Patrick Castro v. C&C Verde LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 28, 2025
• Docket: 23-15488
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION MAR 28 2025 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

PATRICK CASTRO, an Arizona resident, Nos. 23-15488 23-16217 Plaintiff-Appellee, D.C. No. 2:18-cv-04715-JJT v.

C&C VERDE LLC, DBA Midas, an MEMORANDUM* Arizona limited liability company; CHRISTOPHER CONFORTI, an Arizona resident,

Defendants-Appellants,

and

NICHOLAS CONFORTI, an Arizona resident,

Defendant.

Appeal from the United States District Court for the District of Arizona John Joseph Tuchi, District Judge, Presiding

Argued and Submitted September 9, 2024 Phoenix, Arizona

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: RAWLINSON and COLLINS, Circuit Judges, and FITZWATER,** District Judge. Partial Concurrence and Partial Dissent by Judge RAWLINSON. Partial Concurrence and Partial Dissent by Judge COLLINS.

In these consolidated appeals, Defendants-Appellants C&C Verde LLC and

Christopher Conforti (“Appellants”) challenge orders relating to the entry of default

judgments against them and the award of attorney’s fees to Plaintiff-Appellee Patrick

Castro (“Castro”). Insofar as we have jurisdiction under 28 U.S.C. § 1291, we review

the orders for abuse of discretion. See Brandt v. Am. Bankers Ins. Co. of Fla., 653

F.3d 1108, 1110 (9th Cir. 2011) (set aside default judgment); Uhm v. Humana, Inc.,

620 F.3d 1134, 1140 (9th Cir. 2010) (reconsideration); Roberts v. City of Honolulu,

938 F.3d 1020, 1023 (9th Cir. 2019) (attorney’s fees). As to the appeal docketed as

No. 23-15488, we dismiss in part for lack of jurisdiction and affirm in part. As to the

appeal docketed as No. 23-16217, we affirm in part and vacate and remand in part.

1. Regarding the appeal docketed as No. 23-15488, the notice of appeal filed

on March 30, 2023 is untimely as to the district court’s July 9, 2019 default judgments

against Appellants and its October 9, 2019 order awarding additional attorney’s fees

to Castro, but timely as to the district court’s December 7, 2022 order granting in part

Appellants’ motion to set aside the default judgments against them and its March 2,

** The Honorable Sidney A. Fitzwater, United States District Judge for the Northern District of Texas, sitting by designation.

-2- 2023 order granting Castro’s motion to reconsider. Fed. R. App. P. 4(a)(1)(A). The

court has jurisdiction only to review the orders that were timely appealed. See United

States v. Sadler, 480 F.3d 932, 937 (9th Cir. 2007).

2. The district court did not abuse its discretion in concluding that there was

not good cause to set aside the default judgments because Appellants’ culpable

conduct led to the defaults. See S.E.C. v. Osborne, Stern & Co., 70 F.3d 1280, 1281

(9th Cir. 1995). Appellants, who had previously consulted with counsel in relation

to similar litigation, are legally sophisticated parties who had constructive or actual

notice of Castro’s complaint and failed to answer. See TCI Grp. Life Ins. Plan v.

Knoebber, 244 F.3d 691, 699 n.6 (9th Cir. 2001), overruled on other grounds by

Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001).

3. The district court did not abuse its discretion in implicitly concluding that

the default judgments should not be set aside on the basis that Castro defrauded the

court. Even if Castro’s affidavit in support of the default judgments contained false

statements, perjury does not alone rise to the level of fraud on the court. See, e.g.,

Trendsettah USA, Inc. v. Swisher Int’l, Inc., 31 F.4th 1124, 1132-33 (9th Cir. 2022).

4. The district court did not abuse its discretion in reinstating the default

judgments entered against Appellants based on Castro’s voluntary dismissal of

Appellants’ former codefendant, Nicholas Conforti (“Nicholas”). After the district

-3- court set aside the default judgments entered against Appellants on the basis that

Nicholas was not properly served, Castro voluntarily dismissed Nicholas and moved

for reconsideration of the order setting aside the default judgments. It was not an

abuse of discretion for the district court to reinstate the default judgments on the basis

that there was no longer a risk of future inconsistent judgments against jointly and

severally liable defendants. See Sch. Dist. No. 1J, 390 Multnomah Cnty. v. ACandS,

Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).

5. Regarding the appeal docketed as No. 23-16217, initiated by the notice of

appeal filed on September 6, 2023, we have jurisdiction to consider Appellants’

appeal of the district court’s August 28, 2023 order granting additional attorney’s fees

to Castro. See In re Elias, 188 F.3d 1160, 1164 (9th Cir. 1999).

6. The district court did not abuse its discretion in concluding that Castro, who

despite losing some motions ultimately prevailed on his Fair Labor Standards Act

claim, was a prevailing party under 29 U.S.C. § 216(b). See Hensley v. Eckerhart, 461

U.S. 424, 435 (1983).

