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Vandyke v. Northern Leasing System

May 14, 2009


The opinion of the court was delivered by: Gregory G. Hollows United States Magistrate Judge


Plaintiff, proceeding pro se and in forma pauperis, has filed an action concerning a contract dispute with defendants who are located in New York. Defendants' motion to set aside default and to dismiss was heard on March 26, 2009. Plaintiff appeared in pro se. Jonathon Ayers appeared for defendants Cohen and Northern Leasing Systems, Inc. ("NLS"). For the reasons stated in this opinion, the court recommends that defendant NLS' motion to set aside default be granted. The motion to dismiss by NLS will be denied without prejudice to its later renewal. The motion to dismiss by Jay Cohen is denied as unnecessary.


This action was commenced on September 11, 2007. The amended complaint, filed December 17, 2007, alleges that plaintiff entered into a lease agreement with defendant NLS for Virtual Terminal Software in May, 1999, and the agreement was cancelled in June, 1999 due to poor services.*fn1 Plaintiff states that she never received any bills, but on July 18, 2007, she received a phone call from defendant's collection department, threatening to pull her credit report 100 times every 6 months and to take her to court. Plaintiff claims that the statute of limitations on collecting a debt is six years and that defendant has violated the "Unfair Debt Collection Practices Act," "Unfair Business Practice Act," and the Fair Credit Reporting Act, through its attempt to collect the debt by fraud and its agreement which was never legitimate. Plaintiff seeks $300,000 in compensatory damages, $1,000 in statutory damages for each violation, and for defendant to leave plaintiff and her "credit report alone for life." (Dkt. #7.)

At this court's hearing on plaintiff's motion for default judgment, held on February 5, 2009, NLS contested service as defective and argued that it was not served with the notice of entry of default. NLS requested to be relieved of entry of default. Accordingly, the court directed NLS to file a motion for relief of entry of default, and vacated without prejudice plaintiff's motion for default judgment.

At the hearing on March 26, 2009, based on plaintiff's indication that she now sought only for defendants to leave her and her credit report alone, the court directed defendants to draft a settlement agreement within five court days of the hearing for plaintiff to sign and file within twenty days of the hearing. If an agreement could not be reached, the court would rule on the papers. Plaintiff filed a statement indicating that no settlement was reached. Therefore, defendants' motion and plaintiff's opposition have been reviewed.


I. Motion to Set Aside Default (Defendant NLS)

Default against defendant NLS was entered by the Clerk of the Court on December 11, 2008, pursuant to plaintiff's request. NLS now moves to set aside default due to defective service. Plaintiff opposes the motion, claiming that defendants received a copy of the clerk's entry of default as well as her motion for default judgment.


Federal Rule of Civil Procedure, 55(c) provides that a default may be set aside for "good cause." "Good cause" is demonstrated by: 1) a sufficient excuse for not meeting the filing deadline; 2) a meritorious defense; and 3) that setting aside default will not unfairly prejudice the other party. Madsen v. Bumb, 419 F.2d 4, 6 (9th Cir. 1969); Mendoza v. Wight Vineyard Management, 783 F.2d 941, 945 (9th Cir. 1986). See Tri-Continental Leasing Corp. v. Zimmerman, 485 F. Supp. 495, 497 (N. D. Cal. 1980).

These factors are disjunctive, and the court may vacate entry of default if any of the three factors is true. Franchise Holding II, LLC. v. Huntington Restaurants Group, Inc., 375 F.3d 922, 926 (9th Cir. 2004), quoting American Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000).

1. Good Cause

The court has discretion to determine whether good cause has been shown. See Madsen, 419 F.2d at 6; Curry v. Jensen, 523 F.2d 387, 388 (9th Cir. 1975). The court's discretion is particularly generous where the motion seeks to set aside an entry of default, rather than a default judgment. Mendoza, 783 F.2d at 945. Any doubt should be resolved in favor of setting aside the default in order to decide cases on their merits. Schwab v. Bullock's, Inc., 508 F.2d 353, 355 (9th Cir. 1974).

Leniency in setting aside a default is especially appropriate if the attorney failed the client. Girlsongs & Warner Bros., Inc. v. Starkey, 108 F.R.D. 275, 277 (N.D. Cal. 1984). In reversing the dismissal of an action for ...

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