Judge: Michael E. Whitaker, Case: 24SMCV04211, Date: 2025-01-13 Tentative Ruling

Case Number: 24SMCV04211    Hearing Date: January 13, 2025    Dept: 207

TENTATIVE RULING

DEPARTMENT          207

HEARING DATE       January 13, 2025

CASE NUMBER        24SMCV004211

MOTION                    Motion to Set Aside Entry of Default

MOVING PARTIES   Defendants Equinox Holdings, Inc.; Equinox Fitness Beverly Hills, Inc.; and Equinox Fitness Santa Monica, Inc.

OPPOSING PARTIES            Plaintiffs Francesca Borchardt; Gabriela Borchardt; and      Veronica Borchardt

MOTION

This case arises from allegations that Defendants Equinox Holdings, Inc.; Equinox Fitness Beverly Hills, Inc.; and Equinox Fitness Santa Monica, Inc. (“Defendants”) discriminated against Plaintiffs Francesca Borchardt; Gabriela Borchardt; and Veronica Borchardt (“Plaintiffs”) because of their disabilities.

On August 30, 2024, Plaintiffs filed the initial complaint against Defendants.  Then, on October 9, 2024, Plaintiffs filed a First Amended Complaint (“FAC”).  The operative FAC alleges six causes of action for (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) violation of the Unruh Civil Rights Act; (4) violation of Cal. Civ. Code, § 51.5; (5) violation of the California Disabled Persons Act; and (6) violation of the Tom Bane Civil Rights Act.

Default was entered against Defendants on November 18, 2024. Defendants now move to set aside the default.  Plaintiffs oppose the motion and Defendants reply.

EVIDENTIARY OBJECTIONS

            The Court overrules Plaintiffs’ objection to the Declaration of Randy Hy filed in support of Defendants’ motion.

NOTICE OF MOTION

            As a threshold matter, Plaintiffs oppose the motion on the grounds that Defendants did not properly serve Plaintiffs, because Defendants served the motion electronically on Plaintiffs, who are proceeding in pro per, without a consent to electronic service.

            The Court agrees with Plaintiffs that electronic service in such a scenario is improper.  However, given that Plaintiffs actually received notice of the motion and timely filed a fulsome opposition on the merits, the Court finds that Plaintiffs have not been prejudiced by the defect in service, and the interests of justice and judicial economy will not be best served by continuing the hearing to require additional service on Plaintiffs.

            Therefore, the Court exercises its discretion to consider the merits of the motion.

LEGAL STANDARD

                          I.          DISCRETIONARY AND MANDATORY RELIEF

“Proceeding to judgment in the absence of a party is an extraordinary and disfavored practice in Anglo–American jurisprudence:  The policy of the law is to have every litigated case tried upon its merits, and it looks with disfavor upon a party, who, regardless of the merits of the case, attempts to take advantage of the mistake, surprise, inadvertence, or neglect of his adversary.”  (Au-Yang v. Barton (1999) 21 Cal.4th 958, 963 [cleaned up].) 

Code of Civil procedure section 473 “includes a discretionary provision, which applies permissively, and a mandatory provision, which applies as of right.” (Minick v. City of Petaluma (2016) 3 Cal.App.5th 15, 25 (hereafter Minick).)  “Section 473 is a remedial statute to be “applied liberally” in favor of relief if the opposing party will not suffer prejudice.  Because the law strongly favors trial and disposition on the merits, any doubts in applying section 473 must be resolved in favor of the party seeking relief from default.  Unless inexcusable neglect is clear, the policy favoring trial on the merits prevails.”  (Minick, supra, 3 Cal.App.5th at p. 24 [cleaned up].) 

The party or the legal representative must seek such relief “within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken.” (Code Civ. Proc., § 473, subd. (b); see Rappleyea v. Campbell (1994) 8 Cal.4th 975, 980 [“because more than six months had elapsed from the entry of default, and hence relief under section 473 was unavailable”]; People v. The North River Ins. Co. (2011) 200 Ca.App.4^th 712, 721 [motion for relief under section 473 must be brought “within a reasonable time, in no case exceeding six months”]).  “The six-month limit is mandatory; a court has no authority to grant relief under section 473, subdivision (b), unless an application is made within the six-month period.”  (Arambula v. Union Carbide Corp. (2005) 128 Cal.App.4th 333, 340, citations omitted.) 

