MICHAEL ZWEBNER, Plaintiff, v. JOHN DOES ANONYMOUS FOUNDATION, INC., a corporation, and Does 1 through 100, Defendants.

No. CV-00-1322-HUUnited States District Court, D. Oregon.
February 28, 2001

Renee E. Rothauge BULLIVANT HOUSER BAILEY Portland, Oregon Attorney for Plaintiff.

George P. Fisher GEORGE P. FISHER, ATTORNEY AT LAW Portland, Oregon Attorney for Defendant John Does Anonymous Foundation, Inc.

OPINION ORDER
DENNIS JAMES HUBEL, Magistrate Judge:

Plaintiff Michael Zwebner brings this tort action against defendants John Does Anonymous Foundation, Inc. (JDAF), and Does 1 through 100. Plaintiff alleges that the JDAF, which operates and maintains an internet bulletin board website called “JohnDoes.org,” receives material from users and publishes it on the website, allowing it to be transmitted to computers around the world. Plaintiff contends that defamatory material about him has been published via this website and that he has been harmed from such action. Plaintiff brings claims for defamation, intentional infliction of emotional distress, and false light invasion of privacy. He also seeks injunctive relief.

Presently, the JDAF moves to set aside an order of default. Additionally, plaintiff moves to strike an Answer filed by Les French, a director of the JDAF, and French moves to amend his Answer. For the reasons explained below, I deny the motion to set aside the default order, I deny plaintiff’s motion to strike

French’s Answer, and I grant French’s motion to amend his Answer.

BACKGROUND
Plaintiff filed the Complaint in this case on September 26, 2000. At the same time, plaintiff filed an emergency motion to preserve evidence. Judge King heard the argument on the motion on September 29, 2000. Plaintiff was represented by counsel. The JDAF had not yet obtained counsel, but French and the JDAF’s registered agent Jim Martin, were present for the hearing.

During the hearing, French made certain objections to the proposed motion. In addressing those objections, Judge King offered to seal any order on the motion and suggested that the order to preserve evidence be reciprocal, applying to both plaintiff and defendants. French and plaintiff agreed to these provisions.

At the conclusion of the hearing, Judge King orally issued an order, effective the day of the hearing, and ordered that the order be under seal. He directed plaintiff to prepare a revised form of order, submit it to French and then send it to the Court for signature. For reasons unknown to me, an order drafted by French, and not by plaintiff, was received by Judge King’s chambers on October 5, 2000. This was the order Judge King signed. It was filed as a sealed order on October 10, 2000.

Finally, immediately before the hearing recessed, plaintiff’s counsel noted for the record her objection to the JDAF being represented by French and Martin, both non-attorneys. Her understanding, confirmed on the record by French, was that the JDAF was in the process of obtaining counsel.

On October 24, 2000, French filed an Answer. Although he is not a named defendant, he believes he is one of the John Doe defendants specifically described in paragraph 19 of the Complaint as “InternetZorro” and thus, he voluntarily appeared to defend himself. In his Answer, French admits he is InternetZorro as described in the Complaint. Plaintiff moves to strike the Answer arguing that French cannot insert himself into the case without plaintiff substituting him for one of the John Doe defendants.

In the meantime, the JDAF had not yet answered the complaint. On October 26, 2000, plaintiff moved for an order of default against the JDAF based on the JDAF’s failure to answer or otherwise defend. I granted the motion, signing the order on November 30, 2000. The order was filed on December 4, 2000. Plaintiff filed the certificates of service for the motion for an order of default which show service on French and Martin.[1] Nonetheless, the JDAF made no appearance in the more than one month that elapsed between the filing of the motion for order of default and the filing of the order of default.

Plaintiff then moved for entry of default judgment on January 12, 2001. A prima facie hearing on the motion was scheduled for January 31, 2001. On January 26, 2001, counsel for the JDAF filed a notice of appearance. Three days later, and only two days before the prima facie hearing on the default judgment motion, the JDAF moved to set aside the order of default. Between December 4, 2000, when the order of default was filed, and January 26, 2001, almost eight weeks later, the JDAF had still made no appearance in the case. Upon receipt of the JDAF’s motion, the hearing on the motion for judgment based upon the default order, was postponed until resolution of the motion to set aside the order of default.

