NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS OCT 15 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ZURICH AMERICAN INSURANCE No. 17-55776
COMPANY,
D.C. No. 2:16-cv-04301-R-JC
Plaintiff-Appellee,
v. MEMORANDUM*
SEALINK INSURANCE SERVICE CORP.
and YAN SARA ZHANG,
Defendants-Appellants,
and
PHANN GELINDA KEO; et al.,
Defendants.
Appeal from the United States District Court
for the Central District of California
Manuel L. Real, District Judge, Presiding
Submitted October 11, 2018**
Pasadena, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Page 2 of 5
Before: WATFORD and OWENS, Circuit Judges, and PRESNELL,*** District
Judge.
Defendants Yan Sara Zhang and Sealink Insurance Service Corporation
appeal from the district court’s denial of their motion to set aside the entry of
default and default judgment against them. In evaluating such a motion, “a court
must consider three factors: (1) whether the party seeking to set aside the default
engaged in culpable conduct that led to the default; (2) whether it had no
meritorious defense; or (3) whether reopening the default judgment would
prejudice the other party.” United States v. Signed Personal Check No. 730 of
Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (internal quotation marks
and alterations omitted). “[A] finding that any one of these factors is true is
sufficient reason for the district court to refuse to set aside the default.” Id. For the
following reasons, we hold that the district court did not abuse its discretion in
denying defendants’ motion.
1. We need not reach the issue of defendants’ culpable conduct because
defendants’ lack of a meritorious defense is sufficient to justify the district court’s
refusal to set aside the default and default judgment. See United States v. Aguilar,
782 F.3d 1101, 1105 & n.5, 1109 (9th Cir. 2015). Defendants have no meritorious
***
The Honorable Gregory A. Presnell, United States District Judge for
the Middle District of Florida, sitting by designation.
Page 3 of 5
defense to Zurich American Insurance Company’s breach of contract claim. They
point to the lack of a written agreement and argue that the “contract at issue does
not exist.” However, they do not dispute that Sealink sold insurance policies
issued by Zurich in exchange for Sealink’s remittance of premiums, and there is
ample evidence of an agreement governing that arrangement. Defendants offer no
facts to dispute the existence of an agreement, and “general objections to the
existence of a contract” are “insufficient to satisfy the meritorious defense
requirement.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 (9th Cir. 2016)
(internal quotation marks omitted).
Defendants also lack a meritorious defense to Zurich’s breach of fiduciary
duty claim. Defendants do not dispute that Sealink failed to maintain the
premiums it owed Zurich in a segregated trust account as required by California
Insurance Code sections 1733 and 1734. Defendants’ argument that those
provisions do not provide Zurich with a cause of action is mistaken. See Middlesex
Insurance Co. v. Mann, 177 Cal. Rptr. 495, 503 (Ct. App. 1981) (“We conclude
that a civil action will lie for damages proximately resulting from a licensee’s
breach of the fiduciary obligations imposed by [sections 1733 and 1734].”).
Finally, defendants fail to assert a meritorious defense to the size of the
default judgment award. The district court determined that the declaration of
Zurich’s legal collection specialist and the billing statement generated by Zurich
Page 4 of 5
constituted “proof sufficient to support [Zurich’s] requested damages.”
Defendants’ challenge to the sufficiency and reliability of that evidence does not
amount to a meritorious defense. See Franchise Holding II, LLC v. Huntington
Restaurants Group, Inc., 375 F.3d 922, 926 (9th Cir. 2004) (a “mere general
denial” regarding the extent of the deficiency owed “is not enough to justify
vacating a default or default judgment” (internal quotation marks omitted)).
Defendants fail to offer specific facts disputing the damages amount despite being
“in the best position to have the accurate records required to refute” Zurich’s
evidence. NewGen, 840 F.3d at 617. Defendants’ assertion that they lack records
substantiating the claimed amount does not amount to an allegation of “sufficient
facts that, if true, would constitute a defense.” Mesle, 615 F.3d at 1094.
2. The district court did not err in failing to set aside the default judgment
pursuant to Federal Rule of Civil Procedure 60(b)(4). Rule 60(b)(4) provides for
relief when a judgment is void. In contrast to the other grounds for relief under
Rule 60(b), a default judgment may be vacated on this ground even if the
defendant lacks a meritorious defense. See Thos. P. Gonzalez Corp. v. Consejo
Nacional de Produccion de Costa Rica, 614 F.2d 1247, 1256 (9th Cir. 1980).
Defendants argue that the judgment is void due to inadequate service of process.
But Zurich’s service of process satisfied the statutory requirements. Zurich’s
substituted service of the summons and complaint on Zhang was proper under
Page 5 of 5
Federal Rule of Civil Procedure 4(e)(1) and California Code of Civil Procedure
section 415.20(b). Zurich’s service of the summons and complaint on Sealink
complied with Federal Rule of Civil Procedure 4(h)(1)(B). Finally, Zurich served
both Zhang and Sealink with its motion to enter default judgment in accordance
with the Central District of California’s Local Rule 55-2 and Federal Rule of Civil
Procedure 5(b)(2)(C).
AFFIRMED.