Marsh-Girardi v. Client Resolution Management, LLC ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 DEIRDRE P. MARSH-GIRARDI, No. 2:19-cv-02188-JAM-AC 12 Plaintiff, 13 v. FINDINGS AND RECOMMENDATIONS 14 CLIENT RESOLUTION MANAGEMENT, LLC, 15 Defendant. 16 17 18 This matter is before the court on plaintiff’s motion for default judgment. ECF No. 7. 19 The motion was referred to the undersigned pursuant to E.D. Cal. R. 302(c)(19). Defendant did 20 not file a response and the matter was taken under submission. For the reasons set forth below, 21 the undersigned recommends plaintiff’s motion be DENIED without prejudice. 22 I. Relevant Background 23 Plaintiff brought her complaint on October 30, 2019, alleging violations of the Fair Debt 24 Collection Practices Act (“FDCPA”), 15 U.S.C. §1692 et seq., the Telephone Consumer 25 Protection Act (“TCPA”), 47 U.S.C. §227 et seq., and the Rosenthal Fair Debt Collection 26 Practices Act, Cal Civ. Code §1788 et seq. ECF No. 1. Plaintiff filed a summons returned 27 executed on November 20, 2019. ECF No. 4. Plaintiff requested entry of default on December 4, 28 2019. ECF No. 5. The clerk’s office entered default on December 12, 2019. ECF No. 6. 1 Plaintiff moved for default judgment on January 30, 2020. ECF No. 7. The motion indicates that 2 it was served on the defendant by mail. ECF No. 7 at 11. 3 Plaintiff’s complaint alleges that she is an individual consumer residing in Stockton, 4 California, and defendant is a debt collection agency organized under the laws of the state of New 5 York. ECF No. 1 at 2. The case arises out of defendant’s attempt to collect upon a consumer 6 debt said to be owed by plaintiff. Id. at 3. The debt stems from a personal installment loan 7 plaintiff took out through Personify Financial. Id. Plaintiff believes that after she defaulted on 8 her obligation to Personify, the debt was assigned to or otherwise turned over to defendant for 9 collection. Id. Plaintiff began receiving calls to her cell phone from defendant during the 10 summer of 2019. Id. Defendant mainly used the phone number (916) 796-4912 when placing 11 collection calls, but plaintiff believes it has used other numbers as well. Id. 12 Plaintiff alleges that when she answered the phone calls from defendant, she experienced 13 a significant pause before being connected to a live representative, at which point plaintiff was 14 advised that defendant was calling to collect upon the subject debt. Id. Plaintiff advised 15 defendant that she was in the process of filing for bankruptcy. Id. Notwithstanding this 16 information, defendant continued contacting plaintiff. Id. The repeated phone calls became so 17 bothersome that, in approximately August 2019, plaintiff demanded that defendant stop calling 18 her cellular phone. Id. Despite plaintiff’s demands, defendant continued to place calls to 19 plaintiff’s cellular phone seeking to collect the subject debt up until the filing of this action. Id. at 20 4. Defendant also placed several calls to plaintiff’s work phone. Id. Plaintiff demanded 21 defendant stop calling her work phone number, but the calls continued. Id. Plaintiff has received 22 at least 25 phone calls from defendant since asking it to stop calling. Id. 23 II. Motion 24 Plaintiff moves for default judgment on all counts, seeking statutory damages and an 25 award of attorneys’ fees and costs. ECF No. 7 at 10-11. Defendant has not appeared or filed any 26 response. 27 //// 28 //// 1 III. Analysis 2 A. Standards for Default Judgment 3 Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party 4 against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend 5 against the action. See Fed. R. Civ. P. 55(a). However, “[a] defendant’s default does not 6 automatically entitle the plaintiff to a court-ordered judgment.” PepsiCo, Inc. v. Cal. Sec. Cans, 7 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 8 (9th Cir. 1986) ); see Fed. R. Civ. P. 55(b) (governing the entry of default judgments). Instead, 9 the decision to grant or deny an application for default judgment lies within the district court’s 10 sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). 11 Before assessing the merits of a default judgment motion, a court must confirm that it has 12 subject matter jurisdiction over the case and personal jurisdiction over the parties. See In re Tuli, 13 172 F.3d 707, 712 (9th Cir. 1999). As part of the personal jurisdiction inquiry, a court must 14 ensure that all defendants have been adequately served in conformance with Rule 4 of the Federal 15 Rules of Civil Procedure. See Securities & Exchange Comm’n v. Ross, 504 F.3d 1130, 1140 (9th 16 Cir. 2007) (“‘[N]either actual notice nor simply naming the defendant in the complaint will 17 provide personal jurisdiction without substantial compliance with Rule 4.’”) (citations omitted); 18 see also Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999) (“[O]ne 19 becomes a party officially, and is required to take action in that capacity, only upon service of a 20 summons ....”). 21 If the court finds these jurisdictional elements satisfied, it turns to the following factors to 22 determine whether default judgment is warranted: 23 (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) 24 the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to 25 excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 26 27 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). 