United States District Court, S.D. California
THUNDERBIRD RESORTS, INC., a British Virgin Isles Corporation, Plaintiff,
MURRAY JO ZIMMER, an individual; ANGULAR INVESTMENTS CORPORATION, a Panama corporation; MITZIM PROPERTIES, INC., a Nevada corporation; and TALOMA ZULU, S.A., a Panamanian corporation; JACK RAY MITCHELL, an individual, Defendants.
ORDER: 1. GRANTING DEFENDANT ANGULAR INVESTMENTS
CORPORATION'S MOTION TO SET ASIDE ENTRY OF DEFAULT [DOC.
NO. 70]; and 2. SETTING A HEARING DATE ON DEFENDANT ANGULAR
INVESTMENTS CORPORATION'S MOTION TO DISMISS PURSUANT TO
FRCP 12(b)(2), (6), (7) [DOC. NO. 80]
John a. Houston United States District Judge.
matter comes before the Court on two motions by Defendant
Angular Investments Corporation: (1) a motion to set aside
default and default judgment, if any [Doc. No. 79]; and (2) a
motion to dismiss Pursuant to Federal Rules of Civil
Procedure (“Fed.R.Civ.P.”) 12(b)(2), (6), and (7)
for lack of jurisdiction, failure to state a claim, and
failure to join a party [Doc. No. 80]. After a careful review
of the parties' submissions, and for the reasons set
forth below, Defendant's Motion to Set Aside Default is
GRANTED and a hearing date SET on Defendant's Motion to
Dismiss for Lack of Jurisdiction.
matter arises from the international business dealings of two
foreign corporations. In 2002, Plaintiff Thunderbird Resorts
Inc., a British Virgin Isles corporation
(“Plaintiff” or “Thunderbird”)
partnered with Defendant Angular Investments Corporation, a
Panamanian corporation (“Defendant” or
Angular”), forming Grupo Thunderbird de Costa Rica,
S.A. (“GTCR”) to operate casinos and related
businesses in Costa Rica. Doc. No. 28 at 4-5. Murray
Jo Zimmer (“Zimmer”), controlled and operated the
business activities of Angular, oversaw the day-to-day
operations of the partnership as president of GTCR, and acted
as the “country manager” for Plaintiff's
operations in Costa Rica. Plaintiff and Defendant Angular
agreed to split GTCR's profits equally. Id.
However, Plaintiff alleges that between July 2007 and
September 2014, Defendant Angular, by and through
co-defendant Zimmer convinced Plaintiff to authorize GTCR to
pay over $2 million to co-defendant Taloma Zulu, a Panamanian
corporation (“TZ”), under false pretenses.
Id. Defendant Zimmer advised Plaintiff the payments
were for legal and consulting fees and Plaintiff alleges it
approved distribution of the fees on this basis. Id.
Instead, the funds were paid back to Zimmer, co-defendant
Mitzim Properties, Inc (“Mitzim”), which has its
principal place of business in California, and others,
without Plaintiff's knowledge. In 2015, Plaintiff
discovered that over $550, 000 of the funds GTCR paid to
Defendant TZ were redirected to Defendant Zimmer in a matter
of days. Id.
12, 2015, Plaintiff filed a Complaint against Defendants
Zimmer, Angular, Mitzim and TZ alleging seven causes of
action including breach of fiduciary duty and fraud, a civil
RICO claim under 18 U.S.C. § 1961, et seq against all
defendants, a state tort action for conversion and equitable
claims for constructive trust and accounting. Doc. No.
1. Proof of service, as to Defendant Mitzim was returned
executed on July 2, 2015. See Doc. No. 4. On July
13, 2015, Defendant Mitzim answered the Complaint. See
Doc. No. 8.
September 11, 2015, Plaintiff filed its FAC adding an eighth
claim for Breach of Contract and joining Defendant Jack R.
