Opinion
CV 22-01180 PHX CDB
03-14-2023
Osiris Valenzuela, Plaintiff, v. Samantha Esser, Formula Wellness Scottsdale LLC, Kevin Kimball, Defendants.
REPORT AND RECOMMENDATION
TO THE HONRABLE STEPHEN M. McNAMEE
Plaintiff has consented to the exercise of magistrate judge jurisdiction over this matter. (ECF No. 6). Service on Defendants Esser and Kimball was returned as executed on October 9, 2022. (ECF Nos. 8 & 9). Defendants' responses to the Complaint were due October 31, 2022. Plaintiff applied for the entry of default against Defendants Esser and Kimball on November 5, 2022 (ECF No. 11). The Clerk of the Court entered Defendants' defaults on November 7, 2022. (ECF No. 12, as amended at ECF No. 18 (December 6, 2022)). Before the Court is Plaintiff's motion for judgment by default against Defendants Esser and Kimball (ECF No. 19). Because some of the parties to this matter have not affirmatively consented to the exercise of Magistrate Judge jurisdiction over the matter, including the entry of final judgment, the undersigned Magistrate Judge makes the following findings of fact, law, and recommendation.
The return of service as executed on Defendant Esser indicates that service was effected by Defendant Kimball's acceptance of the summonses and complaint with regard to himself, Defendant Esser, and Defendant Formula Wellness Scottsdale LLC (Defendant Kimball is Defendant Esser's husband). (ECF No. 8). Arizona Corporation Commission records indicate the only member of Formula Wellness Scottsdale LLC is Samantha Esser and that Defendant Esser is not the LLC's statutory agent. Rule 4(h)(1)(B) of the Federal Rules of Civil Procedure provides that service on a corporate entity is proper when effected on its managing or statutory agent, officer, or partner. Because Defendant Kimball is none of these, it is arguable whether the LLC was properly served. Nonetheless, Plaintiff did not seek the entry of default against the corporate Defendant and does not seek judgment by default against the corporate Defendant.
I. Background
Plaintiff, through counsel, docketed a complaint on July 14, 2022, alleging a cause of action against Defendants pursuant to the Fair Labor Standards Act and a cause of action pursuant to state law. (ECF No. 1). Plaintiff asserts she was employed “by Defendants since January 29, 2022” as a “health worker collecting COVID-19 swaps [sic] from patients of the Defendant Employer.” (ECF No. 1 at 2). Plaintiff further alleges Defendant Formula Wellness Scottsdale LLC is an outpatient clinical laboratory and testing facility offering an array of on-demand lab testing services “such as COVID-19 testing,” and that Formula Wellness Scottsdale LLC is an employer as that term is defined in 29 U.S.C. § 203(d). (Id.).
Plaintiff also asserts:
Defendant Samantha Esser is the owner and manager of Formula Wellness as well as the sole member of Formula Wellness, LLC. Samantha Esser managed and directed the operations of Formula Wellness and she was at all times a person responsible for determining the rate and method of payment of Plaintiff's wages. Samantha Esser was an “employer” of the Plaintiff as that term is defined in 29 U.S.C. §203(d).(Id.). Plaintiff further alleges that Defendant Kimball (referred to in the Complaint as John Doe Esser) is Esser's husband, and he is named as a co-defendant pursuant to Arizona Revised Statutes § 25-215(D). (ECF No. 1 at 3).
Plaintiff contends that during her term of employment by Defendants she was a non-exempt employee entitled to be paid minimum wage for all hours worked and overtime pay for all hours worked in excess of 40 hours per week; however Plaintiff does not allege that she actually worked in excess of 40 hours per week. (ECF No. 1 at 3). Plaintiff alleges Defendants terminated her employment on March 5, 2022. (Id.). Plaintiff contends Defendants failed “to pay Plaintiff any wages whatsoever for the three week period from February 14, 2022 until March 3, 2022.” (Id.). Additionally, Plaintiff alleges in the Complaint that Defendant Esser acknowledged Plaintiff's wages were due and that Defendant Esser averred she would pay the wages “‘right away.'” (ECF No. 1 at 4). Plaintiff asserts the unpaid wages total $1950.00, representing 95 hours of work at $20 per hour and one “$50 concierge service fee that was earned by Plaintiff for providing remote services to a patient.” (Id.).