DISCUSSION
I. Plaintiff’s Motion to Strike Answer

As indicated above, plaintiff names John Does 1 through 100 as defendants. Within the body of the Complaint, one particular John Does is identified as “InternetZorro.” Compl. at ¶ 19. Plaintiff alleges that InternetZorro published numerous false and defamatory statements about plaintiff. Id. Exhibit A to the Complaint is the basis of the allegations and claims at issue in the case. The Exhibit shows that it was posted on the website by InternetZorro. Additionally, plaintiff alleges that all defendants, in the plural, not just the JDAF, performed the actions constituting the individual claims. See Compl. at ¶¶ 27-30, 32-35, 37-43, 45, 48. French tenders an affidavit in which he admits that he is the person who uses the online identity or alias of InternetZorro. French Affid. at ¶ 1. He also admits that he is the author and publisher of Exhibit A to plaintiff’s Complaint. Id. at ¶ 2. Plaintiff’s supplemental response in support of the motion indicates that there may be a factual dispute about whether French is the InternetZorro referred to in the Complaint, but that issue is not ripe for decision at this time.

Plaintiff argues that based on Federal Rules of Civil Procedure 5, 7, 10, and 12, it is plaintiff’s prerogative to decide who he will sue and name in the Complaint, and that until plaintiff moves to substitute French as one of the John Does, French cannot voluntarily insert himself into the case. Plaintiff acknowledges that a defendant in an action may make a voluntary appearance without having been served with the summons and complaint, see Jackson v. Hayakawa, 682 F.2d 1344, 1347 (9th Cir. 1982), but plaintiff contends that such a defendant must be named by plaintiff to do so. Plaintiff cites no authority for the requirement he asserts.

Neither the parties, nor I, have found any cases on the issue faced here: when plaintiff names a John Doe as a defendant, then describes that John Doe in the body of the Complaint in such a way as to implicate that particular John Doe’s personal conduct, and indicates that all defendants are liable for these acts under a variety of theories, can an individual who admits to being that John Doe described in the Complaint and who admits committing the acts alleged in the Complaint, voluntarily appear by filing an Answer? Without controlling caselaw to the contrary, I conclude that the appropriate answer to the question is yes, the individual may voluntarily appear.[2]

When plaintiff identified one of the John Does as InternetZorro, alleged that InternetZorro himself published numerous false and defamatory statements about plaintiff, and alleged that all defendants committed actions constituting the individual claims, plaintiff effectively named InternetZorro as a defendant. With French asserting that he is InternetZorro, there is no basis for striking his Answer any more than if he voluntarily appeared and filed an answer to a complaint naming him as Les French. See Nagle v. Lee, 807 F.2d 435, 440 (9th Cir. 1987) (in addressing whether previously dismissed suit against John Doe defendants was res judicata against subsequent suit naming individual defendants by their true names, the court noted that “the only question with respect to individuals fictitiously named is whether the summons and complaint or other notice of the proceedings is a reasonable apprisal that the action concerns him.”) (quoting Restatement (Second) of Judgments § 34(3) cmt. d (1982)). I see no meaningful distinction between plaintiff naming a defendant and describing a defendant with particularity as has occurred here.

II. French’s Motion to Amend Answer

French moves to amend his original Answer and Affirmative Defenses. In the proposed Amended Answer, he asserts the same fourteen affirmative defenses as in his original Answer. He also adds counterclaims against plaintiff for breach of contract, defamation, and abuse of process. Additionally, he asserts a third party claim of defamation against Mark O. Van Wagoner and John Oertel, whom he asserts are business associates of plaintiff’s. He also states that Van Wagoner is an attorney.

Under Rule 15(a), leave to amend “shall be freely given when justice so requires.” The court should apply the rule’s “policy of favoring amendments with extreme liberality.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987) (internal quotation omitted). In determining whether to grant a motion to amend, the court should consider bad faith, undue delay, prejudice to the opposing party, futility of amendment, and prior amendments, if any. Sisseton-Wahpeton Sioux Tribe v. United States, 90 F.3d 351, 355-56 (9th Cir. 1996). Delay, by itself, will not justify denying leave to amend. DCD Programs, 833 F.2d at 186.

In its written submissions, plaintiff opposes the motion to amend only on the ground that French is not a defendant in the case. At oral argument on the motion, plaintiff raised several futility arguments, including failure to state a claim and lack of personal jurisdiction. However, as these were not raised initially by plaintiff, they were not fully briefed and I decline to consider them at this point.[3]

Because I conclude that French is a proper defendant in the case, it is appropriate to allow his motion to amend his Answer and Affirmative Defenses.[4]

III. The JDAF’s Motion to Set Aside Order of Default

Under the applicable rule, “[f]or good cause shown the court may set aside an entry of default[.]” Fed.R.Civ.P. 55(c). Generally, “[t]he court’s discretion is especially broad where, as here, it is entry of default that is being set aside, rather than a default judgment.” O’Connor v. Nevada, 27 F.3d 357, 364 (9th Cir. 1994) (internal quotation omitted).

