EDMUND F. BRENNAN, Magistrate Judge.
This case was before the court on May 27, 2015, for hearing on the United States' application for entry of default judgment against plaintiff and counter-defendant Peggy Boynton ("plaintiff" or "Ms. Boynton"). ECF No. 73. Attorney Mark Gallagher appeared on behalf of plaintiff; Assistant United States Attorney Bobbie Montoya appeared on behalf of the United States.
In violation of Local Rule 230, plaintiff, who is represented by counsel, filed nothing in response to the motion. Instead, Ms. Boynton, herself, submitted a letter requesting appointment of counsel and complaining about her current attorney of record and her former attorney, Ronald W. Carter. ECF No. 84. In light of that letter and the failure of plaintiff's counsel to file any response to the motion, Attorney Mark Gallagher was ordered to appear at the hearing to show cause why he should not be sanctioned for violation of Local Rule 230(c).
At the hearing, the court observed that the United States failed to address in its motion whether entry of default judgment was appropriate under the factors articulated in Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986), and further failed to address whether entry of a judgment was appropriate under Federal Rule of Civil Procedure 54(b). Accordingly, the parties were ordered to submit supplemental briefs addressing these issues.
Supplemental briefing has been submitted. ECF Nos. 89, 90. Having considered the parties' pleadings and the arguments made at the hearing, the court discharges the Order to Show Cause and recommends that the United States' motion for default judgment be denied.
Plaintiff, proceeding pro se, filed this action on March 7, 2011. ECF No. 1. She subsequently retained attorney Ronald Carter who entered an appearance as counsel of record and filed an amended complaint. ECF Nos. 9, 14. The amended complaint alleged that plaintiff's mobile home, which was located at the Federal Correctional Institution at Dublin, was damaged due to the government's failure to properly maintain a storm drain. ECF No. 14 at 2.
The United States filed an answer and a counterclaim for ejectment and damages for wrongful detention. ECF No. 16. Plaintiff failed to file an answer (or other responsive pleading) to the counterclaim. On February 7, 2012, the Clerk entered her default as to the counterclaim. ECF No. 19. Although attorney Ronald Carter signed a Joint Status Report stating that "To date, plaintiff has not filed an answer to the counterclaim nor requested an extension therefor" (ECF No. 20 at 2) rather than taking action to cure the default, Carter filed a motion to withdraw as counsel. ECF No. 26. His motion included a declaration asserting that "plaintiff notified Carter that she no longer wanted him to represent her." Id. at 7 (¶ 4). Ultimately, Carter was permitted to withdraw from the case, but plaintiff remained in default.
After plaintiff was granted numerous requests for additional time for plaintiff to obtain new counsel, attorney Mark Gallagher substituted in as counsel for plaintiff. ECF Nos. 48, 52. However, Gallagher, too, has failed to file any motion in regards to the clerk's entry of default or otherwise address the government's counterclaim.
Nonetheless, on July 30, 2014, the United States filed a notice of settlement of the case. ECF No. 56. The parties were ordered to file dispositional documents on or before October 14, 2014. ECF No. 57.
In light of the government's representations, the court ordered plaintiff to show cause why the case should not be dismissed for failure to comply with the court's local rules, court orders, and/or failure to prosecute the action. ECF No. 65; see Fed. R. Civ. P. 41(b). Mr. Gallagher filed a response, indicating that he had not had contact with his client in more than six months. ECF No. 67. The government also responded to the order to show cause, stating that it had no objection to plaintiff's claims being dismissed, but arguing that dismissal of its counterclaim would be inappropriate. ECF No. 68. Plaintiff also personally filed several letters with the court, indicating that she had in fact been in contact with Mr. Gallagher and that he was not being truthful. ECF No. 75. She also complained that his performance as her attorney was deficient. ECF Nos. 66, 67. Despite the fact that Mr. Gallagher remains her attorney of record, plaintiff filed a motion for appointment of counsel. ECF No. 74.
On March 24, 2015, the government filed the instant motion for default judgment and noticed it for hearing on April 22, 2015. ECF No. 73. Rather than taking action to cure or otherwise address the default, on April 6, 2015, Gallagher moved to withdraw as plaintiff's attorney. ECF No. 76. Gallagher's motion was denied without prejudice in an order which admonished that it would be unethical for Gallagher to withdraw in light of the pending motion for default judgment. ECF No. 80. Specifically, the order stated that Gallagher's ethical obligation to not withdraw during a critical point in the case was "directly implicated here where not only did Counsel fail to file any opposition to Defendant's Motion for Default Judgement on Plaintiff's behalf, but, just two days before the opposition was due, he instead requested to withdraw." Id. at 4-5.
