United States District Court, S.D. California
ORDER: (1) GRANTING MOTION TO SET ASIDE DEFAULT (ECF NO. 31); AND (2) TERMINATING AS MOOT MOTION FOR DEFAULT JUDGMENT (ECF NO. 29)
CYNTHIA BASHANT, District Judge.
On November 18, 2013, the Clerk of the Court entered default against Defendant Transportes Castores de Baja California S.A. de C.V. ("Defendant") (ECF No. 12.) On May 30, 2014, Plaintiff Royal & Sun Alliance Insurance, Plc ("Plaintiff") filed a motion for default judgment against Defendant. (ECF No. 29.) Defendant now moves to set aside the entry of default. (ECF No. 31.) Plaintiff opposes. (ECF No. 34.)
The Court finds these motions suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the following reasons, the Court (1) GRANTS Defendant's motion to set aside the default; and (2) TERMINATES AS MOOT Plaintiff's motion for default judgment.
Plaintiff commenced this action on August 6, 2013 against Defendant and Castor Transport, LLC ("Castor Transport") alleging non-delivery of cargo, negligence, breach of contract, and breach of bailment. (ECF No. 1 ("Compl.".) On September 10, 2013, a summons was returned executed by Plaintiff as to Defendant. (ECF No. 6.) The Proof of Service of Summons stated that Plaintiff served Defendant on August 29, 2013 by means of substituted service by leaving the documents with or in the presence of Jonathan Arias. ( Id. at 2.) Thereafter, Plaintiff mailed copies of the summons, complaint, civil case cover sheet, and notice of party with financial interest to Defendant c/o Jose L. Sanchez, 10031 Marconi Drive 3F, San Diego, CA 92154. ( Id. at 2-3.) Defendant did not file a responsive pleading.
On November 14, 2013, Plaintiff requested that the Clerk of the Court enter default against Defendant. (ECF No. 11.) The Clerk entered default on November 18, 2013. (ECF No. 12.) On May 30, 2014, Plaintiff filed a motion for default judgment against Defendant. (ECF No. 29.) Thereafter, on July 17, 2014, Defendant moved to set aside the default. (ECF No. 31.)
II. LEGAL STANDARD
A federal court does not have jurisdiction over a defendant unless the defendant has been served properly under Rule 4 of the Federal Rules of Civil Procedure. Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988). "However, Rule 4 is a flexible rule that should be liberally construed so long as a party receives sufficient notice of the complaint.'" Id. (quoting United Food & Commercial Workers Union v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984). "Nonetheless, without substantial compliance with Rule 4 neither actual notice nor simply naming the defendant in the complaint will provide personal jurisdiction." Id. (citation and internal quotations omitted). "A general appearance or responsive pleading by a defendant that fails to dispute personal jurisdiction will waive any defect in service or personal jurisdiction." Benny v. Pipes, 799 F.2d 489, 492 (9th Cir. 1986).
If a complaint is properly served, failure to make a timely answer or otherwise defend will justify entry of default. Fed.R.Civ.P. 55(a). Under Rule 55(c) of the Federal Rules of Civil Procedure, the court "may set aside an entry of default for good cause." Fed.R.Civ.P. 55(c). The court's good cause analysis considers the following three so-called " Falk factors": "(1) whether the plaintiff will be prejudiced, (2) whether the defendant has [no] meritorious defense, and (3) whether culpable conduct of the defendant led to the default." Brandt v. Am. Bankers Ins. Co. of Fla., 653 F.3d 1108, 1111 (9th Cir. 2011) (quoting Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). These factors are disjunctive and a district court may deny a motion to set aside default if any of the three factors is true. Franchise Holding II, LLC v. Huntington Rests. Grp., Inc., 375 F.3d 922, 926 (9th Cir. 2004). 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. The defendant moving to set aside default bears the burden of showing that any of these factors favor setting aside default. Id.
Notably, "[j]udgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits." Falk, 739 F.2d at 463. Thus, "[w]here timely relief is sought from a 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) (quoting Schwab v. Bullock's Inc., 508 F.2d 353, 355 (9th Cir.1974)). The court has broad discretion in setting aside entry of default. Id. at 945.
Defendant first argues that it was not validly served with the summons and complaint, and therefore this Court has no jurisdiction over Defendant and the default should be set aside. (ECF No. 31-2 at pp. 2, 5.) In its opposition, Plaintiff does not specifically address this contention. Rather, Plaintiff argues that Defendant and Castor Transport are closely related companies and Defendant was well aware of this lawsuit as early as September 11, 2013. (ECF No. 34 at pp. 1, 5-6.)
A court may set aside an entry of default because of improper service under Rule 4. See S.E.C. v. Internet Solutions for Bus. Inc., 509 F.3d 1161, 1165 (9th Cir. 2007) (" Internet Solutions "). However, a defendant moving to set aside entry of default based on improper service of process, where the defendant had actual notice of the original proceeding but delayed in bringing the ...