Opinion ID: 771992
Heading Depth: 2
Heading Rank: 2

Heading: The Rulings on the Default-Related Motions

Text: 17 In a Memorandum and Order dated July 21, 1999 (July 1999 Order), the district court denied without prejudice Powerserve's motion for a default judgment, granted leave for the new law firm to appear and represent Lavi and Omega, and conditionally granted the motion of Lavi and Omega for an extension of time to oppose the motion. The court indicated that it would be inclined to vacate the defaults because it found no clear evidence of wilful disregard of its orders but merely the admittedly lax efforts of a non-party, non-attorney to obtain counsel for a corporation and incarcerated person, and because the delays in complying with the court's order to obtain counsel three months by Lavi, two by Omega had not unduly prejudiced Powerserve, given that new counsel stands ready (albeit belatedly) to defend. July 1999 Order at 9. Nonetheless the court was troubled by the rate of attrition among defendants' lawyers in this case, the delays occasioned by Ms. Mottahedeh's laxity and by the retaining lien, and by the allegations regarding defendants' actual and potential transfers of assets. Id. at 10. Accordingly, the court made its grant of additional time for Lavi and Omega to oppose Powerserve's motion contingent on their satisfaction of several conditions, including that they pay reasonable costs and attorneys' fees of plaintiff's counsel from 11 December 1998 to date, and that they post with this Court, within ten (10) days of the date of this Order, a bond signed by a reputable insurer in the amount of $500,000 to secure against any further transfers pending the outcome of this case. 18 Id. at 11. The court warned that [i]f all the[] conditions are not met within the times prescribed therefor, a Default Judgment will be entered against Parviz Lavi and Omega. Id. 19 Lavi and Omega moved for reconsideration of the condition that they post a bond. Their attorney submitted an affidavit stating that a declaration would be forthcoming in which Mr. Lavi will aver that he does not have the funds or resources available to post or collateralize a $500,000 undertaking, and that as an incarcerated defendant, he is scarcely in a position in a civil case to perform the types of business steps which would be necessary to provide such an undertaking under any circumstances. (Affidavit of Robert M. Calica dated July 29, 1999, ¶9.) Thereafter, Lavi submitted a declaration stating: 20 I affirm that I am unable to comply with the third condition imposed by this Court's order, i.e., that I post a $500,000 undertaking with the Court in order to defend myself and Omega against the merits of Powerserve's claims against us. I have neither the financial resources nor the ability to do so while imprisoned. 21 (Declaration of Parviz Lavi dated July 31, 1999 (Lavi Declaration), ¶5.) The Lavi Declaration said nothing further about the financial status of Lavi or Omega. Lavi also submitted a pro se unsworn and unsigned letter to the district court purporting to be for Omega Industries and Development Corp. (Letter of Parviz Lavi dated August 2, 1999 (Lavi Letter), at3), stating that due to Omega's actual financial situation posting $500,000 bond is impossible at this time (id. at 1). The letter, like the Lavi Declaration, provided no information as to why the posting of a bond was not feasible. Instead, the Lavi Letter accused Powerserve of trying to put Omega out of business and requested that the court dismiss Powerserve's claims and order Powerserve to pay Omega $1.5 million in punitive and exemplary damages. 22 Powerserve opposed elimination of the bond requirement and submitted, inter alia, copies of Lavi's income tax returns and a statement of Lavi's financial condition as of the end of May 1998. The latter, while indicating a negative net worth because Lavi owed back taxes, showed assets totaling some $5.325 million, including real estate valued at more than $2.6 million. Thus, Powerserve argued that 23 based upon Parviz Lavi's own documents, he has far more than sufficient assets to obtain a bond in the amount required by the Court, unless he has recently transferred such assets without fair consideration, in which event the condition imposed by the Court is critical to avoiding undue prejudice to Powerserve. 24 (Powerserve Memorandum of Law in Opposition to Motion for Reconsideration or Reargument at 3.) Lavi and Omega did not submit a reply. 25 In a Memorandum and Order dated September 1, 1999 (September 1999 Order), the district court denied the motion for reconsideration of the bond requirement. After considering Lavi's assertions of his and Omega's financial inability to pay for a bond, the court stated that 26 (1) Defendants have failed to submit any documentation or financial information which would support the allegation of financial inability to comply with the Court's bond requirement. 27 (2) Defendants have failed to set forth what, if any, efforts they have made to obtain the bond. 28 (3) Defendants' documents, submitted by plaintiffs, reveal adequate assets to post the bond, to wit: 29 (a) financial statement of May [31], 1998 showing assets of $5,325,000 with real estate worth $2,610,000 including [four properties ranging in value from $247,000 to more than $800,000, plus a house in Santa Monica, California]. 30 If, for example, one or more or all of these property interests had recently been sold, foreclosed upon, etc., documents which demonstrated that fact would be readily available. No such documents have been forwarded by defendants. 31 (4) Defendants have never submitted an affidavit of merits signed and sworn to by the person(s) having first-hand knowledge of the facts. 32 September 1999 Order at 3-4. See also id. at 4 fn. (Lavi... letter dated August 2.... does not add any substantive support to defendants' assertion that they are unable to post the required bond.) 33 Lavi and Omega did not post a bond. On September 13, the district court entered a default judgment against them for $740,000 plus interest. An amended default judgment was entered on March 28, 2000, requiring Lavi and Omega to pay Powerserve a total of $1,027,321.79 including interest, and containing a certification pursuant to Fed. R. Civ. P. 54(b) that the judgment was final. This appeal followed.