Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-02105/USCOURTS-caed-2_04-cv-02105-0/pdf.json

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

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

FRUITX, INC.,

Plaintiff, No. CIV S-04-2105 WBS KJM

vs.

STEPHEN CRAIG, et al.,

Defendants. ORDER

 /

Plaintiff’s motion for entry of default judgment against defendants Hadaway and

Turismo Costa Brava came on for hearing on April 6, 2005. Mark Serlin appeared for plaintiff. 

No appearance was made for defendants. Following the hearing, the court granted leave for

plaintiff to file supplemental briefing. 

Defendant Hadaway’s motion to set aside default and default judgment, filed after

the hearing on plaintiff’s motion, came on regularly for hearing on May 25, 2005. Defendant’s

motion also seeks leave to file his answer, which he has lodged with the court. Mark Serlin

appeared at hearing for plaintiff; Charles Nelson and William Cherry appeared for defendant

Hadaway. No appearance was made for the remaining defendants. Upon review of the

documents in support and oppostion, upon hearing the arguments of counsel, and good cause

appearing, THE COURT FINDS AS FOLLOWS:

Case 2:04-cv-02105-WBS -KJM Document 43 Filed 07/11/05 Page 1 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1

 Rule 4(h) provides, in pertinent part:

Unless otherwise provided by federal law, service upon a domestic or foreign

corporation or upon a partnership or other unincorporated association that is

subject to suit under a common name, and from which a waiver of service has not

been obtained and filed, shall be effected:

2

In light of plaintiff’s pending motion for entry of default judgment against

defendants Hadaway and Turismo Costa Brava, defendant Hadaway’s motion to set aside default

judgment is premature.

With respect to plaintiff’s motion for entry of default judgment against defendant

Turismo Costa Brava, it appears that default against Turismo Costa Brava was entered

improvidently. The proof of service indicates the summons was served on defendant Hadaway as

“agent for service of process.” See Return of Service filed Oct. 25, 2005 (docket no. 4). The

record, however, does not support plaintiff’s assertion that defendant Hadaway is a proper agent

for service of process on the Chilean foreign corporation. See Decl. of Jack Hadaway (filed

April 13, 2005) (“Hadaway Decl.”), ¶¶ 2, 3 (denying status as agent for service of process); cf.

Decl. of Mark Serlin (filed Feb. 23, 2005) (“Serlin Decl.”), ¶ 3 (Hadaway “made no effort to

claim that he was not an officer or agent . . .”); Decl. of Chuck Hankins (filed Feb. 23, 2005)

(“Hankins Decl.”), ¶¶ 3-5 (Hadaway “made representations” and participated in phone

conversations with a co-defendant that “their company” would follow through on certain

commitments); Decl. of Jan Harford (filed Feb. 23, 2005) (“Harford Decl.”), ¶¶ III, XII

(Hadaway was “actively working” in the business, which was operated by co-defendant Craig

and his wife; Hadaway was “financially involved” in and a “financial backer” of the business). 

In light of Hadaway’s denial that he was authorized to accept service, and the dearth of any

affirmative documentation of which the court may take judicial notice that Hadaway is either an

officer, managing or general agent, or designated with an appropriate agency as agent for service

of process, service upon him does not effect service on the corporation in a judicial district of the

United States under Federal Rule of Civil Procedure 4(h)(1),1 on which plaintiff relies. Cf. 

Case 2:04-cv-02105-WBS -KJM Document 43 Filed 07/11/05 Page 2 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

(1) in a judicial district of the United States in the manner prescribed for

individuals by subdivision (e)(1), or by delivering a copy of the summons and of

the complaint to an officer, a managing or general agent, or to any other agent

authorized by appointment or by law to receive service of process and, if the agent

is one authorized by statute to receive service and the statute so requires, by also

mailing a copy to the defendant. . .

2

 Rule 4(h)(2) provides that service upon a corporate entity may be effected, in the

alternative: 

in a place not within any judicial district of the United States in any manner

prescribed for individuals by subdivision (f) except personal delivery as provided

in paragraph (2)(C)(i) thereof.

