MedCapGroup, LLC v. Mesa Pharmacy, Inc., No. 2:2014cv01864 - Document 90 (D. Nev. 2017)
Court Description: ORDER that the Magistrate Judge's 84 Findings and Recommendations are ADOPTED. Medcare's 87 Objections to the Magistrate Judge's Report and Recommendations are OVERRULED. Dave Brown's 53 Motion for Default Judgment Again st Fourth-Party Defendant Medcare Finance, LLC is GRANTED. The Clerk of Court is instructed to enter judgment in favor of Brown and against fourth-party defendant Medcare (see Order for details). Signed by Judge Jennifer A. Dorsey on 2/8/2017. (Copies have been distributed pursuant to the NEF - SLD)
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MedCapGroup, LLC v. Mesa Pharmacy, Inc. Doc. 90 1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 MEDCAPGROUP, LLC, 4 2:14-cv-01864-JAD-GWF Plaintiff 5 Order & Default Judgment Against Fourth-Party Defendant Medcare Finance, LLC 6 v. 7 PRAXSYN, Inc. fka MESA PHARMACY, INC, [ECF Nos. 53, 84, 87] 8 Defendant _____________________________________ 9 10 all other claims and parties 11 12 When MedCapGroup, LLC sued prescription-medicine compounder Mesa Pharmacy,1 13 14 alleging that Mesa’s undisclosed conduct before selling certain of its accounts receivable to 15 MedCap rendered those accounts uncollectable, Mesa filed a third-party complaint against Dave 16 Brown, claiming that Brown—the middleman in the account-purchase transaction—is 17 responsible for the misrepresentations. Brown claims that he was acting as the Chief Operating 18 Officer of Medcare Finance, LLC and that it was Medcare and its manager Greg Sundem who are 19 responsible for Medcare’s actions—not him. Medcare did not answer Brown’s fourth-party 20 complaint for indemnification and declaratory relief, and the Clerk entered default. Brown now 21 moves for—and the magistrate judge recommends that I grant—a default judgment against 22 Medcare.2 Medcare objects.3 After a de novo review, I adopt the recommendation, grant the 23 motion, and direct the Clerk to enter default judgment against Medcare. 24 25 1 26 2 27 28 Mesa is now known as Praxsyn, Inc. ECF No. 54 (motion); ECF No. 84 (findings and recommendation). I find these matters suitable for disposition without oral argument. Nev. L.R. 78-1. 3 ECF No. 87. Dockets.Justia.com 1 2 Discussion A. Medcare was served. The magistrate judge’s first step in evaluating Brown’s motion for default judgment was 3 4 to confirm that Medcare was properly served with process.4 Medcare is a Nevada limited 5 liability company in “revoked” status with the Nevada Secretary of State.5 Brown served 6 Medcare using a combination of rules: FRCP 4(e)(1), which permits service by a method 7 prescribed by state law; and Nevada Rule of Civil Procedure 4(d)(1), which allows service on a 8 corporation to be made on the Nevada Secretary of State.6 Medcare challenges the magistrate 9 judge’s conclusion that service was adequate, arguing that “there is no evidence that Brown 10 complied with NRCP 4(d)(1) and sent a copy of the complaint and summons via registered or 11 certified mail to Greg Sundem, as manager of Medcare.”7 12 But Medcare’s suggestion that the rule mandated this mailing ignores key language in the 13 rule. NRCP 4(d)(1) requires that a copy of service also be mailed only “if it shall appear . . . that 14 there is a last known address of a known officer, general partner, member, manager, trustee or 15 director of said entity or association outside the state.”8 The Secretary of State’s records reflect a 16 single manager of Medcare: Greg Sundem. Both addresses on record for Sundem are Nevada 17 addresses, so it does not appear that any manager has an address “outside the state.”9 So Brown 18 did not have to mail a copy of the summons and complaint to Sundem to effectuate service under 19 NRCP 4(d)(1); he was required only to serve the Secretary of State and post a copy of the 20 21 22 4 ECF No. 84 at 2–3. 5 ECF No. 54 at 5. 6 ECF No. 43 (affidavit of service). 7 ECF No. 87. 27 8 Nev. R. Civ. P. 4(d)(1) (emphasis added). 28 9 ECF No. 54 at 5 (listing a Reno address and a Las Vegas address for Sundem). 23 24 25 26 2 1 summons and complaint at this courthouse, which he did.10 Medcare’s objection to the 2 magistrate judge’s determination that Medcare was properly served is overruled. 3 B. The Eitel Factors support a default judgment against Medcare. 4 District courts consider seven factors when deciding whether to enter a default judgment 5 against a defaulted party: (1) potential prejudice to the claimant; (2) the merits of the claimant’s 6 substantive claim; (3) the sufficiency of the complaint; (4) the amount of money at stake in the 7 action; (5) the potential dispute of material facts; (6) whether the default was due to excusable 8 neglect; and (7) the strong federal policy favoring adjudications on the merits.11 The magistrate 9 judge found that these factors weigh in favor of entering a default judgment in favor of Brown 10 and against Medcare.12 Medcare challenges that conclusion.13 11 Medcare’s main argument is that the factors do not support a default judgment because it 12 was not properly served.14 Having found that service was properly effectuated, I give no weight 13 to this argument. In challenging the first Eitel factor—the potential prejudice to 14 Brown—Medcare adds that “if this Court were to set aside the default and allow the case to 15 proceed on its merits[,] Brown would be able to pursue his claims against Medcare.”15 But the 16 record does not support this notion. Service was effectuated on Medcare via Nevada’s 17 alternative statutory method for service on corporations because Medcare’s corporate status was 18 in default.16 That service was completed in October 2015,17 and the Clerk entered default against 19 20 10 See Nev. R. Civ. P. 4(d)(1) and ECF No. 43. 