Click to Chat

Setting Aside Default Judgments under FRCP 60(b) (Sample Form Opposition)

Posted by: on Thu, Dec 20, 2012

Share this post

LEGAL ARGUMENT

A. Defendant’s Motion to Dismiss or, Alternatively, to Set Aside Default Judgment is Woefully Late under Fed. R. Civ. Proc. 60(b), and Therefore Must Be Denied.

i. Defendant Was Well-Aware of the Summons and Complaint as well as the Judgment Against Him in 2006 and 2007.

Mr. B, through counsel, has filed the instant motion to dismiss, or, in the alternative to set aside a default judgment against him now nearly six years after that judgment was entered, on the theory that somehow the service made on him was legally deficient. At the outset, it should be noted that, given the entry of judgment against Mr. B, a “motion to dismiss” is not proper, and, for that reason, the arguments made in his motion target the second form of relief he seeks: to wit, the motion to set aside the default judgment previously entered against him.

Mr. B makes a number of assertions relative to the actions of Plaintiff Medical Capital herein in obtaining a judgment by default against him (following his failure to respond to the service), including asserting that documents filed with the Court were somehow incorrect or misleading (which, as discussed below, they are not). What is most striking, however, is Mr. B’s feigned ignorance of this case (as confirmed by his own sworn declaration in support of his motion), the summons and the complaint in this matter, as well as the judgment against him, when it is clear that Mr. B is failing to disclose to this Court that he was very well aware of this case, and had full knowledge of the existence of the service of process and the default entered against him, clear back in October of 2006 – facts which render his instant motion to set aside fatally late at the present time.

As shown in the Declaration of D attached hereto as Exhibit “B”, in 2006 Mr. B contacted New Jersey attorney John B, Esq., of the law firm of P, P.C., who, on September 11, 2006, left a voicemail message for Mr. Johnson stating that he (Mr. B) had recently received a copy of the summons and complaint in this matter from his client, i.e., Mr. B. See Declaration at Exh. B, ¶ 2. Mr. B, then inquiring on behalf of Mr. B, asked Mr. Johnson (in the voicemail)whether Mr. Johnson’s client (Plaintiff Medical Capital) would oppose a motion to set aside the default entered against his (Mr. B) client, Mr. B, to which Mr. Johnson responded that his client would, in fact, oppose such a motion to set aside. Id. at ¶ 3.

Mr. Johnson followed up on the foregoing voice message by memorializing that message in a letter to Mr. B, dated October 10, 2006, a copy of which is attached hereto as Exhibit B-1, in which he indicated, in part, that “On September 11, 2006, I receive [sic] a voice mail message from you indicating that you represent B, one of the defendants in the above-referenced matter, in an unrelated matter, and that you recently receive [sic] a copy of the summons and complaint from your client . . . . You further inquired if [Plaintiff Medical Capital] would oppose a motion to set aside the default entered against your client on August 17, 2006 . . . .” Id. While Mr. B responded a week later on October 17, 2006, confirming that he was not ultimately retained by Mr. B(see Exhibit B-2), the bottom line is that Mr. B was well-aware of this lawsuit, the entry of default against him, and the judgment that would very soon be entered against him at least as early as October 17, 2006.

Mr. B’s efforts to explain away his failure to respond by claiming he was not served with the summons and complaint, and that attorney B failed to advise him of the suit (in spite of the fact that it is clear he knew all about it and gave copies of the summons and complaint to Mr. Balsamo) are all misleading and constitute an effort to pretend a lack of knowledge regarding these proceedings in order to attack the judgment he was fully aware of nearly six years ago.

