Electrical Industry Service Bureau, Inc., et al v. J Copello International Corp. d/b/a Copello Electric Co.

Filing 25

ORDER GRANTING 17 MOTION to Set Aside Default; and Setting Case Management Conference. Case Management Statement due by 11/27/2015. Initial Case Management Conference set for 12/4/2015 11:00 AM in Courtroom 5, 2nd Floor, Oakland. Signed by Judge Jeffrey S. White on 10/5/15. (jjoS, COURT STAFF) (Filed on 10/5/2015)

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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ELECTRICAL INDUSTRY SERVICE
BUREAU, INC., et al.,

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For the Northern District of California

United States District Court

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No. C 15-01946 JSW
ORDER GRANTING MOTION
TO SET ASIDE DEFAULT AND
SETTING CASE MANAGEMENT
CONFERENCE

Plaintiffs,
v.
J COPELLO INTERNATIONAL CORP. d/b/a
COPELLO ELECTRIC CO.,
Defendant.

Docket No. 17
/

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Now before the Court is the motion of Defendant J. Copello International Corp. d/b/a

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Copello Electric Co. (“Defendant”) to set aside default (Docket No. 17). The Court has considered

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the parties’ papers, relevant legal authority, and the record in this case, and for the reasons set forth

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below, the Court GRANTS the motion to set aside default.

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BACKGROUND
On April 29, 2015, Plaintiffs, multi-employer employee benefit plans and jointly trusteed

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employee benefit trusts, filed this action against Defendant, alleging claims under Section 515 of the

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Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1145, and Section 301 of the

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Labor-Management Relations Act, 29 U.S.C. § 185.

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On July 6, 2015, Plaintiffs filed a motion for entry of default. The Clerk entered Defendant’s

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default on July 7, 2015. On August 20, 2015, Defendant filed the instant motion to set aside default.

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ANALYSIS
A.

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Legal Standard.
Pursuant to Federal Rule of Civil Procedure 55(c), the Court may set aside an entry of default

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for good cause shown. “[J]udgment by default is a drastic step appropriate only in extreme

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circumstances; a case should, whenever possible, be decided on the merits.” Falk v. Allen, 739 F.2d

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461, 463 (9th Cir. 1984). In general, a more lenient standard is applied when determining whether

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to set aside an entry of default than is applied to vacating a default judgment. See Mendoza v. Wight

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Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir. 1986) (per curiam) (“The court’s discretion is

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especially broad where . . . it is entry of default that is being set aside, rather than a default
judgment”).

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For the Northern District of California

United States District Court

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To determine “good cause” for setting aside an entry of default, the Court must consider

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three factors: (1) whether the party seeking to set aside the default engaged in culpable conduct that

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led to the default; (2) whether it had no meritorious defense; or (3) whether reopening the default

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judgment would prejudice the other party. U.S. v. Signed Personal Check No. 730 of Yubran S.

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

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

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a finding that any one of these factors is true is sufficient reason for the district court to refuse to set

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aside the default.” Id. (citation omitted). The party seeking to invoke Rule 55(c) bears the burden of

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demonstrating that these factors favor setting aside the default. TCI Group Life Ins. Plan v.

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Knoebber, 244 F.3d 691, 696 (9th Cir. 2001).

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B.

Defendant Has Shown Good Cause to Vacate the Entry of Default.

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A party’s conduct can be considered culpable if it “has received actual or constructive notice

Defendant’s Conduct Was Not Culpable.

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of the filing of the action and intentionally failed to answer.” Id. at 697 (quotation omitted). The

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Ninth Circuit has explained, however, that “in this context the term ‘intentionally’ means that a

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movant cannot be treated as culpable simply for having made a conscious choice not to answer;

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rather, to treat a failure to answer as culpable, the movant must have acted with bad faith, such as an

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‘intention to take advantage of the opposing party, interfere with judicial decisionmaking, or
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otherwise manipulate the legal process.’” Mesle, 615 F.3d at 1092 (quoting TCI Group, 244 F.3d at

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697). In other words, a defendant’s conduct is “culpable for purposes of the [good cause] factors

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where there is no explanation of the default inconsistent with a devious, deliberate, willful, or bad

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faith failure to respond.” TCI Group, 244 F.3d at 698. Thus, if the defaulting party “offers a

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credible, good faith explanation negating any intention to take advantage of the opposing party,

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interfere with judicial decisionmaking, or otherwise manipulate the legal process,” its conduct is not

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“intentional.” Id. at 697.

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Here, the Court cannot say that there is no good faith explanation for Defendant’s default.

Executive Officer, President, and Responsible Managing Officer, which states that, upon receipt of

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For the Northern District of California

Defendant submits a seven-paragraph declaration of Jack S. Copello (“Copello”), Defendant’s Chief

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United States District Court

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the Complaint, Copello “could not understand what the case related to,” but contacted

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representatives for Plaintiffs to determine what information they sought. (Copello Decl. ¶ 4-5.)

