Rafferty v. KeyPoint Government Solutions, Inc. et al
MEMORANDUM DECISION AND ORDER - 1. Defendant JTSs Motion to Set Aside Entry of Default (Dkt. 12 ) is GRANTED. 2. Plaintiff Raffertys request for attorneys fees incurred in defending this motion is GRANTED. Plaintiff shall, within 10 days from the da te of this Order, submit its claim for attorney fees, with accompanying affidavits setting forth the amount requested and verifying that the requested fees were incurred in responding to the Motion to Set Aside Entry of Default. 3. Defendant JTS shall file a response to the Amended Complaint within 10 days from the date of this Order. 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 (cjs)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
CONSTANCE R. RAFFERTY,
Case No. 4:16-cv-00210-BLW
MEMORANDUM DECISION AND
SOLUTIONS, INC., a Delaware
corporation; and JOINT TECHNICAL
SERVICES, LLC, a New Mexico limited
Before the Court is Defendant Joint Technical Services, LLC’s (“JTS”) Motion to
Set Aside Clerk’s Entry of Default. Dkt. 12. For the reasons explained below, the Court
will grant the motion.
Plaintiff Constance Rafferty sued defendants on May 20, 2016. See Compl., Dkt.
1. She filed an amended complaint on August 15, 2016, and served defendant JTS with a
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copy of the amended complaint the next day, August 16, 2016. See Am. Compl., Dkt. 4;
Affidavit of Service, Dkt. 5-1. JTS did not timely respond, and on September 27, 2016,
the Court Clerk entered the company’s default. See Dkt. 10. Shortly after the Clerk
entered JTS’s default, JTS filed the pending motion to set aside the default. See Oct. 6,
2016 Mot., Dkt. 12. Plaintiff opposes the motion, contending that JTS has not adequately
explained its failure to timely respond. See Opp., Dkt.23.
The details surrounding the service of the complaint on JTS, and JTS’s appearance
before this Court, are as follows: JTS is a New Mexico limited liability company. It has
designated Corporation Service Company (CSC) as its registered agent for service of
process in Idaho. On August 16, 2016, plaintiff’s process server hand delivered a copy of
the complaint and summons to Megan Dickson of CSC at an address in Boise, Idaho. See
Aff. of Service, Dkt. 5-1.
JTS does not dispute the August 16, 2016 service, but Virginia Buckmelter, a
managing member of JTS, says she did not become aware of this lawsuit until September
23, 2016. See Buckmelter Dec., Dkt. 12-1, ¶¶ 3-4 (“The Notice of Process form indicated
that Corporation Service Company was served on August 16, 2016, but I had no notice of
the Rafferty case until September 23, 2016.”). Buckmelter says she received a Federal
Express package on September 23, 2016, but she does not provide further detail. JTS
concludes that CSC must have slipped up in transmitting a copy of the complaint to JTS
management. In any event, Buckmelter quickly retained an attorney for JTS and the
company promptly filed a motion to set aside the entry of default. See Moody Dec., Dkt,
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12-2, ¶ 4. JTS says it is ready to file a response and litigate this matter if given the
Rafferty objects to relief from entry of default. She says JTS failed to provide
enough detail to qualify for such relief. More specifically, Rafferty says JTS should
answer (or provide more detailed answers) to these questions:
(1) What happened between August 16, 2016, the date plaintiff served the
complaint on JTS’s registered agent, and September 23, 2016, the date JTS’s
managing member Buckmelter says she was made aware of the case?
(2) Why was Buckmelter provided with physical copies via FedEx as opposed to
electronic copies, given that CSC’s website indicates it provides same-day
(3) Who sent the FedEx package to Buckmelter?
(4) Why was that FedEx package routed through Tennessee?
For the reasons explained below, the Court believes JTS has provided sufficient
information to qualify for relief from default, despite not providing the sort of detail
plaintiff has requested.
THE GOVERNING LEGAL STANDARD
“The court may set aside an entry of default for good cause . . . .” Fed. R. Civ. P.
55(c). The “good cause” standard that governs vacating an entry of default under Rule
55(c) is the same standard that governs vacating a default judgment under Rule 60(b). See
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TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). To determine
whether good cause exists, the Court must analyze three factors:
(1) Whether JTS engaged in culpable conduct that led to the default;
(2) Whether JTS has a meritorious defense; and
(3) Whether Rafferty would be prejudiced if default is set aside.
