Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_02-cv-05875/USCOURTS-caed-1_02-cv-05875-0/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1961 Racketeering (RICO) Act

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

JESUS ALBIZU, )

)

Plaintiff, )

)

)

v. )

)

CLYDE A. STROHL, et al., ) 

 )

Defendants. )

)

 

CV F 02-5875 AWI SMS 

ORDER DEEMING DEFENDANTS’ MOTION

TO SET ASIDE DEFAULT AND DEFAULT

JUDGMENT TO BE MOTION TO SET

ASIDE DEFAULT (DOC. 93)

ORDER GRANTING PLAINTIFF’S

REQUEST TO TAKE JUDICIAL NOTICE

(DOC. 99)

ORDER GRANTING DEFENDANTS’

REQUEST TO TAKE JUDICIAL NOTICE

(DOC. 104)

ORDER DENYING DEFENDANTS’ MOTION

TO STRIKE THE DECLARATION OF

DROBNY (DOC. 102)

ORDER DENYING MOTION TO SET ASIDE

DEFAULT OF DEFENDANTS WESLEY E.

AMUNDSON AND AMUNDSON &

ASSOCIATES (DOC. 93)

ORDER SETTING AND DIRECTING THE

PARTIES TO PARTICIPATE IN A

TELEPHONIC STATUS CONFERENCE

Date: August 3, 2005

Time: 10:00 a.m.

I. Background

Plaintiff is proceeding with an action commenced on July 19,

2002, by the filing of a verified complaint alleging 1) a RICO

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claim in violation of 18 U.S.C. § 1962 (prohibiting specified

activities in the investment of income derived from a pattern of

racketeering activity or through collection of an unlawful debt)

premised upon wire fraud and mail fraud via misrepresentation

regarding an investment of $102,000.00 made by Plaintiff in

Defendants’ firm (seventh claim); and 2) pendent state claims for

intentional and negligent misrepresentation, making a promise

without intent to perform, breach of contract, conversion, and

breach of fiduciary duty (first through sixth claims).

The proofs of service filed on August 27, 2002, reveal that

summons and complaint were served personally on Defendant Wesley

E. Amundson (Amundson) on Friday, August 9, 2002, at 7030 Monza

Place, Alta Loma, California, by a registered California process

server; service upon Defendant Amundson and Associates (A&A) was

likewise effected by service upon Wesley Amundson, as authorized

to accept service, at the same date and time by the same

registered server. Amundson admitted service upon him and upon

A&A as of July 19, 2002. (Decl filed March 18, 2005 at ¶ 2.)

Plaintiff’s request for entry of default against Defendants

Amundson, filed September 9, 2002, is not accompanied by a proof

of service on Defendants. However, the Clerk’s entry of default

upon Defendants Amundson was dated September 11, 2002, and was

served by mail by the Clerk on Amundson and A&A at 7030 Monza

Place, Alta Loma, CA 91701.

On November 6, 2002, Defendant Strohl filed an answer as

proceeding pro se. His earlier answer was unintelligible,

indicated that his counsel was McCormick Barstow (Plaintiff’s

counsel), and was not served. His answers were stricken by the

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Court on November 12, 2002.

On December 4, 2002, the defaults of Defendants Clyde A.

Strohl and Strohl’s Financial Services, Inc., were entered.

Notice of this was not served on Defendants Amundson.

Plaintiff’s motion for entry of default judgment against all

Defendants, including Defendants Amundson, filed by Plaintiff on

March 6, 2003, was served on Defendants Amundson at the Monza

Place address on March 6, 2003 by overnight mail. The

application, signed by Kurt F. Vote and submitted in connection

with the motion, recited all Defendants’ failure to respond to

the complaint, including the striking of Defendant Strohl’s

answer, and the failure of Defendants Amundson to respond to the

complaint.

Defendant Strohl filed a motion to set aside his default.

Defendant Strohl’s first motion to set aside default, which was

filed by Henry Nunez on March 14, 2003 for Defendant Clyde

Strohl, indicated that Nunez was Strohl’s attorney, but it did

not indicate that he was acting on behalf of Defendants Amundson;

it was not served by Nunez on Defendants Amundson, according to

the proof of service. However, Plaintiff’s memorandum, case

appendix, and request for judicial notice submitted in opposition

to the motion, filed on April 4, 2003, were served on Defendants

Amundson by overnight mail dated the same date. These documents

detailed the progress of the case, including meeting and

conferring to prepare a joint scheduling report.

The bankruptcy court’s order granting relief from the

automatic bankruptcy stay, filed on June 9, 2003, and referring

to a hearing held on May 29, 2003, was served on the Strohl and

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 The request was stricken because no party had sought to reopen the case.

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Amundson Defendants at their respective addresses. This order

detailed all the proceedings in this action between August 28,

2002, and April 18, 2003--all proceedings which were released

from the effect of the automatic bankruptcy stay. 

On September 3, 2003, Defendant Clyde A. Strohl filed in

this Court a notice of reopening a Chapter 7 proceeding, Case No.

01-15866-7, and invoking an automatic stay pursuant to 11 U.S.C.

§ 362(a). 

On September 4, 2003, the Court ordered the case

statistically closed because of the pendency of a bankruptcy

proceeding, and directed the parties to submit a request to reopen case and set scheduling conference should counsel desire to

reopen the case. The order was served on counsel and on Defendant

Strohl.

