Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03646/USCOURTS-cand-3_05-cv-03646-1/pdf.json

Nature of Suit Code: 625
Nature of Suit: Drug Related Seizure of Property
Cause of Action: 21:881 Forfeiture Property-Drugs

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United States District Court

For the Northern District of California

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“Judicial forfeitures of property are governed by the Supplemental Rules for Certain

Admiralty and Maritime Claims . . . .” United States v. Lido Motel, 5145 N. Golden State

Blvd., 135 F.3d 1312, 1315 (9th Cir. 1998).

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

$30,790 IN UNITED STATES

CURRENCY,

Defendant.

NO. C05-3646 TEH

ORDER DENYING CLAIMANT

VERDUGO’S MOTION FOR

RELIEF FROM DEFAULT AND

GRANTING PLAINTIFF’S

MOTION FOR A DEFAULT

JUDGMENT

This matter comes before the Court on Claimant Rosa Verdugo’s motion for relief

from default and Plaintiff United States of America’s motion for a default judgment. 

This is a judicial forfeiture action involving the seizure of $30,790 in U.S. currency on

March 14, 2005, from a safe deposit box rented to Rosa Verdugo (“Verdugo”). The United

States (“U.S.”) filed a complaint for forfeiture of the $30,790 on September 9, 2005, alleging

that the forfeiture of the money is authorized by 21 U.S.C. § 881(a)(6), because the money

was “furnished or intended to be furnished . . . in exchange for a controlled substance” or

“was proceeds traceable to such an exchange.” Compl. at ¶ 27; Req. of U.S. to the Clerk to

Enter a Default at 1:23-27. Verdugo received a copy of the complaint on September 14,

2005, via certified mail (the U.S. received a return receipt signed “Rosa Verdugo”, dated

“9-14-05”), but she failed to file a claim within the next 30 days as required by Rule

C(6)(a)(i) of the Supplemental Rules for Certain Admiralty and Maritime Claims.1 On

November 29, 2005, the U.S. filed its request for the Clerk to enter default. Verdugo took no

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action after receiving notice of the request to enter default, and the Clerk entered default on

December 6, 2005.

On December 9, 2005, three days after the Clerk entered default, Verdugo through

counsel, Eileen Burke (“Burke”), filed a motion for relief from default alleging that Verdugo

had attempted to retain counsel but had been unable to afford a retainer. Verdugo also

asserted that the seized money was lawfully obtained through three years of wages and tips

and represented her entire savings. Verdugo concurrently filed a proposed claim and answer. 

The U.S. answered on January 3, 2006, with its opposition to the motion for relief from

default and its own motion for a default judgment. Verdugo filed a late opposition to the

motion for a default judgment on February 13, 2006. The Court heard oral arguments on the

two motions, which go hand in hand, on March 6, 2006.

Having carefully considered the parties’ papers and oral arguments, the Court

DENIES Claimant’s motion for relief from default and GRANTS Plaintiff’s motion for a

default judgment for the reasons set forth below.

I. LEGAL STANDARD

Federal Rule of Civil Procedure 55(c) provides that a court may set aside a default for

“good cause shown.” “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).” Franchise Holding II, LLC, v. Huntington Restaurants Group, LLC, 375 F.3d 922,

925 (9th Cir. 2004).

In the Ninth Circuit, the good cause analysis considers three factors: (1) whether the

claimant engaged in culpable conduct that led to the default; (2) whether the claimant does

not have a meritorious defense; and (3) whether reopening the default will prejudice the

plaintiff. Id. at 925-26. The claimant bears the burden of showing that these factors favor

setting aside the default. TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir.

2001). Because the claimant must establish all three factors, a court may deny a motion to

set aside a default “if any of the three factors [is] true.” Franchise Holding II, 375 F.3d at

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926 (quoting American Ass’n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108

(9th Cir. 2000)). This is in tension with the policy that defaults and default judgments are

disfavored because “a case should, whenever possible, be decided on the merits.” TCI, 244

F.3d at 696 (quoting Falk v. Allen, 739 F.3d 461, 463 (9th Cir. 1984)).

II. DISCUSSION

The Court addresses each of the three prongs of the “good cause” analysis in turn

below.

A. Culpable conduct prong

There is a split of authority in the Ninth Circuit as to the culpable conduct prong of the

“good cause” analysis. The parties are in disagreement as to which line of cases controls. 

However, because the Court finds that Verdugo’s conduct is culpable under either line of

authority, the Court does not resolve the conflict between the competing lines of cases.

