FILED Clerk District Court MAY 18 2021 for the Northerry Mayiana Islands 1 By YY. (D@hu@ Clerk) IN THE UNITED STATES DISTRICT COURT 3 FOR THE NORTHERN MARIANA ISLANDS 4 5 WINZY CORPORATION, Case No. 1:20-cv-00028 6 Plaintiff, 7 vs MEMORANDUM DECISION DENYING 8 DEFENDANT’S MOTION TO SET ASIDE || IMPERIAL PACIFIC INTERNATIONAL ENTRY OF DEFAULT (CNMI), LLC, 0 Defendant. 11 On March 2, 2021, default was entered against Defendant Imperial Pacific International 12 B (CNMI), LLC (“IPI”) for its failure to appear or otherwise defend. (ECF No. 8.) Plaintiff Winzy 14 || Corporation (“Winzy”) subsequently moved for default judgment, and a default judgment hearing was 15 || set for April 15, 2021. On the day of the hearing, however, attorney Juan Lizama made an appearance 16 || for Defendant IPI and moved for a continuance of the default judgment hearing, arguing that IPI had '7 4 basis for setting aside the entry of default. The Court granted IPI’s motion to continue to give it an is opportunity to file a motion to set aside entry of default in writing. (Minutes, ECF No. 11.) 19 On April 19, 2021, IPI filed its motion to set aside the entry of default pursuant to Federal Rule 20 of Civil Procedure 55(c) (Motion, ECF No. 12), which Winzy opposed (Opp’n, ECF No. 14). The 21 Court held a hearing on the matter on April 23, 2021. Based on the briefs and counsels’ oral 22 3 arguments, the Court found that the first Fa/k factor weighed in favor of IPI because there would be

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no prejudice to Winzy other than delay if default was set aside. See Falk v. Allen,

, 463 1 (9th Cir. 1984) (noting that the three factors to consider in determining whether there was “good cause” 2 to set aside entry of default pursuant to Fed. R. Civ. P. 55(c) are: “(1) whether the plaintiff will be 3 4 prejudiced, (2) whether the defendant has a meritorious defense, and (3) whether culpable conduct of 5 the defendant led to the default.”); see also TCI Group Life Ins. Plan v. Knoebber,

, 701 6 (9th Cir. 2001) overruled on other grounds by Egelhoff v. Egelhoff ex. rel. Breiner,

(2001) (“To be prejudicial, the setting aside of a judgment must result in greater harm than simply 8 delaying resolution of the case.”). 9 As to the third factor, however, the Court found that it weighed against setting aside entry of 10 default because IPI’s culpable conduct led to the default. See TCI Group Life Ins. Plan, 244 F.3d at 11 697 (noting that “a defendant’s conduct is culpable if he has received actual or constructive notice of 12 the filing of the action and intentionally failed to answer” and that a defendant’s action was 13 14 “intentional” if it was “willful, deliberate, or eviden[t] of bad faith.”). Here, the Court found that 15 notice of Winzy’s amended complaint was given to several important IPI representatives when IPI’s 16 Compliance Administrator Remedio Mafnas sent the amended complaint to them through a group 17 chat. (Mafnas Affidavit, ECF No. 13.) The Court highlighted that some of these members that were 18 placed on notice frequently appeared in Court and unequivocally knew that a company needed to be 19 represented by an attorney. That IPI did not have an attorney at the time to take on the case was not 20 excusable neglect, but rather evidence of IPI’s bad faith, especially when IPI was placed on clear 21 notice months prior in other pending cases against it in this Court that it had to actively seek new 22 counsel. This third factor therefore weighed against setting aside default. 23 However, because of the public policy preference for deciding cases on their merits, see Falk 1 v. Allen,

, the Court continued the matter to give IPI an opportunity to look at the 2 contract at issue that Winzy’s counsel presented for the first time at the hearing, and to determine 3 4 whether it had any basis for a meritorious defense against Winzy’s breach of contract claim so that the 5 second Falk factor would weigh in its favor. The Court gave IPI a deadline of May 3, 2021 to file 6 supplemental briefing supported by affidavit. (Minutes, ECF No. 15.) The Court also warned IPI that 7 failure to present any meritorious defense would result in the Court denying IPI’s motion to set aside 8 entry of default. (Id.) However, IPI failed to file any supplemental brief by the deadline, which IPI’s 9 counsel later apprised the Court that the lack of any filing was due to a technical issue with his 10 computer. Winzy subsequently filed a notice and request for ruling from this Court. (ECF No. 16.) 11 Before the Court could issue a ruling, IPI filed an untimely declaration on May 5, 2021 from 12 Eric Poon without any supplemental brief in contravention to the Court’s order. (See Poon Decl., ECF 13 14 No. 17). The declaration confirmed the validity of a contract entered into between Winzy and IPI in 15 February 2020 for supervision and consultation regarding fire protection systems at the IPI resort for 16 a contract price of $171,500 to be completed by September 2020, and listed out Winzy’s tasks under 17 the contract. (See Poon Decl. ¶¶ 1-5). The only potential basis for a meritorious defense offered in the 18 declaration was Poon’s indication that Winzy was short of full completion and that the last record that 19 IPI has of Winzy’s on-site visit according to another IPI representative’s email was on May 27, 2020. 20 (Id. ¶¶ 6-7.) 21 In response, Winzy included a declaration from its manager, Rogelio Deducin, confirming that 22 Winzy completed about 95 percent of the project, and thus Winzy only seeks $162,925 instead of the 23 entire $171,500 contract price. (Deducin Decl. ¶ 3). The declaration also attests that Winzy’s 1 employees were present through August 2020 and that IPI representatives, including Poon, were 2 present at monthly meetings even past May. (Id. ¶ 8.) Winzy also provided evidence of written reports 3 4 it submitted to the Department of Fire and Emergency Medical Services indicating a progress of at 5 least 70 percent completion (see Ex. 2, ECF No. 18-3), and monthly invoices it submitted to IPI 6 through July 1, 2020, with each invoice acknowledged received by an IPI representative (see Ex. 3, 7 ECF No. 18-4). In its subsequent reply, IPI wholly failed to address any of Winzy’s arguments or 8 evidence. 9 The matter came on for a hearing on May 14, 2021, during which time the Court found that 10 IPI utterly failed to meet its burden to present any basis for a meritorious defense. The Court noted 11 further that with IPI, just because there is no written record in its possession does not mean that there 12 is no evidence. Moreover, the Court found IPI’s proffer from Poon that Winzy’s presence at the IPI 13 14 site beyond May could have been for other work pursuant to other contracts was insufficient. This 15 proffer is speculative and is not based on any specific facts. 16 Thus, given IPI’s failure to articulate any basis for a meritorious defense and IPI’s culpable 17 conduct, the Court found that the Falk factors weighed against setting aside the entry of default. See 18 Franchise Holding II, LLC. v. Huntington Rest. Grp. Inc.,

, 926 (9th Cir. 2004) (“As 19 these [Falk] factors are disjunctive, the district court [is] free to deny the motion ‘if any of the three 20 factors was true.’” (quoting American Ass’n of Naturopathic Physicians v. Hayhurst,

, 21 1108 (9th Cir. 2000)). Accordingly, IPI’s motion to set aside the entry of default (ECF No. 12) is 22 DENIED. 23 IT IS SO ORDERED this 18th day of May, 2021. 1 2 3 vw Ute 4 RAMONA V. GLONA Chief Judge 5 6 7 8 9 10 ll 12 13 14 15 16 17 18 19 20 21 22 23 24