1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 NOTARY ZOOM, LLC, No. 2:24-cv-3526 DJC AC 12 Plaintiff, 13 v. ORDER and 14 MARGARET KAPLAN, FINDINGS AND RECOMMENDATIONS 15 Defendant. 16 17 This matter is before the court on plaintiff’s motion for relief from default. ECF No. 37. 18 This motion was referred to the undersigned pursuant to E.D. Cal. R. 302(c)(19). Finding no 19 hearing necessary, the motion was taken under submission by the court. ECF No. 38. For the 20 reasons stated below, the court recommends defendant’s motion to set aside default be 21 GRANTED. 22 Additionally, defendant filed a duplicative motion to set aside default (ECF No. 33) which 23 is DENIED as moot and a proposed answer (ERC No. 37-1) which she failed to sign. Defendant 24 is accordingly ORDERED to file an amended answer bearing her signature within 14 days. 25 I. Background 26 Plaintiff filed its complaint on December 16, 2024. ECF No. 1. Plaintiff filed a certificate 27 of service on May 28, 2025. ECF No. 12. After being prompted by multiple orders to show 28 cause issued by the District Judge (ECF Nos. 9, 14) plaintiff requested entry of default on July 9, 1 2025 (ECF No. 16), and default was entered on July 10, 2025 (ECF No. 18). After being 2 prompted by another order to show cause (ECF No. 20), plaintiff filed a motion for default 3 judgment on November 26, 2025, and noticed the hearing for January 21, 2026. ECF No. 24. 4 Defendant appeared in pro se and filed an opposition on January 16, 2026 (ECF No. 26) 5 along with a motion for an extension of time to file an answer. ECF No. 27. Plaintiff filed a 6 motion to set aside entry of default on February 13, 2026. ECF No. 33. The undersigned heard 7 oral argument on the motions on February 18, 2026. ECF No. 32. For the reasons stated on the 8 record, the undersigned denied the Motion for Default Judgment (ECF No. 24) without prejudice 9 to re-filing, and defendant’s Motion for an Extension of time to file an answer (ECF No. 27 ) was 10 denied as moot. Id. Defendant was ordered to file a motion for relief from default, along with a 11 proposed answer, within 30 days. Defendant filed the required motion on March 16, 2026. ECF 12 No. 39. Plaintiff opposed the motion. ECF No. 39. The motion for relief from default is now 13 before the court. 14 II. Analysis 15 A. Legal Standard 16 The Federal Rules provide that a “court may set aside an entry of default for good cause.” 17 Fed. R. Civ. P. 55(c). To determine “good cause,” a court must “consider[ ] three factors: (1) 18 whether [the party seeking to set aside the default] engaged in culpable conduct that led to the 19 default; (2) whether [it] had [no] meritorious defense; or (3) whether reopening the default 20 judgment would prejudice” the other party. See Franchise Holding II, LLC. v. Huntington 21 Restaurants Grp., Inc., 375 F.3d 922, 925–26 (9th Cir. 2004). This standard, which is the same as 22 the one used to determine whether a default judgment should be set aside under Rule 60(b), is 23 disjunctive, such that a finding that any one of these factors is true is sufficient reason for the 24 district court to refuse to set aside the default. See id. Crucially, however, “judgment by default 25 is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be 26 decided on the merits.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984); see also Latshaw v. 27 Trainer Wortham & Co., Inc., 452 F.3d 1097, 1103 (9th Cir. 2006); Speiser, Krause & Madole 28 P.C. v. Ortiz, 271 F.3d 884, 890 (9th Cir. 2001); TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 1 691, 695–96 (9th Cir. 2001), as amended on denial of reh’g and reh’g en banc (May 9, 2001). 2 Additionally, “[w]hile the same test applies for motions seeking relief from default judgment 3 under both Rule 55(c) and Rule 60(b), the test is more liberally applied in the Rule 55(c) context.” 4 Cracco v. Vitran Exp., Inc., 559 F.3d 625, 631 (7th Cir. 2009) (quotations and citations omitted). 5 This is because in the Rule 55 context there is no interest in the finality of the judgment with 6 which to contend. See Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 7 1986). 8 B. There is Good Cause to Set Aside Default in This Case 9 Entry of default in this case should be set aside because (1) it is unclear whether defendant 10 engaged in culpable conduct, and delay in this case was mutual; (2) defendant has potentially 11 meritorious defenses which she is entitled to assert and litigate; and (3) setting aside default 12 would not prejudice plaintiff. See Franchise Holding II, LLC, 375 F.3d at 925–26. 