Under one line of Ninth Circuit cases relied on by the U.S., a party’s conduct is

culpable if he “received actual or constructive notice of the filing of the action and failed to

answer.” Franchise Holding II, 375 F.3d at 926 (quoting Direct Mail Specialists, Inc. v.

Eclat Computerized Techs., Inc., 840 F.2d 685, 690 (9th Cir. 1988)). Under this authority,

the rule is straightforward: when a party has actual notice of the filing of a complaint and

fails to answer, the party’s conduct is culpable, and it is within the district court’s discretion

to deny the motion to set aside the default. Id.

Verdugo does not contest that she had actual notice of the complaint. See Verdugo’s

Memorandum of Points and Authorities (“M.P.A.”) in Supp. of Mot. for Relief from Default

at 3:9-10, 3:17-18 (explaining that Verdugo received and gave counsel a copy of the

complaint). The U.S. has submitted a copy of the return receipt for the complaint signed by

“Rosa Verdugo” and dated “9-14-05.” See Ex. D to Kenney’s Decl. in Supp. of U.S.’s

Opp’n to Mot. of Verdugo. In addition, Verdugo also does not contest that she failed to file a

claim in the time required by the Supplemental Rules. Thus, based on Verdugo’s actual

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notice of the complaint and failure to file a claim, Verdugo has not met her burden of

establishing a lack of culpable conduct. This Court therefore has discretion to deny the

motion to set aside the default under the Franchise Holding II line of cases relied on by the

U.S.

However, this does not end the Court’s analysis. Under another line of Ninth Circuit

cases relied on by Verdugo, a party’s “‘conduct is culpable if he has received actual or

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

F.3d at 697 (quoting Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir.

1988)). “Intentionally,” in the default and default judgment context, generally requires a

showing that a defendant’s conduct demonstrated a “devious, deliberate, willful, or bad faith

failure to respond.” Id. at 698. In contrast, where there is a “neglectful failure to answer”

and the party “offers 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,” the failure to respond is not “necessarily . . . culpable or

inexcusable.” Id. at 697-98.

When considering the intentionality component, a “defaulting party’s general

familiarity with legal processes or consultation with lawyers at the time of default [are]

pertinent to the determination [of] whether the party’s conduct in failing to respond to legal

process was deliberate, willful, or in bad faith.” Id. at 699 n.6; see, e.g., Alan Neuman

Prods., Inc., 862 F.2d at 1392 (district court did not abuse its discretion in refusing to set

aside the default because the defaulting party intentionally failed to answer based on his

actual notice of the complaint and retention of attorneys who “monitored the court docket”);

Direct Mail Specialists, Inc., 840 F.2d at 690 (district court did not abuse its discretion in

refusing to vacate a default judgment because the party who had actual notice of the

complaint was a lawyer and “presumably was well aware of the dangers of ignoring service

of process”).

Verdugo contends that her conduct is not culpable because of her inability to retain

counsel and her lack of sophistication. After Verdugo received a copy of the complaint, she

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In addition, even accepting Burke’s declaration as evidence, the Court finds it not

credible that Verdugo could not retain counsel because she could not afford a retainer. 

Assuming Verdugo’s contention is true that she received the $30,790 through three years of

wages and tips and that this was her “entire savings,” then it is questionable that she could

not afford an attorney. Verdugo’s M.P.A. in Supp. of Mot. for Relief from Default at 3:13. 

On average, $30,790 equates to approximately $855 per month in savings. Verdugo had

notice of the complaint on September 14, 2005. Assuming that she was still working at this

time, and that she was accumulating wages and tips regularly, she would have earned $855

from mid-September to mid-October. It is not unreasonable to believe that an attorney would

accept this amount as a retainer.

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claims that she was unable to retain counsel until after the default had been entered. See

Verdugo’s M.P.A. in Supp. of Mot. for Relief from Default at 3:9-17, 4:1-3 (explaining that

Verdugo contacted several attorneys but could not secure counsel because she could not

afford a retainer and that Burke’s “schedule could not accommodate” Verdugo’s case until

after the Clerk entered default). Verdugo also asserts that she “has not completed high

school and works as an exotic dancer . . . [and] has no legal experience.” Id. at 5:18-19.

