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United States v. Distribuidora Batiz CGH

August 10, 2009

UNITED STATES OF AMERICA, PLAINTIFF,
v.
DISTRIBUIDORA BATIZ CGH, S.A. DE C.V.; ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hayes, Judge

ORDER

The matters before the Court are the Motion for Default Judgment Against Fourteen Defendants (Doc. # 59); the Motion to Set Aside Clerk's Default and Dismiss Action as to Moving Defendants (Doc. # 61); the Motion to Withdraw the Motion for Default Judgment as to Thirteen of Fourteen Defendants (Doc. # 66); and the Motion for Limited Early Discovery (Doc. # 67).

I. BACKGROUND

On February 27, 2007, Plaintiff United States of America filed the Complaint against Distribuidora Batiz, S.A. De C.V. (hereinafter "Distribuidora Batiz") and Silvia Del Carmen Batiz Esquer, Rodolfo Batiz Guillen, Raul Batiz Echavarria, Raul Guillermo Batiz Guillen, Raul Guillermo Batiz Gamboa, Ricardo Batiz Gamboa, Olga Elena Batiz Esquer, Jorge Guillermo Batiz Guillen, Jorge Guillermo Batiz Esquer, Gabriela Maria Batiz Gamboa, Angela Maria Batiz Gamboa, Gerardo Batiz Esquer, Grupo Batiz CGH, S.A. de C.V., Greenver, S.A. de C.V., Invernaderos La Pequena Joya, S.A. De C.V., and Pedro Batiz Guillen (collectively, "Guarantor Defendants"). (Doc. # 1).

The Complaint alleges the following facts. On May 12, 2004, Distribuidora Batiz entered into a Business Loan Agreement with First National Bank. (Compl. ¶ 3). On May 12, 2004, Distribuidora Batiz executed and delivered a Promissory Note pursuant to the Business Loan Agreement, payable to the order of First National Bank. (Compl. ¶ 4). On May 12, 2004, in San Diego, California, the Guarantor Defendants executed guarantees on the Promissory Note for prompt repayment of the full amount of Distribuidora Batiz's indebtedness under the Promissory Note. (Compl. ¶ 5). The Promissory Note and guaranties provide that the Defendants agree to "submit themselves ... to the jurisdiction of the United States Federal District Court for the Southern District of California." (Compl., Ex. 2 at 13). Plaintiff, United States of America, acting by and through its agency, the Export-Import Bank of the United States ("Ex-Im Bank"), insured Distribuidora Batiz's indebtedness on the Promissory Note. (Compl. ¶ 5). Distribuidora Batiz defaulted on its repayment obligations under the Promissory Note. (Compl. ¶ 8).

Following Distribuidora Batiz's default, First National Bank filed a claim with the ExIm Bank for payment under the insurance policy. (Compl. ¶ 12). First National Bank assigned the Distribuidora Batiz Promissory Note and all rights against Distribuidora Batiz and Guarantor Defendants to the Ex-Im Bank. (Compl. ¶ 14). On or about September 12, 2005, the Ex-Im Bank demanded payment from Distribuidora Batiz and the Guarantor Defendants of the outstanding principal amount on the Promissory Note. (Compl. ¶ 16). Distribuidora Batiz and Guarantor Defendants have not paid the outstanding amount. (Compl. ¶ 17). The Complaint alleges that each Guarantor Defendant has breached the contractual obligation to repay Distribuidora Batiz's indebtedness; that Plaintiff has been damaged by this breach; and that Distribuidora Batiz and the Guarantor Defendants are jointly and severally liable for the amount outstanding. (Compl. ¶¶ 18-20).

On March 26, 2007, Plaintiff filed executed Summons indicating that, on March 23, 2007, Distribuidora Batiz and all of the Guarantor Defendants except Ricardo Batiz Gamboa were either personally served (in the case of Rodolfo Batiz Guillen) or constructively served (in the case of the remaining Defendants) with Summons and Complaint. (Doc. # 4-20).

