-RJJ Chrome Hearts, LLC v. Boutique Talulah, No. 2:2012cv00280 - Document 22 (D. Nev. 2012)
Court Description: ORDER Granting 17 Defendant's Motion to Set Aside and Vacate 16 Clerk's Entry of Default. IT IS FURTHER ORDERED that 18 Plaintiffs' Request for Attorneys' is GRANTED. Signed by Judge Miranda M. Du on 9/28/2012. (Copies have been distributed pursuant to the NEF - EDS)
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-RJJ Chrome Hearts, LLC v. Boutique Talulah Doc. 22 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 DISTRICT OF NEVADA 7 *** 8 CHROME HEARTS, LLC, a Delaware LLC, Case No. 2:12-cv-00280-MMD-RJJ 9 Plaintiff, ORDER 10 v. 11 12 BOUTIQUE TALULAH, an unknown business entity; and DOES 1-10, inclusive, 13 (Def.’s Motion to Set Aside and Vacate Entry of Default – dkt. no. 17; (Pl.’s Request for Attorneys’ Fees – dkt. no. 18). Defendants. 14 15 16 I. SUMMARY 17 Before the Court is Defendant’s Motion to Set Aside and Vacate Entry of Default 18 (dkt. no. 17) and Plaintiff’s Request for Attorneys’ Fees (dkt. no. 18). For reasons 19 discussed below, Defendant’s Motion is GRANTED and Plaintiff’s Request is 20 GRANTED. 21 II. BACKGROUND 22 On February 22, 2012, Plaintiff Chrome Hearts, LLC (“Chrome Hearts”) filed its 23 original Complaint (dkt. no. 1) against Defendant Boutique Talulah, alleging trademark 24 infringement, trademark dilution, unfair competition, and copyright infringement. (Dkt. no. 25 1 at 1.) Plaintiff served Natasha Smith, a manager at Boutique Talulah, by personal 26 delivery on March 9, 2012, and by mail on March 12, 2012. (Dkt. no. 6.) On April 19, 27 2012, defense counsel notified Plaintiff that it had not served Defendant in accordance 28 with Nevada law (dkt. no. 17 at 9), asserting that Plaintiff had not sued a legal entity and Dockets.Justia.com 1 had only served Defendant by mail.1 (Dkt. no 17 at 2.) On May 7, 2012, Plaintiff filed its 2 First Amended Complaint (“FAC”) (dkt. no. 9), naming XRTZ, Inc., the legal entity doing 3 business as Boutique Tallulah, as Defendant. (Dkt. no. 9 at 2.) Plaintiff served the FAC 4 and Summons on XRTZ’s Registered Agent, United States Corporation Agents, by 5 personal service on May 9, 2012, and by mail on March 17, 2012. (Dkt. no. 13 at 2, 3.) 6 Accordingly, Defendant had until May 30, 2012, to file an answer or responsive pleading. 7 However, XRTZ’s registered agent did not inform Defendant’s representative that 8 Defendant had been served until May 16, 2012. (Dkt. no. 17 at 2.) On June 5, 2012, 9 Plaintiff requested entry of default (dkt. no. 15), which the Clerk’s Office entered on June 10 6, 2012. (Dkt. no. 16.) On June 7, 2012, Defendant filed its Motion to Set Aside and 11 Vacate Entry of Default. (Dkt. no. 17.) That same day, Plaintiff emailed Defendant 12 offering to stipulate to setting aside the default provided that Defendant file an answer 13 immediately upon lifting the default. (Dkt. no. 19 at 31.) Plaintiff alleges that Defendant 14 did not respond to its offer. (Dkt. no. 18 at 2.) Defendant never filed an answer. 15 III. DEFENDANT’S MOTION TO SET ASIDE AND VACATE ENTRY OF DEFAULT 16 A. 17 Rule 55(c) of the Federal Rules of Civil Procedure provides that “[t]he court may 18 set aside an entry of default for good cause . . . .” Fed. R. Civ. P. 55(c). In determining 19 whether good cause exists, a court must consider three factors: “‘(1) whether the plaintiff 20 will be prejudiced, (2) whether the defendant has a meritorious defense, and (3) whether 21 culpable conduct of the defendant led to the default.’” Brandt v. Am. Bankers Ins. Co. of 22 Fla., 653 F.3d 1108, 1111 (9th Cir. 2011) (quoting Falk v. Allen, 739 F.2d 461, 463 (9th 23 Cir. 1984)). These factors, which are consistently referred to as the “‘Falk factors,’” are 24 25 26 27 28 Legal Standard 1 Service was improper because Plaintiff did not serve the Summons and Complaint on XRTZ, Inc.’s registered agent, United States Corporate Agents, Inc., or leave a copy at the registered agent’s address on file. (Dkt. no. 6.) Pursuant to NRS § 14.020(2), “all