Huynh v. Chiaravanond

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Phong Thanh Huynh, No. CV-23-08622-PCT-JJT 10 Plaintiff, ORDER 11 v. 12 Alissa Chiaravanond, et al., 13 Defendants. [14] 15 At issue is Defendants’ Motion to Set Aside Entry of Default (Doc. 28, Mot.), to 16 which Plaintiff filed a Response (Doc. 33, Resp.), and Defendants filed a Reply (Doc. 34, 17 Reply). The Court has reviewed the parties’ briefs and finds this matter appropriate for 18 decision without oral argument. See LRCiv 7.2(f). For the reasons set forth below, the 19 Court will grant Defendants’ Motion. 20 I. BACKGROUND 21 Plaintiff Phong Huynh and Defendant Alissa Chiaravanond were previously 22 married to each other. (Doc. 1, Compl. ¶ 75.) During their relationship, Chiaravanond 23 acquired Defendants Pacific Shangrila LLC, ILU LLC, Cathedral Shangrila LLC, and Nido 24 di Stelle LLC. (Compl. ¶¶ 29–34.) On December 2, 2023, after the couple separated, 25 Plaintiff filed a Complaint alleging fourteen claims against Defendants. Plaintiff served 26 Nido di Stelle and Cathedral Shangrila on January 16, 2024, and filed proof of service on 27 January 29, 2024. (Docs. 9–10.) Plaintiff served Chiaravanond, Pacific Shangrila, and ILU 28 on February 1, 2024, and filed proof of service on February 6, 2024. (Docs. 11–13.) After 1 Defendants failed to answer, Plaintiff filed applications for entry of default against Nido di 2 Stelle and Cathedral Shangrila on February 7, 2024, Pacific Shangrila and ILU on February 3 14, 2024, and Chiaravanond on February 26, 2024. (Docs. 14, 18, 21.) The Clerk of Court 4 entered default as to Nido di Stelle and Cathedral Shangrila on February 12, 2024, as to 5 Pacific Shangrila and ILU on February 15, 2024, and as to Chiaravanond on February 27, 6 2024. (Docs. 16, 20, 23.) On April 3, 2024, Defendants appeared through counsel and 7 moved to set aside entry of default. (Doc. 28.) 8 II. LEGAL STANDARD 9 Federal Rule of Civil Procedure 55(a) states that the Clerk of Court must enter 10 default when “a party against whom a judgment for affirmative relief is sought has failed 11 to plead or otherwise defend.” Rule 55(c) allows the Court to set aside any entry of default 12 for “good cause.” See O’Connor v. Nevada, 27 F.3d 357 , 364 (9th Cir. 1994) (noting that a 13 District Court’s discretion is especially broad when considering whether to set aside entry 14 of default). In deciding whether to exercise its discretion and set aside an entry of default, 15 the Court must consider three factors: (1) whether the party seeking to set aside the default 16 engaged in culpable conduct that led to the default; (2) whether the party seeking to set 17 aside the default has no meritorious defense; and (3) whether setting aside the default 18 judgment would prejudice the other party. United States v. Signed Pers. Check No. 730 of 19 Yubran S. Mesle (“Mesle”), 615 F.3d 1085, 1091 (9th Cir. 2010) (citing Franchise Holding 20 II, LLC v. Huntington Rests. Grp., Inc., 375 F.3d 922 , 925–26 (9th Cir. 2004)). A finding 21 that any one of these factors is true is sufficient reason for the District Court to refuse to set 22 aside the default, but the Ninth Circuit also cautions that “judgment by default is a drastic 23 step appropriate only in extreme circumstances; a case should, whenever possible, be 24 decided on the merits.” Id. (quoting Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). 25 III. ANALYSIS 26 A. Culpable Conduct 27 “[A] defendant’s conduct is culpable if he has received actual or constructive notice 28 of the filing of the action and intentionally failed to answer.” TCI Grp. Life Ins. Plan v. 1 Knobber, 244 F.3d 691 , 697 (9th Cir. 2001), overruled on other grounds by Egelhoff v. 2 Egelhoff ex rel. Breiner, 532 U.S. 141 (2001). The Ninth Circuit has held that conduct can 3 be intentional only where “there is no explanation of the default inconsistent with a 4 devious, deliberate, willful, or bad faith failure to respond.” Mesle, 615 F.3d at 1091 5 (citation omitted). “Neglectful failure to answer as to which the defendant offers a credible, 6 good faith explanation negating any intention to take advantage of the opposing party, 7 interfere with judicial decisionmaking, or otherwise manipulate the legal process is not 8 ‘intentional.’” TCI Grp., 244 F.3d at 697. 