Plaintiff then moved for leave to file an amended complaint

in October 2003. These papers were served on Defendants Amundson

at the Monza Place address.1

In January 2004, Plaintiff sought to reopen the case as to

Defendants Amundson, as to whom the case was not stayed. These

papers were served on Defendants Amundson at the Monza Place

address. Further, Plaintiff’s notice of non-receipt of opposition

to the motion to reopen the case, filed on March 15, 2004, was

served by Plaintiff on Defendants Amundson at the Monza Place

address on March 12, 2004.

Pursuant to Plaintiff’s request, the case was ordered

reopened on March 26, 2004.

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 A status report filed by Plaintiff on March 2, 2005, included an attached docket of the criminal case that

indicates that the case is still pending. Thus, the action remains stayed as to Defendant Strohl.

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 Plaintiff’s motion for default judgment against Defendants Amundson was served by mail on Defendants

Amundson on January 7, 2005. However, it was not until March 18, 2005, that Defendants Amundson filed

opposition and moved to set aside the default.

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Plaintiff’s status report filed May 3, 2004, which detailed

Plaintiff’s intent to seek default judgment against Defendants

Amundson or to consolidate the instant action with the

nondischargeability bankruptcy action, was served on Defendants

Amundson. 

 A stipulated stay of the proceedings pending disposition of

a criminal action as to defendant Clyde A. Strohl was filed on

December 13, 2004. The stipulation, which was between attorney

Nunez on behalf of Defendant Strohl, and attorney Vote on behalf

of Plaintiff, was served on Defendants Amundson; it recited that

the action would be stayed as to Defendant Strohl only pending

the results of a criminal action. It clearly indicated that Nunez

was signing on behalf of Strohl.2

On January 7, 2005, Plaintiff filed a motion for default

judgment against Defendants Amundson with supporting authorities

and a declaration of Plaintiff Albizu.3 Pursuant to the Court’s

order of January 26, 2005, a supplemental memorandum and

declaration with exhibits were filed on March 11, 2005, along

with a proof of service of the materials on the defaulting

defendants against whom judgment was sought. The hearing on the

Plaintiff’s motion for default judgment was set for March 25,

2005.

On March 18, 2005, Defendants Wesley Amundson and Amundson

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and Associates (A&A) (collectively Defendants Amundson), who were

in default, purported to file opposition to the motion for

default judgment, in which they sought to argue that Plaintiff

was not entitled to default judgment on the merits, and to

demonstrate that the failure to respond timely to the complaint

was the result of mistake and excusable neglect. They sought

relief pursuant to Fed. R. Civ. P. 60(b).

On March 18, 2005, Defendants Amundson filed a notice of

motion and motion to set aside default and default judgment 

By order dated March 21, 2005, the Court determined that

because Defendants Amundson had defaulted and that default had

not been set aside, the Court would not consider their purported

opposition to the motion for default judgment, which opposition

did not pertain to the damages or relief sought by Plaintiff, but

rather only to the propriety of entry of the judgment. The Court

determined that consideration of the Defendants’ request for a

continuance was unnecessary because the Court would sua sponte

direct that the hearing on the motion for default judgment be

vacated. The Court noted that resolution of the Defendants’

request to set aside the default could render moot any default

judgment entered in the interim. Likewise, consideration and

entry of a default judgment without consideration of the reasons

advanced in favor of setting aside the underlying default could

waste the resources of the Court and the parties. The Court set

the hearing on the motion to set aside default for May 6, 2005;

it vacated the hearing then set on Plaintiff’s motion for default

judgment pending the Court’s consideration and ruling on the

motion to set aside the default of Defendants’ Amundson. The

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Court stated that when a final ruling on the motion to set aside

default issued, either the motion for default judgment would be

rendered moot, or the Court would reset the hearing on the motion

for default judgment. The Court ordered that briefing on the

Defendants’ motion to set aside default should proceed as

scheduled under the pertinent rules of court and local rules.

On April 21, 2005, Plaintiff filed opposition to the motion

to set aside default, a supporting declaration of Stephen E.

Drobny, and a request for judicial notice. 

On May 2, 2005, Defendants Amundson filed supplemental

declarations of Henry D. Nunez and Wesley Amundson in reply to

the opposition, evidentiary objections, a motion to strike, a

certificate of service, and a request for judicial notice. On May

3, 2005, Defendants filed a declaration of Janice Polglase,

apparently an attorney in Nunez’s office, and a memorandum in

support of reply.

On May 3, 2005, Plaintiff filed a response that included a

notice of untimely reply, pointing out that pursuant to Local

Rule 78-230(d), the reply was due no less than five court days

before the hearing, or by Friday, April 29. The earliest reply

documents were filed on the fourth court day before the hearing. 

Polglase filed a supplemental declaration on May 3 and 4,

2005, that indicated that she miscalculated the time period; she

admitted that Nunez asked her to check the date to see if she was

correct, but she failed to realize or correct her error.

On May 5, 2005, a telephonic status conference was held on

the record. The motion was set for hearing on the basis of the

papers previously submitted.

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The hearing on the motion was held on June 9, 2005. Henry

Nunez appeared on behalf of the moving Defendants, and Stephen

Drobny appeared on behalf of Plaintiff. The Court had considered

all the papers submitted on behalf of the parties. The matter was

argued and was submitted for decision.

II. Facts

A. Retention of Nunez

Declarations of Nunez and Wesley A. Amundson dated March 18,

2005, address a purported misunderstanding about whether Nunez

represented only Strohl, or also represented Nunez.