21 11 Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). 22 12 ECF No. 84 at 7. 13 ECF No. 87. 23 24 14 Id. at 3. 15 Id. 25 26 27 16 ECF No. 54 at 2, ¶ 4. 28 17 ECF No. 43. 3 1 Medcare more than a year ago.18 But Medcare made no effort to set aside the default; it first 2 joined the default discussion after Magistrate Judge Foley recommended that I enter default 3 judgment against Medcare, even though Medcare is represented by the same attorney that 4 represents defendant Mesa.19 Medcare has given me no reason to believe that it—a defunct 5 Nevada corporation that has ignored this litigation for more than a year—will suddenly defend 6 this case on its merits if I disregard the magistrate judge’s well-reasoned recommendation and 7 (without even a motion to do so) set aside the Clerk’s default against it. Thus, the first Eitel 8 factor continues to weigh in favor of entering a default judgment. I also cannot conclude on this record that Medcare’s failure to participate in this case was 9 10 the result of excusable neglect. Its argument that it was improperly served rests on its own 11 decision to ignore a critical clause in NRCP 4(d)(1). Medcare does not argue that it was unaware 12 of this lawsuit, just that it was justified in ignoring the suit because service was inadequate.20 13 Ignoring service based on a selective reading of the service rules is not excusable neglect. The 14 sixth factor also weighs in favor of entering a default judgment. 15 On the second through fifth factors, Medcare offers only the conclusory statements that 16 Brown’s factual allegations “are without merit because the acts he committed in this case were 17 solely for his benefit,” not Medcare’s; that the amount of money at stake is yet undetermined; and 18 that the facts are “in dispute.”21 But just saying so does not make it so. As a result of Medcare’s 19 failure to respond to the complaint, the facts are deemed admitted, and Medcare has proffered 20 nothing to refute them. Thus, the second and fifth Eitel factors weigh in favor of default. Magistrate Judge Foley undertook a review of Brown’s claims against Medcare, complete 21 22 with a discussion of the applicable standards, and he concluded that Brown had adequately pled 23 24 18 ECF No. 47. 19 ECF No. 87. 27 20 Id. at 4–5. 28 21 Id. at 3–5. 25 26 4 1 the facts to obtain indemnification and declaratory relief against Medcare.22 Medcare offers 2 nothing substantive to undermine that conclusion, and my own de novo review unearths nothing. 3 So, the third factor also weighs in favor of entering a default judgment. The fourth factor—the amount of damages at stake—is yet unknown and thus does not tip 4 5 the scales in either direction. And although the seventh and final factor almost always weighs 6 against the entry of default judgment, I do not find that the public policy favoring the resolution 7 of claims on their merits outweighs factors one, two, three, five, and six, all of which weigh in 8 favor of entering default judgment against Medcare. 9 Conclusion Accordingly, with good cause appearing and no reason to delay, IT IS HEREBY 10 11 ORDERED, ADJUDGED, AND DECREED that: 12 • The Magistrate Judge’s Findings and Recommendations [ECF No. 84] are 13 14 ADOPTED; • Medcare’s objections to the Magistrate Judge’s Report and Recommendations [ECF No. 15 16 87] are OVERRULED; • Dave Brown’s Motion for Default Judgment Against Fourth-Party Defendant Medcare 17 Finance, LLC [ECF No. 53] is GRANTED. The Clerk of Court is instructed to enter 18 JUDGMENT23 in favor of Brown and against fourth-party defendant Medcare as follows: 19 • Brown’s first claim for relief; and 20 21 Medcare must indemnify Brown for any liability in this case, consistent with ... 22 23 24 25 26 27 28 22 ECF No. 84 at 4–6. 23 This judgment only resolves the claims by third-party defendant/fourth-party plaintiff Brown against fourth-party defendant Medcare Finance LLC. 5 1 • Should Brown be held liable in this case, Brown is entitled to the protections of 2 Nevada law limiting the liability of a member of a limited liability company; 3 therefore, the conduct alleged against Brown, if wrongful, was in Brown’s 4 capacity as an employee of Medcare and not individually, so that Brown’s liability 5 in this case, if any, will be imputed to Medcare and not to Brown individually. 6 DATED: February 8, 2017 _______________________________ _________________ _ __ _ _ _ Jennifer A. Dorsey er A. Dorsey o United States District Judge Judge 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6
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