Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02748/USCOURTS-caed-2_06-cv-02748-3/pdf.json

Nature of Suit Code: 446
Nature of Suit: Americans with Disabilities Act - Other
Cause of Action: 42:12101 Americans with Disabilities Act

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1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

DERRICK ROSS, )

) 2:06-cv-02748-GEB-GGH

Plaintiff, )

)

v. ) ORDER

)

BASKETBALL TOWN, LLC; SACRAMENTO )

BASKETBALL TOWN, LLC; BARBARA )

HARDCASTLE as an individual and as )

Trustee for the Hardcastle Trust; )

HARDCASTLE TRUST; NOTHING BOT NET, )

LLC dba BASKETBALL TOWN SPORTS AND )

EVENTS; KIM DENNIS; STEVEN FEICK )

dba ALDINO’S PIZZA, )

)

Defendants. )

)

 )

SACRAMENTO BASKETBALL TOWN, LLC; )

and KIM DENNIS, )

 )

Cross-Complainants, )

v. )

 )

BARBARA HARDCASTLE, as an )

individual and as Trustee for the )

Hardcastle Trust; HARDCASTLE TRUST;)

21st CENTURY INVESTMENTS, INC.; )

GREG HARDCASTLE; )

 )

Cross-Defendants. )

)

On November 16, 2007, Cross-Defendants Greg Hardcastle and

21st Century Investments, Inc. (“Cross-Defendants”) moved to set aside

the Default entered against them on the Cross-Claim by Sacramento

Case 2:06-cv-02748-GEB -GGH Document 76 Filed 12/27/07 Page 1 of 7
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1 Oral arguments were scheduled for December 17, 2007. However,

the lawyer representing Kim Dennis was apparently ill and sent another

lawyer to conduct arguments who could not answer the first question

posed to her because she was not familiar with the case. Accordingly,

the hearing was adjourned. Thus, for all practical purposes, the matter

was submitted without oral arguments. 

2

Basketball Town LLC and Kim Dennis (“Cross-Complainants”). Kim Dennis

alone opposes the motion.1 For the reasons stated, the motion is

granted. 

BACKGROUND

On July 9, 2005, 21st Century Investments, Inc. entered into

a lease with Sacramento Basketball Town, LLC for property in Rancho

Cordova, California. (Dennis’ Opp’n at 2:3-5.) Greg Hardcastle is

the CEO of 21st Century Investments, and Kim Dennis is the manager of

Sacramento Basketball Town. (Hardcastle Decl. ¶ 1; First Amended

Cross-Claim ¶ 2.) Plaintiff filed this action on November 17, 2006

claiming that he was denied “equal access to full use and enjoyment of

the property given the absence of a lift to a mezzanine area . . . .” 

(Hardcastle Decl. at 2:12-15.) On June 26, 2007, Plaintiff filed an

Amended Complaint, which was served on Cross-Defendants on July 31,

2007. (Mot. at 2:1-3.) On July 25, 2007, Cross-Complainants served

Cross-Defendants with a First Amended Cross-Claim, which included

claims for breach of contract, declaratory relief, and equitable

contribution. (Id. at 2:14-23; First Amended Cross-Claim ¶¶ 20, 24,

28.)

Greg Hardcastle declares he “believed, in good faith, that

the insurance company would take care of the matter.” (Hardcastle

Decl. ¶ 5) But he received a letter from his insurance company

denying coverage on a date that he fails to disclose. (Id. ¶ 6.) On

August 21, 2007, Mr. Hardcastle contacted the law firm Christensen

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3

Ehret, LLP regarding representation of Cross-Defendants. (Kashack

Decl. ¶ 9.) “Thereafter, it was determined that 21st Century

Investments, Inc. was a suspended corporation.” (Id.) On August 31,

2007, Cross-Complainants filed a Request for Entry of Default against

Cross-Defendants. (Mot. at 3:16-15.) Default was entered against

Cross-Defendants on September 4, 2007. (Id. at 3:16.) CrossComplainants have not moved for a Default judgment against CrossDefendants. (Id. at 1:16-17.) On September 6, 2007, Christensen

Ehret was retained to represent Cross-Defendants. (Kashack Decl. ¶

12.) On September 21, 2007, counsel for Kim Dennis suggested the

parties enter mediation. (Kashack Decl. ¶ 16.) Cross-Defendants and

Cross-Complainants dispute why the proposed mediation did not take

place. (Mot. at 4:15-19; Dennis’ Opp’n at 4:21-28.) 

