Hartley v. Longshot Enterprises, Inc.

Filing 16

MEMORANDUM DECISION AND ORDER Defendants Motion to Set Aside Clerk's Entry of Default (Dkt. 11 ) is GRANTED. Counsel for Plaintiff and Defendant are to meet and confer regarding the fees and expenses incurred while preparing docket entries 6 a nd 13. Longshot is hereby ORDERED to pay the reasonable fees and expenses associated with the preparation of those filings. 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 (jp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

DARLENE HARTLEY,
Case No. 4:18-cv-00157-BLW
Plaintiff,
MEMORANDUM DECISION &
ORDER

v.
LONGSHOT ENTERPRISES, INC. d/b/a
HOME HELPERS HOME HEALTH, a
corporation,
Defendant.

INTRODUCTION
Federal Rule of Civil Procedure 1 requires parties and their counsel “to secure the just,
speedy, and inexpensive determination of every action and proceeding.” This case is off to an
inauspicious start. Before the Court is Defendant Longshot Enterprise, Inc.’s (“Longshot”)
Motion to Set Aside Clerk’s Entry of Default. Dkt. 11. Plaintiff Darlene Hartley (“Hartley”)
opposes Longshot’s motion. Dkt. 13. For the reasons set forth below, Longshot’s motion is
GRANTED. Furthermore, counsel for both parties are to meet and confer regarding the fees and
expenses incurred by Hartley. Longshot and its counsel, Lane Erickson (“Erickson”), are hereby
ORDERED to pay those fees and expenses as they are apportioned below.
BACKGROUND
Hartley filed a Charge of Discrimination with the Idaho Human Rights Commission and
the United States Equal Opportunity Commission (“EEOC”) alleging, as she does in this suit,
that Longshot created a hostile work environment and breached a duty of care owed to her.
Complaint ¶ 27, Dkt. 1. Longshot retained Erickson to represent it before both agencies. Pl.’s
Memorandum Decision & Order – Page 1

Ex. A, Dkt. 13-2. On January 12, 2018, Hartley received her Notice of Right to Sue from the
Idaho Human Right Commission. Def.’s Br. at 2-3, Dkt. 12-1. Hartley received an additional
Notice from the EEOC on February 8, 2018. Id. This action was filed less than two months
later. Compl., Dkt. 1.
Service was accomplished on June 27, 2018. Dkt. 5. Teresa Nelson, Longshot’s Chief
Executive Officer, (“Nelson”) forwarded the Complaint to Longshot’s insurance company on
June 28, 2018. Nelson Aff. ¶ 5, Dkt. 12-2. From June 28, 2018 through July 25, 2018, Ms.
Nelson continued to communicate with Longshot’s insurance company and assumed,
erroneously, that the insurance company was carefully responding on Longshot’s behalf in this
action. Id. ¶¶ 6-7. During this period, Longshot’s July 18, 2018 deadline to file an answer
passed, and Hartley filed a motion for entry of default on July 23, 2018. Dkt. 6. On July 25,
2018, Nelson was informed that the insurance company was denying Longshot’s claim and was
instructed to secure independent counsel for Longshot. Pl.’s Ex. E, Dkt. 13-6. That same day,
Nelson contacted Erickson (Def.’s Br. ¶ 8, Dkt. 12-2), and Erickson entered a Notice of
Appearance in this case (Notice of Appearance, Dkt. 7).
Erickson, however, did not request leave of the Court to file an answer. And, he failed to
communicate with Hartley’s counsel after telling the Court’s Clerk that he would. Pl.’s Ex. C,
Dkt. 13-4. As a result, on August 6, 2018, the Clerk of the Court entered default. Clerk’s Entry
of Default, Dkt. 10. Nine days later, on August 15, 2018, (which was 21 days after he first
appeared) Erickson filed the Motion to Set Aside Clerk’s Entry of Default. Dkt. 11.
Hartley opposes Longshot’s motion and argues that Longshot is a legally sophisticated
actor who intentionally decided not to answer the Complaint in a timely manner. Pl.’s Resp. at
6-7, Dkt. 13. In particular, Hartley credibly argues that Longshot’s claim of work-product

Memorandum Decision & Order – Page 2

privilege over Nelson’s communications with Longshot’s insurance company from July 2, 2018
through July 19, 2018 indicates that a lawyer was working on Longshot’s behalf, thereby making
Longshot a legally sophisticated party. Id. Additionally, Hartley argues that vacating the entry
of default is unwarranted here because Longshot has failed to put forth sufficient facts to indicate
that it can defend on the merits. Id. at 8. Hartley appropriately concedes that she will not suffer
prejudice greater than having to try the case on the merits if the order of default is vacated. Id. at
8-9.
After Hartley filed her opposition to Longshot’s motion, Longshot filed an Answer to the
Complaint on September 19, 2018. Dkt. 14. That same day, Longshot filed its Reply to
Hartley’s opposition. Dkt. 15. In its Reply, Longshot makes three arguments: (1) Hartley
misrepresented the legal standard for vacating a default motion under Federal Rule of Civil
Procedure 55(c), (2) Longshot “previously provided the Court with facts evidencing it has
meritorious defenses to plead in this case,” and (3) Longshot’s Answer contains sufficient facts
and affirmative defenses to indicate that a meritorious defense exists. See generally Dkt. 15.
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 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 Longshot engaged in culpable conduct that led to the default;
(2) whether Longshot has a meritorious defense; and
(3) whether Hartley would be prejudiced if default is set aside.

