Murphy v. Kahana Villa Vacation Club & Soleil Mgmt.

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SEAN MURPHY, Plaintiff, v. KAHANA VILLA VACATION CLUB^[1]and SOLEIL MANAGEMENT, LLC, Defendants.

Civil Action No. 1:22-cv-11646-IT

United States District Court, D. Massachusetts

April 25, 2023

MEMORANDUM & ORDER

Indira Talwani United States District Judge.

Plaintiff Sean Murphy, proceeding pro se, seeks a declaratory judgment and damages against Kahana Villa Vacation Club (“Kahana Club”) and Soleil Management, LLC (“Soleil”) (collectively “Defendants”) for breach of contract, unfair and/or deceptive practices, and civil rights violations under Massachusetts law related to the use of a time-share. Verified Compl. ¶¶ 1, 6-7 [Doc. No. 1-1]. Now pending before the court is Defendants' Motion to Set Aside Entry of Default and Motion to Dismiss [Doc. No 10]. For the following reasons, Defendants' Motion is GRANTED.

I. Procedural History

On May 4, 2022, Murphy filed his Verified Complaint in Bristol County Superior Court for violations of the Massachusetts Consumer Protection Act, Mass. Gen. Laws c. 93A §§ 1-11 the Massachusetts Civil Rights Act, Mass. Gen. Laws c. 12 §§ 11H, 11I, breach of contract, and declaratory judgement pursuant to Mass. Gen. Laws c. 231A. Id. Murphy alleges, inter alia, that in 2021 he paid approximately $7,000 towards his arrears due under his 2008 time-share contract with Kahana Club as requested by Defendants, who instructed Murphy that once he paid his arrears, the unused weeks would be automatically returned. Id. at ¶¶ 4-13. Murphy alleges further that after he made another payment, Defendants told him that he could not redeem any of his past weeks because the demand in Hawaii was high and attempted to “extort an additional $1,000 from Murphy by means of threats, intimidation and coercion.” Id. at ¶ 14-18. Murphy alleges that although Defendants eventually brought his account to zero as promised, id. at ¶ 22, Kahana Villa owners were not allowed to use their time-shares in 2020-2021 because of the flight restrictions due to the COVID-19 pandemic, id. at ¶ 23.

On September 15, 2022, the Bristol County Clerk of Court defaulted Defendants pursuant to Massachusetts Rule of Civil Procedure 55(a) for failure to plead or otherwise defend the case. Default Order [Doc. No. 1-4]. On September 20, 2022, Murphy filed his Motion for Default Judgment [Doc. No. 1-5]. On September 28, 2022, before the Superior Court acted on Murphy's motion, see State Court Record 5 [Doc. No. 9], Defendants removed the action based on diversity of citizenship between the parties, see Not. of Removal 1-3 [Doc. No. 1]. On October 5, 2022, Defendants filed the pending Motion to Set Aside Entry of Default and Motion to Dismiss [Doc. No. 10] for lack of personal jurisdiction, which Murphy opposes. See Opp. [Doc. No. 14].

II. Factual Background

A. Facts as Relevant to the Motion to Set Aside Entry of Default

Defendant Kahana Club is an association of residential unit owners that operates the Kahana Villa Vacation Club Resort (“Kahana Resort”) located at 4242 Lower Honoapiilani Road, Lahaina, HI 96761. Mano Decl. ¶ 4 [Doc. No. 11]; Verified Compl. ¶ 2 [Doc. No. 1-1]. On or about June 22, 2022, Murphy attempted to serve Kahana Club with the Superior Court Summons and Complaint through a part-time front-desk employee at the Kahana Resort, Kathleen Pascual. Kahana Return of Service [Doc. No. 1-3]; Mem. 2 [Doc. No. 13]. Pascual's duties at the Kahana Resort were limited to checking guests into their units; she was not authorized to accept new reservations, change existing reservations, supervise maintenance staff, or accept service of legal process on behalf of Kahana. Mano Decl. ¶¶ 5, 8-9 [Doc. No. 11].

Kahana Club's registered agent is Soleil Management Hawaii, LLC (“Soleil Hawaii”), for which Gary Mano is the registered agent. Mano Decl. ¶¶ 3, 10-11. [Doc. No. 11]. Soleil Hawaii's service address is 10 Ho'ohui Road, Suite 302, Lahaina, Hawaii 96761. Id. at ¶ 12. Kahana Club has no record of having been served with the summons or complaint in this lawsuit through its registered agent or otherwise. Id. at ¶ 13.

On or about June 10, 2022, Murphy attempted to serve Defendant Soleil with the Superior Court Summons and Complaint by serving Jeffery Owens at Soleil's service address of 7200 South Las Vegas Blvd., #A, Las Vegas, Nevada 89119. Soleil Return of Service [Doc. No. 1-2]; Mem. 2 [Doc. No. 13]. At the time, Owens was employed as the guest services manager at Tahiti Village Resort in Las Vegas and his duties included guest services, employee recruitment and training, and employee scheduling. Rodriguez Decl. ¶¶ 7, 10 [Doc. No. 12]. Owens was not an officer, managing agent, or registered agent of Soleil, and he was not in control “of the dayto-day operations” of Soleil. Id. at ¶¶ 8-9. Owens was not authorized to accept service of legal process on behalf of Soleil. Id. at ¶ 11.