Mr. B may try to argue in reply that not only did his former counsel Mr. Wisotsky fail him in having refused to provide him the summons and complaint (which appears to be false based on the fact that he had the service papers and gave them to attorney B), but also that Mr. B failed him as well in refusing to even advise him (in spite Mr. B’s refusal to ultimately retain him) of this law firm’s then-imminent intention to reduce the entry of default to judgment. However, in this regard, it must further be noted that on or about January 17, 2007, Mr. B himself called attorney Dustin Johnson, obviously aware of the collection efforts against him, wherein he alleged that his business partners in Quality Care had raided the business and expressing his frustration with their actions. See Exh. B ¶ 5. Mr. B’s call to Mr. Johnson was made for no other reason that to dissuade him from pursuing collection actions against him.

As demonstrated below, Mr. B’s motion is stale and meritless at this time given the fact that he has had full knowledge of this suit, the default, and then the judgment against him since 2006 and 2007, and has, until now, done nothing to challenge it (in spite of having attempted to retain counsel to consider pursuing such an attack in 2006, and having apparently decided not to proceed at that time), and having himself personally contacted counsel at this law firm to dissuade Plaintiff from taking action against him in 2007.

ii. Mr. B Admits He Has Known About the Judgment Against Him Since 2010. In addition to all the foregoing, as demonstrated by the Declaration of attorney David Mandel, an attorney with the company (Thomas Seaman Company) currently serving as receiver for Plaintiff Medical Capital, Mr. B was well aware of the summons and complaint in this suit, as well as the judgment entered against him in November of 2010, when Mr. Mandel, attempting to collect on that judgment, contacted Mr. B by letter and explained that a judgment had been entered against him (Mr. B). See Mandel Declaration at Exhibit C, and Letter to B, dated November 10, 2010, at Exhibit C-1. Delivery of the foregoing letter was made via Federal Express on November 11, 2010, and signed for by Mr. B. See Federal Express proof of delivery at Exhibit C-2.

After receiving the foregoing letter, Mr. B personally contacted Mr. Mandel to discuss his financial situation, and on November 16, 2010, was sent a copy of the Order for Judgment by Default, together with other information he had requested of Mr. Mandel, receipt of which letter was confirmed by Federal Express on November 17, 2010. See Exh. C-3, see also, Federal Express proof of delivery at Exh. C-4. As admitted in Mr. B’s Declaration (see ¶ 2), Mr. B never replied to the foregoing letters, nor challenged the entry of the judgment against him at that time.

iii. Mr. B Fails to Meet the Standard Required to Attack a Judgment Under Fed. R. Civ. Proc. 60.

Notably, Mr. B’s motion makes only passing reference to the legal framework which allows for an attack upon a default judgment. At page 8, lines 20-23 of his motion, Mr. B mentions that there is authority under the Federal Rules to set aside a judgment “if it is void or for any other reason that justifies relief”. A review of the rules cited by Mr. B, however, particularly when reviewed in light of his obvious kno wledge of the entry of default and default judgment against him, shows that this motion has been brought too late and, therefore, must be denied in its entirety.

Under Fed. R. Civ. Proc. 55(c), an entry of default may be set aside for “good cause”, and a default judgment may be set aside under the provisions of Rule 60(b). Rule 60(b) provides:

Grounds for Relief from a Final Judgment, Order, or Proceeding. On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or

proceeding for the following reasons:

(1) mistake, inadvertence, surprise, or excusable neglect;

(2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b);

(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;

(4) the judgment is void;

(5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or

(6) any other reason that justifies relief.

Any argument which may arise to attack a judgment under Rule 60(b) must be made in the time frame provided for under subsection (c) of Rule 60, which provides that: “[a] motion under Rule 60(b) must be made within a reasonable time—and for reasons (1), (2), and (3) no more than a year after the entry of the judgment or order or the date of the proceeding.” (Emphasis Supplied).

Hence, the only questions this Court must answer in considering Rule 60(c) are:

(a) whether this motion is being made within one year after the entry of the judgment (assuming Mr. B’s attack thereon is premised on reasons (1), (2) or (3) of Rule 60(b)); or;

(b) whether this motion is being made “within a reasonable time” (assuming Mr. B’s attack is being made based on another of the reasons described in Rule 60(b)).