In September and October of 2007, Cross-Defendants’ counsel,

Shawna Kashack, made several unsuccessful requests that CrossComplainants stipulate to set aside the default. (Kashack Decl. ¶ 13-

15, 18, 20, 21.) Meanwhile, Mr. Hardcastle began taking steps to

restore the corporate status of 21st Century Investments, and on

October 23, 2007, Ms. Kashack confirmed that the corporate status had

been restored. (Hardcastle Decl. ¶ 8, Kashack Decl. ¶ 22.) On

November 16, 2007, Cross-Defendants moved to set aside the Default. 

DISCUSSION

“For good cause shown the court may set aside an entry of

default . . . .” Fed. R. Civ. P. 55(c). To satisfy the “good cause”

standard the movant must show: 1) excusable neglect; 2) a meritorious

defense; and 3) that setting aside the default will not unfairly

prejudice the other party. Franchise Holding II, LLC. v. Huntington

Rest.s Group, Inc. 375 F.3d 922, 925-26 (9th Cir. 2004); Mendoza v.

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Wight Vineyard Mgmt., 783 F.2d 941, 945-46 (9th Cir. 1986); Am. Ass’n

of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir.

2000). Where the movant seeks timely relief from a default “and the

movant has a meritorious defense, doubt, if any, should be resolved in

favor of the motion to set aside the [default] so that cases may be

decided on their merits.’” Mendoza, 783 F.2d at 945-46 (quoting Schwab

v. Bullock's Inc., 508 F.2d 353, 355 (9th Cir. 1974)). 

I. Excusable Neglect

Cross-Defendants argue their “mistaken belief that their

insurance company was handling this matter on their behalf, coupled

with their inexperience and unfamiliarity with legal procedure,

constitute inadvertence and excusable neglect . . . .” (Mot. at 5:23-

27.) “Further, . . . 21st Century Investments, Inc. [argues its] lack

of corporate status prohibited it from responding to the CrossComplaint until such time as its corporate status was renewed.” (Mot.

at 5:23-27, 6:1-2.) Cross-Complainants rejoin that “[n]either Mr.

Hardcastle nor 21st Century Investments is unfamiliar with legal

process,” as evidenced by their prior involvement in litigation. 

(Dennis’ Opp’n at 8:5-19.) Cross-Complainants further argue that

Cross-Defendants had notice of the Summons and Cross-Claim on July 25,

2007, and “if the insurance carrier misled him, that is a matter

between Hardcastle and the insurance carrier.” (Id. at 7:8-28.) 

Cross-Complainants also suggest that Cross-Defendants’ failure to

appear was deliberate, in part because he was marketing the property

to potential new tenants. (Id. at 7:8-28.)

///

///

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[T]he determination [of excusable neglect] is at

bottom an equitable one, taking account of all

relevant circumstances surrounding the omission

[including] the length of the delay and its

potential impact on judicial proceedings, the

reason for the delay, including whether it was

within the reasonable control of the movant, and

whether the movant acted in good faith.

Pioneer Inv. Serv.s Co. v. Brunswidk Assoc.s Ltd. P’ship, 507 U.S.

380, 395 (1993). No excusable neglect exists when the movant’s

actions leading to the default were culpable; "[i]n this context

culpable conduct means actions taken willfully or in bad faith." 

Gross v. Stereo Components Sys.s, Inc., 700 F.2d 120, 123-24 (3d Cir.

1983). 