7. The district court did not abuse its discretion in concluding that District of

Arizona Local Rule LRCiv 54.2 did not apply to Castro’s motion. See LRCiv 54.2(a);

Miranda v. S. Pac. Transp. Co., 710 F.2d 516, 521 (9th Cir. 1983) (broad discretion

-4- in interpreting local rules); see also LRCiv 83(f)(1)(A) (emphasis added) (district

court “may impose appropriate sanctions” for violations of local rules).

8. The district court did abuse its discretion, however, in including in its

August 28, 2023 order the sum of $5,108.00 in costs that it did not adequately explain.

The district court’s one-sentence treatment of the $5,108.00 in costs is “conclusory

and unsupported by any analysis of the time records actually presented in this case[.]”

Sealy, Inc. v. Easy Living, Inc., 743 F.2d 1378, 1385 (9th Cir. 1984). Because “the

district court fail[ed] to provide a clear indication of how it exercised its discretion,

we [] remand the fee award for the court to provide an explanation.” McGrath v.

Cnty. of Nev., 67 F.3d 248, 253 (9th Cir. 1995) (citation omitted). We otherwise

affirm the August 28, 2023 order.

9. Finally, regarding Appellants’ challenge to the district court’s April 13, 2023

order denying their motion to reconsider, we lack jurisdiction because Appellants

failed to identify this order in the notice of appeal filed on September 6, 2023. See

Fed. R. App. P. 3(c)(1)(A); West v. United States, 853 F.3d 520, 522 (9th Cir. 2017)

(requirements jurisdictional). Alternatively, we vacate the April 13, 2023 order

because Appellants’ March 30, 2023 notice of appeal divested the district court of

jurisdiction to enter it. See Scott v. Younger, 739 F.2d 1464, 1466 (9th Cir. 1984).

-5- NO. 23-15488 DISMISSED IN PART AND AFFIRMED IN PART. NO.

23-16217 AFFIRMED IN PART AND VACATED AND REMANDED IN PART.

Each party shall bear his or its respective taxable costs.

-6- FILED Castro v. C&C Verde, Case Nos. 23-15488 and 23-16217 MAR 28 2025 Rawlinson, Circuit Judge, concurring in part and dissenting in part: MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS I join paragraphs 5, 6, 7, 8, and 9 of the memorandum disposition.

However, I respectfully dissent from the second phrase of paragraph 1, and from

paragraphs 2, 3, and 4. Under our precedent, the challenges to the district court’s

order granting in part Appellants’ motion to set aside the default judgments, and to

the district court’s order granting Patrick Castro’s motion to reconsider, are not

properly before us.

Under our precedent, a party “may [not directly] appeal after entry of a

default judgment . . . without having moved under either Federal Rule of Civil

Procedure 55(c) or 60(b) in the district court,” and an “appeal . . . cannot be used as

a substitute for these procedures.” Consorzio Del Prosciutto di Parma v. Domain

Name Clearing Co., LLC, 346 F.3d 1193, 1195 (9th Cir. 2003) (citations and

internal quotation marks omitted). Appellants’ failure to seek relief in the district

court under Federal Rule of Civil Procedure 55(c) or 60(b) “mandates dismissal.”

Dreith v. Nu Image, Inc., 648 F.3d 779, 789 n.1 (9th Cir. 2011). The post-

judgment motions filed by Appellants did not cure this defect. See id.

Nevertheless, on the merits I agree that the district court acted within its discretion

in setting aside the default judgments and in awarding additional attorney’s fees to

1 Castro. I also agree that we should remand for the district court to further explain

the award of $5,108 in costs.

2 FILED Castro v. C&C Verde LLC, et al., Nos. 23-15488, 23-16217 MAR 28 2025

COLLINS, Circuit Judge, concurring in part and dissenting in part: MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

I concur in the court’s jurisdictional ruling in section 1 of its memorandum

disposition. As to the merits of the appeal filed by Defendants-Appellants C&C

Verde LLC and Christopher Conforti (“Appellants”) challenging the reinstated

default judgment against them, I would reverse that reinstated default judgment,

and I would vacate the award of attorney’s fees and costs that is predicated on that

judgment. To the extent that the majority does otherwise, I respectfully dissent.

I

In his initial complaint, Plaintiff-Appellee Patrick Castro asserted various

claims, jointly and severally, against the two Appellants as well as against an

additional third Defendant named Nicholas Conforti (“Nicholas”). After all three

Defendants failed to appear, the clerk entered a default against all three Defendants

on March 27, 2019, and the district court subsequently entered a default judgment

against them on July 9, 2019. More than two years later, Defendants moved to set

aside the defaults and the default judgment under Rules 55(c), 60(b), and 60(d)(3)

of the Federal Rules of Civil Procedure, contending that they had not been properly

served, that there was good cause to set aside the defaults and the judgment, and

that Castro had engaged in fraud on the court. On December 7, 2022, the district

court granted this motion in part. The court held that because Nicholas had not been properly served, the default and judgment against him had to be set aside

under Rule 60(b)(4). The court further concluded that, because Nicholas was

alleged to be jointly and severally liable with Appellants, the default judgment

against all Defendants had to be set aside. See Neilson v. Angela Shiu Rong Chang