Plaintiff's Complaint, captioned as “F.L.S.A. Minimum Wage Claim and Arizona Unpaid Wage Claim,” asserts causes of action based on the Fair Labor Standards Act (“FLSA”) (Count One) (“Violation of FLSA/Failure to Pay Minimum Wage”); and “Failure to Pay Earned Wages & Arizona Minimum Wage Act Violation” (Count Two), citing the “AMWA” (the Arizona Minimum Wage Act) and Arizona Revised Statutes § 23-363; in Count Two Plaintiff also asserts Defendants “willfully failed to or refused to pay Plaintiff her earned wages pursuant to A.R.S. §23-353(a) and §23-355.” (ECF No. 1 at 5). In her prayer for relief Plaintiff seeks her unpaid wages; an additional amount as liquidated damages, citing 29 U.S.C. § 216(b) and Arizona Revised Statutes §§ 23-353, 23-355, and 23-364; and her “reasonable attorney's fees and costs of this action pursuant to 29 U.S.C. § 216(b).” (ECF No. 1 at 6).
II. Governing Law
Rule 55 of the Federal Rules of Civil Procedure provides that if “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). After a default has been entered and the defendant fails to appear or move to set aside the default, the Court may, on the plaintiff's motion, enter a default judgment. Fed.R.Civ.P. 55(b)(2). Rule 55(b)(2) requires the application for a judgment by default be accompanied by a declaration that any defaulting defendant is not a minor, incompetent, or a member of the armed services.
Rule 55 does not require the entry of judgment against a defaulting party and the entry of a judgment by default is completely within the Court's discretion. See, e.g., DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 852 (9th Cir. 2007); Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Default judgments are disfavored because public policy favors the resolution of civil cases on their merits. NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 (9th Cir. 2016); Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).
When exercising its discretion in this regard, the Court may consider a variety of factors, including:
(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning material facts, (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.Eitel, 782 F.2d at 1471-72, quoted in Newgen, LLC, 840 F.3d at 616.
[A motion for judgment by default] should be a fully-fleshed motion that enables the Court to grant relief. Szabo v. Sw. Endocrinology Assocs. PLLC, 2021 WL 3411084, *1 (D. Ariz. 2021). To prevail on a motion, the moving party must apply the law to the facts of the case. LRCiv 7.2(b) (the moving party must “set[ ] forth the points and authorities relied upon in support of the motion”). A motion for default judgment is a case-dispositive motion which requires the Court to undertake an in-depth analysis.Norris v. Shenzhen IVPS Tech. Co. Ltd., 2021 WL 4844116, at *1 (D. Ariz. Oct. 18, 2021). See also Long v. Okopny, 2021 WL 3410916, at *1 (D. Ariz. July 27, 2021).
When determining whether judgment by default should be granted, the Court must take as true all factual allegations in the complaint, except for those related to the amount of the plaintiff's damages. NewGen LLC, 840 F.3d at 617; Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977); Twentieth Century Fox Film Corp. v. Streeter, 438 F.Supp.2d 1065, 1070 (D. Ariz. 2006). A defendant's default functions as their admission of the complaint's well-pleaded allegations of fact. DIRECTV, Inc., 503 F.3d 854; Cripps v. Life Ins. Co., 980 F.2d 1261, 1267 (9th Cir. 1992). Facts necessary to establish each element of the cause of action stated in the complaint that are not themselves stated in the complaint, and claims that are legally insufficient, are not established by a defendant's default. See DIRECTV, Inc., 503 F.3d 854; Cripps, 980 F.2d at 1267.