Unlike a default judgment, setting aside an entry of default does not require consideration of the grounds specified in Rule 60(b).[5]
Fed.R.Civ.P. 55(c). As explained in a 1986 case,”[t]he different treatment of default entry and judgment by Rule 55(c) frees a court considering a motion to set aside a default entry from the restraint of Rule 60(b) and entrusts determination to the discretion of the court.” Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 512 (9th Cir. 1986). “As a practical matter, however, when considering a motion to set aside a default entry, the parallels between granting relief from a default entry and a default judgment encourage utilizing the list of grounds for relief provided in Rule 60(b), including considering whether a defendant has a meritorious defense.” Id. “These Rule 60(b) grounds are liberally interpreted when used on a motion for relief from an entry of default.” Id.

For Rule 60(b) motions, the court’s discretion is guided by three policy considerations. In re Hammer, 940 F.2d 524, 525 (9th Cir. 1991). First, since Rule 60(b) is remedial in nature, it must be liberally construed. Id. Second, default judgments are generally disfavored and whenever reasonably possible, cases should be decided upon their merits. Id. “Third, where a defendant seeks timely relief from the judgment and has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment.” Id.

In the Ninth Circuit, a district court has discretion to deny a Rule 60(b) motion to vacate a default judgment, and hence, the discretion to deny a Rule 55(c) motion to set aside an entry of default, if (1) plaintiff would be prejudiced if the judgment is set aside, (2) defendant has no meritorious defense, or (3) defendant’s culpable conduct led to the default. Id. at 525-26. Because the “tripartite test is disjunctive[,]” the satisfaction of any one of the three criteria will support the denial of a motion to set aside a default judgment or the entry of default. Id. at 526. Thus, a “trial court’s denial of a motion to vacate a default judgment will be affirmed if the defendant’s own culpable conduct prompted the default.” Id.

“A party’s conduct is culpable if he has received actual or constructive notice of the filing of the action and failed to answer the complaint.” Id.; see also Meadows v. Dominican Republic, 817 F.2d 517, 521 (9th Cir. 1987) (holding conduct is culpable if defendant receives actual or constructive notice of the filing of the action, but fails to answer). The district court need not consider a “meritorious defense” argument if culpable conduct is shown. Meadows, 817 F.2d at 521.

If the order of default entered on December 4, 2000, was appropriate under Rule 55(a), the issue is whether the JDAF has shown good cause for its failure to plead or otherwise defend before the default was entered. The JDAF did not file any pleading at any time before the default order. See Fed.R.Civ.P. 7(a) (listing allowable pleadings as complaint, answer, reply to a counterclaim, answer to a cross-claim, third-party complaint, and a third-party answer).

Although the JDAF, through its director French and registered agent Martin, appeared at the September 29, 2000 hearing on the emergency motion to preserve evidence before Judge King, such appearance does not meet the “otherwise defend” standard in Rule 55(a). Rashidi v. Albright, 818 F. Supp. 1354, 1355-56 (D.Nev. 1993) (“failure to `otherwise defend’ presumes the absence of some affirmative action on the part of a defendant which would operate as bar to the satisfaction of the moving party’s claim.” In context, “otherwise defend” indicates “challenges to matters such as service, venue and the sufficiency of the complaint[.]”), aff’d, 39 F.3d 1188 (9th Cir. 1994). Because appearing at the hearing on the motion to preserve evidence before Judge King was not an affirmative action, such as a challenge to venue, service, or the sufficiency of the complaint, which would bar the satisfaction of plaintiff’s claim, it was not “otherwise defending” as required in Rule 55(a).[6] Accordingly, the entry of default on December 4, 2000, was consistent with Rule 55(a).

The JDAF argues that its lack of counsel and confusion over whether French or Martin could represent the corporation show good cause for its failure to plead or otherwise defend. I disagree.

First, as to the lack of counsel, French was aware, no later than September 29, 2000, when he appeared before Judge King, that the JDAF had to retain counsel to represent it in this action. French does not deny that he indicated at that time that he already had spoken to counsel and was in the process of hiring an attorney. He went so far as to name the attorney he had spoken with and intended to retain.

Nonetheless, even with the knowledge that counsel was required, counsel for the JDAF did not appear in this action until January 26, 2001, almost four months after the case was filed. Default was not entered in the case until more than two months after the case was filed. French, a director of the corporation, acknowledges that he received the motion for order of default and then discussed it with plaintiff’s counsel on November 3, 2000. Even though the order of default was not filed for another month, still no counsel for the JDAF appeared. Then, the motion for entry of default judgment was filed on January 12, 2001, approximately five weeks after the entry of default, with still no appearance from counsel for the JDAF. Not until five days before the prima facie hearing on the default judgment motion did counsel appear.

