AFCM, Inc et al v. Elite Global Farming and Logistics, Inc et al
Filing
105
ORDER by Judge Claudia WilkenDENYING DEFENDANT STEPHEN WYRICKS 94 MOTION TO VACATE AND SET ASIDE DEFAULT JUDGMENT, TO DISMISS THE COMPLAINT AND FOR SUMMARY JUDGMENT. (ndr, COURT STAFF) (Filed on 3/29/2013)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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AFCM, INC.; and FO-FARMER’S
OUTLET, INC.,
Plaintiffs,
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United States District Court
For the Northern District of California
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No. C 11-4677 CW
v.
ELITE GLOBAL FARMING AND
LOGISTICS, INC; RICHARD
ESCAMILLA, SR.; JOSE ESCAMILLA;
JOHN CREIGHTON; STEPHEN WYRICK;
KENT CURLEY; DAVID GATTIS; AMBER
RIGOR; and RICHARD ESCAMILLA,
JR.,
ORDER DENYING
DEFENDANT STEPHEN
WYRICK’S MOTION TO
VACATE AND SET
ASIDE DEFAULT
JUDGMENT, TO
DISMISS THE
COMPLAINT AND FOR
SUMMARY JUDGMENT
(Docket No. 94)
Defendants.
________________________________/
Defendant Stephen Wyrick moves to vacate and set aside the
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default judgment entered against him, to dismiss the claims
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asserted against him by Plaintiffs AFCM, Inc. and FO-Farmer’s
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Outlet, Inc. and for summary judgment on those claims.
Plaintiffs
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oppose the motions.
Having considered the papers filed by the
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parties, the Court DENIES Wyrick’s motion to vacate the default
19
judgment and DENIES his remaining requests as moot.
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BACKGROUND
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In the fall of 2010, Defendant Elite Global Farming and
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Logistics, Inc. (Elite), through Wyrick and Defendant Richard
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Escamilla, Sr., approached Thomas Angulo, Plaintiffs’ president.
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Angulo Decl. ¶ 2.
Wyrick and Escamilla proposed that Elite and
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AFCM enter into a joint venture to grow approximately 130 acres of
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crops for the 2010-11 farming season in Imperial Valley,
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California, and then have Elite sell the crops on behalf of both
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parties.
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Id.
On November 1, 2010, Wyrick sent Angulo an email outlining
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Elite’s proposal regarding the division of labor and
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responsibility for the crops.
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Wyrick stated what Elite would provide, what it would like AFCM to
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provide and asked Angulo for his thoughts on this.
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complaint, Plaintiffs allege that AFCM and Elite did enter into an
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oral joint growing agreement, with the basic split of
United States District Court
For the Northern District of California
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Id. at ¶ 3 & Ex. A.
responsibilities as outlined in Wyrick’s email.
In the email,
Id.
In their
Compl. ¶ 23.
On January 11, 2011, Wyrick filed for Chapter 7 bankruptcy.
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Mot. at 1;1 see also Docket No. 1, In re Stephen Frank Wyrick,
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Case No. 11-50240 (Bankr. N.D. Cal.) (hereinafter, In re Wyrick).2
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In his bankruptcy filing, he listed his address as 3376 Cienaga
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Road in Hollister, California.
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Docket No. 1, In re Wyrick.
After the crops were harvested and sold, Elite sent AFCM an
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accounting statement dated May 17, 2011, showing that AFCM was
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owed $167,188.43 for the crops.
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also Compl., Ex. B.
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Angulo Decl. ¶ 4 & Ex. B; see
Elite failed to pay AFCM its share of the proceeds for the
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crops.
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notice of intent to preserve trust benefits under the Perishable
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Agricultural Commodities Act (PACA), alleging that Elite is
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obliged to hold these proceeds in trust for AFCM until full
Id. at ¶ 5.
On July 26, 2011, AFCM sent Elite a written
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1
Wyrick has sworn to the truth of the contents of his motion
under penalty of perjury. Mot. at 4.
2
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The Court takes judicial notice of the filings made in
Wyrick’s bankruptcy proceedings.