United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091
(9th Cir. 2010) (citing Franchise Holding II, LLC v. Huntington Rests. Group, Inc., 375
F.3d 922, 925-26 (9th Cir. 2004). The factors are disjunctive, so the Court may deny
relief if any of the three factors are met. Am. Ass’n of Naturopathic Physicians v.
Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000). Additionally, the party seeking to set
aside the entry of default carries the burden of demonstrating that relief is warranted. See
Franchise, 375 F.3d at 926. “Crucially, however, ‘judgment by default is a drastic step
appropriate only in extreme circumstances; a case should, whenever possible be decided
on the merits.’” Mesle, 615 F.3d at 1091 (citing Falk, 739 F.2d at 463).
Motion to Set Aside Default Judgment
The Court will analyze the three factors relevant to the good-cause standard, but
first generally observes that this case does not present the sort of extreme circumstances
justifying the drastic step of judgment by default. Plainly, JTS did not timely respond to
the complaint. But the company nevertheless appeared before this Court less than two
months after the amended complaint was filed and served. This type of a delay is not
MEMORANDUM DECISION AND ORDER - 4
desirable, but it is not uncommon; indeed, plaintiff waited nearly three months after
commencing this case before serving an amended complaint upon defendants. See Dkts.
1, 4, 5. Further, JTS was served via a registered agent for service of process and the
amended complaint did not find its way to managing member Virginia Buckmelter of
JTS for roughly a month after service. These circumstances are not extreme, and JTS
should be afforded the opportunity to litigate this matter on the merits.
A. Culpable Conduct
As this Court has previously explained, there are two lines of cases within the
Ninth Circuit regarding the correct standard for evaluating the “culpable conduct” factor
for purposes of setting aside a default. See Garner v. Wells Fargo Home Mortg., Inc.,
No. 1:10-cv-266-BLW, 2011 WL 2413841, at *2 (D. Idaho June 9, 2011).
One line of cases holds that “a defendant’s conduct is culpable if he has received
actual or constructive notice of the filing of the action and intentionally failed to answer.”
TCI Group, 244 F.3d at 697 (quoting Alan Neuman Prods., Inc. v. Albright, 862 F.2d
1388, 1392 (9th Cir. 1988)). These cases indicate that “[n]eglectful failure to answer as to
which 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” is not intentional and should not necessarily be considered
culpable conduct. Id. at 697-98. Rather, a defendant’s conduct should be deemed culpable
when “there is no explanation of the default inconsistent with a devious, deliberate,
willful, or bad faith failure to respond.” Id. at 698.
MEMORANDUM DECISION AND ORDER - 5
A second line of cases, however, suggests that if a defendant has received actual or
constructive notice of an action and fails to answer, this conduct alone is indicative of
culpability. See Franchise Holding II, LLC. v. Huntington Restaurants Group, Inc., 375
F.3d 922, 926 (9th Cir. 2004); Direct Mail Specialists, Inc. v. Eclat Computerized
Technologies, Inc., 840 F.2d 685, 690 (9th Cir. 1988). The Ninth Circuit later clarified
that this standard for culpability is inappropriate where the defaulting party is not
represented by counsel or is otherwise not legally sophisticated. Mesle, 615 F.3d 1093.
The Ninth Circuit also suggested that the Franchise Holding standard is “not the ordinary
standard for Rule 55(c) and 60(b) motions” and that such an approach may not be
consistent with the Supreme Court's interpretation of “excusable neglect” in Pioneer
Investment Services Co. v. Brunswick Associates Ltd., 507 U.S. 380 (1993). Mesle, 615
F.3d 1092–93. Nonetheless, the Ninth Circuit did not reject Franchise Holding, but
instead limited the application of its more stringent standard. Attempting to reconcile the
two lines of cases, the Ninth Circuit stated that “[w]hen considering a legally
sophisticated party's culpability in a default, an understanding of the consequences of its
actions may be assumed, and with it, intentionality.” Id. (emphasis added).
Here, plaintiff says the more stringent, Franchise Holdings standards should apply
because JTS is “sophisticated.” See Response Br., Dkt. 23, at 6. But there is no evidence
before the Court demonstrating that JTS was represented by counsel before Ms.
Buckmelter received the complaint, or that JTS is otherwise legally sophisticated. The
Court thus concludes that the TCI standard governs. Applying this standard, JTS’s
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conduct was not culpable. JTS has offered an explanation its failure to timely respond,
namely, that there was a delay in getting the complaint from the registered agent for
service of process to Ms. Buckmelter, a managing member of JTS. Ms. Buckmelter then
promptly retained counsel who, in turn, promptly filed a motion to set aside the default.