On April 12, 2007, Plaintiff's counsel received a phone call regarding this action from an attorney in Phoenix, Arizona. (Doc. # 65-7). The attorney said that "he can't say that he represents any of the defendants yet ... [but] [i]f he does proceed to represent the defendants ... he would likely represent all of them." (Doc. # 65-7 at 1). The attorney requested an extra thirty days to answer the Complaint. (Doc. # 65-7 at 1). On May 17, 2007, the Phoenix attorney sent an e-mail to Plaintiff's counsel informing him that he did not represent any of the Defendants in this matter. (Doc. # 65-7 at 2).

On October 16, 2007, Defendant Rodolfo Batiz Guillen filed an Answer to the Complaint stating a general denial of the allegations and affirmative defenses of failure to state a claim, uncertain allegations, unjust enrichment, and failure to mitigate damages. (Doc. # 23, ¶¶ 21-24).

Between at least April 2008 and July 2008, Plaintiff attempted to serve seven of the Defendants in Mexico pursuant to the Inter-American Convention on Letters Rogatory, but the efforts were unsuccessful. (Doc. # 65-9, 65-10). For five of the Defendants, the Mexican authorities stated that they could not locate the Defendants at the given addresses. (Doc. # 65-9).

On May 19, 2008, at Plaintiff's request, the Clerk of the Court entered default against Defendant Batiz Echavarria. (Doc. # 38). On June 18, 2008, Plaintiff filed a Motion for Default Judgment against Defendant Raul Batiz Echavarria. (Doc. # 39-1). On October 22, 2008, the Court granted the Motion for Default Judgment against Defendant Raul Batiz Echavarria, awarding Plaintiff damages in the amount of $3,867,733.42 plus the $771.48 per day interest amount that had accrued since June 12, 2008. (Doc. # 45). On November 7, 2008, the Court issued a Judgment against Defendant Raul Batiz Echavarria pursuant to Federal Rule of Civil Procedure 54(b). (Doc. # 46). The Judgment ordered Defendant Raul Batiz Echavarria's liability to be joint and several. (Doc. # 46 at 2).

On August 28, 2008, Plaintiff filed a Motion for Summary Judgment against Defendant Rodolfo Batiz Guillen. (Doc. # 42) Defendant Rodolfo Batiz Guillen, despite having appeared and filed an Answer, did not file an opposition to the Motion for Summary Judgment. On November 26, 2008, the Court granted the Motion for Summary Judgment, finding that Plaintiff had produced sufficient evidence to establish that Plaintiff was entitled to judgment as a matter of law as to the breach of contract claim against Defendant Rodolfo Batiz Guillen. (Doc. # 48). On December 5, 2008, the Court issued a Judgment against Defendant Rodolfo Batiz Guillen pursuant to Federal Rule of Civil Procedure 54(b), awarding Plaintiff damages in the amount of $4,003,513.90 (which included $82,548.36 of pre-judgment interest which had accrued since August 21, 2008). (Doc. # 51). The Judgment ordered Defendant Rodolfo Batiz Guillen's liability to be joint and several. (Doc. # 51 at 2).

On February 20, 2009, Plaintiff requested the Clerk of the Court to enter default against fourteen Defendants: Distribuidora Batiz; Grupo Batiz CGH, S.A. de C.V.; Greenver, S.A. de C.V.; Invernaderos la Pequena Jolla, S.A. de C.V.; Pedro Batiz Guillen; Silvia del Carmen Batiz Esquer; Raul Guillermo Batiz Guillen; Raul Guillermo Batiz Gamboa; Olga Elena Batiz Esquer; Jorge Guillermo Batiz Guillen; Jorge Guillermo Batiz Esquer; Gabriela Maria Batiz Gamboa; Angela Maria Batiz Gamboa; and Gerardo Batiz Esquer. (Doc. # 55). On February 24, 2009, the Clerk of the Court entered default against the fourteen Defendants. (Doc. # 56).

