UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
October 3, 2011
ROBERT E. WEISS, INC., ET AL.,
The opinion of the court was delivered by: M. James Lorenz United States District Court Judge
ORDER GRANTING MOTION TO SET ASIDE CLERK'S ENTRY OF DEFAULT [doc. #6]
This action was filed in the Superior Court for the State of California, County of San Diego, on December 8, 2010. Defendants MERS and Aurora Loan Services, LLC removed the action on January 6, 2011, and nominal defendant Robert E. Weiss, Inc., the foreclosure trustee, consented to the removal of the action.*fn1 Defendants did not file a responsive pleading to the complaint either prior to or after removal of the action. Nor did defendants file an extension of time to respond to the pleading. Plaintiff sought entry of default against defendants MERS, Aurora Loan Services, LLC and Robert E. Weiss, Inc., which was entered on March 9, 2011.
Defendants argue the Clerk's entry of default should be set aside. "For good cause shown the court may set aside an entry of default . . .." FED. R. CIV. P. 55(c). "[D]efault judgments are generally disfavored, and whenever it is reasonably possible, cases should be decided on upon their merits." In re Hammer, 940 F.2d 524, 525 (9th Cir. 1991) (internal quotation marks and citation omitted). "[A] district court's discretion is especially broad when, as in this case, it is entry of default that is being set aside, rather than a default judgment." Brady v. United States, 211 F.3d 499, 504 (9th Cir. 2000) (internal quotation marks omitted).
The court analyzes the factors governing the lifting of entries of default under Rule 55(c). See TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). "Those factors are: whether the defendant's culpable conduct led to the default; whether the defendant has a meritorious defense; and whether reopening the default . . . would prejudice the plaintiff." Id. The moving party "bears the burden of demonstrating that these factors favor" setting aside the default. Id.
When a defendant fails to file responsive pleadings and "offers a credible, good faith explanation negating any intention to interfere with judicial decisionmaking, or otherwise manipulate the legal process" the failure to appear is not necessarily culpable. TCI Group Life Ins. Plan, 244 F.3d at 697-98. In this case, counsel states that he inadvertently failed to calendar his clients' Rule 12(b)(6) motion. Plaintiff does not challenge this statement but argues that defendants' failure to respond to his complaint prevented plaintiff from filing a motion to "consolidate the unlawful detainer action into the underlying civil state action." (Opp. at 5.) But as noted in their reply memorandum, none of the defendants in the present federal court litigation are parties in the state court unlawful detainer action. Defendants therefore cannot use the default to gain an advantage as plaintiff suggests.
A defendant seeking to vacate a default judgment must present specific facts that would constitute a defense, however, the burden is not extraordinarily heavy. TCI Group Life Ins. Plan, 244 F.3d at 700 (citations omitted). All that is required is a "potentially meritorious defense." Id. at 699. At this stage, the court merely looks at factual allegations, and does not make findings whether they are true. Id. at 700. Defendants point to a potentially meritorious defenses: the declaratory relief plaintiff seeks has been mooted by the fact that the foreclosure has been accomplished and the operative Deed of Trust has been extinguished.
Plaintiff does not address defendants' defense but instead contend that there are irregularities with respect to the substitution of trustee and the assignments to the deed of trust that call into question the veracity of these documents. This argument does not support a finding that defendants do not have facts that constitute a defense to plaintiff's claims.
The final factor to consider is whether setting aside the default would prejudice plaintiff. Plaintiff argues he will be prejudiced because he will not have an opportunity to consolidate the unlawful detainer action into the primary civil action, i.e. plaintiff does not have enough time to properly defend himself against defendants' attempt to evict him from his home.
"To be prejudicial, the setting aside of a judgment must result in greater harm than simply delaying the resolution of the case. Rather, the standard is whether [the plaintiff's] ability to pursue his claim will be hindered." TCI Group Life Ins. Plan, 244 F.3d at 701 (internal quotation marks and citation omitted). "[M]erely being forced to litigate on the merits cannot be considered prejudicial for purposes lifting a default judgment," since a "default judgment gives the plaintiff something of a windfall by sparing [it] from litigating the merits of [its] claim because of [its] opponent's failure to respond; vacating the default judgment merely restores the parties to an even footing in the litigation." Id. (internal citation omitted).
Plaintiff's claimed prejudice is that he was prevented from filing a consolidation of cases in the state court and he was presented from filing a motion to remand. But plaintiff does not contend his ability to pursue the claims will be hindered if the entry of default is set aside, or that his position will be any different than it was at the outset of the case. Further, the validity of a motion to remand is in no manner dependent upon the filing of a motion to dismiss. Either there is a basis for remand or there is not. Accordingly, plaintiff's claim of prejudice is insufficient under Rule 55(c).
Based on the foregoing, IT IS ORDERED defendants' motion to set aside default is GRANTED. Defendants shall answer or otherwise respond to the complaint within ten days of the filing of this Order.
IT IS SO ORDERED.
COPY TO: HON. BERNARD G. SKOMAL UNITED STATES MAGISTRATE JUDGE