United States v. 2007-03-15 | 05-35270 | EMPLOYEE PAINTERS VETHAN ENTERPRISES | precedential | opinion |

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
 EMPLOYEE PAINTERS’ TRUST;
RESILIENT FLOORCOVERING PENSION
FUND; WESTERN WASHINGTON
FLOOR COVERING APPRENTICESHIP
FUND; WESTERN WASHINGTON
FLOOR COVERING INDUSTRY
PROMOTION FUND; REBOUND TRUST; No. 05-35270
CARPET LINOLEUM & SOFT TILE
D.C. No. LAYERS LOCAL UNION 1238  CV-03-02904-RSM IUPAT,
Plaintiffs-Appellees, OPINION
v.
ETHAN ENTERPRISES, INC., a
Washington corporation; REBECCA
JOHNSON, individually; GREGORY S.
TIFT, individually,
Defendants-Appellants. 
Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, District Judge, Presiding
Argued and Submitted
November 16, 2006—Seattle, Washington
Filed March 16, 2007
Before: Pamela Ann Rymer, Marsha S. Berzon, and
Richard C. Tallman, Circuit Judges.
Opinion by Judge Berzon
3257

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COUNSEL
Randolph W. Urmston, Hendricks & Lewis, Seattle, Wash-
ington, for the appellants.
Robert A. Bohrer, Ekman, Bohrer & Thulin, Seattle, Wash-
ington, for the appellees.
OPINION
BERZON, Circuit Judge:
Several trusts that administer employee benefit plans sued
for delinquent contributions. Appellants, Ethan Enterprises
and two of its officers, failed to participate in much of the liti-
gation, and a default judgment was entered against them for
roughly a million dollars. The district court denied Ethan and
the individually-named defendants relief from the judgment.
We affirm, albeit for a different reason with respect to each:
The company violated a local rule requiring it to be repre-
sented by counsel, and it was proper to enter judgment against
it. The individually-named defendants failed to answer an
amended complaint properly served pursuant to Rule 5 of the
Federal Rules of Civil Procedure,1 so default was proper
1Rule 5, as here pertinent, provides:
(a) Service: When required. Except as otherwise provided in
these rules, . . . every pleading subsequent to the original com-
plaint unless the court otherwise orders because of numerous
defendants, . . . shall be served upon each of the parties.
. . .
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against them. The applicability of Rule 5 in determining
proper service of an amended complaint escaped both the par-
ties and the district court. We therefore take this opportunity
to clarify that an amended complaint can often be served in
the same manner as any other pleading if the original com-
plaint is properly served and the defendants appeared in the
first instance.
BACKGROUND
Appellant corporation Ethan Enterprises (“Ethan”) is a
commercial floor covering company. Rebecca Johnson and
Greg Tift serve as its officers. Johnson was the president and
sole shareholder of Ethan from its incorporation in 2001 until
2004, while Tift managed the company from 2002 onward.
Appellee trusts (“trusts”) are joint labor-management trust
funds that administer four separate employee benefit plans,
see 29 U.S.C. § 1002(3), created and maintained pursuant to
the terms of a Collective Bargaining Agreement (CBA) and
the provisions of § 302(c) of the Labor-Management Rela-
tions Act (LMRA), 29 U.S.C. § 186(c).2
The instant appeal is limited to the propriety of the default
judgment, so we do not review the underlying facts except to
(b) Making Service.
. . .
(2) Service under Rule 5(a) is made by:
. . .
(B) Mailing a copy to the last known address of the person
served. Service by mail is complete on mailing.
FED. R. CIV. P. 5.
2As here pertinent, § 302(c) permits employers to contribute funds to
employee trust funds notwithstanding the prohibition on employer pay-
ments to unions or union officers otherwise imposed by § 302 of the
LMRA.
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report that they grow out of a long-running dispute, over
unfair labor practices and broken agreements, between Ethan
and the Carpet, Linoleum and Soft Tile Layers Local Union
No. 1238 IUPAT (“union”). See NLRB v. Ethan Enter., Inc.,
No. 04-74905, 154 Fed. Appx. 23 (9th Cir. Nov. 14, 2005)
(affirming a decision of the National Labor Relations Board
(NLRB) holding that Ethan had committed an unfair labor
practice by failing to honor an agreement with the union).