13 1. Culpable Conduct 14 It is unclear whether defendant engaged in culpable conduct in failing to respond to the 15 complaint, and that uncertainty must weigh in favor of defendant. “A defendant’s conduct is 16 culpable if he has received actual or constructive notice of the filing of the action and 17 intentionally failed to answer . . . [I]n this context the term ‘intentionally’ means that a movant 18 cannot be treated as culpable simply for having made a conscious choice not to answer; rather, to 19 treat a failure to answer as culpable, the movant must have acted with bad faith, such as an 20 intention to take advantage of the opposing party, interfere with judicial decision making, or 21 otherwise manipulate the legal process.” United States v. Signed Pers. Check No. 730 of Yubran 22 S. Mesle, 615 F.3d 1085, 1092 (9th Cir. 2010) (internal citations omitted). 23 Here, the court cannot conclude that defendant engaged in culpable conduct because while 24 defendant was plainly on notice of the conflict with plaintiff, it is not clear that defendant was 25 more than negligent in failing to respond to this lawsuit. Plaintiff’s counsel submitted a sworn 26 statement that he had been in touch with the defendant as early as July 20, 2024, and that as of 27 May 13, 2025, the parties were discussing settlement. ECF No. 39-1 at 4. On May 16, 2025, the 28 District Judge assigned to this case noted that plaintiff had not timely filed a proof of service and 1 issued an order to show cause why the case should not be dismissed for failure to prosecute. ECF 2 No. 9. Plaintiff responded on May 22, 2025, by submitting proof of service and indicating that 3 the parties were working to finalize a settlement agreement. ECF No. 10. Specifically, plaintiff 4 asked “that if service of process is found sufficient, the parties be granted thirty (30) days to 5 finalize a mutually agreeable settlement for both parties, or to provide Defendant an opportunity 6 to file an Answer or otherwise respond in the case.” ECF No. 10 at 3. On May 23, the District 7 Judge discharged the order to show cause and ordered the parties to file a notice of settlement or 8 for defendant to respond to the complaint within 30 days. ECF No. 11. Neither party responded 9 to the court’s order. On July 3, 2025, the District Judge entered another order to show cause why 10 the parties’ failure to follow the court’s order should not result in monetary sanctions. ECF No. 11 14.
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 NOTARY ZOOM, LLC, No. 2:24-cv-3526 DJC AC 12 Plaintiff, 13 v. ORDER and 14 MARGARET KAPLAN, FINDINGS AND RECOMMENDATIONS 15 Defendant. 16 17 This matter is before the court on plaintiff’s motion for relief from default. ECF No. 37. 18 This motion was referred to the undersigned pursuant to E.D. Cal. R. 302(c)(19). Finding no 19 hearing necessary, the motion was taken under submission by the court. ECF No. 38. For the 20 reasons stated below, the court recommends defendant’s motion to set aside default be 21 GRANTED. 22 Additionally, defendant filed a duplicative motion to set aside default (ECF No. 33) which 23 is DENIED as moot and a proposed answer (ERC No. 37-1) which she failed to sign. Defendant 24 is accordingly ORDERED to file an amended answer bearing her signature within 14 days. 25 I. Background 26 Plaintiff filed its complaint on December 16, 2024. ECF No. 1. Plaintiff filed a certificate 27 of service on May 28, 2025. ECF No. 12. After being prompted by multiple orders to show 28 cause issued by the District Judge (ECF Nos. 9, 14) plaintiff requested entry of default on July 9, 1 2025 (ECF No. 16), and default was entered on July 10, 2025 (ECF No. 18). After being 2 prompted by another order to show cause (ECF No. 20), plaintiff filed a motion for default 3 judgment on November 26, 2025, and noticed the hearing for January 21, 2026. ECF No. 24. 4 Defendant appeared in pro se and filed an opposition on January 16, 2026 (ECF No. 26) 5 along with a motion for an extension of time to file an answer. ECF No. 27. Plaintiff filed a 6 motion to set aside entry of default on February 13, 2026. ECF No. 33. The undersigned heard 7 oral argument on the motions on February 18, 2026. ECF No. 32. For the reasons stated on the 8 record, the undersigned denied the Motion for Default Judgment (ECF No. 24) without prejudice 9 to re-filing, and defendant’s Motion for an Extension of time to file an answer (ECF No. 27 ) was 10 denied as moot. Id. Defendant was ordered to file a motion for relief from default, along with a 11 proposed answer, within 30 days. Defendant filed the required motion on March 16, 2026. ECF 12 No. 39. Plaintiff opposed the motion. ECF No. 39. The motion for relief from default is now 13 before the court. 