Hawkins v. Bank of America, N.A. et al, No. 3:2017cv01954 - Document 39 (S.D. Cal. 2018)

Court Description: ORDER granting 31 Defendant Beryl Hawkins' Ex Parte Motion to Set Aside the Entry of Default; denying 28 Plaintiff's Motion for Default Judgment Against Defendant Hawkins; and terminating as moot 36 Plaintiff's Motion to Expedit e. For the foregoing reasons, the Court GRANTS Defendant Beryl Hawkins ex parte motion to set aside the entry of default. (ECF No. 28.) The Clerk of the Court is directed to SET ASIDE the default entered against Defendant Beryl Hawkins. (ECF No. 55.) The Court TERMINATES AS MOOT Plaintiff's motion to expedite a decision on whether to aside the default. Because the default entered against Beryl Hawkins has been set aside, the Court DENIES Plaintiff's motion for default judgment. (ECF No . 28.) Defendant Hawkins is ORDERED to file the proposed motion to dismiss attached to the ex parte motion to set aside default no later than Monday, 7/30/2018. The filed motion must include a proper hearing date for briefing purposes. Should Defendant Hawkins fail to comply with this deadline, the Court will reconsider the propriety of setting aside the procedural default. Signed by Judge Cynthia Bashant on 7/16/2018. (acc)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 FRED HAWKINS, 11 Plaintiff, 12 13 BANK OF AMERICA, N.A., et al., 15 ORDER: (1) GRANTING DEFENDANT BERYL HAWKINS’ EX PARTE MOTION TO SET ASIDE THE ENTRY OF DEFAULT; v. 14 Case No. 17-cv-01954-BAS-AGS Defendants. 16 [ECF No. 31] (2) DENYING PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT AGAINST DEFENDANT HAWKINS; 17 18 [ECF No. 28] 19 AND 20 (3) TERMINATING AS MOOT PLAINTIFF’S MOTION TO EXPEDITE 21 22 [ECF No. 36] 23 24 25 I. BACKGROUND 26 Plaintiff Fred Hawkins brought this suit against Defendants Beryl Hawkins and 27 Bank of America, N.A., on September 26, 2017, alleging that his daughter stole 28 nearly $600,000 of his life savings from his Bank of America accounts. (ECF No. –1– 17cv1954 1 1.) On April 4, 2018, the Court authorized Plaintiff to effectuate service on Defendant 2 Hawkins, a resident of Japan, by serving her U.S.-based attorney after Plaintiff 3 showed that he had been unable to effectuate service through other methods. (ECF 4 No. 17.) Plaintiff filed proof of service on Defendant Hawkins’ U.S.-based attorney, 5 which shows service was effected on April 21, 2018. (ECF No. 22.) Three weeks 6 later, Plaintiff requested entry of default against Defendant Hawkins, which was 7 entered by the Clerk of the Court on May 16, 2018. (ECF Nos. 23, 25.) A week later, 8 Plaintiff filed an ex parte motion for default judgment against Defendant Hawkins, 9 which is pending before the Court. (ECF No. 28.) 10 Before the Court is also an ex parte motion to set aside the entry of default 11 against Defendant Beryl Hawkins, which includes a motion to dismiss1, filed on June 12 14, 2018. (ECF No. 31.) At the Court’s instruction, Plaintiff Fred Hawkins has filed 13 an opposition solely to the ex parte motion to set aside the entry of default as a 14 threshold issue the Court must resolve. (ECF Nos. 33, 34.) Plaintiff has filed a 15 motion to expedite ruling on Defendant Hawkins’ ex parte motion to set aside entry 16 of default. (ECF No. 36.) For the reasons herein, the Court grants Defendant 17 Hawkins’ ex parte motion, denies Plaintiff’s ex parte motion for default judgment, 18 and terminates as moot Plaintiff’s motion to expedite ruling. 