While the case before the NLRB was in process, the trusts
filed the present action in district court seeking allegedly
delinquent contributions. Ethan and the individually-named
defendants filed an answer and added a counterclaim against
the union, alleging that it had breached the settlement agree-
ment at issue in the NLRB proceeding. The district court dis-
missed the counterclaim and set the present matter for trial.
Two months later, defendants’ attorney J. Patrick Brown
lodged with the court a stipulation and proposed order for
withdrawal as counsel. In it, Brown certified that he had
served a copy of the document on his clients, which included
Ethan and both individually-named defendants. He further
certified, as required by the local rules, see W.D. Wash. Local
Rule GR 2(f)(4)(B),3 that he
informed Defendant Ethan Enterprises, Inc. that as a
corporation it is required by law to be represented by
3The General Rules were amended in 2005, moving GR 2(f)(4) to GR
2(g)(4). At all relevant times below, W.D. Wash. Local Rule GR
2(f)(4)(B) read:
If the attorney for a corporation is seeking to withdraw, the attor-
ney shall certify to the court that he or she has advised the corpo-
ration that it is required by law to be represented by an attorney
admitted to practice before this court and that failure to obtain a
replacement attorney by the date the withdrawal is effective may
result in the dismissal of the corporation’s claims for failure to
prosecute and/or entry of default against the corporation as to any
claims of other parties.
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an attorney admitted to practice before this court and
that failure to obtain a replacement counsel by the
date the withdrawal is effective may result in dis-
missal of the corporation’s claims for failure to pros-
ecute and/or entry of default against the corporation
as to any claims of other parties.
(emphasis added). The court accepted the stipulation and filed
the order, which became effective immediately.
Three days after Brown withdrew as defense counsel, the
trusts filed a motion to amend their complaint, which the dis-
trict court granted. Between the time this motion was filed
and granted, the clerk of the court received notice that a copy
of the withdrawal order served on Johnson via mail had been
returned as undeliverable. That notice was only the beginning
of a series of failed attempts at service. A month later, mailed
copies of the court’s Order to Compel Inspection of Records
were returned as undeliverable to both Johnson and Tift, as
was the order allowing the trusts’ amended complaint. Mail
was but one unsuccessful avenue of contact with the individ-
ual defendants; the trusts also attempted to serve Johnson and
Tift with the amended complaint in person but could not
locate them.
A month after these unsuccessful attempts to serve the
amended complaint in person, the trusts asked the court for
permission to serve the amended complaint via publication. A
summons was subsequently published in a local commercial
paper six times the next month. The defendants never
responded to either the summons or to the court orders issued
months before. The trusts therefore moved for an entry of
default, which the clerk of the court granted. Notice of the
order was mailed to the defendants and, again, was returned
undelivered. The district court therefore entered a default
judgment against all defendants in the amount of
$1,030,344.95.
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According to an affidavit he filed with the district court,
Tift learned of the default judgment after speaking with a
union representative one month later. Two weeks after that,
the defendants filed a Rule 60(b)(4) motion seeking to set
aside the order and judgment of default. They argued that the
judgment was void because the amended complaint was not
properly served. According to defendants, service by publica-
tion was improper because insufficient efforts were made to
locate them and the trusts knew where they could be found.
The district court denied the motion. It agreed with the
trusts that Ethan violated W.D. Wash. Local Rule GR
2(f)(4)(B), which requires that a corporation be represented
by counsel throughout litigation, thereby subjecting Ethan to
default without regard to its failure to answer the amended
complaint. The court upheld the default against Tift and John-
son on similar grounds, holding that their violation of W.D.
Wash. Local Rule CR 41(b)(2),4 which requires pro se liti-
gants to update their mailing address with the court, justified
default. Even if reliance on the local rules were not sufficient,
the court went on to hold, the trusts complied with the rules
for service by publication in Washington and, thus, the default
judgment was warranted by defendants’ failure to answer the
amended complaint.