Amundson states that his misunderstanding arose during the

period in which responsive papers were due to Plaintiff’s

complaint, which would have been immediately after service of the

complaint, or either July 19, 2002 (Amundson’s declaration), or

August 9, 2002 (proof of service).

Amundson states that the confusion arose after a meeting

with co-defendant Strohl, a meeting which, according to the

representation of Nunez at hearing, Amundson did not attend. At

the meeting Strohl retained Nunez for $5,000.00. No details are

given. Amundson states that after the meeting, Strohl informed

him that $2,500.00 of the payment was to procure representation

for Amundson also. Amundson states that he believed Strohl

despite the fact that Amundson never signed a retainer agreement,

paid any retainer fee at that time, or personally spoke to Nunez

about being represented by him. Amundson states that he trusted

that Nunez was handling all matters in his case based on Strohl’s

representation. He also states that Nunez never agreed to

represent him, and he asserts that Nunez had not heard of any

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agreement between Nunez and Strohl about splitting the retainer

fee. Amundson declares that Strohl’s representations were false. 

In a supplemental declaration, Amundson states that he had

more than one conversation with Nunez about setting aside the

default and thought that it pertained to or included him. At

hearing, Nunez represented that Amundson’s conversations about

Strohl’s motion to set aside default took place with his staff

(no declarations of staff members have been submitted); Nunez was

not aware of them. In contrast, in his supplemental declaration,

Nunez said that he had a conversation with Amundson about the

status of the motion to set aside the default. 

Amundson admits that he failed to file a responsive

pleading, and he admits his awareness of the default entered

against him and A&A.

Nunez recites, with no specifics such as date, time, or

place, and without any supporting documentation or explanation

for the lack of such documentation, that he was at “a joint

meeting with all defendants.” (Decl. in support of motion at 2.)

Strohl paid him $5,000.00 to represent him, and then Strohl

informed Amundson that half of the money was for representation

of Amundson as well. Nunez states that this statement was without

Nunez’s knowledge or consent; he had never heard of such an

agreement and did not consent to it; Amundson did not retain

Nunez’s services by any agreement or retainer at that period of

time. He states that he has now been retained by Amundson. The

time or circumstances of that retention are not set forth.

Apparently it was after April 2003, when Nunez had a telephone

conversation with Amundson in which they discussed setting aside

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 It is not clear why Amundson would have been informed of Nunez’s plans about representing Strohl.

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the default; Nunez believed they were talking about setting aside

the default of Strohl.4 At the hearing on this motion, Nunez

stated that in view of concerns about a conflict of interest, he

would not be representing Amundson in the future.

It appears that Nunez is purporting to state under penalty

of perjury that his client, Strohl, made untrue statements to

Amundson, who is also his client. Neither Nunez nor Amundson had

reason to believe from what transpired in the meeting that Nunez

represented Amundson. Thus, the clear inference is that Strohl

lied to Amundson about this.

B. Amundson’s Status as an Attorney

Plaintiff requests that the Court take judicial notice of a

printout from the State Bar of California’s website indicating

that as of June 1999, and to the present, Amundson has been a

member of the State Bar of California. His address is listed as

7030 Monza Plaza, Alta Loma, California 91701 (the address at

which process was served and all service of papers upon the

Amundson Defendants was effected in connection with this action).

C. Amundson’s Correspondence with Plaintiff’s Counsel

In opposition to the motion, Stephen P. Drobny submitted a

declaration stating that in February 2002, his office received by

facsimile a letter from Amundson dated February 4, 2002, in which

Amundson responded to a letter from Kurt F. Vote (another

attorney in the firm representing Plaintiff) dated January 31,

2002, in which Vote had demanded return of funds for the

Plaintiff. (Decl. of Drobny, Ex. B.) In the letter Admundson

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admitted that Plaintiff invested $102,800.00 and had received

$6,200 as profit; Amundson stated that the funds would be

returned to Plaintiff by February 11, 2002. If Vote chose not to

extend the demand period for few days, any court costs would be

deducted from Plaintiff’s profits before they were repaid him. 

A second letter received from Amundson by facsimile and

dated February 27, 2002, stated that a deadline of that date

would not be met because funding had not yet been received from

investment projects but would be received later in March.

Amundson wrote:

If it makes you client “feel” better to be engaged in some

action, then by all means, go ahead and file this complaint. 

You can easily dismiss the action in a couple of weeks when

the principal and profits are returned to your client as 

previously stated to you in my letter dated February 4th.

Decl. of Drobny, Ex. C.

Another letter dated October 7, 2002 (about a month after

default was entered, and at a time at which Amundson claims to

have been represented by Nunez), regarding “Settlement Offer in

Albizu v Strohl, et al.” consisted of a settlement offer. The

offer was a total of $135,200.00. Amundson apologized for the

delay in returning the funds because the investment took longer

to mature than originally projected. Id., Ex. D.

Further, Drobny declared that on January 9, 2004, the

Amundson Defendants were served with a request to reopen the case

and set a scheduling conference; this document stated that on

September 11, 2002, defaults were entered as to Defendants Wesley

E. Amundson and Amundson and Associates. Id. at Ex. A.

D. Defenses and Prejudice

Nunez states in a supplemental declaration filed May 2,

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2005, that there is no prejudice because the case is stayed as to

Defendant Strohl, and Strohl will need a trial on the merits.

