The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge
This matter is before the court on defendants Troy Stafford, Patrick Williams and WS Seafood Investment LLC's ("defendants") motion to set aside the entry of default entered against them.*fn1
Defendants move for relief arguing good cause exists to set aside the default entered June 14, 2011 (Docket #36) because: (1) defendants believed the parties were still engaged in settlement efforts at the time plaintiff Marc Black ("plaintiff") filed his requests for entry of default; (2) defendants have meritorious defenses to the action; and (3) plaintiff will not be prejudiced if the default is set aside. Plaintiff opposes the motion.
For the reasons set forth below, defendants' motion is GRANTED. This case does not present the extreme circumstances where the drastic step of default is warranted.
On March 10, 2010, plaintiff filed the instant action against defendants. From that time until at least April 2011, the parties engaged in settlement discussions. (See generally Gallagher Decl. [Docket #38-2], filed Aug. 8, 2011.) Those discussions included participation in the court's Voluntary Dispute Resolution Program ("VDRP"). At various times, the parties nearly reached an agreement, exchanging drafts of settlement agreements on various occasions. (Id. at ¶s 2, 5, 7.)
However, in August 2010, during the VDRP process, the parties' settlement discussions were complicated when plaintiff filed an amended complaint adding several new defendants, who defendants' previous counsel did not present. (Id. at ¶s 5-9, 11.) Those newly added defendants were not promptly served, and the parties settlement discussions stalled.
In a March 2011 declaration filed with the court regarding the case status, plaintiff indicated that the additional defendants had not been served due to the ongoing settlement negotiations with defendants. Plaintiff also indicated that he had not demanded a response to the complaint from defendants due to the settlement negotiations. (Docket #29.) Plaintiff stated he intended to move forward with service on the new defendants unless a mutually agreeable settlement agreement was signed by April 4, 2011. (Id.)
An agreement was not signed by April 4, and after that date, defendants' previous counsel attests that it was unclear to him whether plaintiff ever served the new defendants. (Gallagher Decl, ¶ 11.) Counsel states that because he never heard from plaintiff's counsel after April 4, he did not believe defendants had a deadline to respond to the amended complaint. From his perspective, until he saw plaintiff's requests for default, defendants' counsel believed the settlement was stalled because of the unknown status of the unserved defendants. (Id. at ¶s 11-13.)
Plaintiff filed requests for default against defendants on Friday, June 10, 2011 at approximately 6:15 p.m. (Id. at ¶ 14.) Defendants' then-counsel became aware of the filing over the weekend, and on Monday morning, June 13, he informed defendants of plaintiff's requests. Counsel states that this was the first time it became apparent to him and defendants that the parties' settlement discussions were over such that it was necessary for defendants to respond to plaintiff's amended complaint. (Id. at ¶ 15; Stafford Decl. [Docket #38-3], filed Aug. 2, 2011.)
On June 13, defendants discussed with their attorney their need to retain more affordable local counsel, as well as their intent to move to dismiss the complaint. In the midst of these discussions, on Tuesday, June 14, 2011, the Clerk entered default. (Docket #36.)
Following the entry of default, defendants began to look for new representation. They obtained new counsel on July 26, 2011. (Fischer Decl. [Docket #38-5], filed Aug. 2, 2011.) That counsel contacted plaintiff's counsel on July 28 to determine whether plaintiff would stipulate to setting aside the clerk's default; defendants offered to respond to plaintiff's complaint within ten days. (Id. at ¶ 2.) When plaintiff's counsel refused, defendants' new counsel immediately prepared the instant motion, filing and serving the motion on August 2, 2011 and noticing the hearing for the first available date of September 2, 2011. (Id.)
It is well established in the Ninth Circuit that "judgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be determined on the merits." Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984); see also J&J Sports Prods. v. Gidha, 2011 U.S. Dist. LEXIS 86209, *5 (E.D. Cal. Aug. 3, 2011) (recognizing that the Ninth Circuit's "distaste for default judgment cannot be overstated" and as such "courts are directed to be solicitous towards movants and deny a motion to set aside default only where extreme circumstances exist"). Because of the preference for deciding cases on their merits, a motion for relief from default entries must be viewed liberally, and all doubts resolved in favor of the party seeking relief. Freezor v. Central Valley OSR, Inc., 2011 U.S. Dist. LEXIS 79558, *3 (E.D. Cal. July 21, 2011). This is particularly true where, as here, a clerk enters default pursuant to Federal Rule of Civil Procedure 55(a), as opposed to default judgment under Rule 55(b). Mendoza v. Wight Vineyard Management, 783 F.2d 941 945 (9th Cir. 1986) (noting ...