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Thrasher v. Rocky Mountain Auto Brokers, Inc.

United States District Court, D. Colorado

September 26, 2019

MICKEY THRASHER and KIMBERLY CYR, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
ROCKY MOUNTAIN AUTO BROKERS, INC., Defendant.

          ORDER

          PHILIP A. BRIMMER, Chief United States District Judge

         This matter is before the Court on Defendant’s Motion to Set Aside Entry of Default and to Dismiss for Lack of Subject Matter Jurisdiction [Docket No. 15] filed on November 2, 2018. Plaintiffs’ Response to Defendant’s Motion to Set Aside Clerk’s Entry of Default and to Dismiss for Lack of Subject Matter Jurisdiction [Docket No. 16] was filed on November 21, 2018. On December 6, 2018, defendant filed Defendant’s Reply in Support of Motion to Set Aside Entry of Default and to Dismiss for Lack of Subject Matter Jurisdiction [Docket No. 19].

         I. BACKGROUND

         On September 13, 2018, plaintiffs filed a class action complaint asserting one claim under the Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. § 1693. Docket No. 1 at 1, ¶ 1. Plaintiffs allege that, on separate dates in 2017, they purchased vehicles on credit from defendant’s automobile dealership. Id. at 3-4, ¶¶ 16-17; id. at 5, ¶¶ 27-28. Plaintiffs claim that defendant conditioned the extension of credit on plaintiffs’ consent to automatic electronic fund transfer (“EFT”) payments, which violated the EFTA. Id. at 4, ¶ 19; at 5, ¶ 30; at 10, ¶ 61.

         The affidavit of service states that Rocky Rodriguez was served with the complaint and summons on September 27, 2018. Docket No. 5 at 2. The affidavit lists Rodriguez as the owner of defendant. Id. Defendant did not file an answer by the applicable deadline. On October 26, 2018, plaintiffs moved for a clerk’s entry of default under Rule 55. Docket No. 6. The clerk entered default on October 29, 2018. Docket No. 7.

         Defendant received a copy of plaintiffs’ motion for entry of default on October 31, 2018 [Docket No. 15 at 3, ¶ 10] and filed this motion on November 2, 2018. Docket No. 15.

         II. DEFAULT

         The Court may set aside an entry of default for good cause. See Fed. R. Civ. P. 55(c). “The preferred disposition of any case is upon its merits and not by default judgment.” Gomes v. Williams, 420 F.2d 1364, 1366 (10th Cir. 1970); see also Katzson Bros., Inc. v. E.P.A., 839 F.2d 1396, 1399 (10th Cir. 1988) (noting that “default judgments are not favored by courts”). It is, however, within the Court’s discretion to balance the judicial preference against default judgments with “considerations of social goals, justice and expediency.” Gomes, 420 F.2d at 1366.

         Failure to effectuate proper service, thus preventing the exercise of personal jurisdiction over a party, constitutes good cause to set aside an entry of default. See Two Moms and a Toy, LLC v. Int’l Playthings, LLC, No. 10-cv-02271-PAB-BNB, 2012 WL 4355555 (D. Colo. Sept. 24, 2012) (setting aside entry of default for failure to effectuate service); see also Kriston v. Peroulis, No. 09-cv-00909-MSK-MEH, 2010 WL 11553397, at *2 (D. Colo. Oct. 28, 2010) (“[P]rocedural deficiencies such as inadequate service, lack of subject matter jurisdiction, or lack of personal jurisdiction constitute good cause allowing an entry of default to be set aside.”); see also Insituform Techs., Inc. v. AMerik Supplies, Inc., 588 F.Supp.2d 1349, 1352 (N.D.Ga. 2008) (“W here service of process is insufficient, the entry of default is void and must be set aside.”).

         Under Rule 4(h), a corporate defendant must be served either “by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process, ” Fed.R.Civ.P. 4(h)(1)(B), or by “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.” Fed.R.Civ.P. 4(h)(1)(A); Fed.R.Civ.P. 4(e)(1). Colorado law provides that a corporate defendant may be served by delivering a copy of the summons to the corporation’s registered agent or that agent’s secretary or, if no such person can be found in the state, service may be made upon “any person serving as a shareholder, member, partner, or other person having an ownership or similar interest in, or any director, agent, or principal employee of such entity, who can be found in this state.” C.R.C.P. 4(e)(4)(G). The plaintiff has the burden of establishing the validity of the service of process. Fed. Deposit Ins. Corp. v. Oaklawn Apartments, 959 F.2d 170, 174 (10th Cir. 1992).

         Plaintiffs’ affidavit of service indicated that service was effected upon “Rocky Rodriguez as owner.” Docket No. 5 at 2. Defendant argues Rodriguez is not the owner of the corporation and, even if he was, this does not render him capable of accepting service for the company under federal or state procedural rules. Docket No. 15 at 7. Plaintiffs contend that defendant held out Rodriguez as having authority to act for the business because its website listed Rodriguez as the company’s “General Manager.” Docket No. 16-4 at 2. Further, plaintiffs point to Rodriguez’s Facebook profile, where Rodriguez states he is the general manager of the defendant corporation. Docket No. 16-6 at 2. They argue that defendant held out Rodriguez as its general manager and, in doing so, it “clothed [him] in apparent authority to accept service” for defendant, making service proper. Docket No. 16 at 7.

         “Whether apparent authority can suffice to show authorization to accept service under Rule 4 is an unsettled question.” Chatman v. Condell Med. Center, 2002 WL 737051, at *3 (N.D. Ill. Apr. 22, 2002). See Select Creations, Inc. v. Paliafito Am. Inc., 830 F.Supp. 1223, 1238 (E.D. Wis. 1993) (“[I]t is relatively certain that apparent authority is insufficient for the service or acceptance of process.”); see also Annuity Plan of the Intern. Union of Operating Engineers Local No. 649 v. DEM/EX Group, Inc. , 2008 WL 4491951, at *2 (C.D. Ill. Oct. 2, 2008) (“The doctrine of apparent authority, however, has no applicability to the issue of service of process.”); but see Trotter v. Tredick, 2013 WL 6633001, at *4 (D. Mont. Dec. 17, 2013) (considering whether office manager had apparent authority to accept service for company).

         The Tenth Circuit has not determined whether apparent authority applies in the service of process context. Regardless, plaintiffs have not demonstrated Rodriguez had apparent authority to accept service on behalf of defendant. Rodriguez’s Facebook page cannot establish apparent authority, which “must be established by an act of the principal.” Pytlik v. Professional Res. Ltd., 887 F.2d 1371, 1376 (10th Cir. 1989). And plaintiffs have not established why defendant’s website, listing Rodriguez as the general manager, without more, is sufficient to demonstrate apparent authority. A general manager is not one of the individuals enumerated in Rule 4(h) who may accept service, and listing Rodriguez as such does not cloak him in apparent authority to accept service on behalf of defendant.

         Plaintiffs have provided no evidence to demonstrate Rodriguez is a proper recipient of process under Fed. R. Civ P. 4. Inversora Murten, S.A. v. Energoprojekt Holding Co., 2009 WL 179463, at *3 (D. Colo. Jan. 22, 2009) (“The Plaintiff’s failure to show that this person was one of those permitted to receive process under Fed.R.Civ.P. 4(h)(1)(B) prevents the Plaintiff from carrying its burden of proving that its service was proper.”). Therefore, the Court is unable to tell from the record whether defendant was properly served and whether it has personal jurisdiction over defendant. See ...


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