Chandler v. Extended Stay America

Opinion

LAURA ASHLEY CHANDLER, Case No.: 20-CV-0024 W (BLM)

Plaintiff, ORDER FOR FURTHER BRIEFING v. ON PLAINTIFF’S APPLICATION FOR DEFAULT JUDGMENT EXTENDED STAY AMERICA; [DOC. 7] ESH/ESA PROPERTIES, LLC; ESA MANAGEMENT, INC.; ESA P PORTFOLIO, LLC; and DOES 1 through 100, inclusive, Defendants. Pending before the Court is Plaintiff’s Application for Default Judgment. [Doc. 7.] The application is based on Defendant ESH/ESA Properties, LLC’s (“Defendant”) failure to respond to the Complaint served to them on December 5, 2019. (Proof of Service [Doc. 7-2.]) Codefendants Extended Stay America; ESA Management, Inc.; and ESA P Portfolio, LLC (“Codefendants”) maintain, and have attempted to inform Plaintiff on four separate occasions (January 17, 2020; February 3, 2020; February 13, 2020; and March 6, 2020) that Defendant is unable to answer Plaintiff’s Complaint because Defendant “does not exist.” (Opp’n to Default J. [Doc. 8] 2:2–8.) It is not clear from the record if Plaintiff has ever directly responded to Codefendants. On February 2, 2020, the Clerk entered default for ESH/ESA Properties, LLC. (Clerk’s Entry of Default [Doc. 6].) On March 4, 2020, Plaintiff applied for default judgment. (App. for Default J. [Doc. 7].) On March 16, 2020, Codefendants opposed Plaintiff’s Motion for Default Judgement on the basis that ESH/ESA Properties, LLC “does not exist.” (Opp’n to Default J. [Doc. 8] 3:16–18.) On April 6, 2020, Plaintiff replied to Codefendants’ Opposition with records from the County of San Diego and the California Secretary of State showing that Defendant ESH/ESA Properties, LLC does exist, is a SOS/FTB forfeited corporation, and is the current owner of the property that Plaintiff alleges to have been injured on. (Reply [Doc. 9] 4:12–27; Cty. of San Diego Pub. Rec. [Doc. 9-2, Ex. D]; Cty. of San Diego Treas.-Tax Collector Rec. [Doc. 9-3, Ex. E]; Cal. Sec’y of State Bus. Search [Doc. 9-4, Ex. F].) Again, it is not clear if Plaintiff ever attempted to meet and confer with Defendant between obtaining these records on March 13, 2020, and filing the Reply on April 6, 2020. As a suspended corporation, Defendant would be subject to action against it and would be unable to defend such an action while suspended. See, e.g., Cal. Rev. & Tax. Code § 23301 (West 2001); Reed v. Norman, 48 Cal.2d 338, 343 (1957). If Defendant is now a dissolved corporation, it may still be sued and may defend an action while in the process of wrapping up its affairs. See, e.g., Cal. Corp. Code § 2010 (West 2006); Cal. Corp. Code § 17707.07 (West 2020); Peñasquitos, Inc. v. Superior Court, 53 Cal.3d 1180, 1194 (1991). In either event, Defendant may be subject to default judgement, entry of which is within the trial court’s discretion. See Taylor Made Golf Co. v. Carsten Sports, Ltd., 175 F.R.D. 658, 660 (S.D. Cal. 1997) (Brewster, J.) (citing Lau Ah Yew v. Dulles, 236 F.2d 415, 416 (9th Cir. 1956)). However, default judgements are “ordinarily disfavored” and cases should be decided on the merits “whenever reasonably possible.” Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986). Additionally, the purpose of section 23301 is not punitive, but rather is meant to incentivize corporations to pay their taxes. See United States v. 2.61 Acres of Land, More or Less, Situated in Mariposa Cty., State of Cal., 791 F.2d 666, 668 (9th Cir. 1985). Thus, the “normal practice” when suspension status comes to light during litigation is to “permit a short continuance to enable the suspended corporation to effect reinstatement.” Timberline, Inc. v. Jaisinghani, 54 Cal.App.4th 1361, 1366-67 (1997). Codefendants are hereby ORDERED to file a supplemental briefing in connection with their Opposition to Plaintiff's Application for Default Judgement, clarifying the legal status of Defendant ESH/ESA Properties, LLC and any action Defendant is taking to revive or dissolve its status in California. The document must be filed by Friday, June 5, 2020. It must not exceed five pages, exclusive of exhibits. Plaintiff may file a responsive brief on this issue if they so desire on or before Wednesday, June 10, 2020. It must not exceed five pages, exclusive of exhibits. Dated: May 27, 2020 \ [pe Lon Hn. 1 omas J. Whelan United States District Judge