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Gustafson v. Bowman

United States District Court, D. Alaska

May 28, 2018

Aaron Gustafson and Gary Gustafson, Plaintiffs,
v.
Jason Bowman and Subsistence Placers LLC, Defendants.

          ORDER AND OPINION [RE: MOTION AT DOCKET 13]

          JOHN W. SEDWICK SENIOR JUDGE.

         MOTION PRESENTED

         At docket 13 defendant Jason Bowman (“Bowman”) moves to set aside his default which was entered by the Clerk on April 26, 2018, at docket 11. The motion is supported by the Declaration of Bradley Jameson (“Jameson”) at docket 14. At docket 15 plaintiffs Aaron Gustafson and Gary Gustafson (“Plaintiffs”) oppose the motion. The opposition is supported by the Declaration of John Joseph Turri (“Turri”) at docket 16 and the Declaration of Brandon C. Marx (“Marx”) at docket 17. Bowman replies at docket 21. Oral argument was not requested and would not assist the court.

         BACKGROUND

         Plaintiffs sued Bowman seeking a declaration that Bowman is required by contract to execute an authorization allowing Plaintiffs to commence mining on a placer mining claim known as Claim # 611836 which he had purchased from Subsistence Placers LLC. Plaintiffs also seek compensatory damages from Bowman in an amount exceeding $150, 000. Plaintiffs named Subsistence Placers LLC as a co-defendant but to date have not served process on that entity.

         The complaint was filed on March 2, 2018. Bowman was served in person on April 3, 2018, in Napa, California.[1] Bowman's answer to the complaint was due April 24, 2018. He did not file an answer. Plaintiffs moved for the entry of Bowman's default on April 25, 2018. The Clerk entered Bowman's default the next day.

         A similar lawsuit was filed by Gary Gustafson, one of the Plaintiffs here, against Bowman in 2015 in California. In that case Gary Gustafson was represented by Turri, a California lawyer who is one of the lawyers representing Plaintiffs in this case. Bowman was represented in the California case by Jameson, another California lawyer. After being served in the case at bar, Bowman contacted Jameson who helped find an Alaska lawyer for Bowman. Apparently unfamiliar with the Federal Rules of Civil Procedure, Jameson assumed that Bowman had 30 days in which to respond to the complaint, which would have been May 2, 2018. On April 27, Jameson contacted Turri seeking an extension of time in which to respond to the complaint because Bowman still had not retained an Alaska lawyer. Turri responded on April 28, 2018, advising that Bowman's default had already been entered. Jameson suggested that the parties stipulate to set aside the default. On April 30, 2018, Turri advised Jameson that he would encourage his clients to agree to set aside the default if Bowman paid the sum of $700. Jameson neither accepted nor rejected the $700 payment Turri suggested. By May 3, 2018, Turri had his clients' consent to set aside the default in exchange for the $700, but was unable to promptly communicate that information to Jameson as a result of circumstances beyond Turri's control.

         STANDARD OF REVIEW

         A district court may set aside a default pursuant to Fed.R.Civ.P. 55(c) for good cause. When evaluating a motion to set aside default, the district court should consider: (1) whether the movant engaged in culpable conduct leading to the entry of movant's default; (2) whether the movant possesses a meritorious defense; and (3) whether granting the motion will prejudice the plaintiff.[2]

         DISCUSSION

         Plaintiffs contend that because Bowman knew he had been sued but did not timely respond to the complaint, his conduct was culpable. The situation is more nuanced than Plaintiffs suggest. The Ninth Circuit has explained: “The usual articulation of the governing standard, oft repeated in our cases, is that ‘a defendant's conduct is culpable if he has received actual or constructive notice of the filing of an action and intentionally failed to answer.'”[3] Elaborating, the appellate court wrote: “A neglectful failure to answer as to which a defendant offers a credible, good faith explanation negating any intention to take advantage of the opposing party, interfere with judicial decision-making, or otherwise manipulate the legal process is not ‘intentional' . . . -although it certainly may be, once the equitable factors are considered-culpable or inexcusable.”[4]

         Here, there is no evidence that Bowman intended to take advantage of Plaintiffs, interfere with this court's decision-making, or manipulate the judicial process. To the contrary, the purpose of his actions was to afford the court an opportunity to decide the parties' dispute on the merits. There are no equitable considerations which operate to convert Bowman's purpose into a culpable one.

         Plaintiffs rely on Speiser, Krause & Modol PC v. Ortiz[5] to support their argument that Bowman's conduct was culpable. In Speiser, the defendant, Ortiz, was a lawyer who had been sued in state court in a dispute about the division of attorneys' fees between the plaintiff law firm and Ortiz. The plaintiff sent a letter to Ortiz advising that it intended to seek the entry of default if Ortiz did not timely answer the complaint. Thereafter, Ortiz removed the case to federal court. The time for Ortiz to respond to the complaint in the removed case was governed by Fed.R.Civ.P. 81(c). Ortiz did not timely respond; the law firm moved for entry of default; and the clerk entered Ortiz's default. Ortiz admitted he did not read Rule 81(c) well enough to understand it. The district court held that Ortiz's failure to timely respond to the complaint was culpable and entered a default judgment.

         On appeal, the Ninth Circuit observed: “Ortiz briefly alludes to the good cause standard regarding defaults. . . . That standard is less rigorous than excusable neglect. . . . The distinction, however, is one of degree, which might make a difference at the margin. But the failure of this lawyer, who was the removing party, to properly read the clear language of Rule 81(c) does not amount to good cause either.”[6] The appellate court then affirmed the district court's decision, but also noted: “Here the district court would not necessarily have ...


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