Further, there is a meritorious defense because Amundson did not

have any direct contact or communications with Plaintiff.

Defendant Amundson states in a supplemental declaration, “I

dispute the allegations of the complaint.”

The proposed answer, which does not appear to have been

filed but was faxed to chambers upon request and appears to have

been served on Plaintiff, reveals that Amundson would deny that

Strohl’s financial service was undercapitalized and was not a

separate corporate or business entity from Strohl; would deny

that he conspired with Strohl or was his agent; and would deny on

information and belief that Strohl misrepresented the nature of

the investment. He would deny that Defendants Amundson (Amundson

and Amundson & Associates) were transferred the investment from

Strohl; and would deny that they offered a new investment

agreement to Plaintiff instead of cancelling the first one and

sent Plaintiff a check of $6,200 in May 2001. He would deny that 

Plaintiff did not receive his investment and profits. Amundson

would also deny all the allegations of the various claims

concerning intentional misrepresentation, negligent

misrepresentation, promise without intent to perform, breach of a

2001 contract of investment between Amundson and Plaintiff,

conversion, breach of fiduciary duty, and RICO violations. He

would raise affirmative defenses of failure to state a claim,

lack of jurisdiction, statute of limitation, unclean hands,

comparative fault of Plaintiff or of other entities, wilful

misconduct of Plaintiff, estoppel, failure to mitigate,

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ratification, performance, consent, waiver, mistake of fact,

mistake of law, breach of contract and implied covenant,

discharge, superseding acts, bad faith of Plaintiff, assumption

of risk, laches, no reliance, offset, prior breach, failure of a

condition precedent, third party fault, and reduction of

recovery. 

Nunez also argues in the memorandum in support of reply that

because there are four defendants and because the sum of damages

and apportionment thereof among Defendants is not ascertained or

ascertainable without a hearing, a default judgment cannot be

entered by the clerk. This is true; there would have to be a

hearing as to damages if Plaintiff were able to show that he was

otherwise entitled to a default judgment.

III. Analysis

A. Motion Deemed to be Motion to Set Aside Default

Defendants Amundson have moved to set aside default and a

default judgment. No default judgment has been entered. The Court

DEEMS Defendants’ motion to set aside default and default

judgment TO BE a motion to set aside default.

B. Consideration of the Reply

The Court has broad discretion to interpret and apply its

local rules. Dulange v. Dutro Construction, Inc., 183 F.3d 916,

919 n. 2 (9th Cir. 1999). The Court need not consider the papers

submitted by way of reply. The Court finds that Polglase’s

neglect or mistake was inexcusable. However, the hearing on the

motion was continued. No prejudice appears to have been suffered

by Plaintiff from the slight delay in the filing of Defendants’

reply. 

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Accordingly, the reply papers WILL BE CONSIDERED by the

Court.

C. Request to Take Judicial Notice

Defendant Amundson does not dispute his status as an

attorney. The Court GRANTS Plaintiff’s request that the Court

take judicial notice of a printout from the website of the State

Bar of California that reflects that since June 1999 Defendant

Amundson has been an active member of the State Bar of

California, a fact not reasonably subject to dispute. Fed. R.

Evid. 201; United States v. Alisal Water Corp., 326 F.Supp.2d

1032, 1036 n. 5 (N.D.Cal. 2004).

The Court also GRANTS Defendants’ request to take judicial

notice of the Court’s docket in the instant case. The Court may

take judicial notice of court records. Fed. R. Evid. 201(b);

United States v. Bernal-Obeso, 989 F.2d 331, 333 (9th Cir. 1993);

Valerio v. Boise Cascade Corp., 80 F.R.D. 626, 635 n. 1 (N.D.

Cal. 1978), aff’d, 645 F.2d 699 (9th Cir. 1981).

D. Objections and Motion to Strike re: Drobny’s

 Declaration

On May 2, 2005, Defendants filed evidentiary objections to

Drobny’s declaration and the correspondence attached to it (Exs.

B, C, and D), as well as moving to strike the declaration.

Defendants object to the admission of three letters received

by Plaintiff’s counsel’s office from Defendant Amundson.

Defendants object to the foundation laid by Drobny, namely, that

the letters were received by Drobny’s firm by facsimile from

Defendant Amundson. Drobney states that the letters were received

by facsimile; the Court notes that they bear signatures that

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purport to be those of Defendant Amundson, and they refer to

detailed facts regarding the transactions that are the basis for

the complaint in this action. Plaintiff has provided evidence

sufficient to support a finding that the matter in question is

what its proponent claims; there is enough support in the record

to warrant a reasonable person in determining that the evidence

is what it purports to be. Fed. R. Evid. 901(a), (b). 

Defendants raise various objections to statements in the

letters in which Amundson purports to admit the fact and amount

of Plaintiff’s investment. The Court rejects Defendants’

objections of lack of personal knowledge, argumentative

character, lack of foundation, conclusion, and hearsay. The Court

concludes that these letters are admissions of Wesley A.

Amundson, a party to this proceeding. Fed. R. Evid. 801(d)(2)(A).

However, the Court finds it unnecessary to reach these objections

because the Court uses the documents primarily for the purpose of

proof that the statements were made by Amundson himself (as

distinct from Amundson through counsel), and not for the truth of

the matters asserted in the statements.

The Court DENIES Defendants’ motion to strike the

declaration of Drobny and the attachments thereto.