legal process . . . to be served upon the corporation . . . may be served upon the registered agent personally or by leaving a true copy thereof with a person of suitable age and discretion at the most recent street address of the registered agent shown on the information filed with the Secretary of State pursuant to chapter 77 of NRS.” 2 1 disjunctive. Brandt, 653 F.3d at 1111 (quoting Falk, 739 F.2d at 463) (emphasis in 2 original). The court may refuse to set aside the default if it holds any one of the three 3 factors is true. U.S. v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 4 1085, 1091 (9th Cir. 2010). 5 “‘[J]udgment by default is a drastic step appropriate only in extreme 6 circumstances; a case should, whenever possible, be decided on the merits.’” Mesle, 7 615 F.3d at 1091 (quoting Falk, 739 F.2d at 463) (alternation in original). The Falk 8 factors are more liberally applied in the context of a clerk’s entry of default than in the 9 default judgment context. Mesle, 615 F.3d at 1091 n.1 (quoting Cracco v. Vitran Exp., 10 Inc., 559 F.3d 625, 631 (7th Cir. 2009)); see also Haw. Carpenter’s Trust v. Stone, 794 11 F.2d 508, 513 (9th Cir. 1986). “‘The court’s discretion is especially broad where . . . it is 12 entry of default that is being set aside, rather than a default judgment.’” 13 Techs, Inc. v. High Impact Design & Entm’t, 642 F. Supp. 2d 1228, 1233 (D. Nev. 2009) 14 (quoting O’Connor v. State of Nev., 27 F.3d 357, 364 (9th Cir. 1994)). 15 B. Analysis 1. 16 Aristocrat Whether Defendant engaged in culpable conduct 17 “A defendant’s conduct is culpable if he has received actual or constructive notice 18 of the filing of the action and intentionally failed to answer.” TCI Group Life Ins. Plan v. 19 Knoebber, 244 F.3d 691, 697 (9th Cir. 2001) (emphasis in original). In order for a failure 20 to answer to be intentional, “the movant must have acted with bad faith.” Mesle, 615 21 F.3d at 1092. 22 conscious choice not to answer.” Id. If a defendant neglectfully2 fails to answer, yet 23 offers a “credible, good faith explanation negating any intention to take advantage of the 24 opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal 25 process[,]” he or she is not necessarily culpable. 26 “A movant cannot be treated as culpable simply for having made a In this context, “‘[n]eglect’ ‘encompasses simple, faultless omissions to act and, more commonly, omissions caused by carelessness.’” TCI Group, 244 F.3d at 697 (quoting Pioneer Inv. Servs Co.v. Brunswick Assocs Ltd. P’ship, 507 U.S. 380, 388 (1993)). 2 27 28 TCI Group, 244 F.3d at 697-98 3 1 (holding that defendant’s family emergency explanation for missing the deadline to 2 answer a motion for summary judgment was “weak, but not the result of ‘deviousness or 3 willfulness.’”) (quoting Bateman v. U.S. Postal Service, 231 F.3d 1220, 1225 (9th Cir. 4 2000)). Culpable behavior “usually involves conduct by parties that is calculated to help 5 them retain property in their possession, and avoid liability by staying out of court: for 6 instance, when companies act to avoid service in order to thwart their customers’ 7 attempts to bring suit against them.” Mesle, 615 F.3d at 1094. 8 Whether or not Defendant engaged in culpable conduct is a close question. The 9 only explanation Defendant offers for failing to submit an answer is that its counsel 10 misunderstood the deadline. (Dkt. no. 17 at 4.) However, the Summons is unambiguous 11 and clearly states that defendant must serve an answer or responsive pleading on 12 plaintiff within 21 days after service of process. (Dkt. no. 12 at 1.) Pursuant to the 13 Nevada Rules of Civil Procedure, service is effectuated when a copy of the Summons 14 and Complaint has been left with “a person of suitable age and discretion at the most 15 recent street address of the registered agent shown on the information filed with the 16 Secretary of State.” Nev. Rev. Stat. § 14.020(2). Defense counsel demonstrated its 17 knowledge of the rules governing service of process in Nevada when it informed 18 Plaintiff’s counsel that it had not served the original Complaint on Defendant in 19 accordance with Nevada law.3 (Dkt. no. 17 at 9.) Accordingly, it is unlikely that defense 20 counsel did not understand May 30, 2012, to be the deadline to file an answer or 21 responsive pleading. (Dkt. no. 13 at 2.) 