The JDAF’s lack of counsel is not considered good cause or excusable neglect when the JDAF, aware since at least September 29, 2000, that counsel was required to represent the corporation, waited for almost four months to retain counsel and make an appearance in the case. Additionally, the JDAF waited nearly three months after discussing the motion for entry of default with plaintiff’s counsel to appear through counsel. Such delay does not constitute good cause or excusable neglect.

Although the JDAF knew that it needed to retain counsel, it argues that it was confused as to whether French or Martin could represent the JDAF because it was allowed to do so in front of Judge King. Even accepting that the JDAF was confused about who could represent it, the fact remains that it failed to plead or otherwise defend the action either through counsel or French or Martin. If French thought he could represent the JDAF, he needed to file an Answer or a motion on the JDAF’s behalf, or somehow indicate the JDAF’s intent to challenge the sufficiency of the Complaint. At a minimum, he could have sought an extension of time for the JDAF to respond to the Complaint, or sought clarification on representation from the Court. Failure to do so belies any claim of confusion. The same can be said of Martin. The JDAF cannot sustain its argument of good faith or excusable neglect based on its supposed confusion about representation.

Finally, in its written materials, the JDAF also argues that plaintiff was at fault for failing to provide the proper notice required by Rule 55. The JDAF is mistaken. Rule 55(a), under which the order of default was entered, requires no notice.

The JDAF’s conduct is clearly culpable as that is defined in the above-cited cases. The JDAF had actual notice of the action through service on its registered agent and it had constructive notice as demonstrated by French’s appearance before Judge King. Yet, it did not file an Answer or otherwise defend the action within twenty days of being served with the summons and complaint.

It also had notice of the motion for default order, at least through service on French. Additionally, it waited until almost two months after the order of default was entered to move to set aside that order. The JDAF offers no reason for this delay and as a result, the motion is not timely. The JDAF’s conduct here demonstrates inexcusable neglect and there is no basis for a finding of “good cause.” See Hammer, 940 F.2d at 526 (“A party’s conduct is culpable if he has received actual or constructive notice of the filing of the action and failed to answer the complaint.”). Given the culpability of the JDAF, I need not consider any other factors. Meadows, 817 F.2d at 521 (district court need not consider a “meritorious defense” argument if culpable conduct is shown).

CONCLUSION
Plaintiff’s motion to strike (#13) is denied; French’s motion to amend answer (#14) is granted; and the JDAF’s motion to set aside order of default (#24) is denied. French shall submit his Amended Answer and Affirmative Defenses within ten days of the date of this Opinion and Order.

IT IS SO ORDERED.

[1] While the certificates of service show service on both French and Martin, and French concedes that he received the motion, Martin denies actually receiving it.
[2] Plaintiff suggests that in a similar case filed by plaintiff in Massachusetts and currently pending there, the court rejected French’s attempt to appear in the case. The pleadings in that case show that plaintiff named as defendants Robert Villasenor and John Does 1-100. In the Complaint, plaintiff alleges that John Doe 1 used the alias “InternetZorro” when communicating over the Internet. Plaintiff also alleges that Villasenor published statements about plaintiff on the JDAF website, which plaintiff contends is controlled by French. Plaintiff further alleges that French published “a series of innuendos” about plaintiff on the Internet and that InternetZorro published “numerous false and defamatory statements about Zwebner.”

French filed a motion to dismiss contending that the court lacked personal jurisdiction over him. The court declined to hear French’s motion because French was not a party to the action.

Thus, unlike in the present case, French did not appear and answer admitting he was InternetZorro, and the precise question at issue here was not addressed by the Massachusetts court.

[3] Nothing prevents plaintiff from raising these issues in an appropriate responsive pleading.
[4] With the substitution of French for one of the John Does and with the amendment of French’s answer, the caption on all future submissions should include French as a named defendant, along with John Does 2 through 100. Van Wagoner and Oertel should be named as third-party defendants.
[5] Rule 60(b) provides that the court may relieve a party from a judgment for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud; (4) the judgment is void; (5) the judgment was been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated; or (6) any other reason justifying relief from the operation of the judgment. Fed.R.Civ.P. 60(b).
[6] I make no decision as to whether French’s and Martin’s appearance at that hearing on behalf of the JDAF would be considered an “appearance” within the meaning of Rule 55(b), requiring three days written notice of a hearing on the application for default judgment. I note, however, that the certificate of service accompanying plaintiff’s motion for default judgment shows service of the motion on both French and Martin, and now that the JDAF has counsel who has filed a notice of appearance, JDAF’s counsel will, and has, received notice, well in advance of three days, of the hearing on the default judgment motion.