Opinion
B304536
12-02-2021
HEALTHCARE ALLY MANAGEMENT OF CALIFORNIA, LLC, Plaintiff and Appellant, v. ARJOHUNTLEIGH, INC., Defendant and Respondent.
Law Offices of Jonathan A. Stieglitz and Jonathan A. Stieglitz for Plaintiff and Appellant. Brutzkus Gubner and Michael A. Bernet for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a postjudgment order of the Superior Court of Los Angeles County No. SC125267, Elaine W. Mandel, Judge. Affirmed.
Law Offices of Jonathan A. Stieglitz and Jonathan A. Stieglitz for Plaintiff and Appellant.
Brutzkus Gubner and Michael A. Bernet for Defendant and Respondent.
EGERTON, J.
Plaintiff Healthcare Ally Management of California, LLC (Healthcare) appeals from an order setting aside and vacating a default and default judgment entered against defendant Arjohuntleigh, Inc. (Arjo). Finding no abuse of discretion, we affirm.
BACKGROUND
Arjo is a medical services company based in Sweden. It provides medical devices and services to more than 60 countries and is registered to do business in California. Arjo's U.S. headquarters is in Illinois. Healthcare is the assignee of medical provider La Peer Surgery Center.
1. Underlying complaint and entry of default and default judgment
Healthcare alleged Arjo breached an oral agreement with La Peer to pay for a medical procedure performed at La Peer's facility in November 2013 for a patient who was a member and enrollee of Arjo's health plan. Because La Peer was an "out-of-network" provider, it did not have a written contract with Arjo. As is customary in such a situation, on November 13, 2013, La Peer's employee called Arjo's alleged third party administrator -Horizon Blue Cross Blue Shield of New Jersey-to determine if Arjo would pay for the patient's use of the surgery center and to confirm the payment terms. Horizon's employee, on behalf of Arjo, promised that La Peer "would be paid for medical services" at 70 percent of the market rate, or the reasonable and customary amount, after the applicable deductible and until the patient's maximum out of pocket expense was met.
Healthcare withheld the patient's identifying information to comply with HIPAA.
Although unclear from the complaint, in support of Healthcare's application for default judgment, La Peer's representative Tarina Bechtle declared the percentage paid would rise to 100 percent after the maximum out of pocket expense was met.
The patient underwent the surgical procedure at La Peer's facility on November 15, 2013. La Peer submitted its $77,500 bill for the patient's use of the facility to Arjo. Arjo paid the patient $1,832.64. La Peer sent Arjo a letter of appeal on May 8, 2014, based on Horizon's assurances of payment, but Arjo denied additional payment. On June 17, 2015, La Peer assigned the still-unpaid bill to Healthcare.
Bechtle declared La Peer submitted the bill to Arjo's representative, Horizon, as instructed on the patient's insurance card.
Bechtle clarified Horizon, on behalf of Arjo, told La Peer it had sent the payment to the patient and no further payment would be made. She attached a copy of the February 22, 2014 check from Horizon to the patient (redacted) to her declaration.
On January 19, 2016, Healthcare filed a lawsuit against Arjo alleging causes of action for quantum meruit, breach of oral contract, and promissory estoppel. On January 29, 2016, a registered California process server personally served the complaint, a summons issued to Arjo, and other required documents, on Michael Brzeczek-a District Manager for Arjo at its office in Cerritos, California-as a person authorized to accept service for Arjo.
After Arjo did not respond to the complaint, on March 15, 2016, Healthcare filed a request for entry of default and mailed a copy of the request addressed generally to Arjo at the Cerritos location where it had served Brzeczek. Healthcare filed its request for default judgment and supporting declarations with exhibits on May 23, 2016. On September 1, 2016, the trial court (Judge Nancy Newman) entered default judgment against Arjo in the amount of $92,741.46.
According to the court's case summary, Healthcare also filed those documents on March 15, 2016.
