Judge: Teresa A. Beaudet, Case: 20STCV12007, Date: 2023-05-01 Tentative Ruling

Case Number: 20STCV12007    Hearing Date: May 1, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

On March 25, 2020, Plaintiffs in Interpleader Kottler & Kottler, a Professional Law Corporation; International Practice Group, Professional Corporation; and Bryan M. Garrie, a Professional Law Corporation (collectively, “Plaintiffs in Interpleader”) filed this action against a number of defendants.  

In the Complaint, Plaintiffs in Interpleader allege that “[o]n May 31, 2013…Kottler & Kottler, a Professional Law Corporation…and Defendant in Interpleader Stanley Gardner entered into a Contingency Fee Agreement for the prosecution of Defendant in Interpleader Stanley Gardner’s claims as plaintiff in the matter of Stanley Gardner; Barbara Wilson v. Nazareth Sales Furniture Inc.; Jonathan Barrales-Garcia and Everardo Salazar, filed in the Superior Court for the State of California, County of Los Angeles, Case No: BC549020 (hereinafter referred to as the ‘Gardner Legal Action’).” (Compl., ¶ 2.) “The Gardner Legal Action arose out of an automobile collision and Defendant in Interpleader Stanley Gardner was a plaintiff in the Gardner Legal Action seeking compensation for personal injuries and economic damages.” (Compl., ¶ 3.)

The Complaint alleges that “[a]fter four (4) years of litigation and two (2) mediations on April 25, 2017 and March 28, 2018, Defendant in Interpleader Stanley Gardner agreed to settled [sic] his bodily injury claims in the Gardner Legal Action for the sum of $250,000.00, which was $225,000.00 over the State Farm Insurance policy limits of $25,000 to any one person for bodily injury liability.” (Compl., ¶ 6.) Plaintiffs in Interpleader allege that they “will deposit the sum of $250,000.00 with the Superior Court for the State of California, County of Los Angeles, which is the gross settlement sum for Defendant in Interpleader Stanley Gardner’s settlement in the Gardner Legal Action, and the sum that is available to satisfy (a) Plaintiff in Interpleader Kottler & Kottler, APC’s recovery of its attorneys’ fees and costs of suit pursuant to the May 31, 2013 Contingency Fee Agreement for the prosecution of the Gardner Legal Action, (b) Plaintiff in Interpleader Kottler & Kottler, APC’s recovery of its attorneys’ fees and costs of suit incurred for the filing and prosecution of this Interpleader action, (c) Defendant in Interpleader Stanley Gardner’s recovery of reasonable net settlement proceeds from the Gardner Legal Action and (d) Defendants in Interpleader who are purportedly medical providers who claim payment for amounts billed for medical care and treatment of Defendant in Interpleader Stanley Gardner.” (Compl., ¶ 9.)

On February 18, 2021, a Judgment by Default was entered in this action against Defendant Playa Advance Urgent Care, Inc. in the amount of $2,302.26. On February 18, 2021, a Judgment by Default was entered against Defendant Silicon Beach Surgery Center Inc. in the amount of $2,302.26. On February 18, 2021, a Judgment by Default was entered against Defendant Silicone Beach Medical Center in the amount of $2,302.26. On March 11, 2021, a Judgment by Default was entered against Defendant Playa Advance Surgical Institute, LLC in the amount of $2,272.26.

On March 11, 2021, the Court issued an Order for Entry of Judgment of Interpleader and Judgment Thereon. The March 11, 2021 Order provides, inter alia, the amounts “to be paid directly from the client trust account of the Plaintiffs’ counsel” to each of the specified parties. 

In addition, on April 15, 2022, Plaintiffs in Interpleader moved for an order compelling certain defendants (including the moving defendants herein) to respond to Plaintiffs in Interpleader’s Special Interrogatories (Set One) and Requests for Production of Documents and Tangible Things (Set One) served on January 25, 2022 and February 23, 2022. Plaintiffs in Interpleader also moved for an award of sanctions and attorney’s fees in the amount of $4,972.50. On May 26, 2022, the Court issued an Order granting the motion.

The Court’s May 26, 2022 Order provides, inter alia, that “[t]he Court orders Defendants to serve complete verified responses, without objections, to Plaintiffs in Interpleader’s Special Interrogatories (Set One) and Requests for Production of Documents and Tangible Things (Set One), and to produce responsive documents to the Requests for Production of Documents and Tangible Things (Set One), within 30 days of notice of this order. The Court further orders Defendants to pay $4,972.50 to Plaintiffs in Interpleader within 30 days of notice of this order, with this amount to be allocated equally among the Defendants.” (May 26, 2022 Order at           p. 4:15-21.)

