District Council 16 Northern California Health and Welfare Trust Fund v. Lidini…

Background

The plaintiffs filed an action under the Employee Retirement Income Security Act (ERISA), alleging that the defendants violated 29 U.S.C. § 1145. The claim arose from bargaining and employer agreements that required the defendants to make monthly fringe-benefit contributions to the plaintiffs’ trust funds and to maintain records for auditing.

The plaintiffs served the defendants’ agent for service of process on November 5, 2017. The Clerk entered default in February 2018 after the defendants did not appear. The court later adopted Magistrate Judge Sallie Kim’s report and recommendation and entered default judgment on August 9, 2019, awarding $32,187.09 for unpaid contributions, liquidated damages, interest, audit fees, attorneys’ fees, and costs.

The defendants appeared in August 2020 and moved to set aside the entry of default and the default judgment. They argued that their failure to appear resulted from mistake, inadvertence, surprise, or excusable neglect. They also argued that the plaintiffs failed to serve the motion for default judgment on the correct defense attorney.

Court’s Analysis

Under Federal Rule of Civil Procedure 60(b), a party seeking relief from a final default judgment must comply with Rule 60(c)(1). For claims based on mistake, inadvertence, surprise, or excusable neglect, the motion must be filed no more than one year after entry of judgment. The court entered judgment on August 9, 2019, but the defendants did not appear or file their motion until August 21, 2020. The court therefore found the motion untimely. The defendants did not file a reply explaining why the one-year limit should not apply.

The court further held that the defendants could not show “good cause” even if it considered the motion on its merits. A defendant’s conduct is culpable when the defendant has actual or constructive notice of the lawsuit but fails to answer. The court found that the defendants had notice beginning in November 2017, received notice of the entry of default, and were served with the motion for default judgment. The plaintiffs also presented evidence that defense counsel knew about the filings and indicated an intention to answer but did not appear.

The court rejected the defendants’ notice argument under Rule 55(b)(2). That rule requires notice of an application for default judgment when the opposing party has made an appearance, including in some circumstances an informal appearance showing a clear purpose to defend. The court concluded that the plaintiffs had served the defendants and their counsel, Nolan Del Campo, with the motion for default judgment before the defendants’ purported new counsel, Yasha Rahimzadeh, contacted the plaintiffs. The plaintiffs therefore did not fail to provide the required notice.

Disposition

The court DENIED the defendants’ motion to set aside the default judgment. The opinion did not state that the denial was with or without prejudice.