In response, the defendants filed a motion for reconsidera-
tion as well as a renewed Rule 60(b) motion, this time on
grounds of excusable neglect and misrepresentation. Tift
alleged that he never received a copy of the withdrawal order
signed by the court and that he believed there had to be a
4W.D. Wash. Local Rule CR 41(b)(2) reads:
A party proceeding pro se shall keep the court and opposing par-
ties advised as to his current address. If mail directed to a pro se
plaintiff by the clerk is returned by the Post Office, and if such
plaintiff fails to notify the court and opposing parties within 60
days thereafter of his current address, the court may dismiss the
action without prejudice for failure to prosecute.
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hearing before the Court would allow Brown to withdraw. He
and the other defendants also argued that substantial evidence
supported their defense and that the trusts misrepresented
information upon which the default judgment was based. In
particular, the defendants alleged that the employment data
relied upon by the trusts for calculating the judgment was that
of Tift & Young, Inc., a company it asserted had “no relation-
ship” to Ethan.5
The district court denied the motion for reconsideration and
subsequent Rule 60(b) motions. Appellants now appeal. Nota-
bly, after both parties filed their briefs, a panel of this court
affirmed the decision of the NLRB requiring Ethan to execute
a collective bargaining agreement with the union and comply
with its terms, which include payment to the plaintiff trusts
for benefit contributions. Ethan Enter., Inc., 154 Fed. Appx.
at 23.
ANALYSIS
We review the district court’s entry of the default judgment
and decisions not to set aside that judgment for an abuse of
discretion. TCI Group Life Ins. Plan v. Knoebber, 244 F.3d
691, 695-96 (9th Cir. 2001); Haw. Carpenters’ Trust Funds
v. Stone, 794 F.2d 508, 511-12 (9th Cir. 1986). Although we
analyze the claims of the corporate defendant and the
individually-named defendants separately, we agree with the
district court that default was a proper sanction against both.
A. Default Against Ethan Enterprises
Ethan concedes that it violated Local Rule GR 2(f)(4)(B),
5This characterization of the firms’ relationship is in dispute. There is
separate litigation in district court in which it is alleged that Ethan is actu-
ally the alter ego or successor to Tift & Young, Inc. See Bd. of Tr. of the
Masonry Sec. Plan of Wash. v. Ethan Enter., Inc., No. 04-659 (W.D.
Wash. filed Mar. 26, 2004).
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which requires a corporation to be represented by counsel
before the court. This failure suffices to support the default
judgment against the corporation.
[1] Local Rule GR 2(f)(4)(B) is explicit that “failure to
obtain a replacement attorney by the date the withdrawal [of
counsel] is effective may result in . . . entry of default against
the corporation as to any claims of other parties.” Ethan’s
attorney provided it with actual notice of the rule before he
withdrew, yet Ethan never retained replacement counsel. As
Ethan concedes, we have recognized default as a permissible
sanction for failure to comply with local rules requiring repre-
sentation by counsel. See United States v. High Country
Broadcasting Co., Inc., 3 F.3d 1244, 1245 (9th Cir. 1993) (per
curiam). We find no reason to distinguish the present case.
Ethan nonetheless argues that the default judgment here
was an abuse of discretion because it was based solely on its
failure to answer the amended complaint, which, Ethan con-
tends, was not properly served. Neither the record nor the law
supports Ethan’s position. The district court made clear that
it found Ethan in default not for failure to answer the
amended complaint but for failure to retain substitute counsel
after Brown withdrew. Although the trusts did file an
amended complaint at a time when Ethan was no longer rep-
resented by counsel, nothing about that filing itself diverged
from the normal course of litigation.
[2] Because Ethan’s violation of Local Rule GR 2(f)(4)(B)
justified entry of a default judgment against it whether or not
service of the amended complaint was effective, the district
court did not abuse its discretion by entering a default judg-
ment and, later, refusing to set it aside.
B. Default Against Tift and Johnson
In their challenge to the default judgment Tift and Johnson
also rely primarily on alleged deficiencies of service. The
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record is clear, however, that service of the amended com-
plaint was effective.