To establish a violation of 29 U.S.C. § 206, the minimum-wage provision of the FLSA, a plaintiff must establish she was an employee of the defendant, she was covered under the FLSA, and the defendant failed to pay her minimum wages for the hours worked. E.g., Smith v. November Bar N Grill LLC, 441 F.Supp.3d 830, 834 (D. Ariz. 2020), cited in Davis v. Shri Hari Hotels LLC, 2022 WL 3139861, at *3 (D. Ariz. Aug. 5, 2022), and Nichol v. On Point Solar Power LLC, 2022 WL 2159051, at *3 (D. Ariz. June 15, 2022).
The Court may exercise supplemental jurisdiction over Plaintiff's state-law based claims. To state a claim under the Arizona Minimum Wage Act (“AMWA”), the defendant must be an “employer” under the statute, the plaintiff must be a qualified employee of the defendant, and “the plaintiff must allege that she was not paid the applicable minimum wage for hours worked.” Coe v. Hirsch, 2021 WL 5634798, at *2 (D. Ariz. Dec. 1, 2021), citing Ariz. Rev. Stat. Ann. § 23-363. See also Nichol, 2022 WL 2159051, at *3. The Arizona Wage Act (“AWA”) provides for an award of damages if an “employer” or former “employer” fails to pay wages due any employee within a specified time. See Ariz. Rev. Stat. Ann. § 23-355.
The Court may exercise supplemental jurisdiction over Plaintiff's state law claims because they pertain to the same case or controversy, i.e., Plaintiff's alleged unpaid wages. See 28 U.S.C. § 1367(a) (“[T]he district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III....”). See also Kuba v. 1-A Agric. Ass'n, 387 F.3d 850, 855-56 (9th Cir. 2004) (“Nonfederal claims are part of the same ‘case' as federal claims when they derive from a common nucleus of operative fact and are such that a plaintiff would ordinarily be expected to try them in one judicial proceeding.”).
Article 8 of Chapter 2 of Title 23 of the Arizona Revised Statutes, “Minimum Wage and Employee Benefits,” §§ 23-362 to 23-365, effective January 1, 2007; the enforcement provision is § 23-364.
Article 7 of Chapter 2 of Title 23 of the Arizona Revised Statutes, “Payment of Wages,” §§ 23-350 to 23-362, enacted in 1980. Section 23-355 is titled as “Action by Employee to Recover Wages.”
III. Analysis of Eitel Factors
A. The prejudice to Plaintiff if default judgment is denied
Plaintiff will be prejudiced if default judgment is denied. Defendants have not appeared nor defended this matter. There is no indication in the record that Defendants will make any appearance or defend against the claims stated in the Complaint. Plaintiff will be prejudiced, in the form of accruing additional attorneys' fees, by any further delay in resolving these claims. If Plaintiff's motion for judgment by default is denied, Plaintiff will be prejudiced because she will likely be without other recourse for recovery. See Zekelman Indus. Inc. v. Marker, 2020 WL 1495210, at *3 (D. Ariz. Mar. 27, 2020), citing PepsiCo, Inc. v. California Sec. Cans, 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002)).
B. The merits of Plaintiff's substantive claim
Plaintiff's Complaint, specifically and clearly states causes of action pursuant to the FLSA and the AMWA, although Plaintiff cites to some statutes within the AWA. The AMWA authorizes a claim against “[a]ny employer who fails to pay the [minimum] wages or earned paid sick time required under this article.” Ariz. Rev. Stat. § 23-364(G). The prayer for relief cites Arizona Revised Statutes § 23-364, the enforcement provision of the AMWA. The prayer for relief also cites Arizona Revised Statutes §§ 23-353 and 23-355 with regard to damages; these two statutes are part of the Arizona Wage Act (“AWA”), which provides a cause of action when an employee is not paid at all and is a statutory scheme separate and distinct from the AMWA.
