Ross v. San Diego Hospice & Palliative Care Corporation et al
Filing
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ORDER granting defendant Kipperman's 27 Motion to Set Aside Entry of Default, and denying as moot plaintiff's 28 , 30 Motions for Default Judgment. Defendant Kipperman is directed to respond to the First Amended Complaint within 20 days of this Court's order. Signed by Judge John A. Houston on 7/28/15. (kas)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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In re
LEILANI ROSS,
Plaintiff,
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v.
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RICHARD M. KIPPERMAN, in his
capacity as liquidating trustee of the
Liquidating Trust of San Diego Hospice
& Pallative Care,
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Defendant.
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Civil No. 14cv2236 JAH (JMA)
ORDER GRANTING DEFENDANT
KIPPERMAN’S MOTION TO SET
ASIDE ENTRY OF DEFAULT
[Doc. No. 27]; DENYING
PLAINTIFF’S MOTIONS FOR
DEFAULT JUDGMENT AS MOOT
[Doc. Nos. 28, 30]
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Pending before the Court is defendant Kipperman’s motion to set aside entry of
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default and plaintiff Ross’ motion and amended motion for default judgment. After a
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thorough review of the parties’ submissions and for the reasons set forth below, the Court
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GRANTS defendant Kipperman’s motion to set aside entry of default and DENIES
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plaintiff Ross’ motion and amended motion for default judgment as MOOT.
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BACKGROUND
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On May 16, 2014, plaintiff Leilani Ross (“Ross”) filed a complaint in the Superior
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Court of California, County of San Diego, against defendants San Diego Hospice &
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Palliative Care Corporation (“SDHP”), San Diego Hospice Foundation (“the
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Foundation”), and Richard M. Kipperman, as liquidating trustee of the Liquidating Trust
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of San Diego Hospice & Palliative Care (“Kipperman”). In September 2014, Ross filed
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a first amended complaint (“FAC”) to add an additional cause of action. The FAC
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contains eight causes of action: (1) violation of Title VII of the Civil Rights Act of 1964,
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42 U.S.C. § 2000(e); (2) violation of the Civil Rights Act of 1866, 42 U.S.C. § 1981; (3)
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discrimination on the basis of race, ancestry, national origin in violation of Fair
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Employment and Housing Act (“FEHA”); (4) harassment on the basis of race, ancestry,
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national origin in violation of FEHA; (5) retaliation for complaining of discrimination; (6)
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failure to prevent discrimination and harassment in violation of FEHA; (7) wrongful
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termination in violation of public policy; and (8) violation of California Business and
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Profession Code § 17200. (Doc. Nos. 1-4.)
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On September 19, 2014, SDHP removed the action to this Court. (Doc. No. 1.)
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On November 5, 2014, Kipperman was served with the summons and the FAC. (Doc.
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Nos. 9, 16.) On March 25, 2015, Ross filed a request for Clerk’s entry of default, and the
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Clerk of Court entered default on March 26, 2015. (Doc. Nos. 25, 26.)
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Kipperman filed the pending motion to set aside entry of default on April 20, 2015.
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(Doc. No. 27.) Ross filed an opposition on May 18, 2015 and Kipperman filed a reply
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on May 22, 2015. (Doc. Nos. 33, 34.) Ross filed a motion for default judgment on April
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20, 2015, and filed an amended motion for default judgment on April 22, 2015 solely to
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give notice of a hearing. (Doc. Nos. 28, 30.) Kipperman filed an opposition on May 18,
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2015 and Ross filed a reply on May 22, 2015. (Doc. Nos. 32, 35.) The hearing for the
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motions was originally set for June 1, 2015, but continued on the Court’s own motion to
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June 15, 2015. (Doc. No. 36.) On June 15, 2015, the Court took the motions under
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submission without oral argument. (Doc. No. 37.)
DISCUSSION
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I.
Preliminary Issues
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A.