A.    DISCRETIONARY RELIEF

Per Code of Civil Procedure section 473, subdivision (b), a court may “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.”

B.    MANDATORY RELIEF

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.

(Code Civ. Proc., § 473, subd. (b).)  “In considering whether the trial court properly denied relief under section 473(b), the first question is the sufficiency of defendants' showing of attorney fault, if believed, to trigger the mandatory relief provisions of that statute.”  (Standard Microsystems Corp. v. Winbond Electronics Corp. (2009) 179 Cal.App.4th 868, 896, disapproved on other grounds by Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830 (hereafter Standard).)  “Under section 473(b), a party is entitled to relief from a default and resulting judgment whenever, on timely application for relief, his attorney ‘attest[s] to his or her mistake, inadvertence, surprise, or neglect’ in connection with the default or the judgment.”  (Ibid.) 

ANALYSIS

            Defendants’ registered agent for service, CSC-Lawyers Incorporating Service, was personally served on October 16, 2024, and default was entered against each Defendant on November 18, 2024.

            Although Defendants’ counsel knew that its registered agent would often take longer than 30 days to provide notice to Defendants of the service, counsel failed to diligently monitor the filings, and did not have actual notice of the service of summons or default in this action until December 5, 2024.  (Hy Decl. ¶ 4.)

            In opposition, Plaintiffs have provided the Declaration of Francesca Borchardt, which Plaintiffs assert demonstrates that Mr. Hy did have actual notice of the service of summons by virtue of October 7, 2024 email correspondence.  Specifically, the Borchardt declaration indicates:

3. On August 30, 2024, I was a Plaintiff who filed an initial Complaint against Defendants in the Los Angeles Superior Court.

4. On September 5, 2024, Defendants registered agents for service, CSC-Lawyers Incorporating Service, were served via first-class mail, in accordance with CCP section 415.30.

5. On September 13, 2024, I received the following email from an individual named Lee Sherman (“Mr. Sherman”): “Good morning: My name is Lee Sherman, and I represent Equinox. I would like to reach out by telephone and introduce myself and discuss a preliminary matter with you. Your Complaint does not list a telephone number, so is there a number and a convenient time today or Monday to discuss this matter? Please let me know. Thank you, Lee”

6. Shortly thereafter, I responded to Mr. Sherman, providing him with Plaintiffs’ availability for his requested phone call. A true and correct copy of this email thread is attached hereto as “Exhibit A”. Ultimately, this phone call occurred that same day at 4 pm.

7. On the phone call, Mr. Sherman further confirmed receipt of the Complaint. Mr. Sherman referenced specific details of the Complaint, such as the Membership Agreements, and expressed his opinion on particular causes of action.

8. On September 19, 2024, Lennis Vasquez, Mr. Sherman’s assistant, emailed me a PDF file titled “2024-09-19 Follow up Letter to Plaintiffs”. This file was a letter from Mr. Sherman, in which he confirmed the September 13th call, and expressed Defendants’ positions on certain details of the Complaint.

9. Defendants had not returned the Notice and Acknowledgment forms, so I replied to the September 19th email as follows: “Dear Lee, The complaint and summons were served on Defendants' agents via Certified Mail on September 5th, 2024. However, Defendants' agents have failed to return the signed Notice of Acknowledge of Receipt forms to the server. I have attached the forms to this email. Before we continue to communicate, please sign the forms and return to the server's email, juliettejolie29@gmail.com, as soon as possible. Thank you, Francesca Borchardt” A true and correct copy of this email is attached hereto as “Exhibit B”.

10. I had not received a response to my previous email so on October 7, 2024, I sent another email to Mr. Sherman, and once again, requested Defendants to return the completed Notice and Acknowledgement forms, as required by CCP section 415.30.