Mitchell, the former CEO of Thunderbird and Zimmer's
partner in Mitzim Properties. See Doc. No. 28. On
December 31, 2015, Plaintiff moved for issuance of Letters
Rogatory, as to Defendants Angular and TZ. See Doc. Nos.
45, 46. This Court granted Plaintiff's motions on
March 15, 2016, [doc. nos. 54, 55], and requests for
international judicial assistance were sent to the
appropriate judicial authorities of the Republic of Panama
(“Panama”). See Doc. Nos. 54, 55.
December 19, 2016, Plaintiff filed proof of service via
Letters Rogatory, asserting that service was effected on
Angular Investments Corporation's registered agent for
service of process on or about August 18, 2016, in accordance
with Fed.R.Civ.P. 4(f)(1) and 4(h)(2) and the Inter-American
Convention on Letters Rogatory and Additional Protocol.
Doc. No. 63.
December 30, 2016, Plaintiff filed a request for entry of
Clerk default against Defendant Angular. See Doc. Nos. 65.
The Clerk of Court entered default against Angular on January
03, 2017. Doc. No. 67.
January 27, 2017, Plaintiff filed a motion for default
judgment against Angular. Doc. No. 69. The motion
went unopposed. This Court held a hearing on Plaintiff's
motion. Doc. No. 74. Attorney David H. Lichtenstein
appeared on behalf of Thunderbird. Doc. No. 73.
Defendant Angular did not appear. Id. On the same
date, March 20, 2017, the Court issued a minute order
granting Plaintiff's motion for default judgment against
Angular and directing Plaintiff to supplement the pleadings
regarding damages above “$657, 975 [sic]…”
Doc. No. 74.
April 6, 2017, Plaintiff timely filed its supplemental brief
on damages. Doc. No. 75. On May 4, 2017, Defendant
Angular appeared and filed a motion to set aside entry of
default and default judgment, if any. Doc. Nos. 79,
80. Defendant also incorporated by reference and filed
concurrently a motion to dismiss the FAC pursuant to
Fed.R.Civ.P. 12(b)(2), (6), and (7). On the same date,
Defendant Angular filed a disclosure statement and notice of
party with financial interest, pursuant to Fed.R.Civ.P. 7.1
and CivLR 40.2. Doc. No. 81. Defendant Angular's
fully briefed motions are now before the Court.
Fed.R.Civ.P. 4(k), “[s]erving a summons... establishes
personal jurisdiction over a defendant who is subject to the
jurisdiction of a court of general jurisdiction in the state
where the district court is located….”
California's long arm statute extends personal
jurisdiction to the limit allowed by the Due Process Clause
of the federal Constitution. Cal. Civ. Proc. Code
§ 410.10; Schwarzenegger v. Fred Martin Motor
Company, 374 F.3d 797, 800-801 (9th Cir. 2004).
Additionally, under the federal long-arm statute, federal
courts are permitted “to exercise personal jurisdiction
over a defendant that lacks contacts with any single state if
the complaint alleges federal claims and the defendant
maintains sufficient contacts with the United States as a
whole.” Getz v. Boeing Co., 654 F.3d 852, 858
(9th Cir. 2011) (citing Rule 4(k)(2), Fed.R.Civ.P.). However,
due process precludes a court from asserting jurisdiction
over a defendant unless the defendant has certain minimum
contacts with the forum state. In circumstances where a
defendant's contacts with a state “are so
‘substantial' or ‘continuous and
systematic' as to render [it] essentially at home in the
forum State, ” general jurisdiction may be exercised.
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564
U.S. 915, 919 (2011). “Activity by the defendant need
not physically take place in the forum state so as to
constitute sufficient contact under the due process test ....