19 II. LEGAL STANDARD 20 “[J]udgment by default is a drastic step appropriate only in extreme 21 circumstances; a case should, whenever possible, be decided on the merits.” Falk v. 22 Allen, 739 F.2d 461, 463 (9th Cir. 1984). Under Federal Rule of Civil Procedure 23 55(c), a court may set aside an entry of default for “good cause shown.” Fed. R. Civ. 24 25 26 27 28 1 The purported motion to dismiss lacks a hearing date, which is necessary for setting a briefing schedule. (See ECF No. 31.) Although filed with the ex parte motion to set aside entry of default, the motion to dismiss lacks the exigency that necessitates ex parte relief and the Court will not address the merits of the motion at this time. Rather, the Court construes the motion to dismiss as a proposed motion that bears upon whether default should be set aside. –2– 17cv1954 1 P. 55(c). A district court has “especially broad” discretion to determine whether good 2 cause has been shown when “it is entry of default that is being set aside, rather than 3 a default judgment.” Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir. 4 1986); Joe Hand Promotions, Inc. v. Williams, No. 2:14-cv-02663-JAM-AC, 2015 5 WL 592361, at *2 (E.D. Cal. Oct. 9, 2015) (quoting Cracco v. Vitran Exp., Inc., 559 6 F.3d 625, 631 (7th Cir. 2009)) (noting that although the “same test applies for motions 7 seeking relief from default judgment under both Rule[s] 55(c) and 60(b), the test is 8 more liberally applied in the Rule 55(c) context.”). The court’s exercise of its 9 discretion is guided by three disjunctive factors: (1) whether the defendant engaged 10 in culpable conduct leading to the default; (2) whether the defendant has a meritorious 11 defense; or (3) whether setting aside the default would prejudice the plaintiff. 12 Franchise Holding II, LLC v. Huntington Restaurants Grp., Inc., 375 F.3d 922, 925– 13 26 (9th Cir. 2004). A district court may deny a motion to set aside an entry of default 14 if any factor weighs against setting the default aside. Id. at 926. 15 III. DISCUSSION 16 A. 17 Determining whether a party’s culpability led to the entry of default under Rule 18 55(c) is a similar inquiry as to whether a party has shown “excusable neglect” under 19 Rule 60(b)(1). See TCI Group Line Ins. Plan v. Knoebber, 244 F.3d 691, 695–97 20 (9th Cir. 2001). Only intentional conduct is sufficiently culpable to deny a motion to 21 set aside default. Id. at 698; FOC Fin. Ltd. P’ship v. Nat’l City Commercial Capital 22 Corp., 612 F. Supp. 2d 1080, 1082 (D. Ariz. 2009). Such conduct occurs when the 23 party “has received actual or constructive notice of the filing of the action and 24 intentionally failed to answer.” TCI Grp. Line Ins. Plan, 244 F.3d at 697 (emphasis 25 in original). Nonappearance of the party following receipt of notice of the action is 26 insufficient to constitute conduct sufficiently culpable to preclude setting aside entry 27 of default. Id. at 698 (“‘culpability’ involves ‘not simply nonappearance following 28 receipt of notice of the action, but rather conduct which hindered judicial Culpability –3– 17cv1954 1 proceedings’”) (quoting Gregorian v. Izvestia, 871 F.2d 1515, 1525 (9th Cir. 1989)); 2 see also United States v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 3 F.3d 1085, 1089 (9th Cir. 2010) (“[T]o treat a failure to answer as culpable, the 4 movant must have acted with bad faith, such as an intention to take advantage of the 5 opposing party, interfere with judicial decisionmaking, or otherwise manipulate the 6 legal process.”). 7 Defendant Hawkins contends that the entry of default against her resulted from 8 excusable neglect. (ECF No. 31 at 2.) She claims that (1) she was not properly served 9 with the Complaint and (2) she had no notice of the matter until she was contacted 10 her counsel around June 1, 2018. (Id.) Defendant claims that she gave counsel 11 authority to accept service of the complaint on her behalf at that point and that she is 12 now “acting promptly and does not wish to delay matters.” (Id. at 3.) Insofar as 13 Defendant Hawkins contends that service was not proper because it was served on 14 her U.S.-based attorney, Michael Kusnir, the Court rejects that argument. The Court 15 expressly authorized Plaintiff to effectuate service on Defendant Hawkins through 16 service on her U.S.