Judge: Mark H. Epstein, Case: SC126845, Date: 2023-05-05 Tentative Ruling

Case Number: SC126845    Hearing Date: May 5, 2023    Dept: R

The motion to vacate default is GRANTED.  The proposed answer is deemed FILED THIS DAY.  If plaintiffs state that they do not intend to demur thereto (which would be a wise choice) and if the parties have addressed Department 1’s concerns, the court will send the case back to Department 1 for long cause determination forthwith.

The court has been around and around this particular block.  A brief factual recitation is appropriate, but more facts can be found in prior orders. 

Plaintiffs filed this action in 2016.  They assert that defendants’ construction related activities caused them significant harm and that the property owners acted improperly in various other respects.  That is a gross over-simplification of the actual claim, so the court asks for the parties’ indulgence here.  Farzaneh was a named defendant and was involved in the construction but he does not own the property.  He was properly served in 2017.  However, he did not respond to the complaint.  There were some meetings between Farzaneh and plaintiffs’ counsel, but the case did not resolve at those meetings and plaintiffs’ counsel did not tell Farzaneh that Farzaneh was being dismissed.

Plaintiffs’ counsel claims (and the court has no reason to doubt it) that he meant to default Farzaneh for the failure to answer or otherwise respond to the complaint shortly after the meetings.  And in fact, plaintiffs’ counsel did default another party who had failed to answer.  However, due to an error or oversight by plaintiffs’ counsel, no default was actually entered.  Presumably because that plaintiffs’ counsel erroneously believed Farzaneh was in default, plaintiffs did not serve Farzaneh with pleadings thereafter and (critically) they never gave him the required notice of entry of default.  Defense counsel, however, did provide Farzaneh with papers from time to time, including certain FSC materials, although done for every paper filed or served.  Defense counsel never purported to represent Farzaneh and in every pleading filed, defense counsel never listed Farzaneh as a client.

Plaintiffs’ counsel apparently discovered the oversight in November 2022 as the case was moving toward trial.  At that point, counsel placed Farzaneh in default.  Farzaneh claims he did not get notice thereof even then and only learned he was in default when defense counsel contacted him about testifying at the trial.  Shortly after his discussion with defense counsel, Farzaneh moved to vacate the default.  Sort of.  What he actually did was to move for shortened time to have the motion to vacate the default heard.  In an effort to streamline the process, the court did not do what it should have done.  What it should have done was to grant the ex parte application for an order shortening time and set the matter and then allowed the motion to be filed and briefed.  Instead, the court (after hearing from Farzaneh’s counsel that he had made his substantive points in the application) construed the application as the motion to vacate and set a briefing schedule. 

The matter proved somewhat difficult.  The court, frankly, did not find Farzaneh’s declaration as to why he had not responded to be compelling or convincing or honest.  Farzaneh suggested that he thought defense counsel represented him.  But lead defense counsel had not even spoken to him.  He had never been told by defense counsel that they would represent him, he was never sent a retainer agreement or an agreement of any sort, nor he did not have communications with counsel on the case or receive updates.  There was no evidence that any other defendant told him that defense counsel represented him.  At best, he just assumed it.  At worst, and most likely, he knew he wasn’t represented, but hoped that the matter had gone away or was going away or that no one cared about him.  Further, there was no evidence that plaintiffs promised that they would drop him from the law suit or dismiss him.  He never received a dismissal notice from plaintiffs or plaintiffs’ counsel.  And while there were some early talks, nothing materialized to the point where any reasonable or rational person would believe that plaintiffs had decided to let him go.  In short, the court found it hard to buy Farzaneh’s claim that he honestly believed either that he was represented by defense counsel, that he had been promised a pass by plaintiffs’ counsel, or that there was an objective basis to believe that the litigation had ended for him.  But that said, it remains the case that for literally four years or so, plaintiffs took no action that would lead Farzaneh to believe that they were in fact pursuing him.  They served no discovery on him; they never sought to depose him; they never sought his documents, they did not serve him with litigation materials they had filed.  So, while the court cannot find that Farzaneh had a good explanation for doing nothing for four years, plaintiffs had no good explanation for it either, and their gross failure to do anything relating to him, including things that they had a legal obligation to do, makes this case different from most.

The court granted the motion to relieve Farzaneh from default.  The court ordered Farzaneh to file an answer.  The court ordered that he adopt as his own the other defendants’ FSC materials.  The court ordered that he agree to extend the time to bring the matter to trial, all as conditions for vacating the default.  The court ordered that he sit for deposition and produce documents should the deposition notice include a document request.  Farzaneh agreed to those terms.  He filed an answer and agreed to sit for deposition and accepted a deposition notice that included a demand for documents.

