(PS) Olson v. Hornbrook Community Services District ( 2022 )

1 2 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 KIMBERLY R. OLSON, No. 2:19-CV-2127-KJM-DMC 12 Plaintiff, 13 v. ORDER 14 HORNBROOK COMMUNITY SERVICES DISTRICT, et al., 15 Defendants. 16 17 18 Plaintiff, who is proceeding pro se, brings this civil action. Pending before the 19 Court are Plaintiff’s motions, ECF Nos. 23 and 26, for default judgments. Also before the Court 20 is Defendants’ opposition, ECF No. 28, to Plaintiff’s motions in which Defendants ask the Court 21 to set aside defaults entered by the Clerk of the Court. With their opposition, Defendants have 22 submitted a proposed joinder to the motion to dismiss filed by Defendant Kampa as well as a 23 proposed answer to Plaintiff’s complaint should the Court not permit joinder. Plaintiff has filed 24 objections and a reply, ECF No. 30, to Defendants’ opposition and request to set aside entry of 25 defaults. 26 / / / 27 / / / 28 / / / 1 I. PROCEDURAL HISTORY 2 On August 10, 2021, the Court screened Plaintiff’s original pro se complaint and 3 determined it was appropriate for service on Defendants Hornbrook Community Services District 4 (HCSD), Clint Dingman, Robert Puckett, Sr., Michele Hanson, Melissa Tulledo, Patricia Brown, 5 Peter Kampa, Kevin Dixon, and Julie Bowles. See ECF No. 5. The Court issued process for all 6 defendants and directed Plaintiff to submit documents necessary for service of process to the 7 United States Marshall. See ECF Nos. 5 and 6. On August 31, 2021, Defendant Kampa filed a 8 motion to dismiss. See ECF No. 10. That motion is fully briefed and will be addressed 9 separately. 10 On November 8, 2021, process was returned executed as to Defendants Kampa 11 and Puckett. See ECF No. 15. On November 12, 2021, process was returned executed as to 12 Defendants Brown, Dingman, Hanson, HCSD, and Tulledo. See ECF No. 16. On November 17, 13 2021, process was returned executed as to Defendant Bowles. See ECF No. 17. On November 14 18, 2021, Plaintiff requested entry of defaults as against Defendants Brown, Dingman, Hanson, 15 HCSD, and Tulledo. See ECF No. 19. On November 22, 2021, Plaintiff requested entry of 16 default as against Defendant Bowles. See ECF No. 20. On November 24, 2021, the Clerk of the 17 Court entered the defaults of Defendants Bowles, Brown, Dingman, Hanson, HCSD, and Tulledo. 18 See ECF No. 21. On November 29, 2021, Plaintiff requested entry of default as against 19 Defendant Puckett. See ECF No. 22. On December 8, 2021, the Clerk of the Court entered the 20 default of Defendant Puckett. See ECF No. 25. 21 Plaintiff now seeks default judgments as against Defendants Brown, Bowles, 22 Dingman, Puckett, Hanson, Tulledo, and HCSD. See ECF Nos. 23 and 26. Defendants seek to 23 set aside all defaults entered on the docket by the Clerk of the Court. See ECF No. 28. 24 Defendants also seek leave to either join in Defendant Kampa’s pending motion to dismiss or file 25 an answer to the original pro se complaint. See id. 26 / / / 27 / / / 28 / / / 1 II. DISCUSSION 2 Defaults are disfavored and, under Federal Rule of Civil Procedure 55(c), the 3 Court has the discretion to set aside the Clerks of the Court’s entry of default. See Eitel v. 4 McCool, 782 F.2d 1470, 1472 (9th Cir. 1986). Good cause must be shown to set aside entry of 5 default. See Fed. R. Civ. P. 55(c). In evaluating whether good cause exists, the Court considers: 6 (1) whether the party seeking to set aside the default engaged in culpable conduct that led to the 7 default; (2) whether the defaulting party has meritorious defenses; or (3) whether prejudice would 8 result to the party opposing a motion to set aside the default. See United States v. Mesle, 615 9 F.3d 1085, 1091 (9th Cir. 2010). The standard is disjunctive, meaning that a finding that any 10 factor is true is sufficient reason for the Court to decline to set aside a default entered by the Clerk 11 of the Court. See TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). 12 Where, however, the party seeking to set aside entry of default has a meritorious defense, any 13 doubt should be resolved in favor of setting aside the default so the case may be decided on the 14 merits. See Mendoza v. Wright Vineyard Mgmt., 783 F.2d 941, 945-46 (9th Cir. 1986). A case 15 should, whenever possible, be decided on the merits and not by way of the drastic step of a 16 default judgment. See Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). 