Playa Advance Surgical Institute, LLC, Playa Advance Urgent Care, Inc., Silicon Beach Surgery Center Inc., and Silicon Beach Medical Center[1] (collectively, the “Moving Defendants”) now move for an order to set aside the default judgments entered against them. Plaintiffs in Interpleader oppose.

 The Moving Defendants also move “for an order for relief from waiver of objections as well as monetary sanctions granted against the Defendant on May 26, 2022 and order for a stay of discovery pending resolution of the motion.” Plaintiffs in Interpleader oppose.

Request for Judicial Notice

On April 20, 2023, the Moving Defendants filed two requests for judicial notice in support of their motion to set aside default judgments. The Court notes that these requests were filed after the Moving Defendants’ motion to set aside default judgments was filed on March 20, 2023, and after the Moving Defendants’ reply in support of the motion was filed on April 13, 2023. The Court notes that “¿[t]he general rule of motion practice…is that new evidence is not permitted with reply papers.¿” (¿Jay v. Mahaffey¿(2013) 218 Cal.App.4th 1522, 1537¿.) Thus, the Moving Defendants’ requests for judicial notice are denied.

Motion to Set Aside Default Judgments ¿¿

Code of Civil Procedure section 473, subdivision (b)¿ provides in pertinent part:  

“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.” 

In the motion, the Moving Defendants indicate that they “did not file for relief from default judgment within the six (6) month deadline imposed by Code of Civil Procedure section 473,” and thus acknowledge that “the relief from default judgment authorized by Code of Civil Procedure section 473(b) is not available to them.” (Mot. at p. 4:3-5.) The Moving Defendants assert that the Court still has inherent authority to set aside the subject default judgments entered against them on equitable grounds. 

The Moving Defendants cite to Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981, where the California Supreme Court noted that “[a]fter six months from entry of default, a trial court may still vacate a default on equitable grounds even if statutory relief is unavailable…One ground for equitable relief is extrinsic mistake--a term broadly applied when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits.” The Rappleyea Court noted that “[w]hen a default judgment has been obtained, equitable relief may be given only in exceptional circumstances. [W]hen relief under section 473 is available, there is a strong public policy in favor of granting relief and allowing the requesting party his or her day in court. Beyond this period there is a strong public policy in favor of the finality of judgments and only in exceptional circumstances should relief be granted.” (Id. at pp. 981-982 [internal quotations omitted, emphasis in original].)

The Rappleyea Court further noted that “[a]pparently to further the foregoing policy, one appellate court has created a stringent test to qualify for equitable relief from default on the basis of extrinsic mistake. To set aside a judgment based upon extrinsic mistake one must satisfy three elements. First, the defaulted party must demonstrate that it has a meritorious case. Second[], the party seeking to set aside the default must articulate a satisfactory excuse for not presenting a defense to the original action. Last[], the moving party must demonstrate diligence in seeking to set aside the default once … discovered.” (Rappleyea v. Campbell, supra, 8 Cal.4th at p. 982 [internal quotations omitted, emphasis in original, citing to Stiles v. Wallis (1983) 147 Cal.App.3d 1143, 1147-1148.)

As to the first element, the Moving Defendants assert that they have a meritorious defense.

Specifically, Silicon Beach Surgery Center and Silicon Beach Medical Center assert that the service of the summons and Complaint on them was invalid. Pursuant to Code of Civil Procedure section 415.95, subdivision (a), “[a] summons may be served on a business organization, form unknown, by leaving a copy of the summons and complaint during usual office hours with the person who is apparently in charge of the office of that business organization, and by thereafter mailing a copy of the summons and complaint by first-class mail, postage prepaid, to the person to be served at the place where a copy of the summons and complaint was left. Service of a summons in this manner is deemed complete on the 10th day after the mailing.” Pursuant to Code of Civil Procedure section 415.95, subdivision (b), “[s]ervice of a summons pursuant to this section is not valid for a corporation with a registered agent for service of process listed with the Secretary of State.”

Silicon Beach Surgery Center indicates that its agent for service of process listed with the California Secretary of State is Nicole Brown, 630 ½ N. Plymouth Blvd, Los Angeles, CA 90004. (Uzun Decl., ¶ 5, Ex. B-1.) Plaintiffs in Interpleader filed a proof of service on July 8, 2020 indicating that Silicon Beach Surgery Center was served with the summons and Complaint in this action by personal service on July 8, 2020. The proof of service indicates that the Agent for Service is “Chris S. Takahashi” and that the address where the party was served is “4030 Spencer St Ste 101 Torrance, CA 90503-2456.” Silicon Beach Surgery Center thus asserts that the summons and Complaint was served on the wrong person at the wrong address, and that the default judgment was thus based on defective service.