The government contends, however, that Verdugo has not met her burden of negating

culpable conduct because she “did not submit any declaration, affidavit or other evidence as

to why she failed to file a claim by the October 14, 2005 deadline for filing a claim.” U.S.’s

Second Reply at 3:16-18. Only her attorney, Burke, has included a declaration claiming that

Verdugo “was unable to retain counsel because she did not have any money for a retainer

because the money seized in this case constituted all of her savings.” Burke’s Decl. in Supp.

of Mot. for Relief from Default at 2:4-7. But, according to the U.S., these assertions by

Burke “are based on ‘information and belief’ which is inadmissible.” U.S.’s Second Reply at

3 n.3. The Court need not decide this dispute because, as discussed below, the Court finds

that Verdugo has failed to meet her burden even if the statements in Burke’s declaration are

assumed to be true.2

In particular, even if Verdugo was unable to retain counsel and is not a sophisticated

party, the Court simply cannot ignore that Burke, an attorney (and criminal defense attorney

for Verdugo’s boyfriend), advised and assisted Verdugo months before the U.S. filed its

forfeiture complaint. Burke was involved in the process since at least May 2005, when she

assisted Verdugo in preparing a motion for return of property in state court. Burke’s Decl. in

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On May 13, 2005, Verdugo received notice from the D.E.A. that the money seized

from Verdugo’s safe deposit box was subject to forfeiture. Verdugo’s M.P.A. in Supp. of

Mot. for Relief from Default at 2:8-10.

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The U.S. asserts that Burke received a courtesy copy of the complaint shortly after September 9, 2005, “because Ms. Burke had inquired about the status of defendant $30,790

on behalf of Ms. Verdugo.” U.S.’s Opp’n to Mot. to Vacate Default at 2:10-12. It is unclear

whether Burke disputes that she received a courtesy copy of the complaint from the U.S. 

Thus, the Court will not rely on this fact in making its determination of whether Verdugo has

met her burden of negating culpable conduct.

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Supp. of Mot. for Relief from Default at 2:13-16. In June 2005, Burke helped Verdugo to

prepare an administrative claim for the money with the Drug Enforcement Administration

(“D.E.A.”).3

 Verdugo’s M.P.A. in Supp. of Mot. for Relief from Default at 2:10-15. The

U.S. correctly points out that Verdugo (through Burke) was able to file this claim in a timely

fashion, indicating that she is capable of filing a claim within the time limits. After the case

was referred to the U.S. Attorney’s Office, Burke contacted the office on July 11, 2005, and

again on August 8, 2005, to inquire about Verdugo’s claim and was informed that the U.S.

had until September 9, 2005, to decide whether to file a complaint. Id. at 2:20-21. After

Verdugo received the complaint, Burke remained “in contact” with Verdugo. Id. at 4:1-2. In

late October 2005, Verdugo contacted Burke and gave counsel a copy of the complaint.4

 Id.

at 3:16-18. Burke told Verdugo that she would find out from the U.S. Attorney’s Office

about the action. Id. at 3:18-19. Burke, “as a courtesy” to Verdugo, called the U.S.

Attorney’s Office and inquired whether Verdugo could have more time to file a claim and

answer. Id. at 3:20-21. There is no dispute that Patricia Kenney (“Kenney”), the Assistant

U.S. Attorney, informed Burke at that time that Verdugo should file a motion to allow for a

late filing. Verdugo’s M.P.A. in Supp. of Mot. for Relief from Default at 3:24-26.

The U.S. contends that this was not just a courtesy call, and that Burke told counsel in

the U.S. Attorney’s Office that she “had agreed to represent Ms. Verdugo and asked for an

extension of time to file a claim and answer.” Kenney’s Decl. in Supp. of U.S.’s Opp’n to

Mot. of Verdugo at 2:25-26 (emphasis added). In other words, the U.S. contends that Burke

was Verdugo’s attorney at least by late October 2005. Burke claims, however, that it was not

until after November 29, 2005, that Burke accepted Verdugo as a client “because Counsel’s

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schedule could not accommodate Ms. Verdugo’s case.” Verdugo’s M.P.A. in Supp. of Mot.

for Relief from Default at 4:2-3. Regardless if Burke was Verdugo’s attorney (i.e. her

attorney in fact) in late October 2005, there is still no explanation why Burke, who was

clearly aware of the filing deadline, failed to assist Verdugo in filing a simple and

straightforward claim or ask this Court for an extension of time or, at a minimum, assure that

Verdugo understood her dilemma. See Verdugo’s Proposed Claim (a simple one-page

document in which Verdugo declares under penalty of perjury that she is “the lawful owner

of the property seized”). The U.S. did not ask for default to be entered until November 29,

2005, and Burke and Verdugo had sufficient time from late October to late November to file

a claim or ask this Court for more time. The Court simply does not find it credible that

Burke had no time to help Verdugo file a claim prior to the entry of default.