Plaintiff’s Request for Judicial Notice
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In support of Ross’ opposition to Kipperman’s motion to set aside default, Ross
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requests the Court take judicial notice of eight documents: 1) Kipperman’s website, found
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at http://www.corpmgt.com/about.html; 2) Kipperman’s resume; 3) a printout from
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PACER reflecting sixty-nine Federal civil cases Kipperman has served as a party; 4) a
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printout from PACER reflecting over 45,000 cases defendant Kipperman’s has served as
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a party in various bankruptcy cases and bankruptcy adversary proceedings; 5) a chapter
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11 post confirmation quarterly report for quarter ending March 31, 2014; 6) plaintiff
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Leilani Ross’ declaration in support of the motion for default judgment; 7) Gail J. Higgins’
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declaration in support of the motion for default judgment; and 8) “a motion for authority
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to enter into settlement agreement with San Diego Hospice Foundation, Inc. and approval
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of related settlement agreement between San Diego Hospice Foundation, Inc. and Wells
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Fargo Bank, N.A.; memorandum of points and authorities and declaration of Kipperman
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in support thereof.” (Doc. No. 33-4 at 1-3.)
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Kipperman filed objections to Ross’ request for judicial notice. (Doc. No. 34-1 at
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3-6.) Specifically, Kipperman asserts that the documents are introduced for their truth
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and not properly subject to judicial notice. (Id.) Additionally, with respect to documents
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1-5 and 8 above, Kipperman asserts that the documents are irrelevant to determining
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whether good cause exists to set aside the entry of default. (Id.)
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Rule 201 of the Federal Rules of Evidence provides that a “court may judicially
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notice a fact that is not subject to reasonable dispute because it . . . (1) is generally known
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within the trial court’s territorial jurisdiction; or (2) can be accurately and readily
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determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid.
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201(b).
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With respect to documents 3 and 4, the Court GRANTS Ross’ request for judicial
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notice pursuant to Rule 201 of the Federal Rules of Evidence on the grounds that the
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documents are publically available records not subject to reasonable dispute. The Court
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does not rely on documents 1, 2, 5-8 and therefore DENIES Ross’ request as to these
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documents as MOOT.
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B.
Evidentiary Objections
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Both parties filed objections to the evidence submitted by the opposing party. Ross
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filed objections to portions of paragraphs 2, 7, 9-12, 15-16, 19 and 27 of Shauna Sinnot’s
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declaration. (Doc. No. 33-7 at 1-6.) Kipperman filed objections to portions of paragraphs
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17, 22, and 34 of Gail Higgin’s declaration. (Doc. No. 34-1 at 2.)
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With respect to paragraph 27 of Shauna Sinnot’s declaration wherein the declarant
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discusses Kipperman’s meritorious defense to Ross’ claims, Ross objects on the grounds
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that the evidence lacks foundation and is inadmissible hearsay. Kipperman does not
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respond to this argument. Nevertheless, these objections are without merit because only
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factual allegations, not admissible evidence, is required at this stage to support a
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meritorious defense. See Results ByIQ, LLC v. NetCapital.com, LLC, No. C 11–0550 SC.,
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2012 WL 2838594, at *4 (N.D. Cal. July 10, 2012). Accordingly, Ross’ objection to
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paragraph 27 of Shauna Sinnot’s declaration is OVERRULED.
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The Court finds it unnecessary to consider many of the other objected to portions
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of the declarations in making its determination on the motion. The declarations also
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include information not relevant to the Court’s consideration of the motion. As such, to
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the extent the Court has not relied on the evidence that is subject to Ross’ and
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Kipperman’s objections, the objections are DENIED AS MOOT. However, in the few
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instances where the Court has relied on the evidence that is subject to the parties’
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objections, except as stated herein, this Court finds that the objections go to the weight
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and credibility of the evidence and not its admissibility. Ross’ and Kipperman’s objections
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are OVERRULED.
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II.
Motion to Set Aside Entry of Default
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A.
Legal Standard
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Federal Rules of Civil Procedure 55(c) provides that for good cause shown the court
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may set aside the entry of default and, if a judgment by default has been entered, may
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likewise set it aside in accordance with Rule 60(b). When default judgment has not been
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entered, the Court analyzes a motion to set aside entry of default under the “good cause”
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standard of Rule 55(c) rather than the standard applied to setting aside a default judgment
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under Rule 60(b). See Hawaii Carpenters’ Trust Funds v. Stone, 794 F. 2d 508, 513 (9th
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Cir. 1986) (noting a court considering a motion to set aside entry of default is free from
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the restraints of Fed.R.Civ.P. 60(b)). The discretion exercised by the court is especially
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broad when “it is entry of default that is being set aside, rather than a default judgment.”