Granted, JTS has not provided the detailed information regarding the delay Rafferty has
demanded. That is, JTS has not given details regarding what, precisely, was happening
during the period between when plaintiff’s process server delivered papers to CSC and
the date Ms. Buckmelter says she receives the complaint. Still, though, the record
suggests that Ms. Buckmelter was the first decisionmaker at JTS who learned of the
complaint. As such, the record supports a finding that the failure to timely respond
resulted from mere negligence or inadvertence, rather than an attempt to manipulate the
process or take advantage of the plaintiff. See Pioneer Investment, 507 U.S. 380, 394–95,
1993) (noting that excusable neglect encompasses situations in which the failure to
comply with a filing deadline is attributed to negligence). The Court therefore concludes
that this factor weighs in favor of setting aside the entry of default.
B. Meritorious Defense
The next factor, whether JTS has a meritorious defense, also weighs in favor of
setting aside the default.
A party seeking to vacate a default judgment must present specific facts that
would constitute a defense. But the burden on a party seeking to vacate a default
judgment is not extraordinarily heavy.” Mesle, 615 F.3d 1094 (quoting TCI Group, 244
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F.3d at 700). Rather, the defendant satisfies the meritorious-defense requirement if it
alleges sufficient facts that, if true, would constitute a defense. Id. Whether those
allegations are true is not determined at this point; they are the subject of later litigation.
JTS satisfies the meritorious-defenses requirement. Rafferty has asserted various
claims requiring proof that JTS or its employees contacted a potential employer and
interfered with Rafferty’s employment with that employer. JTS Managing Member
Buckmelter says she investigated these claims and, to her knowledge, “no one from JTS
provided any adverse information about Rafferty to Keypoint and no one from JTS urged
DOE-IDE to do so.” Buckmelter Dec. ¶ 7. If Buckmelter’s statements are true, JTS has a
defense to Rafferty’s claims. Accordingly, this factor supports setting aside the default.
C. Prejudice to Plaintiff
Plaintiff concedes that JTS’s relatively brief delay will not prejudice her. See
Opp., Dkt. 23, at 9. So the prejudice factor also supports setting aside the default.
Based on the above analysis, the Court will set aside the entry of default. As noted
earlier, the Ninth Circuit has emphasized that “judgment by default is a drastic step
appropriate only in extreme circumstances” and instructed district courts not to ignore its
“oft stated commitment to deciding cases on the merits whenever possible.” Mesle, 615
F.3d at 1091. Considering this instruction and the more liberal standard applied to Rule
55(c) motions, the Court finds that JTS’s motion to set aside entry of default should be
granted. That said, however, JTS is advised that the Court expects it to strictly comply
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with all further deadlines, orders, and rules applicable to this action.
Plaintiff’s Request for an Attorneys’ Fee Award
Finally, the Court will grant plaintiff’s alternative request for an award of
attorneys’ fees. See Opp., Dkt. 23, at 10. The Ninth Circuit has observed that “[b]y
conditioning the setting aside of a default” on the payment of attorneys’ fees, “any
prejudice suffered by the non-defaulting party as a result of the default and the
subsequent reopening of the litigation can be rectified.” Nilsson, Robbins, Dalgarn,
Berliner, Carson & Wurst v. La. Hydrolec, 854 F.2d 1538, 1546 (9th Cir. 1998) (citation
omitted). Here, plaintiff concedes that she has not suffered any prejudice by virtue of the
delay. Nevertheless, it would seem obvious that some limited amount of time has been
expended by plaintiff’s counsel in addressing the issues raised here. The Court concludes
that it would be unjust to require that the plaintiff or her attorneys bear that cost.
Accordingly, plaintiff may, within 10 days of this Order, submit a claim for attorney fees,
but limited only to the fees incurred in responding to the Motion to Set Aside Entry of
1. Defendant JTS’s Motion to Set Aside Entry of Default (Dkt. 12) is
2. Plaintiff Rafferty’s request for attorneys’ fees incurred in defending this
motion is GRANTED. Plaintiff shall, within 10 days from the date of this
Order, submit its claim for attorney fees, with accompanying affidavits setting
MEMORANDUM DECISION AND ORDER - 9
forth the amount requested and verifying that the requested fees were incurred
in responding to the Motion to Set Aside Entry of Default.
3. Defendant JTS shall file a response to the Amended Complaint within 10 days
from the date of this Order.
DATED: December 19, 2016
B. Lynn Winmill
United States District Court
MEMORANDUM DECISION AND ORDER - 10
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