Sterling Consulting vs. Credit Managers, No. 07-1019 (10th Cir. 2007)

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FILED United States Court of Appeals Tenth Circuit October 30, 2007 UNITED STATES CO URT O F APPEALS Elisabeth A. Shumaker FO R TH E TENTH CIRCUIT Clerk of Court STER LIN G CO N SU LTIN G CORPO RATION, a Colorado corporation, Plaintiff-Appellant, v. CREDIT M ANA GERS A SSO CIA TIO N O F C ALIFO RNIA, doing business as CM A Business Credit Services, a California nonprofit corporation; IND IAN M OTO RCY CLE COM PA NY, a Delaware corporation, IM COA LIC EN SIN G A ME RICA, IN C., a Delaw are corporation; IM COA HOLDIN GS AM ERICA, IN C., a Delaware corporation, No. 07-1019 (D.C. No. 05-cv-1573-CB S) (D . Colo.) Defendants-Appellees. OR D ER AND JUDGM ENT * Before TA CH A, Chief Judge, M cCO NNELL and GORSUCH, Circuit Judges. * After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent w ith Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. Sterling Consulting Corporation appeals the district court s denials of its motion to strike the answer and other filings of Credit M anagers Association of California (CM A) and motion for default against CM A and other defendants. W e have jurisdiction under 28 U.S.C. § 1291, and we AFFIRM . Facing financial difficulties, assignors Indian M otorcycle Company, IM COA Licensing America, Inc., and IM COA Holdings America, Inc. (collectively, the Indian Entities), executed General Assignments for the benefit of their creditors in favor of CM A. The assignments transferred all of the Indian Entities property, including their rights and obligations under a certain settlement agreement and indemnification agreement with Sterling. Sterling subsequently came to believe that these agreements had been breached. In August 2005, it brought a declaratory judgment action against CM A and the Indian Entities. Sterling requested CM A waive service and accept process, and it served each of the Indian Entities with process. CM A waived service and accepted process in its capacity as Assignee under an Assignment for Benefit of Creditors. Aplt. App. at 127. Also as Assignee, it accepted service for the Indian Entities. Aplee. Supp. App. at 196, 198, 200. In November 2005, CM A answered the complaint in its capacity as assignee. The Indian Entities never filed responsive pleadings on their own behalf. In September 2006, Sterling moved to strike CM A s answer and subsequent filings and moved for default against the Indian Entities and CM A in its -2- individual corporate capacity. 1 Aplt. App. at 151. It argued that CM A as assignee was not a separate entity capable of being sued and that Sterling in fact had sued CM A in its own capacity, not as an assignee. It further argued that the Indian Entities had not responded to the complaint and that CM A had no legal ability to conduct litigation for the Indian Entities. The district court, through the magistrate judge acting by consent of the parties under 28 U.S.C. § 636(c), denied Sterling s motions and granted summary judgment to CM A. Sterling appeals only the denials of the motion to strike and the motion for default. M otion to Strike Sterling argues that CM A as assignee was not named or served in this case, and that it simply has participated improperly without intervening. W e review the district court s decision on Sterling s motion to strike for abuse of discretion. See Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1377 (10th Cir. 1996). A district court abuses its discretion when it issues an arbitrary, capricious, whimsical, or manifestly unreasonable judgement. Coletti v. Cudd Pressure Control, 165 F.3d 767, 777 (10th Cir. 1999) (quotation omitted). In addition, a decision based on an erroneous view of the law is an abuse of discretion. Dennis Garberg & Assocs. v. Pack-Tech Int l Corp., 115 F.3d 767, 771 (10th Cir. 1997). 