In light of the motion to withdraw just prior to the hearing on the government's motion for default judgment, the court continued the hearing on the latter motion to May 27, 2015. ECF No. 79. That continuance effectively provided Mr. Gallagher yet another opportunity to file, on his client's behalf, an opposition to the motion for default judgment. See L.R. 230(c) (requiring an opposition to the granting of a motion to be filed not less than fourteen days before the hearing date). Nonetheless, and in spite of the court's prior admonition as to his ethical obligation not to abandon his client at this critical state in the proceedings, Gallagher failed to file a response to the government's motion.
Accordingly, Gallagher was ordered to appear at the May 27, 2015 hearing to show cause why he should not be sanctioned for violation of Local Rule 230. ECF No. 85.
Gallagher appeared at the May 27, 2015 hearing and provided the curious explanation that he filed nothing in response to the motion because he believed that there was no basis for opposing the motion for entry of default judgment given that his client's default was entered in 2012, prior to his involvement in this case. Hearing Tr. (ECF No. 91) at 3. Counsel also acknowledged that he should have filed a response with the court and apologized for failing to do so. Id. at 4.
Mr. Gallagher further indicated that he has been working pro bono on this case, and that he will continue to represent plaintiff in this action and do everything "necessary to protect the client's interest going forward. . . ." Id. at 5. Although Mr. Gallagher provided no information that could justify his failure to comply with Local Rule 230(c), in light of his representations the court reluctantly discharges the order to show cause and does not impose sanctions.
According to its counterclaim, the United States is the owner of, and entitled to possession, of 6700 Goodfellow Avenue, Mobile Home Space Number 1 of the Federal Correctional Institution ("FCI") Dublin staff housing ("Space No. 1") located on certain real property situated in Alameda and Contra Costa Counties, California. ECF No. 16 at 5. Plaintiff is now in possession of Space No. 1, and has been in possession of the property since September 1995. Id. at 6. At the time plaintiff gained possession she was an employee of the Bureau of Prisons ("BOP") at FCI Dublin. Id.
Plaintiff applied for and was approved for housing at FCI Dublin's mobile park in accordance with BOP Program Statement 4220.02 Mobile Home Sites, Staff Housing and with Institution Supplemental DUB 4220.02(H) §§ 2(D) and 8(F). Institution Supplement DUB 4220.02(H)(2)(D)(1) provides that "[t]he privilege to occupy a mobile home site terminates with the transfer of the BOP . . . employee from FCI Dublin or the Western Regional Office, or retirement, resignation, or termination from the BOP." Id. at 6-7.
On September 16, 2010, plaintiff was given a formal notice of termination of occupancy, terminating her privilege to maintain her mobile home at FCI Dublin due to retirement from the BOP. Id. at 7. The notice gave plaintiff 90 days to sell her mobile home or remove it from FCI Dublin grounds. Id. at 7. Plaintiff took no action. Accordingly, on January 12, 2011, the BOP sent her a notice informing her that if she failed to vacate by March 12, 2011, the BOP would initiate steps to have the mobile home transported off FCI Dublin grounds at her expense. Id.
On March 4, 2011, plaintiff requested 90 additional days to sell or remove her home. Id. The request was granted on April 5, 2011, and plaintiff was given until July 5, 2011 to vacate the space. Id. Plaintiff, however, still has possession of Space No. 1 and has failed to remove or sell the mobile home in accordance with BOP policy. Id.
The reasonable value of the rents and profits of the premises is, and was, $225.50 bi-weekly. Id. The government now seeks an order for restitution of the premises to the United States of America; damages for plaintiff's unlawful possession at $222.50 bi-weekly from July 5, 2011, until delivery of possession; damages for reasonable costs of repair or restoration of the property; costs of recovering possession of the premises; and costs of this suit. Id. at 8.
Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend against the action. See Fed. R. Civ. P. 55(a). However, "[a] defendant's default does not automatically entitle the plaintiff to a court-ordered judgment." PepsiCo, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)). Instead, the decision to grant or deny an application for default judgment lies within the district court's sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court considers the following factors:
Eitel, 782 F.2d at 1471-72. "In applying this discretionary standard, default judgments are more often granted than denied." Philip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003) (quoting PepsiCo, Inc. v. Triunfo-Mex, Inc., 189 F.R.D. 431, 432 (C.D. Cal. 1999)). As a general rule, once default is entered, the factual allegations of the complaint are taken as true, except for those allegations relating to damages. TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (citations omitted). However, although well-pleaded allegations in the complaint are admitted by defendant's failure to respond, "necessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992).
As detailed below, entry of a default judgment is not appropriate under the Eitel factors. Although some factors weigh in the government's favor, the sixth and seventh factors weigh heavily against the motion and, on balance, the Eitel factors weigh against entry of default judgment.
As for the second and third factors, the United States sufficiently alleges a claim for ejectment and wrongful detention of Space No. 1 by Ms. Boynton. The counterclaim alleges that when plaintiff was employed at FCI Dublin, she applied and was approved for staff housing at FCI Dublin's mobile home park in accordance with BOP Program Statement 4220.02, Mobile Home Sites, Staff Housing, and Institution Supplement DUB 4220.02(H) §§ 2(D) and 8(F). Def.'s Counterclaim (ECF No. 16) ¶ 5. Institution Supplement DUB 422.02(H)(2)(D)(1) provides that "[t]he privilege to occupy a mobile home site terminates with the transfer of the BOP . . . employee from FCI or the West Regional Office, or retirement, resignation, or termination from BOP." Id. at ¶ 6. Although plaintiff was given formal notice of termination of occupancy of the space due to her retirement from BOP, she continues to occupy the space. Id. ¶¶ 7-10. These allegations are sufficient to support the claims for ejectment and wrongful detention.
Furthermore, "[b]ecause all allegations in a well-pleaded complaint are taken as true after the court clerk enters default judgment, there is no likelihood that any genuine issue of material fact exists." Elektra Entm't Group Inc. v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005). As for the sum of money at stake, defendant seeks damages for plaintiff's unlawful possession of space No. 1 at $222.50 bi-weekly from July 5, 2011, until delivery of possession; damages for reasonable costs of repair or restoration of the property; costs of recovering possession of the premises; and costs of this suit. ECF No. 89 at 8. These damages are proportionate to plaintiff's alleged conduct and therefor this factor weighs in favor of default judgment. See PepsiCo, Inc., 238 F. Supp. 2d at 1177 ("the court must consider the amount of money at stake in relation to the seriousness of Defendant's conduct."). Accordingly, the second, third, fourth and fifth Eitel factors support entry of default judgment.
The remaining two factors, however, do not. Those factors—the possibility of prejudice to the government and the strong public policy in favor of deciding cases on the merit—weigh strongly against a default judgment. Unlike the typical case where the defaulting party is entirely absent from the litigation, here, Ms. Boynton has appeared in this action and has attempted to assert her interests. She has expressed her desire to litigate this case. The United States will have an opportunity to have its claims decided on the merits at trial or summary judgment and will not be left without recourse if its default judgment is denied. Accordingly, the government will not be prejudiced if its motion is denied.
Boynton's supplemental brief plaintiff argues her failure to respond to defendant's counterclaim is the result of excusable neglect.
This case does not present extreme circumstances justifying the entry of default judgment. Instead, a fair review of the docket reveals plaintiff wants to litigate this action and have it resolved on the merits. Whatever the issues may have been with her earlier representation, Mr. Gallagher has now represented to the court that he will continue to represent his client and "will do everything . . . necessary to protect the client's interest going forward." ECF No. 91 at 5. As noted, Ms. Boynton is not absent from the litigation and seeks to defend against the counterclaim on its merits. In light of Mr. Gallagher's representation, it is possible for the counterclaim to be resolved either on summary judgment or trial and the government will have the opportunity to have its claims be decided on the merits. Given the strong public policy in favor of deciding cases on their merits and the lack of prejudice the government will suffer by having to litigate its claim, the court finds that entry of default judgment is not appropriate.
Accordingly, it is recommended that the court exercise its discretion to not enter default judgment against plaintiff as to the government's counterclaim.
Accordingly, it is hereby ORDERED that the May 21, 2015 order to show cause (ECF No. 85) is discharged and no sanctions are imposed.
Further, it is hereby RECOMMENDED that the United States' motion for default judgment (ECF No. 73) be denied.
These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Failure to file objections within the specified time may waive the right to appeal the District Court's order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).
