Case 2:11-cv-01426-GMS Document 95 Filed 06/12/12 Page 1 of 6

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

David S. Gingras, #021097 Gingras Law Office, PLLC 3941 E. Chandler Blvd., #106-243 Phoenix, AZ 85048 Tel.: (480) 668-3623 Fax: (480) 248-3196 David@GingrasLaw.com Attorney for Plaintiff Xcentric Ventures, LLC UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA XCENTRIC VENTURES, LLC, an Arizona limited liability company, Plaintiff, v. LISA JEAN BORODKIN et al., Defendants. Plaintiff Xcentric Ventures, LLC (Xcentric) respectfully submits the following Response to Defendants RAYMOND MOBREZ and ILIANA LLANERAS' (the "Mobrez Defendants") Motion to Set Aside [Entry of] Default (Doc. #94). For the reasons stated herein, the motion should be denied. I. BACKGROUND This action was commenced nearly one year ago on July 18, 2011. As reflected in Doc. # 81 (Notice of Filing Affidavits of Service) Mr. Mobrez and Ms. Llaneras were served with the Complaint and Summons on July 27, 2011 and July 29, 2011 respectively. On August 18, 2011, Mr. Mobrez and Ms. Llaneras filed a pro se "Motion for Extension of Time to Answer of Otherwise Respond to Plaintiff's Complaint" (Doc. #12) which requested a 60-day extension of time to respond. On September 2, 2011, the Court granted the motion in part (Doc. #14), giving the Mobrez Defendants until September 30, 2011 in which to file an Answer or motion.
RESPONSE TO MOTION TO SET ASIDE ENTRY OF DEFAULT

Case No.: 11-CV-1426-GMS PLAINTIFF'S RESPONSE TO DEFENDANTS' MOTION TO SET ASIDE ENTRY OF DEFAULT

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

On September 30, 2011, the Mobrez Defendants (acting through retained counsel Hartwell Harris) filed a variety of motions including a Motion to Change Venue (Doc. #17) and a Motion to Dismiss for Lack of Personal Jurisdiction (Doc. #18). The Court denied these motions by order dated March 1, 2012 (Doc. #52). Because their Rule 12 motions were denied, Fed. R. Civ. P. 12(a)(4)(A) required the Mobrez Defendants to file their Answer "within 14 days after notice of the court's action", but no Answer or other responsive pleading was ever filed. On that same dateMarch 1, 2012the Court also set a scheduling conference (Doc. #53) for April 13, 2012. However, by order dated March 26, 2012 (Doc. #58) the scheduling conference was changed to a status conference to discuss, among other things, whether the Mobrez Defendants' former counsel, Hartwell Harris, would be permitted to withdraw from representing their LLC, Asia Economic Institute. The Court's March 26th Order further directed Mr. Mobrez, Ms. Llaneras, and their former counsel, Ms. Harris, to appear at the status conference which they each subsequently did. After Ms. Harris was permitted to withdraw from the case, several weeks passed with no further participation in the case by the Mobrez Defendants. As such, on May 3, 2012, Xcentric applied for entry of default against Mr. Mobrez and Ms. Llanera (Doc. # 82). By order dated May 23, 2012, the Court entered default (Doc. #86) followed by the clerk's entry of default on the same day (Doc. #87). II. ARGUMENT Xcentric acknowledges that the disposition of claims by default is not favored and that "Rules 55(c) and 60(b) express a policy of liberality toward motions for relief from default entries and default judgments." 10A Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure 2693 (3d. ed). On the other hand, when a litigant ignores their obligations under the Rules of Civil Procedure, default is an appropriate remedy which may only be vacated upon a showing of "good cause". This analysis requires the Court to consider three separate factors: (1) whether [the party seeking to set aside the default] engaged in culpable conduct that led to the default; (2) whether 2
RESPONSE TO MOTION TO SET ASIDE ENTRY OF DEFAULT

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

[they] had [no] meritorious defense; or (3) whether reopening the default judgment would prejudice" the other party. Franchise Holding II, LLC v. Huntington Restaurants Group, Inc., 375 F.3d 922, 926 (9th Cir. 2004) (affirming Arizona district court's refusal to vacate entry of $24 million default judgment). A district court may properly refuse to vacate the entry of default if any one of these factors are present; "As these factors are disjunctive, the district court was free to deny the motion 'if any of the three factors was true.' Franchise Holding II, 375 F.3d at 926 (quoting American Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000)). Further, as the parties seeking to vacate the default, Mr. Mobrez and Ms. Llaneras bear the burden of showing that none of these factors are present. See id. a. Culpability Relief from the entry of default may be properly denied when the defaulting party has engaged in "culpable conduct" resulting in the default. In this context, "[i]f a defendant 'has received actual or constructive notice of the filing of the action and failed to answer,' its conduct is culpable." Franchise Holding II, 375 F.3d at 926 (emphasis added) (quoting Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc ., 840 F.2d 685, 690 (9th Cir. 1988)). Here, as reflected in the Affidavits of Service (Doc. #81) Mr. Mobrez and Ms. Llaneras were personally served with the Complaint and Summons nearly a year ago in July 2011. Furthermore, both Mr. Mobrez and Ms. Llaneras have filed numerous pleadings in this action which conclusively demonstrates their actual knowledge of the filing of this action. Despite this, more than three months have passed since this Court denied the Mobrez Defendants' Rule 12 motions and yet they have filed no Answer or responsive pleading of any kind. In their motion, the Mobrez Defendants appear to suggest that these events occurred through no fault of their own because at some point the post office in Los Angeles failed to properly forward mail from their previous office address. assuming this is true, this argument is insufficient for two different reasons. 3
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

