Eldering et al v. Dillard et al, No. 2:2019cv00772 - Document 19 (D. Nev. 2020)
Court Description: ORDER denying as moot 10 Motion for Default Judgment; ORDER granting 12 Motion to Set Aside; Glenn Dillard answer due 11/2/2020. Signed by Judge Jennifer A. Dorsey on 10/21/2020. (Copies have been distributed pursuant to the NEF - JM)
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Eldering et al v. Dillard et al Doc. 19 1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 Charles Eldering et al., 4 Case No.: 2:19-cv-00772-JAD-NJK Plaintiffs Order Setting Aside Default and Denying Motion for Default Judgment 5 v. [ECF Nos. 10, 12] 6 Glenn Dillard and Rio Wild Properties, 7 Defendants 8 Five plaintiffs brought this breach-of-contract and fraud lawsuit against Glenn Dillard 9 and Rio Wild Properties for their alleged mismanagement of the plaintiffs’ investments in 10 Brazilian real estate.1 The plaintiffs served the defendants by publication and, after months 11 passed, they sought and received a default against the defendants in November 2019.2 A year 12 later, Dillard has appeared in this action and now moves to set aside the clerk’s entry of default 13 against him.3 Because Dillard has shown good cause to set aside the default, I grant his motion, 14 deny the plaintiffs’ related default-judgment motion4 against Dillard as moot, and against Rio 15 Wild as premature, given the entanglement of the claims and parties in this case. 16 Background5 17 Last year, plaintiffs Charles Eldering, Janice and Paul Maitino, and Mabel and Paul 18 McInerney sued Dillard and Rio Wild for tricking them into investing several million dollars in 19 20 21 22 23 1 ECF No. 1 (complaint). 2 ECF Nos. 8 (motion for entry of default), 9 (entry of default). 3 ECF No. 12 (motion to set aside default). 4 ECF No. 10 (motion for default judgment). 5 This is merely a summary of facts alleged in the complaint and should not be construed as findings of fact. Dockets.Justia.com 1 Brazilian real estate, which the defendants promised to manage and sell.6 But after trying and 2 failing to serve Dillard at his parents’ home and resorting to service by publication, the plaintiffs 3 argue that they were left without so much as a word from the defendants, and they successfully 4 received an entry of default at the end of last year.7 Six months passed before the plaintiffs 5 moved for default judgment against the defendants and, days later, Dillard’s attorney filed a 6 notice of appearance on his behalf.8 Dillard now moves to set aside the default against him only, 7 arguing that he was unaware of this lawsuit until months after the default was entered.9 The 8 plaintiffs maintain that Dillard’s disappearing act was intentional and that they would suffer 9 prejudice if required to pursue this suit.10 Instead, they maintain that they are entitled to over 10 eight million dollars from the defendants in compensatory and punitive damages—and by default 11 judgment.11 12 Discussion 13 A. Good cause exists to set aside the default against Dillard. 14 Federal Rule of Civil Procedure 55 requires the clerk to enter a default against a party 15 who is shown, “by affidavit or otherwise,” to have failed to plead or otherwise respond to claims 16 brought against him. But the rule also allows the court to set aside an entry of default with a 17 showing of good cause.12 The Ninth Circuit has identified three factors to determine whether 18 19 20 21 22 6 ECF No. 10 at 3. 7 Id. at 10–11. 8 ECF No. 11 (notice of appearance). 9 See ECF No. 12 at 3. 10 ECF No. 14. 11 See ECF No. 10 at 1 (requesting $2,097,294.14 in general damages and $6,291,882.42 in 23 punitive damages). 12 Fed. R. Civ. P. 55(c). 2 1 good cause exists: whether the defaulting party engaged in culpable conduct, which lead to the 2 default; whether there is a meritorious defense; and whether the plaintiff would suffer prejudice 3 if the default is set aside.13 Default is generally disfavored when a case can be decided on its 4 merits and should be granted only under “extreme circumstances,”14 with all doubts resolved in 5 favor of setting aside default.15 6 Dillard argues that he was unaware of this lawsuit until several months after the clerk 7 entered default against him and that his failure to appear was not intentional. He maintains that 8 he didn’t even know he was sued until he searched his name in March and had assumed, at that 9 point, that it had been dismissed.16 It wasn’t until a May internet search that he realized that the 10 plaintiffs were seeking judgment against him, and he then immediately sought to set aside the 11 default so he could defend this suit.17 The plaintiffs don’t believe Dillard, and they argue that he 12 knew of the suit in March and his father told him people were looking for him. While Dillard 13 acknowledges that he had been informed that someone was looking for him,18 established Ninth 14 Circuit law indicates that a defendant must have “actual or constructive notice” of the lawsuit 15 and “intentionally fail[] to answer.”19 Dillard’s general knowledge that he was sought after for 16 fraud does not establish that he knew of the lawsuit and intentionally avoided responding in bad 17 18 19 13 Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). 