However, in her motion for judgment by default, Plaintiff states her two claims as “a failure to pay unpaid minimum wages pursuant to the [FLSA's] minimum wage statute (see 29 U.S.C. §206(a)),” and a “second claim alleg[ing] an Arizona State wage law violation - contending that Defendants willfully failed or refused to pay her earned wages pursuant to A.R.S. § 23-353 and § 23-355 [the Arizona Wage Act, or AWA].” (ECF No. 19 at 2). Plaintiff appears to have swapped the cause of action on which Count Two is predicated from the AMWA to the AWA. And, notably, the motion for judgment by default does not seek judgment against the corporate (limited liability corporation)
Defendant; the motion states only that “[t]he Plaintiff ... in accordance with Federal Rules of Civil Procedure 55, hereby requests that the Court enter judgment by default against Defendants Samantha Esser and her husband, co-defendant Kevin Kimball (collectively, ‘Defendants').” (ECF No. 19 at 1).
See also ECF No. 19 at 7 (“Therefore, Plaintiff has met all of the Eitel factors and the Court should enter default judgment against Defendants Samantha Esser and her husband Kevin Kimball.”).
The fact that Plaintiff seeks judgment by default under the AWA and does not seek judgment by default against the corporate Defendant is notable because the term “employer” is defined much more narrowly under AWA than it is under the FLSA or the AMWA. Under the AWA, an employer is defined by statute as “any individual, partnership, association, joint stock company, trust or corporation, the administrator or executor of the estate of a deceased individual or the receiver, trustee or successor of any of such persons employing any person.” Ariz. Rev. Stat. Ann. § 23-350(3). The available legal opinions interpreting this statutory definition of an “employer” who is liable for the non-payment of wages by a specified date after the termination of employment does not authorize individual liability against the owners, officers, and directors of a corporate employer in a case where the claim is for the employer's wholesale failure to pay wages. See Stamper v. Freebird Logistics Inc., 2022 WL 2316317, at *5 (D. Ariz. June 28, 2022), citing e.g., Rosen v. Fasttrak Foods LLC, 2021 WL 2981590, at *5 (D. Ariz. July 15, 2021). See also Channel v. Home Mortg., Inc., 2005 WL 8160525, *14 (D. Ariz. 2005) (“The Court concludes that Arizona courts would interpret the term ‘employer' in A.R.S. § 23-355 to include a corporation, but not officers or agents of the corporation.”).
In contrast, for purposes of an AMWA claim (i.e., failure to pay minimum wages), the term “employer” is more broadly defined to include “any corporation, proprietorship, partnership, joint venture, limited liability company, trust, association, political subdivision of the state, [and] individual or other entity acting directly or indirectly in the interest of an employer in relation to an employee.” Ariz. Rev. Stat. § 23-362(B) (emphasis added). Similarly, in the FLSA the definition of the term “employer” includes the phrase “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). Thus, under the FLSA and AMWA, the managers of a corporate entity are “individually liable for unpaid wages.” Boucher v. Shaw, 572 F.3d 1087, 1090-91 (9th Cir. 2001). See also Loserth v. Accelerated Retention Inst. LLC, 2020 WL 13268122, at *5 (D. Ariz. Feb. 7, 2020) (concluding a corporate entity does not shield an individual corporate officer from liability for damages pursuant to the FLSA); Baker v. D.A.R.A. II, Inc., 2008 WL 191995, *8 (D. Ariz. Jan. 22, 2008) (“In view of [Defendant] Wintersteen's position as a corporate officer in DARA II, Plaintiff has created a prima facie case that [Defendant] Wintersteen was an employer for FLSA purposes.”).
Accordingly, if Plaintiff does not seek judgment by default regarding her second claim for relief (which she states in the motion for judgment by default is pursuant to the AWA) against the corporate Defendant, and judgment may not be taken against the individual Defendants for an AWA violation, then Plaintiff is not entitled to judgment by default with regard to her second claim for relief because she does not seek judgment against a Defendant amenable to a judgment under the AWA. And the AWA appears to be the correct statute to apply to Plaintiff's claim because she was not paid at all, rather than not paid in an amount in compliance with the state's statutory minimum wage, and the AWA and the AMWA statutes are distinct causes of action intended to provide a remedy in distinct situations, as evidenced by their enactment at separate times by separate acts of the Legislature, their separate and different statutory definitions of defendants amenable to suit, and different statutory provisions for the applicable remedy.