Memorandum Decision & Order – Page 3

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). But the Court is not required to grant relief when one of the three factors is met.
Brandt v. Am. Bankers Ins. Co. of Florida, 653 F.3d 1108, 1112 (9th Cir. 2011). 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, … ‘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 v. Allen, 739 F.2d 461, 463(9th Cir. 1984)).
ANALYSIS
1.

Culpable Conduct
Hartley characterizes Longshot as a legally sophisticated party whose intent to commit

culpable conduct can be inferred from the act of failing to file an answer. Pl.’s Resp. at 6-7, Dkt.
13. The Court disagrees with Hartley’s characterization. Although Longshot secured counsel to
represent it before the Idaho Human Rights Commission and the EEOC, that does not transform
Longshot into a legally sophisticated party for purposes of this proceeding. Granted, there is
some logic to Hartley’s argument that if Longshot is properly claiming attorney work product
protection over its communications with its insurance provider between July 2, 2018 and July 19,
2018, see Pl.’s Ex. E, Dkt. 13-6; then it must have retained counsel. But the Court finds it is
more plausible that Longshot was communicating with counsel for the insurance carrier to
determine if Hartley’s claims were covered by Longshot’s insurance policy during that period.
In short, the fact that Longshot was previously represented in administrative proceedings and

Memorandum Decision & Order – Page 4

was corresponding with attorneys at its insurance carrier does not transform it into a legally
sophisticated party.
Instead, Longshot is more aptly described as a legally unsophisticated party. To find that
a legally unsophisticated party has engaged in culpable conduct, the Court must conclude that
“there is no explanation for default other than a ‘devious, deliberate, willful, or bad faith failure
to respond.” United States v. Assorted Firearms, 605 Fed. Appx. 603, 605 (9th Cir. 2015)
(quoting TCI Grp., 244 F.3d at 698). Carelessness on Longshot’s behalf is not sufficient to
support a finding of culpable conduct. TCI Grp., 244 F.3d at 697.
Here, there is no evidence that Longshot or its employees acted in bad faith. On the day
Longshot learned that its insurance company was declining coverage, Longshot retained
Erickson, who quickly filed an appearance. Def.’s Br. at 3, Dkt. 12-1; Notice of Appearance,
Dkt. 7. Furthermore, Nelson, who is not an attorney, apparently assumed that her insurance
company was monitoring the case after she forwarded the Complaint to the insurance company.
Def.’s Br. at 3, Dkt. 12-1. Though this ultimately turned out to be untrue, the assumption is
hardly unreasonable, let alone an indication of bad faith.
2.

Prejudice to Plaintiff and Meritorious Defense
Hartley appropriately acknowledges that she faces no prejudice other than having to try

the case on the merits if the order of default is vacated. Pl.’s Resp. at 8-9, Dkt. 13. As such, this
factor weighs in favor of Longshot’s motion.
Because two of the three factors weigh in favor of Longshot’s motion, the Court will not
evaluate the merits of Longshot’s possible defenses.

Memorandum Decision & Order – Page 5

3.

Attorneys’ Fees
The Court finds that the medicine of default is too strong in this case. The same cannot

be said of an order requiring Longshot to pay Hartley’s expenses and attorney’s fees associated
with moving for default and opposing the motion to set aside the Clerk’s entry of default. “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.’” Rafferty v. Keypoint
Government Solutions, Inc., 4:16-cv-00210-BLW, 2016 WL 7340281, at *4 (D. Idaho Dec. 19,
2016) (quoting Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. La. Hydrolec, 854 F.2d
1538, 1546 (9th Cir. 1998)).
Counsel for both Parties are to meet and confer regarding the fees and expenses incurred
with the preparation and filing of docket entries six (6) and thirteen (13). If the Parties cannot
reach agreement on reasonable fees and expenses for docket entries six (6) and thirteen (13), the
Parties are to advise the Court’s Clerk and file simultaneous three-page briefs on the appropriate
amount fees and expenses to be paid by Longshot.
ORDER
IT IS ORDERED:
1.

Defendant’s Motion to Set Aside Clerk’s Entry of Default (Dkt. 11) is

GRANTED.
2.

Counsel for Plaintiff and Defendant are to meet and confer regarding the fees and

expenses incurred while preparing docket entries six (6) and thirteen (13). Longshot is hereby
ORDERED to pay the reasonable fees and expenses associated with the preparation of those
filings.

Memorandum Decision & Order – Page 6

DATED: October 1, 2018
_________________________
B. Lynn Winmill
Chief Judge
United States District Court

Memorandum Decision & Order – Page 7