FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TODD BRANDT AND KAREN BRANDT, 

Plaintiffs-Appellants, No. 10-35764

v. D.C. No.  3:08-cv-05760-BHS AMERICAN BANKERS INSURANCE

COMPANY OF FLORIDA, OPINION

Defendant-Appellee. 

Appeal from the United States District Court

for the Western District of Washington

Benjamin H. Settle, District Judge, Presiding

Argued and Submitted

June 6, 2011—Seattle, Washington

Filed August 10, 2011

Before: William A. Fletcher and Johnnie B. Rawlinson,

Circuit Judges, and Irma E. Gonzalez,

Chief District Judge.*

Opinion by Judge Gonzalez

*The Honorable Irma E. Gonzalez, Chief District Judge for the United

States District Court, Southern District of California, sitting by designation. 

10565
COUNSEL

Bradley A. Maxa, Gordon, Thomas, Honeywell, L.L.P.,

Tacoma, Washington, for appellants Todd and Karen Brandt.

William T. Treas, Nielsen Law Firm, L.L.C., Metairie, Louisiana, for appellee American Bankers Insurance Co. of Florida.

OPINION

GONZALEZ, Chief District Judge:

Todd and Karen Brandt appeal the district court’s order

granting American Bankers Insurance Company’s motion to

set aside default judgment for excusable neglect under Fed. R.

Civ. P. 60(b)(1). The Brandts argue that once the district court

concluded American Bankers acted culpably in failing to

respond to the complaint, it was precluded as a matter of law

from setting aside the default judgment. 

We hold that the district court applied the correct legal

standard, and that it did not abuse its discretion.

Background

American Bankers issued a flood insurance policy to the

Brandts under the National Flood Insurance Program, 42

BRANDT v. AMERICAN BANKERS INSURANCE 10567
U.S.C. §§ 4001 et seq., and its related regulations. After the

Brandts’ home flooded in December of 2007, the Brandts submitted a claim to American Bankers. Although American

Bankers paid a portion of the claim, the Brandts believed the

payment was too low.

The Brandts brought suit against American Bankers in the

U.S. District Court for the Western District of Washington,

alleging breach of contract and bad faith under Washington

law. The Brandts served process on American Bankers

through the Office of the Insurance Commissioner for the

State of Washington (“OIC”) as permitted by Washington

law. See R.C.W. § 48.05.200. The OIC accepted service of

the complaint and sent it, via certified mail, to American

Bankers’ registered agent, Corporations Service Company

(“CSC”).

Thereafter, CSC forwarded the complaint, via email, to two

individuals at Assurant Group, American Bankers’ parent

company, according to instructions for service on record with

CSC. Although personnel at Assurant should have forwarded

the complaint to the appropriate personnel at American Bankers, they failed to do so. The Brandts’ counsel also mailed a

copy of the complaint to the American Bankers claims

adjuster handling the matter; however, the claims adjuster

stated he did not receive the complaint. 

American Bankers did not answer or otherwise respond to

the Brandts’ complaint, and the Clerk entered default. Upon

motion by the Brandts, and following an evidentiary hearing,

the district court entered default judgment against American

Bankers in the amount of $655,489.42, representing both contractual and extra-contractual state law damages. The following day, counsel for the Brandts sent a letter to American

Bankers via fax, demanding payment of the default judgment.

Upon receipt of the Brandts’ letter, American Bankers

retained counsel, who filed a notice of appearance in the dis10568 BRANDT v. AMERICAN BANKERS INSURANCE
trict court. Shortly thereafter, American Bankers filed a

motion to set aside default for good cause pursuant to Fed. R.

Civ. P. 55(c), and to set aside the default judgment for excusable neglect pursuant to Fed. R. Civ. P. 60(b)(1). 