Before the deposition went forward, though, plaintiffs demurred to the answer.  The answer, which was in the form of a general denial with a large number of vaguely worded affirmative defenses, did not set forth a factual basis for why he would prevail on the merits, which is required where the court exercises its equitable power to vacate a default and to which the court had adverted in an earlier hearing.  When plaintiffs demurred, Farzaneh refused to appear for deposition notwithstanding his earlier commitment to do so.  Farzaneh’s counsel’s position was that appearing for deposition was the quid pro quo for being relieved of default so it was ok for him to engage in self-help even if it conflicted with a court order.  If plaintiff was going to move to strike the answer (without leave to amend), counsel reasoned, then he ought not be forced to sit for deposition.  Plaintiffs’ counsel doubled-down on what it hoped would be an order that relieved them of their obligation to prove their case as to Farzaneh and sought to reinstate the default.

When that came back before the court, a somewhat frustrated court ordered the deposition to go forward anyway.  As to the demurrer, the court noted the confusion as to whether the general denial would be sufficient, but ruled on the various affirmative defenses.  The court also heard that during the period before the default was entered, Farzaneh lost (or destroyed) his documents.  Farzaneh says that he changed devices so some things did not transport.  And then there was a physical incident in which his hard drive was lost.  As a result, he no longer has many of the documents that he would otherwise have and that plaintiffs demanded in the deposition notice.  That fact, which Farzaneh knew when he sought to vacate the default but somehow neglected to tell the court or opposing counsel, was material.

Given that situation, the court vacated its prior order vacating the default and elected to start again, this time with full briefing and by the numbers.  The court also ordered that Farzaneh complete his deposition.  And the court ordered that he lodge an answer, which he has done.  The new answer is a federal court style answer—that is, it admits or denies the various allegations in the operative complaint rather than rely on a general denial.  The affirmative defenses that survived demurrer are also pled, but he has not re-pled the affirmative defenses as to which the demurrer was sustained.  And he has moved to vacate the default.

And that, pretty much, brings us to where we are now.

Plaintiffs claim, again, that Farzaneh has not demonstrated a meritorious defense.  But plaintiffs misperceive that requirement.  The motion to vacate is not a motion by which the court can weigh evidence; it is not even a summary judgment motion where the court looks to see if there is a dispute.  The existence of a meritorious defense requires only that there are facts articulated indicating a claim that would entitle the moving party to a fair adversary hearing.  (Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th 1241.)  The court is satisfied that Farzaneh has done that much here, especially given that plaintiffs have been able to take his deposition.  The court acknowledges that Farzaneh’s deposition is not a model of consistent testimony.  It is oft-times confusing and can be read as contradictory.  But the package, in full, is enough.

The court is also concerned about the distinct possibility that defendants may prevail on the merits, but Farzaneh—who will be in default and thus unable to make a merits argument—will be the one who becomes solely liable in damages.  Making plaintiffs prove their case against Farzaneh before they recover against him does not seem to be outside the realm of this court’s discretion, at least in light of their role in creating this problem.

The court is also mindful of the fact that much evidence is lost.  Plaintiffs might well be able to obtain a spoliation instruction at trial, although that will be for the trial judge to decide.  But again, part of that is of plaintiffs’ own making.  They could have sent Farzaneh a document retention letter.  Or, even if he were in default (which plaintiffs believed), they could have subpoenaed his records long ago and well before they were lost.  They could have deposed him.  The fact that they did nothing is at least some reason to believe that the documents are not mission critical.  And at least some of the documents—like plans, drawings, permits, and correspondence—are likely already in plaintiffs’ possession from other sources.  In short, while the court is troubled, that is not sufficient to deny Farzaneh the ability to defend himself.  And it is not lost on the court that at least part of the real problem here stems from plaintiffs’ counsel’s inattention to Farzaneh.  Counsel might have believed Farzaneh was defaulted, but no one ever actually filed the paperwork and counsel did not check until four years later.  Had counsel acted with reasonable diligence, this kerfuffle would never have occurred or, if it had, the court would have had little trouble denying a motion by Farzaneh brought four years after having had the default entered.  Given that, the court simply cannot place all of the burden on Farzaneh.

If, at the end of the day, plaintiffs can prove their case against Farzaneh (or the other defendants) then they will prevail.  If not, then the court is hard-pressed to say that justice was not done because Farzaneh does not have to stand in significant damages for a tort plaintiffs cannot demonstrate he committed.

Accordingly, the motion is GRANTED assuming Farzaneh reiterates his agreement to the prior conditions (other than the deposition, which the court gathers is now complete).

From the court’s perspective, this puts an end to the Farzaneh default question.  While the court is not saying that plaintiffs cannot demur to the answer, the court believes a better path would be to get the case to trial quickly.  Hopefully, the parties have cured the issues that caused Department 1 to send the matter back here.  If so, and assuming that the pleadings are now settled, the court will send the matter back to Department 1 for an assessment as to whether this is a long cause matter and whether it is ready for trial.  Hopefully, the case will then be well and truly on the trial train and in line for a resolution on the merits.