[3] Rule 4 of the Federal Rules of Civil Procedure governs
the commencement of an action and the service of process. It
provides that “[a] summons shall be served together with a
copy of the complaint,” FED. R. CIV. P. 4(c)(1), and that
service . . . may be effected in any judicial district of
the United States: (1) pursuant to the law of the state
in which the district court is located, or in which ser-
vice is effected, . . . ; or (2) by delivering a copy of
the summons and of the complaint to the individual
personally . . . .
FED. R. CIV. P. 4(e). Rule 5, in turn, governs service of “every
pleading subsequent to the original complaint unless the court
otherwise orders because of numerous defendants.” FED. R.
CIV. P. 5(a). It provides that such pleadings can be served by
various means, including by “[d]elivering a copy to the person
served[, m]ailing a copy to the last known address of the per-
son served[, and i]f the person served has no known address,
leaving a copy with the clerk of the court.” FED. R. CIV. P.
5(b).
[4] Although the parties and the district court assumed —
for reasons not explained — that Rule 4 governed service of
the amended complaint, that is not so. Instead, it is Rule 5 that
was applicable. Here is why: The amended complaint in this
case qualifies as a “pleading subsequent to the original com-
plaint,”6 thus allowing it to be served in any manner pre-
scribed in Rule 5(b). Plaintiffs served the amended complaint
via mail, which is permitted by Rule 5(b)(2)(B). Thus, to the
extent that appellants’ arguments rely on claims of ineffective
service, their appeal fails.
6An amended complaint clearly is “subsequent to the original com-
plaint” and thus falls squarely within the provisions of Rule 5.
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[5] True, there are circumstances in which amended com-
plaints must be served pursuant to Rule 4. But this is not one
of them. An amended complaint need only be served in the
manner provided by Rule 4 when (1) a party is “in default for
failure to appear” and (2) the “pleadings assert[ ] new or addi-
tional claims for relief.” FED. R. CIV. P. 5(a).
[6] Here, the individual defendants were not in default for
failure to appear; the court had already exercised personal
jurisdiction over them. By the time the amended complaint
was filed, appellants had participated actively in the litigation,
filing an answer to the original complaint and contesting a
disputed counterclaim. It is therefore immaterial whether or
not the amended complaint asserted “new or additional
claims.” See 4B Charles Alan Wright & Arthur R. Miller,
FEDERAL PRACTICE AND PROCEDURE § 1144 (3d ed. 2002) (not-
ing that, “by appearing in the action the party . . . may become
vulnerable to service of claims for new or additional relief
under the relatively informal methods set out in Rule 5(b)”).7
[7] Because Rule 5 and not Rule 4 applies, service of the
amended complaint was complete when plaintiffs sent it via
first class mail. See FED. R. CIV. P. 5(b)(2)(B) (permitting ser-
vice by “[m]ailing a copy to the last known address of the
person served”) (emphasis added). Proof of such service is
clear from the record, as the trusts’ attorney “deposited copies
7We do not suggest that a court could not order that a formal manner
of personal service was necessary for amended complaints filed after the
period for filing such complaints as of right has expired. See FED. R. CIV.
P. 15(a). Nothing in the record, however, indicates that the district court
took this step. In its order allowing the amended complaint, the district
court stated that “service of an Amended Complaint upon [defendants]
shall be allowed.” This statement comports with the “leave of court”
required by Rule 15 for amendments to pleadings out of time; it does not
suggest that the court found Rule 5 service inadequate. This is unsurpris-
ing. Once a party appears in a civil action it is responsible for the diligent
presentation of its case, which includes, inter alia, keeping apprised of
recent filings and providing the court with a correct mailing address.
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of the [Amended Complaint] with the United States Post
Office, directed to said Defendants at the last known address.”
As a result, appellants’ argument that the default judgment
was void for lack of service fails.
C. Alternative Objections to Default
Notwithstanding the propriety of the default judgment,
appellants argue that the district court should have set it aside
because (1) their errors in failing to obtain counsel and update
their addresses amounted to excusable neglect, and (2) plain-
tiffs committed misconduct or misrepresented the record. We
review for an abuse of discretion and affirm.