Given that the judgment being attacked in Mr. B’s motion was entered on October 12, 2006 – five and a half years ago), he cannot meet either of the foregoing standards. While it is not clear what specific basis Mr. B is asserting to attack the judgment herein as he has only made passing reference to the applicable standard, at the end of the day, he cannot meet either of the foregoing standards.

Even if Mr. B did not have the knowledge clearly ascribable to him based on the discussions with counsel for Plaintiff in 2006, all as discussed above, he has frankly admitted in his own Declaration having received a copy of the judgment being attacked herein, 18 months ago, in December of 2010 (see B Declaration in Support of Motion at ¶ 2 – although, as shown by the documentation provided herewith, it was actually provided to him a month earlier, on November 17, 2010) wherein he states that he was contacted by a company (i.e., Thomas Seaman Company) attempting to collect on that judgment, and admits that “[t]hey did send me a copy of the judgment but I did not respond to them.” Id.

Even if November of 2010 had been the first time Mr. B ever became aware of the fact that there was a judgment pending against him (which it was not), the instant motion was not brought until May 25, 2012 – then approximately a full year and half after he admits he knew of the judgment (and had received a copy of it from Plaintiff). Had Mr. B run into this Court in early 2011 to attack that judgment, claiming that he was coming in as soon as he learned of the judgment, and had there been no evidence that he knew of the judgment many years before, there may have been some basis to entertain the motion (assuming he did not have the knowledge he actually had in 2006), but waiting between 18 months and 6 years to have acted cannot be deemed reasonable.

B. Defendant B Fails to Even Cite or Discuss the Well-Settled Ninth Circuit Case Law Governing Motions to Set Aside Default Judgments, and, In any Event, Cannot Meet that Standard.

Aside from the fact that Defendant B has failed to engage the applicable Federal Rules regarding the setting aside of a default judgment, he also fails to cite or discuss, much less set forth any legal arguments relating to, the Ninth Circuit’s well-settled case law regarding motions to set aside default judgments.

As indicated above, Rule 55(c) allows an entry of default to be set aside only for “good cause”, and a default judgment may be set aside under the factors described in Rule 60(b). Reconciling this language, the Ninth Circuit has held that the “good cause” standard governs the vacating of an entry of default or the entry of a default judgment. Franchise Holding II, LLC v. Huntington Rests. Group, Inc., 375 F.3d 922, 926 (9th Cir. 2004). The factors used when considering whether “good cause” exists to set aside the entry of default or default judgment are: (1) whether the plaintiff would be prejudiced if the judgment or entry of default is set aside; (2) whether the defendant has a meritorious defense1; or (3) whether defendant’s culpable conduct led to the default. Franchise Holding, 375 F.3d at 925-26; see also, O’Connor v. Nevada, 27 F.3d 357, 364 (9th Cir. 1994); Shippam v. Rapid Link Corp., 2012 WL 1131536 (E.D. Cal. 2012). Notably, while all of the foregoing factors favor Plaintiff Medical Capital, these factors are to be considered disjunctively, such that if any of the factors favor the plaintiff, the court may deny a motion to set aside the entry of default. Franchise Holding, 375 F.3d at 926. Further, it is the moving party (which in this case has not even discussed these factors) which bears the burden of establishing that these factors weigh in favor of granting the motion to set aside. Id.

i. Prejudice to Plaintiff.

Taking the foregoing factors in turn, Plaintiff Medical Capital is being required to oppose this motion to set aside five and a half years after the judgment in this case was entered, and after it has already made substantial legal efforts to pursue Defendant B to collect on the judgment. To be forced to now go back, set aside the judgment, and require Plaintiff to litigate its claims in this case would be a textbook example of prejudice. More importantly for consideration of this factor, Defendant Breining has not affirmatively brought forth any arguments, much less carried his burden of proof, to suggest that Plaintiff Medical Capital would not be prejudiced. Certainly in a case where a defendant becomes aware of the default and promptly moves to set it aside, there is a strong argument that the plaintiff would not be prejudiced by setting aside the default, but that is not the case here.

ii. Whether the Defendant Has a Meritorious Defense.

