Howarth v. Patterson ( 2020 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Morgan Howarth, No. CV-19-00726-PHX-ESW 10 Plaintiff, ORDER 11 v. 12 Ryan Patterson, et al., 13 Defendants. 14 15 16 On November 22, 2019, the Clerk of Court entered default against Patterson 17 Remodeling, LLC (referred to herein as “Defendant Patterson Remodeling” or 18 “Defendant”). (Doc. 90). Pending before the Court is Defendant’s “Motion to Set Aside 19 an Entry of Default Under FRCP 55(c)” (Doc. 91). For the reasons explained herein, the 20 Motion (Doc. 91) will be denied. 21 I. LEGAL STANDARDS 22 “[J]udgment by default is a drastic step appropriate only in extreme circumstances; 23 a case should, whenever possible, be decided on the merits.” Falk v. Allen, 739 F.2d 461, 24 463 (9th Cir.1984). Under Federal Rule of Civil Procedure 55(c), a court may set aside an 25 entry of default for “good cause shown.” Fed. R. Civ. P. 55(c). A district court has 26 “especially broad” discretion to determine whether good cause has been shown when “it is 27 entry of default that is being set aside, rather than a default judgment.” Mendoza v. Wight 28 Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir. 1986). In analyzing whether good cause has 1 been shown, courts consider the following three factors: (i) whether the defendant engaged 2 in culpable conduct leading to the default; (ii) whether the defendant has a meritorious 3 defense; and (iii) whether setting aside the default would prejudice the plaintiff. Franchise 4 Holding II, LLC v. Huntington Restaurants Grp., Inc., 375 F.3d 922, 925-26 (9th Cir. 5 2004). If any one of these three factors weighs against setting the default aside, the Court 6 may refuse to set aside an entry of default. Id. at 926. A defendant bears the burden of 7 proving that the default should be set aside. TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 8 691, 696 (9th Cir. 2001), overruled on other grounds by Egelhoff v. Egelhoff ex rel. 9 Breiner, 532 U.S. 141 (2001). As explained in the following section, the Court finds that 10 Defendant Patterson Remodeling’s conduct leading to the default was culpable and that 11 Defendant has failed to show that it has a meritorious defense. 12 II. DISCUSSION 13 A. Defendant’s Conduct Leading to the Default was Culpable 14 “[A] defendant’s conduct is culpable if he has received actual or constructive notice 15 of the filing of the action and intentionally failed to answer.” TCI Grp. Life Ins. Plan, 244 16 F.3d at 697 (emphasis in original) (quoting Alan Neuman Productions, Inc. v. Albright, 862 17 F.2d 1388, 1392 (9th Cir. 1988)). “The Ninth Circuit has established two separate 18 standards for whether consciously failing to respond to a complaint fits the meaning of 19 ‘intentionally’ as used in the definition of culpability. Which standard is applicable 20 depends on whether the party seeking to set aside default is considered ‘legally 21 sophisticated.’” CWT Canada II LP v. Danzik, No. CV-16-00607-PHX-DGC, 2017 WL 22 1437557, at *2 (D. Ariz. Apr. 24, 2017) (citing United States v. Signed Pers. Check No. 23 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010)). 24 If a party is legally sophisticated, then a court may deem the party’s conduct 25 culpable if the party has “received actual or constructive notice of the filing of the action 26 and failed to answer[.]” Franchise Holding II, 375 F.3d at 926; Mesle, 615 F.3d at 1093 27 (“When considering a legally sophisticated party’s culpability in a default, an 28 understanding of the consequences of its actions may be assumed, and with it, 1 intentionality.”); see also Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 2 840 F.2d 685, 690 (9th Cir. 1988) (holding a defendant’s conduct was culpable because he 3 “had actual notice of the summons and complaint” soon “after it was served” and, “as a 4 lawyer, presumably was well aware of the dangers of ignoring service of process”). If a 5 party is not legally sophisticated, then “the term ‘intentionally’ means that a movant cannot 6 be treated as culpable simply for having made a conscious choice not to answer; rather, to 7 treat a failure to answer as culpable, the movant must have acted with bad faith, such as an 8 ‘intention to take advantage of the opposing party, interfere with judicial decisionmaking, 9 or otherwise manipulate the legal process.’” Mesle, 615 F.3d at 1092 (quoting TCI Grp. 10 Life Ins. Plan, 244 F.3d at 697). “[A] defendant’s conduct [is] culpable . . . where there is 11 no explanation of the default inconsistent with a devious, deliberate, willful, or bad faith 12 failure to respond.” Id. 13 Here, it is undisputed that Plaintiff effected service on Defendant Patterson 14 Remodeling on October 15, 2019 by serving Defendant’s manager/member Curtis 15 Patterson. It is undisputed that Curtis Patterson is the father of Defendant Ryan Patterson, 16 who appeared on March 1, 2019. (Doc. 93 at 5; Doc. 14). As an explanation for failing to 17 appear in this case until January 2020, Defendant Patterson Remodeling states that Curtis 18 Patterson “had been retired for over six years, had no experience with intellectual property 19 litigation, and was in the process of settling in a newly-adopted special-needs child, and 20 was therefore unable to respond to Plaintiff until he was able to secure counsel . . . .” (Doc. 21 91 at 4-5). The assertion that Curtis Patterson