14 II. Analysis 15 A. Legal Standard 16 The Federal Rules provide that a “court may set aside an entry of default for good cause.” 17 Fed. R. Civ. P. 55(c). To determine “good cause,” a court must “consider[ ] three factors: (1) 18 whether [the party seeking to set aside the default] engaged in culpable conduct that led to the 19 default; (2) whether [it] had [no] meritorious defense; or (3) whether reopening the default 20 judgment would prejudice” the other party. See Franchise Holding II, LLC. v. Huntington 21 Restaurants Grp., Inc., 375 F.3d 922, 925–26 (9th Cir. 2004). This standard, which is the same as 22 the one used to determine whether a default judgment should be set aside under Rule 60(b), is 23 disjunctive, such that a finding that any one of these factors is true is sufficient reason for the 24 district court to refuse to set aside the default. See id. Crucially, however, “judgment by default 25 is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be 26 decided on the merits.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984); see also Latshaw v. 27 Trainer Wortham & Co., Inc., 452 F.3d 1097, 1103 (9th Cir. 2006); Speiser, Krause & Madole 28 P.C. v. Ortiz, 271 F.3d 884, 890 (9th Cir. 2001); TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 1 691, 695–96 (9th Cir. 2001), as amended on denial of reh’g and reh’g en banc (May 9, 2001). 2 Additionally, “[w]hile the same test applies for motions seeking relief from default judgment 3 under both Rule 55(c) and Rule 60(b), the test is more liberally applied in the Rule 55(c) context.” 4 Cracco v. Vitran Exp., Inc., 559 F.3d 625, 631 (7th Cir. 2009) (quotations and citations omitted). 5 This is because in the Rule 55 context there is no interest in the finality of the judgment with 6 which to contend. See Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 7 1986). 8 B. There is Good Cause to Set Aside Default in This Case 9 Entry of default in this case should be set aside because (1) it is unclear whether defendant 10 engaged in culpable conduct, and delay in this case was mutual; (2) defendant has potentially 11 meritorious defenses which she is entitled to assert and litigate; and (3) setting aside default 12 would not prejudice plaintiff. See Franchise Holding II, LLC, 375 F.3d at 925–26. 13 1. Culpable Conduct 14 It is unclear whether defendant engaged in culpable conduct in failing to respond to the 15 complaint, and that uncertainty must weigh in favor of defendant. “A defendant’s conduct is 16 culpable if he has received actual or constructive notice of the filing of the action and 17 intentionally failed to answer . . . [I]n this context the term ‘intentionally’ means that a movant 18 cannot be treated as culpable simply for having made a conscious choice not to answer; rather, to 19 treat a failure to answer as culpable, the movant must have acted with bad faith, such as an 20 intention to take advantage of the opposing party, interfere with judicial decision making, or 21 otherwise manipulate the legal process.” United States v. Signed Pers. Check No. 730 of Yubran 22 S. Mesle, 615 F.3d 1085, 1092 (9th Cir. 2010) (internal citations omitted). 23 Here, the court cannot conclude that defendant engaged in culpable conduct because while 24 defendant was plainly on notice of the conflict with plaintiff, it is not clear that defendant was 25 more than negligent in failing to respond to this lawsuit. Plaintiff’s counsel submitted a sworn 26 statement that he had been in touch with the defendant as early as July 20, 2024, and that as of 27 May 13, 2025, the parties were discussing settlement. ECF No. 39-1 at 4. On May 16, 2025, the 28 District Judge assigned to this case noted that plaintiff had not timely filed a proof of service and 1 issued an order to show cause why the case should not be dismissed for failure to prosecute. ECF 2 No. 9. Plaintiff responded on May 22, 2025, by submitting proof of service and indicating that 3 the parties were working to finalize a settlement agreement. ECF No. 