Soleil's registered agent is Richard L. Rodriguez, id. at ¶ 5, and its managers include Rodriguez, Jennifer Cuthbert, and Robert Wagner, id. at ¶ 9. Soleil has no record of having properly been served with the summons and complaint. Id. at ¶ 12.

B. Jurisdictional Allegations and Facts in the Record

Soleil is a Nevada limited liability company that provides management services in Nevada, Hawaii, California, and Florida. Rodriguez Decl. ¶¶ 3-4 [Doc. No. 12]. Kahana Club operates the Kahana Resort located in Hawaii, see Mano Decl. ¶ 4 [Doc. No. 11], and is managed by Soleil Hawaii, which is also located in Hawaii, id. at ¶ 3.^[2] Neither Soleil nor Soleil Hawaii have offices in Massachusetts, manage any resort or conduct business in Massachusetts, or own or lease any real property in Massachusetts. Id. at ¶ 14; Rodriguez Decl. ¶ 14 [Doc. No. 12]. Further, neither Soleil nor Soleil Hawaii has a Massachusetts address or telephone number, pays taxes in Massachusetts, has any Massachusetts bank accounts, or has employees who work in Massachusetts. Mano Decl. ¶ 15 [Doc. No. 11]; Rodriguez Decl. ¶ 15 [Doc. No. 12].

In September 2008, Murphy, a Massachusetts resident, see Verified Compl. ¶ 1 [Doc. No. 1-1] upgraded his time-share at Kahana Resort, id. at ¶ 4. The time-share contract between Murphy and Kahana Club was signed by Murphy in Hawaii. Mano Decl. ¶ 17 [Doc. No. 11].

Murphy claims that all bills and invoices were sent to him in Massachusetts. Opp. ¶ 5 [Doc. No. 14]. In 2021, Murphy sought to pay Soleil his arrearages for the time-share. Verified Compl. ¶ 10 [Doc. No. 1-1]. Murphy spoke with Soleil employee Iris Caldwell and “Reservations,”^[3] and Murphy made payments to bring his account out of arrears. Id. at ¶¶ 14-15.

As alleged, Soleil misrepresented to Murphy that if he paid his arrearages, he would be able to redeem his weeks. Id. at ¶ 28.

On March 25, 2022, Murphy sent Kahana Club and Soleil demand letters pursuant to M.G.L. c. 93A describing the claimed unfair and deceptive practices and demanding all the money he applied to the time-share be returned to him. Id. at ¶ 29.

III. Motion to Set Aside Entry of Default

Defendants move to vacate the Superior Court's entry of default based on Murphy's failure to properly serve either defendant. Murphy argues that default was warranted where he properly served Defendants in their regular place of business. See Opp. 1 [Doc. No. 14].

A. Standard of Review

Under Federal Rule of Civil Procedure 55(c), “the court may set aside an entry of default for good cause.” However, “[t]here is no mechanical formula for determining whether good cause exists and courts may consider a host of relevant factors.” Indigo Am., Inc. v. Big Impressions, LLC, 597 F.3d 1, 3 (1st Cir. 2010); see also Com. Bank & Tr. Co. v. Ria LLC, 314 F.R.D. 338, 340 (D. Mass. 2016) (internal quotations omitted) (“[Rule 55(c)] is also a liberal standard, but not so elastic as to be devoid of substance. It is a lower standard than that for vacating a judgment pursuant to Rule 60(b).”). Courts generally consider “(1) whether the default was willful; (2) whether setting it aside would prejudice the adversary; and (3) whether a meritorious defense is presented.” McKinnon v. Kwong Wah Rest., 83 F.3d 498, 503 (1st Cir. 1996); see KPS & Assocs., Inc. v. Designs By FMC, Inc., 318 F.3d 1, 12 (1st Cir. 2003). However, these factors are not exhaustive and other relevant factors include: “(4) the nature of the defendant's explanation for the default; (5) the good faith of the parties; (6) the amount of money involved; [and] (7) the timing of the motion [to set aside entry of default].” KPS & Assocs., 318 F.3d at 12 (quoting McKinnon, 83 F.3d at 503); see also Coon v. Grenier, 867 F.2d 73, 76 (1st Cir. 1989). “[T]he burden of demonstrating good cause lies with the party seeking to set aside the default.” Indigo Am., Inc., 597 F.3d at 3.

B. Discussion

First, Defendants argue that default was not willful where their failure to respond to Murphy's pleadings was not based on evasion of service, but rather a result of improper service to individuals who were not authorized agents. Mem. 5-6 [Doc. No. 13]. Murphy contends that both Defendants were properly served at their “normal and regular place of business” in adherence to the Massachusetts rules of service. Opp. ¶¶ 1-2 [Doc. No. 14].

Service must be “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Cent. Hanover Bank &amp Tr. Co., 339 U.S. 306, 314 (1950). Where Defendants do not move for dismissal based on insufficient process under Federal Rule of Civil Procedure 12(b)(5) or challenge sufficiency of service after the case was removed, but rather seek to remove the Superior Court's entry of default based on service prior to removal, Massachusetts rules regarding...