Ewing v. Reliant Credit Repair, LLC

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] 11 ANTON EWING, Case No.: 19-cv-01788-AJB-RBB Plaintiff, [12] ORDER: v. [13] RELIANT CREDIT REPAIR, LLC, (1) GRANTING DEFENDANT’S [14] Defendant. MOTION TO SET ASIDE ENTRY OF 15 DEFAULT, (Doc. No. 9); AND [16] (2) DENYING PLAINTIFF’S MOTION 17 FOR SANCTIONS, (Doc. No. 12) [18] 19 Plaintiff Anton Ewing (“Ewing”), proceeding pro se, brings this action under the 20 Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”), alleging that Defendant 21 Reliant Credit Repair, LLC (“Defendant”) called Ewing, without his consent, using an 22 automatic telephone dialing system. (Complaint, Doc. No. 1 ¶ 30.) Presently pending 23 before the Court are (1) Defendant’s motion to set aside entry of default, (Doc. No. 9); and 24 (2) Ewing’s motion for sanctions against defense counsel, (Doc. No. 12). For the reasons 25 stated below, the Court GRANTS Defendant’s motion to set aside default judgment, and 26 DENIES Ewing’s motion for sanctions. 27 // 28 // 1 I. DEFENDANT’S MOTION TO SET ASIDE DEFAULT JUDGMENT 2 The Court first considers Defendant’s motion to set aside default. (Doc. No. 9.) Entry 3 of default may be set aside for good cause. See Fed. R. Civ. Pro. 55(c). The court examines 4 three factors when determining whether there is good cause: (1) whether the defendant’s 5 culpable conduct led to the default; (2) whether defendant has a meritorious defense; and 6 (3) whether setting aside the default will prejudice the plaintiff. See Franchise Holding II, 7 LLC, v. Huntington Rests. Grp., Inc., 375 F.3d 922 , 926 (9th Cir. 2004). The defaulting 8 party bears the burden of showing the default should be set aside. Id. However, “judgment 9 by default is a drastic step appropriate only in extreme circumstances; a case should, 10 whenever possible, be decided on the merits.” United States v. Signed Personal Check No. 11 730 of Yurban S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (quoting Falk v. Allen, 739 12 F.2d 461, 463 (9th Cir. 1984)). A court’s discretion to set aside a default is “especially 13 broad” where, as here, an entry of default, as opposed to a default judgment, is being set 14 aside. O’Conner v. Nevada, 27 F.3d 357 , 364 (9th Cir. 1994). 15 The Court concludes good cause exists to set aside entry of default. First and 16 importantly, the Court finds no evidence of bad faith or culpable conduct in Defendant’s 17 failure to respond to the Complaint. Adam Mherz, CEO for Defendant, adequately explains 18 he was aware that Plaintiff had filed a Complaint in this Court but, at that time a pro se 19 litigant, erroneously believed that Ewing never properly served the Summons and 20 Complaint on the company because the Summons and Complaint were not served at the 21 company’s business address. (Declaration of Adam Mherz ¶ 7, 8, 11.) Therefore, the 22 circumstances leading to the default do not show bad faith, but rather, mistake and 23 inadvertence at best. Thus, this factor does not weigh in favor of the extreme measure of 24 judgment by default. 25 Second, the Court favors a decision on the merits. See Eitel v. McCool, 782 F.2d 26 1470, 1472 (9th Cir. 1986) (holding default judgments generally are disfavored because 27 “cases should be decided on their merits whenever reasonably possible”). Defendant 28 asserts it will provide a defense in this litigation, and denies that it, or any agents acting on 1 its behalf, called Ewing without his consent using autodialed and prerecorded calls in 2 violation of the TCPA. With this assertion, the Court will be able to evaluate the merits of 3 Plaintiff’s case against Defendant’s defense, and decide the case on the merits. 4 Lastly, the Court finds no prejudice to Plaintiff in permitting this case to proceed 5 forward. Specifically, Defendant promptly filed its motion to set aside default once it 6 discovered default was entered, this case is still in the early stages of litigation, and no 7 substantive activity has occurred in the matter. Contra PepsiCo, Inc. v. Cal. Sec. Cans., [8] 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002) (noting this factor weighs in favor of default 9 if the plaintiff “will likely be without other recourse for recovery” without a default 10 judgment). 11 In light of the foregoing, the factors weigh in favor of setting aside the entry of 12 default against Defendant. The Court thus GRANTS Defendant’s motion to set aside entry 13 of default. (Doc. No. 9.) Defendant must answer or otherwise respond to Ewing’s 14 Complaint on or before October 16, 2020. 