22 However, Defendant’s failure to respond did not allow it to “take advantage” of the 23 opposing party, or “manipulate the legal process.” Mesle, 615 F.3d at 1093. On the 24 contrary, the only outcome that such a failure could have earned Defendant was what it 25 /// 26 27 28 Email from defense counsel to plaintiff’s counsel read: “In reviewing matters in this case, my understanding is that there has been no service of process in accordance with Nevada law.” (Dkt. no. 17 at 9.) 3 4 1 received: an entry of default and a heightened possibility of default judgment in favor of 2 Plaintiff. 3 Moreover, although Defendant did not respond to Plaintiff’s offer to stipulate to 4 setting aside the default, Defendant filed its Motion to Set Aside and Vacate Default one 5 day after the entry of default. (Dkt. nos. 16 and 17.) See Mesle, 615 F.3d at 1092 6 (setting aside an entry of default where movant responded to the lawsuit as soon as he 7 received notice of the entry of default, which had alerted him to his misunderstanding of 8 the situation). Thus, by quickly responding to the entry of default, Defendant 9 demonstrated that it was not trying to manipulate the legal process. 10 Accordingly, because Defendant immediately moved to set aside entry of default 11 and because Defendant’s explanation for missing the deadline demonstrates that it did 12 not intend “to take advantage of the opposing party, interfere with judicial 13 decisionmaking, or otherwise manipulate the legal process,” the Court holds that 14 Defendant has not engaged in culpable conduct. TCI Group, 244 F.3d at 697-98. 2. 15 Whether Defendant has a meritorious defense 16 “A party in default . . . is required to make some showing of a meritorious defense 17 as a prerequisite to vacating an entry of default.” Haw. Carpenters’ Trust Funds, 794 18 F.2d at 513. The defendant’s burden is minimal. Mesle, 615 F.3d at 1094. “All that is 19 necessary to satisfy the ‘meritorious defense’ requirement is to allege sufficient facts 20 that, if true, would constitute a defense . . . .” Id. at 1094 (quoting TCI Group, 244 F.3d 21 at 700). “A meritorious defense is one which, if proven at trial, will bar plaintiff’s 22 recovery.” Aristocrat Techs, 642 F. Supp. 2d at 1233 (quoting Accu-Weather, Inc. v. 23 Reuters Ltd., 779 F. Supp. 801, 802 (M.D. Pa. 1991)). 24 general denials, or simple assertions that the movant has a meritorious defense’ are, 25 however, insufficient to justify upsetting the underlying judgment.” Cassidy v. Tenorio, 26 856 F.2d 1412, 1415 (9th Cir. 1988) (quoting In re Stone, 588 F.2d 1316, 1319 (10th Cir. 27 1978)). 28 /// “‘[M]ere legal conclusions, “To permit reopening of the case in the absence of some showing of a 5 1 meritorious defense would cause needless delay and expense to the parties and court 2 system.” Haw. Carpenters’ Trust Funds, 794 F.2d at 513. 3 Defendant has not presented any facts which might constitute a defense. 4 Defendant merely asserts that “it does not believe there to be any merit to the claims 5 being made.” (Dkt. 17 at 5.) Defendant presents no facts to rebut Plaintiff’s allegations 6 that Defendant has engaged in copyright or trademark infringement. Contra RingCentral, 7 Inc. v. Quimby, 781 F. Supp. 2d 1007, 1012 (N.D. Cal. 2011) (finding that defendants 8 had potentially meritorious defense in trademark infringement case when defendant 9 claimed that it had never actually used plaintiff’s domain names). Therefore, this factor 10 11 weighs in favor of Plaintiff. 