E. Timeliness

Defendants Amundson move to set aside the default pursuant

to Fed. R. Civ. P. 60(b)(1), which provides that upon motion and

upon such terms as are just, the Court may relieve a party or a

party’s legal representative from a final judgment, order, or

proceeding for mistake, inadvertence, surprise, or excusable

neglect. Because no default judgment has been entered, Defendants

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must proceed pursuant to Fed. R. Civ. P. 55(c) instead of 60(b).

O’Brien v. R.J. O’Brien & Associates, Inc., 998 F.2d 1394, 1401

(7th Cir. 1993). Thus, the timeliness of the motion will be

judged by the standards pertinent to Rule 55(c).

The only time limitation for a motion to set aside a default

is one of reasonable time. 10 Moore’s Federal Practice, 3d ed.

(2005) at 55-63. There does not appear to be any direct Ninth

Circuit authority adopting this standard or applying this

standard in the context of a motion to set aside a default, as

distinct from a motion to set aside a default judgment. Other

circuits have held that a defendant must show diligence in

seeking to open a default. See Zuelzke Tool & Engraving Co. v.

Anderson Die Castings, Inc., 925 F.2d 226, 230 (7th Cir. 1991),

abrogated on other grounds by Pioneer Inv. Services Co. v.

Brunswick Associates Ltd. Partnership, 507 U.S. 380 (1993)

(moving to set aside the default four months after learning of

default and after having reason to believe that reliance on

others was unreasonable was held not to be prompt); Dow Chemical

Pacific Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 335 (2d

Cir. 1986) (moving for relief from default seven months after

being served with notice of a default was held not to be action

within a reasonable time); Merrill Lynch Mortgage Corp. v.

Narayan, 908 F.2d 246, 251-52 (7th Cir. 1990) (delay of five

months after entry of default and of almost a year after the

answer was due was held not to constitute prompt action).

If reasonable promptness is not considered a requirement

separate and apart from the other requirements of Rule 55(c),

then it has nevertheless been considered as part of the

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determination of good cause. Merrill Lynch Mortgage Corp. v.

Narayan, 908 at 252.

Here, Defendants Amundson were served with notice of the

default at the time it was entered, and they continued to be

served with documents thereafter that demonstrated that no action

had been taken on their behalf to set aside or remedy the

default. Although the action was stayed as to Defendant Strohl,

and, during the pendency of Judge Ishii’s order closing the case, 

as to all Defendants, a review of the docket shows that after

Defendant Amundsons’ default was entered on September 11, 2002,

the action proceeded for four months and one week until the

filing on April 18, 2003 of the undersigned Magistrate Judge’s

first order imposing a temporary stay to permit Plaintiff to seek

relief from a bankruptcy stay involving Defendant Strohl. On July

14, 2003, the Court received notice of the annulment of the stay.

The action proceeded for another month and two weeks before the

Strohl bankruptcy was noticed and Judge Ishii’s order closing the

case was filed on September 4, 2003. The stay endured until March

26, 2004, when the case was reopened. 

In summary, not counting any time during which any stay was

in effect as to the moving Defendants, after the default in

question was entered, the case was pending for over a year and

five and one-half months. Defendants have not demonstrated that

their delay was reasonable or based on good cause.

In view of Amundson’s being an attorney and his having

received clear notice of the default, the unreasonableness of his

claimed reliance on Nunez (discussed below), and the long delay,

the Court will find that Defendants’ delay was unreasonable, and

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it will be weighed against them in the determination of good

cause.

F. Setting Aside a Default

Fed. R. Civ. P. 55(c) provides:

For good cause shown, the court may set aside an

entry of default and, if a judgment by default has 

been entered, may likewise set it aside in accordance 

with Rule 60(b).

A showing of lack of culpability sufficient to meet the Rule

55(c) standard of good cause is ordinarily sufficient to

demonstrate as well the criteria of excusable neglect or mistake

under Rule 60(b)(1) to set aside a judgment; there is no need to

consider the two matters separately. Franchise Holding II v.

Huntington Restaurants Group, Inc., 375 F.3d 922, 927 (9th Cir.

2004); TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696

(9th Cir. 2001). The factors informing a decision under each

standard are essentially the same: whether the defendant’s

culpable conduct led to the default; whether the defendant has a

meritorious defense; and whether reopening the default judgment

would prejudice the plaintiff. Id. The three factors are

disjunctive; thus, a district court may deny a motion if any of

the three factors is not met by the moving party. Franchise

Holding II, LLC v. Huntington Restaurants Group, Inc., 375 F.3d

922, 926 (9th Cir. 2004), cert. denied. It is the burden of the

party seeking relief to show that all of the factors warrant

setting aside the default. Id. at 926.

G. Culpable Conduct

Culpable conduct has traditionally been defined such that if

a defendant has received actual or constructive notice of the

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filing of the action and has failed to answer, its conduct is

culpable. Franchise Holding II, LLC v. Huntington Restaurants

Group, Inc., 375 F.3d 922, 926. However, in the course of

examining culpability in the context of setting aside a default

judgment, it has been noted that the usual articulation of the

governing standard is that a defendant’s conduct is culpable if

he has received notice of the filing of the action and

intentionally failed to answer. TCI Group Life Ins. Plan v.

