Dixon v. City of Oakland et al

Filing 27

Order by Magistrate Judge Donna M. Ryu granting 16 Motion to Set Aside Default.(dmrlc2, COURT STAFF) (Filed on 3/25/2013)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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PETER DIXON,

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No. C-12-05207 DMR

Plaintiff,

ORDER GRANTING DEFENDANTS
PERSONAL PROTECTIVE SERVICES,
INC. AND DEMONT MARROW’S
MOTION TO SET ASIDE DEFAULT

v.

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CITY OF OAKLAND, et al.

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Defendants.
___________________________________/

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Defendants Personal Protective Services, Inc. (“PPS”) and Demont Marrow (“Marrow”)

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(collectively, “Defendants”) move the court pursuant to Federal Rules of Civil Procedure 55 and

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60(b)1 to set aside the default entered against them on January 29, 2013 [Docket No. 14]. This

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matter is appropriate for determination without oral argument pursuant to Civil L.R. 7-1(b). For the

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reasons below, Defendants’ motion is GRANTED.

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I. Background and Procedural History

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Plaintiff Peter Dixon filed this case on October 9, 2012. [Docket No. 1.] He served the

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Complaint and summons on PPS by substituted service on October 11, 2012 and by mail on October

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17, 2012, and on Marrow by personal service on October 11, 2012. Decl. of Michael Haddad

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(“Haddad Decl.”) [Docket No. 22] at ¶ 3. An answer or responsive pleading was due from

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The court reaches its determination under Rule 55, and therefore declines to analyze the matter
under Rule 60(b).

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Defendant PPS on November 13, 2012, and from Defendant Marrow on November 1, 2012. Id. at ¶

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Stan Teets, the President of PPS, explained that it is his custom and practice to “forward any

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complaints to PPS’s insurance broker, One Risk, within a week of receipt.” Decl. of Stan Teets

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(“Teets Decl.”) [Docket No. 16-1] at ¶ 3. Upon receipt, One Riskthen forwards the complaint to

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PPS’s liability carrier, Everest National Insurance. Id. Teets stated in his declaration: “I have no

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reason to believe that my custom and practice were deviated from when the complaint in this matter

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was received by Personal Protective Services, Inc.” Id. Teets confirmed that on November 9, 2012,

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One Risk sent the Complaint to Everest National Insurance, requesting that it retain defense counsel

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For the Northern District of California

United States District Court

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to defend both PPS and Marrow. Id. at ¶ 4.
On November 16, 2012, Fred Benjamin, a representative from One Risk, called Plaintiff’s

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counsel requesting an extension to file an answer on behalf of both Defendants. Haddad Decl. at ¶

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6. Plaintiff’s counsel granted the request and extended time for the answer to December 17, 2012.

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Id. On December 12, 2012, Plaintiff’s counsel contacted Benjamin to request that he stipulate to

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continuing the January 9, 2013 Case Management Conference. Id. at ¶ 7. Benjamin agreed on the

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condition that Defendants be granted another extension to file an answer. The parties agreed to

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extend that deadline until January 2, 2013. Id. The January 2 deadline passed without Defendants

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filing an answer or responsive pleading. Id. at ¶ 8.

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On January 22, 2013, Plaintiff’s counsel informed Benjamin that she intended to request

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entry of default, and offered Defendants another extension of time to January 25, 2013, to file an

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answer. Teets Decl. at ¶ 6; Haddad Decl. at ¶ 8, Ex. C. The same day, Benjamin retained the law

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firm of Bremer, Whyte, Brown & O’Meara to represent Defendants in this lawsuit. Decl. of Keith

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G. Bremer (“Bremer Decl.”) [Docket No. 16-2.] at ¶ 2. Defendants’ counsel claims that it “was not

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made aware that an answer needed to be filed by January 25, 2013 or a request for entry of default

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would be filed.” Id. Between January 22 and January 25, 2013, Defendants’ counsel “work[ed] on

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obtaining the necessary information to file an answer . . . .” Id. at ¶ 3. As of Friday, January 25,

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2013, Defendants had failed to appear or otherwise respond to the Complaint. Haddad Decl. at ¶ 9.

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Plaintiff filed a request for entry of default that day. Id. The following Monday, January 28, 2013,

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Defendants’ counsel informed Plaintiff’s counsel that it had been retained to represent Defendants.

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Bremer Decl. at ¶ 3. Later that day, Defendants’ counsel learned that Plaintiff had already requested

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entry of default. Id. The Clerk of Court entered default as to Defendants on January 29, 2013.

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[Docket No. 14.]