In addition, Silicon Beach Medical Center indicates that its agent for service of process listed with the California Secretary of State is Gladys Happer, 5450 Lincoln Blvd., Los Angeles, CA 90094. (Uzun Decl., ¶ 5, Ex. C-1.) Plaintiffs in Interpleader filed a proof of service on July 8, 2020 indicating that “Silicone Beach Medical Center” was served with the summons and Complaint in this action by substituted service on June 29, 2020. The proof of service indicates that the Agent for Service is “Chris S. Takahashi” and that the address where the party was served is “4030 Spencer St Ste 101 Torrance, CA 90503-2456.” Silicon Beach Medical Center thus asserts that the summons and Complaint was served on the wrong person at the wrong address, and that the default judgment was thus based on defective service. In the opposition, Plaintiffs in Interpleader do not dispute that service of the summons and Complaint on Silicon Beach Surgery Center and Silicon Beach Medical Center was invalid. Rather, they cite to allegations of the Complaint in support of the assertion that “Defendants in Interpleader” do not have a meritorious case. 

The Moving Defendants do not assert in the motion that service of the summons and Complaint on Playa Advance Surgical Institute, LLC or Playa Advance Urgent Care, Inc. was invalid. However, the Moving Defendants argue that “each of the Defendants has [sic] meritorious defense to this action.” (Mot. at p. 5:21.) In support of this assertion, the Moving Defendants cite to paragraph 4 of their counsel’s declaration, which states, “[i]t is not disputed that medical treatments and services were provided to their patient Stanley Garner. There is no validity of contract issue between the Defendants and the patient Garner. Defendants and Garner executed a contract in which Garner agrees to bear personal responsibility for medical bills. It is not disputed that the medical bills at issue have not been fully paid for the treatments/services provided by the defendants to Garner.” (Agopoglu Decl., ¶ 4.) In the opposition, Plaintiffs in Interpleader assert that “Defendants in Interpleader do not have a valid lien,” and that “[h]ad Defendants in Interpleader appeared in the interpleader action, the Court would have been asked to not award any of the interplead funds to Defendants in Interpleader because the medical expenses were unreasonable…” (Opp’n at p. 7:7; 7:18-21.) In support of this assertion, Plaintiffs in Interpleader cite to allegations of the Complaint. (See Opp’n at p. 7:18-8:10.) 

As to the second element, the Moving Defendants must “articulate a satisfactory excuse for not presenting a defense to the original action.” (Rappleyea v. Campbell, supra, 8 Cal.4th at p. 982.) The Moving Defendants asserts that their satisfactory excuse for not presenting a defense is the “positive misconduct” of their attorney.

The Moving Defendants cite to People v. One Parcel of Land (1991) 235 Cal.App.3d 579, 584, where the Court of Appeal noted that “[f]or attorney misconduct to support equitable relief from a default judgment due to extrinsic mistake, there must have been neglect of an extreme degree amounting to positive misconduct by counsel, rather than mere inexcusable neglect, sufficient to obliterate the attorney-client relationship and thereby preclude any imputation of counsel’s neglect to the client. Positive misconduct is found where there is a total failure on the part of counsel to represent his client.” (Internal quotations and citations omitted.) The One Parcel of Land Court found that “[a]ttorney Oliver’s…absolute failure to oppose the default judgment motion, as well as his apparent failure to return any of Wallace’s telephone calls, suggests positive misconduct through a total failure to represent his client.” (Ibid.)  

Here, the Moving Defendants provide the Declaration of Guven Uzun in support of the motion, who is a member of the Moving Defendants. (Uzun Decl., ¶ 1.) Mr. Uzun states that in August, 2020, he learned that Plaintiffs in Interpleader were trying to obtain a default against the Moving Defendants, and that he contacted attorney Gregory Byberg to schedule a meeting. (Uzun Decl., ¶¶ 4-5.) On September 1, 2020, Mr. Uzun hired Mr. Byberg. (Uzun Decl., ¶ 5.)   Mr. Uzun states that Mr. Byberg “said he would file an answer to the Complaint immediately to avoid the need to work to set aside a default,” and that Mr. Byberg “actually prepared an Answer [t]o the Complaint-in-interpleader on behalf of the defendants, but he never filed.” (Ibid.)

