Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-01983/USCOURTS-azd-2_09-cv-01983-1/pdf.json

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

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

M&I Marshall & Ilsley Bank, 

Plaintiff, 

vs.

Kyle Wright et al., 

Defendants. 

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No. CV09-1983-PHX-NVW

ORDER

Before the Court is Defendant Camelback Title Agency’s (CTA) Motion to Set Aside

Entry of Default. (Doc. #41). 

A court may set aside an entry of default for good cause. Fed. R. Civ. P. 55(c). “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 Rests. Group, 375 F.3d 922, 925-26 (9th Cir. 2004) (citation omitted).

The good cause analysis consist of three factors: (1) whether the defendant engaged in

culpable conduct that led to the default; (2) whether the defendant has a meritorious defense;

or (3) whether reopening the default judgment would prejudice the plaintiff. Id. at 926. The

district court is free to deny a motion to set aside a default if any of the three factors is

satisfied. Id.; see also Cassidy v. Tenorio, 856 F.2d 1412 (9th Cir. 1988) (“This tripartite test

is disjunctive. Hence, a finding that the plaintiff will be prejudiced, or that the defendant

lacks a meritorious defense, or that the defendant’s own culpable conduct prompted the

Case 2:09-cv-01983-NVW Document 49 Filed 04/16/10 Page 1 of 3
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On the other hand, “there is no rigid rule against late filings attributable to the

movant’s negligence.” Pincay v. Andrews, 389 F.3d 853, 860 (9th Cir. 2004) (en banc). The

Ninth Circuit has avoided articulating a bright-line rule in favor of allowing the district court

to weigh the factors and exercise discretion. Id. at 859-60.

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default is sufficient to justify the district court’s refusal to vacate a default judgment.”). The

defendant bears the burden of showing that the factors favors setting aside the default.

Franchise Holding II, 375 F.3d at 926. 

Generally, “[i]f a defendant ‘has received actual or constructive notice of the filing

of the action and failed to answer,’ its conduct is culpable.”1

 Id. (quoting Direct Mail

Specialists, Inc., v. Eclat Computerized Techs., Inc., 840 F.2d 685, 690 (9th Cir. 1988)).

CTA’s counsel indicates in a footnote that she “has not been able to verify if CTA’s statutory

agent, Sheldon Freeman was served.” It is hard to believe that CTA cannot verify whether

its own agent, Shelton L. Freeman, actually received the summons and complaint from his

paralegal. In fact, counsel does not indicate whether she even attempted to communicate

with Mr. Freeman. Because whether or not the defendant received actual notice is pertinent

to the Court’s inquiry, the Court will order CTA provide further briefing, with accompanying

affidavits, discussing whether or not (1) Mr. Freeman actually received the summons and

complaint that were served upon his paralegal on November 5, 2009; and (2) whether CTA

received the summons and complaint, along with relevant dates

“To justify vacating [a] default judgment, [the defendant] ha[s] to present the district

court with specific facts that would constitute a defense. Franchise Holding II, 375 F.3d at

926-27. CTA only states in a conclusory fashion and rather unintelligibly that, “CTA

contends it [has] a meritorious defense that [M&I] gave various approvals and instructions

to CTA/Patterson so it could push through what ultimately was its own bad loan decision.

The resulting bad credit decisions of many banks during the relevant time, including M&I,

has caused it to suffer losses.” However, CTA does not aver any facts that support a

defense. The Court will therefore order CTA to provide further briefing, along with

affidavits, if necessary, to support its contention that it has a meritorious defense. 

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Finally, contrary to CTA’s contention, the Court did not find in its January 29, 2010

order that M&I’s service of process was legally deficient. Instead, the Court found that

M&I’s proof of service was insufficient. The Court’s January 29, 2010 order specifically

stated: 

Plaintiff served Heidi Cooling, paralegal for Scott Freeman, on November 5,

2009, at 6909 East Main, Scottsdale, AZ 85251. (Doc. #11)[.] However,

Plaintiff’s affidavit does not indicate whether Ms. Cooling is “an officer, a

managing or general agent, or [an] agent authorized by appointment or by law

to receive service of process,” as required by Fed. R. Civ. P. 4(h)(1)(B).

Moreover, Plaintiff’s application for default lists Mr. Shelton L. Freeman,

located at 731 N. 16th St., #330, Phoenix, AZ 85020, and not Scott Freeman,

as the agent for service of process for Camelback Title Agency. Plaintiff’s

proof of service is therefore insufficient and does not satisfy Fed. R. Civ. P.

4(l)(1). 

(Doc. #34). The Court then extended the time for service to March 1, 2010.

However, counsel’s mistaken reading of the Court’s order may be a plausible mistake.

More facts regarding counsel’s understanding of what was required of CTA to avoid default,

including whether she thought she had a ten-day grace period, as her email suggests, may be

relevant to whether discretion warrants setting aside the entry of default. 

IT IS THEREFORE ORDERED that CTA provide further briefing by April 26, 2010,

with accompanying affidavits, if necessary, discussing whether: (1) CTA’s statutory agent

received the summons and complaint served on November 5, 2009, upon Heidi Cooling; (2)

whether CTA received the summons and complaint, along with relevant dates. Plaintiff will

then have until May 6, 2010, to respond. 

IT IS FURTHER ORDERED that CTA provide further briefing by April 26, 2010,

with accompanying affidavits, if necessary, to support its contention that it has a meritorious

defense. Plaintiff will then have until May 6, 2010, to respond. 

DATED this 16th day of April, 2010.

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