28 //// 1 B. The Court Has Subject Matter Jurisdiction 2 The court possesses subject matter jurisdiction over this action, as the TCPA and FDCPA 3 claims present a federal question, see 28 U.S.C. § 1331; Mims v. Arrow Fin. Servs., LLC, 565 4 U.S. 368 (2012) (holding that federal and state courts have concurrent jurisdiction over private 5 suits arising under the TCPA), and the state Rosenthal Act claim may be heard pursuant to the 6 court’s supplemental jurisdiction, see 28 U.S.C. § 1367(a). 7 C. The Court Lacks Personal Jurisdiction over Defendant Due to Insufficient Service 8 Personal jurisdiction over a defendant may be acquired “by personal service of that 9 defendant or by means of a defendant’s ‘minimum contacts’ with the jurisdiction.” Cripps v. Life 10 Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Burnham v. Super. Ct. of Cal., 11 495 U.S. 604 (1990) ). 12 The undersigned finds that that the court lacks personal jurisdiction over defendant Client 13 Resolution Management due to procedurally deficient service. Rule 4(h) of the Federal Rules of 14 Civil Procedure provides that a corporation must be served “(A) in the manner prescribed by Rule 15 4(e)(1) for serving an individual; or (B) by delivering a copy of the summons and of the 16 complaint to an officer, a managing or general agent, or any other agent authorized by 17 appointment or by law to receive service of process....” Fed. R. Civ. P. 4(h)(1). In addition, in 18 the Ninth Circuit, “service can be made upon a representative so integrated with the organization 19 that he will know what to do with the papers. Generally, service is sufficient when made upon an 20 individual who stands in such a position as to render it fair, reasonable and just to imply the 21 authority on his part to receive service.” Direct Mail Specialists, Inc. v. Eclat Computerized 22 Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988) (stating that service of process is not limited solely 23 to officially designated officers, managing agents, or agents designated to receive process). 24 Rule 4(e)(1), in turn, permits service by “following the state law for serving a summons in 25 action brought in courts of general jurisdiction in the state where the district court is located or 26 where service is made.” Fed. R. Civ. P. 4(e)(1), (h)(1)(A). Under California law, service may be 27 made on a corporation by delivering a copy of the summons and complaint “[t]o the person 28 designated as agent for service of process” or “[t]o the president, chief executive officer, or other 1 head of the corporation, a vice president, a secretary or assistant secretary, a treasurer or assistant 2 treasurer, a controller or chief financial officer, a general manager, or a person authorized by the 3 corporation to receive service of process.” Cal. Civ. Proc. Code § 416.10. 4 Here, there is no indication that any individual at Client Resolution Services, let alone an 5 officer, president, chief executive officer, or other head of the corporation, a vice president, a 6 secretary or assistant secretary, a treasurer or assistant treasurer, a controller or chief financial 7 officer, was actually served. The “proof of service” provided to the court indicates that a process 8 server named Michael Hadden posted the summons to a locked door at 1651 Niagra St., Suite 3, 9 Buffalo, NY 14213 on November 12, 2019. ECF No. 4 at 2. A notation at the bottom of the 10 document reads “Door Locked, PS can hear activity inside, no answer after knocking loudly.” Id. 11 Accepting the service return as accurate, there is an insufficient basis to conclude that 12 service of defendant was sufficient. According to the service returns, service was attempted upon 13 defendant by leaving a copy of the summons and complaint unattended on a locked door, without 14 hand-delivering the documents to anyone. This is plainly insufficient where service on a business 15 needs to identify the individual who was served and that person’s authority within the company. 16 See Ayres v. Jacobs & Crumplar, P.A., 99 F.3d 565, 567 (3d Cir. 1996) (service was not proper 17 under Rule 4(h)(1) where summons and complaint were delivered to firm’s office manager); 18 DisputeSuite.com, LLC v. Credit Umbrella Inc., No. CV 14-6340 MWF (MANx), 2015 WL 19 12911757, at *3 (C.D. Cal. June 2, 2015) (service was not proper under section 416.10 where 20 court was not provided with any details regarding service recipient’s position or rank within 21 defendant corporation); TMX Logistics, Inc. v. FF Trucking, Inc., No. CV 14-00873 PSG (ASx), 22 2014 WL 12691618, at *2 (C.D. Cal. Sept. 5, 2014) (service not proper under Rule 4(h)(1) where 23 proof of service did not indicate that recipient was an officer, a managing or general agent, or 24 other agent authorized to receive service of process on behalf of corporation). 25 The undersigned notes that service also did not comply with California’s substitute 26 method of service for business entities. “In lieu of personal delivery, Cal. Civ. Proc. Code § 27 415.20 permits service on a corporation by substituted service which requires leaving the 28 summons and complaint during normal office hours at the office of the defendant with a person 1 ‘who is apparently in charge’ and thereafter mailing a copy of the summons and complaint to the 2 defendant at that same office.” 