Unpublished Disposition, 860 F.2d 1089 (9th Cir. 1985)

MEMORANDUM^* 

Gabriel A. Maalouf and Big H Corporation ("Big H") allege that plaintiff did not effect proper service of process pursuant to Fed. R. Civ. P. 4. They further allege that the default judgment entered against Maalouf and Big H and the refusal to set aside default constitute an abuse of discretion. G.A.M. Enterprises, Inc. ("G.A.M.") alleges that the dismissal of its counterclaim was also an abuse of discretion.

The court below determined that Kazan had properly served Maalouf and Big H pursuant to California law, and that Maalouf and Big H had not filed a timely answer to the complaint. The court therefore entered default against Maalouf and Big H. The court refused to set aside the default because Maalouf and Big H had been properly served and had notice of the pending complaint. The court dismissed the counterclaim after imposing sanctions on both G.A.M. and Kazan for failure to prosecute. We affirm.

DISCUSSION

Because the district court interpreted California service of process laws, its finding that proper service of process was effected upon a defendant is subject to de novo review. In Re McLinn, 739 F.2d 1395, 1399-1400 (9th Cir. 1984) (en banc). The court's refusal to set aside a default judgment is reviewed for abuse of discretion. Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985). The dismissal of a counterclaim for failure to prosecute is reviewed for abuse of discretion. Mir v. Fosberg, 706 F.2d 916, 918 (9th Cir. 1983).

II. Maalouf's claim that service of process was defective

Maalouf and Big H err in believing that process was not properly served. Rule 4(c) (2) (C) (i) states, "a summons and complaint may be served upon a defendant ... pursuant to the laws of the State in which the district court is held for the service of summons or other like process upon such a defendant in an action brought in the courts of general jurisdiction of that state." Although Rule 4(e) specifically provides means for service upon parties who are not inhabitants of the state, neither the advisory committee Notes nor the language of the rule itself indicates that Rule 4(c) (2) (C) (i) is limited to defendants residing within the territory of the forum state. See 4A C. Wright & A. Miller, Federal Practice and Procedure Sec. 1114 (1987). Rule 4 is a flexible rule that should be construed liberally as long as a party receives sufficient notice of the complaint. United Food & Commercial Workers Union v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984). Therefore, Maalouf and Big H's argument that California rules are irrelevant in deciding whether service was proper and that Fed. R. Civ. P. 4 requires personal service upon a defendant who resides outside the territory of the jurisdiction of the court is without merit.

Cal.Civ.Proc.Code Sec. 415.20 allows service of process at a defendant's place of business by leaving a copy of the summons and complaint with anyone apparently in charge of the office and by thereafter mailing a copy of the complaint to the defendant. Additionally, Sec. 415.40 provides:

A summons may be served on a person outside the state in any manner provided by this article or by sending a copy of the summons and of the complaint to the person to be served by first-class mail, postage prepaid, requiring a return receipt. Service of a summons by this form of mail is deemed complete on the 10th day after such mailing.

The court below found that several attempts had been made to serve Maalouf and Big H and that service was valid. Counsel for Maalouf and Big H conceded at oral argument that service was valid pursuant to California procedure. Maalouf and Big H's contention that service was defective therefore fails.

Maalouf and Big H claim that the district court abused its discretion in entering default judgment against them and in refusing to set aside the default judgment pursuant to Fed. R. Civ. P. 60(b). "A failure to make a timely answer to a properly served complaint will justify the entry of a default judgment." Benny v. Pipes, 799 F.2d 489, 492 (9th Cir. 1986), amended 807 F.2d 1514, cert. denied, 108 S. Ct. 198 (1987). A default judgment will be set aside only for good cause. See generally Wilson v. Moore & Assoc., Inc., 564 F.2d 366 (9th Cir. 1977). Where timely relief is sought from a default judgment and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment. Schwab v. Bullock's Inc., 508 F.2d 353, 355 (9th Cir. 1974).

Maalouf and Big H filed an untimely answer setting forth general doctrines of law as meritorious defenses. However, Maalouf and Big H did not provide facts to support the defenses to the complaint. Therefore, the district court did not abuse its discretion in entering default and refusing to set it aside.

Maalouf and Big H also claim that Kazan failed to comply with Fed. R. Civ. P. 55(b) (2), which requires three days notice to a party against whom default shall be entered. Maalouf and Big H failed to raise the issue below; thus, they are barred from raising the defense on appeal. Issues not presented to the trial court will not be considered on appeal, except in exceptional circumstances. The court has discretion to consider issues not raised below if a question of law is raised, and consideration is necessary to prevent manifest injustice. Komatsu Ltd. v. States S.S. Co., 674 F.2d 806, 812 (9th Cir. 1982).

Even if the court were to consider Maalouf and Big H's claim, they would not be entitled to relief. Rule 55 does not apply to Maalouf and Big H because they had neither appeared in the action when the default judgment was requested nor demonstrated a purpose to defend the suit. See Wilson v. Moore & Associates, Inc., 564 F.2d 366 (9th Cir. 1977) (appearance does not have to be formal where defendant has demonstrated a purpose to defend) (emphasis added). Moreover, Maalouf and Big H had notice of the action and of the requirement to answer the complaint due to the proper service of process.

G.A.M. argues that the district court erred in dismissing its counterclaim against Kazan. A dismissal for lack of prosecution must be supported by evidence of unreasonable delay. Nealey v. Transportation Maritima Mexicana, S.A., 662 F.2d 1275, 1280 (9th Cir. 1981). Unreasonable delay causes injury to defendant in a suit. Ash v. Cvetkov, 739 F.2d 493, 496 (9th Cir. 1984), cert. denied, 470 U.S. 1007, 105 S. Ct. 1368 (1985).

G.A.M. filed a counterclaim on January 14, 1985. G.A.M.'s only attempt to prosecute consisted of a request for default judgment against Kazan five months later. The court twice issued orders to show cause why the counterclaim should not be dismissed for failure to prosecute. G.A.M. failed to appear at one of the hearings and failed to submit a response to the court's order. The court sanctioned both parties to induce action. Yet the parties continued to use dilatory tactics. The district court then dismissed the counterclaim for failure to prosecute nearly two years after it had been filed. On review this court is to give deference to the district court's decision to dismiss for failure to prosecute. Henderson v. Duncan, 779 F.2d 1421, 1423 (9th Cir. 1986). Under these circumstances, we find no abuse of discretion.

Both parties request sanctions on appeal. We find these requests to be without merit. The motions are denied. We must emphasize, however, that we expect strict compliance with Fed. R. App. P. 10(b) (2) which requires that if appellant intends to urge on appeal that the lower court's finding is unsupported by or contrary to the evidence then counsel must include all relevant documentation in its record of transcript.

AFFIRMED.