For purposes of the Rule 55(c) and 60(b)(1) motion, the

Brandts conceded American Bankers had a meritorious

defense. The district court found American Bankers was culpable because it “fail[ed] to provide a credible explanation for

its failure to respond to Plaintiff’s lawsuit.” Nonetheless, the

court concluded American Bankers’ conduct was not intentional or in bad faith. Because American Bankers had a meritorious defense, and any prejudice to the Brandts could be

cured, the district court granted American Bankers’ motion

and ordered the default judgment and entry of default be set

aside upon American Bankers’ satisfaction of certain conditions.1

American Bankers satisfied the conditions imposed by the

court. The court set aside the default and default judgment,

and reopened the case. After discovery, the district court

granted partial summary judgment in favor of American

Bankers, dismissing the Brandts’ state law extra-contractual

and tort claims as preempted by the National Flood Insurance

Program. Following a bench trial, the district court concluded

American Bankers did not breach its contract of insurance

with the Brandts. Thus, the district court entered judgment in

favor of American Bankers.

The Brandts now appeal the district court’s order setting

aside default judgment. They do not appeal the district court’s

1The conditions imposed by the district court were substantial: (1) reimbursement of the Brandts’ attorney fees associated with American Bankers’ motion to set aside the default judgment; (2) reimbursement of Mr.

Brandt’s travel expenses to attend the default judgment hearing; and (3)

reimbursement of the cost of the Brandts’ mortgage payments, plus $1,500

per month, from the date they filed the complaint until the date of the

order setting aside the default judgment. 

BRANDT v. AMERICAN BANKERS INSURANCE 10569
order granting partial summary judgment on the state law

extra-contractual and tort claims, or the district court’s decision rejecting their breach of contract claim.

Standard of Review

A district court’s denial of a motion to set aside either

default under Rule 55(c) or default judgment under Rule

60(b)(1), is reviewed for abuse of discretion. United States v.

Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d

1085, 1091 (9th Cir. 2010) (“Mesle”); TCI Group Life Ins.

Plan v. Knoebber, 244 F.3d 691, 695 (9th Cir. 2001) (“TCI”).

[T]he first step of our abuse of discretion test is to

determine de novo whether the trial court identified

the correct legal rule to apply to the relief requested.

[T]he second step . . . is to determine whether the

trial court’s application of the correct legal standard

was (1) “illogical”, (2) “implausible,” or (3) without

“support in inferences that may be drawn from the

facts in the record.”

Mesle, 615 F.3d at 1091 (quoting United States v. Hinkson,

585 F.3d 1247, 1261 (9th Cir. 2009) (en banc)).

Discussion

On appeal, the Brandts argue the district court abused its

discretion by applying an incorrect legal standard to grant

American Bankers’ motion to set aside default judgment.2

Once the district court found American Bankers acted culpa2The Brandts also argue the district court erred as a matter of law in

vacating the default judgment based on excusable neglect under Rule

60(b)(1) because American Bankers failed to come forward with affirmative evidence demonstrating what happened to the complaint after it was

properly served. However, our cases require no threshhold showing of

“excuse” apart from the inquiry into “excusable neglect” under Rule

60(b)(1). 

10570 BRANDT v. AMERICAN BANKERS INSURANCE
bly in failing to respond to the complaint, the Brandts argue

the district court was precluded, as a matter of law, from setting aside the default judgment. 

[1] Pursuant to Rule 55(c), a district court may set aside

the entry of default upon a showing of good cause. Once

default judgment has been entered, relief is governed by Rule

60(b). Where a defendant seeks relief under Rule 60(b)(1)

based upon “excusable neglect,” the court applies the same

three factors governing the inquiry into “good cause” under

Rule 55(c). Mesle, 615 F.3d at 1091. Those factors, which

courts consistently refer to as the “Falk factors,” are:

(1) whether the plaintiff will be prejudiced, (2)

whether the defendant has a meritorious defense, and

(3) whether culpable conduct of the defendant led to

the default. 

Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). The determination of what conduct constitutes “excusable neglect” under

Rule 60(b)(1) and similar rules “is at bottom an equitable one,

taking account of all relevant circumstances surrounding the

party’s omission.” Pioneer Inv. Svcs. Co. v. Brunswick Assoc.

Ltd., 507 U.S. 380, 395 (1993).

The Brandts argue the district court applied an incorrect

legal standard when it set aside the default judgment against

American Bankers. The Brandts point to a perceived conflict

in the way the Falk factors have been applied by this Court

in Mesle and Franchise Holding II, LLC v. Huntington Restaurants Group, Inc., 375 F.3d 922 (9th Cir. 2004)

(“Franchise Holding II”) on the one hand, and TCI on the

other. They argue the Falk factors are “disjunctive” and that

the district court erred when it “balanced” the factors. Applying the “disjunctive approach,” the Brandts contend the district court was required, as a matter of law, to deny American

Bankers’ motion to set aside the default judgment once it

found American Bankers acted culpably.

BRANDT v. AMERICAN BANKERS INSURANCE 10571
[2] However, there is no conflict between our description

of the “disjunctive” nature of the Falk factors, as expressed in

Franchise Holding II and Mesle, and the approach we took to

applying those factors in TCI. In all three cases, we held that

although a district court should consider the Falk factors in

ruling on a motion to set aside default judgment, “the district

court [is] free to deny [relief] ‘if any of the three factors [is]

true.’ ” Franchise Holding II, 375 F.3d at 926 (quoting American Ass’n of Naturopathic Physicians v. Hayhurst, 227 F.3d

1104, 1108 (9th Cir. 2008)); see also Mesle, 615 F.3d at 1091;

TCI, 244 F.3d at 696-97. 

In TCI, because the district court denied the defendant’s

motion to set aside default judgment for excusable neglect

under Rule 60(b)(1) without providing any explanation, we

outlined the factors and equitable principles the district court

should consider in the first instance when ruling on a Rule

60(b)(1) motion to set aside a default judgment for excusable

neglect. See TCI, 244 F.3d at 695-96. Nothing in TCI is contrary to the well-established proposition that a finding of culpability on the part of a defaulting defendant is sufficient to

justify the district court’s exercise of its discretion to deny

relief from a default judgment.

Neither Franchise Holding II nor Mesle supports the new

rule the Brandts propose, stripping the district court of its discretion to set aside a default judgment under Rule 60(b)(1) if

it finds the defaulting defendant acted culpably. None of the

cases cited by the Brandts suggest that a district court is limited in its discretion to set aside a default judgment under

Rule 60(b)(1) where the defendant has a meritorious defense

and any prejudice can be cured. The rule the Brandts propose

conflicts with the Supreme Court’s decision in Pioneer Investment Services, which describes the inquiry into “excusable

neglect” as “at bottom an equitable one, taking account of all

relevant circumstances surrounding the party’s omission.”

507 U.S. at 395.

10572 BRANDT v. AMERICAN BANKERS INSURANCE
[3] In short, the application of Rule 60(b)(1)’s excusable

neglect standard “is committed to the discretion of the district

courts.” TCI, 244 F.3d at 695. TCI, Franchise Holding II, and

Mesle, as well as the other cases cited by the parties, consistently hold that the district court is to consider the defendant’s

culpability, the presence of a meritorious defense, and potential prejudice to the plaintiff, in determining whether to set

aside a default judgment for excusable neglect under Rule

60(b)(1). A district court may exercise its discretion to deny

relief to a defaulting defendant based solely upon a finding of

defendant’s culpability, but need not. Here, American Bankers had a meritorious defense and prejudice to the Brandts

from setting aside default could be cured. The district court’s

finding that American Bankers acted culpably did not preclude it, as a matter of law, from setting aside the default

judgment under Rule 60(b)(1) based upon excusable neglect.

The district court applied the correct legal standard, and did

not abuse its discretion in setting aside the default judgment.

AFFIRMED.

BRANDT v. AMERICAN BANKERS INSURANCE 10573