The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
ORDER GRANTING MOTION TO SET ASIDE DEFAULT [Doc. No. 13]
Presently before the Court is Defendants' motion to set aside the clerk's entry of default. [Doc. No. 13.] The motion has been fully briefed and is suitable for disposition without oral argument under Civil Local Rule 7.1(d)(1). For the reasons set forth below, the Court GRANTS Defendants' motion to set aside default.
The following facts are taken from the complaint. In 1974, Plaintiffs purchased five mining claims and a millsite named Lord Elgin's Silver Duke Millsite located within the Cleveland National Forest. [Compl. ¶ 17.] Plaintiffs allege that from 1995 to 2006, the federal government placed restrictions on Plaintiffs' access to the millsite and Plaintiffs' mining claims. [Id. ¶¶ 37-66.] Plaintiffs further allege that since 2006, the federal government, specifically the United States Forest Service, has exercised dominion and control over Plaintiffs' personal property located at the millsite as well as their right to use the structures at the millsite. [Id. ¶ 67.]
Based on these restrictions to their property, Plaintiffs filed the present lawsuit on November 16, 2010 against Defendants Eric Holder, Tom Vilsack, Tom Tidwell, Ken Salazar, Bob Abbey, and Thomas Gillett, alleging causes of action for (1) trespass to chattels, (2) conversion, (3) negligence, and (4) declaratory and injunctive relief. [Doc. No. 1.] After Plaintiffs failed to file a proof of service of the complaint, the Court set a hearing for dismissal for want of prosecution pursuant to Federal Rule of Civil Procedure 4(m) on August 10, 2011. [Doc. No. 4.] In response to this, Plaintiffs filed their proof of service on August 24, 2011. [Doc. Nos. 5, 10.] Also on August 24, 2011, Plaintiffs requested an entry of default. [Doc. No. 7.] On August 25, 2011, the Clerk entered default. [Doc. No. 8.] By the present motion, Defendants seek to set aside the clerk's entry of default. [Doc. No. 13.]
I. Legal Standards for a Motion to Set Aside the Entry of Default
Pursuant to Federal Rule of Civil Procedure 55(c), a district court may set aside the entry of default upon a showing of good cause. Fed. R. Civ. P. 55(c). To determine "good cause," a court must consider three factors: (1) whether the party seeking to set aside the default engaged in culpable conduct that led to the default; (2) whether it had no meritorious defense; or (3) whether reopening the default judgment would prejudice the other party. United States v. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010). "This standard . . . is disjunctive, such that a finding that any one of these factors is true is sufficient reason for the district court to refuse to set aside the default." Id. In considering a motion to set aside default, a court should bear in mind that "judgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits." Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). A district court's determination of whether to set aside the entry of default pursuant to Rule 55(c) is reviewed for abuse of discretion. Mesle, 615 F.3d at 1091.
"[A] defendant's conduct is culpable if he has received actual or constructive notice of the filing of the action and intentionally failed to answer." TCI Group Life Ins. Plan v. Knoebber, 244
F.3d 691, 697 (9th Cir. 2001) (emphasis in original). "The term 'intentionally' means that a movant cannot be treated as culpable simply for having made a conscious choice not to answer; rather, to treat a failure to answer as culpable, the movant must have acted with bad faith, such as an 'intention to take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal process.'" Mesle, 615 F.3d at 1092.
Here, Defendants have provided a good faith explanation for their failure to respond to Plaintiffs' complaint. Federal Rule of Civil Procedure 4(i) governs service on federal agencies and federal employees. This rule requires that a plaintiff (1) deliver a copy of the summons and complaint to the U.S. Attorney for the district where the action is brought, and (2) send a copy of the summons and complaint by registered or certified mail to the Attorney General of the United States in Washington, D.C. FED. R. CIV. P. 4(i)(1).
Defendants admit that they were served with Plaintiffs' complaint and the summons at the U.S. Attorney's office on February 28, 2011. [Doc. No. 13-1 at 4; Doc. No. 13-3, Declaration of Mary Wiggins ("Wiggins Decl.") ¶¶ 4-5.] However, during monthly check-ins, the office of the Attorney General indicated that it had not received a copy of Plaintiffs' complaint or the summons as recently as September 14, 2011. [Doc. No. 20 at 7; Doc. No. 20-3, Reply Declaration of Mary Wiggins ("Wiggins Reply Decl.") ¶ 5.] Defendants intended to respond to Plaintiffs' complaint by filing a motion to dismiss upon the completion of proper service. [Doc. No. 13-1 at 4; Doc. No. 20-2, Reply Declaration of Steve Chu ("Chu Reply Decl.") ¶ 2.] Defendants only recently discovered that the Attorney General did actually receive a copy of the complaint and the summons. [Doc. No. 20 at 7-8; Wiggins Reply Decl. ¶ 5.] Defendants explained that their failure to discover this was due to the complaint being routed in error to the Environmental and Natural Resources Division ...