Alan Neuman Productions, Inc. v. Albright

Decision Date02 March 1989
Docket NumberNo. 86-6085,86-6085
Citation862 F.2d 1388
Parties, RICO Bus.Disp.Guide 7088 ALAN NEUMAN PRODUCTIONS, INC., Plaintiff-Appellee, v. Jere ALBRIGHT, Defendant-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

Barbara J. Revak and Rufus Cook, Cook Partners, Chicago, Ill., for defendant-appellant.

Frank D. Francone, Slaff, Mosk & Rudman, Los Angeles, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before TANG, BOOCHEVER and O'SCANNLAIN, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

Alan Neuman Productions, Inc. ("ANPI") obtained judgment on default entered after Albright, having actual knowledge of the filing of the complaint and ANPI's intention to take a default, failed to respond. We affirm in part, reverse in part, and remand.

FACTS AND PROCEEDINGS

Neuman, a television producer who, through his wholly-owned corporation ANPI, also produces motion pictures, met Albright, an entrepreneur interested in participation in movie financing. Albright had previously entered into an agreement with Mueller, a Dutch financier, whereby Albright was to receive an executive producer's fee for each film financing package Albright brought to Mueller and for which Mueller issued standby letters of credit. The executive producer's fee was to be paid only if the film was actually completed.

Through Albright's negotiations and as a result of his representations, ANPI and Mueller signed a contract on September 19, 1981. In a marginal notation, that contract required that ANPI pay $92,500 to Mueller as a deposit which would be refundable should the letter of credit not be opened. Neuman did not make the deposit at the time of the execution of the agreement, but did make payment after Albright assured him by telephone and telex that the $92,500 would be returned upon Neuman's demand. Neuman demanded and Mueller refused to return the deposit.

After Mueller refused to return Neuman's deposit, Mueller's attorneys in Europe contended that Neuman had misrepresented his financing package and had breached his agreement, but they brought no action against Neuman. Neuman's attorneys wrote to Mueller and Albright advising them that Neuman intended to bring RICO claims. Albright did write to Mueller requesting that Neuman's deposit be returned, but Mueller refused Albright as he had Neuman.

Neuman's attorney filed a complaint on behalf of ANPI against Albright and Mueller and attempted to serve Albright personally while Albright was in California. The process server awaited Albright in an inside hall of an apartment building where Albright had sublet the apartment in which he had previously lived. When Albright appeared, he did not admit who he was and refused to accept the papers from the process server, who laid them at Albright's feet. Albright did advise his Chicago attorneys that service had been attempted, and those attorneys hired a California firm to check the docket for a return of service entry. ANPI's attorneys wrote to Albright confirming to him that he had been personally served and that shortly after the date of that letter the time in which Albright could answer the complaint would run; ANPI's attorneys unequivocally said that they would take a default against Albright should he not answer the complaint.

ANPI filed for and received entry of default by the court clerk against Albright.

Albright hired California attorneys who appeared before Judge Hatter and moved to vacate the entry of default, primarily on the grounds that Albright had not been served. The motion was denied.

The case was reassigned to Judge Rea who, after reconsidering the motion to set aside the default, denied that motion. Mueller was dismissed as a defendant for want of prosecution. ANPI sought entry of judgment on default. An evidentiary hearing was held to determine damages. ANPI's capacity to sue was challenged, briefed, and argued; Judge Rea entered an order finding that ANPI had capacity to sue. During the course of the hearing, Judge Rea expanded its scope by requiring that ANPI make a prima facie showing of liability. Damages for breach of contract and RICO violations were separately computed and attorney fees were awarded.

After issuing findings of fact and conclusions of law, Judge Rea ordered judgment on default in favor of ANPI and against Albright on May 23, 1986. Albright timely appealed.