2
1
payment has been made.
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named recipients of this letter, which was sent to him at the
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Cienaga Road address.
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Id. at ¶ 5 & Ex. C.
Wyrick was one of the
Id.
On September 21, 2011, Plaintiffs initiated the instant suit,
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alleging that Wyrick was “a manager and/or direct or indirect
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owner” of Elite and that he and others were “responsible for the
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daily management and control” of Elite.
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complaint, AFCM asserts the following claims against Wyrick:
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(1) enforcement of PACA trust provisions and disgorgement (seventh
Compl. ¶ 9, 16.
In the
United States District Court
For the Northern District of California
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cause of action); (2) violation of the PACA and the California
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Food and Agriculture Code (FAC) §§ 55631, et seq., for failure to
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account and pay promptly (eighth cause of action); (3) conversion
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(ninth cause of action); (4) unjust enrichment (tenth cause of
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action); (5) constructive trust and disgorgement (eleventh cause
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of action); (6) declaratory judgment (twelfth cause of action);
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and (7) injunctive relief (thirteenth cause of action).
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On November 2, 2011, Wyrick was personally served with the
summons at the Cienaga Road address.
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Docket No. 17.
On November 28, 2011, Plaintiffs filed a motion for entry of
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default against Wyrick.
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of the motion upon Wyrick at the Cienaga Road address.
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41-2.
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Docket No. 41.
Plaintiffs served a copy
On November 30, 2011, the Clerk entered default against
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Wyrick.
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default on Wyrick at the Cienaga Road address.
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Docket No.
Docket No. 43.
Plaintiffs served a notice of entry of
Docket No. 44.
On February 23, 2012, Angulo and his counsel had a conference
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call with Defendants Creighton and Curley and their attorney.
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Angulo Decl. ¶ 7.
During the conference call, Creighton and
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Curley stated that Elite was established by Wyrick, who provided
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the initial vegetable seed, land and equipment for the business,
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and that he, along with Richard Escamilla and other members of the
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Escamilla family, made the decisions on who Elite did business
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with and which creditors were paid.
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been given the same information during the course of AFCM’s
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dealings with Elite.
Id. at ¶¶ 7-8.
Angulo had
Id. at ¶ 9.
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On May 25, 2012, Plaintiffs moved for default judgment
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against Elite, Wyrick and Defendants Richard Escamilla, Sr., Jose
United States District Court
For the Northern District of California
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Escamilla and Richard Escamilla, Jr.
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Wyrick with a copy of this motion at the Cienaga Road address.
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Docket No. 68-5.
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Docket No. 68.
They served
This Court referred the motion to a Magistrate Judge for a
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report and recommendation.
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set a hearing on Plaintiffs’ motion for July 10, 2012.
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70.
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Cienaga Road address.
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Docket No. 69.
The Magistrate Judge
Docket No.
Plaintiffs served Wyrick with notice of the hearing at the
Docket No. 72.
On July 5, 2012, Wyrick called Plaintiffs’ counsel.
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Anastassiou Decl. ¶ 7.
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scheduled for July 10, 2012 and questioned her as to how he could
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be held liable for Elite’s debt when he was Elite’s employee and
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not its owner or officer.
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new address or that he had problems receiving the documents in
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this case.
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He asked her about the hearing that was
Id.
He did not tell her that he had a
Id. at ¶ 8.
On July 10, 2012, the Magistrate Judge held a hearing on the
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motion for default judgment.
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any of the other Defendants appeared at the hearing.
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date, the Magistrate Judge filed a report, recommending that the
Docket No. 75.
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Neither Wyrick nor
Id.
On that
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Court grant Plaintiffs’ motion for default judgment.
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76.
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Wyrick at the Cienaga Road address.
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Docket No.
Plaintiffs served a copy of the report and recommendation on
Docket No. 77.
On July 19, 2012, Wyrick filed a declaration in opposition to
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the motion for default judgment.
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declaration, he asked to be dismissed from the lawsuit.