2. Arjo's motion to vacate the default judgment
In March 2019, Healthcare's counsel sent a letter to Arjo addressed to Brzeczek at the Cerritos office demanding payment of the judgment. Brzeczek, who did not recall hearing anything about the lawsuit, forwarded the letter to Arjo's corporate counsel at Arjo's U.S. headquarters in Illinois. On March 25, 2019, Arjo's corporate counsel contacted Healthcare's counsel to find out more about the case, noting she had no information about it. On April 11, 2019, two weeks after they spoke by phone, Healthcare's attorney emailed Arjo's corporate counsel to reiterate Healthcare's demand that Arjo pay the full amount of the outstanding judgment plus interest for a total of $116,930.45.
At that point, Arjo retained California counsel. Arjo's California counsel contacted Healthcare's counsel by email on May 8, 2019. Counsel asked for more information underlying Healthcare's claim, stating Arjo preferred to resolve the matter "amicably," but would seek judicial relief from the default judgment if necessary. Healthcare's counsel responded by email on May 13, 2019, contending equitable mistake did not apply, restating the outstanding balance of the judgment and interest, and asking for Arjo's offer. Healthcare's counsel also stated Healthcare would not provide Arjo with the patient's information as it was "irrelevant at th[at] point."
In his May 16, 2019 reply email, Arjo's counsel asserted Healthcare's refusal to give Arjo the information underlying the medical services provided and the details of the patient's insurance policy supported the conclusion there was extrinsic fraud and the judgment should be set aside. Without more information, Arjo was willing to settle the matter for no more than $25,000. Arjo's counsel and Healthcare's counsel continued to exchange emails about a possible settlement until August 21, 2019, but did not reach an agreement.
On September 6, 2019, Arjo's counsel retrieved a copy of the court's online case summary. On September 9, 2019, counsel's office reserved the first available hearing date- November 21, 2019-for Arjo's motion to set aside the default and default judgment. Arjo filed its motion on October 29, 2019, with counsel's and Brzeczek's supporting declarations, and a request for judicial notice of court records and Arjo's business entity details listed on the California Secretary of State's website.
Arjo argued it was entitled to equitable relief based on Healthcare's "deliberate and calculated ineffective and improper service of the Complaint, Request for Default, Request for Default judgment only upon a lower-level employee at a local depot location, as well as [Healthcare's] subsequent refusal to provide Arjo's counsel with any information or documentation relating to the allegations in the Complaint." Arjo argued it remained unaware of the default proceedings based on extrinsic fraud or mistake because Healthcare served Brzeczek-instead of Arjo's California-registered agent-and mailed the default-related documents to the Cerritos depot without identifying a recipient. Arjo contended Healthcare's actions demonstrated it intended to keep Arjo "in the dark" about the case.
The declaration of mailing for the request for entry of default states it was mailed to Arjo at its Cerritos depot address.
Arjo asserted it acted diligently in seeking relief from the default judgment, by first contacting Healthcare's counsel, then retaining local counsel after Healthcare refused to provide information about its claims, and finally, seeking to reserve the first available hearing date after settlement discussions ceased on August 21, 2019. Arjo also contended it had a meritorious defense to the complaint based on the two-year statute of limitations, and might have other defenses, including that Healthcare's claims against it were based on "supposed communications between [La Peer] and Horizon (allegedly acting as an agent for Arjo), and not communications directly between [La Peer] and Arjo." Arjo maintained that, because it had never used Horizon as a third-party administrator for its health insurance plan, "the allegations of the Complaint should easily be defeated if th[e] case were heard on its merits." Finally, Arjo argued the default judgment was void because it awarded Healthcare damages that exceeded the complaint in violation of Code of Civil Procedure section 580, subdivision (a), as the prayer for relief was silent as to the amount of damages sought.
Healthcare opposed the motion. It submitted the declaration of its process server attesting that Brzeczek had indicated he was a" 'District Manager'" for Arjo and "was authorized to accept service on its behalf." Healthcare relied on Bechtle's earlier-filed declaration and exhibits, including a copy of the patient's insurance card bearing Arjo's and Horizon's logos. Bechtle also had authenticated an insurance verification form that La Peer's employee had completed when she verified the patient's insurance details in November 2013. The form lists the patient's deductible and out of pocket maximum and, for out of network charges, the patient's responsibility is "30% P[ai]d at 70%."
The trial court (Judge Elaine Mandel) heard Arjo's motion on November 21, 2019, and took it under submission. On December 30, 2019, the court issued its written ruling granting Arjo's motion and exercising its "equitable authority to set aside the entry of default and default judgment for extrinsic mistake."