17 According to Defendants: 18 . . . Here, resolution of this case on the merits is eminently possible. Indeed, it has already begun with the other Defendants in this 19 case, who are represented by the same counsel and are moving to dismiss Plaintiff’s Complaint under Rule 12(b)(6) concurrently with this Motion. 20 Defendants are submitting their proposed responsive pleadings to the Court concurrently with this Opposition. 21 The current situation is the result of a years-long, far-reaching campaign of litigation by Plaintiff. Plaintiff has been declared a vexatious 22 litigant in Siskiyou County, and has harassed Defendants with constant, duplicative, meritless litigation for close to a decade. With respect to the 23 instant case, counsel was appointed by Peter Kampa’s insurance policy to represent Mr. Kampa. (Declaration of Ryan Matthews (“Matthews Dec.”), 24 par. 2.) At that point, counsel had not been appointed for the moving Defendants. (Matthews Dec., par. 3.) Counsel timely filed a Motion to 25 Dismiss on behalf of Mr. Kampa. (Matthews Dec., par. 4.) That Motion has been taken under submission, and the Court has not yet issued a 26 ruling. (Matthews Dec., par. 5.) Counsel was subsequently appointed to represent the moving Defendants by Hornbrook Community Services 27 District’s insurance policy. (Matthews Dec., par. 6.) Moving Defendants executed waivers of service, but did not notify counsel until after the 60- 28 day deadline had passed. (Matthews Dec., par. 7.) The resulting delay was 1 exacerbated by the fact that counsel was participating in a jury trial in San Joaquin County at the time. (Matthews Dec., par. 8.) For all of these 2 reasons, Counsel did not become aware that a deadline for a responsive pleading had been triggered until the defaults were entered. (Matthews 3 Dec., par. 9.) Plaintiff capitalized on that confusion, leading to the current scenario. 4 Following clarification of the situation, Defendants have moved promptly to rectify the issue. The timing of this Motion ensures that 5 Plaintiff will suffer no prejudice should the Court grant it. The case is still not at issue, and if the Motion to Dismiss filed by Mr. Kampa is granted, 6 Plaintiff is likely to file an Amended Complaint regardless. As discussed below, Defendants are filing two alternative proposed pleadings. 7 Regardless of which the Court accepts, however, it is guaranteed that granting this Motion will not cause any delay, undue or otherwise. Given 8 that the entry of these defaults was due to excusable neglect, and in light of the timely action to remedy the situation, Defendants respectfully 9 request that the Court grant the instant Motion to Lift Defaults. 10 ECF No. 28, pgs. 4-5. 11 For the reasons discussed below, the Court finds that the defaults entered against 12 Defendants should be set aside and that Defendants should be permitted to join in Defendant 13 Kampa’s pending motion to dismiss which raises arguments common to all named defendants. 14 A. Culpability 15 A defendant’s conduct is culpable in the context of a default when the defendant 16 has actual or constructive notice of the filing of the action and intentionally fails to answer. See 17 TCI Group Life, 244 F.3d at 697. The negligent failure to answer coupled with a good faith 18 explanation does not constitute intentional conduct. See id. at 697-98. 19 Defendants’ request to set aside entry of defaults is supported by the declaration of 20 Ryan Matthews, Esq., who represents all named defendants. See ECF No. 28, pgs. 7-8. Mr. 21 Matthews states that his office was appointed to represent Defendant Kampa by Mr. Kampa’s 22 insurance carrier. See id. at 7. Mr. Matthews also states that, after he filed a motion to dismiss on 23 behalf of Defendant Kampa, his office was retained by Defendant HCSD’s insurance carrier to 24 represent the remaining named defendants. See id. According to Mr. Matthews, the defaulting 25 defendants did not notify him that waivers of service had been executed until after the response 26 deadline had passed and that, when he was notified, he was in the midst of a jury trial in the San 27 Joaquin County Superior Court. See id. 28 / / / 1 The Court finds that the foregoing demonstrates no culpability on the part of the 2 defaulting defendants’ counsel, Mr. Matthews. Defendant Puckett waived service and 3 acknowledged that a response to Plaintiff’s complaint was due within 60 days of September 7, 4 2021. See ECF No. 15. Defendants Brown, Bowles, Dingman, Hanson, Tulledo, and HCSD also 5 waived service and acknowledged that their responses to