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attested, “When I was originally served for this lawsuit I spoke
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to my former employer, Richard Escallia [sic] Sr. and he told me
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he would take care of having me removed from the action.”
Docket No. 80.
In his
He
Id.
He
United States District Court
For the Northern District of California
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stated, “My family and I lost our home to foreclosure in May 2012
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and moved to a new house,” and that “it takes a long time for my
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mail to be forwarded and delivered so I was never served any
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paperwork at our new home until just days before a default
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judgment was scheduled to be entered.”
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have been, and continue to be in active bankruptcy,” and could
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therefore not afford to hire an attorney to represent him in this
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matter.
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even a board member of Elite Global” or a “decision maker, or
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responsible party for any contract elite [sic] engaged in” and
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that he “was only an employee” of Elite.
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Id.
Id.
He also stated, “I
He further stated that he “was never an owner or
Id.
Wyrick had emailed a copy of this document to Plaintiffs on
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July 16, 2012.
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Plaintiffs a copy of this letter, which they received on July 18,
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2012, in an envelope bearing a return address of 113 Best Road in
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Hollister, California.
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informed Plaintiffs or indicated that he had a mailing address
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other than the Cienaga Road address.
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letter, Plaintiffs regularly served Wyrick with copies of the
Anastassiou Decl. ¶ 9 & Ex. A.
Id. at ¶ 10.
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He also mailed
Wyrick had not previously
Id.
Prior to receiving this
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relevant documents filed in this case at the Cienaga Road address
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and these documents were never returned as undeliverable.
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¶¶ 3-6.
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with the Court.
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The Best Road address was not included in Wyrick’s filing
On August 7, 2012, the Court adopted the Magistrate Judge’s
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report and recommendation and addressed Wyrick’s filing.
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No. 81.
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United States District Court
For the Northern District of California
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Id. at
Docket
The Court stated,
He admits that he was served with the complaint, but
states that he relied upon a co-Defendant to take care
of it. He indicates that he did receive later documents
from the Court, although he did not receive them timely
at his new address. However, he did not, and still does
not, provide a new address. He also implies that he has
filed a bankruptcy petition. If he has, he may be
entitled to a stay of these proceedings, but he provides
no information about his purported bankruptcy filing.
Otherwise, he provides no meritorious objection to the
Report and Recommendation and the Court adopts it in
every respect. If Defendant Wyrick has not filed for
bankruptcy, he may file a motion for relief from
judgment and a motion to set aside his default, if he
has other grounds to do so.
Id. at 1-2.
On August 20, 2012, Wyrick filed the instant motion to vacate
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and set aside the default judgment, to dismiss the claims against
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him and for summary judgment.
Docket No. 94.
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Plaintiffs oppose Wyrick’s motion.
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Wyrick did not file a reply in support of his motion.
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Docket Nos. 84, 87, 89.3
LEGAL STANDARD
Federal Rule of Civil Procedure 55(c) provides that a court
“may set aside a default judgment under Rule 60(b).”
Rule 60(b)
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Plaintiffs’ opposition papers were filed before the Court
received Wyrick’s motion papers.
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enumerates the following grounds upon which a motion for relief
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from an order or judgment may be made:
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1) mistake, inadvertence, surprise or excusable neglect;
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2) newly discovered evidence which by due diligence
could not have been discovered before the court’s
decision;
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3) fraud by the adverse party;
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4) the judgment is void;
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5) the judgment has been satisfied; or
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6) any other reason justifying relief.
United States District Court
For the Northern District of California
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The Ninth Circuit has stated that the three factors that
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govern lifting entry of default for good cause under Rule 55(c)
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also govern the vacating of a default judgment under Rule 60(b)(1)
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for excusable neglect or mistake.
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Knoebber, 244 F.3d 691, 696-97 (9th Cir. 2001); see also United
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States v. Signed Personal Check No. 730 of Yubran S. Mesle
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(Mesle), 615 F.3d 1085, 1091 n.1 (9th Cir. 2010) (noting that this
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test is applied more liberally in the Rule 55(c) context than in
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the Rule 60(b) context because in the former situation “there is
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no interest in the finality of the judgment with which to
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contend”).