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O’Connor v. Nevada, 27 F.3d 357, 364 (9th Cir. 1994) (quoting Mendoza v. Wight
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Vineyard Mgmt. 783 F.2d 941, 945 (9th Cir. 1986))
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Among the factors considered by a court in assessing whether “good cause” has been
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shown are: 1) whether the plaintiff would be prejudiced by the setting aside of the default;
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2) whether the defendant has a meritorious defense; and 3) the defendant’s culpability in
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the default. Id.; Falk v. Allen, 739 F.2d 461, 463 (9th Cir.1984). The underlying concern
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is to determine whether there is some possibility that the outcome of the action after a full
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trial will be contrary to the result achieved by the default. Hawaii Carpenters, 794 F.2d
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at 513. The factors are “disjunctive,” meaning that a 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,
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but need not to.” See Brandt v. Am. Bankers Ins. Co. of Florida, 653 F.3d 1108, 1112
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(9th Cir. 2011).
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There is a strong preference for deciding cases on their merits, and therefore any
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doubts should be resolved in favor of setting aside the default. See Direct Mail Specialists
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v. Eclat Computerized Techs., 840 F.2d 685, 690 (9th Cir. 1988).
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B.
Analysis
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Kipperman argues that the entry of default should be set aside because vacating the
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entry of default will not prejudice Ross, he has a meritorious defense, and the entry of
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default was not the result of any culpable conduct. (Doc. No. 27-1 at 5-6.) In response,
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Ross argues that Kipperman’s motion fails because he cannot satisfy any of the factors
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establishing good cause to set aside an entry of default. (Doc. No. 33 at 13.) In reply,
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Kipperman repeats much of his arguments. (Doc. No. 34.)
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1.
Prejudice
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Kipperman argues that Ross will not be prejudiced because her ability to pursue her
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claim has not been hindered. (Doc. No. 27-1 at 8-9.) In response, Ross argues that
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reopening the default would prejudice plaintiff because defendants are engaging in
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“gamemanship,” avoiding settlement, and causing an exponential increase in attorneys’
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fees. (Doc. No. 33 at 23.) Ross further contends that the delay that has already occurred
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in the case has caused all critical communication before 2012 to be unaccounted for and
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further delay will only increase the risk of fraud and collusion between SDHP and the
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Foundation. (Doc. No. 33 at 24.)
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A plaintiff will be prejudiced if its ability to pursue the claim has been hindered
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since the entry of the default judgment by loss of evidence or otherwise. Falk, 739 F.2d
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at 463; TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 696-97 (9th Cir. 2001),
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overruled in part on other grounds by Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141
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(2001). For a delay to be prejudicial, it must result in tangible harm such as loss of
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evidence, increased difficulties of discovery, or greater opportunity for fraud or collusion
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rather than simply delaying the resolution of the case. TCI Grp., 244 F.3d at 701
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(quoting Falk, 739 F.2d at 463). Being forced to litigate on the merits cannot be
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considered prejudicial because the plaintiff would have had to litigate the merits of the
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case had there been no default. Id.
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The Clerk of Court entered default on March 26, 2015. (Doc. No. 26.) Less than
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one month later, on April 20, 2015, Kipperman filed the motion to set aside entry of
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default. (Doc. No. 27.) The Court finds that no harm is caused by this short delay. See
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e.g., Carroll v. Cnty. of San Diego, No. 13-CV-1256 JLS MDD, 2014 WL 4185530, at
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*4 (S.D. Cal. Aug. 21, 2014) (finding good cause in part because defendants filed their
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motion for relief less than one month after clerk’s entry of default). Defendant Kipperman
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has litigated the case diligently by verifying discovery responses and attending the Early
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Neutral Evaluation (“ENE”) conference on February 4, 2015. (Doc. Nos. 33-3 at 104; 34
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at 5.) Ross was able to proceed to the ENE and with its discovery requests without delay.
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Ross does not provide evidence for her belief that defendants are engaging in
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“gamemanship” by avoiding settlement. Moreover, it is unclear how any alleged collusion
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between SDHP and the Foundation is relevant here given that those defendants are not
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parties to the default. Accordingly, the Court finds that Ross’ ability to pursue its claim
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will not be hindered and no prejudice to Ross will result by setting aside the entry of
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default.