Healthcare then applied ex parte to ask the court to clarify its order to explain what it had found to be the extrinsic mistake or to reconsider the order on its own motion. The court found ex parte relief unwarranted and continued the matter to February 11, 2020. On that date, the court tentatively ruled the extrinsic mistake was "Brzeczek's failure to make the corporate defendant's management aware that he had been served with the lawsuit." After hearing argument, the court amended its tentative ruling and clarified that the extrinsic mistake was both the service on Brzeczek and his failure to notify corporate management.
The court confirmed it was not ruling the service was invalid, but that the extrinsic mistake "was because the service was on Brzeczek." The court explained, "It is the combination that he was the one who was served, and then he failed to notify the corporate management, both." In response to counsel asking if there were two extrinsic mistakes, the court responded, "You can consider it one, or you can consider it two. He was the one who was served, and then he failed to pass along the information that he had been served. If they had served someone else-." Counsel then interrupted the court, "So the service was proper?" The court attempted to explain further, "No. I'm not saying the service was proper or not proper. I'm saying the fact that he was the one who was served set in motion this chain of events. If service had been on somebody else, then-." Healthcare's counsel again interrupted the court, "But as a matter of the court's ruling and order, was service proper or was service improper?" The court agreed Brzeczek "was served." The court again explained, "But the fact that the service was made to him, and then he failed to pass along the information, that combined to make the extrinsic mistake."
The court's final written ruling states, "The 'extrinsic mistake' was service on Brzeczek and Brzeczek's failure to make the corporate defendant's management aware that he had been served with the lawsuit." Healthcare timely appealed.
We do not find Healthcare's opening brief to be untimely.
DISCUSSION
1. Applicable law and standard of review
Under Code of Civil Procedure section 473, subdivision (b), a default judgment may be set aside by a motion made within six months after entry of the default. (Manson, Iver & York v. Black (2009) 176 Cal.App.4th 36, 42.) After the six-month statutory period has expired, "the court may still grant relief on equitable grounds, including extrinsic fraud or mistake," provided the party "demonstrate[s] diligence in seeking to set aside the default once it was discovered." (Id. at pp. 47, 49.) "When a default judgment has been obtained, equitable relief may be given only in exceptional circumstances." (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981 (Rappleyea).)
All further statutory references are to the Code of Civil Procedure.
"To qualify for equitable relief based on extrinsic mistake, the defendant must demonstrate: (1) 'a meritorious case'; (2) 'a satisfactory excuse for not presenting a defense to the original action'; and (3) 'diligence in seeking to set aside the default once the fraud [or mistake] had been discovered.'" (Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th 1241, 1246 (Mechling); accord, Rappleyea, supra, 8 Cal.4th at p. 982.)
We review an order on a motion to vacate a default and set aside a default judgment for an abuse of discretion. (Rappleyea, supra, 8 Cal.4th at p. 981.) "The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court." (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478-479.) "[W]e will not disturb the trial court's factual findings where . . . they are based on substantial evidence. It is the province of the trial court to determine the credibility of the declarants and to weigh the evidence." (Falahati v. Kondo (2005) 127 Cal.App.4th 823, 828.) Rather, we must resolve all ambiguities in favor of affirming the order. (Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 889.)
On appeal, the order of the trial court is presumed to be correct. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564 (Denham).) All intendments and presumptions are made to support the order on matters as to which the record is silent. (Ibid.) As the law "favor[s] a hearing on the merits whenever possible, . . . appellate courts are much more disposed to affirm an order which compels a trial on the merits than to allow a default judgment to stand." (Aldrich v. San Fernando Valley Lumber Co. (1985) 170 Cal.App.3d 725, 737.)
2. The court did not abuse its discretion in granting Arjo relief from the default and default judgment
Substantial evidence supports the court's decision to set aside the default and default judgment based on extrinsic mistake under the three-part Rappleyea test.
a. Arjo demonstrated it had a meritorious defense
The court found Arjo established a meritorious defense based on its assertion that the alleged oral contract did not exist and Healthcare's evidence of its existence was hearsay. Healthcare argues the court improperly considered this defense because (1) Arjo belatedly raised it in its reply, and (2) hearsay is not a defense. We disagree on both points.
