Lakeview Cheese Co., LLC v. Nelson-Ricks Creamery Co., 296 F.R.D. 649

Lakeview Cheese sued Nelson-Ricks defendants for trademark infringement and breach of contract alleging unauthorized sales of BANQUET‑branded cheese after an asset sale transferred the mark to Lakeview; complaint filed August 15, 2013.
Defendants failed to file an answer by the September 9, 2013 deadline; parties exchanged emails in which defendants' president, Michael Greenberg, said defendants stopped selling BANQUET and believed the matter was settled.
Lakeview moved for entry of default on November 1, 2013; the Clerk entered default on November 4, 2013; defendants retained counsel and moved to set aside the entry of default within two weeks.
Defendants argued their failure to answer was inadvertent because they reasonably believed the dispute had been resolved by their agreement to stop sales and by communications with Lakeview’s counsel.
Lakeview argued defendants were legally sophisticated and culpable for failing to answer and sought fees as a condition to vacatur; defendants asserted meritorious defenses (settlement/estoppel and contested damages) and that vacatur would not prejudice Lakeview.
The court granted the motion to set aside the Clerk’s entry of default, declined to award attorneys’ fees, and ordered defendants to file an answer by January 3, 2014.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether defendant's default was culpable	Nelson‑Ricks is legally sophisticated; failure to answer indicates culpability	Failure to answer was inadvertent because parties believed matter settled after defendants stopped sales	Not culpable — defendants were not sufficiently sophisticated and offered a credible innocent explanation
Whether defendants showed a meritorious defense	Lakeview: defenses unproven and do not negate infringement liability	Defendants: settlement/estoppel and contested damages would defeat or limit recovery	Meritorious defense satisfied — alleged facts, if true, would constitute a defense
Whether vacating default would prejudice plaintiff	Vacatur disrupted discovery and caused weeks of lost opportunity; fees sought	Delay was short and plaintiff can proceed on merits; no substantial prejudice shown	No substantial prejudice — short delay and ability to litigate on merits weigh for vacatur
Whether vacatur should be conditioned on attorney fees	Plaintiff: award fees and costs for obtaining default and responding	Defendants: did not meaningfully oppose fee request	Court declined to impose fees — discretionary denial based on short delay and defendants’ circumstances

TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691 (9th Cir.) (explains good‑cause factors for vacating default and default judgment)
Franchise Holding II, LLC v. Huntington Rests. Group, Inc., 375 F.3d 922 (9th Cir.) (holds failure to answer can indicate culpability)
Mesle (United States v. Signed Pers. Check No. 730 of Yubran S. Mesle), 615 F.3d 1085 (9th Cir.) (limits culpability rule where defendant is not legally sophisticated; negligent omissions may not be culpable)
Falk v. Allen, 739 F.2d 461 (9th Cir.) (policy favoring decision on the merits over default)
Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. Louisiana Hydrolec, 854 F.2d 1538 (9th Cir.) (discusses discretion to condition vacatur on payment of fees)