First and most obviously, if the address which Mr. Mobrez and Ms. Llaneras provided to the Court in this matter was no longer valid, they were responsible for providing the Court with a new/updated address which they failed to do. Second, and much more importantly, the event which triggered Mr. Mobrez and Ms. Llaneras's duty to Answer was the Court's denial of their Rule 12 motions on March 1, 2012an event of which they were both clearly aware. Based on that denial, Rule 12(a)(4)(A) obligated them to file an Answer within 14 days, or by March 15, 2012. Of course, simultaneously with the denial of those motions, the Court also issued an order setting a scheduling conference (which was later re-designated as a status conference) for April 13, 2012. As ordered, both Mr. Mobrez and Ms. Llaneras personally participated in the April 13, 2012 status conference with their former counsel, Ms. Harris. In light of these facts, Mr. Mobrez and Ms. Llaneras cannot legitimately argue that they were unaware of the Court's denial of their Rule 12 motions on March 1st more than three months ago. Because Mr. Mobrez and Ms. Llaneras received notice of this matter and the fact that their Rule 12 motions had been denied, they were obligated to file an Answer within 14 days. Their unexcused failure to do so constitutes "culpable conduct" which, standing alone, is sufficient to warrant denial of their current motion. b. Meritorious Defense To make this The second factor which may warrant relief from the entry of default is a showing that the defendant has a meritorious defense to the claims at issue. showing, the moving party must "present the district court with specific facts that would constitute a defense." Franchise Holding II, 375 F.3d at 926 (emphasis added) (citing Madsen v. Bumb, 419 F.2d 4, 6 (9th Cir.1969)). Here, nothing in the Mobrez Defendants' motion suggests that they have any meritorious defense. As such, the motion may be denied on this ground alone. See Franchise Holding II, 375 F.3d at 926 (affirming denial of relief from default judgment where moving party failed to demonstrate existence of meritorious defense and instead "offered the district court only conclusory statements that a dispute existed.") 4
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

c.

Prejudice

In Franchise Holding II, the District Court refused to set aside a $24 million default judgment on the grounds that "any delay in judgment would allow [the defendant] to move and hide assets." The Ninth Circuit affirmed this aspect of the decision, finding that such delay would unfairly prejudice the plaintiff. The same is true here. Clearly, Mr. Mobrez and Ms. Llaneras have already changed addresses without notifying the Court (or Xcentric) of that fact, and they have repeatedly sought to delay addressing the merits of Xcentric's claims in this case for a period of nearly a year. This raises the possibility that they may be preparing to flee or dispose of assets in an effort avoid any attempts by Xcentric to collect a future default judgment. III. CONCLUSION Even assuming the post office in Los Angeles failed to forward mail to their new address, there is no question but that Mr. Mobrez and Ms. Llaneras had knowledge of this lawsuit and were aware that their Rule 12 motions were denied in early March. Although it could have sought the entry of default sooner, Xcentric waited longer than the rules required to provide Mr. Mobrez and Ms. Llaneras with an opportunity to retain new counsel or otherwise filed their Answer, neither of which occurred. As such, the Mobrez Defendants' Motion to Set Aside Default should be denied. DATED June 12, 2012. GINGRAS LAW OFFICE, PLLC /S/ David S. Gingras David S. Gingras Attorneys for Plaintiff

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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, ARIZONA 85048

CERTIFICATE OF SERVICE I hereby certify that on June 12, 2012 I electronically transmitted the attached document to the Clerks Office using the CM/ECF System for filing, and for transmittal of a Notice of Electronic Filing to the following: Raymond Mobrez Iliana Llaneras and Asia Economic Institute, LLC 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Defendants In Pro Se John S. Craiger, Esq. David E. Funkhouser III, Esq. Quarles & Brady LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 Attorney for Defendant Lisa J. Borodkin And a courtesy copy of the foregoing delivered to: HONORABLE G. MURRAY SNOW United States District Court Sandra Day OConnor U.S. Courthouse, Suite 622 401 West Washington Street, SPC 80 Phoenix, AZ 85003-215 /s/David S. Gingras

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RESPONSE TO MOTION TO SET ASIDE ENTRY OF DEFAULT