Wells v. Global Tech Industries, Inc, 2:21-cv-02040

Plaintiff David Wells, a California resident and financial consultant, received 1,500,000 fully paid shares of Global Tech on Feb. 6, 2012 and later sought to sell them; he alleges Global Tech/its transfer agent refused to register the shares under NRS § 104.8401 and Rule 144 procedures.
Plaintiff filed suit in this District on Nov. 11, 2021; Global Tech was served Nov. 16, 2021 but did not answer; counsel for Global Tech emailed plaintiff’s counsel on Nov. 29 proposing a stay based on a first-to-file dispute in New York, which plaintiff rejected.
Plaintiff requested and obtained a clerk’s entry of default against Global Tech on Jan. 1, 2022. Global Tech moved to vacate the entry of default on Jan. 12, 2022.
Global Tech argued its omission was reasonable because of the first-to-file issue and pro hac vice considerations; plaintiff argued Global Tech’s sophisticated counsel deliberately failed to respond and that vacatur would prejudice plaintiff and was unsupported by any meritorious defense.
The Court applied the Ninth Circuit "good cause" factors (culpability, prejudice, meritorious defense) for vacating a clerk’s entry of default and, balancing those factors and the federal preference to decide cases on the merits, granted Global Tech 21 days to answer.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether defendant's failure to timely answer was culpable	Markowitz (Global Tech) is sophisticated; actual notice + no prompt action = culpable, deliberate choice	Counsel reasonably relied on first-to-file and believed pro hac vice would be possible; omission not taken to gain advantage	Delay not shown to be bad-faith manipulation; culpability weighs only marginally in favor of vacatur
Whether vacating default would prejudice plaintiff	Plaintiff: loss in stock value and unfair delay	Defendant: prejudice is de minimis; it moved quickly after entry of default	Financial volatility alone is not tangible prejudice; prejudice prong favors vacatur
Whether defendant raised a meritorious defense	Plaintiff: defendant offered no factual defenses to the NRS claim	Defendant: asserted procedural/legal reasons (first-to-file) but provided no factual defense	Defendant failed to meet minimal showing of meritorious defense, but this was not dispositive
Whether default should be vacated and relief granted	Plaintiff: deny vacatur	Defendant: grant vacatur to litigate merits	Court granted vacatur (good cause shown) and gave Global Tech 21 days to answer

Brandt v. American Bankers Ins. Co. of Florida, 653 F.3d 1108 (9th Cir. 2011) (Rule 55(c) vacatur governed by "good cause" standard and relates to Rule 60(b) when default judgment entered)
United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085 (9th Cir. 2010) (defines culpability standard for vacating default and presumes cases should be decided on the merits)
Franchise Holding II, LLC v. Huntington Restaurants Grp., Inc., 375 F.3d 922 (9th Cir. 2004) (vacatur standard and Ninth Circuit's preference to decide cases on merits)
Falk v. Allen, 739 F.2d 461 (9th Cir. 1984) (prejudice requires hindrance to plaintiff's ability to pursue claim)
Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685 (9th Cir. 1988) (cases addressing counsel culpability in default contexts)
Richmark Corp. v. Timber Falling Consultants, Inc., 937 F.2d 1444 (9th Cir. 1991) (addressing standards for setting aside default judgments)
Meadows v. Dominican Republic, 817 F.2d 517 (9th Cir. 1987) (cases concerning counsel's notice and default-setting standards)