3. Whether the Plaintiff will be prejudiced 12 Plaintiff will not be prejudiced by setting aside the clerk’s entry of default. “To be 13 prejudicial, the setting aside of a judgment must result in greater harm than simply 14 delaying resolution of the case.” TGI Group, 244 F.3d at 700. Rather, “the delay must 15 result in tangible harm such as loss of evidence, increased difficulties of discovery, or 16 greater opportunity for fraud or collusion.” Id. at 701 (citing Thompson v. Am. Home 17 Assur. Co., 95 F.3d 429 (6th Cir. 1996). 18 In its Opposition (dkt. no. 18), Plaintiff does not allege that setting aside the clerk’s 19 entry of default will prejudice it in any way. Further, because Defendant filed its Motion 20 to Set Aside Default (dkt. no. 17) one day after the Clerk’s Entry of Default (dkt. no. 16), 21 it is unlikely that there has been an opportunity for fraud or collusion or that Plaintiff has 22 suffered a loss of evidence or will encounter an increased difficulty of discovery. For 23 these reasons, this factor weighs in favor of Defendant. 24 Although the Court may refuse to set aside default if it finds one of the factors is 25 true, the Court’s discretion remains especially broad. 26 Aristocrat Techns, 642 F. Supp. at 1233. Since two of the three factors in the “good 27 cause” analysis for setting aside a default under Rule 55(c) favor Defendant, the Court 28 grants Defendant’s Motion to Set Aside and Vacate Default. Defendant did not engage 6 Mesle, 615 F.3d at 1091; 1 in culpable conduct and setting aside the default will not prejudice Plaintiff. Therefore, 2 the Court holds that refusing to set aside the default would be contrary to the Ninth 3 Circuit’s long held policy in favor of deciding cases on the merits whenever possible. 4 Mesle, 615 F.3d at 1091 (quoting Falk, 739 F.2d at 463). 5 IV. PLAINTIFF’S REQUEST FOR ATTORNEYS’ FEES 6 A. Legal Standard 7 Rule 60(b)(1) of the Federal Rules of Civil Procedure “permits a court to impose 8 ‘just terms’ on any order setting aside a judgment.” RingCentral, Inc. v. Quimby, 781 F. 9 Supp. 2d 1007, 1012 (N.D. Cal. 2011). Accordingly, the district court has the authority to 10 condition the setting aside of a default upon payment of attorney fees and costs. 11 Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. Louisiana Hydrolec, 854 F.2d 12 1538, 1546-47 (9th Cir. 1988). 13 prejudice suffered by the non-defaulting party as a result of the default and the 14 subsequent reopening of the litigation can be rectified.” Id.; see also RingCentral, Inc., 15 781 F. Supp. 2d at 1012; Brandt v. Am. Bankers Inc. Co. of Fla., 653 F.3d 1108, 1110, 16 n.1 (9th Cir. 2011) (ordering that “the default judgment and entry of default be set aside 17 upon [defendants’] satisfaction of certain conditions,” including “reimbursement of 18 [plaintiff’s] attorney fees associated with [defendants’] motion to set aside the default 19 judgment”); 20 court’s award of attorney fees and costs where the non-defaulting party provided a 21 detailed, hourly accounting of attorney fees which did not appear clearly unreasonable). “By conditioning the setting aside of a default, any Haw. Carpenters’ Trust Funds, 794 F.2d at 512 (upholding the district 22 B. Analysis 23 Plaintiff requests $1,950 in attorneys’ fees. (Dkt. nos. 20 at 2 and 21 at 2.) 24 Plaintiff has provided a detailed, hourly accounting of its attorneys’ fees. (Id.) Plaintiff’s 25 attorneys, Lori Siderman and Brent Blakely, each submitted a declaration representing 26 the amount of time spent and fees incurred in obtaining entry of default (dkt. no. 15) and 27 in opposing Defendant’s Motion to Set Aside and Vacate Entry of Default. (Dkt. nos. 20 28 and 21.) Because the services rendered were not duplicated and are not clearly 7 1 unreasonable, the Court will condition the setting aside of the default upon payment of 2 attorneys’ fees and costs. 3 V. 4 5 6 7 8 CONCLUSION IT IS THEREFORE ORDERED that Defendant’s Motion to Set Aside and Vacate Entry of Default (dkt. no. 17) is GRANTED. IT IS FURTHER ORDERED that Plaintiffs’ Request for Attorneys’ Fees (dkt. no. 18) is GRANTED. Dated this 28th day of September 2012. 9 10 11 UNITED STATES DISTRICT JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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