1. Excusable Neglect
[8] When a default judgment is challenged on grounds of
excusable neglect, three factors inform the district court’s
exercise of discretion: (1) “whether the defendant’s culpable
conduct led to the default”; (2) “whether the defendant has a
meritorious defense”; and (3) “whether reopening the default
judgment would prejudice the plaintiff.” TCI Group Life Ins.
Plan, 244 F.3d at 696; see also Falk v. Allen, 739 F.2d 461,
463 (9th Cir. 1984) (per curiam). Because appellants were
culpable with respect to the default and have no meritorious
defense, the district court acted well within its discretion
when it refused to set aside the judgment.
[9] In this circuit, “a defendant’s conduct [is] culpable for
purposes of the Falk factors where there is no explanation of
the default inconsistent with a devious, deliberate, willful, or
bad faith failure to respond.” TCI Group Life Ins. Plan, 244
F.3d at 698. Such a deliberate failure can be found where, as
here, defendants provide the opposing party with an incorrect
address, thereby precluding normal service of process. See id.
at 698-99 (citing Pena v. Seguros La Comercial, S.A., 770
F.2d 811, 815 (9th Cir. 1985)). As in Pena, the defendants’
failure to update their address made it difficult for the oppos-
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ing party to contact them. This error was hardly “excusable,”
as defendants reasonably should have expected contact with
the trusts in the course of ongoing litigation, particularly dur-
ing the discovery period. Moreover, Ethan’s failure to secure
replacement counsel, as required by the local rules, certainly
cannot be described as “excusable neglect” given clear notice
to Ethan of the need to obtain counsel and Ethan’s unex-
plained delay in doing so. See, e.g., Pioneer Inv. Servs. Co.
v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 392 (1993)
(“[M]istakes construing the rules do not usually constitute
‘excusable’ neglect.”); Pincay v. Andrews, 389 F.3d 853, 858
(9th Cir. 2004) (en banc) (describing a misreading of court
rules as “egregious” but affirming the district court’s consid-
eration of other factors).
[10] Nor do appellants have a meritorious defense. See
Haw. Carpenters’ Trust Funds, 794 F.2d at 513 (“[A]s a pre-
requisite to vacating an entry of default,” a party in default “is
required to make some showing of a meritorious defense[.]”).
Although Ethan, Johnson, and Tift argued in their briefs that
they have not signed the CBA and would have a meritorious
defense if the Ninth Circuit reversed the NLRB’s decision,
appellants recently lost their NLRB appeal. See Ethan Enter.,
Inc., 154 Fed. Appx. at 23. As a result, Ethan must execute
the CBA and satisfy its terms, including payment of contribu-
tions to the plaintiff trusts. Given the preclusive effect of this
recent decision on the primary merits issue in the present case
— whether Ethan is in fact bound by a collective bargaining
agreement with the union requiring contributions to the trusts
— “[t]o permit reopening of the case . . . would cause need-
less delay and expense to the parties and court system.” Haw.
Carpenters’ Trust Funds, 794 F.2d at 513.
2. Plaintiff Misconduct
Appellants also argue that the default judgment should be
set aside because of misconduct and misrepresentation by the
trusts. Appellants, however, have provided no evidence of
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misconduct by the trusts, let alone the “clear and convincing”
evidence required to support such a charge. See De Saracho
v. Custom Food Mach., Inc., 206 F.3d 874, 880 (9th Cir.
2000).
[11] As described above, the trusts served notice of the
default on the defendants in the same manner as they had
served previous pleadings. Nothing in the record suggests that
the trusts defrauded the court with respect to their claims.
Similarly, no evidence suggests that the trusts misrepresented
the contributions owed to them. Rather, it was appellants’
failure to participate in the litigation that forced the court to
rely on indirect payroll information to calculate the amount of
the judgment. Prior to the default, the district court entered an
order to compel inspection of payroll records, but the copy of
the order sent to defendants was returned to the court as unde-
liverable. So it was defendants who were responsible for the
absence of direct data concerning the contributions due.
[12] Given the lack of evidence of misconduct or misrepre-
sentation, appellants fail to meet their burden under Rule
60(b)(3).
AFFIRMED.
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