First, although Arjo articulated in its notice of motion only the statute of limitations as its "meritorious defense," in its supporting memorandum of points and authorities Arjo also argued it could demonstrate Horizon was not its agent and Healthcare's claims were based on communications between La Peer and Horizon, not between La Peer and Arjo-in other words, hearsay. (Luri v. Greenwald (2003) 107 Cal.App.4th 1119, 1125 ["An omission in the notice may be overlooked if the supporting papers make clear the grounds for the relief sought."].) Accordingly, Arjo's argument that Healthcare cannot establish an oral contract because it is based solely on hearsay was not an entirely new position raised for the first time in its reply, as Healthcare contends. Rather, Arjo's reply referred to the specific hearsay evidence-Bechtle's earlier-filed declaration and attached exhibits. As Arjo explained in its reply, it did not receive the declaration and exhibits from Healthcare until two days before the reply was due.
Healthcare filed Bechtle's declaration in support of its application for default judgment in 2016 and relied on the declaration and exhibits in its opposition to Arjo's motion to set aside the default judgment.
Moreover, the record does not include the reporter's transcript from the November 21, 2019 hearing on Arjo's motion for relief from default. We presume, therefore, Healthcare did not object to Arjo's argument and reference to the Bechtle declaration and exhibits as untimely, and it had an opportunity to respond to Arjo's argument about the hearsay evidence at that hearing. (See Hearn v. Howard (2009) 177 Cal.App.4th 1193, 1200-1201 [in absence of reporter's transcript appellate court presumes "that what occurred at that hearing supports the judgment"]; Denham, supra, 2 Cal.3d at p. 564.)
Second, substantial evidence supports the court's finding that Arjo presented a meritorious defense. "[O]nly a minimal showing is necessary" for a party moving for equitable relief from a default judgment to establish it had" 'a meritorious case.'" (Mechling, supra, 29 Cal.App.5th at p. 1246.) "The moving party does not have to guarantee success, or 'demonstrate with certainty that a different result would obtain. . . . Rather, [it] must show facts indicating a sufficiently meritorious claim to entitle [it] to a fair adversary hearing.'" (Ibid.)
If Arjo were to establish that Healthcare's only evidence of the purported oral contract between La Peer and Arjo was based on inadmissible hearsay evidence, then Arjo would be able successfully to defend against Healthcare's claims. Healthcare's evidence of La Peer's oral contract with Arjo is based on Bechtle's description of oral conversations between "Linda," a La Peer employee, and "Jacqueline," a Horizon employee, and attached exhibits, including an insurance verification form Linda filled out; an illegible copy of the patient's Blue Cross Blue Shield insurance card with Arjo's and Horizon's logos on it; a bill La Peer sent to Horizon; and a check Horizon sent to the patient. As Arjo noted, Bechtle did not declare how she has personal knowledge of the phone conversation between Linda and Jacqueline, which took place before she began working for La Peer. Nor did she declare she was a custodian of records to demonstrate the exhibits attached to her declaration fall within the business records exception.
Even if Healthcare were able to admit those exhibits at trial under a hearsay exception-and Linda and Jacqueline were to testify to their conversation-as Arjo asserted, none of that evidence is related to Arjo (except for its logo on the health insurance card), nor does it show Horizon had the authority to bind Arjo to Horizon's alleged oral agreement with La Peer. And, Brzeczek declared Arjo never has used Horizon to administer its health insurance plan as alleged in the complaint. (See Mechling, supra, 29 Cal.App.5th at p. 1247 [moving party is not required but may satisfy the meritorious defense prong by submitting a declaration "averring there is such a defense"].) Arjo may not succeed at trial, but in the context of a motion for relief from default, its showing was sufficient to demonstrate a meritorious defense against Healthcare's claim that Horizon entered into an oral agreement with La Peer on behalf of Arjo.