14 Id. 15 Schwab v. Bullock’s Inc., 508 F.3d 353, 355 (9th Cir. 1974). 16 21 ECF No. 12-1 at ¶ 6–7 (Ex. A to motion to set aside). 17 Id. at ¶ 8. 22 18 Id. at ¶ 4. 20 19 23 United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F. 3d 1085, 1092 (9th Cir. 2010) (citing TCI Grp. Life. Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001), overruled on other grounds by Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001)). 3 1 faith.20 So I cannot find that these facts establish that Dillard’s culpable conduct alone led to the 2 default. There may also be a meritorious defense to the plaintiffs’ claims. Plaintiffs allege that 3 4 Dillard requested money to purchase Brazilian properties and refused to “return[] the proceeds or 5 any other benefit to the Plaintiffs” before absconding and refusing to communicate with them.21 6 But Dillard states that he deeded Brazilian properties to the plaintiffs to compensate them for the 7 losses on their investments.22 He also contends that his Brazilian real-estate license shows that 8 he did not misrepresent his capacity to sell properties in Brazil.23 I don’t not need to resolve this 9 defense at this stage; in setting aside a default, I need only consider whether the defaulting party 10 has alleged “sufficient facts that, if true, would constitute a defense.”24 Dillard has retained 11 counsel and demonstrated his intent to defend against the plaintiffs’ claims, and his defenses are 12 not plainly without merit. I am also unpersuaded that the plaintiffs would suffer prejudice 13 merely because they now have to litigate this case after waiting a year.25 So I find that good 14 cause exists to set aside the default against Dillard and deny the plaintiffs’ motion for default 15 judgment against him as moot. 16 17 18 20 See NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 (9th Cir. 2016) (citing TCI Group, 244 F.3d at 697). The plaintiffs submit a video of their final attempt at service at Dillard’s parents’ 19 home, which confirms that, though they attempted to leave documents with Dillard’s profanely threatening father, no documents were ever left. And while they told him the papers were legal, 20 they did not say that Dillard had been sued. 21 ECF No. 14 at 9. 22 22 ECF No. 12 at 7–8. 23 ECF No. 18 at 5. 23 24 Mesle, 615 F.3d at 1094 (citing TCI Group, 244 F.3d at 700). 25 See ECF No. 14 at 10. 21 4 1 B. A default judgment against Rio Wild Properties is premature. 2 I also deny the plaintiffs’ motion for default judgment against Rio Wild as premature. 3 The Ninth Circuit follows the time-honored Frow doctrine for considering whether to enter a 4 default judgment against a single defaulting defendant in a multi-defendant case. The doctrine 5 recognizes that, “where a complaint alleges that defendants are jointly liable and one of them 6 defaults, judgment should not be entered against the defaulting defendant until the matter has 7 been adjudicated with regard to all defendants.”26 The Ninth Circuit extends this doctrine to 8 cases in which the co-defendants are “similarly situated” and defense of the claims will hinge on 9 the same legal theory because “it would be incongruous and unfair to allow a plaintiff to prevail 10 against defaulting defendants on a legal theory rejected by a court with regard to an answering 11 defendant in the same action.”27 12 Here, Frow unmistakably counsels against a default judgment against Rio Wild while the 13 suit against Dillard persists. Plaintiffs seek relief from the defendants “jointly and severally” and 14 argue that their claims against Rio Wild “should apply equally against Dillard” because Dillard is 15 “the alter ego of Rio Wild.” Frow cautions against entering a default judgment against Rio Wild 16 while its co-defendant actively defends against the suit, which seeks to hold them equally liable 17 for this South American business deal gone sour. So I deny the plaintiffs’ motion for default 18 judgment against Rio Wild without prejudice to their ability to reurge this request after the 19 claims against Dillard have been resolved. 20 21 22 26 In re First T.D. & Inv., Inc., 253 F.3d 520, 532 (9th Cir. 2001) (citing Frow v. De La Vega, 82 23 U.S. 552 (1872)). 27 Geramendi v. Henin, 683 F.3d 1069, 1082–83 (9th Cir. 2012) (quotation omitted). 5 1 2 Conclusion IT IS THEREFORE ORDERED that Dillard’s motion to set aside default [ECF No. 12] 3 is GRANTED. The Clerk of Court is instructed to set aside default [ECF No. 9] as to 4 defendant Glenn Dillard. Dillard must answer or otherwise respond to the complaint by 5 November 2, 2020. 6 IT IS FURTHER ORDERED that the plaintiffs’ motion for default judgment [ECF No. 7 10] is DENIED as moot as to Dillard and denied as premature and without prejudice as to Rio 8 Wild Properties. 9 _______________________________ U.S. District Judge Jennifer A. Dorsey October 21, 2020 10 11 12 13 14 15 16 17 18 19 20 21 22 23 6
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