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Mendez v. Wright, Findlay and Zak LLP

United States District Court, D. Nevada

January 4, 2017

IRMA MENDEZ, Plaintiff,
WRIGHT, FINDLAY AND ZAK LLP et al., Defendants.


          ROBERT C. JONES United States District Judge.

         This case arises out of a homeowners association foreclosure sale. Now pending before the Court are a Motion to Dismiss (ECF No. 36), Motion for Clarification of Order (ECF No. 39), Motion to Set Aside Entry of Default (ECF No. 43), and Motion to Stay Proceedings (ECF No. 44). For the reasons given herein, the Court grants the Motion to Set Aside Entry of Default, Motion to Dismiss, and Motion for Clarification, and denies the Motion to Stay.


         In 2005, Irma Mendez (“Plaintiff”) purchased real property at 3416 Casa Alto Ave., North Las Vegas, Nevada, 89031 (the “Property”) for $315, 000, giving the lender a promissory note for $252, 792 and a deed of trust against the Property securing the note. When Mendez became delinquent on her monthly assessment fees, Alessi & Koenig (“Alessi”) conducted a trustee's sale to Absolute Business Solutions, Inc. (“ABS”), on behalf of Fiesta Del Norte Homeowners Association (the “HOA”).

         The HOA sale has given rise to three lawsuits now pending before this Court: Mendez v. Fiesta Del Norte Homeowners Ass'n, 2:15-cv-00314 (filed Feb. 23, 2015) (“the ‘314 Case”); Absolute Bus. Sols., Inc. v. Mortg. Elec. Registration Sys., Inc., 2:15-cv-01325 (filed July 13, 2015) (“the ‘1325 Case”); and the instant case, Mendez v. Wright, Findlay and Zak LLP, 2:15-cv-01077 (filed May 13, 2016) (“the ‘1077 Case”). The procedural background of these cases was detailed in the Court's August 3, 2016 Order deciding several motions in this case, (ECF No. 29), and need not be repeated here. In the August 3, 2016 Order, the Court dismissed Plaintiff's claims of fraud, violation of the Dodd-Frank Act, and violation of the Fair Debt Collection Practices Act, with leave to amend as to the fraud claim only. (ECF No. 29 at 11-12.) On September 1, 2016, the Court issued another order, stating that the August 3, 2016 Order “granted Plaintiff Irma Mendez leave to amend in part Motions to Dismiss (ECF #11 and 18 in case No. 2:16-cv-1077), ” and ordering that Plaintiff's amended motions to dismiss be filed no later than September 19, 2016. (ECF No. 31 at 1.)

         Subsequently, on September 9, 2016, the Clerk of the Court entered default against Defendant Bank of America, N.A. (“BOA”), due to its failure to timely file a responsive pleading or otherwise defend against Plaintiff's claims. (ECF No. 34.) Also on September 9, BOA filed a response to Plaintiff's request for entry of default, (ECF No. 35), as well as the instant Motion to Dismiss Plaintiff's claims of slander of title, negligence, and breach of implied contract, (ECF No. 36). BOA later filed the instant Motion to Set Aside Entry of Default, citing inadvertent error and excusable neglect as the reasons for its failure to answer the Complaint. (ECF No. 43.) Then, on September 22, 2016, Defendants Fannie Mae, Seterus, and Wright, Findlay and Zak (“WFZ”) filed the instant Motion to Stay Proceedings pending issuance of the Ninth Circuit's mandate in Bourne Valley Court Trust v. Wells Fargo Bank, NA, No. 15-15233, 2016 WL 4254983 (9th Cir. Aug. 12, 2016). Finally, on September 23, 2016, three days before Plaintiff's response to the Motion to Dismiss was due, Fannie Mae, Seterus, and WFZ joined BOA's Motion to Dismiss, additionally requesting that the Court dismiss the slander of title, negligence, and breach of implied contract claims as pled against them. (ECF No. 45.)


         a. Legal Standard

         Under Federal Rule of Civil Procedure 55(c), a court may set aside an entry of default for “good cause.” “To determine ‘good cause, ' a court must consider three factors: (1) whether the party seeking to set aside the default engaged in culpable conduct that led to the default; (2) whether it had no meritorious defense; or (3) whether reopening the default judgment would prejudice the other party.” United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (internal quotation marks and brackets omitted). When exercising its discretion under Rule 55, the court's “underlying concern . . . is to determine whether there is some possibility that the outcome of the suit after a full trial will be contrary to the result achieved by the default.” Hawaii Carpenters' Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986). The party seeking to invoke Rule 55(c) bears the burden of demonstrating that the test factors favor setting aside the default. See TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001).

         The overriding judicial goal of deciding cases correctly on the merits is to be balanced with the interests of both litigants and the courts in the finality of judgments. See Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985). Accordingly, “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 (quoting Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)).

         b. Analysis

         BOA asserts that its failure to timely defend in this action is the product of excusable neglect. It states that the “substantially similar nature” of the ‘1325 Case and the ‘1077 Case “led to internal calendaring errors, and, as a result, [BOA] did not timely file a response to Plaintiff's Complaint.” (Mot. 2, ECF No. 43.) After learning that Plaintiff had requested the Clerk enter default, BOA promptly-the following day-filed a response to Plaintiff's request for entry of default, (ECF No. 35), and the Motion to Dismiss discussed below, (ECF No. 36).

         The parties and claims in the ‘1325 Case and ‘1077 Case are different, though both actions arise from the same HOA foreclosure sale. Nonetheless, “to treat a failure to answer as culpable, the movant must have acted with bad faith, such as an intention to take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal process.” Mesle, 615 F.3d at 1092. While BOA's failure to respond is surely the result of some level of carelessness, the Court cannot find the requisite bad faith under the circumstances presented. Furthermore, as explained more fully below in the analysis of BOA's Motion to Dismiss, BOA has meritorious defenses to Plaintiff's claims. Both of these factors weigh in favor of setting aside the Clerk's entry of default.

         Lastly, Plaintiff will not be prejudiced by setting aside the default. “The standard is whether [her] ability to pursue [her] claim will be hindered.” Falk, 739 F.2d at 463. In her Response, Plaintiff has not argued prejudice nor presented any basis for a finding that she would suffer prejudice. Nor does the Court find any such basis.

         Accordingly, for the foregoing reasons, the Court will set aside the Clerk's entry of default in service of the strong ...

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