The trial court did not consider Arjo's asserted defense based on the statute of limitations; we need not consider it either.
b. Substantial evidence supports the court's finding of extrinsic mistake i. Applicable law
" 'Extrinsic mistake occurs "when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits." [Citation.] In contrast with extrinsic fraud, extrinsic mistake exists when the ground of relief is not so much the fraud or other misconduct of one of the parties as it is the excusable neglect of the defaulting party to appear and present his claim or defense. If that neglect results in an unjust judgment, without a fair adversary hearing, the basis for equitable relief on the ground of extrinsic mistake is present. [Citation.] Relief will be denied, however, if the complaining party's negligence permitted the fraud to be practiced or the mistake to occur.'" (Kramer v. Traditional Escrow, Inc. (2020) 56 Cal.App.5th 13, 29-30 (Kramer) [no relief warranted where defendants received actual notice of the lawsuit, but took no action, and were "responsible for their own lack of awareness of the proceedings" by failing to provide notice of changes to their mailing address].) One example of extrinsic mistake (among others) is "when a mistaken belief of one party prevented proper notice of the action." (Kulchar v. Kulchar (1969) 1 Cal.3d 467, 471-472.)
ii. Arjo demonstrated a satisfactory excuse for not defending the action based on extrinsic mistake
The trial court found Brzeczek's position, as a general manager of one of Arjo's depots in California, was "sufficiently remote from [Arjo's] upper echelons that it was reasonable for [Arjo] to be unaware of the judgment until [Healthcare's] demand letter was served." Substantial evidence supports the trial court's finding.
As the court noted, "Arjo was based in Sweden, providing services in a number of countries; Brzeczek managed a single depot." Brzeczek declared he was a "General Manager of a depot in Cerritos" for Arjo. Although he apparently indicated to the process server that he was authorized to accept service on behalf of Arjo, Brzeczek declared he never has been authorized to accept service of process for Arjo. Brzeczek also declared that, since at least January 2016, Arjo's registered agent for service of process-listed with the California Secretary of State-is CSC-Lawyers Incorporating Service in Sacramento. He attested he did not specifically recall being served (or not) with the summons and complaint and does not accept service of such documents as part of his "regular business duties as a manager of one of Arjo's depots." He did not remember hearing anything about this case until he received a letter from Healthcare's counsel on March 18, 2019.
Healthcare argues Arjo's failure to respond to the complaint was entirely its own fault and thus cannot constitute extrinsic mistake entitling it to equitable relief. (See Kramer, supra, 56 Cal.App.5th at p. 29.) Healthcare asserts that, because the court found Brzeczek was served with the summons and complaint, no exceptional circumstances or extrinsic mistake exists to excuse his negligence in failing to forward the summons and complaint to Arjo's corporate counsel. Healthcare primarily relies on Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 503 (Cruz) where the Court of Appeal reversed an order granting relief from a default judgment for extrinsic mistake. There, the plaintiff demonstrated it properly served an out of state corporation by mail, but the corporate officer to whom the envelope was addressed declared he had not received the summons and complaint. (Id. at pp. 499-500, 504-505.) The appellate court concluded the fact the company's internal mail procedures "may have resulted in the misplacement of documents that the evidence establishe[d] were delivered to the company [was] not a sufficient excuse" for the company's failure to defend the action. (Id. at p. 505.)
Cruz is distinguishable. True, the trial court here agreed Brzeczek was personally served with the summons and complaint. But, Brzeczek declared he never has been authorized to accept service of process for Arjo and did not accept service of summonses and complaints as part of his regular duties as the general manager of one of Arjo's depots. In Cruz, in contrast, the plaintiff served the litigation documents by mail addressed to a corporate officer, return receipt requested, and an employee who regularly received mail on the company's behalf signed the return receipt. (Cruz, supra, 146 Cal.App.4th at pp. 492-493, 504-506.) Here, it was the fact that Healthcare chose to serve a manager at one of Arjo's depots instead of someone else-for example, Arjo's agent designated to accept service in California- that created the extrinsic mistake. Had Healthcare served Arjo's registered agent or an employee with ties to Arjo's U.S. corporate headquarters in Illinois, then the situation here would have been more like that in Cruz.
The plaintiff in Cruz served the corporation by mail as permitted under section 415.40 and established the employee who signed the return receipt was authorized to receive mail on the defendant's behalf, so as to have complied with sections 416.10, subdivision (b) and 417.20. (Cruz, supra, 146 Cal.App.4th at pp. 496-499.)
We can infer this is what the court meant when it repeatedly explained, "If service had been on somebody else, then-," but was interrupted.