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II. Legal Standard
Rule 55(c) of the Federal Rules of Civil Procedure permits the court to “set aside an entry of

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default for good cause.” Fed. R. Civ. P. 55(c). To determine whether a party has shown good cause,

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the court must examine “(1) whether [the party seeking to set aside the default] engaged in culpable

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conduct that led to the default; (2) whether [it] had [no] meritorious defense; [and] (3) whether
reopening the default judgment would prejudice any other party.” United States v. Signed Personal

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For the Northern District of California

United States District Court

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Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) [hereinafter Mesle]

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(brackets in original) (quoting Franchise Holding II v. Huntington Rests. Group, Inc., 375 F.3d 922,

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925-26 (9th Cir. 2004)) (quotation marks omitted). When performing this analysis, the court must

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remember that “judgment by default is a drastic step appropriate only in extreme circumstances; a

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case should, whenever possible, be decided on the merits.” Id. at 1091 (quoting Falk v. Allen, 739

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F.2d 461, 463 (9th Cir. 1984)) (quotation marks omitted).

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III. Discussion

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A. Culpable Conduct

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The court will consider a party’s conduct culpable if it “has received actual or constructive

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notice of the filing of the action and intentionally failed to answer.” Mesle at 1092 (citations and

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quotation marks omitted) (emphasis in original). In this context, “intentionally” means that the party

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“must have acted with bad faith, such as an intention to take advantage of the opposing party,

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interfere with judicial decisionmaking, or otherwise manipulate the legal process.” Id. (citation and

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quotation marks omitted). A party is culpable “where there is no explanation of the default

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inconsistent with a devious, deliberate, willful, or bad faith failure to respond.” Id. (citation and

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quotation marks omitted). “When considering a legally sophisticated party's culpability in a default,

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an understanding of the consequences of its actions may be assumed, and with it, intentionality.” Id.

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at 1093.

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Defendants’ insurance broker, One Risk, knew about the Complaint by at least November 9,

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2012, the date that One Risk contacted PPS’s liability carrier. However, One Risk did not retain

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counsel for Defendants until January 22, 2013, after it had entered into three separate agreements

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with Plaintiff’s counsel to extend the deadline for filing a responsive pleading. It appears that

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Defendants’ insurance broker or insurer dropped the ball. However, simple carelessness,

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particularly by an insurer rather than a party, does not demonstrate culpable conduct. Mesle at 1092

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(“It is clear that simple carelessness is not sufficient to treat a negligent failure to reply as

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inexcusable, at least without a demonstration that other equitable factors, such as prejudice, weigh

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heavily in favor of denial of the motion to set aside a default.”). None of the cases cited by Plaintiff
involve conduct by an insurer who fails to arrange for a timely response on a defendant’s behalf.

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For the Northern District of California

United States District Court

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All of the cases cited by Plaintiff in support of the argument that Defendants were legally

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sophisticated parties whose failure to answer was intentional involve represented parties. Opp. at 9-

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10. Here, Defendants did not have representation until January 22, 2013. Moreover, there is no

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evidence that Defendants’ failure to respond to the Complaint was the result of intentional,

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deliberate, manipulative, or bad faith conduct. The court therefore finds that Defendants did not

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engage in culpable conduct that led to the entry of default against them.

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B. A Meritorious Defense

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The moving party must “allege[] sufficient facts that, if true, would constitute a defense: the

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question whether the factual allegation [i]s true is not to be determined by the court . . . .” Mesle,

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615 F.3d at 1094 (brackets in original) (citation and quotation marks omitted). Although this

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showing does not impose an “extraordinarily heavy” burden, id. (citation and quotation marks

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omitted), the party may not rely on “mere general denial without facts to support it.” Franchise

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Holding II, 375 F.3d at 926 (citation and quotation marks omitted). Defendants have asserted that

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they were acting in self-defense and with probable cause. Mot. at 4; see also Declaration of

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Monique R. Donovan [Docket No. 24-1] at Ex. 2 (incident report containing facts Defendants allege

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support their affirmative defenses). Accordingly, Defendants have established the existence of a

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meritorious defense.

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C. Prejudice

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In order to establish prejudice, setting aside the default “must result in greater harm than

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simply delaying resolution of the case.” Mesle, 375 F.3d at 1095 (citation and quotation marks

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omitted). In the present case, the court can discern no harm that will arise from setting aside the

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default against Defendants. Defendants filed this motion approximately two weeks after their last

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deadline for filing an answer. [Docket No. 16.] The litigation is still at an early stage, and

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permitting Defendants to file an answer or responsive pleading will not prejudice Plaintiff.

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IV. Conclusion

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and deems the Answer submitted as Exhibit 1 to the Declaration of Monique R. Donovan [Docket
No. 24-1] filed as of the date of this Order.

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For the Northern District of California

United States District Court

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For the reasons provided above, the court GRANTS the motion to set aside default judgment,

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IT IS SO ORDERED.

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Dated: March 25, 2013

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DONNA M. RYU
United States Magistrate Judge

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