Because a defaulting party’s “consultation with lawyers at the time of default [is]

pertinent to the determination [of] whether the party’s conduct in failing to respond to legal

process was deliberate, willful, or in bad faith,” the Court finds that Verdugo has failed to

meet her burden of showing a lack of culpable conduct. TCI, 244 F.3d at 699 n.6. Even

accepting Burke’s claim that Verdugo was not her client until after November 29, 2005,

Burke was closely involved in the process as early as May 2005 and assisted and advised

Verdugo up to the entry of default. More importantly, the facts show that Burke selectively

meted out her time to Verdugo. For example, as discussed above, Burke had time to file an

administrative claim in June 2005, but no time to file a similar claim during the two-and-ahalf months between service of the complaint and the U.S.’s request for entry of default. 

Burke even stated, at oral argument, that she “helped [Verdugo] along the way significantly.” 

Since counsel was involved in the process but failed to do anything to meet the filing

deadline, this Court has discretion to deny the motion to set aside default under the TCI line

of cases relied on by Verdugo: “Absent some explanation . . . , it is fair to expect that

individuals who . . . have consulted with a lawyer appreciate the consequences of failing to

answer and do so only if they see some advantage to themselves.” Id. In other words, where

a lawyer has been involved in the process -- especially to the extent shown here -- and there

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is no credible, good faith explanation as to why she failed to file a claim, it is appropriate to

conclude that failure to respond was culpable.

The facts of this case are distinguishable from TCI and the cases cited therein, in

which culpable conduct was not found. Contrary to Verdugo’s assertion, TCI does not assist

Verdugo in showing that her conduct was not culpable. TCI involved an intra-family dispute

between the wife of a deceased and her mother-in-law over the proceeds of a life insurance

policy in an interpleader action. Id. at 693. There was no dispute that the wife had notice of

the cross-claim brought by the mother-in-law and failed to respond during the time required

by local rules. Id. at 694. But, the court determined that the wife’s conduct was not culpable

“because of her exigent personal circumstances, especially her mental state, and because of

her lack of familiarity with legal matters.” Id. at 699. She “had been widowed less than a

year before [the mother-in-law’s] action against her, and was distraught. She was in a

psychiatrist’s care for her severe depression, and was taking several strong psychoactive

medications.” Id. During the time the wife had to answer the cross-claim, she “was in the

process of selling her home and moving herself and her two small children from California to

Florida.” Id. Her “extreme personal difficulty” satisfied the court that the wife’s conduct

was excusable. Id. In addition, there is no evidence that the wife had contacted counsel prior

to the entry of default in favor of her mother-in-law. See id. at 694-95 (showing that the wife

told the mother-in-law’s counsel that “she had not retained counsel and did not know what

she was going to do about the litigation” and explaining that the wife contacted a lawyer in

Florida for advice after she had failed to respond to the motion to enter a default judgment). 

In contrast, while Verdugo may also lack legal sophistication, nothing in the record before

this Court demonstrates “extreme personal difficulty” of the nature considered by the court in

TCI. And, as discussed above, Burke’s close involvement in this case weakens Verdugo’s

argument that this Court should grant relief from default. Unlike the wife in TCI, Verdugo

did have the assistance and advice of an attorney, but she nonetheless failed to take any steps

to file a claim or seek more time.

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The court in TCI discussed three cases regarding the lack of culpable conduct, two of

which the Court finds relevant to the proceedings here. In the third case, Gregorian v.

Izvestia, 871 F.2d 1515 (9th Cir. 1989), the Ninth Circuit determined that the defendants’

failure to appear in the action was not culpable because the defendants had a reasonable

belief that the court lacked subject matter jurisdiction over them. Gregorian, 871 F.2d at

1525. Because there is no similar allegation of this Court lacking jurisdiction to hear this

case, the Court finds Gregorian outside the scope of its analysis.

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At oral argument, Burke explained that she has been in an ongoing trial before the

San Francisco Police Commission since late August 2005. See also Burke’s Decl. in Supp.

of Resp. to Order to Show Cause at 2:34-7 (stating the same). This still does not explain how

she had time to call the U.S. Attorney’s Office, but no time to file a claim with this Court or

ask for an extension of time, particularly since Burke acknowledged that she was not in trial

every day.