-based attorney, Michael Kusnir, under Federal Rule of Civil 17 Procedure 4(f)(3). (ECF No. 17.) The Court determined that, based on the facts 18 presented to the Court, service on Attorney Kusnir was reasonably calculated to 19 provide her with notice of this action. (Id.) Thus, service on Attorney Kusnir 20 constituted service on Defendant Hawkins, so long as it otherwise comported with 21 the requirements to effectuate service—an issue Defendant Hawkins apparently seeks 22 to dispute. 23 Even so, the Court finds that Defendant Hawkins’ failure to timely respond to 24 the Complaint after service on Attorney Kusnir resulted from excusable neglect. 25 Attorney Kusnir states that he was away from his office for “much of April and May 26 of 2018,” during which time Plaintiff served the Complaint. (ECF No. 31 ¶ 20 27 (“Kusnir Decl.”).) Attorney Kusnir contacted Defendant Hawkins on June 1, 2018 28 when he discovered a proof of service of the Complaint in his mail and informed her –4– 17cv1954 1 of the legal proceedings in this case. (Id. ¶ 22.) Defendant Hawkins “eventually 2 contacted” Attorney Kusnir and requested that he represent her in this current matter. 3 (Id. ¶ 24.) Thereafter, Attorney Kusnir sought to have Plaintiff’s counsel “dismiss 4 the clerk’s entry of default,” and filed the present ex parte motion on June 14, 2018. 5 (Id. ¶ 29–30.) Based on these facts, the Court does not find that Defendant Hawkins 6 engaged in intentional conduct to hinder the proceedings in this case. See, e.g., 7 Abbate Family Farms Ltd. P’ship v. Leo L. Cotella & Co., No. C 09-04836 JSW, 8 2010 WL 694230, at *2 (N.D. Cal. Feb. 23, 2010) (noting that although defendant 9 did not file responsive pleading within time allowed by the law due to failure to retain 10 legal counsel, defendant obtained counsel within a reasonable time after discovery of 11 entry of default). Rather, after she received actual notice of the lawsuit, Defendant 12 Hawkins filed the present motion to set aside the entry of default within a reasonable 13 period of time and has shown that she is prepared to defend against the claims 14 Plaintiff asserts.2 Thus, this factor does not weigh against setting aside default. 15 B. 16 Prejudice to a non-moving party “must result in greater harm than simply 17 delaying resolution of the case[,] [r]ather, the standard is whether [the non-movant’s] 18 ability to pursue his claim will be hindered.” TCI Grp. Life Ins. Plan, 244 F.3d at 19 701; Bateman v. United States Postal Serv., 231 F.3d 1220, 1225 (9th Cir. 2000). Prejudice 20 21 22 23 24 25 26 27 28 Plaintiff argues that Defendant Hawkins’ conduct is culpable because Attorney Kusnir “fail[ed] to remain active with his legal practice and/or inquire with the [office] staff as to incoming documentation” after the Complaint was served at his office on April 10, 2018. (ECF No. 34 at 11.) This argument, however, focuses on Attorney Kusnir’s conduct, rather than that of Defendant Hawkins. Plaintiff identifies no intentional conduct by Defendant Hawkins that would counsel against setting aside the entry of default. Without more, the Court will not impute intentional conduct to Defendant Hawkins based on Attorney Kusnir’s oversights. See, e.g., Hoch v. Mayberg, No. 1:10-cv-2258-DLB-PC, 2012 WL 1158860, at *3 (E.D. Cal. Apr. 6, 2012) (finding good cause to set aside procedural default where it was “evident from the record that the delay in responding to Plaintiff’s complaint was due to error by Defendants’ counsel”). 2 –5– 17cv1954 1 “[M]erely being forced to litigate on the merits cannot be considered prejudicial for 2 purposes of lifting a default judgment.” TCI Grp. Life Ins. Plan, 244 F.3d at 701; 3 see also Abbate Family Farms Ltd. P’ship, 2010 WL 694230, at *2 (observing that 4 the “[p]laintiff still would have had to prosecute the case if default had not been 5 entered” and thus having to expend additional time and money was not prejudicial). 