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A.F. Holdings LLC v. Joseph Skoda

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA


February 4, 2013

A.F. HOLDINGS LLC, PLAINTIFF,
v.
JOSEPH SKODA, DEFENDANT.

FINDINGS AND RECOMMENDATIONS

Plaintiff brought this action initially against a John Doe for copyright infringement for allegedly illegally downloading and distributing a copyrighted motion picture. Plaintiff eventually discovered the name of a defendant through issuing a subpoena to the internet service provider who provided service to defendant's IP address.

Plaintiff filed an amended complaint on September 24, 2012. On September 25, 2012, a summons was issued for defendant. Defendant was personally served with the summons and amended complaint on September 25, 2012. The summons explained to defendant that he had twenty-one days to answer the complaint and that any answer served on the parties must be filed with the Clerk of this Court within a reasonable period of time after service.

On November 13, 2012, after defendant had not filed an answer to the amended complaint, plaintiff requested entry of default. Default was entered by the Clerk on November 14, 2012.

On November 15, 2012, plaintiff filed a motion for default judgment. However, plaintiff's motion for default judgment failed to include a notice of the motion. Thus, it was never put on the undersigned's law and motion calendar.

Defendant subsequently filed an answer on December 7, 2012. On December 19, 2012, plaintiff filed a motion to strike the answer. Plaintiff asserts that the answer should be struck because it is untimely. Plaintiff states that defendant filed his answer seventy-three days after being served with the summons and amended complaint which was well beyond twenty-one days. Furthermore, plaintiff argues that default has already been entered in this case and defendant has not attempted to set aside the default for good cause.

Defendant filed a response to plaintiff's motion to strike the answer on January 25, 2013. Defendant asserts in his response to the motion to strike the answer that his failure to answer within twenty-one days should be excused. He states that he did not neglect to serve an answer on plaintiff's counsel. He claims that he emailed a signed copy of the answer on plaintiff's counsel on October 15, 2012, which was within the twenty-one day period to do so. He admits that his answer was filed late with the Clerk, but argues that he was confused as to the proper procedure as the summons only indicated that he had to file an answer served on the parties with the Clerk within "a reasonable period of time after service."

Plaintiff's motion to strike the answer was argued on January 31, 2013. Both parties appeared at the hearing. During the hearing, defendant presented evidence in the form of computer screen shots as well as a purported email with attachment addressed to plaintiff's counsel that was purportedly emailed to plaintiff on October 15, 2012. Plaintiff indicated during oral argument that it did not recall receiving such an email from defendant. While plaintiff's submissions do not conclusively prove that he in fact properly served plaintiff within an answer within twenty-one days as required by Federal Rule of Civil Procedure 12(a)(1)(A), they at least indicate that defendant made an attempt to comply with the summons and the Federal Rules of Civil Procedure. Subsequently, it should be noted, plaintiff filed an answer with the Clerk on December 7, 2012. (See Dkt. No. 17.)

Nevertheless, as plaintiff correctly notes, default has already been entered by the Clerk in this case. However, through his opposition to the motion to strike the answer, plaintiff asserts that his answer should be allowed to stand. Thus, in effect, he is seeking to set aside the default and his arguments in opposition to the motion to strike the answer will be construed as such.*fn1

Federal Rule of Civil Procedure 55(c) provides that "[t]he court may set aside an entry of default for good cause[.]" The court's discretion is particularly broad where a party seeks to set aside an entry of default rather than default judgment. See Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir. 1986). "This is because in the Rule 55 contexts there is no interest in the finality of judgment with which to contend." United States v. Signed Personal Check No. 730 of Yubran S. Mesle (Mesle), 615 F.3d 1085, 1091 n. 1 (9th Cir. 2010). In determining whether to set aside default, 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 would prejudice the party. See id. at 1091. "Crucially, however, judgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits." Id.

(internal quotation marks and citations omitted).

The Ninth Circuit has stated that "[a] showing of lack of culpability sufficient to meet the Rule 55(c) 'good cause' standard [for setting aside default] is ordinarily sufficient to demonstrate as well the 'excusable neglect' or 'mistake' criteria under Rule 60(b)(1)." TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001). The Supreme Court has noted that "'excusable neglect' is understood to encompass situations in which the failure to comply with a filing deadline is attributable to negligence." Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 394 (1993). With respect to whether defendant lacks a meritorious defense, defendant need not show that he will prevail, only that there is a bona fide chance that such a result will occur. See Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984); Jones v. Phipps, 39 F.3d 158, 165 (7th Cir. 1994). Finally, with respect to prejudice to the plaintiff, "the setting aside of a judgment must result in greater harm than simply delaying resolution of the case. Rather, the standard is whether [plaintiff's] ability to pursue his claim will be hindered." Knoebber, 244 F.3d at 701 (internal quotation marks and citation omitted).

The court finds that there is good cause sufficient to set aside the entry of default. It does not appear that defendant purposefully delayed in responding to the complaint or attempted to gain an advantage by not responding. Rather, the record, while not conclusive, appears to indicate that defendant attempted to comply with the Federal Rules of Civil Procedure by emailing an answer to plaintiff. Defendant's failure to timely file a copy of his answer with the Clerk appears to be due to a misunderstanding. It amounts to excusable neglect on defendant's part which is sufficient under Rule 55(c).

At this stage of the proceedings, it is unclear whether defendant's denials as set forth in his answer would be meritorious. However, there is at least a possibility that defendant may prevail.

Additionally, while setting aside the default would require plaintiff to prove its case, this does not in and of itself amount to prejudice. Finally, it is worth reiterating the preference to decide cases on the merits.

Therefore, in light of the foregoing, the entry of default should be set aside as there is good cause to do so. Since the entry of default should be set aside, plaintiff's motion for default judgment should be denied. See, e.g., Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986) (noting the two-step process required by Rule 55 to obtain a default judgment which includes entry of default as step one). Additionally, as previously noted, plaintiff's motion for default judgment failed to comply with Local Rule 230(b) by not being properly noticed. Furthermore, plaintiff's motion to strike the answer should be denied in light of the recommendation that the entry of default should be set aside.

Accordingly, IT IS HEREBY RECOMMENDED that:

1. The entry of default (Dkt. No. 15.) be set aside;

2. Plaintiff's motion for default judgment (Dkt. No. 16.) be denied; and

3. Plaintiff's motion to strike the answer (Dkt. No. 18.) be denied.

These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any reply to the objections shall be served and filed within fourteen days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

14 afho1663.motstrike


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