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Nor do the relevant cases cited in TCI support Verdugo’s argument. See id. at 697-98

(citing cases where the court determined that the party’s conduct was not culpable).5

 First,

this case is distinguishable from Bateman v. United States Postal Service, 231 F.3d 1220 (9th

Cir. 2000), in which an attorney “left the country for a family emergency, miss[ed] the

deadline to answer a motion for summary judgment while he was away, and did not contact

the district court or the opposing counsel until 16 days after his return because it took that

long for him to recover from his trip and sort through his mail.” TCI, 244 F.3d at 698. While

this did not preclude a finding of “excusable neglect” under Federal Rule of Civil Procedure

60(b), Burke has offered no similar explanation as to why she took no steps to assist Verdugo

in filing a claim or asking this Court for an extension of time.6

Further, Falk does not support Verdugo’s failure to respond. Falk involved an

unlawful detainer action brought by a landlord against a tenant. Falk, 739 F.2d at 462. The

tenant failed to appear at the hearing, and a default judgment was entered against her. Id. 

The court determined that the tenant’s conduct was not culpable because she was preparing

to leave the country the day after the hearing for medical treatment and did not return from

Korea until two months after the judgment. Id. at 462, 464. “Moreover, after she learned

about the [landlord’s] judgment, she had difficulty finding counsel because the local legal aid

office declined to assist her.” Id. (emphasis added). Her failure to respond was not culpable

because she failed to respond for “understandable reasons.” TCI, 244 F.3d at 698. Here,

Verdugo has offered no evidence of medical issues or being out of the country, nor did she

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fail to contact a lawyer until after default had been entered. Instead, Verdugo had the

assistance and advice of a lawyer even before the U.S. filed its complaint for forfeiture.

Accordingly, under either line of Ninth Circuit cases, Verdugo’s conduct is culpable

and this Court has discretion to allow the entry of default to stand. See Franchise Holding II,

375 F.3d at 926 (because the party seeking to set aside the default must show that all three

factors of the “good cause” analysis favor setting aside the default, a district court may deny

the motion if any of the three factors is true). Because Verdugo has failed to meet her burden

in establishing a lack of culpable conduct, the Court finds it appropriate to deny the motion

for relief from default.

B. Other components of the “good cause” analysis

Although the Court’s findings on culpable conduct are a sufficient basis for denying

the motion for relief from default, the Court considers the remaining prongs of the “good

cause” analysis for purposes of creating a complete record.

1. Meritorious defense prong

“A defendant seeking to vacate a default judgment [or a default] must present specific

facts that would constitute a defense.” TCI, 244 F.3d at 700 (emphasis added). The burden

on the party seeking to set aside a default “is not extraordinarily heavy.” Id. Under this

lenient standard, Verdugo satisfies her burden at this stage of the proceedings because she

may be able to establish a meritorious defense.

Courts that have considered whether a party has a meritorious defense look to see

whether the party has set forth specific facts to support its defenses or merely conclusory

statements. See, e.g., Franchise Holding II, 375 F.3d at 926 (finding that the party seeking to

set aside the default had failed to set forth specific facts that would constitute a defense

because it had merely “offered the district court only conclusory statements that a dispute

existed”); Falk, 739 F.2d at 462-63 (determining that a tenant who had failed to make timely

rental payments had asserted specific facts that could support a defense of waiver to an

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According to the U.S., the California Employment Development Department has no

record that Verdugo has been employed. U.S.’s Opp’n to Mot. to Vacate Default at 5:12-14. 

However, as this is a motion to set aside the default, this Court does not weigh the evidence,

but looks to see whether the party seeking to set aside the default has put forward sufficient

facts to warrant a meritorious defense.

8

Section 983(d)(1) states that: “An innocent owner’s interest in property shall not be

forfeited under any civil forfeiture statute. The claimant shall have the burden of proving

that the claimant is an innocent owner by a preponderance of the evidence.” 18 U.S.C. §

983(d)(1). As to “a property interest in existence at the time the illegal conduct giving rise to

the forfeiture took place,” an “innocent owner” is someone who “did not know of the

conduct giving rise to the forfeiture.” 18 U.S.C. § 983(d)(2)(1).

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unlawful detainer action under the governing law because the landlord “repeatedly accepted

her late rental payments”); Madsen v. Bumb, 419 F.2d 4, 6 (9th Cir. 1969) (finding that the

trial court properly concluded that the defendant had failed to show a meritorious defense

because the defendant’s “proposed Answer consists of a mere general denial without facts to

support it and is unverified”).

