United States District Court, D. Nevada
BRYANT K. CALLOWAY, Plaintiff,
TORY M. PANKOPF, an individual, TORY M. PANKOPF, LTD, a Nevada Corporation, et al., Defendants.
ORDER (Plaintiff's Motion for Entry of Default Judgment - dkt. no. 31; Defendants' Motion to Set Aside Entry of Default - dkt. no. 32)
MIRANDA M. DU, District Judge.
Before the Court are Defendants Tory M. Pankopf, as an individual ("Pankopf"), and Tory M. Pankopf, Ltd.'s ("Pankopf Ltd.") (collectively as "Defendants") Motion to Set Aside Entry of Default (dkt. no. 32) and Plaintiff Bryant K. Calloway's Motion for Entry of Default Judgment (dkt. no. 31). For the reasons discussed below, both motions are denied. The case will be transferred to the Central District of California.
Plaintiff Bryant K. Calloway filed a verified complaint in California state court on July 9, 2012. ("Complaint") (Dkt. no. 1-1.) One month later, on August 17, 2012, Defendant Pankopf removed the action to this Court based on diversity pursuant to 28 U.S.C. §1441(b). (Dkt. no. 1.) Pankopf filed his certificate of service of the notice of the removal to adverse parties on August 31, 2012. (Dkt. no. 3.) On September 10, 2012, when the answers to the complaint were due, Defendants filed and served their statement regarding removal. (Dkt. no. 4.)
This case saw no activity from either party until five months later on February 25, 2013, when Plaintiff moved for entry of clerk's default. (Dkt. no. 5.) Two days later, on February 27, 2013, Pankopf filed his Answer to the complaint on behalf of himself. (Dkt. no. 6.) Magistrate Judge William G. Cobb entered a minute order directing Defendants to address, on or before March 11, 2013, Plaintiff's request for entry of clerk's default and explain, in accordance with Fed.R.Civ.P. 55(c), why the Clerk should not enter a default against each of them. (Dkt. no. 8.) Pankopf was also directed to provide an explanation as to why no answer was filed for Pankopf, Ltd., since Defendant's notice of removal reflects that both Pankopf and Pankopf, Ltd. were served with Plaintiff's action. ( Id. )
On March 18, 2013, Pankopf Ltd. filed its answer to the complaint. (Dkt. no. 11.) On the same day, after being granted an extension of time, Defendants filed their response to Plaintiff's motion for entry of clerk's default explaining why Pankopf, Ltd.'s answer was not filed at the same time as Pankopf's answer. (Dkt. no. 12.) Defendants did not address the reason for the initial delay in filing responsive pleadings on behalf of Pankopf. On April 12, 2013, Judge Cobb entered an order directing the Clerk to enter default against Defendants, because the motion for default was filed before the answers. (Dkt. no. 15.) Defendants were directed to file a Rule 55(c) motion to set aside entry of default as a remedy. ( Id. ) On the same day, the Clerk entered default. (Dkt. no. 16.)
Over two weeks later, on April 29, 2013, Defendants filed a motion for reconsideration regarding Judge Cobb's Order, arguing that the clerk of the court is precluded from entering default after an answer is filed. (Dkt. no. 17.) This Court disagreed and on January 22, 2014, the Court entered an Order denying Defendants' motion to reconsider entry of default. (Dkt. no. 30.)
There was no activity from either party until April 14, 2014, when Plaintiff filed his Motion for Default Judgment. (Dkt. no. 31.) Then on April 28, 2014, just over three months after the Court's Order denying Defendants' motion to reconsider, Defendants filed their motion to set aside entry of default. (Dkt. no. 32.)
III. DEFENDANTS' MOTION TO SET ASIDE ENTRY OF DEFAULT
A. Legal Standard
Rule 55(c) of the Federal Rules of Civil Procedure provides that "[t]he court may set aside an entry of default for good cause...." Fed.R.Civ.P. 55(c). In determining whether good cause exists, a court considers three factors: "(1) whether the plaintiff will be prejudiced, (2) whether the defendant has a meritorious defense, and (3) whether culpable conduct of the defendant led to the default.'" Brandt v. Am. Bankers Ins. Co. of Fla., 653 F.3d 1108, 1111 (9th Cir. 2011) (quoting Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). "These factors... are disjunctive." Brandt, 653 F.3d at 1111 (quoting Falk, 739 F.2d at 463)). Thus, the court may refuse to set aside default if it holds any one of the three factors is true. U.S. v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010).
However, strong policy in the Ninth Circuit is to decide cases on their merits. "[J]udgment 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 (quoting Falk, 739 F.2d at 463) (alternation in original). The Falk factors are more liberally applied in the context of a clerk's entry of default than in the default judgment context. Mesle, 615 F.3d at 1091 n.1 (quoting Cracco v. Vitran Exp., Inc., 559 F.3d 625, 631 (7th Cir. 2009)); see also Haw. Carpenter's Trust v. Stone, 794 F.2d 508, 513 (9th Cir. 1986). "The court's discretion is especially broad where... it is entry of default that is being set aside, rather than a ...