Brad Hall & Assocs. v. Elkotb
| Decision Date | 09 March 2023 |
| Docket Number | CV-22-00155-TUC-RM |
| Court | U.S. District Court — District of Arizona |
| Parties | Brad Hall & Associates Incorporated, Plaintiff, v. Mohamed Elkotb, et al., Defendants. |
Pending before the Court is Defendants Mohamed Elkotb (“Elkotb”) and Tucson Chevron Gas, LLC's (“Tucson Chevron”) (collectively “Defendants”) Motion to Set Aside Default Judgment. (Doc. 37.) Plaintiff Brad Hall & Associates Incorporated (“Plaintiff” or “BHA”) responded (Doc. 41) and Defendants replied (Doc. 44). For the following reasons, the Motion will be denied.
On September 26, 2017, Tucson Chevron entered into a Dealer Agreement with Senergy Petroleum, LLC (“Senergy”), pursuant to which Tucson Chevron agreed to purchase, exclusively from Senergy, gasoline to be sold and dispensed from Tucson Chevron's gas station located at 1570 W. Grant. Rd., Tucson, Arizona. (Doc. 17 at 1-2; Doc. 37 at 3.) The Dealer Agreement contained terms stating that Tucson Chevron would maintain gasoline brand names and trademarks at the gas station as directed by Senergy. (Doc. 37 at 3.) On September 29, 2017, Defendant Elkotb entered into a Guaranty whereby he agreed to pay Senergy any money owed to it by Tucson Chevron. (Doc. 17 at 1-2; Doc. 37 at 3.)
On March 30, 2020, Senergy assigned its interests in the Dealer Agreement to Plaintiff. (Doc 1 at 2; Doc. 37 at 4.)
Plaintiff filed its Complaint in this action on March 31, 2022, alleging that Defendants were responsible for paying Plaintiff money due under the Dealer Agreement upon Tucson Chevron's termination of the Dealer Agreement on January 28, 2022. (Doc. 1; Doc. 17 at 2; Doc. 16-1 at 5 n. 3.) Service was executed on April 28, 2022 (Docs. 12, 13), but Defendants did not answer or otherwise respond to the Complaint. On June 10, 2022, Plaintiff filed an Application for Entry of Default (Doc. 14) and the Clerk of Court entered default on June 14, 2022 (Doc. 15). On June 15, 2022, Plaintiff moved for default judgment. (Doc. 16.) On July 1, 2022, the Court entered default judgment in favor of Plaintiff and against Defendants in the amount of $237,221.53. (Doc. 17.) On August 3, 2022, the Court granted Plaintiff's Motion for Attorneys' Fees and awarded Plaintiff attorneys' fees and taxable costs. (Doc. 22.) On September 2, 2022, the Court entered an Order (“Charging Order”) granting in part and denying in part Plaintiff's Application for Order Charging Limited Liability Companies with Payment of Judgment. (Doc. 31.) Plaintiff also filed several applications for writs of garnishment, which then issued. (Docs. 26, 28, 30, 35.)
On September 28, 2022, defense counsel filed a Notice of Appearance. (Doc. 36.) On September 30, 2022, Defendants filed the pending Motion to Set Aside, along with requests to stay the Charging Order and Writs of Garnishment. (Docs. 37, 38, 39.) The Court granted Defendants' requests to stay the Charging Order and Writs of Garnishment and took the Motion to Set Aside under advisement. (Doc. 47.)
Federal Rule of Civil Procedure 60(b) allows for relief from judgment in certain circumstances and provides, in relevant part, that a party may be relieved from a final judgment, order, or proceeding for “mistake, inadvertence, surprise, or excusable neglect.” Fed.R.Civ.P. 60(b)(1); see also Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984) (per curiam). “Rule 60(b) is remedial in nature and therefore must be liberally applied.” Falk, 739 F.2d at 463; see also Hawaii Carpenters' Tr. Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986) (“Rule 60(b) grounds are liberally interpreted when used on a motion for relief from an entry of default.”)
In evaluating a Rule 60(b) motion to reopen a default judgment, courts consider three factors: “(1) whether the plaintiff will be prejudiced, (2) whether the defendant has [no] meritorious defense, and (3) whether culpable conduct of the defendant led to the default.” Falk, 739 F.2d at 463. “[T]his tripartite test is disjunctive,” meaning a district court may deny a Rule 60(b) motion “if any of the three factors [i]s true.” Am. Ass n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000), as amended on denial of reh 'g (Nov. 1, 2000). Defendants bear the burden of demonstrating that the three factors favor setting aside the default judgment. Franchise Holding II, LLC. v. Huntington Restaurants Grp., Inc., 375 F.3d 922, 926 (9th Cir. 2004).