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“Falk factors,” are (1) whether the defendant’s culpable conduct
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led to the default; (2) whether the defendant has a meritorious
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defense; and (3) whether setting aside the default would prejudice
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the plaintiff.
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Cir. 2011) (citing Falk v. Allen, 739 F.2d 461, 463 (9th Cir.
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1984)).
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free to deny relief if any of the three factors is true.”
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653 F.3d at 1111 (quoting Franchise Holding II, LLC v. Huntington
TCI Group Life Ins. Plan v.
These three factors, to which courts refer as the
Brandt v. Am. Bankers, 653 F.3d 1108, 1111 (9th
The standard is disjunctive and “the district court is
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Brandt,
1
Restaurants Group, Inc., 375 F.3d 922, 926 (9th Cir. 2004))
2
(internal quotation marks and formatting omitted).
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finding of culpability on the part of a defaulting defendant is
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sufficient to justify the district court’s exercise of its
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discretion to deny relief.”
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neglect’” is “‘at bottom an equitable one, taking account of all
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relevant circumstances surrounding the party’s omission.’”
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1111.
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Id.
Thus, “a
The “inquiry into ‘excusable
The party seeking to vacate the entry of default bears the
10
United States District Court
For the Northern District of California
Id. at
burden of demonstrating that these factors favor doing so.
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Group Life Ins. Plan, 244 F.3d at 696.
12
DISCUSSION
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I.
TCI
Rule 60(b)(4)
Wyrick argues first that the default judgment should be set
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aside pursuant to Rule 60(b)(4) because it violated the automatic
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bankruptcy stay under 11 U.S.C. § 362 and thus was void as a
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matter of law.
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act to collect, assess, or recover a claim against the debtor that
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arose before the commencement of the” bankruptcy petition and “the
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commencement or continuation” of any “action or proceeding against
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the debtor that was or could have been commenced before the
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commencement of the” petition “or to recover a claim against the
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debtor that arose before the commencement of the” petition.
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U.S.C. § 362(a)(1),(6).
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intended, “to bar proceedings for post-petition claims that could
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not have been commenced before the petition was filed.”
27
First Federal Sav. & Loan Ass’n, 843 F.2d 153, 154 (3d Cir. 1988).
28
Here, both the conduct underlying the claim and the accrual of the
In relevant part, that statute serves to stay “any
11
However, it does not, and was not
8
Taylor v.
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claim itself occurred after Wyrick filed his bankruptcy petition.
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Accordingly, this case was not subject to the automatic bankruptcy
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stay and the judgment was not void as a result, as Wyrick
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contends.
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II.
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Rule 60(b)(1)
Wyrick also argues that good cause exists to set aside the
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default judgment pursuant to Rule 60(b)(1).
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whether any of the three Falk factors is met here.
The parties dispute
Under the first factor, “a defendant’s conduct is culpable if
10
United States District Court
For the Northern District of California
9
he has received actual or constructive notice of the filing of the
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action and intentionally failed to answer.”
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at 697.
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term ‘intentionally’ means that a movant cannot be treated as
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culpable simply for having made a conscious choice not to answer”
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or for having demonstrated “simple carelessness.”
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“to treat a failure to answer as culpable, the movant must have
17
acted with bad faith, such as an ‘intention to take advantage of
18
the opposing party, interfere with judicial decisionmaking, or
19
otherwise manipulate the legal process.’”
20
(quoting TCI Group, 244 F.3d at 697); see also id. at 1094
21
(concluding it was error to find a defendant’s conduct culpable
22
based on “his failure to act after being notified of the need to
23
do so, in the absence of any indication that he acted in bad
24
faith”).
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if “‘there is no explanation of the default inconsistent with a
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devious, deliberate, willful, or bad faith failure to respond.’”
27
Id. at 1092 (quoting TCI Group, 244 F.3d at 698); see also TCI
28
Group, 244 F.3d at 697 (“Neglectful failure to answer as to which
TCI Group, 244 F.3d
The Ninth Circuit has explained that “in this context the
Id.
