Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-04836/USCOURTS-cand-3_09-cv-04836-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ABBATE FAMILY FARMS LIMITED

PARTNERSHIP, a California Limited

Partnership

Plaintiff,

 v.

LEO L. COTELLA & CO., INC., a California

corporation; DONALD RATTO, an individual;

BENEDETTO RATTO, JR., an individual,

Defendant. /

No. C 09-04836 JSW

ORDER GRANTING MOTION 

FOR RELIEF FROM ENTRY OF

DEFAULT

 

Now before the Court is the motion for relief from entry of default filed by defendants

Leo L. Cotella & Co., Inc., Donald Ratto and Benedetto Ratto, Jr. (collectively, “Defendants”). 

The Court finds that this matter is appropriate for disposition without oral argument and the

matter is deemed submitted. See Civ. L. R. 7-1(b). Accordingly, the hearing set for February

26, 2010 is VACATED. Having considered the parties’ papers and the relevant case law, and

good cause appearing, the Court hereby GRANTS Defendants’ motion for relief from entry of

default.

FACTUAL AND PROCEDURAL HISTORY

On October 13, 2009, plaintiff Abbate Family Farms Limited Partnership (“Plaintiff”)

filed this action against Defendants alleging claims for enforcement of statutory constructive

trust, breach of contract, breach of fiduciary duty and constructive fraud. Defendants failed to

timely respond to the complaint. Plaintiff subsequently filed its request for entry of default 

Case 3:09-cv-04836-JSW Document 26 Filed 02/23/10 Page 1 of 4
United States District Court

For the Northern District of California

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against defendants Leo Cotella & Co., Inc. and Donald Ratto on November 30, 2009, which the

Court entered on December 8, 2009. Plaintiff filed its request for entry of default against

defendant Benedetto Ratto, Jr. on December 9, 2009, which the Court entered on December 17,

2009. Defendants now move for relief from entry of default.

ANALYSIS

A. Legal Standard

Pursuant to Federal Rule of Civil Procedure 55(c), a court may set aside an entry of 

default for good cause shown. In general, a more lenient standard is applied when determining

whether to set aside an entry of default than is applied to vacating a default judgment. See

Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir.1986) (per curiam) (“The

court’s discretion is especially broad where . . . it is entry of default that is being set aside,

rather than a default judgment.”). When exercising its discretion under Rule 55, the court’s

“underlying concern . . . is to determine whether there is some possibility that the outcome of

the suit after a 

full trial will be contrary to the result achieved by the default.” Hawaii Carpenters’ Trust

Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986). The overriding judicial goal of deciding

cases correctly, on the basis of their legal and factual merits, is to be balanced out with the

interests of both litigants and the courts in the finality of judgments. See Pena v. Seguros La

Comerical, 770 F.2d 811, 814 (9th Cir. 1985). 

The Court considers the following factors when deciding whether to set aside the entry

of default: (1) whether the defendants’ culpable conduct led to the default; (2) whether the

defendants have a meritorious defense; and (3) whether reopening the default would prejudice

the plaintiff. See TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). 

The party seeking to invoke Rule 55(c) bears the burden of demonstrating that these factors

favor setting aside the default. Id. 

B. Defendants Have Demonstrated Good Cause to Vacate the Entry of Default.

1. Defendants’ conduct was not culpable.

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United States District Court

For the Northern District of California

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A party’s conduct can be considered culpable if he, or she, “has received actual or

constructive notice of the filing of the action and intentionally failed to answer.” TCI, 244 F.3d

at 697 (emphasis in original). In TCI, however, the Ninth Circuit has made clear that a lack of

“culpable conduct” is essentially the equivalent of excusable neglect. Thus, if the defaulting

party comes forth with a “credible, good faith explanation negating any intention to take

advantage of the opposing party, interfere with judicial decisionmaking, or otherwise

manipulate the legal process,” his or her conduct is excusable, not culpable. Id. at 697-98; see

also id. at 698 (“‘culpability’ involves ‘not simply nonappearance following receipt of notice of

the action, but rather conduct which hindered judicial proceedings’”) (quoting Gregorian v.

Izvestia, 871 F.2d 1515, 1525 (9th Cir. 1989).)

Here, Defendants contend that relief is proper under Rule 55(c) due to their excusable

neglect. Defendants did not file a responsive pleading within the time allowed by law due to

failure to timely engage legal counsel. However, Defendants retained legal counsel within a

reasonable time after discovering that entry of default had been entered and are now prepared to

defend themselves, as demonstrated by their proposed answer. (See Declaration of David C.

Lee (“Lee Decl.”), Ex. A (Defendants’ Proposed Answer).) The Court does not find any

evidence that suggests Defendants intentionally failed to respond or otherwise intended to take

advantage of Plaintiff, interfere with judicial decisionmaking, or otherwise manipulate the legal

process. As such, the Court concludes that Defendants’ conduct in failing to timely respond to

the Complaint was not culpable.

2. Defendants have put forth sufficient evidence of a meritorious defense.

 With respect to the question of a meritorious defense, “[t]he underlying concern . . . is to

determine whether there is some possibility that the outcome of the suit after a full trial will be

contrary to the result achieved by the default.” Hawaii Carpenters Trust Fund v. Stone, 794

F.2d 508, 513 (9th Cir. 1986) (affirming denial of motion to set aside entry of default where

there was no showing of meritorious defense). Defendants have submitted a proposed answer

with their motion to set aside default. Further, Defendants contend that Plaintiff failed to

perform the promises of the contract and tender goods that conformed with the contract. (Lee

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United States District Court

For the Northern District of California

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Decl., Ex. A at 5.) Thus, the Court cannot say that Defendants do not have a colorable defense

to Plaintiff’s claims. 

3. Plaintiff would not be prejudiced by vacating entry of default.

“To be prejudicial, the setting aside of a [default] judgment must result in greater harm

than simply delaying resolution of the case. Rather ‘the standard is whether [plaintiff’s] ability

to pursue his claim will be hindered.’” TCI, 244 F.3d at 701 (quoting Falk, 739 F.2d at 463). 

Plaintiff argues that it has “already expended substantial effort and monies in connection with

attempting to recover this relatively minimal amount [$12,759.10], and to require it to continue

to expend additional time and monies in continuing to prosecute this case is simply unfair.” 

(Opp. at 4.) However, Plaintiff still would have had to prosecute the case if default had not

been entered. Given the early stages of this litigation and the strong preference for resolving

cases on their merits, the Court finds that no prejudice would result from vacating the entry of

default.

CONCLUSION

For the foregoing reasons, the Court GRANTS Defendants’ motion for relief from entry

of default.

IT IS SO ORDERED.

Dated: February 23, 2010 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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