Knoebber, 244 F.3d 691, 696-97 (9th Cir. 2001). “Intentional” in

this context refers to an act or omission taken by an actor

knowing what the likely consequence will be; this standard, after

Pioneer Investment, does not exclude all intentional actions or

omissions, because some omissions that were the product of

intention are excusable under the Pioneer standard. Id. at 697. 

Thus, in this context, “intentional” means “willful, deliberate,

or evidence of bad faith.” Id. A neglectful failure to answer for

which there is 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” under the default cases in this

circuit. Id. Thus, it is not necessarily culpable or inexcusable;

rather, the equitable factors of Pioneer Investment must be

considered.

In the present case, Defendant Amundson admits having been

served with the complaint and having failed to answer.

Defendant Amundson declares that he had a genuine belief

that the motion to set aside default that was prepared on behalf

of Strohl was also made on his behalf. (Supp,. Decl. at 2.) It is

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unlikely that this is the case because the basis of the motion to

set aside the default was the effect of the bankruptcy stay, a

matter unique to Defendant Strohl.

Because of the circumstances of the asserted retention of

Nunez to represent Defendant Amundson, the Court declines to

credit Defendant Amundson’s claim that he sincerely believed that

Nunez had been retained to represent him. However, even if it

were assumed that Defendant Amundson believed Defendant Strohl’s

statement to him about having retained attorney Nunez at the time

the statement was made, subsequent events warrant a finding that

Defendants Amundson delayed unreasonably and did not proceed in

good faith.

Correspondence in October 2002 between Amundson and

Plaintiff’s counsel constitute admissions of a party. The mere

fact that Amundson corresponded directly with Plaintiff’s counsel

indicates that Defendant Amundson did not at that time believe

that he was represented by counsel. 

The response to the complaint, which was personally served

on Defendant Amundson, was due in August 2002. Defendant Amundson

was served at his own address with numerous documents in this

action, including the clerk’s entry of default on or about

September 11, 2002; Plaintiff’s motion for entry of default

judgment against all defendants, which contained a declaration of

attorney Vote reciting all defendants’ failure to respond to the

complaint and the striking of Defendant Strohl’s answer, on or

about March 6, 2003; Plaintiff’s opposition to Defendant Strohl’s

motion to set aside default, which contained indications that

Defendant Strohl had submitted an answer without counsel’s aid

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and that Plaintiff’s counsel had communicated with Strohl

directly, on or about April 4, 2003; the bankruptcy court’s order

detailing all the proceedings in this action between August 28,

2002, and April 18, 2003, that were released from the stay, in

June 2003; Plaintiff’s motion for leave to file an amended

complaint in October 2003; Plaintiff’s motion to reopen the case

as to Defendants Amundson in January 2004; Plaintiff’s notice of

non-receipt of opposition on March 12, 2004; Plaintiff’s status

report indicating Plaintiff’s intent to seek a default judgment

against Defendants Amundson in May 2004; Plaintiff’s motion for

default judgment against Defendants Amundson on January 7, 2005;

and Plaintiff’s supplemental memorandum and declaration in March

2005. Despite his knowledge of the significance of these events,

Defendant Amundson apparently neglected to contact his counsel

about these repeated and clear indications of lack of

representation in the case. Any purported reliance on Defendant

Strohl’s representation made back in July or August (or even

September or October) 2002 quickly became unreasonable and,

indeed, incredible. Because Defendant Amundson is an attorney,

the Court finds that Defendant’s conduct in this regard was

particularly culpable. Direct Mail Specialists, Inc. v. Eclat

Computerized Techonologies, Inc., 840 F.2d 685, 690 (9th Cir.

1988). The extreme length of the delay and the fact that it was

within the control of Defendant Amundson to inquire and cure the

delay warrants an inference of culpability. The delay is not

explained, and negative inferences are not precluded, by vague

assertions by Amundson that he had discussed setting aside

default with Nunez, or by Nunez’s assertions that he discussed

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setting aside default with Amundson. The Court’s docket reveals

that no action to set aside the default was undertaken until the

instant motion was filed. Plaintiff went through the effort of

moving for default judgment, and the progress of this action with

respect to Defendants Amundson was impeded. 

Under the circumstances, it is concluded that Defendant

Amundson did not proceed in good faith and in fact engaged in

culpable conduct.

H. Meritorious Defense

The party seeking to set aside a default has the burden to

show a defense such that the result at trial might be different

from that reached by default; the defendant must present specific

facts that would constitute a defense. TCI Group Life Ins. Plan

v. Knoebber, 244 F.3d 691, 700 (9th Cir. 2001). Conclusional

statements that a dispute exists are insufficient. Franchise

Holding II, LLC, 375 F.3d 922, 926. It has been held not to have

been erroneous to decline to set aside a default judgment where

the defendant offered only a mere general denial without evidence

of facts to support the denial. Madsen v. Bumb, 419 F.2d 4, 6

(9th Cir. 1969). However, the burden is not extraordinarily

heavy; the movant need only demonstrate facts or law showing the

Court that a sufficient defense is may be asserted. TCI Group

Life Ins. Plan, 244 F.3d at 700.

The complaint alleged that in 1999 Plaintiff gave $102,000

to Strohl, who represented that the principal would be returned

on request and the guaranteed return on the investment was at

least five per cent monthly; Strohl transferred it to Amundson as

trustee of Amundson & Associates; Amundson refused to comply with

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Plaintiff’s May 2001 request for return of the investment,

offered/represented another year-long investment contract

(Plaintiff did not sign it), sent one $6,200 payment in May 2001

in the form of a personal check of Amundson, and failed to return

the principal as requested thereafter. 