Instead,
Mesle, 615 F.3d at 1092
The Ninth Circuit has typically found culpability only
9
1
the defendant offers a credible, good faith explanation negating
2
any intention to take advantage of the opposing party, interfere
3
with judicial decisionmaking, or otherwise manipulate the legal
4
process is not ‘intentional.’”).
5
Wyrick argues that his conduct was not culpable because he
6
“was not given proper service and the time to which I could defend
7
against this complaint.”
8
he was served with the complaint, he “assumed the matter was
9
subject to the bankruptcy’s automatic stay and bankruptcy process
Mot. at 4.
He also states that, after
United States District Court
For the Northern District of California
10
and no action was required,” and that he had turned over the
11
complaint to Elite and Richard Escamilla, Sr., who assured him
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that they would take care of the matter.
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had been foreclosed upon and that his mail was not forwarded to
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his new address until mid-July 2012 and that it was only then that
15
he learned that Plaintiffs were continuing to prosecute claims
16
against him, that a default had been entered against him and that
17
they were seeking a default judgment.
18
He states that his home
However, Wyrick has not provided a credible, good faith
19
explanation negating bad faith.
20
has attested in the instant motion contradict his sworn statements
21
elsewhere in the motion or in his earlier filing.
22
although he states that he was not properly served with the
23
complaint and thus was not given time to defend against it, Wyrick
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also acknowledges that he was served with the complaint and that
25
he turned over defense of the action to Elite.
26
Many of the facts to which Wyrick
For example,
Further, although Wyrick’s misunderstanding about the
27
bankruptcy stay and his belief that Elite and Escamilla were
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resolving this action for him may provide a good faith explanation
10
1
for his failure to respond initially to the complaint in a timely
2
fashion, they do not explain his failure to address the default
3
entered against him for more than seven months and he has not
4
provided a credible explanation for this delay.
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entry of default and the default itself were filed and served upon
6
Wyrick at the Cienaga Road address in November 2011.
7
those filings, as he acknowledges in his motion, Wyrick reasonably
8
should have known that the case was proceeding against him,
9
despite his belief about the bankruptcy stay and the assurances of
The motion for
Through
United States District Court
For the Northern District of California
10
Elite and Escamilla.
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attested that his home was foreclosed upon in May 2012 and that
12
his family had to move to a new address at that time.
13
Wyrick’s statement in the present motion that he did not receive
14
the motion for entry of default and the entry of default until
15
mid-July due to the foreclosure is not credible.
16
In his July 19, 2012 declaration, Wyrick
Thus,
In addition, Wyrick’s representation that he did not receive
17
the other filings until “mid-July” is also not credible.
18
previously noted, he called Plaintiffs’ counsel on July 5, 2012
19
regarding the motion for default judgment and hearing on that
20
motion.
21
(letter from Wyrick’s bankruptcy counsel to Plaintiffs’ counsel
22
acknowledged the telephone conversation took place on that date).4
As
Anastassiou Decl. ¶¶ 7-8; see also id. at ¶ 12 & Ex. C
23
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4
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26
27
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The Court notes that there are other contradictions between
Wyrick’s various sworn representations. For example, he states in
the instant motion that, had he known that this action was not
subject to the bankruptcy stay or that Elite was not resolving the
action, he would have immediately addressed the matter with his
attorneys. Mot. at 1. However, in his prior filing, he asked
that this action be dismissed, and represented that he could not
afford a lawyer to represent him in this matter. Docket No. 80.
11
1
Further, to the extent that Wyrick appears to blame
2
Plaintiffs for sending him notices at the Cienaga Road address,
3
and states that Plaintiffs continue to send him service copies at
4
his former address, the Court notes that Wyrick never updated his
5
address in his bankruptcy case and that he continues to be served
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with documents in that case at that address.
7
Nos. 58-59, In re Wyrick (September 12, 2012 Order Discharging
8
Debtor and certificate of service upon Wyrick at the Cienaga Road
9
address).