3

United States v. Ziegler Bolt and Part Co., 111 F.3d 878 (Fed. Cir. 1997) (while agent’s authority

may be implied in fact, a party urging such an implication “must present facts and circumstances

showing the proper relationship between the defendant and its alleged agent”; in case involving 

Court of International Trade rules for service of process, analogous to Rule 4, even where

attorney represented corporation in administrative proceedings and signed form acknowledging

receipt of a copy of summons and complaint, record did not support his status as implied agent in

face of corporation’s denial that it ever expressly authorized attorney to act as agent for service of

process); United States v. Balanovski, 236 F.2d 698 (2d Cir. 1956) (where power of attorney

granted broad authority, and person holding power of attorney filed tax return as “agent” of

grantor, person was “authoriz[ed] by operation of law (in addition to her appointment in fact) to

receive service of process. . .”). As an alternative, plaintiff makes no attempt to demonstrate

compliance with Federal Rule of Civil Procedure 4(h)(2).2 The default against defendant

Turismo Costa Brava therefore will be set aside.

As to the default entered against defendant Hadaway, the court finds defendant

has shown good cause under Federal Rule of Civil Procedure 55(c) to grant the relief requested. 

The "good cause" standard that governs vacating an entry of default under Rule 55(c) is the same

standard that governs vacating a default judgment under Rule 60(b). See TCI Group Life Ins.

Case 2:04-cv-02105-WBS -KJM Document 43 Filed 07/11/05 Page 3 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

 Plaintiff’s objections to the cited portions of Hadaway’s supplemental declaration are

overruled. See Fed. R. Evid. 803(3) (state of mind). Other portions of Hadaway’s declaration

have not been relied upon in reaching the determinations made herein; the supplemental

declaration of Charles Nelson also has not been relied upon. 

4

Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). The good cause analysis considers three

factors: (1) whether defendant engaged in culpable conduct that led to the default; (2) whether

defendant has a meritorious defense; or (3) whether reopening the default judgment would

prejudice plaintiff. Id. 

In applying these factors, three precepts guide the court. First, the rules allowing

for vacating of default or default judgment are remedial in nature and must be liberally applied. 

See Meadows v. Dominican Republic, 817 F.2d 517, 521 (9th Cir.1987) (applying Rule 60). 

Second, default judgments generally are disfavored and cases should be decided on their merits. 

Id. Third, where defendant seeks timely relief from the judgment and has a meritorious defense,

doubt, if any, should be resolved in favor of the motion to set aside the judgment. Id. "The

court's discretion is especially broad where, as here, it is entry of default that is being set aside,

rather than a default judgment." Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir.

1986). 

In the instant action, all three factors weigh in favor of defendant. Defendant

Hadaway has engaged in no proven culpable conduct leading to the entry of default and promptly

moved to set aside entry of default after receiving notice of plaintiff’s motion for default

judgment. In particular, it appears Hadaway did not ignore the fact that this action had been

filed, but rather upon receiving the complaint undertook efforts, although apparently unfruitful,

to resolve the matter without the need for litigation. Hadaway Decl., ¶¶ 13-16; Supp. Decl. of

Jack Hadaway (filed May 18, 2005) (“Supp. Hadaway Decl.”), ¶¶ 4, 5, 8 (lines 16-19 of latter

paragraph).3 Based on defendant’s understanding of conversations he had with plaintiff’s

counsel and defendant’s report of the conduct of other litigation involving plaintiff and this

defendant, Hadaway Decl., ¶ 9, Supp. Hadaway Decl., ¶¶ 4-5, the actions taken in this litigation

Case 2:04-cv-02105-WBS -KJM Document 43 Filed 07/11/05 Page 4 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

5

by defendant at a time when he was proceeding in propria persona, do not appear to have been

unwarranted. If defendant’s testimony as to the actions he took that he thought had resolved the

parties’ instant dispute is credited by a jury, it also appears defendant will have a meritorious

defense. Finally, defendant has caused no delay that plaintiff has shown will inhibit prosecution

of this action on the merits; thus there is no apparent prejudice. The motion to set aside default

therefore will be granted.

In light of the court’s determination that the defaults entered against defendants

Hadaway and Turismo Costa Brava must be set aside, plaintiff’s motion for default judgment is

moot and will be denied without prejudice. Defendant Hadaway will be directed to file his

answer within ten days of the filed date of this order.

Accordingly, IT IS HEREBY ORDERED that:

1. The default entered against defendant Turismo Costa Brava on November 19,

2004 is set aside.

2. Defendant Hadaway’s motion to set aside entry of default is granted; the

default entered against defendant Hadaway on November 19, 2004 is set aside.

3. Plaintiff’s motion for default judgment is denied without prejudice.

4. Defendant Hadaway shall file the answer lodged on April 13, 2005 within ten

days of the filed date of this order.

DATED: July 8, 2005.

______________________________________

UNITED STATES MAGISTRATE JUDGE

006

fruitx2.oah

Case 2:04-cv-02105-WBS -KJM Document 43 Filed 07/11/05 Page 5 of 5