Judge Cherol J. Nellon, Case Number: 23STCV02252, Date: 2023-10-04 Tentative Ruling

Judge: Cherol J. Nellon, Case: 23STCV02252, Date: 2023-10-04 Tentative Ruling

Case Number: 23STCV02252 Hearing Date: October 4, 2023 Dept: 14

Case Background

Plaintiff alleges that Defendant refused to pay the full amount owed for several shipping containers, then started bad-mouthing Plaintiff to others in the industry when Plaintiff insisted on full payment.

On February 1, 2023, Plaintiff filed its Complaint for (1) Defamation, (2) Defamation Per Se, (3) Trade Libel, (4) Intentional Interference with Prospective Economic Advantage, (5) Negligent Interference with Prospective Economic Advantage, and (6) Unfair Competition against Defendants S&S Brokerage, Inc. (“Broker”) and DOES 1-30.

On March 23, 2023, the default of Defendant Broker was entered.

Instant Motion

Defendant Broker now moves this court, per Code of Civil Procedure § 473(b), for an order setting aside their default and permitting them to file an Answer.

Decision

Plaintiff’s Evidentiary Objections should be OVERRULED.

The motion is GRANTED. Defendant Broker is to file its Answer within one week.

Plaintiff’s request for $4,950 in fees and costs is DENIED.

Governing Statute

Code of Civil Procedure § 473 provides in relevant part as follows:

“(b) The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect. Application for this relief shall be accompanied by a copy of the answer or other pleading proposed to be filed therein, otherwise the application shall not be granted, and shall be made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken. … Notwithstanding any other requirements of this section, the court shall, whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorney's sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect, vacate any (1) resulting default entered by the clerk against his or her client, and which will result in entry of a default judgment, or (2) resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorney's mistake, inadvertence, surprise, or neglect. The court shall, whenever relief is granted based on an attorney's affidavit of fault, direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or parties. However, this section shall not lengthen the time within which an action shall be brought to trial pursuant to Section 583.310.

(c)(1) Whenever the court grants relief from a default, default judgment, or dismissal based on any of the provisions of this section, the court may do any of the following:

(A) Impose a penalty of no greater than one thousand dollars ($1,000) upon an offending attorney or party.

(B) Direct that an offending attorney pay an amount no greater than one thousand dollars ($1,000) to the State Bar Client Security Fund.

(2) However, where the court grants relief from a default or default judgment pursuant to this section based upon the affidavit of the defaulting party's attorney attesting to the attorney's mistake, inadvertence, surprise, or neglect, the relief shall not be made conditional upon the attorney's payment of compensatory legal fees or costs or monetary penalties imposed by the court or upon compliance with other sanctions ordered by the court.

Discussion

There is no real dispute about what happened here. Defendant Broker was served on February 7, 2023. Because they are a New Jersey corporation, their first call was to a New Jersey lawyer, one Mr. Tom Reardon. Plaintiff’s counsel and Mr. Reardon exchanged a few emails, attempting to settle the case. Mr. Reardon told Plaintiff’s counsel that his client would be retaining local counsel, but did not say who that would be. Plaintiff’s counsel told Mr. Reardon, on March 22, that he would be seeking entry of default.

Mr. Reardon then called current Defense counsel, Ms. Hillary Arrow Booth. He did not inform her of the impending default. They did a conflicts check, and Ms. Booth was formally retained on March 28. Unfortunately, default had already been entered on March 27. Ms. Booth discovered the default on March 30.

Defense counsel immediately emailed Plaintiff and asked for a stipulation to set aside the default; in exchange, she would commit to filing a response within a week. Plaintiff’s counsel refused, asserting that there was no basis to set aside the default. Defense counsel explained the situation, but Plaintiff’s counsel refused to budge.

Code of Civil Procedure § 473(b) contains two provisions for relief: one mandatory, the other discretionary. Minick v. City of Petaluma (2016) 3 Cal.App.5^th 15, 25. The mandatory provision requires a sworn admission of fault from the attorney who is responsible for the default. Bailey v. Citibank, N.A. (2021) 66 Cal.App.5^th 335, 348-349. The court may not grant relief from default if the person who signed the affidavit was not the person who caused the default to be entered. Id.

Defendant Broker previously filed a motion to be relieved under the mandatory provision, with an affidavit of fault from Ms. Booth. There was no declaration of any kind from Mr. Reardon. This court heard the motion on June 8, 2023. The motion was denied because the court found that Mr. Reardon, not Ms. Booth, was the cause of the default.

Mr. Reardon had to know that, as a New Jersey lawyer, he could not defend a California case without local counsel. It was his responsibility to find local counsel before default loomed, and it was his responsibility to inform Ms. Booth that default was in fact looming. Had Mr. Reardon filed an affidavit of fault in connection with the prior motion, this court could have accepted it. See SJP Limited Partnership v. City of Los Angeles (2006) 136 Cal.App.4^th 511, 517-518 (attorney signing the affidavit need be neither counsel of record, nor licensed in California).

This court made the denial without prejudice, a judicial invitation to correct the motion by either producing an affidavit of fault from Mr. Reardon or making a motion under the discretionary provision of the statute.

Plaintiff complains that this motion violates the provisions of Code of Civil Procedure § 1008. It does not. Because Defendant made the original motion, this would be a renewed motion under Section 1008(b). That subdivision contains no time limit. All it requires is a declaration that shows what happened before. The Declaration of Hilary Arrow Booth does that.

The affidavit of fault now submitted by Mr. Reardon is sufficiently straightforward to entitle the Defendant to relief under the mandatory provision of Section 473(b).

The final sentence of Section 473(b) requires this court to award “compensatory” fees and costs to the opposing party. Plaintiff takes that to mean that they recover their costs for (unsuccessfully) opposing the motion. But the purpose of the statute is not to reward parties for losing a motion. The purpose of this provision is to let the opposing parties to recover for whatever work they did in pursuit of the default, since that work is rendered moot when the default is set aside. Plaintiff has produced no evidence of any costs and fees incurred pursuing the default, and therefore has no compensatory costs to recover.

Conclusion

This is a simple mistake that could and should have been avoided. It also could and should have been resolved between counsel without the need for two motions. Defendant Broker is entitled to relief. Plaintiff has produced no evidence of proper compensatory costs. Therefore, the motion is GRANTED and Plaintiff’s request for $4,950 in fees and costs is DENIED. Defendant Broker is to file its Answer within one week.