Because 21st Century Investments was a suspended corporation

when the Request for Entry of Default was filed, and since because its

corporate status was not renewed until after the Default was entered,

21st Century Investments’ failure to respond to the Cross-Claim is

excusable. 

Mr. Hardcastle mistakenly believed his insurance company

would answer the Complaint. After he became aware that his insurance

company would not represent him, Mr. Hardcastle contacted a law firm

about representing him on August 21, 2007; he did not retain counsel

until two days after the Default had entered. Once counsel was

retained, she quickly made several requests that Cross-Complainants

stipulate to setting aside the Default, but Cross-Complainants refused

to do so. While it may have been possible for Mr. Hardcastle to

retain counsel more quickly, his delay is not significant. The bulk

of the delay in these proceedings resulted instead from CrossComplainants refusing to stipulate to set aside the Default once

Cross-Defendants were represented by counsel. Cross-Complainants have

not shown that Cross-Defendants’ failure to respond was in bad faith. 

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Accordingly, Mr. Hardcastle has shown a reasonable excuse for the

Default. Butner v. Newstadter, 324 F.2d 783, 786-87 (9th Cir. 1963)

(finding sufficient excuse where Defendant thought he had hired

counsel to represent him). 

II. Meritorious Defense 

Cross-Defendants argue that they have a meritorious defense

in this action because “[t]he Lease Agreement contains provisions

which require Cross-Complainants to hold Cross-Defendants harmless and

to defend and indemnify Cross-Defendants from all claims arising out

of or in connection with the use and occupancy of the premises.” 

(Defs.’ Reply at 5:18-21.) Cross-Complainants rejoin that “simply

asserting that one has a defense without supporting facts is ‘not

enough’ to justify vacating a Default or Default Judgment.” (Dennis’

Opp’n at 9:8-11 (citing Franchise Holding II, LLC, 375 F.3d at 926).)

“[A] party seeking to set aside a default need not prove his

defense by a preponderance of the evidence. Rather, that party only

carriers the burden of producing competent evidence that establishes a

factual or legal basis for the tendered defense.” Tri-Cont’l Leasing

Corp., Inc. v. Zimmerman, 485 F. Supp. 495, 497 (N.D. Cal. 1980)

(citing Cent. Operating Co. v. Util. Workers Union of Am., 491 F.2d

245, 252 n.8 (4th Cir. 1974)). 

The Sacramento Basketball Town lease contains a provision

that Sacramento Basketball Town shall indemnify, and hold harmless

21st Century Investments and its agents from any claims arising out of

the use of the premises by Sacramento Basketball Town. (Dennis’

Opp’n, Exh. 1 ¶ 8.7.) This appears to be a valid hold harmless clause

that provides a legal basis for a defense to Cross-Complainants’

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breach of contract, declaratory relief (to determine the parties’

rights under the lease), and equitable contribution claims. 

III. Unfair Prejudice

Cross-Defendants argue that “Cross-Complainants have

proceeded with their case against all other cross-defendants [and]

[b]y setting aside the default, Cross-Complainants would suffer no

prejudice.” Cross-Complainants do not respond to this argument. "The

standard [for unfair prejudice] is whether [Cross-Complainants’]

ability to pursue [their] claim will be hindered." Falk v. Allen, 739

F.2d 461, 463 (9th Cir. 1984). Cross-Complainants will not be

unfairly prejudiced by setting aside the Default because they can

pursue their claims against Cross-Defendants concurrent with the same

claims against other cross-defendants.

SUMMARY

For the reasons stated, Cross-Defendants’ Motion is granted. 

The September 4, 2007 entry of Default against 21st Century

Investments, Inc. and Greg Hardcastle is set aside. 21st Century

Investments, Inc. and Greg Hardcastle have leave to file responsive

pleadings within ten days after this Order is filed, exclusive of the

date of filing. 

IT IS SO ORDERED.

Dated: December 26, 2007

 

GARLAND E. BURRELL, JR.

United States District Judge

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