In this regard the AMWA is distinct from the FLSA, which has been found by some courts to encompass a situation where the plaintiff was not paid at all, much less for less than minimum wage, for work performed for an employer. Compare Biggs v. Wilson, 1 F.3d 1537, 1538 (9th Cir. 1993) (finding that at some point there must be a failure to pay the amount of the minimum wage, which may begin when wages are due but no wages at all are paid), cited in Rother v. Lupenko, 515 Fed.Appx. 672, 675 (9th Cir. 2013), with Sao v. Pro-Tech Prod. Inc., 2019 WL 6909566, at *4 (D. Ariz. Dec. 19, 2019). The Sao court reasoned:
Where Plaintiff's AMWS [Arizona Minimum Wage Statute] claim falls short in this early stage of litigation is in demonstrating as a matter of law that Pro-Tech actually failed to pay Plaintiff minimum wages under Arizona law. Defendants tendered a check for Plaintiff's full amount of wages on September 16, approximately one month after Plaintiff quit. As discussed above, the Ninth Circuit implies a timeliness requirement into the FLSA-something, the Court notes, it had to research and find on its own- such that late wages are unpaid wages. Plaintiff has presented no equivalent obligation under the AMWS, and the Court finds no cases mandating such. In fact, the Ninth Circuit in Rother held “there is no need for the courts to read a timeliness requirement into the [Oregon state] statute's minimum wage provision, or to treat late payment as nonpayment” because Oregon had a separate statute explicitly mandating timely payment of wages. 515 Fed.Appx. at 676. Arizona also has a separate statute explicitly mandating timely payment of wages: the Arizona Wage Statute.
At this time, the Court cannot conclude as a matter of law that Defendant's late payment of wages violates the AMWS. Accordingly, Plaintiffs motion for judgment on the pleadings is denied with respect to his AMWS claim.2019 WL 6909566, at *4-5 (emphasis added).
It is logical that where no payment of wages has been made the proper statute to apply is the AWA, as the issue is not whether the employer owes the plaintiff additional funds (to make-up the difference between what was paid and the minimum wage), but that the plaintiff was to be paid at or above the minimum wage but was not tendered any wages. See id., 2019 WL 6909566, at *4-5. See also Stamper, 2022 WL 2316317, at *6 (D. Ariz. June 28, 2022) (explaining the plaintiff, who was not paid any wages, was seeking “unpaid minimum and overtime wages he is owed under the FLSA and AMWA, along with liquidated damages. He also seeks the owed unpaid wages under the AWA.”
The AWA speaks to when an employee must be paid, providing that “[e]ach employer in [Arizona] shall designate two or more days in each month, not more than sixteen days apart, as fixed paydays for payment of wages to his employees” and that “[e]ach employer shall, on each of the regular paydays, pay to the employees ... all wages due the employees up to such date.” Ariz. Rev. Stat. §§ 23-351(A) & 23-351(C).
(emphasis added)); Finton v. Cleveland Indians Baseball Co. LLC, 2021 WL 1610199, at *2 (D. Ariz. Apr. 26, 2021) (“The [defendant] also recognizes this distinction and agrees with [the plaintiff] that the FLSA “'does not preempt her claim for hours that she asserts she worked but that do not constitute overtime hours.'”), vacated in part on reconsideration, 2021 WL 1610199 (D. Ariz. Apr. 26, 2021); Grabda v. IMS Acquisition LLC, 2020 WL 5544366, at *2 (D. Ariz. Sept. 16, 2020) (“To succeed on Count Three, Plaintiff must prove that Defendants did not pay her the minimum wage as required under the AMWA. [] To succeed on Count Four, Plaintiff must prove that Defendants did not timely pay all wages due as required under the AWA.”); Vail v. Kopper Crest Manor on Harris LLC, 2019 WL 2869672, at *3 (D. Ariz. July 3, 2019).