2 Vandyke v. N. Leasing Sys., Inc., No. CIV.S 07-1877 FCD 3 GGH PS, 2009 WL 1396193, at *4 (E.D. Cal. May 14, 2009), report and recommendation 4 adopted, No. CIVS 07-1877 FCD GGH PS, 2009 WL 2044254 (E.D. Cal. July 13, 2009) 5 (emphasis added). “Plaintiffs must however be reasonably diligent in their attempts at direct 6 service before substitute service is permitted.” Hong-Ming Lu v. Primax Wheel Corp., No. C 04- 7 4170 JSW, 2005 WL 807048, at *3 (N.D. Cal. Apr. 7, 2005) (citing Evartt v. Sup. Ct. of 8 Stanislaus County, 89 Cal. App. 3d 795, 799, 152 Cal. Rptr. 836 (1979)). Under California law, 9 two or three attempts at personal service satisfies the reasonable diligence requirement. 10 Espindola v. Nunez, 199 Cal. App. 3d 1389, 1392 (1988). There is no indication here that the 11 papers were actually left with anyone; there is no indication that the papers were then mailed to 12 the same address; and there is no record that personal service was first attempted the requisite two 13 or three times. 14 Because the record is insufficient to establish that defendant was properly served, the 15 undersigned recommends that the motion for default judgment be denied. 16 D. Extension of Time to Effect Service 17 Federal Rule of Civil Procedure 4(m) provides in relevant part: 18 If a defendant is not served within 90 days after the complaint is filed, the court—on motion or on its own after notice to the plaintiff—must 19 dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff 20 shows good cause for the failure, the court must extend the time for service for an appropriate period. 21 22 Fed. R. Civ. P. 4(m). 23 As plaintiff filed the complaint on October 30, 2019, the time for proper service expired at 24 the end of January 2020. Where service is untimely, Rule 4(m) requires a district court to grant 25 an extension of time for service when the plaintiff shows good cause for the delay in service. 26 Efaw v. Williams, 473 F.3d 1038, 1040 (9th Cir. 2007). In the absence of good cause, the rule 27 permits the district court to grant an extension upon a showing of “excusable neglect.” Id.; see 28 1 also Lemoge v. United States, 587 F.3d 1188, 1198 (9th Cir. 2009). Courts may extend the time 2 for service even after the Rule 4(m) deadline has expired, Mann v. Am. Airlines, 324 F.3d 1088, 3 1090 (9th Cir. 2003), and there is no specific test that a court must apply in deciding whether to 4 exercise its discretion to extend the period for service, In re Sheehan, 253 F.3d 507, 513 (9th Cir. 5 2001); see Efaw, 473 F.3d at 1041 (stating that courts may consider factors like a statute of 6 limitations bar, prejudice to the defendant, actual notice of a lawsuit, and eventual service). 7 “Good cause” is likely to be found when the failure to complete service in a timely fashion is due 8 to the conduct of a third person, typically the process server. See Wright & Miller, Federal 9 Practice and Procedure Civil (4th ed.) § 1137. 10 Here, no defendant has appeared to challenge the sufficiency of service, so plaintiff has 11 not had a formal opportunity to argue for an extension. However, plaintiff’s counsel clearly 12 believes service was adequate, as he filed a declaration stating that defendant was served with the 13 summons and complaint. ECF No. 7-2 at 2. The undersigned concludes that there is good cause 14 for the court to sua sponte extend the period for service in this case. Plaintiff did timely attempt 15 service on defendant. The insufficiency of service was due to the failure of the process server to 16 serve the complaint and summons in a manner consistent with applicable rules. Though counsel 17 was not diligent in checking the adequacy of the process service’s work, the undersigned does not 18 see how a limited extension would prejudice defendants. Moreover, proper service might allow 19 for this case to be decided on the merits. The Rule 4(m) service window only closed roughly one 20 month ago, and the undersigned recommends that the period be held open only for an additional 21 30 days to properly effect service. 22 Based on the foregoing, the undersigned finds that, although service of process was 23 insufficient, good cause exists for an extension to serve the complaint and summons. In the 24 alternative, even if an extension under Rule 4(m) were not mandatory for good cause shown, the 25 undersigned would recommend granting a discretionary 30-day extension for the reasons stated. 26 //// 27 //// 28 //// 1 IV. CONCLUSION 2 Based on the foregoing, the undersigned RECOMMENDS THAT: 3 1. Plaintiffs January 30, 2020 motion for default judgment (ECF No. 7) be DENIED 4 without prejudice to renewal upon effecting proper service of process; and 5 2. Plaintiff be granted an extension of 30 days from the date these findings and 6 recommendations are adopted to serve defendant. See Fed. R. Civ. P. 44m). 7 These findings and recommendations are submitted to the United States District Judge 8 || assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within twenty-one days 9 || after being served with these findings and recommendations, any party may file written 10 || objections with the court and serve a copy on all parties. Id.; see also Local Rule 304(b). Such a 11 | document should be captioned “Objections to Magistrate Judge’s Findings and 12 | Recommendations.” Failure to file objections within the specified time may waive the right to 13 || appeal the District Court’s order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez 14 | v. Yist, 951 F.2d 1153, 1156-57 (9th Cir. 1991). 15 || DATED: February 27, 2020 . 16 Cthren— 7 ALLISON CLAIRE UNITED STATES MAGISTRATE JUDGE 18 19 20 21 22 23 24 25 26 27 28