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Comercializadora Recmaq v. Hollywood Auto Mall

February 6, 2013


The opinion of the court was delivered by: Hon. Anthony J. BattagliaU.S. District Judge


Presently before the Court are Defendant Mohamed Ghasemi's ("Ghasemi") motion to set aside entry of default under Federal Rule of Civil Procedure 55(c), and Plaintiff Comercializadora Remaq's ("Plaintiff") motion for default judgment. Pursuant to Civil Local Rule 7.1.d.1, the Court finds both motions suitable for determination on the papers and without oral argument. Accordingly, the motion hearing set for February 28, 2013, is hereby vacated. For the reasons set forth below, Ghasemi's motion to set aside entry of default is hereby GRANTED, (Doc. No. 23), and Plaintiff's motion for default judgment is hereby DENIED as premature, (Doc. No. 20).


This case involves an alleged oral contract (the "Contract") entered into by and between Plaintiff and Defendants Hollywood Auto Mall, LLC ("Hollywood Auto Mall"), Ghasemi, and Jamie Sotomayor ("Sotomayor") (collectively, "Defendants"), in or around 2002. (Comp. ¶11.) To effectuate the Contract, money was transferred from Plaintiff to Defendants on various occasions during 2009 and 2010, totaling approximately $1,099,000.*fn1 (Id. at ¶¶ 17-21.) Pursuant to the Contract, Defendants agreed to locate heavy machinery for sale at auctions in the United States and advise Plaintiff of the availability, condition, and specifications of the equipment. (Id. at ¶ 11.) Upon further instruction by Plaintiff, the Contract also specified Defendants would purchase the equipment for the benefit and on behalf of Plaintiff. (Id.) To date however, Defendants have not delivered the equipment as promised, nor have Defendants returned any portion of the funds transferred to Defendants for the purchase of the equipment. (Id. at ¶¶ 17-18.)

On April 17, 2012, Plaintiff filed a Complaint against Defendants alleging fifteen causes of action, including: (1) fraud; (2) conspiracy to commit fraud; (3) breach of contract; (4) RICO violation; (5) RICO conspiracy; (6) conversion; (7) unfair business practices; (8) intentional interference with prospective economic advantage; (9) breach of implied covenant of good faith and fair dealing; (10) breach of fiduciary duty; (11) unjust enrichment; (12) account stated; (13) debt; (14) money lent; and (15) money paid. (Doc. No. 1.) On July 12, 2012, the clerk entered default against Hollywood Auto Mall and Sotomayor. (Doc. No. 9.) Default was not entered against Ghasemi at this time because Plaintiff had failed to effectuate service of the Summons and Complaint. On August 22, 2012, the Court granted Plaintiff's motion to serve Ghasemi by publication, and extended the deadline by which Plaintiff had to file any forthcoming motion for default judgment. (Doc. Nos. 12, 13.)

Plaintiff published a copy of the Summons in the San Diego Union Tribune on September 14, 2012, September 21, 2012, September 28, 2012, and October 5, 2012. (Doc. No. 16.) Service of Ghasemi was considered complete on October 5, 2012, and Plaintiff filed a proof of service with the Court on October 11, 2012. (Id.) On October 11, 2012, the Court ordered Ghasemi to answer or otherwise respond to the Complaint by October 27, 2012, and instructed Plaintiff that any application for default judgment against all Defendants must be filed no later than November 26, 2012. (Doc. No. 15.) Ghasemi failed to timely respond to the Complaint, and the clerk entered default against Ghasemi on November 13, 2012. (Doc. No. 18.)

On November 14, 2012, Ghasemi filed a motion to dismiss the Complaint, which was rejected by the Court as untimely. (Doc. No. 19.) On November 26, 2012, Plaintiff filed a motion for default judgment against all Defendants. (Doc. No. 20.) On December 14, 2012, Ghasemi filed the instant motion to set aside the entry of default. (Doc. No. 23.) Plaintiff filed an opposition on January 18, 2013, (Doc. No. 27), and Ghasemi filed a reply on January 31, 2012, (Doc. No. 31).


Legal Standard

Federal Rule of Civil Procedure 55(c) provides that a "court may set aside an entry of default for good cause . . . " Fed. R. Civ. P. 55(c). To determine "good cause," a court must consider three factors: " '(1) whether the plaintiff will be prejudiced, (2) whether the defendant has a meritorious defense, and (3) whether culpable conduct of the defendant led to the default.' " Brandt v. Am. Bankers Ins. Co. of , 653 F.3d 1108, 1111 (9th Cir. 2011) (quoting Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)).

These factors, which are consistently referred to as the "Falk factors," are disjunctive, such that a court may decline to vacate an entry of default upon a finding of any of the factors. Brandt, 653 F.3d at 1111; U.S. v. Signed Pers. Check No. 730 of Yubran S. Mesle ("Mesle"), 615 F.3d 1085, 1091 (9th Cir. 2010). Nonetheless, a district court is not, as a matter of law, required to deny a motion to set aside entry of default upon a finding of any of the factors. See Brandt, 653 F.3d at 1111.

Crucially, "judgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits." Mesle, 615 F.3d at 1091 (quoting Falk, 739 F.2d at 463). Moreover, the Falk factors are more liberally applied in the context of a clerk's entry of default than in the default judgment context. Mesle, 615 F.3d at 1091 n. 1 (quoting Cracco v. Vitran Exp., Inc., 559 F.3d 625, 631 (7th Cir. 2009)); see also Haw. Carpenter's Trust v. Stone, 794 F.2d 508, 513 (9th Cir. 1986); O'Connor v. State of Nev., 27 F.3d 357, 364 (9th Cir. 1994). Additionally, while pro se litigants are not entitled to a general exemption from the rules of procedure, the "rules for determining when a default should be set aside are solicitous towards movants, especially those whose actions leading to the default were taken without the benefit of legal representation." Mesle, 615 F.3d at Falk, 739 F.2d at 463 (finding the defendant's failure to timely respond not culpable because she was unrepresented and the local legal aid office had declined to assist her).


A. Whether Defendant Ghasemi Engaged in ...

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