1 Sterling notes that the term individual corporate capacity was used in the district court to distinguish CM A itself from CM A acting in another capacity, such as assignee. Like Sterling, [e]ven though the word individual is peculiar in this context, we shall use the term for continuity. Aplt. Br. at 7 n.3. -3- The district court did not abuse its discretion in denying Sterling s motion to strike. First, the motion was untimely. Federal Rule of Civil Procedure 12(f) allows twenty days for a motion to strike, yet Sterling s motion was filed ten months after CM A s answ er. W hen questioned by the district court, Sterling did not offer any convincing explanation for the delay. Supp. Aplee. App. at 259-62. Second, Sterling s argument that CM A as assignee was never served and was not a party is unpersuasive. CM A s capacity was not listed in the caption. It clearly accepted service in its capacity as assignee, Aplt. App. at 127, and it answered as assignee, id. at 129, 130. By letter dated January 31, 2006, CM A s counsel informed Sterling s counsel that he represented CM A only in its capacity as assignee and that he had accepted service only on behalf of CM A as assignee. Aplee. Supp. App. at 204. He stated, [i]f in fact Sterling intended to sue CM A all along (and not the Assignee), please inform me immediately so that the Assignee can withdraw its appearance and you can proceed with serving CM A. Id. at 206. Sterling apparently did not take any further action on the issue until it filed its motion to strike eight months later. The district court s denial of the motion to strike was neither arbitrary, capricious, whimsical, or manifestly unreasonable, nor did it constitute legal error. M otion for D efault Sterling also argues that the district court should have granted it a default judgment against CM A in its individual corporate capacity and against the Indian -4- Entities because CM A appeared only as assignee and the Indian Entities never appeared at all. W e review the district court s decision to deny a motion for default for abuse of discretion, Dennis Garberg & Assocs., 115 F.3d at 771, but we review the district court s determination of the underlying legal questions de novo, cf. King v. PA Consulting Group, Inc., 485 F.3d 577, 592 (10th Cir. 2007) (holding that an attorney-fee determination is reviewed for abuse of discretion, but underlying legal principles are reviewed de novo). The district court denied the motion for default on the ground that CM A in its individual corporate capacity was not a party to the litigation. It also held that, under California law, CM A as assignee was the legal representative of the Indian Entities with regard to property subject to the assignment. See Credit M anagers Assoc. of S. Cal. v. Nat l Indep. Bus. Alliance, 162 Cal. App. 3d 1166, 1171-72 (Cal. Ct. App. 1984). These determinations were not legally incorrect or otherwise an abuse of discretion. As discussed above, when CM A accepted service, it did so as Assignee under an Assignment for Benefit of Creditors. Aplt. App. at 127. CM A never accepted service in its individual corporate capacity, as distinguished from its capacity as an assignee, and Sterling never served process on CM A in its individual corporate capacity. Thus, the district court correctly determined that CM A in its individual corporate capacity was not a party to the law suit. -5- M oreover, California law permits an assignee to act on behalf of an assignor in litigation. In Credit M anagers Association, the California Court of Appeal held that the trial court erred in refusing the assignee s request to vacate a default judgment against the assignor, so that the assignee could defend the case. 162 Cal. App. 3d at 1173. An assignee or grantee is a legal representative of the assignor or grantor in regard to the thing assigned or granted. . . . After transferring his entire interest in the subject of the controversy, the defendant was only nominally a party to the action. The real parties in interest w ere his grantees. Id. at 1172 (quotations omitted). Plaintiff-assignee was the legal representative of the assignor and as trustee for all the creditors, was charged with the duty to defend the property in its hands against all unjust adverse claims. Id. Because their legal representative appeared and defended the law suit, the Indian Entities were not in default. Sterling argues that it may bring claims against an assignor if it so chooses. Its complaint, however, focused on defendants failures to require a third party to adopt the settlement agreement and indemnification agreement, which w ere among the things assigned to CM A. The district court appropriately construed the claim as directed toward the real party in interest, CM A as assignee. -6- Conclusion The judgment of the district court is AFFIRMED. Entered for the Court Deanell Reece Tacha Chief Circuit Judge -7-

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