Verdugo asserts that she has several affirmative defenses to the seizure of the money,

including that the government cannot directly link the money to any illegal activity and that

she is an innocent owner. Verdugo’s M.P.A. in Supp. of Mot. for Relief from Default at

5:10-14; Verdugo’s Proposed Answer at 4:23. In her proposed answer, she states that the

money taken from the safe deposit box “belongs to her and she has filed an administrative

claim for the money.” Verdugo’s Proposed Answer at ¶ 21. She also claims that she “has

been employed in San Francisco for several years,” apparently as an exotic dancer. Id. at ¶

22; Verdugo’s M.P.A. in Supp. of Mot. for Relief from Default at 5:19. In addition, she has

attached as an exhibit to her motion for relief from default her administrative claim, dated

June 10, 2005, in which Verdugo states under penalty of perjury that the money belongs to

her and that she has obtained it through “a legitimate manner as a result of three years worth

of wages and tips.”7

 Ex. A to Verdugo’s M.P.A. in Supp. of Mot. for Relief from Default.

Given these assertions, it appears that Verdugo may be able to establish that she is an

innocent owner of the money seized from the safe deposit box under 18 U.S.C. § 983(d).8

Accordingly, because Verdugo has put forth facts that support a meritorious defense and not

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just conclusory statements, she satisfies this prong of the “good cause” analysis, and the

Court will not deny the motion to set aside the default based on this factor.

2. Prejudice prong

“To be prejudicial, the setting aside of a judgment [or default] 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). The Ninth Circuit has determined that 

merely being forced to litigate on the merits cannot be considered prejudicial

for purposes of lifting a default judgment [or default]. . . . A default judgment

gives the plaintiff something of a windfall by sparing her from litigating the

merits of her claim because of her opponent’s failure to respond; vacating the

default judgment merely restores the parties to an even footing in the litigation.

Id. In order to prejudice a party, the delay must generally result in either an evidentiary or

financial loss. Id. (citing Thompson v. American Home Assur. Co., 95 F.3d 429, 433-34 (6th

Cir. 1996)).

Verdugo correctly points out that the U.S. has not asserted prejudice as a reason to

deny the motion for relief from default. Merely being forced to litigate on the merits is not

prejudicial as setting aside the default places the parties on an even footing. There are no

assertions that the U.S. will have some evidentiary or financial loss by going forward with

this litigation. Thus, the Court will not deny the motion for relief from default based on

prejudice.

III. CONCLUSION

Verdugo does not dispute that it is her burden to establish that the “good cause”

factors favor setting aside the default. Because this Court finds that Verdugo has failed to

meet her burden of establishing a lack of culpable conduct, Verdugo’s motion for relief from

default is DENIED. Although the Court acknowledges that a case should, whenever

possible, be decided on the merits, the Court simply cannot condone Burke’s actions in this

case. Nor can the Court imagine that any court would endorse a policy which sets aside a

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default under these facts, where a lawyer remained closely involved in the case by advising

and assisting a party but took no steps to file a timely claim before default was entered. The

Court is not unsympathetic to Verdugo’s allegation that she was unable to retain counsel, nor

to her lack of sophistication; however, neither of these factors excuses Burke’s conduct up to

the entry of default. Even accepting Burke’s contention that she was not Verdugo’s lawyer

until after default was entered, the Court is unable to ignore Burke’s level of involvement

with Verdugo from at least May 2005, her awareness of the filing deadline, and her inaction

in filing a claim or asking for an extension of time -- both of which are relatively

straightforward and non-time-consuming acts. Simply put, the Court cannot endorse a policy

that would allow this type of behavior on the part of an attorney to support setting aside entry

of default; to do so would be to obliterate a party’s right to a default. If, as Burke claims, she

is simply trying to help Verdugo regain her money, she should have taken the minimal steps

necessary to do that (i.e. file a claim), or at least sought an extension of time in which to do

so, before default was entered.

Finally, as Verdugo’s counsel acknowledged at oral argument, entering a default

judgment would be appropriate if the Court declined to set aside the default. Accordingly,

because the Court has denied Verdugo’s motion to set aside the default, Plaintiff’s motion for

a default judgment is GRANTED. The Clerk shall enter a default judgment in favor of

Plaintiff and close the file.

IT IS SO ORDERED.

Dated: 04/05/06 

THELTON E. HENDERSON, JUDGE

UNITED STATES DISTRICT COURT

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