Moreover, in Cruz the appellate court concluded declarations from the corporate officer-that he had not received the documents-and from the head of claims-that she was unaware of the lawsuit-did not rebut plaintiff's evidence that the corporation had received notice of the lawsuit. (Cruz, supra, 146 Cal.App.4th at pp. 504-505.) The court implied the defendant could have met its burden, however, by presenting evidence the employee who signed the return receipt was not authorized to receive mail for the company or that the address to which plaintiff sent the summons and complaint was not the defendant's address for service of process. (Id. at pp. 504-505 & fn. 6.) It did not. Thus, relief was not available for extrinsic mistake because the corporation had "been given notice of [the] action yet fail[ed] to appear, without having been prevented from participating in the action." (Id. at p. 503.) In direct contrast, Arjo presented evidence Brzeczek was not authorized to accept service of process on behalf of Arjo, and the Cerritos depot was not its designated address for service of process.
The trial court apparently found Brzeczek's declaration credible. Noting Brzeczek managed "a single depot," not Arjo's general business, the court found his position was "relatively remote from the company's upper management." Under section 416.10, a corporation may be served by delivering a copy of the summons and complaint to a person designated as agent for service of process or to a president, other head, or officer of the corporation, or to "a general manager, or a person authorized by the corporation to receive service of process." (§ 416.10, subds. (a)-(b).) A "general manager" of a corporation is "an agent of the corporation of sufficient character and rank to make it reasonably certain that the corporate defendant will be apprised of the service made." (General Motors Corp. v. Superior Court (1971) 15 Cal.App.3d 81, 85-86 (General Motors) [explaining "general manager" means an individual" 'who has general direction and control of the business of the corporation as distinguished from one who has the management only of a particular branch of the business' "].)
The court did not expressly find serving Brzeczek was invalid service for Arjo, but it noted the evidence "suggest[ed] Brzeczek's authority was too limited for him to qualify as a 'general manager' for purposes of accepting service." The "unrefuted evidence" that Arjo's upper management did not become aware of the lawsuit or judgment until 2019 "suggested," in the court's view, that serving Brzeczek with the summons and complaint "did not make it 'reasonably certain that the corporate defendant w[ould] be apprised of the service made,' as required under General Motors."
In response to Healthcare's counsel, the court said it was "not saying the service was invalid" on Brzeczek, but clarified it also was "not saying the service was proper or not proper." Thus, the court found the process server did in fact personally serve Brzeczek, but did not decide whether that service was proper or improper as to Arjo.
Healthcare contends the court was "misled" by the authorities Arjo cited about invalid service under section 416.10 rendering a judgment void, and that section 416.10 cannot support a finding of extrinsic mistake to set aside a judgment "in equity." We can infer from the court's comments and written ruling that it was not misled. Based on the evidence, the court implicitly found Arjo's ignorance of Healthcare's lawsuit was not simply a result of its own negligence or failed internal procedures, as Healthcare argued. Rather, the "mistake" of serving Brzeczek-whose authority appeared to be limited to the Arjo depot in Cerritos, despite his title of general manager or district manager-in the court's words, "set in motion th[e] chain of events" that resulted in Arjo not receiving notice of the lawsuit and default.
Based on this record, we cannot say the court exceeded the bounds of reason in reaching this conclusion. The evidence supports its finding that the service on Brzeczek (instead of someone else), combined with his subsequent failure to inform Arjo's corporate office of the suit, constituted a satisfactory excuse based on extrinsic mistake that made it reasonable for Arjo's managers "to be ignorant" of the lawsuit and judgment until 2019. Accordingly, we need not address Arjo's alternative argument that the default judgment was void under section 580.
c. Substantial evidence supports the trial court's finding that Arjo was sufficiently diligent
Finally, Healthcare contends the trial court abused its discretion in finding Arjo diligently sought to set aside the default judgment when it waited seven months to file its motion. We cannot say the court "exceeded the bounds of reason" in determining Arjo diligently sought to set aside the default judgment when, before doing so, Arjo attempted to negotiate with Healthcare first.