Plaintiff’s complaint were due within 60 6 days of September 2, 2021. See ECF Nos. 16 and 17. Pursuant to the waivers of service of 7 process, responses were due in early November 2021. Mr. Matthews states that he learned that 8 waivers had been signed after the response deadline had passed. Presumably, given that Mr. 9 Matthews was already counsel of record for Defendant Kampa, he would have received notice via 10 the Court’s electronic filing system when waivers of service were first returned executed in early 11 November 2021, coinciding with the time Mr. Matthews first became aware that waivers had 12 been executed – a date after expiration of the response deadline. Shortly thereafter, Plaintiff 13 obtained entry of defaults and moved for default judgments. Despite an ongoing trial in another 14 matter, Mr. Matthews then timely responded to Plaintiff’s motions by way of the current request 15 to set aside entry of defaults. 16 The Court also finds that there is no evidence of culpability on the part of the 17 defaulting defendants during the time period between waiver of service in early September 2021 18 and the response deadline in early November 2021, shortly after which Mr. Matthews would have 19 presumably become aware of the problem. During this two-month period, the defaulting 20 defendants were not only engaging in their duties as president and members of the board of 21 HCSD, they were also engaging in efforts to retain counsel for this and other pending federal 22 lawsuits filed by either Plaintiff or Roger Gifford, both of whom have filed a series of actions in 23 the Eastern District of California alleging wrongdoing by HCSD and its board members. These 24 actions are reflected in this case by the retention of Mr. Matthews, which could not have 25 happened if the defaulting defendants had not first contacted their insurance carrier who in turn 26 would have decided whether to appoint counsel under the policy. Given these circumstances, the 27 two-month period after the defaulting defendants waived service through counsel’s involvement 28 shortly after expiration of the response deadline in early November 2021 is adequately explained 1 and is not the result of culpable conduct. 2 B. Defenses 3 The “meritorious defense” requirement is not extraordinarily heavy. See Mesle, 4 615 F.3d at 1094. All that is required is the allegation of sufficient facts which, if true, would 5 constitute a defense. See id. The veracity of such allegations is not to be determined in the 6 context of a motion to set aside entry of defaults but is the subject of later litigation. See id. In 7 other words, the allegations relating to potential defenses are presumed true when deciding a 8 motion to set aside entry of default. See id. 9 Here, the Court finds that the defaulting defendants have adequately alleged the 10 existence of meritorious defenses. Specifically, the defenses raised by Defendant Kampa in his 11 motion to dismiss also apply to the defaulting defendants. In this regard, the Court further finds 12 that the request to join in Defendant Kampa’s motion is appropriate. 13 C. Prejudice 14 Prejudice exists when the ability to present a case by that party who is opposing a 15 motion to set aside entry of defaults will be hindered, if the defaults are set aside. See TCI 16 Group, 244 F.3d at 696. Denial of a quick victory by way of a default judgment does not 17 constitute prejudice. See Bateman v. United States Postal Service, 231 F.3d 1220, 1225 (9th Cir. 18 2000). In this case, the Court finds that Plaintiff’s ability to pursue her claims will not be 19 hindered if the defaults are set aside. Notably, the docket reflects that, despite the defaults, 20 Plaintiff has filed an opposition to Defendant Kampa’s motion to dismiss, joined now by all other 21 defendants and which will be addressed separately by findings and recommendations to the 22 District Judge. 23 / / / 24 / / / 25 / / / 26 / / / 27 / / / 28 / / / 1 I. CONCLUSION 2 Accordingly, IT IS HEREBY ORDERED that: 3 1. Defendants request to set aside entry of defaults is granted; 4 2. The defaults entered by the Clerk of the Court at ECF Nos. 21 and 25 are 5 | set aside; 6 3. Plaintiff's motions for default judgments, ECF Nos. 23 and 26, are denied 7 | as moot; and 8 4. The Clerk of the Court is directed to separately file Defendants’ joinder, 9 | ECF No. 28-1, which is deemed timely. 10 11 | Dated: August 16, 2022 Ssvcqo_ DENNIS M. COTA 13 UNITED STATES MAGISTRATE JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28