Plaintiff's motion for default, construed alongside the Complaint, is unclear about the state statute under which she is proceeding, and Plaintiff presents no published legal opinion to support either the award of damages under the AWA against an individual defendant, nor does she cite support for an award of damages for unpaid wages, rather than the payment of less than minimum wage, under the AMWA. As Plaintiff's motion for judgment by default seeks judgment and damages on a claim pursuant to the AWA, which does not allow for damages against individual defendants, and Plaintiff does not seek judgment by default against the corporate Defendant, Plaintiff is not entitled to judgment by default on her state law claim.
Plaintiff is entitled to judgment by default regarding her FLSA claim, which has been construed as applying to a situation where a plaintiff who was not paid at all with regard to due wages and allows a plaintiff to recover damages from an individual defendant.
C. The sufficiency of the complaint
The Complaint sufficiently alleges jurisdiction over the parties and the subject matter at issue in this suit. The Complaint sufficiently alleges a factual predicate for the relief sought with regard to the FLSA. The Complaint names eligible defendants, insofar as the Complaint seeks damages under the FLSA and the AMWA against individual defendants and a corporate defendant; however, the motion for judgment by default asserts a claim for damages under the AWA against individual defendants who are not an “employer” as that term is defined by the relevant state statute. The Complaint and the motion for judgment by default are properly verified and accompanied by the required affidavits.
D. The sum of money at stake in this action
The Court must consider the amount of money at stake in relation to the seriousness of Defendants' conduct. See HTS, Inc. v. Boley, 954 F.Supp.2d 927, 941 (D. Ariz. 2013); Pepsico, Inc., 238 F.Supp.2d at 1176. Defendants' conduct was reasonably serious, as Plaintiff was not paid for three weeks (95 hours) of work and one “concierge” appointment, resulting in unpaid wages of $1950. With regard to damages, unlike a complaint's other factual allegations, those pertaining to damages are not taken as true upon default. Geddes, 559 F.2d at 560. Thus, a plaintiff “is required to prove all damages sought in the complaint.” Tolano v. El Rio Bakery, 2019 WL 6464748, at *6 (D. Ariz. Dec. 2, 2019) (internal quotations omitted), quoting Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003). A plaintiff must provide evidence of their damages, and the damages sought must not be different in kind or amount from those set forth in the complaint.” Fisher Printing Inc. v. CRG LTD II LLC, 2018 WL 603299, at *3 (D. Ariz. Jan. 22, 2018), citing Amini Innovation Corp. v. KTY Int'l Mktg., 768 F.Supp.2d 1049, 1054 (C.D. Cal. 2011). The Court may rely on declarations submitted by the plaintiff in determining appropriate damages. Tolano, 2019 WL 6464748, at *6, citing Philip Morris USA, Inc., 219 F.R.D. at 498.
Plaintiff submitted a sworn declaration regarding her damages, and she has also submitted time sheets evidencing the hours she worked and for which she was not paid. Plaintiff also produces evidence that Defendant Esser acknowledged Plaintiff was not paid earned wages.
Plaintiff asserts she is owed $1950 total in earned wages. Plaintiff asserts she is entitled to her unpaid wages, $1950, doubled by the provisions of the FLSA, and then that sum tripled by operation of the statute statute(s). Plaintiff seeks statutory damages of $11,700 ($1950 in unpaid wages, doubled under the FLSA to $3900, and that amount tripled under the AMWA to $11,700). (ECF No. 19 at 5, 7-8). This would, in effect, award Plaintiff the sum of six times the unpaid wages, i.e., $11,700. Plaintiff cites no published (or unpublished) legal opinion for awarding this amount of damages. The available legal opinions indicate that Plaintiff is entitled only to the maximum amount of damages under either the state or federal statute. E.g., Stamper, 2022 WL 2316317, at *6; Grabda v. IMS Acquisition LLC, 2020 WL 5544366, at *3 (D. Ariz. Sept. 16, 2020); Sao, 2019 WL 6909566, at *8 (D. Ariz. Dec. 19, 2019) (“As Plaintiff states, he would not be entitled to both liquidated and treble damages, just the higher of the two,” i.e., damages under either the FLSA or the statute statute); Finton, 2021 WL 661975, at *10.
