Maciel Builders LLC. v. US Framing International LLC.

Background

Maciel Builders LLC filed the complaint on June 24, 2019, naming eight defendants: US Framing International LLC; US Framing West Inc.; Thomas G. English; Ryan Therrien; Joe Garcia; Matthew Phillips; Nicholas Rivera, also identified as Nicholas Rivera Pulida; and Ivan Villalva.

Maciel Builders served Rivera and Villalva in August 2019. The Clerk entered defaults against both defendants on October 9, 2019, under Federal Rule of Civil Procedure 55(a). A default is a formal entry against a defendant who has not responded to the complaint. Default judgment had not been requested.

Rivera and Villalva moved under Rule 55(c) to set aside, or remove, the entries of default. They had attorneys representing them. They also moved to join a separate Rule 12(b)(6) motion filed by US Framing International LLC, US Framing West Inc., and English. The court noted that the separate dismissal motion and the motion to join it were still pending.

Legal standard

Under Rule 55(c), a court may set aside an entry of default for “good cause.” In the Ninth Circuit, the court considers whether the default resulted from culpable conduct, whether the defendant has a meritorious defense, and whether removing the default would prejudice the plaintiff. The court explained that default is a drastic step and that cases should generally be decided on their merits when possible. It also stated that this standard is applied more liberally to an entry of default than to a final default judgment.

Discussion

The court found that Rivera and Villalva had not engaged in culpable conduct. Rivera stated that he did not recall being served and did not learn about the lawsuit until later. Villalva acknowledged receiving case-related documents while working at a jobsite in San Jose, California, but said that he contacted Matthew Phillips, a vice president of US Framing, and was told the lawsuit was being handled and that he did not need to worry about it. Villalva said he learned on October 11, 2019, that he was being sued and needed to appear.

The court treated these explanations as simple carelessness rather than bad faith. It rejected Maciel Builders’ arguments that the defendants’ conduct was disingenuous or that other defendants had manipulated them into filing the motion. The court found those manipulation allegations speculative and found no intent to take advantage of Maciel Builders, interfere with the court’s decision-making, or manipulate the legal process.

The court also found that Rivera and Villalva had shown a meritorious defense. For this purpose, a defendant need only identify facts or law showing that a sufficient defense can be asserted. The court found that their decision to join the Rule 12(b)(6) motion, which sought dismissal of the entire complaint, presented a sufficiently colorable defense. The court expressly did not decide whether that dismissal motion had merit.

Finally, the court found no sufficient showing of prejudice. Maciel Builders suggested that the other defendants might alter, hide, reframe, or shield information and documents involving Rivera and Villalva. The court found those allegations unfounded and nonspecific. It explained that ordinary litigation costs and delay are not enough; prejudice generally requires a showing that the plaintiff’s ability to pursue its claims will be hindered, such as through lost evidence or more difficult discovery.

Disposition

The court found that the defaults were not caused by culpable conduct, that Rivera and Villalva had a meritorious defense for purposes of the motion, and that setting aside the defaults would not prejudice Maciel Builders. It therefore granted the Motion to Set Aside Default and directed the Clerk to set aside the entries of default as to Ivan Villalva and Nicholas Rivera. The opinion did not rule on the separate Rule 12(b)(6) motion to dismiss.