One of the more interesting factors for consideration on the instant motion is Mr. B’s failure to describe how he would defend this case if the default were set aside. The Complaint in this case asserted that on October 24, 2003, Plaintiff Medical Capital and Defendant Quality Care entered into a purchase agreement (the “Agreement”) for the purchase of certain accounts receivable of Quality Care for a discounted price and fee. The Agreement provided that Plaintiff Medical Capital would be able to purchase additional accounts receivables from Defendant Quality Care for a period of one year, beginning October 24, 2003 and ending October 24, 2004. Pursuant to the terms of the Agreement, if Quality Care failed to collect on the accounts receivable it purchased, which caused the accounts receivable, directly or indirectly, not to reach an agreed upon “Adjusted Value” (as that term was defined in the Agreement) within 120 days, Defendant Quality Care would be liable to Plaintiff Medical Capital for the difference between the amount actually collected and the Adjusted Value. Defendants Walters and Breining each signed a personal guaranty in favor of Plaintiff Medical Capital in the event of a default of Quality Care in performance of the Agreement.

It was Defendant B’s burden in his motion to show that he had a meritorious defense to the claims being asserted in the case. The motion, however, is void of any discussion or argument as to how Mr. B would actually defend the underlying case, likely because no such defenses actually exist. Did Quality Care not enter into the contract at issue? Did Mr. Breining not actually sign the guaranty as alleged by Plaintiff? A copy of the Agreement, with the guaranty of Mr. Breining, which would refute any such arguments, is attached hereto as Exhibit C-5.

Further, whatever complaints Mr. B may have about his business partners in Quality Care (such as those described in his Declaration at ¶ 7, which may possibly give him claims against his former business partner and/or Quality Care – which, of course he already knows, given his having admittedly retained attorney Bruce Wisotsky to consider pursuing those claims – Breining Declaration at ¶ 7), such arguments would not affect his liability to Plaintiff Medical Capital under the guaranty he signed.

In sum, Mr. B has failed to meet the second prong of the Ninth Circuit standard, by failing to carry his burden to show that he has a meritorious defense in this case if the default were set aside.

iii. Defendant’s Own Culpable Conduct.

While the foregoing two (2) factors each favor Plaintiff Medical Capital, Defendant B’s own culpable conduct also requires that his motion be denied. As the Honorable Judge Dawson explained in Trustees of the Operating Engineers Pension Trust v. Richard Thornton (Case No. 2:10-CV-00502-KJD-PAL) (see also 2010 WL 5287533 (D. Nev. 2010)), at p. 1, in considering a defendant’s motion to set aside:

When examining culpable conduct, the court concurrently examines any excusable neglect of the defaulting party (citing Franchise Holding, 375 F.3d at 927). Defendant’s conduct is culpable if it “received actual or constructive notice of the filing of the action and failed to answer or otherwise defend.

Id. (citing Direct Mail Specialist, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685, 690 (9th Cir. 1988) (Emphasis Supplied). As set forth above, there is no question that Mr. B received actual notice of the filing of the action and failed to defend the case. Indeed, the fact that he had counsel inquiring into the matter with the undersigned’s law firm, and that he personally called that attorney after the judgment was entered (some years ago) makes clear he had actual notice of this action. Further, the fact that defendant Quality Care was a small entity with two members that signed guarantees of the entity’s obligations to Plaintiff Medical Capital, which entity (Quality Care) was served in this case, places Mr. Breining on constructive notice of the pendency of this action.

In sum, Defendant cannot engage the Ninth Circuit’s “good cause” standard for setting aside the judgment against him since he fails to meet any of the factors that must be considered when making this analysis. He has completely failed to meet his burden to show that good cause exists, and his motion, therefore, must be denied.