On May 12, 2009, Plaintiff filed a Motion for Default Judgment against the fourteen Defendants. (Doc. # 59). Plaintiff also submitted evidence in support of the claims in the Complaint. (Scalia Decl., Exs. 1-10, Doc. # 59-3 through 5-13). According to a declaration submitted by Plaintiff, prior to filing suit, Ex-Im Bank entered into settlement negotiations with counsel for Defendants, but no settlement could be achieved. (Scalia Decl., Doc. # 59-3, ¶ 17). Plaintiff contended that the Defendants received constructive service of process on March 23, 2007, when the United States Marshals' Service served summonses addressed to each of them, together with the Complaint, at the offices of Wilson Batiz, LLC, "a Batiz family business," located at 9925 Airway Road, San Diego, California. (Doc. # 59-2 at 5, citing Doc. # 4-10, 12-15, 17-19). Plaintiff also contended that it constructively served Defendant Raul Guillermo Batiz Guillen at his home on July 11, 2007, and personally served defendant Olga Elena Batiz Esquer on September 13, 2007. (Doc. # 59-2 at 5, citing Doc. # 24 and 28).

On May 22, 2009, thirteen of the fourteen Defendants who were the subject of the May 12, 2009 Motion for Default Judgment,*fn1 as well as Defendant Ricardo Batiz Gamboa*fn2 ("Moving Defendants"), filed an Opposition to Plaintiff's Motion for Default Judgment (Doc. # 60) and a Motion to Set Aside Clerk's Default and Dismiss Action as to Moving Defendants (Doc. # 61). The Moving Defendants contend that Plaintiff has failed to effectuate service against them, and therefore the action against them should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(5). In support, the Moving Defendants submitted a declaration from Defendant Jorge Guillermo Batiz Guillen stating that the Moving Defendants neither resided nor worked at the San Diego addresses where Plaintiff delivered service of process. (Jorge Guillermo Batiz Guillen Decl., Doc. # 61-3, ¶ 5). Defendant Jorge Guillermo Batiz Guillen stated that Wilson Batiz, LLC, located at 9925 Airway Road, San Diego, California "is a business partly owned by my brother, Pedro Batiz Guillen, who is a Defendant herein but not a Moving Party. ... Neither [myself] nor any of the Moving Defendants have an office at that address, nor any usual place of abode or business there, and none of the Moving Defendants have any ownership interest in the company, either." (Jorge Guillermo Batiz Guillen Decl., Doc. # 61-3, ¶ 5). Defendant Jorge Guillermo Batiz Guillen stated that "[e]ach of the Moving Defendants is of Mexican citizenship and domicile, and each of them resides in Mexico." (Jorge Guillermo Batiz Guillen Decl., Doc. # 61-3, ¶ 6). He further stated that "I first learned of the lawsuit when I received a copy of the letter [dated] February 26, 2009 that was signed by [Plaintiff's counsel] and addressed to me and numerous other members of the Batiz family at addresses which are not the residences or usual places of abode or business of any of the Moving Defendants." (Jorge Guillermo Batiz Guillen Decl., Doc. # 61-3, ¶ 3).

On June 8, 2009, Plaintiff filed a Reply Brief Regarding Its Motion for Default Judgment and a Motion to Withdraw Its Motion for Default Judgment as to the Moving Defendants. (Doc. # 65-66). Plaintiff stated that "despite its good faith efforts to serve the defendants, and the defendants' actual notice of the suit, [Plaintiff] seek[s] to withdraw its Motion for Default Judgment because defendants have appeared by counsel and have raised questions about the sufficiency of service of process. Further, now that the defendants have appeared, it should be possible to resolve [Plaintiff]'s claims based on their merits, rather than by default." (Doc. # 66 at 2, citing Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986) ("[D]efault judgments are ordinarily disfavored. Cases should be decided upon their merits whenever reasonably possible.")). Plaintiff also does not contest the Moving Defendants' request to set aside the Clerk's entry of default against them. (Doc. # 68 at 2-3). Plaintiff continues to seek default judgment against Defendant Pedro Batiz Guillen, who is not one of the Moving Defendants and has not opposed the Motion for Default Judgment. (Doc. # 65 at 10). ...


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