See, e.g., Docket
Since they were provided notice of his new address,
United States District Court
For the Northern District of California
10
Plaintiffs have served Wyrick at that address.
11
No. 83-1.
12
See, e.g., Docket
Thus, Wyrick has not offered a credible and good faith
13
explanation for his failure to answer.
14
this case, including that Wyrick’s various sworn representations
15
materially contradict each other and suggest bad faith conduct,
16
the Court finds that Wyrick has not shown good cause to set aside
17
the default judgment and DENIES his motion.
18
Court need not reach the other Falk factors.
19
Considering the facts of
Accordingly, the
The Court notes, however, that to the extent that Wyrick
20
asserts that he cannot be held personally liable under PACA for
21
the actions of Elite, Plaintiffs have offered substantial evidence
22
that Wyrick did exercise sufficient control over Elite to incur
23
such liability.
24
(9th Cir. 1997) (“An individual who is in the position to control
25
the trust assets and who does not preserve them for the
26
beneficiaries has breached a fiduciary duty, and is personally
27
liable for that tortious act . . . [A] PACA trust in effect
28
imposes liability on a trustee, whether a corporation or a
See Sunkist Growers v. Fisher, 104 F.3d 280, 283
12
1
controlling person of that corporation, who uses the trust assets
2
for any purpose other than repayment of the supplier.”) (internal
3
citation omitted).
4
witnesses with knowledge of Wyrick’s role in Elite and Wyrick’s
5
own emails, in which he directly participated in negotiating the
6
contract at issue here.
7
This includes testimony from a number of
Further, although, in general, setting aside a default is
8
considered prejudicial only if the opposing party’s “ability to
9
pursue his claim will be hindered,” such as through “loss of
United States District Court
For the Northern District of California
10
evidence, increased difficulties of discovery, or greater
11
opportunity for fraud or collusion,” TCI Group, 244 F.3d at 701
12
(citations omitted), under the circumstances of the instant case,
13
the delay alone constitutes prejudice.
14
under PACA, which was created in 1930 “primarily for the
15
protection of the producers of perishable agricultural products--
16
most of whom must entrust their products to a buyer or commission
17
merchant who may be thousands of miles away, and depend for their
18
payment upon his business acumen and fair dealing.”
19
Kornblum & Co., 81 F.3d 280, 283 (2d Cir. 1996) (quoting H.R. Rep.
20
No. 1196, 84th Cong., 1st Sess. 2 (1955)).
21
statute in 1984 to add an additional remedy: the perishable
22
commodities or proceeds from the sale of those commodities are
23
held in trust by the dealer for the benefit of the unpaid seller
24
until full payment is made.”
25
(citation omitted).
26
that prompt payment to producers of crops, such as AFCM, is an
27
important concern:
Plaintiffs assert claims
In re
“Congress amended the
Sunkist Growers, 104 F.3d at 282
At that time, the relevant House report noted
28
13
Producers and shippers of perishable commodities are,
for the most part, small size businesses. The process
of growing, harvesting, packing and shipping perishables
is a real gamble; costs are high, capital is tied up in
farm land and machinery, and returns are delayed until
the crop is sold. If the grower-shipper cannot realize
any returns on the sale of the crop when due, he may not
be able to survive.
1
2
3
4
5
H. Rep. No. 98-543, 98th Cong., 1st Sess. 5 (1983).
6
also problematic because, once funds in a trust “are dissipated,
7
it is all but impossible to effect recovery.”
8
would be unduly prejudicial to AFCM to delay its ability to
9
recover based on Wyrick’s culpable failure to participate in these
United States District Court
For the Northern District of California
10
Id.
Delays are
Thus, here, it
proceedings in a timely fashion.
11
CONCLUSION
12
For the reasons set forth above, the Court DENIES Wyrick’s
13
motion to vacate and set aside the default judgment and DENIES AS
14
MOOT his motion to dismiss and for summary judgment (Docket No.
15
94).
16
IT IS SO ORDERED.
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Dated: 3/29/2013
CLAUDIA WILKEN
United States District Judge
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