6 Although Defendant Hawkins does not expressly argue Plaintiff would not 7 face prejudice from setting aside the entry of default, she contends that the denial of 8 a “quick recovery” through a default judgment is not sufficient to preclude relief 9 from the entry of a default. (ECF No. 31 at 2.) In opposition, Plaintiff contends that 10 he will suffer prejudice because setting aside the entry of default will result in “more 11 delay” and “force him to incur substantially more attorney’s fees.” (ECF No. 34 at 12 12.) Plaintiff’s contentions are unavailing. 13 For one, incurring additional time and expense in litigating a case on the 14 merits is not prejudice that precludes setting aside a procedural default. See Abbate 15 Family Farms Ltd. P’ship, 2010 WL 694230, at * 2 (incurring litigation fees is not 16 prejudicial). As for Plaintiff’s assertion of delay, “delay alone does not constitute 17 the sort of prejudice cognizable upon a Rule 55(c): ‘it must be shown that delay will 18 result in the loss of evidence, create increased difficulties of discovery, or provide 19 greater opportunity for fraud and collusion.’” Apache Nitrogen Prods., Inc. v. 20 Harbor Ins. Co., 145 F.R.D. 674,682 (D. Ariz. 1993) (quoting Davis v. Musler, 713 21 F.2d 907, 916 (2d Cir. 1983)); see also Tamburri v. Suntrust Mortg., Inc., No. C-11- 22 2899-EMC, 2011 WL 6294472, at *23 (N.D. Cal. Dec. 15, 2011) (identifying same 23 grounds as necessary for delay to constitute prejudice). 24 underscore that prejudicial delay exists when a plaintiff’s ability to litigate his claim 25 will be hindered. Plaintiff does not identify any such prejudice in his opposition to 26 Defendant Hawkins’ motion. These considerations 27 Rather, the principal harm from delay Plaintiff asserts concerns his need for 28 recovery of the damages he seeks in this case, for reasons unrelated to this litigation. –6– 17cv1954 1 Plaintiff contends that he is “in dire need of the $600,000 in life savings his daughter 2 stole from him two years ago” because of the deterioration of his health since the 3 filing of this lawsuit.3 (ECF No. 34 at 12; ECF No. 34-2 ¶12 (“Hill Decl.”).) 4 Plaintiffs reiterates concerns about his physical health and related financial needs in 5 his motion for an expedited ruling. (ECF No. 36.) Although the Court is not 6 insensitive to Plaintiff’s assertion about his financial needs, “[d]efault is an 7 inappropriate method of adjudication when it appears that defendant intends to 8 contest” the allegations. Hart v. Parks, No. CV-00-07420 ABC (RNBx), 2001 WL 9 636444, at *4 (C.D. Cal. June 1, 2001). Default judgments are the exception to 10 securing recovery for the claims a party asserts—not the rule. Despite Plaintiff’s 11 assertions of his deteriorating health, those assertions also do not establish legal 12 prejudice that precludes setting aside the entry of a procedural default. See, e.g., 13 Kim v. Wilmington Trust Co., No. 17-cv-528-WQH-AGS, 2017 WL 6541139, at *4 14 (S.D. Cal. Dec. 21, 2017) (rejecting plaintiff’s assertion that “he will be prejudiced 15 because the prolonged litigation is challenging considering his health and age” and 16 setting aside procedural default); Snow v. Shwe, No. 1:15-cv-01606-SAB (PC), 2016 17 WL 7384001, at *2 (E.D. Cal. Dec. 20, 2016) (plaintiff’s assertion of deteriorating 18 vision not sufficient preclude setting aside procedural default). Accordingly, the 19 Court does not find that this factor precludes setting aside the entry of default. 20 C. 21 Finally, “[a] party in default . . . is required to make some showing of a 22 meritorious defense as a prerequisite to vacating an entry of default.” Hawaii 23 Carpenters’ Tr. Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986). To satisfy this Meritorious Defense 24 25 Plaintiff repeatedly characterizes “delay” by referring to the amount of time that has lapsed since the conduct alleged in the Complaint—some two years. (ECF No. 34 at 1, 3, 12.) Yet, cognizable delay concerns the litigation itself. This case was filed less than a year ago and Defendant Hawkins received actual notice of the litigation, based on the method of service authorized by the Court, around June 2018. 3 26 27 28 –7– 17cv1954 1 standard, the movant must “present specific facts that would constitute a defense.” 2 TCI Grp. Life Ins. Plan, 244 F.3d at 700. Whether the factual allegations are true is 3 not determined by the court when it decides to set aside a default. Mesle, 615 F.3d at 4 1094. 5 Livingston v. Art.com, Inc., No. 13-cv-03748-JSC, 2015 WL 4319851, at *4 (N.D. 6 Cal. Apr. 17, 2015) (quoting TCI Grp. Life Ins. Plan, 244 F.3d at 700). But it is the 7 “most important consideration.” Sorto v. Hannegan, Benson & Co., Inc., No. C08- 8 00189 HRL, 2009 WL 1393063, at *2 (N.D. Cal. May 14, 2009). “The ‘meritorious defense’ requirement is ‘not extraordinarily heavy.’” 9 Defendant Hawkins argues that her alleged conduct in this case was not 10 unlawful because she had a power of attorney authorizing her to manager her father’s 11 bank accounts. (ECF No. 31 at 3.) She claims that her conduct was consistent with 12 the power of attorney. (Id.) She has attached a motion to dismiss to her ex parte 13 motion to set aside default which makes these assertions. (ECF No. 31 at 23–25.) 14 Plaintiff disputes the merits of Defendant Hawkins’ asserted defense, the resolution 15 of which the Court does not deem to be proper when determining whether to set aside 16 a procedural default. 17 adjudicating cases on the merits and the fact that, if true, Defendant Hawkins’ 18 assertion that her conduct was authorized by a power of attorney could affect the 19 outcome of this case on the merits, Defendant Hawkins has identified a meritorious 20 defense that warrants setting aside the entry of default.4 (ECF No. 34 at 13–14.) Given the strong interest in 21 22 23 24 25 26 27 28 4 In her motion to set aside default, Defendant Hawkins also argues that she does not waive any claim that service on her was improper and that the Court therefore lacks personal jurisdiction over her. (ECF No. 31 at 3.) Defendant Hawkins’ proposed motion to dismiss makes a similar assertion. (ECF No. 31 at 25.) To the extent that Defendant Hawkins intends to raise improper service as a basis for dismissal of the claims against her, Rule 12(b)(5) permits a party to raise that ground in moving to dismiss claims asserted against the party. Fed. R. Civ. P. 12(b)(5). Hawkins should assert such an objection in the motion to dismiss she files, or the Court will deem the challenge to service waived. –8– 17cv1954 1 IV. CONCLUSION & ORDER 2 For the foregoing reasons, the Court GRANTS Defendant Beryl Hawkins’ ex 3 parte motion to set aside the entry of default. (ECF No. 28.) The Clerk of the Court 4 is directed to SET ASIDE the default entered against Defendant Beryl Hawkins. 5 (ECF No. 55.) The Court TERMINATES AS MOOT Plaintiff’s motion to expedite 6 a decision on whether to aside the default. 7 Because the default entered against Beryl Hawkins has been set aside, the 8 Court DENIES Plaintiff’s motion for default judgment. (ECF No. 28.) Defendant 9 Hawkins is ORDERED to file the proposed motion to dismiss attached to the ex 10 parte motion to set aside default no later than Monday, July 30, 2018. The filed 11 motion must include a proper hearing date for briefing purposes. Should Defendant 12 Hawkins fail to comply with this deadline, the Court will reconsider the propriety of 13 setting aside the procedural default. 14 IT IS SO ORDERED. 15 16 DATED: July 16, 2018 17 18 19 20 21 22 23 24 25 26 27 28 –9– 17cv1954

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