In the first claim (misrepresentation), it is alleged that

Defendants fraudulently represented the original investment

opportunity, the minimum rate of return, and the placement of

funds in the 2001 investment contract with scheduled return of

principal; they took the money with intent to convert it to

personal use, and then they did so. The second claim is for

negligent misrepresentation (same transactions). The third claim

is for false promises without intent to perform regarding the

initial investment, placement of the investment in May 2001, six

per cent return for ten months, and return of principal by May

13, 2002. The fourth claim is for breach of contract against

Amundson and A&A, who executed the agreement in May 2001,

agreeing to invest and return the funds; the fifth is for

conversion; the sixth is for breach of fiduciary duty against

Amundson per the contract; and the seventh is a RICO claim for

wire and mail fraud and racketeering, with a claim for treble

damages. 

Here, contrary to what Plaintiff argues, the fact that

Amundson admitted the investment and offered to return

Plaintiff’s investment and profits do not preclude a meritorious

defense. However, reference to Defendants’ papers show an absence

of a sufficient showing of a meritorious defense. In the notice

of motion and motion filed on March 18, 2005, Defendants argued

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5

 Defendants failed to file the proposed answer electronically. The Court was informed by staff from

Plaintiff’s counsel’s office that the proposed answer had been served upon them, and a copy of the proposed answer

was faxed to the Court by Defendants’ counsel on May 3, 2005, at the Court’s request. Subsequently the Court

directed that the faxed document be filed as the original document. 

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that a genuine controversy existed as to material facts that

could only be resolved by litigation; they asserted that they

would show that the allegations were without merit. However, no

evidentiary showing was made. 

Reference was made to the proposed answer, which was not

initially filed with the Court.5 The proposed answer is

unverified and contains only denials of the specific allegations

of the complaint; it does not set forth facts that would

constitute a defense.

Attorney Nunez declares in his supplemental declaration that

a meritorious defense exists; he states, “Mr. Amundson did not

have any direct contact with plaintiff and or communications with

the plaintiff.” (Decl. filed May 2, 2005, at 2.) This does not

establish that Amundson lacked knowledge of, or did not solicit

or otherwise participate in, misrepresentations to Plaintiff.

Further, there is no showing that Nunez has personal knowledge as

to the contact that Defendant Amundson had with Plaintiff. Nunez

further declares that Amundson disputes the allegations of the

complaint and accordingly has a meritorious defense. (Id.) This

is insufficient to show specific facts constituting a defense.

Amundson states in his supplemental declaration filed on May

2, 2005, “I dispute the allegations of the complaint.” This is

likewise insufficient because it is noting more than a general

denial of the allegations of the complaint.

In Nunez’s memorandum filed May 3, 2005, he asserts that a

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meritorious defense has been shown based on the allegations of

the answer, which is not an evidentiary document. (See Memo. at

pp. 8-10.) Nunez argues that third party liability will reduce

Amundson’s liability. Defendants’ argument amounts to nothing

more than an assertion that defenses might be made out based on

the answer; they does not offer facts or law showing the actual

existence of a meritorious defense.

Defendants argue that no factual inquiry or review of state

law is necessary to determine the merit of defenses. Defendants

cite Horn v. Intelectorn Corp., 294 F.Supp. 1153 (S.D.N.Y. 1968)

in support of that assertion. There the defendant had no notice

of the suit; the Court noted that the defendant raised both

factual and legal defenses on the merits. It appears that the

defendant established that at no time was there an agreement that

plaintiff should receive a finder's fee as had been alleged in

the complaint and that, in any event, the statute of frauds

applied to the agreement in question, which even the plaintiff

admitted was an oral agreement. The Court found it sufficient for

the defendant to state defenses which, if established at trial,

would defeat plaintiff's action. Id. at 1155-56.

Here, there is no factual showing contrary to the

allegations of the complaint other than Amundson’s single

sentence in his supplemental declaration, “I dispute the

allegations of the complaint.” There is no statement of specific

facts that would constitute a defense.

Defendants’ counsel pointed to the allegations of the

answer, which consist of statements of legal defenses, not

specific facts, and which are not supported by a verification or

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declaration.

Defendants argue that raising Plaintiff’s unclean hands or

comparative fault in the answer demonstrates a defense. Defendant

has not established any facts that would constitute such a

defense.

Defendant asserted in the proposed answer that persons or

entities other than Defendant Amundson were at fault for any harm

suffered by Plaintiff, that any damages were caused by

superseding or supervening acts for which Defendant Amundson had

no liability, and that the conduct or omissions of third parties

proximately contributed to the losses sustained by Plaintiff; the

liability of Defendant Amundson should be diminished in

proportion to the amount of fault attributed to third persons. 

At argument Defendant asserted that it would be unfair to

enter default judgment against Defendants Amundson when Defendant

Strohl would be permitted to defend on the merits and when

Defendants Amundson had defenses based on Strohl’s conduct.

