1-800 Radiator Franchise, Inc. v. Blincoe et al
Filing
32
MEMORANDUM DECISION AND ORDER granting 22 Motion to Set Aside Default and Motion to Reconsider. The Preliminary Injunction 18 is VACATED and the Motion for Preliminary Injunction 2 is dismissed without prejudice. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by cjm)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
1-800-RADIATOR FRANCHISE, INC.,
Plaintiff,
v.
Case No. 4:11-cv-100-BLW
MEMORANDUM DECISION AND
ORDER
BLINCOE DIVERSIFIED
ALTERNATIVES, LLC, d/b/a 1-800
RADIATOR OF POCATELLO, IDAHO;
DAMON BLINCE; and KATHI
BLINCOE,
Defendant.
INTRODUCTION
Before the court is the Defendant’s Motion to Set Aside Default and Reconsider
Preliminary Injunction (Dkt. #2). The Court has determined that oral argument would
not significantly assist in the decisional process, and will thus consider the motions
without a hearing. Being familiar with the record and pleadings before it, the Court will
set aside the default and vacate the order of preliminary injunction.
BACKGROUND
Plaintiff 1-800 Radiator Franchise, Inc. (RFI) brought the original action against
Defendants Blincoe Diversified Alternatives, LLC (BDA), Damon Blincoe, and Kathi
Blincoe, for trademark infringement and breach of contract. Plaintiff filed its Complaint
(Dkt. 1), Amended Complaint (Dkt. 3), and Motion for Preliminary Injunction (Dkt. 2),
MEMORANDUM DECISION AND ORDER - 1
to enjoin Defendants from trademark infringement and violation of its covenants not to
compete. Damon and Kathi Blincoe filed an Answer (Dkt. 11) on behalf of themselves
and BDA, whom they purported to represent pro se. Because of a lack of proper
representation, Plaintiffs moved to strike Defendants’ answer, with respect to BDA, and
for entry of default as to BDA. The Court granted both motions and issued a preliminary
injunction.
BDA has since acquired proper representation and filed a motion to set aside
default and reconsider the grant of preliminary injunction. It is noted that the Plaintiff
has failed to provide the Court with proof of service, regarding the motion for
preliminary injunction.
ANALYSIS
1.
Setting Aside Default
There is little evidence that the Plaintiff in this case would be prejudiced by setting
aside default judgment. The Court finds that this outweighs the other factors it must
consider and will set aside its previous default of BDA.
When moving to set aside default, the moving party must demonstrate that “the
interest in deciding the case on the merits should prevail over the very important interest
in the finality of judgments.” TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696
(9th Cir. 2001). To do so, they must demonstrate good cause for lifting the default. Id.
(citing Fed.R.Civ.P. 55(c)). When determining if good cause exists, courts are to look to
three factors, 1) whether the Defendant’s culpable conduct led to the default, 2) whether
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the defendant has a meritorious defense, and 3) whether reopening the default judgment
would prejudice the plaintiff. Id.
Regarding the first factor, culpability may turn on the intentional nature of the
conduct. See id. at 697. In the context of a motion to set aside default, conduct is not
intentional when “the defendant offers a credible, good faith explanation negating any
intention to take advantage of the opposing party, interfere with judicial decisionmaking,
or otherwise manipulate the legal process.” Id.
Damon and Kathi Blincoe knew they were unable to represent BDA, pro se, in
their arbitration proceedings. They argue, however, that they were unaware the same was
true for these federal proceedings. It is undisputed that the Blincoes intentionally
declined to seek representation in these proceedings; but, the Court does not find that
they did so to gain an advantage, interfere with judicial decisionmaking or otherwise
manipulate these proceedings. Accordingly, their conduct is not necessarily culpable,
even though intentional, and can be excused under a finding of good faith and minimal
resultant delay in proceedings. See id. at 698. Under the facts presented, the Court
concludes that the Blincoes’ conduct is not culpable.
Turning to the second factor, the Court notes that reasonable people may disagree
as to the meritorious nature of the defense offered by BDA. Given that uncertainty, the
Court will err in favor of permitting BDA to present that defense.
