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Barker v. BSI Financial

United States District Court, D. Oregon, Eugene Division

September 23, 2019

BSI FINANCIAL, et al., Defendants.

          OPINION & ORDER

          Ann Aiken, United States District Judge.

         Charles Barker ("Plaintiff”) filed a complaint in state court on May 17, 2018 and BSI Financial Services and Civic Financial Services ("Defendants") timely removed the matter to federal court based on federal question jurisdiction. Before me are Plaintiffs motions for default (docs. 9, 10, 11, and 12) and Defendants' Motion to Dismiss (doc. 24). For the reasons herein, Plaintiffs motions for default are DENIED and Defendants' Motion to Dismiss is GRANTED.


         On May 17, 2018, Plaintiff filed suit in Lane County Circuit Court alleging violations of the Fair Debt Collection Practices Act, the Real Estate Settlement Procedures Act, the Consumer Protection Act/Truth in Lending Act, and various common law violations. See Pl.'s First Amend. Compl. at 1 (doc. 21). Plaintiffs claimed violations stem from Defendants' alleged transmittal of a falsified mortgage history ledger indicating that Plaintiff had been late on payments for a loan he received to purchase a property in Eugene and that was serviced by Defendants. Plaintiff alleges that Defendants' actions caused him long-term economic loss due to an increase in interest payments, lowered credit score, and emotional strain, among other things. See Id . at 3.

         Plaintiff timely served defendants BSI and Civic in September of 2018 and Defendants removed the case to federal court within 30 days of being served. See Notice of Removal at 3 (doc. 1). Defendants explain in their response to one of Plaintiffs requests for entry of default that individual defendants Troy Valentine and Gagan Sharma were not properly served in the state court action, were therefore not parties to the case when it was removed, and are therefore not proper parties in the removed action before the Court. See doc. 18 at 3, n.1. Since the action's removal to federal court, Plaintiff has moved for entries of default against Defendants as well as against Valentine and Sharma. Defendants have moved to dismiss the case based on Rule 12(b)(1) and 12(b)(6).


         There are several motions before me: (i) Plaintiffs four motions for default and (ii) Defendants' Motion to Dismiss.[1] Each, is addressed below.

         I. Motions for Default

         Plaintiff requests that this Court file entries of default against Defendants as well as against Gagan Sharma and Troy Valentine. Defendants argue that an entry of default is improper because they have been defending in the action and because Plaintiff won't be prejudiced by having to litigate at this stage.

         Entry of default is the essential first step in the two-step process of obtaining a default judgment for failure to appear. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). Rule 55(a) provides that "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, and that fact is made to appear by affidavit or otherwise, the clerk shall enter the party's default." Fed.R.Civ.P. 55(a). For entry of default to be proper, the moving party has the burden of showing that: (1) the party against whom default is sought has been properly served; (2) the Court has proper subject matter jurisdiction; and (3) the defaulting party has failed to plead or otherwise defend. U.S. v. Panter, 2012 WL 1245669 at *3 (D. Or. March 14, 2012).

         Entering defaults is a discretionary matter reserved for the district court. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980); see also Dreith v. Nu Image, Inc., 648 F.3d 779, 786 (9th Cir. 2011). The "starting point" of the court's analysis, however, "is the general rule that default judgments are ordinarily disfavored." Id. at 1472.

         Here, while Defendants failed to file responsive pleading within the allotted time provided for in Rule 12, entry of default would be improper under Rule 55(a). Defendants indicate that they have corresponded with Plaintiff about the case in January and have been engaged in discovery since the action was filed. They have also conferred with Plaintiff about their plans to defend in this case and removed the action to federal court. All of this is evidence of Defendants' intention to defend the case. See U.S. v. Panter, 2012 WL 1245669 at*3 (D. Or. March 14, 2012). Moreover, there is no reason to believe Plaintiff will be prejudiced if this action is allowed to continue on its merits. While Plaintiff argues that prejudice exists because two months had passed since the action was removed before Plaintiff ultimately requested entries of default, two months is simply not long enough to necessarily constitute prejudice and Plaintiff does not explain why this suit is a special situation where default would be appropriate. Thus, I find that entries of default against Defendants would be unwarranted.

         Entries of default would also be improper with respect to Valentine and Sharma. Under FRCP 4(e)(1) service may be made "following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made." But since Plaintiff only attempted to serve Valentine and Sharma while this case was in state court, the Court must consider whether Plaintiff followed Oregon law for service of process. Rule 7D(1) of the Oregon Rules of Civil Procedure provides that summons must be served in any manner reasonably calculated under all the circumstances to apprise the defendant of the existence and pendency of the action and to afford a reasonable opportunity to appear and defend. The Oregon rules also provide for presumptively adequate methods of service. See Or. R. Civ. P. 7 D. But when service is not made by one of the presumptively adequate methods, the inquiry "focuses on whether plaintiffs conduct was objectively and reasonably calculated under the totality of the circumstances existing at the time of attempted service to apprise defendants of the pendency of the action." See Baker v. Foy, 310 Or. 221, 228-29 (1990). If that inquiry is answered in the affirmative, service is deemed valid. Davis Wright Tremaine, LLP v. Menken, 181 Or.App. 332, 337 (2002). The inquiry focuses, not on the defendant's subjective notice, but on whether the plaintiffs conduct was objectively, reasonably calculated, under the totality of the circumstances then known to the plaintiff, to apprise the defendant of the pendency of the action. Id. at 339. Thus, actual notice "is, essentially, irrelevant." Id; see also Jordan v. Wiser, 302 Or. 50, 60 (1986) (actual notice does not make service adequate under Rule 7).

         As a general rule, service by mail on an individual must be by via restricted delivery-only the person being served can either accept or refuse the mailing-to satisfy the reasonable notice standard of Rule 7 D(1). Davis Wright, 181 Or.App. at 988. Thus, a summons and complaint sent by first class mail is not sufficient to satisfy Rule 7 D(1). In Murphy v. Price,131 Or.App. 693, 697 (1995), the court held that service by sending a copy of the summons and complaint to defendant at his mailing address using certified mail, return receipt requested, but with unrestricted delivery was inadequate because anyone at that address could have signed for the documents with no assurances that defendant would ever see the papers. See also Davis Wright, 181 Or.App. at 343 ("mere service by certified mail, without some more particularized assurance or confirmation of delivery to the defendant, e.g., restricted delivery, return ...

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