The Supreme Court has consistently rejected the notion that
absence of physical contacts with a forum state can defeat
personal jurisdiction, ‘[s]o long as a commercial
actor's efforts are purposefully directed toward
residents of another State.' ” Haisten v. Grass
Valley Medical Reimbursement Fund, Ltd., 784 F.2d 1392,
1398 (9th Cir.1986) citing Burger King, 471 U.S. at
475-477. In tort cases, “the purposeful direction or
availment requirement for specific jurisdiction is analyzed
under the ‘effects' test”. Dole, 303
F.3d at 1111 (citing Calder v. Jones, 465 U.S. 783
(1984). A court may exercise specific jurisdiction over a
defendant where: (1) the defendant has intentionally acted
and purposefully directed his or her activities at the forum
state itself or residents of the forum state; (2)
the plaintiff's claim arises out of or relates to those
activities; (3) defendant's acts cause harm that the
defendant knows is likely to be suffered in the forum state
and (4) the assertion of personal jurisdiction is reasonable
and fair. Id.; Schwarzenegger, 374 F.3d at
802; see also Burger King Corp. v. Rudzewicz, 471
U.S. 462 (1985).
overriding constitutional principle is that maintenance of an
action in the forum must not offend “traditional
conception[s] of fair play and substantial justice.”
International Shoe Co. v. Washington, 326 U.S. 310,
320 (1945). Each defendant's connection with the forum
state must be independently assessed to determine
jurisdiction. Calder, 465 U.S. at 790.
where personal jurisdiction is determined to be appropriate,
“[a] federal court is without personal jurisdiction
over a defendant unless the defendant has been served in
accordance with Fed.R.Civ.P. 4 (citations omitted).”
Travelers Cas. & Sur. Co. of Am. v. Brenneke,
551 F.3d 1132, 1135 (9th Cir. 2009). “So long as a
party receives sufficient notice of the complaint, Rule 4 is
to be liberally construed to uphold service. However, neither
actual notice nor simply naming the defendant in the
complaint will provide personal jurisdiction without
substantial compliance with Rule 4.” (Citations and
quotes omitted). Id. When serving a corporation
outside of the United States, service must comport with an
internationally agreed upon means, if any, that is reasonably
calculated to give notice. See Fed.R.Civ.P. 4(h)(2);
4(f)(1). Unless waived, proof of service must be provided to
the court according to the applicable treaty or convention.
sufficient notice is provided, failure to make a timely
answer or otherwise defend will justify entry of default.
Fed.R.Civ.P. 55(a). Rule 55(c) of the Federal Rules of Civil
Procedure permits a federal court to “set aside an
entry of default for good cause, and … set aside a
final default judgment under Rule 60(b).” Although the
requisites for setting aside an entry of default under Rule
55(c) are less rigorous than those for setting aside a
judgment, the Court should consider the factors in Falk
v. Allen, 739 F.2d 461 (9th Cir.1984. Franchise
Holding II, LLC. v. Huntington Restaurants Grp., Inc.,
375 F.3d 922, 925 (9th Cir. 2004); See also Hawaii
Carpenters' Trust Funds v. Stone, 794 F.2d 508, 513
(9th Cir.1986). These factors include: “(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 Fla., 653 F.3d 1108, 1111 (9th
Cir.2011) (quoting Falk, 739 F.2d at 463). The Court
is free to deny relief on any of these three bases.
Id. (quoting Franchise Holding II, 375 F.3d
at 926). However, it need not deny relief based solely upon a
finding of defendant's culpability, when a meritorious
defense is presented and prejudice to the Plaintiff can be
cured. See Brandt, 653 F.3d at 1111. The party
moving to set aside default has the burden of proving that it
is entitled to relief. Id. “Where 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)).
Motion to Set Aside Default and any Default Judgment
moves to set aside default and default judgment, if any,
pursuant to Fed.R.Civ.P. 55(c), or alternatively, Rule 60(b).
Filed concurrently, and incorporated by reference in its
motion to set aside default, Angular asserts four defenses in
a motion to dismiss.Angular moves to dismiss Plaintiff's
FAC on the grounds that: (1) this Court lacks personal
jurisdiction (Fed.R.Civ.P. 12(b)(2)); (2) Plaintiff lacks
standing to pursue the claims asserted, (3) the FAC fails to
join a party under Rule 19 ...