Finally, with regard to the question of prejudice to the Court notes that the
standard for determining prejudice to the plaintiff is “whether his ability to pursue his
claim will be hindered.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). Plaintiff has
MEMORANDUM DECISION AND ORDER - 3
not persuaded the Court that its claim will be hindered by virtue of delays associated with
the entry of default and subsequent proceedings by BDA to obtain relief from that
default.
Under the facts of this case, the Court finds that Blincoe’s conduct is not culpable,
debatable issues have been raised as a defense, and no prejudice will accrue to the
Plaintiff by lifting the default judgment. Accordingly, good cause has been demonstrated
by BDA and the motion to set aside default is granted.
2.
Reconsidering the Preliminary Injunction
The Court will also reconsider its decision to issue a preliminary injunction.
“Courts have distilled various grounds for reconsideration of prior rulings into three
major grounds for justifying reconsideration: (1) an intervening change in controlling
law; (2) the availability of new evidence or an expanded factual record; and (3) need to
correct a clear error or to prevent manifest injustice.” Louen v Twedt, 2007 WL 915226
(E.D.Cal. March 26, 2007). If the motion to reconsider does not fall within one of these
three categories, it must be denied.
Rule 5 of the Federal Rules of Civil Procedure governs the service of certain
papers, including written motions, which must be served on every party. See
Fed.R.Civ.P. Rule 5(a)(1). For the purposes of the rule, a paper “filed electronically in
compliance with a local rule is a written paper.” Id. at 5(d)(3); see also Local Rule 5.1.
A Defendant who claims that service was invalid bears the burden of proving that relief is
warranted. See S.E.C. v. Internet Solutions for Business Inc., 509 F.3d 1161, 1166 (9th
Cir. 2007). However, actual notice is not sufficient to refute a claim of invalid service,
MEMORANDUM DECISION AND ORDER - 4
and “[t]herefore, a party must advance some other compelling circumstance, in addition
to actual notice in order to have the Court excuse noncompliance with Rule 5(b).”
Magnuson v. Video Yesteryear, 85 F.3d 1424, 1431 (9th Cir. 1996) (citing Salley v.
Board of Governors, Univ. of N.C., 136 F.R.D. 417, 419 (M.D.N.C. 1991)).
The Defendant has submitted sworn affidavits that the Plaintiff’s motion for
preliminary injunction, dated March 15, 2011, was never served on BDA. This
constitutes new evidence, warranting reconsideration. The Plaintiff responded that
service could not be independently verified, but notes that BDA obviously had notice of
the motion, as they refer to it in the affidavits submitted with their current motion. This
is insufficient as a matter of law. Rule 5 makes it clear that service of a written motion,
including those filed electronically, must have been made on BDA, barring waiver.
There has been no waiver in this matter. From the Court’s perspective, no service was
ever effected, and a complete lack of service fails not only Rule 5(a)(1) but Rule 5(b) as
well.
In addition, the Court concludes that reconsideration is necessary because of the
“need to . . . prevent manifest injustice.” Here, the injunction was issued solely because
of BDA’s default and based solely upon Plaintiff’s submissions. BDA should be
permitted to present any defense which it may have to Plaintiff’s claims.
The Court finds that new evidence has been presented, warranting a
reconsideration of the preliminary injunction. This evidence establishes the lack of proof
of service. Moreover, reconsideration is necessary to prevent manifest injustice. The
grant of preliminary injunction is vacated.
MEMORANDUM DECISION AND ORDER - 5
ORDER
IT IS ORDERED THAT:
1.
Defendant’s Motion to Set Aside Default (Dkt. 22) is GRANTED.
2.
Defendant’s Motion to Reconsider (Dkt. 22) is GRANTED; the
Preliminary Injunction (Dkt. 18) is VACATED, and the Motion for
Preliminary Injunction (Dkt. 2) is dismissed without prejudice.
DATED: July 28, 2011
_________________________
B. LYNN WINMILL
Chief U.S. District Court Judge
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