11. That same day, Mr. Sherman responded, completely evading my request. In his response, Mr. Sherman CC’ed an individual named Randy Hy. Shortly thereafter, I replied to Mr. Sherman, in addition to the CC’ed recipients, as follows: “We are going into the fourth week of you not fulfilling my simple request of returning the completed Notice of Acknowledgment of Receipt forms to the server. Obviously, there is no question as to whether Defendants have been served. You initiated communication to Plaintiffs and have confirmed receipt of the Complaint multiple times. What is the problem with completing a standard step in the legal process? This is baffling.”

12. Mr. Sherman did not respond to this email. A true and correct copy of the October 7, 2024 email thread is attached hereto as “Exhibit C.”

13. On October 9, 2024, Plaintiffs filed the operative complaint, the First Amended Complaint (“FAC”) with the court.

14. On October 10, 2024, I emailed Mr. Sherman the following: “Lee, Since Defendants have refused to return the signed Notice and Acknowledgment of Receipt forms, service will be effectuated through other means. Defendants are responsible for any expenses incurred and we will be seeking a remedy from the Court for reimbursement. Additionally, an Amended Complaint has been filed with the Court and will be served on Defendants. As a courtesy, I've attached it in this email. - Francesca Borchardt” In my email, I also CC’ed the individual named Randy Hy (“Mr. Hy”) because Mr. Sherman had added him in his October 7, 2024 email without explaining who he was, so I presumed he was his paralegal. A true and correct copy of my October 10, 2024 email is attached hereto as “Exhibit D”. I never received a response to my email.

15. Because of the refusal to fulfill their obligation of returning the Notice and Acknowledgment forms, Defendants’ registered agents were personally served on October 16, 2024 with the following documents: (1) Initial Complaint; (2) Summons; (3) Civil Case Cover Sheet; (4) Civil Case Cover Sheet Addendum and Statement of Location; (5) Alternate Dispute Resolution Packet; (6) Notice of Case Assignment; and (7) the FAC.

16. On October 17, 2024, Proofs of Personal Service were filed and accepted by this Court for each Defendant. True and correct copies of the Proofs of Personal Service are attached hereto as “Exhibit E”.

17. Defendants failed to timely file a responsive pleading to the FAC. As such, on November 18, 2024, my fellow Plaintiffs and I requested an Entry of Default, which was subsequently granted. A true and correct copy of the Entry of Default is attached hereto as “Exhibit F”.

Service of a summons by mail of a notice of acknowledgment and receipt “is deemed complete on the date a written acknowledgment of receipt of summons is executed, if such acknowledgment thereafter is returned to the sender.”  (Code Civ. Proc., § 415.30, subd. (c).) 

Here, on September 5, 2024, Plaintiffs attempted to serve the original summons and complaint by mail via a notice of acknowledgment and receipt, which Defendants never executed and returned.  Thus, there was no valid service by mail of a notice of acknowledgment and receipt.

As such, Plaintiffs subsequently served Defendants with the summons and amended complaint by personal service on October 16, 2024.  That is the only valid and effective service.

Although the parties were in communication from September 13 through October 10 regarding the notice of acknowledgment and receipt, none of those conversations could establish Hy’s knowledge of the personal service that was not effectuated until October 16.

Therefore, Defendants have provided an attorney declaration of fault, demonstrating that Defendants’ counsel had no actual knowledge that proper service had been effectuated until December 5, and Plaintiffs have not rebutted that showing.

CONCLUSION

            For the foregoing reasons, the Court grants Defendant’s motion to set aside the entries of default and orders the entries of default against Defendants set aside.  Because the Court sets aside the entries of default, the Court denies Plaintiffs’ request for default judgment as moot.

            Further, the Court orders Defendants to respond to the FAC on or before January 31, 2025.       

            The Clerk of the Court shall provide notice of the Court’s ruling.

DATED: January 13, 2025                                                     ___________________________

Michael E. Whitaker

                                                                                          Judge of the Superior Court