(In re First T.D. & Inv., Inc.), 253 F.3d 520, 532 (9th Cir. 2001) (“[W]here a

complaint alleges that defendants are jointly liable and one of them defaults,

judgment should not be entered against the defaulting defendant until the matter

has been adjudicated with regard to all defendants.” (citing Frow v. De La Vega,

82 U.S. 552, 554 (1872) (footnote omitted))). The court otherwise rejected

Appellants’ arguments that good cause existed under Rule 55(c) for setting aside

the default and the default judgment, and it left the defaults against Appellants in

place.

Castro then promptly filed a notice voluntarily dismissing his claims against

Nicholas with prejudice. See FED. R. CIV. P. 41(a)(1)(A)(i). He then moved for

reconsideration of the order setting aside the default judgment as to Appellants,

arguing that, in light of the dismissal of Nicholas, the Frow rule relied upon by the

district court no longer applied and that the court had rejected all of Appellants’

other arguments for setting aside the default judgment. On March 2, 2023, the

district court granted Castro’s motion for reconsideration and re-entered the

previously vacated default judgment against Appellants. Appellants then timely

2 moved for reconsideration, arguing that the court had overlooked Appellants’

arguments under Rule 60(d)(3). While that motion was still pending, Appellants

on March 30, 2023 filed a notice of appeal challenging the order reinstating the

default judgment, the order rejecting Appellants’ other arguments for setting aside

the defaults and the default judgment, and the default judgment itself (including the

accompanying award of attorneys’ fees). On April 13, 2022, the district court

clarified what it deemed to be “implicit in its prior [o]rders,” namely, that

Appellants’ Rule 60(d)(3) arguments lacked merit.

II

I agree with the majority that Appellants’ notice of appeal is “timely as to

the district court’s December 7, 2022 order granting in part Appellants’ motion to

set aside the default judgment[] against them and its March 2, 2023 order granting

Castro’s motion to reconsider.” See Memo. Dispo. at 2. Although those two

orders necessarily resolved issues that indirectly address the validity of the

underlying defaults and default judgment, I agree that we do not have jurisdiction

to directly review the original default judgment and associated attorney’s fees

award. Our review is limited to the issues raised by Appellants’ post-judgment

motion under Rules 55(c), 60(b), and 60(d)(3) and Castro’s subsequent motion to

reconsider the order resolving that motion, and any indirect review of the defaults

and default judgment occurs within the framework of those motions. On that

3 understanding, I concur in section 1 of the majority’s memorandum disposition.

III

On the merits, I conclude that the district court abused its discretion in

granting Castro’s motion for reconsideration and re-entering default judgment

against Appellants. See NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 (9th

Cir. 2016) (“We review . . . the grant of a default judgment for abuse of

discretion.”); Smith v. Clark Cnty. Sch. Dist., 727 F.3d 950, 954 (9th Cir. 2013)

(“We review for abuse of discretion the district court’s decision to grant or deny a

motion for reconsideration.”).

“[J]udgment by default is a drastic step appropriate only in extreme

circumstances; a case should, whenever possible, be decided on the merits.”

United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085,

1091 (9th Cir. 2010) (citation omitted). Here, there is no disputing that, after

concluding that Nicholas had not been properly served, the district court properly

set aside the default judgment against Appellants under Frow and its progeny. At

that point, the case could proceed to be adjudicated on the merits with respect to

Nicholas, and Castro’s claims against Appellants would rise or fall depending upon

the outcome of the adjudication as to Nicholas. See Neilson, 253 F.3d at 532

(explaining that, under Frow, “if an action against the answering defendants is

decided in their favor, then the action should be dismissed against both answering

4 and defaulting defendants” (emphasis added)). I do not agree that Castro’s tactical

maneuver to then voluntarily dismiss his claims against Nicholas with prejudice—

so as to thwart any adjudication of the merits—was sufficient to then allow

reinstatement of a default judgment that had already properly been set aside under

Frow. Allowing a party to defeat a valid application of the Frow rule through this

sort of post-set-aside procedural manipulation is in my view plainly inconsistent

with “the strong policy underlying the Federal Rules of Civil Procedure favoring

decisions on the merits,” and a clear abuse of discretion. NewGen, LLC, 840 F.3d

at 616 (citation omitted). I would therefore set aside the reinstated default

judgment (and the attorneys’ fees and cost awards predicated on that judgment)

and would remand the case for further proceedings, including consideration of

whether Castro’s action in dismissing Nicholas for the purpose of thwarting any

adjudication on the merits, together with the other circumstances of this case,

provides “good cause” for setting aside the defaults against Appellants under Rule

55(c).

For the foregoing reasons, I concur as to the court’s jurisdictional

determination, and I respectfully dissent as to the merits.