B.M. v. Wyndham Hotels & Resorts, Inc.

Background

B.M., who is now deceased, sued several hotel chains under the Trafficking Victims Protection Reauthorization Act, along with negligence and wrongful-death claims. The complaint alleges that B.M. was trafficked at the Days Inn Sunnyvale in 2014 and 2015, when she was a minor. After B.M.’s death, her mother, J.M., was substituted as plaintiff.

J.M.’s second amended complaint named Sundowner Inn, LP, for the first time. The complaint alleges that Sundowner does business as the Days Inn Sunnyvale. J.M. filed proof that Sundowner was served on August 8, 2024. Sundowner did not timely respond, and J.M. later asked the clerk to enter default. That request was still pending when Sundowner filed its motion.

Sundowner’s registered agent and an officer of its general partner submitted evidence that the failure to respond resulted from mistakenly sending the complaint to Admiral Insurance Group instead of Farmers Insurance Exchange. Admiral’s policy did not cover the period involved in the allegations. Farmers later agreed to defend Sundowner and retained counsel.

Legal Standard

The court evaluated the motion under Federal Rule of Civil Procedure 55(c), which permits a court to set aside an entry of default for “good cause.” Because the clerk had not yet entered default, the court used that standard to decide whether entering default would ultimately be appropriate.

The court considered three factors: whether Sundowner engaged in culpable conduct, whether it had a potentially meritorious defense, and whether allowing it to defend would prejudice J.M. The court also emphasized that default is a severe remedy and that cases should generally be decided on their merits when possible.

Court’s Analysis

The court found no culpable conduct. Although Sundowner was aware of the lawsuit and failed to respond, the evidence indicated that the failure resulted from an insurance-tender mistake rather than bad faith or an attempt to take advantage of J.M., interfere with the court’s decision-making, or manipulate the legal process. The court also declined to treat Sundowner as culpable merely because it was a business entity; J.M. had not shown that Sundowner was a sophisticated party under the applicable standard.

The court found that Sundowner had offered a sufficient potential defense. The claims against Sundowner were based on allegations that it knew or should have known that sex trafficking occurred at the Days Inn Sunnyvale. Sundowner asserted that its employees and principals did not know, and had no reason to know, that trafficking was occurring there. The court held that these allegations, although sparse, were enough at this stage. Sundowner did not have to prove the defense while seeking relief from default.

The court also found no sufficient prejudice to J.M. The court noted that trial was set for September 2026, the pleadings were not yet settled, and discovery deadlines had not been set. It concluded that allowing Sundowner to file an answer and defend itself would not hinder J.M.’s ability to litigate the claims.

Order

The court GRANTED Defendant Sundowner’s motion to deny J.M.’s pending request for entry of default. It TERMINATED J.M.’s request for entry of default against Sundowner. The court ordered Sundowner to file a response to the third amended complaint within 14 days after that complaint is filed. The order terminated docket entries 193 and 211, and vacated the scheduled May 8, 2025 hearing.

This order addressed whether Sundowner could participate in the case despite its late response. It did not decide the merits of the Trafficking Victims Protection Reauthorization Act, negligence, or wrongful-death claims.