UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
January 6, 2011
ROBERTO M. GUERRERO, ET AL., DEFENDANTS.
ORDER GRANTING MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT AGAINST MANUEL VIZCARRA
This matter comes before the Court on Defendant Manuel Vizcarra's ("Vizcarra") Motion To Set Aside Default And Default Judgment (Doc. 59). On August 20, 2010, a default judgment was entered against Vizcarra for over five hundred million dollars (Doc. 56). Plaintiff Richard Stellmacher ("Plaintiff") opposes the motion (Doc. 61).
I. LEGAL STANDARD
Default is properly set aside where a party acts within a reasonable amount of time and establishes a valid basis for relief. S.E.C. v. Internet Solutions for Business Inc., 509 F.3d 1161, 1164-65 (9th Cir. 2007). Under Federal Rule of Civil Procedure 55(c), the Court may set aside entry of default by the Clerk of the Court for "good cause" shown. The Ninth Circuit has identified three relevant factors for determining "good cause": (1) whether the defendant's culpable conduct led to the default; (2) whether the defendant has a meritorious defense; and (3) whether setting aside default would prejudice the plaintiff. TCI Group Life Insurance Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001) (citing Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). These three factors are the same as those used to address a Rule 60(b) motion to set aside a final default judgment. Id. However, the factors should be applied more liberally when addressing a Rule 55(c) motion to set aside entry of default. Hawaii Carpenters' Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986) ("Rule 60(b) grounds are liberally interpreted when used on a motion for relief from an entry of default."). Furthermore, the Court has broad discretion in resolving a Rule 55(c) motion to set aside an entry of default so that cases can be decided on the merits. Mendoza v. Wight Vineyard Management, 783 F.2d 941, 945-46 (9th Cir. 1986) (stating that, "doubt, if any, should be resolved in favor of the motion to set aside the [default] so that cases may be decided on their merits.") (internal citation omitted).
The Court finds that the default and default judgment should be set aside. The magistrate judge's order (Doc. 55), which was affirmed by this Court (Doc. #56), was not based on the merits, but rather on Vizcarra's failure to properly answer Plaintiff's complaint. The Court finds that Vizcarra received notice of the suit, but because he was pro se and because Plaintiff initially filed the case in the wrong division of this court and simultaneously filed for bankruptcy, Vizcarra did not fully understand the status of the instant case. Vizcarra showed a good faith effort to oppose Plaintiff's suit by writing a letter to the Court contesting the complaint (Doc. 54) and attempting to attend two hearings, both of which were subsequently cancelled. Thus, the Court finds that Vizcarra's failure to respond was not intentional and he has offered a credible, good faith explanation for his actions. Additionally, Plaintiff will not be prejudiced by vacating the default and Vizcarra appears to have a sufficiently meritorious defense. Accordingly, the default and default judgment are vacated and this case will proceed so that it may be decided on its merits.
For the reasons set forth above,
Vizcarra's Motion to Set Aside Default And Default Judgment is GRANTED. Vizcarra is ordered to file his responsive pleading to Plaintiff's complaint within twenty (20) days of the date of this Order.
IT IS SO ORDERED.
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