In September 2022, Mr. Uzun “asked for a status on this case from one of the Plaintiff’s attorneys,” and “was told that a default was already entered against each of the Defendants.” (Uzun Decl., ¶ 6.) Mr. Uzun called Mr. Byberg for an explanation, who promised Mr. Uzun that “he would file a motion to vacate the default judgments on September 14, 2022.” (Uzun Decl.,   ¶ 6.) Mr. Uzun then hired attorney Berc Agopoglu to represent defendants. (Uzun Decl., ¶ 7.) Mr. Uzun discovered through Mr. Agopoglu “that there were still no pleadings filed to vacate the defaults.” (Uzun Decl., ¶ 7.)

Plaintiffs in Interpleader assert that the Moving Defendants do not have a satisfactory excuse for not presenting a defense to the action. Plaintiffs in Interpleader assert that defendants were on notice of the defaults since 2020. Plaintiffs in Interpleader indicate that “[o]n September 14, 2020, Gregory Byberg, Esq. of Law Offices of Gregory B. Byberg, a licensed California attorney (SBN 162874) emailed counsel for Plaintiffs in Interpleader stating that he represented each of the Defendants in Interpleader who are moving parties herein and acknowledged he was aware of the requests for entry of default.” (Marrero Decl., ¶ 5.) But as set forth above, the Moving Defendants indicate that although Mr. Byberg promised Mr. Uzun that “he would file a motion to vacate the default judgments on September 14, 2022,” no pleadings were filed “to vacate the defaults.” (Uzun Decl., ¶¶ 6-7.) In addition, Mr. Uzun states that Mr. Byberg “prepared an Answer [t]o the Complaint-in-interpleader on behalf of the defendants, but he never filed…” (Uzun Decl., ¶ 5.)

As to the third element, the Moving Defendants must “demonstrate diligence in seeking to set aside the default once … discovered.” (Rappleyea v. Campbell, supra, 8 Cal.4th at p. 982.) As discussed, Mr. Uzun states that “[i]n September 2022, I asked for a status on this case from one of the Plaintiff’s attorneys…I was told that a default was already entered against each of the Defendants. I was so shocked. I called [Byberg] for explanation. He promised me again he would file a motion to vacate the default judgments on September 14, 2022.” (Uzun Decl., ¶ 6, Ex. E.) Mr. Uzun then discovered through Mr. Agopoglu that “there were still no pleadings filed to vacate the defaults.” (Uzun Decl., ¶ 7.) Mr. Agopoglu was retained by Mr. Uzun on or about October 26, 2022. (Agopoglu Decl., ¶ 5.) Mr. Agopoglu asserts that he was “diligent in filing this motion after [he] received the entire UZUN’s [sic] file from BYBERG’s on December 21, 2022.” (Agopoglu Decl., ¶ 6.)

In the opposition, Plaintiffs in Interpleader assert that defendants in interpleader did not act diligently to set aside the default, because “[t]he important point is that counsel for the Defendants in Interpleader had notice of the request for entry of defaults, before default judgments were even obtained.” (Opp’n at p. 8:16-17.)

Plaintiffs in Interpleader also assert that setting aside the default judgment would prejudice them. In Rappleyea v. Campbell (1994) 8 Cal.4th 975, 983-984, the California Supreme Court noted that “[t]he greater the prejudice to the responding party, the more likely it is that the court will determine that equitable defenses such as laches or estoppel apply to the request to vacate a valid judgment. Of the three items a defendant must show to win equitable relief from default, diligence is the most inextricably intertwined with prejudice. If heightened prejudice strengthens the burden of proving diligence, so must reduced prejudice weaken it. Under that view, and given this record, we believe defendants have sufficiently shown diligence. Prejudice to a plaintiff is obviously less if judgment has not been entered when a defendant seeks equitable relief.” (Internal quotations and citations omitted.) In addition, in Orange Empire Nat'l Bank v. Kirk (1968) 259 Cal.App.2d 347, 353, cited by the Moving Defendants, the Court of Appeal noted that “where a client is unknowingly deprived of effective representation by counsel’s failure to serve process, to appear at the pretrial conference, to communicate with the court, client, and other counsel, and the action is dismissed by reason of the attorney’s misrepresentation, the client will not be charged with responsibility for the misconduct of nominal counsel of record, providing the client acts with due diligence in moving for relief after discovery of the attorney’s neglect, and the opposing party’s rights will not be prejudiced nor suffer injustice as a result of the granting of relief.” (Emphasis added.)