has been retired for six years conflicts with 22 the Arizona Corporation Commission records, which reflect that Curtis Patterson took 23 office as manager of Patterson Remodeling in March 2017. (Doc. 83-1 at 4). Further, 24 Defendant acknowledges that “Patterson Remodeling had other managers and members 25 . . . .” (Doc. 100 at 2). No explanation is given as to why those other managers/members 26 could not have timely secured counsel on behalf of Patterson Remodeling. The Court finds 27 that Defendant Patterson Remodeling has not offered a credible, good faith explanation for 28 its failure to appear in this case approximately three months after service. See TCI Grp. 1 Life Ins. Plan, 244 F.3d at 697-98 (“Neglectful failure to answer as to which the defendant 2 offers a credible, good faith explanation negating any intention to take advantage of the 3 opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal 4 process is not ‘intentional.’”). The Court concludes that Defendant Patterson 5 Remodeling’s conduct leading to the default was culpable regardless of whether or not it 6 may be deemed a legally sophisticated party. Although this finding of culpability is 7 sufficient to justify a denial of Defendant’s Motion (Doc. 91), the Court further finds that 8 Defendant has failed to show that it has a meritorious defense. 9 B. Defendant has Not Shown that it has a Meritorious Defense 10 In evaluating the meritorious defense factor, the primary inquiry is “whether there 11 is some possibility that the outcome of the suit after a full trial will be contrary to the result 12 achieved by default.” Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 513 (9th 13 Cir. 1986). While the defendant’s burden under this factor “is not extraordinarily heavy,” 14 he or she must “allege sufficient facts that, if true, would constitute a defense.” Mesle, 615 15 F.3d at 1094. 16 Here, Defendant asserts that it “has meritorious defenses to Plaintiff’s unfounded 17 and baseless accusations. . . . Throughout Plaintiff’s incoherent and inarticulate First 18 Amended Petition, Defendant fails to see that Plaintiff has stated a claim upon which relief 19 may be granted.” (Doc. 91 at 5). Defendant does not provide any argument or authority 20 in support of its contention that the First Amended Complaint fails to state a claim. In its 21 Order denying the Motion to Dismiss filed by Defendants Ryan Patterson and Patterson 22 Homes, LLC, the Court found that the First Amended Complaint sufficiently states a claim 23 for direct copyright infringement and vicarious copyright infringement against all 24 Defendants. (Doc. 92 at 4-5). Although Defendant contends that “other defenses and 25 affirmative defenses exist” (Doc. 91 at 5), Defendant has not articulated any specific facts 26 that would constitute a potentially meritorious defense. As the Ninth Circuit has explained, 27 “conclusory statements that a dispute exist[s]” or “mere general denials without facts to 28 support [the defense are] not enough to justify vacating a default or default judgment.” 1|| Franchise Holdings IT, 375 F.3d at 926 (internal quotations and citation omitted). “A 2|| defendant seeking to vacate [entry of] default... must present specific facts that would 3|/ constitute adefense.” TCI Grp. Life Ins. Plan, 244 F.3d at 700; see also Madsen vy. Bumb, 419 F.2d 4, 6 (9th Cir. 1969) (holding that district court did not abuse its discretion 5 || in declining to set aside the default where defendant offered “‘a mere general denial without 6|| facts to support it”); Gomes v. Williams, 420 F.2d 1364, 1366 (10th Cir. 1970) (stating □□□□□ an attempt to determine the meritorious nature of a defense, the trial court must have before 8 || it more than mere allegations that a defense exists”); Sony Corp. v. Elm State Electronics, 9|| Inc., 800 F.2d 317, 320-21 (2d Cir. 1986) (“Although in an answer general denials || normally are enough to raise a meritorious defense, the moving party on a motion to reopen |} adefault must support its general denials with some underlying facts”); Breuer Electric 12|| Mfg. Co. v. Toronado Systems of America, Inc., 687 F.2d 182, 186 (7th Cir. 13 || 1982) (“[DJefendants gave not the slightest indication of any specific defense on the merits. They merely tendered a general denial which asserts that they are not liable to 15 || plaintiff. The showing of a meritorious defense that is necessary to set aside a default 16 || requires more than the bare legal conclusions set forth in defendants’ proposed answer.’’). 17 Defendant has failed to proffer any facts showing “some possibility that the outcome 18 || of the suit after a full trial will be contrary to the result achieved by the default.” Hawaii 19|| Carpenters’ Trust Funds, 794 F.2d at 513. The Court concludes that the second factor || weighs against setting aside Defendant’s default. The Court need not address the third relevant factor, prejudice to Plaintiff. Franchise Holding II, LLC,375 F.3d at 926 || (explaining that “the district court was free to deny the motion ‘if any of the three factors 23 || was true’”’). Defendant’s Motion (Doc. 91) will denied. 24 Il. CONCLUSION 25 IT IS ORDERED denying Defendant Patterson Remodeling, LLC’s “Motion to 26 || Set Aside an Entry of Default Under FRCP 55(c)” (Doc. 91). 27 Dated this 21st day of February, 2020. . 28 Ads [Abs Eileen 8. Willett United States Magistrate Judge _5-