C. The Affidavits Submitted to this Court Were Not Misleading and All Information Regarding Service on Mr. B Was Within the Court’s File and Public Record in this Matter.

In light of the application of the correct legal standard to this motion, it is understandable why Mr. B seeks to distract the Court with ominous statements about the Court having been misled by Plaintiff’s counsel in obtaining the default judgment. Perhaps his counsel feels that making such statements will distract the Court from the simple analysis required by Rule 60 and the Ninth Circuit case law described above. In any event, however, while the documentation submitted to the Court may not be as specific as Mr. Breining would like in every instance where the matter was presented to the Court, the Court was NOT misled by those submissions.

The thrust of Mr. B’s motion is that Plaintiff misled this Court into somehow believing that Mr. B was personally served with process in this case, whereas he was actually served via service upon an attorney he candidly admits had at one time represented him. See Breining Declaration at ¶ 7. That said, it is clear that Plaintiff’s counsel’s representations to the Court disclosed in multiple places the fact that Mr. Breining was served via counsel. For example, in the “Affidavit of Dustin A. Johnson, Esq. In Support of Request for Default”, which was submitted in support of the “Motion for Request for Clerk’s Entry of Default Against Defendant John Breining” (see Doc. 15 – at para. 3 of Johnson Affidavit), Mr. Johnson advised the Court that:

On July 26, 2006, at 9:00 a.m., Glenn Michael Consor, personally served Defendant B at c/o law firm., Roseland New Jersey 07068.

The foregoing statement contained a citation to the “attached Affidavit of Service” (see Doc. 15). The Affidavit of Service itself, the very document being referenced in Mr. Johnson’s Affidavit, demonstrates that service on Mr. B was made on a “Female, Age: 35+ Height 5’3″ Weight 100-110 lbs Skin Color: Caucasian Hair Color: Blonde”. Id. at p. 1. The Affidavit of Service further states that the person served was “Julienne Job, Authorized Representative”. While the second page of the Affidavit of Service has a box checked for “Served personally upon the defendant”, it immediately thereafter (on the next line) explains where it was served:

law firm , 101 Eisenhower Parkway, Roseland, New Jersey at 09:00 who is the representative counsel authorized to accept.

A few lines down the page, the Affidavit further notes that the name of the person with whom the summons and complaint were left was “.”

While the actual Motion for Judgment by Default itself, filed after the entry of the default, is less detailed, as it is made in an effort to obtain a judgment by default against all three co-defendants in this action (i.e.,were “personally served with process in New Jersey”, without the explanation described above (made in the motion for request for Clerk’s entry of default), the fact is that the default had been entered two months prior with absolutely no involvement, opposition or response of any kind by any of the co-defendants and all of the foregoing information, including the Affidavit of Service itself were within the Court’s record for review, as they had been to the court clerk when it entered the default in the first place.

To the extent that Mr. B thought there was anything deficient in the Motion for Judgment by Default, or any of the papers filed leading up to the entry of said judgment, his time to file that Motion would have run long ago. He has not availed himself of the obligation to timely make such a motion, and, for that reason, the instant motion must fail.

III. CONCLUSION

For the reasons set forth above, it is respectfully requested that the Defendant’s Motion to Dismiss Complaint as to Mr. B or Alternatively, Motion to Set Aside Default Judgment Against B and Motion to Dismiss be denied.


1

The Ninth Circuit precedent in this area, as set forth in the cases cited, requires a defendant seeking to avoid a default judgment to make a showing that it has a meritorious defense to the underlying action, contrary to Nevada Supreme Court precedent in Epstein v. Epstein, 113 Nev. 1401, 1405, 950 P.2d 771, 773 (1997), which overruled this requirement in actions proceeding in the State of Nevada, relying on the U.S. Supreme Court’s decision, in this regard, in Peralta v. Heights Medical Center, Inc., 485 U.S. 80, 108 S.Ct. 896 (1988).

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on commercial litigation, including employment law litigation matters, such as non-compete agreements.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.