The opinion of the court was delivered by: Barbara A. McAuliffe United States Magistrate Judge
FINDINGS AND RECOMMENDATIONS ON DEFENDANTS' MOTIONS TO SET ASIDE DEFAULT (Docs. 13, 18)
On March 11, 2013 and March 20, 2013 Defendants Louis Javier Quintana and Jose Ernesto Zelaya ("Defendants"), filed Motions to Set Aside Default. (Docs. 13, 18). The motions were referred to this Court pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 302. The Court deemed the matter suitable for decision without oral argument pursuant to Local Rule 230(g), and vacated the hearing scheduled for April 19, 2013. For the following reasons, Defendants‟ motions to set aside entry of default (Docs. 13, 18) should be GRANTED.
On November 30, 2012, Plaintiff J&J Sports Production, Inc. ("Plaintiff") filed its complaint 3 against Defendants, alleging violations of 47 U.S.C. § 605, et seq., and 47 U.S.C. § 553, et seq., as 4 well as claims under California state law. Plaintiff claims that it was the exclusive commercial 5 distributor of the program "Good v. Evil: Miguel Angel Cotto v. Antonio Margarito, WBA Super World 6 Light Middleweight Championship Fight Program" (the "Program"). Plaintiff claims that Defendants 7 unlawfully intercepted and broadcast the telecast of the Program on December 3, 2011 at La Huacan 8 restaurant and Night Club (the "restaurant"). According to the complaint, Plaintiff was the exclusive 9 commercial distributor of closed-circuit rights to the Program. Since Defendants operate the restaurant, a commercial establishment, and exhibited the Program there, Defendants could not have lawfully obtained the Program without contracting with Plaintiff. Defendants did not contract with Plaintiff, and thus must have wrongfully intercepted, received, and broadcasted the Program.
On January 30, 2013, Plaintiff filed proofs of service indicating that Louis Quintana was served on January 11, 2013 by substitute service on Dulce Gutierrez, at La Huacan restaurant and Night Club located at 101 East Glenn Avenue, Suite A, Modesto, CA 95358. Jose Ernesto Zelaya was served on January 11, 2013, by substituted service on Dulce Gutierrez at the same address. The process server also mailed the documents to Defendants at the restaurant‟s business address. According to the declaration of diligence, the process server attempted service at the business address three times prior to substitute service. (Docs. 6, 7).
Defendants failed to respond to the complaint within the time prescribed by the Federal Rules of Civil Procedure. On February 27, 2013, pursuant to Plaintiff‟s request, the Clerk of the Court entered default against Defendants. Plaintiff did not file a motion for default judgment and on March 11, 2013 and March 20, 2013, Defendants moved to set aside the Clerk‟s entry of default. On April 8, 2013, Plaintiff requested leave to file a late opposition to Defendants‟ motions to set aside, which the Court granted on April 9, 2013. (Doc. 21). Defendants replied to Plaintiff‟s opposition on April 10, 2013. (Doc. 22).
The Federal Rules of Civil Procedure govern the entry of default. Once default has been 3 entered by the clerk, "[t]he court may set aside an entry of default for good cause." FED. R. CIV. P. 55(c). In evaluating whether good cause exists, the court may consider "(1) whether the party seeking 5 to set aside the default engaged in culpable conduct that led to the default; (2) whether it had no 6 meritorious defense; or (3) whether reopening the default judgment would prejudice the other party." 7
United States v. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (citing Franchise Holding II, LLC v. 8 Huntington Restaurants Group, Inc., 375 F.3d 922, 925-26 (9th Cir. 2004)); see also TCI Group Life 9 Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). The standard for good cause "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.
On the other hand, when the moving party seeks timely relief from default "and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the default so that cases may be decided on their merits." Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945-46 (9th Cir. 1986). Moreover, the Ninth Circuit has opined "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).
The Court will consider each of the good cause factors in turn below.
With respect to the first good cause factor, the Court concludes that Defendants have shown that they did not engage in culpable conduct. The Ninth Circuit has held that "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, 244 F.3d at 697. The concept of "intentionally" in this context refers to conduct that is willful, deliberate, or that evidences bad faith. Id. "Neglectful failure to answer as to which the defendant offers a credible good faith explanation negating any intention to take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal process is not "intentional‟... and is therefore not necessarily-although it certainly may be, 2 once the equitable factors are considered-culpable or inexcusable." Id. at 697-98. 3
Here, Defendants argue that their conduct was not culpable. Defendant Alvarez explains in his
Declaration that he did not file an answer to the complaint for numerous reasons. First, Defendant 5 Alvarez argues he did not understand that he needed to file any papers with the Court or do anything 6 else before the scheduling conference ...