Arjo presented evidence it learned of the default judgment around March 18, 2019, when Brzeczek received Healthcare's demand letter and forwarded it to Arjo's corporate counsel. Arjo's corporate counsel contacted Healthcare's corporate counsel on March 25, 2019. On April 11, 2019, Healthcare's counsel contended it was too late for Arjo to contest the judgment and again demanded payment. Recognizing it had reached an impasse, Arjo-located in Illinois-sought to retain counsel in California. Arjo apparently found and retained its current counsel in less than a month, and, on May 8, 2019, Arjo's new attorney asked Healthcare's attorney to provide more information about the underlying claim, as Arjo would "prefer to resolve the matter amicably." Arjo's counsel declared he continued to exchange emails with Healthcare's counsel about "the possibility of settlement" until August 21, 2019. On September 9, 2019, Arjo's counsel requested (through the court's online system) the earliest available hearing date for Arjo's motion for relief, which was not until November 21, 2019.
Healthcare contends Arjo's seven-month delay in not filing its motion until October 29, 2019, was not diligent as a matter of law, noting it was beyond the six-month period prescribed by section 473 for setting aside judgments and citing to cases where courts found no diligence based on a delay of a few months. Healthcare also contends negotiations between it and Arjo were not ongoing because Healthcare "was always 'adamant' that it would not be settling," and the Court of Appeal in Pulte Homes Corp. v. Williams Mechanical, Inc. (2016) 2 Cal.App.5th 267, 277-278 (Pulte) rejected ongoing negotiations as an excuse to delay filing a motion to set aside a default judgment.
First, we presume the trial court found credible Arjo's counsel's declaration that he was engaged in settlement negotiations until he received an August 21, 2019 email from Healthcare's counsel. We defer to that credibility finding. Second, Pulte is distinguishable. There, the Fourth District Court of Appeal found the defendant was not diligent where its insurer-who became aware of the default judgment against the defendant in early April-waited until after it had received some documents from plaintiff's counsel in late July before it retained counsel for the defendant. Counsel then filed a motion to set aside the default and default judgment in late August. (Pulte, supra, 2 Cal.App.5th at pp. 271, 277-278.) Here, in contrast, Arjo's corporate counsel did not wait for months before retaining litigation counsel, despite not having received more information from Healthcare. Arjo's litigation counsel also asked for and did not receive documents underlying Healthcare's claim over a period of months. Nevertheless, as we discussed, we can infer the court found counsel's decision to wait to file Arjo's motion for relief attributable to his reasonable attempts to settle the matter. Finally, although Arjo did not file its motion until its due date on October 29, 2019, it reserved the earliest hearing date available within six months of receiving the demand letter. (Cf. Cruz, supra, 146 Cal.App.4th at pp. 494, 509 [no diligence where corporate defendant knew default had been requested and did not act for another nine months].)
Counsel declared Healthcare finally provided a copy of the patient's insurance card to Arjo the day before Arjo filed its reply brief.
We also can infer the court found the delay between Arjo's discovery of the default judgment and its filing of the motion for relief from the default did not prejudice Healthcare. (Mechling, supra, 29 Cal.App.5th at pp. 1248-1249 ["When evaluating a motion to set aside a default judgment on equitable grounds, the 'court must weigh the reasonableness of the conduct of the moving party in light of the extent of the prejudice to the responding party.' "].) Although the court entered the default judgment in September 2016, Healthcare waited for more than two years-until March 2019-before it demanded payment from Arjo. Healthcare's own delay suggests it was not in any hurry to proceed, or, as Arjo argued, that it acted purposefully to prevent Arjo from obtaining relief from the default judgment.
On this record, we cannot conclude Arjo's delay until September 2019 to reserve a hearing date-and subsequent filing of its motion for relief from default on October 29-precluded the court from granting Arjo equitable relief.
In sum, under the deferential abuse of discretion standard, we cannot conclude the trial court's decision to exercise its equitable authority to set aside the entry of default and default judgment in these circumstances was" 'so irrational or arbitrary that no reasonable person could agree with it.'" (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773.) Although reasonable jurists could have reached a different decision, we cannot substitute our discretion for that of the trial court. (Mechling, supra, 29 Cal.App.5th at p. 1249.)
DISPOSITION
The order is affirmed. In the interests of justice, the parties are to bear their own costs on appeal.
We concur: EDMON, P.J., LAVIN, J.