ANALYSIS

The issue on appeal is whether the district court erred in its entry of judgment by default pursuant to Fed.R.Civ.P. 55(b) against Albright, who chose not to file a Fed.R.Civ.P. 60(b)(1) motion to set aside that judgment. In Madsen v. Bumb, 419 F.2d 4 (9th Cir.1969), this court dealt with the problem of an appeal from a default judgment where the district court had not been asked to set that judgment aside by treating the matter as if appellant had applied for both Rule 55(c) and 60(b) relief in the district court. Id. at 6. This treatment is consistent with the Rule 55(c) provision that "[i]f a judgment of default has been entered, [the court] may likewise set it aside in accordance with Rule 60(b)." Considering Albright's appeal similarly, the analytical framework is clear: The factual findings of the district court are reviewed for clear error and, if those findings are not clearly erroneous, the court's determination is reviewed for abuse of discretion. Meadows v. Dominican Republic, 817 F.2d 517, 521 (9th Cir.) (citing United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948) and Rodgers v. Watt, 722 F.2d 456, 460 (9th Cir.1983)(en banc)), cert. denied, --- U.S. ----, 108 S.Ct. 487, 98 L.Ed.2d 485 (1987).

1. Factual Findings

Judge Rea made 102 specific findings of fact. For purposes of this appeal, the critical findings are those that relate to Albright's conduct and statements associated with service of summons and complaint in this action.

2. On December 10, 1983, ANPI personally served the Complaint on Albright in Los Angeles, California, by personal delivery of the Complaint to Albright. No responsive pleading to the Complaint was filed on behalf of Albright.

* * *

* * *

4. On March 27, 1984, Albright filed his Motion to Quash Return of Service and Set Aside the Default. In that Motion, Albright stated under penalty of perjury that he had not been served with the Complaint.

5. Subsequently, Albright filed a declaration in which he admitted that he had, in fact, been personally served with the Complaint.

In determining whether these facts are clearly erroneous, we are directed to scrutinize them in light of the record viewed in its entirety. If there is evidence in the record to support them, and if, on the entire evidence we feel no mistake has been committed, then these facts are not clearly erroneous. Anderson v. Bessemer City, 470 U.S. 564, 573-74, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985). "A finding of fact is clearly erroneous when the reviewing court on the entire evidence is 'left with the definite and firm conviction that a mistake has been committed.' " SEC v. Rogers, 790 F.2d 1450, 1455 (9th Cir.1986)(quoting Dollar Rent A Car of Washington, Inc. v. Travelers Indem. Co., 774 F.2d 1371, 1374 (9th Cir.1985)).

The record supports Judge Rea's findings. Our conclusion that no mistake has been made is substantiated by review of the process server's affidavit, his deposition, Albright's sublessee's deposition, Albright's affidavit in support of his motion to vacate entry of default, Albright's declaration of April 25, 1984, acknowledging in vague terms that he had been approached with "papers," and correspondence between Albright and ANPI's attorneys.

We acknowledge that Albright may not have understood the technical legal requisites of personal service and thus might make the statement that he had not been served with the complaint while later he admitted that he had been served. However, "[w]here there are two permissible views of the evidence, the factfinders choice between them cannot be clearly erroneous." Anderson, 470 U.S. at 574, 105 S.Ct. at 1511 (citing United States v. Yellow Cab Co., 338 U.S. 338 342, 70 S.Ct. 177, 179, 94 L.Ed. 150 (1949)). Judge Rea's findings are not clearly erroneous.

2. Abuse of Discretion

The second prong of the Meadows' analysis of the propriety of a default judgment We have held that a default judgment will not be disturbed if (1) the defendant's culpable conduct led to the default; (2) the defendant has no meritorious defense; or (3) the plaintiff would be prejudiced if the judgment is set aside. Meadows, 817 F.2d at 521 (citing Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir.1985) and Falk v. Allen, 739 F.2d 461, 463 (9th Cir.1984)(per curiam)).

is a determination of whether its entry constituted an abuse of the district court's discretion. Clearly, the decision to enter a default judgment is discretionary. Hawaii Carpenters' Trust Funds v. Stone, 794 F.2d 508, 511-12 (9th Cir.1986); Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir.1986); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir.1980).

Essential to the resolution of this appeal is the holding "[i]f a default judgment is entered as the result of a defendant's culpable conduct, however, we need not consider whether a meritorious defense was shown, or whether the plaintiff would suffer prejudice if the judgment were set aside." Meadows, 817 F.2d at 521; Benny v. Pipes, 799 F.2d 489, 494 (9th Cir.1986), amended, 807 F.2d 1514, cert. denied, --- U.S. ----, 108 S.Ct. 198, 98 L.Ed.2d 149 (1987). Those cases have held that the defendant's conduct is culpable if he has received actual or constructive notice of the filing of the action and intentionally failed to answer. That rule, coupled with the record showing that Albright had actual notice of the filing of the complaint, as well as...

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