Trustees of the Northern CA Gen'l Teamsters Security Fund v. Keolis Transit America, Inc. ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 TRUSTEES OF THE NORTHERN No. 2:21-CV-00205-MCE-AC CALIFORNIA GENERAL TEAMSTERS 12 SECURITY FUND, 13 Plaintiff, ORDER 14 v. 15 KEOLIS TRANSIT AMERICA, INC., 16 Defendant. 17 18 On February 2, 2021, Plaintiff Trustees of the Northern California General 19 Teamsters Security Fund (“Plaintiff”) initiated this action against Defendant Keolis Transit 20 America, Inc. (“Defendant”). ECF No. 1. The summons was served and received by 21 Defendant’s agent on February 4, 2021, but Defendant did not timely file an answer or 22 any other response. ECF Nos. 2, 4. As a result, the Clerk of the Court entered default 23 against Defendant on March 5, 2021. ECF Nos. 5, 6. Presently before the Court is 24 Defendant’s Motion to Set Aside the Entry of Default, filed on March 24, 2021, to which 25 Plaintiff has filed has a statement of non-opposition. ECF Nos. 8, 10. For the following 26 reasons, Defendant’s motion is GRANTED.1 27 1 Because oral argument would not be of material assistance, the Court ordered this matter 28 submitted on the briefs. E.D. Local Rule 230(g). 1 Under Federal Rule of Civil Procedure 55(c), “the court may set aside an entry of 2 default for good cause . . .” “To determine ‘good cause,’ a court must ‘consider[] three 3 factors: (1) whether [the party seeking to set aside the default] engaged in culpable 4 conduct that led to the default; (2) whether [it] had [no] meritorious defense; or (3) 5 whether reopening the default judgment would prejudice’ the other party.” United States 6 v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 7 2010) (alterations in original) (quoting Franchise Holding II, LLC v. Huntington Rests. 8 Grp., Inc., 375 F.3d 922, 925–26 (9th Cir. 2005)). “[J]udgment by default is a drastic 9 step appropriate only in extreme circumstances; a case should, whenever possible, be 10 decided on the merits.” Id. (citation omitted). However, “a finding that any one of these 11 factors is true is sufficient reason for the district court to refuse to set aside the default.” 12 Id. 13 The Court finds that none of the three factors are present here. Defendant first 14 explains that it did not engage in culpable conduct and that its failure to timely respond 15 “related to working arrangements during the COVID-19 pandemic” and that it “was 16 unaware of this lawsuit until the clerk had already entered default.” ECF No. 8 at 6; see 17 also Knight Decl., ECF No. 8-1 ¶¶ 4–5 (declaration of Defendant’s vice president of 18 claim management). While the Court is not impressed with Defendant’s explanations, 19 the applicable standard here is whether Defendant “intentionally failed to answer,” 20 specifically whether it “acted with bad faith, such as an ‘intention to take advantage of 21 the opposing party, interfere with judicial decision-making, or otherwise manipulate the 22 legal process.’” Mesle, 615 F.3d at 1092 (citation omitted) (emphasis in original). 23 Defendant’s conduct does not rise to that level of culpability given that Defendant 24 promptly filed the present motion after learning of the entry of default and Plaintiff does 25 not oppose the motion. See also Knight Decl., ECF No. 8-1 ¶ 5 (stating Defendant 26 “diligently sought to investigate the circumstances surrounding [Defendant’s] inadvertent 27 delay in processing, and has worked diligently to submit the [motion].”). 28 /// 1 Second, “[alll that is necessary to satisfy the ‘meritorious defense’ requirement is 2 | to allege sufficient facts that, if true, would constitute a defense: ‘the question whether 3 | the factual allegation [i]s true’ is not to be determined by the court when it decides the 4 | motion to set aside the default. Rather, that question ‘would be the subject of the later 5 | litigation.” Mesle, 615 F.3d at 1094 (citation omitted). Plaintiff asserts claims under the 6 | National Labor Relations Act, 29 U.S.C. § 185, and the Employee Retirement Income 7 | Security Act, 29 U.S.C. § 1001 et seq., for the collection of delinquent employee benefit 8 | contributions. Doc. No. 1 41. Defendant contends it has a number of meritorious 9 | defenses, including, among other things, that “[t]he governing documents concerning the 10 | subject employee welfare benefit plan do not support Plaintiffs’ allegation that 11 | [Defendant] failed to meet its contribution obligations” and that “[c]ertain contributions 12 | Plaintiff alleges [Defendant] owes were calculated incorrectly.” ECF No. 8 at 8. Given 13 | the nature of the allegations, Defendant has raised potentially meritorious defenses. 14 Finally, the Court does not find that setting aside the default would be prejudicial 15 | because Plaintiff does not oppose the present motion, no motion for default judgment 16 | was filed, formal discovery has not begun, and Defendant intends to file a responsive 17 | pleading should the Court grant its motion. ECF No. 8 at 9. In any event, “a case 18 | should, whenever possible, be decided on the merits.” Mesle, 615 F.3d at 1091. 19 For the reasons set forth above, Defendant’s motion to set aside the entry of 20 | default, ECF No. 8, is GRANTED. The default entered against Defendant on March 5, 21 | 2021, ECF No. 6, is VACATED. Defendant shall file its response to Plaintiffs complaint 22 | within thirty (30) days after the issuance of this order. 23 IT |S SO ORDERED. 24 | Dated: September 27, 2021 25 J Lat LEK ee NK °° SENIOR UNITED STATES DISTRICT JUDGE 27 28