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Copello provided additional information. (Id. ¶ 5.) Then, due to the press of business and lack of

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legal counsel, Copello believed the matter was resolved. (Id. ¶¶ 4, 6.) Additionally, after receiving

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Plaintiffs’ request for entry of default, Copello “worked diligently” to retain counsel and file the

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current motion. (Id. ¶ 7.)

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Defendant’s conduct in not responding to the Complaint, and not timely seeking the advice

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of counsel in order to understand the matter, was certainly neglectful. Copello did not ignore the

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Complaint altogether, though; he contacted representatives for Plaintiffs and provided some

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additional information. The Court does not reach the question of whether that additional

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information complied with Defendant’s obligations under the relevant laws and agreements. For the

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purpose of this motion, it is sufficient to find that Defendant’s conduct in failing to respond to the

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Complaint was not “intentional” or “culpable” under the lenient standards of this Circuit.

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2.

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“A defendant seeking to vacate a default judgment must present specific facts that would

Defendant Has Adequately Set Forth Meritorious Defenses.

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constitute a defense. But the burden on a party seeking to vacate a default judgment is not

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extraordinarily heavy.” TCI Group, 244 F.3d at 700 (citations omitted). “All that is necessary to

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satisfy the ‘meritorious defense’ requirement is to allege sufficient facts that, if true, would
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constitute a defense: ‘the question whether the factual allegation [i]s true’ is not to be determined by

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the court when it decides the motion to set aside the default.” Mesle, 615 F.3d at 1094 (quoting id.).

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“Rather, that question ‘would be the subject of the later litigation.’” Id. In other words, when

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exercising its discretion under Rule 55, the Court’s “underlying concern . . . is to determine whether

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there is some possibility that the outcome of the suit after a full trial will be contrary to the result

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achieved by the default.” Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir.

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1986).

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Here, Copello declares, under penalty of perjury, that he cooperated with the auditor’s
requests, “and provided information to permit IBEW Local 6 to complete the audit.” Copello Decl.
¶ 3.) He further alleges that after the Complaint was filed, he contacted the firm conducting the

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For the Northern District of California

United States District Court

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audit, and that Defendant then provided the additional information that the auditors sought. (Id. ¶ 5.)

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In its motion, Defendant indicates additional defenses that it intends to raise, although these are not

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supported by the declaration. The Ninth Circuit has made clear that this Court must not make any

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factual determinations regarding the defenses at this time. See Mesle, 615 F.3d at 1094.

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Accordingly, the Court cannot say that Defendant has raised no meritorious defenses.

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3.

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“To be prejudicial, the setting aside of a judgment must result in greater harm than simply

Plaintiffs Will Not Be Prejudiced if the Default Is Set Aside.

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delaying resolution of the case. Rather, ‘the standard is whether [plaintiff’s] ability to pursue his

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claim will be hindered.’” TCI Group, 244 F.3d at 701 (quoting Falk, 739 F.2d at 463). To be

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considered prejudicial, “the delay must result in tangible harm such as loss of evidence, increased

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difficulties of discovery, or greater opportunity for fraud or collusion.” Thompson v. American

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Home Assurance Co., 95 F.3d 429, 433-34 (6th Cir. 1996), quoted in TCI Group, 244 F.3d at 701.

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Plaintiffs contend that Defendant has pursued a strategy of delay and deception calculated to

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avoid an audit and that setting aside the default will “allow Defendant even more time to bury

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records, and to move and hide assets.” (Opp. at 8.) However, although Plaintiffs have provided

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some evidence of delay and noncompliance, they have not substantiated their assertions that

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Defendant has embarked, or will embark, upon a course of spoliation. Of course, should such

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conduct be substantiated in the future, there will be consequences. But at this time, the record does

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not support a finding that Plaintiffs will be prejudiced if the default is set aside.

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CONCLUSION
Based on the history of this case and this Circuit’s strong preference for decisions made on

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the merits, see Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986), the Court GRANTS

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Defendant’s motion to set aside default. The Clerk’s entry of default is set aside. Defendant shall

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respond to the Complaint no later than 14 calendar days after the filing of this order.

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On September 14, 2015, the Court granted the parties’ stipulated motion to continue the case

aside default having been granted, the Court hereby ORDERS that a case management conference

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For the Northern District of California

management conference pending disposition of the motion to set aside default. The motion to set

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United States District Court

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shall be held in this case on December 4, 2015, at 11:00 a.m., in Courtroom 5, 2nd Floor, Federal

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Courthouse, 1301 Clay Street, Oakland, California.

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The parties shall file a joint case management statement no later than five (5) court days
prior to the conference.
IT IS SO ORDERED.
Dated: October 5, 2015
JEFFREY S. WHITE
UNITED STATES DISTRICT JUDGE

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