15 II. EWING’S MOTION FOR SANCTIONS 16 Next, the Court will turn to Ewing’s motion for sanctions against Defendant’s 17 counsel. (Doc. No. 12.) Ewing argues sanctions are warranted because counsel for 18 Defendant made “derogatory remarks about Plaintiff in direct violation of Local Rule 83.4” 19 in Defendant’s ex parte motion to set aside default. (Id. at 3–4.) Among other things, Ewing 20 takes issue with the verbiage used in the motion to set aside default. (Id.) Ewing argues 21 defense counsel mischaracterizes Ewing’s correspondence, offers unnecessary information 22 in the motion, and improperly accuses Ewing of illegally recording telephone calls. (Id. at 23 6.) Ewing explains that defense counsel “remove[d] the greater majority of her slanderous 24 statements and defamatory remarks” by filing an amended motion, but “damage is still 25 done.” (Id. at 3–4.) 26 Courts have inherently broad authority to impose penalties and sanctions for a 27 party’s failure to comply with the rules of conduct governing the litigation process. 28 Through the district court’s inherent powers, monetary sanctions in the form of attorney’s 1 fees may be imposed against a party who acts in bad faith, such as disrupting the litigation 2 process or failing to abide by a court order. See Leon v. IDX Systems Corp., 464 F. 3d 951 , 3 961 (9th Cir. 2006); see also Rodeway Exp., Inc. v. Piper, 447 U.S. 752, 766 (1980). Before 4 a court may award sanctions under its inherent powers, “the court must make an explicit 5 finding that counsel’s conduct ‘constituted or was tantamount to bad faith.’” Primus Auto. 6 Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997) (quoting Roadway Exp., Inc. 7 v. Piper, 447 U.S. 752, 767 (1980)). “A finding of bad faith is warranted where an attorney 8 ‘knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for the 9 purpose of harassing an opponent.’” Primus Auto. Fin. Servs., 115 F.3d at 649 (quoting In 10 re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 436 (9th Cir. 1996)). “‘Mere recklessness 11 does not alone constitute bad faith; rather, an award of attorney’s fees is justified when 12 reckless conduct is combined with an additional factor such as frivolousness, harassment, 13 or an improper purpose.’” Ibrahim v. U.S. Dep’t of Homeland Sec., 912 F.3d 1147 , 1180– 14 81 (9th Cir. 2019) (quoting Rodriguez v. United States, 542 F.3d 704, 709 (9th Cir. 2008)). 15 Upon close review of the parties’ filings in connection with this motion, the Court 16 does not find sanctionable conduct by defense counsel. First, while defense counsel and 17 Ewing are reminded to exclude extraneous language in filings which are irrelevant to the 18 issues at hand, defense counsel’s conduct does not demonstrate the requisite level of bad 19 faith necessary for the imposition of sanctions. To the contrary, defense counsel’s conduct 20 demonstrates a good faith effort to meet and confer with Ewing to address his objections 21 without involving the Court. (Declaration of Amanda Benedict, Ex. C, at 10–11.) These 22 efforts culminated in Defendant withdrawing its original motion, and promptly refiling a 23 motion with modified language as a compromise with Ewing. (Id.; Doc. Nos. 6, 9.) The 24 parties may disagree as to language in the motion, but the Court does not find that this 25 conduct is sanctionable. 26 Second, defense counsel’s allegation that Ewing illegally recorded telephone calls 27 also does not provide a basis to impose sanctions. Defense counsel’s assertion that Ewing 28 illegally recorded telephone calls that Ewing made or received to Defendant was not in bad 1 || faith, but rather to establish a defense in response to Ewing’s own allegation that Defendant 2 |jillegally recorded telemarketing calls with Ewing in violation of California Penal Code 3 ||sections 632.7 and 637.2. (Doc. No. 9 at 9.) The mounting of this defense was not 4 ||inappropriate as it was essentially an attempt to establish a counterclaim and satisfy an 5 |jelement to set aside entry of default. See Franchise Holding H, LLC, 375 F.3d at 926 6 || (stating that to set aside default, the Court may look at whether defendant has a meritorious 7 || defense). 8 As stated in this Court’s Civil Local Rules, “[i]n seeking justice through the courts, 9 ||attorneys and parties subject themselves to an inherently adversarial system. Although 10 || adversarial, the experience does not have to, and should not, be antagonistic or hostile. 11 || Civility is paramount and not to be confused with weakness. Civility in action and words 12 ||is fundamental to the effective and efficient functioning of our system of justice and public 13 |}confidence in that system.” S.D. Cal. Civil Local Rule 2.1. The Court finds no sanctionable 14 ||}conduct today, but the Court emphasizes the importance of courtesy and civility in 15 || litigation conduct. 16 || TI. CONCLUSION 17 Based on the foregoing, the Court hereby GRANTS Defendant’s motion to set aside 18 default. (Doc. No. 9.) Defendant must answer or otherwise respond to Ewing’s Complaint 19 or before October 16, 2020. Additionally, the Court DENIES Ewing’s motion for 20 || sanctions. (Doc. No. 12.) [21] 22 IT IS SO ORDERED. 23 Dated: September 17, 2020 © 24 Hon, Anthony J.Battaglia 25 United States District Judge