10. Specifically, plaintiff 4 asked “that if service of process is found sufficient, the parties be granted thirty (30) days to 5 finalize a mutually agreeable settlement for both parties, or to provide Defendant an opportunity 6 to file an Answer or otherwise respond in the case.” ECF No. 10 at 3. On May 23, the District 7 Judge discharged the order to show cause and ordered the parties to file a notice of settlement or 8 for defendant to respond to the complaint within 30 days. ECF No. 11. Neither party responded 9 to the court’s order. On July 3, 2025, the District Judge entered another order to show cause why 10 the parties’ failure to follow the court’s order should not result in monetary sanctions. ECF No. 11 14. On July 9, 2025, plaintiff requested entry of default. ECF No. 16. It took another order to 12 show cause from the District Judge before plaintiff finally moved for default judgment. ECF 13 Nos. 20, 24. This history indicates that defendant could plausibly have thought the parties were 14 going to settle this lawsuit out of court; at a minimum, it demonstrates that there was delay and 15 failure to respond to court orders on both sides. 16 Further, to the extent plaintiff argues that the pro se defendant is a paralegal and 17 accordingly should be held to a higher standard with respect to deadlines and compliance with 18 court orders, the court notes that plaintiff is represented by licensed counsel and also failed to 19 comply with court deadlines and orders on multiple occasions. Even if defendant were 20 represented by counsel, in order to maintain entry of default after defendant’s appearance the 21 court would have to find that there “is no explanation of the default inconsistent with a devious, 22 deliberate, willful, or bad faith failure to respond.” Mesle, 615 F.3d at 1092. For example, in the 23 Franchise Holding II, LLC. v. Huntington Restaurants Grp., Inc. case on which plaintiff relies, the 24 represented defendant “failed to file anything with the district court until after [the plaintiff] 25 began collecting on the default judgment.” 375 F.3d 922, 926 (9th Cir. 2004). Such conduct is 26 not analogous to the conduct at issue in this case, particularly where both sides failed to respect 27 court deadlines. This factor favors granting relief from default. 28 //// 1 2. Potentially Meritorious Defenses 2 Defendant has indicated that she has potentially meritorious defenses including improper 3 venue and jurisdictional defenses. ECF No. 31-1 at 2-3. The defendant should be afforded the 4 opportunity to litigate these defenses. 5 3. Prejudice to Plaintiff 6 Finally, lifting the entry of default will not prejudice plaintiff. Plaintiff’s arguments 7 regarding prolonging ongoing harm are unpersuasive in light of plaintiff’s own delays in 8 prosecuting this case. 9 For all these reasons, this case does not present circumstances which overcome the 10 general policy favoring adjudication on the merits. Accordingly, the motion to set aside default 11 should be granted. 12 III. Conclusion 13 It is hereby ORDERED that defendant’s duplicative motion to set aside default (ECF No. 14 33) is DENIED as MOOT. Additionally, defendant is ORDERED to file an amended answer 15 bearing her signature within 14 days. Failure to timely file a signed amended answer may result 16 in monetary sanctions. 17 Additionally, for the reasons set forth above, IT IS HEREBY RECOMMENDED 18 defendant’s motion to set aside default (ECF No. 37) be GRANTED. 19 These findings and recommendations are submitted to the United States District Judge 20 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within fourteen days 21 after being served with these findings and recommendations, any party may file written 22 objections with the court and serve a copy on all parties. Id.; see also Local Rule 304(b). Such a 23 document should be captioned “Objections to Magistrate Judge’s Findings and 24 Recommendations.” Any response to the objections shall be filed with the court and served on all 25 parties within fourteen days after service of the objections. Local Rule 304(d). Failure to file 26 objections within the specified time may waive the right to appeal the District Court’s order. 27 //// 28 //// 1 | Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. YIst, 951 F.2d 1153, 1156-57 2 | (9th Cir. 1991). 3 | DATED: April 21, 2026 .
5 ALLISON CLAIRE UNITED STATES MAGISTRATE JUDGE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28