Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-05931/USCOURTS-cand-4_06-cv-05931-3/pdf.json

Parties Involved:
Robert L. McGrath
Defendant
Gregory Newman
Plaintiff
Michael L. Shelton
Defendant
Scott Walchek
Plaintiff

Document Text:

United States District Court

For the Northern District of California

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

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

Gregory Newman, an individual,

and Scott Walchek, an individual,

Plaintiffs,

 v.

Robert L. McGrath, an individual,

Michael L. Shelton, an individual, and

DOES 1-10.

Defendants. /

No. C 06-05931 SBA

ORDER

[Docket No. 42]

This matter comes before the Court on Plaintiffs Gregory Newman and Scott Walchek’s Second

Motion for Reconsideration of Order Denying Entry of Judgment by Default pursuant to Federal Rules

of Civil Procedure 55(b)(1) [Docket No. 42]. Having read and considered all the papers filed in

connection with this Motion, the Court Grants Plaintiffs’ Motion.

BACKGROUND

Default was entered by the Clerk of the Court as to defendant Robert L. McGrath on January 30,

2007. Docket No. 12. Plaintiffs filed their Application for Entry of Judgment by Default Against

Defendant Robert L. McGrath (Fed. R. Civ. P. 55(b)(2)) [Docket No. 14] on February 13, 2007. On

April 4, 2007, the Court entered its Order denying the Application for Default Judgment without

prejudice. Docket No. 22. The Court ruled that default judgment should not be entered against defendant

McGrath while the action was still pending against defendant Michael L. Shelton. Shelton had not been

served and the action was stayed as to him due to an order of the Connecticut Bankruptcy Court

Case 4:06-cv-05931-SBA Document 44 Filed 02/25/08 Page 1 of 4
United States District Court

For the Northern District of California

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

27

28 2

extending the automatic stay provisions of the bankruptcy code to him. Id.

On May 25, 2007, plaintiffs filed their Motion for Leave to File Motion for Reconsideration of

Order Denying Judgment by Default. Docket No. 26. On June 27, 2007, the Court denied without

prejudice the Motion for Leave to File a Motion for Reconsideration. Docket No. 33. The Court

concluded its order with the following statement: “While it denies the motion without prejudice, the

Court will not entertain further motions for reconsideration until such time as the stay provisions are

lifted with respect to Shelton.” 

Although the Connecticut bankruptcy proceeding is still ongoing, the stay provisions of the

bankruptcy code have been lifted as to defendant Shelton. See, Lathram Decl. ¶¶ 3-5. Rather than serve

the summons and complaint on him and litigate with him at this point, however, plaintiffs elected to

dismiss the action without prejudice as to defendant Shelton. The court ordered the dismissal on

November 16, 2007. Docket No. 41.

LEGAL STANDARD

I. Motion for Reconsideration

Civil Local Rule 7-9 governs motions for reconsideration and provides as follows:

Before the entry of judgment adjudicating all of the claims and the rights and

liabilities of all the parties in a case, any party may make a motion before a

Judge requesting that the Judge grant the party leave to file a motion for

reconsideration of any interlocutory order made by that Judge on any ground

set forth in Civil L. R. 7-9(b). No party may notice a motion for

reconsideration without first obtaining leave of Court to file the motion.

Civil L. R. 7-9(a). Under Civil Local Rule 7-9(b), before leave to file a motion for reconsideration is

granted, the moving party must specifically show:

(1) that at the time of the motion for leave, a material difference in fact or

law exists from that which was presented to the Court before entry of the

interlocutory order for which reconsideration is sought. The party also must

show that in the exercise of reasonable diligence the party applying for

reconsideration did not know such fact or law at the time of the interlocutory

order; or

(2) The emergence of new material facts or a change of law occurring after

the time of such order; or

Case 4:06-cv-05931-SBA Document 44 Filed 02/25/08 Page 2 of 4
United States District Court

For the Northern District of California

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

27

28 3

(3) A manifest failure by the Court to consider material facts or dispositive legal

arguments which were presented to the Court before such interlocutory order. 

Civil L.R. 7-9(b).

II. Motion for Default Judgment

Once the Clerk of Court has entered default, a plaintiff may apply for entry of a default

judgment. See Fed. R. Civ. P. 55(b). The decision to enter a default judgment is discretionary, with the

Court’s determination based on several factors: (1) the possibility of prejudice to the plaintiff; (2) the

merits of plaintiff’s substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at

stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was

due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure

favoring decisions on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986); Aldabe

v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (per curiam). 

ANALYSIS

The lifting of the stay provisions of the bankruptcy code as to defendant Shelton, as well as the

dismissal of the claims against him, clearly constitute “new material facts” warranting reconsideration

of the denial of the application for default judgment. Indeed, this is precisely the scenario contemplated

by this Court as constituting grounds for reconsideration in its previous order. See Docket No. 33.

Defendant McGrath has failed to answer the complaint and the Clerk has entered default against

him. See Docket No 12. Similarly, he has failed respond to the motion for default judgment. There is

no indication that any of the factors enumerated in Eitel, 782 F.2d at1471-72, militate against entry of

default judgment. Accordingly, default judgment against McGrath is appropriate.

CONCLUSION

Plaintiff’s Second Motion for Reconsideration of Order Denying Entry of Judgment by Default

is hereby GRANTED. Judgment by default is ordered in favor of plaintiff Gregory Newman and against

defendant Robert L. McGrath in the amount of $495,000 plus costs of suit, and Judgment by default in

favor of plaintiff Scott Walchek and against defendant Robert L. McGrath in the amount of $495,000

plus costs of suit.

Case 4:06-cv-05931-SBA Document 44 Filed 02/25/08 Page 3 of 4
United States District Court

For the Northern District of California

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

27

28 4

IT IS SO ORDERED.

 Dated: 2/22/08 SAUNDRA BROWN ARMSTRONG

United States District Judge

Case 4:06-cv-05931-SBA Document 44 Filed 02/25/08 Page 4 of 4