“[J]udgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits.” Falk, 739 F.2d at 463. When applying the Falk factors, courts must keep in mind that “default judgments are the exception, not the norm, and should be viewed with great suspicion.” United States v. Aguilar, 782 F.3d 1101, 1106 (9th Cir. 2015). However, so long as a court faithfully applies the Falk factors, it need not “articulate why a particular case presents ‘extreme circumstances.'” Id.
In their Motion to Set Aside Default Judgment, Defendants aver that Senergy did not obtain Defendants' consent to assign the Dealer Agreement to Plaintiff. (Doc. 37 at 4.) Defendants further aver that, between approximately June 1, 2021 and October 21, 2022, the gas station's credit card machines were hacked and malfunctioned, resulting in a few hundred dollars being stolen per day. (Id.) Tucson Chevron sought to purchase new gas dispensers to address this issue, but delivery of the machines was delayed due to COVID-19. (Id.) Defendants aver that Plaintiff then made a “unilateral decision” to “unbrand” Tucson Chevron, refused to sell Tucson Chevron motor fuel, and told Tucson Chevron that it had to remove Chevron signage from the gas station. (Id.) Defendants state, however, that Plaintiff did not terminate the Dealer Agreement but instead offered to sell Tucson Chevron “off-brand gas” at wholesale prices, a deal to which Tucson Chevron agreed. (Id.) Defendants state that they discovered Plaintiff was not providing the off-brand gas at wholesale prices, and when the higher price prevented Tucson Chevron from competing with nearby gas stations, Defendants refused to purchase the off-brand gas. (Id.) Defendants state that Plaintiff then unilaterally terminated the Dealer Agreement on January 28, 2022. (Id.)
Defendants also aver that, after Elkotb received the Complaint in this action, he called Plaintiff's attorney, Taylor Burgoon of Fennemore Craig, P.C., on May 5, 2022, and left a voicemail message. (Id. at 5.) Ms. Burgoon returned Elkotb's call on May 17, 2022. (Id.) During that call, Elkotb informed Burgoon that Defendants would not accept Plaintiff's settlement offer and that Defendants still needed to retain an attorney to answer the Complaint. (Id.) According to Defendants, Burgoon indicated that she “would wait” for a response from Defendants' attorney. (Id.) Based on this conversation, Elkotb believed that Burgoon had “granted” Defendants an “open extension” to retain an attorney and file an answer to the Complaint. (Id.) Defendants aver that they were “surprised” to learn that a default judgment had been entered against them, Plaintiff never advised them that the “open extension” was revoked, and Plaintiff never served Defendants with copies of its Application for Entry of Default, its Motion for Default Judgment, its Motion for Attorneys' Fees and Costs, or any of the Court's Orders, despite knowing Defendants' contact information. (Id. at 5-6.)
Plaintiff alleges that Defendants, not Plaintiff, terminated the Dealer Agreement, and Plaintiff supports that allegation with multiple letters from BHA and Chevron to Defendants regarding Defendants' alleged failure to comply with Chevron policies and the terms of the Dealer Agreement. A letter from BHA to Defendants, dated August 24, 2021, informs Defendants that Plaintiff believed Defendants had violated their obligations pursuant to the Dealer Agreement, had therefore breached the Agreement, were jointly and severally liable for debts incurred, and owed BHA a total sum of $218,980.62. (Doc. 41-1 at 3-4.) That letter informs Defendants that Plaintiff would exercise its rights pursuant to the Dealer Agreement, including filing a lawsuit, to collect the balance due. (Id.) A letter from Chevron dated December 15, 2021, informs Defendants that Chevron intended to terminate the brand authorization for Tucson Chevron if it failed to install compliant gas dispensers within 90 days. (Id. at 5.) A letter from BHA dated January 28, 2022 “acknowledge[s] Tucson Chevron's termination of the Dealer Agreement”[1] and states that BHA consents to termination of the Agreement. (Id. at 6-8.) The letter states that Tucson Chevron terminated the Agreement by selling unbranded fuel, removing Chevron imaging from its gas station, removing itself from the Chevron credit card network, and failing to comply with Chevron's retail brand standards, thereby “unilaterally abandoning]” its Chevron franchise and terminating the Agreement. (Id. at 6.) The letter states that, notwithstanding the termination, BHA was willing to continue providing Chevron products and Chevron was willing to allow Tucson Chevron to continue using its brand. (Id. at 7.) The letter informs Defendants of the balance owed and that Plaintiff will exercise its rights, including filing a lawsuit, to collect the balance due. (Id. at 8.) Lastly, a letter from Chevron dated January 31, 2022, informs Defendants that they must completely remove Chevron's insignia and images from the gas station premises. (Id. at 9.)
Plaintiff also provides a declaration by Taylor Burgoon stating that Elkotb never asked for an extension of the answer deadline and that Burgoon never offered or...
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