9 Defendant Chiaravanond (hereinafter referred to individually as “Defendant”) 10 argues that her conduct is not culpable because her failure to timely respond is excused by 11 her fear for her safety and her lack of familiarity with legal matters. (Mot. at 13.) Defendant 12 alleges several incidents that contributed to her fear of Plaintiff: a fake Instagram account 13 acting as her posted her private pictures, a prominent businessperson threatened her over 14 the phone to return to her marriage with Plaintiff, a car followed her and drove in an 15 aggressive and dangerous manner that caused her fear of being forced off the road, her 16 home electronic devices were hacked, and a drone landed near her home at night. (Doc. 29, 17 Chiaravanond Decl. ¶¶ 12–18.) Defendant also argues that she is not legally sophisticated 18 and was not represented by legal counsel when the Answer was due. (Mot. at 13.) 19 Defendant failed to timely answer, but the Court will not assume, without more, that 20 Defendant acted deviously, willfully, or in bad faith. In doing so, the Court finds that 21 Defendant offers a credible, good faith explanation that negates any intention to take 22 advantage of the opposing party or legal process. At most, Defendant’s explanation 23 suggests neglectful failure to answer. The first factor weighs in favor of setting aside the 24 default. 25 B. Meritorious Defense 26 To satisfy the “meritorious defense” requirement, the movant need only allege 27 sufficient facts that, if true, would constitute a defense to the plaintiff’s claims. Mesle, [28] 615 F.3d at 1094 . Nonetheless, it is important that the movant present the District Court 1 with specific facts. Franchise Holding II, 375 F.3d at 926. “A ‘mere general denial without 2 facts to support it’ is not enough to justify vacating a default or default judgment.” Id. 3 (quoting Madsen v. Bumb, 419 F.2d 4, 6 (9th Cir. 1969)). 4 Although Plaintiff argues that Defendants lack meritorious defenses, Defendant 5 alleges that Plaintiff holds no ownership interest in the properties listed in the Complaint 6 and there is no evidence to prove otherwise, the properties were gifted to Defendant as an 7 irrevocable dowry she is entitled to keep, and Defendant did not misrepresent herself to 8 Plaintiff. (Mot. at 14.) Defendant also stated three affirmative defenses: waiver, 9 acquiescence, and unclean hands. (Mot. at 15.) Defendant has thus alleged sufficient facts 10 that would constitute a defense to Plaintiff’s claims. Therefore, the Court finds that 11 Defendant has met her burden of presenting a meritorious defense and the second factor 12 weighs in favor of setting aside the default. 13 C. Prejudice 14 “To be prejudicial, the setting aside of a [default] must result in greater harm than 15 simply delaying resolution of the case.” TCI Grp., 244 F.3d at 701 (citations omitted). The 16 standard the Court applies is whether the plaintiff’s ability to pursue its claim would be 17 hindered if the default were set aside. Id. For a delay to be prejudicial, it must result in 18 tangible harm, such as the loss of evidence, increased difficulties of discovery, or greater 19 opportunities for fraud or collusion. Id. (citing Thompson v. Am. Home Assur. Co., 95 F.3d 20 429 , 433–34 (6th Cir. 1996)). 21 Plaintiff argues that he will be prejudiced if the default were set aside because 22 Defendant “retains illegitimate control over the [i]nvestment [p]roperties,” which she could 23 destroy or reduce the value of “before [Plaintiff] obtains control over them.” (Resp. at 15.) 24 However, that argument presumes the Court’s determination of which party rightfully 25 owns the properties. Because Plaintiff fails to argue that setting aside the default will result 26 in tangible harm, the Court concludes that Plaintiff will not be prejudiced by the delay. 27 Additionally, when possible, a case should be decided on the merits. The third factor 28 weighs in favor of setting aside the default. 1 Because the Court finds that Defendants’ failure to timely respond is not culpable 2|| conduct, Defendants have meritorious defenses, and setting aside the default will not || prejudice Plaintiff, the Court grants Defendants’ Motion to Set Aside Entry of Default. 4 IT IS THEREFORE ORDERED granting Defendants’ Motion to Set Aside Entry || of Default (Doc. 28). The Clerk of Court is directed to set aside the Entry of Default against 6|| all Defendants (Docs. 16, 20, 23). 7 IT IS FURTHER ORDERED that Defendants shall file an Answer or otherwise 8 || respond to the Complaint by July 17, 2024. 9 Dated this 2nd day of July, 2024. CN 11 wef folee— Unifgd State#District Judge [28] _5-