E. The possibility there would be a dispute concerning material facts if the case were to proceed
It is unlikely that there would be a dispute concerning material facts if this case proceeds, as Plaintiff presents evidence in the form of messages received from Defendant Esser allowing that Plaintiff is owed wages, and Plaintiff has documented (via time sheets) the hours she worked for which she was not paid.
F. Whether the default was due to the defendant's excusable neglect
There is no indication that Defendants' default in this matter is due to excusable neglect.
G. The strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits
The entry of default judgment is disfavored. The Court should not enter a default judgment if Defendants would be entitled to have the default judgment set aside pursuant to Rule 60(b), Federal Rules of Civil Procedure. See, e.g., Educational Servs., Inc. v. Maryland State Bd. for Higher Educ., 710 F.2d 170, 177 (4th Cir. 1983); Martin v. Coughlin, 895 F.Supp. 39, 42 (N.D.N.Y. 1995).
Once default judgment has been entered, relief is governed by Rule 60(b).
Where a defendant seeks relief under Rule 60(b)(1) based upon “excusable neglect,” the court applies the same three factors governing the inquiry into “good cause” under Rule 55(c). Mesle, 615 F.3d at 1091. Those factors, which courts consistently refer to as the “Falk factors,” are:
(1) whether the plaintiff will be prejudiced, (2) whether the defendant has a meritorious defense, and (3) whether culpable conduct of the defendant led to the default.Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). The determination of what conduct constitutes “excusable neglect” under Rule 60(b)(1) and similar rules “is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission.” Pioneer Inv. Svcs. Co. v. Brunswick Assoc. Ltd., 507 U.S. 380, 395 [] (1993).
Brandt v. American Bankers Ins. Co. of Fla., 653 F.3d 1108, 1111 (9th Cir. 2011). A defendant's conduct is culpable if they received actual or constructive notice of the filing of the action and failed to answer. Price v. Seydel, 961 F.2d 1470, 1473 (9th Cir. 1992); Meadows v. Dominican Rep., 817 F.2d 517, 521 (9th Cir. 1987).
As evidenced by the messages attached to the motion for judgment by default, Defendant Esser has acknowledged that Plaintiff was due wages. Defendant Esser's husband, Defendant Kimball, accepted service of process for himself, Defendant Esser, and the corporate Defendant, and neither Defendant Kimball nor Defendant Esser have appeared or defended on behalf of themselves or the corporate Defendant. Accordingly, Defendants had actual notice of the filing and chose not to answer and, therefore, their default is due to culpable conduct.
Therefore, IT IS RECOMMENDED that Plaintiff's motion (ECF No. 19) for the entry of judgment by default against Defendants Esser and Kimball be granted only insofar as Plaintiff seeks judgment by default against Defendants Esser and Kimball on Plaintiff's FLSA claim, i.e., Count One of the Complaint, and that judgment in favor of Plaintiff and against Defendants Esser and Kimball be entered on Count One of the Complaint.
IT IS FURTHER RECOMMENDED that Plaintiff be awarded damages in the amount of $3900.00 against Defendants Esser and Kimball for violation of the FLSA. Any further award of damages, should Plaintiff be awarded judgment by default on Count Two of the Complaint, shall be offset for the amount awarded for violation of the FLSA.
IT IS FURTHER RECOMMENDED that Plaintiff be given leave to file a renewed motion for the entry of judgment by default regarding Count Two of the Complaint within twenty-one (21) days of the date an order is issued adopting or rejecting this Report and Recommendation.