motion to set aside default that was filed by

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For the Northern District of California

default, the court notes at the outset, as plaintiff’s opposition points out, that defendants’

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United States District Court

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defendant F. Montecinos. Indeed, defendants Angulo and I. Montecinos appear to have

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merely re-circulated the same motion in pursuit of their own order setting aside the default.

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However, the court disagrees with plaintiff’s suggestion that this alone is sufficient cause to

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deny defendants’ motion. Indeed, it stands to reason that defendants Angula and I.

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Montecinos would rely on the same arguments made by defendant F. Montecinos, in view

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of the fact that all defendants had default entered at the same time, and presumably

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contend that the same grounds for setting aside the default apply.

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Regarding the substance of the motions, pursuant to Federal Rule of Civil Procedure

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55(c), a court may set aside entry of default for good cause. The Ninth Circuit utilizes a

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three-factor test to determine whether good cause exists. See United States v. Mesle, 615

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F.3d 1085, 1091 (9th Cir. 2010)(‘good cause’ determination requires consideration of three

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factors: (1) whether defendant engaged in culpable conduct; (2) whether defendant has no

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meritorious defense; or (3) whether opposing party will suffer prejudice). Pursuant to

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Mesle, ”a finding that any one of these factors is true is sufficient reason for the district

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court to refuse to set aside the default." Id. As the party seeking relief from the entry of

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default, defendants here bear the burden of showing that the three Mesle factors favor

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such relief. See Franchise Holding II, LLC. v. Huntington Restaurants Grp., Inc., 375 F.3d

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922, 926 (9th Cir. 2004).
With respect to the first Mesle factor, while there is some room for debate on the

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matter, the court ultimately concludes that defendants have not engaged in culpable

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conduct. A defendant's conduct is culpable “if he has received actual or constructive notice

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of the filing of the action and intentionally failed to answer." Mesle, 615 F.3d at 1092; see

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also TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001)(culpability

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requires the defendant to have "acted with bad faith, such as an 'intention to take

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

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manipulate the legal process"). The court previously concluded that defendant F.
Montecinos’ conduct was not culpable, in view of the fact that defendant had filed a motion

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For the Northern District of California

United States District Court

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to dismiss the complaint one day after the clerk entered default, and only days past the

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deadline for responding to plaintiff’s initial complaint. Unlike defendant F. Montecinos,

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defendants Angula and I. Montecinos have not filed a motion to dismiss, and the instant

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motions to set aside the default are the first appearances that either have made in the case

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since default was entered against them nearly eight months ago, on April 14, 2011.

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Notwithstanding this passage of time, however, the court concludes that defendants’

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unrepresented status, in view of defendants’ clearly expressed desire to defend against

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plaintiff’s allegations, are factors that warrant added consideration, and that ultimately

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persuade the court that no culpable conduct has occurred. See Mesle, 615 F.3d at 1093

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(declining to attribute intentionality to an unrepresented defendant's mere failure to answer

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a complaint, holding that such a stringent culpability standard was reserved for a "legally

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sophisticated entity or individual" who is presumed to have "an understanding of the

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consequences of its actions").

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Defendants are also not devoid of a potentially meritorious defense. To satisfy the

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meritorious defense requirement, "[a] defendant seeking to vacate a default judgment must

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present specific facts that would constitute a defense." See Mesle, 615 F.3d at 1094.

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However, the burden to show a meritorious defense in support of a motion to set aside "is

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not extraordinarily heavy." Id. Defendant need only "allege sufficient facts that, if true,

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would constitute a defense...”. Id. Furthermore, the meritorious defense requirement is

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also more liberally applied on a Rule 55(c) motion to set aside entry of default

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than on a Rule 60(b) motion to set aside default judgment. See id. at 1091 n.1. Here, as

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the court found in connection with F. Montecinos’ motion, defendants’ motions to set aside

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the default challenges the complaint on the ground that defendants never actually engaged

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in the unauthorized and/or unlawful display of the alleged programming in question. See,

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e.g., Mots. Set Aside Def. at 3-4. Liberally construed, defendants’ motion challenges the

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allegations of the complaint on its merits, for failure to state a claim. Thus, defendants

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For the Northern District of California

United States District Court

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have presented a legally cognizable defense.
Finally, and as the court previously concluded, there is no undue prejudice to plaintiff

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that results from setting aside the default. "To be prejudicial, the setting aside of a

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judgment must result in greater harm than simply delaying resolution of the case. Rather,

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'the standard is whether plaintiff's ability to pursue his claim will be hindered.'" TCI Group,

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244 F.3d at 701 (citation and quotation marks omitted). Here, while defendants’ delay in

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moving to set aside the default is much longer than that of F. Montecinos, defendants did

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move to set aside the default promptly following the court’s November 4 order stating that

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the default as to defendants Angulo and I. Montecinos remained valid. Moreover, it is

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conceivable to the court, particularly in view of the nearly identical papers these defendants

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filed in support of the motion to set aside default, that defendants Angulo and I. Montecinos

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were not aware of the need to file separate papers in support of the motion to set aside the

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default, until the court clearly stated as much in its prior November 4 order. Thus, and in

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view of the relatively early legal posture of the instant action, the court concludes that

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setting aside the default would not result in "tangible harm such as loss of evidence,

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increased difficulties of discovery, or greater opportunity for fraud or collusion." Id. Finally,

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particularly – as here – where default judgment has not been entered, the lack of prejudice

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to plaintiff favors granting the motion to set aside entry of default.

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Accordingly, the three factors in the good cause analysis under Mesle favor

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setting aside the entry of default pursuant to Rule 55(c). This conclusion is furthermore

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consistent with the strong public policy that generally disfavors default judgments in favor of

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resolving a case on its merits. See Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814

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(9th Cir. 1985).

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In sum, and for all the foregoing reasons, defendant F. Montecinos’ motion to

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dismiss is DENIED, and defendant Angulo’s and defendant I. Montecinos’ motions to set

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aside the defaults against them are GRANTED. The parties shall appear at a case

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management conference on January 12, 2012, at 2 p.m. Case management statements

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For the Northern District of California

United States District Court

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shall be filed by each party no later than January 5, 2010.
All pending motions are terminated.

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IT IS SO ORDERED.

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Dated: December 21, 2011
______________________________
PHYLLIS J. HAMILTON
United States District Judge

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