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2.
Meritorious Defense
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Kipperman asserts the following three defenses: 1) he is not personally liable; 2) he
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can assert the same meritorious defenses asserted by SDHP in its answer; and 3) Ross’
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harassment claim is insufficient as a matter of law. (Doc. No. 27-1 at 7.) In response,
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Ross contends that Kipperman has failed to provide facts in support of a meritorious
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defense and Kipperman has failed to submit a proposed answer. (Doc. No. 33 at 22.) Ross
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also argues she has substantial evidence that the reason for her termination is pretext.
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(Doc. No. 33 at 21-22.)
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The burden on a defaulted defendant to show that it has a meritorious defense “is
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not extraordinarily heavy.” TCI Grp., 244 F.3d at 700. To justify vacating a default a
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party must present the district court with specific facts constituting a defense. Franchise
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Holding II, LLC. v. Huntington Restaurants Grp., Inc., 375 F.3d 922, 926 (9th Cir. 2004)
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(citing Madsen v. Bumb, 419 F.2d 4, 6 (9th Cir. 1969)). A “general denial without facts
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to support it” is insufficient to justify vacating a default. Id. A defendant must “allege
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sufficient facts that, if true, would constitute a defense.” United States v. Signed Pers.
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Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1094 (9th Cir. 2010) (“Mesle”).
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Whether factual allegations are true “would be the subject of the later litigation” and “is
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not to be determined by the court when it decides the motion to set aside the default.” Id.
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The Court finds that Kipperman has made some showing of a potentially
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meritorious defense. Notably, Kipperman argues that defendants had legitimate, non-
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discriminatory and non-retaliatory reasons for all adverse employment actions. (Doc. No.
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27-1 at 8.) See generally, Leong v. Potter, 347 F.3d 1117, 1124 (9th Cir. 2003) (once
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plaintiff establishes a prima facie case of discrimination, the burden shifts to the defendant
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to “articulate a legitimate, nondiscriminatory reason for the employment decision”).
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Specifically, Kipperman contends that Ross was terminated due to her pattern of excessive
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and ongoing unscheduled absences. (Doc. No. 27-1 at 9.) In support of its argument,
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defendant Kipperman sets forth at least eight dates where Ross was absent from work
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without an excuse. (Id.) Ross’ assertion that these absences are merely pretextual is
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irrelevant at this stage of the proceedings where the Court is not determining the truth of
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the allegations. See Mesle, 615 F.3d at 1094. In light of the fact that the burden on
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defendant Kipperman is not particularly heavy, the Court finds that Kipperman has
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alleged sufficient facts that if true, present a potentially meritorious defense.
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3.
Culpability
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Kipperman argues that he is not culpable in the default because he was acting under
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the parties’ agreement to extend the time for his response and the premise that the parties
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were agreeable to a stipulation related to Kipperman’s involvement. (Doc. Nos. 27-1 at
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7; 34 at 3-6.)
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In response, Ross argues there are six reasons Kipperman is culpable for the default:
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1) he had notice of the action, admitted to being a part of the case, and failed to follow
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Court rules; 2) he failed to seek an extension of time to respond to the FAC; 3) the record
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lacks evidence that the parties entered into an agreement or stipulation and even if there
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was an agreement, it cannot exculpate culpability; 4) any alleged agreement is not binding
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on the Court; 5) he is per se culpable because he is a sophisticated, professional litigant;
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and 6) all defendants and their counsel have exhibited bad faith since the case’s inception
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because the Foundation evaded service of process, defendant’s attorney stated she did not
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represent defendant Kipperman and then began to represent defendant Kipperman, and
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SDHP cannot locate critical evidence in the case. (Doc. No. 33 at 14-21.)
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A defendant’s conduct is culpable when he has “no explanation of the default
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inconsistent with a devious, deliberate, willful, or bad faith failure to respond.” TCI Grp.,
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244 F.3d at 698.
