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Panliant Financial Corp. v. ISEE3d, Inc.

United States District Court, District of Nevada

December 29, 2014

PANLIANT FINANCIAL CORPORATION, et al., Plaintiffs,
v.
ISEE3D, Inc., et al., Defendants.

ORDER

Philip M. Pro United States District Judge

Before the Court is Plaintiffs Panliant Financial Corporation, Alan G. Smith, and A.G. Solutions Limited’s Application for Default Judgment (Doc. #71) against Defendants ISEE3D, Inc. (“ISEE3D”) and Ilya Sorokin (“Sorokin”), filed on July 23, 2014. Sorokin filed an Opposition (Doc. #75) on August 11, 2014. Plaintiffs filed a Reply (Doc. #77) on August 21, 2014. ISEE3D did not oppose the motion.

Also before the Court is Sorokin’s Motion to Set Aside Default (Doc. #74), filed on July 30, 2014. Plaintiffs filed an Opposition (Doc. #76) on August 15, 2014. Sorokin filed a Reply (Doc. #78) on August 25, 2014.

I. BACKGROUND

The parties are familiar with the facts of this case, and the Court will not repeat them here except where necessary. On August 3, 2012, Plaintiffs filed a Complaint in this Court, alleging violations of state and federal racketeering laws, fraud, misrepresentation, unjust enrichment, and breach of fiduciary duties arising out of business disputes related to the control of ISEE3D and the consulting contract between Plaintiff Panliant Financial Corporation and ISEE3D. (Compl. (Doc. #1).) Plaintiffs filed an Amended Complaint on December 3, 2012. (Am. Compl. (Doc #4).) Plaintiffs moved for an enlargement of time to serve all Defendants, including Sorokin and ISEE3D. (Pls.’ Mot. to Enlarge Time to Serve All Defs. (Doc. #6).) The Court granted a 60-day extension to complete service on all Defendants, up to and including June 3, 2013. (Order (Doc. #7) at 2-3.) On June 3, 2013, Plaintiffs filed a second motion to extend time, requesting an additional 180 days to complete service on all Defendants. (Pls.’ Second Mot. to Extend Time to Serve All Defs. (Doc. #8).) The Court granted an extension of 60 days to serve all Defendants, up to and including August 5, 2013, stating that an additional 180 days were not warranted. (Min. Order (Doc. #9).)

Plaintiffs filed an affidavit of service stating the Summons and Amended Complaint were served on Sorokin on July 18, 2013, “by leaving with the gate guard/doorman . . . at 120 Riverside Blvd., PH 3, New York, NY 10069-0501.” (Summons & Proof of Service (Doc. #27) at 2 (emphasis omitted).) Sorokin submitted a declaration stating that this “is the address of a corporate apartment leased by ActForex, Inc. It is used by out of town company executives and occasionally clients, when they come to New York City.” (Def. Ilya Sorokin’s Mot. to Set Aside Default (Doc. #74), Ex. B at ¶ 5.) Sorokin’s declaration further states that he has maintained a permanent residence in Connecticut for all periods relevant to this lawsuit, and that he has a Connecticut driver’s license and files tax returns in Connecticut. (Id. at ¶ 6.) According to Sorokin, he became aware of this case in March or April of 2014. (Id. at ¶ 8.)

The August 5, 2013, deadline set by the Court passed without Plaintiffs serving ISEE3D. Plaintiffs did not move to extend the deadline to serve ISEE3D beyond August 5, 2013. More than six months after the deadline passed, Plaintiffs filed an affidavit of service stating the Summons and Amended Complaint were served on ISEE3D on February 6, 2014, “by mail slotting them at the Registered Office address listed on the Corporate Profile with Corporations Canada.” (Summons & Proof of Service (Doc. #37) at 3.)

Plaintiffs moved for an entry of clerk’s default on March 25, 2014. (Pls.’ Mot. for Entry of Clerk’s Default (Doc. #40).) They included in their filing a declaration stating Sorokin and ISEE3D had been served, had not yet appeared or otherwise responded to the action, and the deadline for Sorokin’s appearance was August 8, 2013, and the deadline for ISEE3D’s appearance was February 27, 2014. (Id., Decl. of Allyson R. Noto.) The Clerk of Court entered default with respect to Sorokin and ISEE3D on March 26, 2014. (Default (Doc. #42); Default (Doc. #43).)

Plaintiffs now move for default judgment against Sorokin and ISEE3D in the amount of $11, 864, 246.66. (Appl. for Default J. Against Defs. ISEE3D, Inc. & Ilya Sorokin (Doc. #71); Proposed Default J. Against Defs. ISEE3D, Inc. & Ilya Sorokin (Doc. #72).) Sorokin opposes Plaintiffs’ Motion and countermoves to set aside the Clerk’s entry of default. (Def. Ilya Sorokin’s Mot. to Set Aside Default (Doc. #74); Def. Ilya Sorokin’s Opp’n to Appl. for Default J. (Doc. #75).) ISEE3D did not oppose Plaintiffs’ Motion and has not made an appearance in this case.

II. MOTION TO SET ASIDE CLERK’S ENTRY OF DEFAULT (Doc. #74)

Sorokin moves to set aside the Clerk’s entry of default, arguing the default is void because he was not properly served with the Summons and Amended Complaint. Specifically, Sorokin argues leaving the Summons and Amended Complaint with the doorman at a building where he does not maintain his permanent residence does not constitute personal service under Federal Rule of Civil Procedure 4(e). Sorokin further argues the Court lacks personal jurisdiction over him. Additionally, Sorokin argues that setting aside the default would not prejudice Plaintiffs, that he possesses meritorious defenses, and that he lacks culpability regarding default being entered.

Plaintiffs respond that the default is not void because they served Sorokin in accordance with Nevada Revised Statutes § 14.090(1)(a), which permits service of process on a guard at a guard gate who denies access to a residence. Plaintiffs further argue that a person may have more than one dwelling or usual place of abode for the purposes of Federal Rule of Civil Procedure 4(e), and therefore service at the New York City apartment, which belongs to a company of which Sorokin is the CEO, was proper even if Sorokin also maintains a residence in Connecticut. Additionally, Plaintiffs argue the Court has personal jurisdiction over Sorokin under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1965(b), and under the conspiracy theory of personal jurisdiction. Finally, Plaintiffs argue there is not good cause to set aside the default because Sorokin’s failure to respond to the Amended Complaint was culpable as he properly was served at the New York City corporate apartment.

In his reply, Sorokin requests that the Court defer ruling on the issues of whether service at the New York City corporate apartment was proper and whether there is personal jurisdiction because Sorokin wishes to address these issues in subsequent briefing. (Def. Ilya Sorokin’s Mot. to Set Aside Default at 7 n.1; Def. Ilya Sorokin’s Reply in Support of Mot. to Set Aside Default (Doc. #78) at 5.) At this time, Sorokin requests that the Court set aside the default only.

The Court may set aside the entry of default for “good cause.” Fed.R.Civ.P. 55(c); United States v. Signed Pers. Check No. 730 of Yubran S. Mesle (“Mesle”), 615 F.3d 1085, 1091 (9th Cir. 2010). In ruling on a motion to set aside a default, the Court considers whether the plaintiff would be prejudiced if the default is set aside, whether the defendant has a meritorious defense, and whether the defendant engaged in culpable conduct that led to the default. Id. The defendant bears the burden of demonstrating that these factors favor setting aside the default. TCI Grp. Life Ins. Plan v. Knoebber (“TCI”), 244 F.3d 691, 696 (9th Cir. 2001), overruled on other grounds, Egelhoff v. Egelhoff ex rel. ...


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