Plaintiffs in Interpleader assert that setting aside the default judgment “would result in extreme prejudice to Plaintiffs in Interpleader and all other defendants in interpleader who timely appeared in the action because all of the interplead funds have been distributed to the parties that appeared and reversing the court’s judgment at this point is legally and practically impossible.” (Opp’n at p. 2:23-26.) As set forth above, on March 11, 2021, over two years ago, the Court issued an Order for Entry of Judgment of Interpleader and Judgment Thereon in this action, setting forth, inter alia, the amounts to be paid directly from the client trust account of Plaintiffs’ counsel to each of the specified parties. Plaintiffs in Interpleader indicate that “the interplead funds have been released, as ordered by this Court on March 11, 2021, notice of which was also served on Defendants in Interpleader.” (Opp’n at pp. 3:21-22.) Plaintiffs in Interpleader note that “[i]f this Court were to grant the motion by Defendants in Interpleader, the Judgment on Interpleader that resolved the entire action would have to be undone and all the parties would have to return the proceeds distributed.” (Opp’n at p. 4:17-19.) The Court agrees with Plaintiffs in Interpleader that setting aside the default judgments would result in extreme prejudice to Plaintiffs in Interpleader and the other defendants who timely appeared in the action, for the reasons noted by Plaintiffs in Interpleader. In addition, as set forth above, “[w]hen a default judgment has been obtained, equitable relief may be given only in exceptional circumstances.” (Rappleyea v. Campbell, supra, 8 Cal.4th at p. 981 [emphasis in original].) 

Lastly, Plaintiffs in Interpleader assert that “[c]ounsel prosecuting an interpleader action is entitled to reasonable attorneys’ fees and costs. Cal. Code Civ. Proc. § 386.6. For the matters raised by the defaulted Defendants in Interpleader, Plaintiffs in Interpleader incurred attorneys’ fees as detailed in the Marrero Declaration ¶ 10, filed concurrently herewith.” (Opp’n at p. 8:22-25.) Code of Civil Procedure section 386.6, subdivision (a) provides that “[a] party to an action who follows the procedure set forth in Section 386 or 386.5 may insert in his motion, petition, complaint, or cross complaint a request for allowance of his costs and reasonable attorney fees incurred in such action. In ordering the discharge of such party, the court may, in its discretion, award such party his costs and reasonable attorney fees from the amount in dispute which has been deposited with the court. At the time of final judgment in the action the court may make such further provision for assumption of such costs and attorney fees by one or more of the adverse claimants as may appear proper.”  

The Court notes that in Southern California Gas Co. v. Flannery (2016) 5 Cal.App.5th 476, 486, the Court of Appeal found that “[s]ection 386.6, subdivision (a), gives the trial court authority to award attorney fees to the Gas Co. for fees and costs incurred not only to initiate the Interpleader Case and obtain discharge, but also to defend against subsequent motions, writ petitions, and appeals attacking the validity of the interpleader complaint and discharge order.” In addition, in their reply, the Moving Defendants do not dispute Plaintiffs in Interpleader’s request for sanctions. The Court finds that the requested amount of $6,300.00 in sanctions is reasonable. (Marrero Decl., ¶ 10.)

Motion for Relief from Waiver of Objections and Monetary Sanctions

As set forth above, the Moving Defendants also move for “an order for relief from waiver of objections as well as monetary sanctions granted against the Defendant on May 26, 2022 and order for a stay of discovery pending resolution of the motion.” (Mot. at p. 2:6-8.)

The Court received a courtesy copy of only the Reply Brief in support of the Motion for Relief. The Court will set a new date for the hearing on the Motion for Relief so the parties can deliver the requisite courtesy copies of the moving and opposing papers to Dept. 50 prior to the hearing. The Court also orders the parties to meet and confer via telephone to see if they cannot resolve the remaining issues. Counsel for Moving Defendants is ordered to call counsel for Plaintiffs in interpleader by the close of business tomorrow to arrange a time to meet and confer within 5 business days of this Order.

Conclusion

Based on the foregoing, the Moving Defendants’ motion to set aside default judgments is denied. 

The Court grants Plaintiffs in Interpleader’s request for monetary sanctions and orders the Moving Defendants to pay $6,300.00 to Plaintiffs in Interpleader within 30 days of notice of this Order.

Moving Defendants’ motion for order granting relief from waiver of objections will be continued to _____________.  The courtesy copies discussed above must be delivered to Dept. 50 at least 5 court days prior to the hearing. The parties also must comply with the Court’s order to meet and confer as set forth above.

Plaintiffs in Interpleader are to provide notice of this Order.

DATED:  May 1, 2023                                   ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court