Defendant asked the Court to take judicial notice of portions of

Weil & Brown, California Practice Guide: Civil Procedure Before

Trial (Rutter 2004), Defaults, § 5.263, which concerns California

cases regarding the impropriety of a default judgment against a

defaulting defendant where a codefendant has raised defenses

which, if proven, would establish the nonliability of the

defaulting defendant (Adams Mfg. & Eng. Co. v. Coast Centerless

Grind. Co., 184 Cal.App.2d 649, 655 (1960) (judgment at trial of

a claim for money due for materials and services was rendered for

Defendant Coast, and default judgment had been rendered against

Defendant Black, who was allegedly Defendant Coast’s joint

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venturer or partner and whose liability, if any, was based solely

on Defendant Coast’s liability; it was held that the defaulting

defendant’s liability was wholly dependent upon the prevailing

codefendant’s liability, and thus despite his default, the

defaulting defendant was entitled to the benefit of the favorable

determination of the codefendant’s liability, and his motion to

set aside his default was rendered moot by the entry of judgment

in his favor; Mirabile v. Smith, 119 Cal.App.2d 685, 689 (1953)

(where a California statute permitted judgment to be entered

against one of several defendants where a several judgment was

proper, it was held improper to enter a judgment against only one

defendant who had defaulted where the judgment sought was a joint

judgment predicated upon joint liability from a partnership

obligation, and where the defenses presented by the appearing

defendants were such that if sustained, no judgment should be

entered against the defaulting defendant).

The situation presented to the Court in the instant case is

different. The matter presently before the Court concerns the

setting aside of a default, not the entry of a default judgment.

Although a motion for entry of default judgment against

Defendants Amundson is pending, it has been trailed pending

resolution of the motion to set aside default. It may be that

entry of a default judgment is inappropriate at this time in view

of the pendency of the case against Defendant Strohl. However,

the entry of a default judgment is not presently before the

Court.

Further, the existence and nature of Defendant’s Strohl’s

defense or defenses, if any, are unclear. Defendant Strohl’s

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6

 Defendant’s counsel asked the Court to take judicial notice of the documents attached to the declaration of

Plaintiff Albizu submitted in connection with the motion for default judgment that is not presently before the Court.

(Mot. Def. Jmt, Decl. of Albizu, Exs. A and B.) The Court notes that Amundson purported to act as a trustee.

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default was entered, and the only basis for his earlier motion to

set aside the default was the pendency of a bankruptcy action and

an alleged automatic stay of jurisdiction (a matter of which

Defendant Strohl and his counsel neglected to inform the Court);

it appears that the bankruptcy court annulled any stay, so no

basis for setting aside the default of Defendant Strohl appears

to the Court. No answer has been filed on behalf of Defendant

Strohl, so the Court has no basis for knowledge of any defenses

he might assert. Defendants Amundson have not provided any facts

that would indicate that Defendant Strohl has any particular

defenses.

Further, the nature of the defaulting defendants’ liability

may not be the derivative or dependent type of liability involved

in the California cases relied on by Defendants. The complaint

rests in significant part on allegations that Strohl engaged in

misrepresentation and that Amundson was his agent or coconspirator. However, it is also alleged that Amundson purported

to bind Plaintiff to another year of investment in 2001, and that

Defendants (including Amundson) falsely and fraudulently

represented that the funds had been put in the second investment

contract set to expire in 2002. In addition, the initial check of

$102,000.00 from Plaintiff was made out to Wesley Amundson,

Trustee, T.I. Group Trust.6 Liability of joint tortfeasors

alleged to have acted in concert under California law is joint

and several as to economic damages, see 5 Witkin, California Law

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at §§ 43-44, 51 (9th ed. 1988). It does not appear that Plaintiff

is alleging that Defendants Amundson are liable merely because of

status or relationship, but rather because of their conduct as

tortfeasors acting in concert or in conspiracy with Defendant

Strohl.

At argument, Defendants’ counsel argued that because the

initial investment was made out to Defendant Amundson acting as a

trustee, the action could not go forward because the trust for

which Amundson purported to act as a trustee was not joined.

Defendants did not cite any authority for this proposition. The

Court is not prepared to attempt to discern which claim this

argument might pertain to and independently research a matter

that, in any event, does not appear to constitute or relate to a

defense for Defendant Amundson, whose personal conduct is alleged

to have been tortious.

In summary, Defendants have filed to demonstrate facts that

would establish a meritorious defense. It appears that Defendants

lack a meritorious defense. 

I. Prejudice

Plaintiff argues that assets could be hidden if there is

delay. Given the nature of the allegations of the complaint and

the conduct of Defendants in this action, the Court finds that

setting aside default would result in prejudice to Plaintiff. See

Franchise Holding II, LLC, 375 F.3d at 926-27.

In summary, Defendants have failed to show that the bases

for setting aside their defaults have been satisfied. Failure to

show one of the three bases for setting aside a default warrants

denial of a motion. Although the Court is aware of the policy in

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favor of trying cases on their merits, the Court finds that

Defendants engaged in culpable conduct, Defendants failed to

demonstrate facts that would constitute a defense, and Plaintiffs

would be prejudiced if the defaults were set aside. 

Accordingly, the motion of Defendants Wesley E. Amundson and

Amundson and Associates to set aside their defaults IS DENIED.

IV. Telephonic Status Conference

The parties ARE DIRECTED to participate in an informal

telephonic status conference set for Wednesday, August 3, 2005,

at 10:00 a.m., regarding Plaintiff’s motion for default judgment

against Defendants Amundson, which has been trailed pending

disposition of the motion to set aside default. Further, counsel

for Plaintiff IS DIRECTED to arrange the conference call for the

conference and to direct that call to Frances Robles at (559)

498-7325 at the appointed time.

IT IS SO ORDERED.

Dated: June 21, 2005 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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