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constructive notice of the filing of the action and intentionally failed to answer.” Id. at 697
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(emphasis in the original). The term “intentionally” does not mean a court can treat a
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defendant as culpable “simply for having made a conscious choice not to answer; rather,
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to treat a failure to answer as culpable, the movant must have acted with bad faith, such
A defendant may be found culpable if it has “received actual or
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as an intention to take advantage of the opposing party, interfere with judicial decision
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making, or otherwise manipulate the legal process.” Mesle, 615 F.3d at 1092 (internal
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quotations omitted). “Neglectful failure to answer as to which the defendant offers a
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credible, good faith explanation negating any intention to take advantage of the opposing
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party, interfere with judicial decision making, or otherwise manipulate the legal process
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is not ‘intentional.’” TCI Grp., 244 F.3d at 697-98. Such conduct is not necessarily
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culpable or inexcusable, although it may be “once the equitable factors are considered.”
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Id.
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With respect to Ross’ first argument, there is no dispute that Kipperman received
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actual notice of the filing of the action. Under Mesle, if Kipperman is, as Ross contends,
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a sophisticated litigant, a Court may assume culpability based solely on his default.
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However, the Court finds that such an assumption is not warranted here for reasons
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discussed below. See Mesle, 615 F.3d at 1093 (“When considering a legally sophisticated
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party’s culpability in a default, an understanding of the consequences of its actions may
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be assumed, and with it, intentionality”) (emphasis added). Therefore, the issue is
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whether defendant Kipperman intentionally failed to answer.
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Notwithstanding the issues regarding representation, the series of e-mail
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communications that occurred between the parties from October 2014 to March 2015,
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supports Kipperman’s explanation that he neglected to answer because he was acting under
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an informal agreement to extend time to answer as well as a stipulation removing the
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necessity of an answer. Although Ross argues that an agreement never existed (doc. no.
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33 at 20), Ross admits she proposed to extend the deadline to answer (doc. no. 33 at 11).
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The e-mails further evidence that up until March 13, 2015, the parties were amenable to
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a stipulation voiding the necessity of any answer. (Doc. No. 33-3 at 42.)
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Kipperman is a sophisticated litigant, the existence of the agreement or stipulation
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contemplated by the parties would have obviated the consequences that legally
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sophisticated parties are held to understand. See e.g., Mesle, 615 F.3d at 1093. Thus, the
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Court finds that Kipperman’s explanation of the default appears to be candid and credible.
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Even if
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Moreover, Kipperman’s attendance at the ENE and his later participation in
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discovery matters mitigates against bad faith and evidences an intent to defend against suit
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and comply with the judicial process, rather than an attempt to interfere with judicial
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decision making or manipulate the legal process.
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The Court is also not convinced by Ross’ argument that the Foundation’s alleged
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evasion of service evidences bad faith supporting the default. (Doc. No. 33 at 25-26.)
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Kipperman is not an agent for service of process for the Foundation. (Doc. No. 11.)
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Kipperman was served by way of substituted service on November 5, 2014 (doc. no. 16)
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and the record lacks evidence that Kipperman made any attempts to evade service of
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process. Similarly, the record lacks evidence that Kipperman somehow caused SDHP’s
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alleged spoilation of critical evidence in the case. Accordingly the Court finds that, on
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balance, Kipperman has demonstrated a good faith explanation for the default and is not
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culpable.
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However, even if the Court were to find that Kipperman was culpable in his
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default, the Court still has discretion to set aside default and decide the case on the merits.
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See Brandt, 653 F.3d at 112 (a court “may exercise its discretion to deny relief to a
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defaulting defendant based solely upon a finding of defendant’s culpability, but need not
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to”); see also Direct Mail, 840 F.2d at 690. The strong preference in favor of resolving
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cases on the merits, the examination of the Falk factors, and the entire record in this
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matter evidence that good cause exists to set aside the entry of default.
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//
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CONCLUSION AND ORDER
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For the foregoing reasons, IT IS HEREBY ORDERED that:
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(doc. no. 27) is GRANTED;
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2.
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Defendant Kipperman is directed to respond to the First Amended
Complaint within 20 days of this Court’s order.
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Plaintiff Ross’s motion and amended motion for default judgment (doc. nos.
28, 30) is DENIED AS MOOT; and
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Defendant Kipperman’s motion to set aside the clerk’s entry of default
Dated:
July 28, 2015
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JOHN A. HOUSTON
United States District Judge
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