Heaton v. Geico Insurance Company of Alabama

Filing 14

ORDER GRANTING GEICO's 13 Motion to Set Aside Entry of Default as set out. The Clerk is to set aside the 11 Entry of Default. Plf's 10 Motion for Default Judgment is MOOT as set out. GEICO is to file an Answer or other responsive pleading on or before 10/5/15. Signed by Judge Callie V. S. Granade on 9/15/2015. (copy mailed to Plf on 9/16/15) (tot)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
PHILIP HEATON
Plaintiff,
vs.
GEICO INSURANCE COMPANY
OF ALABAMA
Defendant.

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) CIVIL ACTION NO. 15-224-CG-C
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ORDER
This matter is before the Court on the motion of GEICO General Insurance
Company (“Defendant”1) to set aside clerk’s entry of default. (Doc. 13). After review
of Defendant’s motion and the record of this case, the Court finds that the motion
should be granted.
Defendant contends that the entry of default should be set aside because
Plaintiff never perfected service against it in a manner that comports with the
requirements of Rule 4(h) and because it did not use its correct name. Defendant
argues that Plaintiff attempted to serve it by certified mail using a local GEICO
Auto Insurance sales agent’s address and naming the Defendant as “GEICO
Insurance Company” and “GEICO Insurance Company of Alabama”, neither of
which is known to exist. Defendant reports that its correct name is GEICO General

The Court notes that GEICO General Insurance Company reports that it has not
been properly named or served in this case and thus, it arguably may not currently
be a proper defendant in this matter. The Court’s reference to GEICO Insurance
Company as the Defendant is for simplicity purposes only.
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Insurance Company.
A motion to set aside entry of default is governed by Federal Rule of Civil
Procedure 55(c), which states, in pertinent part, that “[t]he court may set aside an
entry of default for good cause.”2
“ ‘Good cause’ is a mutable standard, varying from situation to
situation.” Compania Interamericana Export–Import, S.A. v.
Compania Dominicana, 88 F.3d 948, 951 (11th Cir.1996). In
determining whether “good cause” has been shown, the courts have
considered the following: (a) whether the default was culpable or
willful; (b) whether setting it aside would prejudice the adversary, (c)
whether the defaulting party presents a meritorious defense; (d)
whether there was significant financial loss to the defaulting party;
and (e) whether the defaulting party acted promptly to correct the
default. Id. If a “party willfully defaults by displaying either an
intentional or reckless disregard for the judicial proceedings, the court
need make no other findings in denying relief.” Id. at 951–52.
S.E.C. v. Johnson, 436 Fed.Appx. 939, 945 (11th Cir. 2011). The Court is mindful
that default judgments are “a drastic remedy which should be used only in extreme
situations.” Mitchell v. Brown & Williamson Tobacco Corp., 294 F.3d 1309, 1316–17
(11th Cir.2002) (quoting Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985)).
This is because they are contrary to “the usual preference that cases be heard on the
merits rather than by resorting to sanctions that deprive a litigant of his day in

In contrast, a party seeking to set aside a default judgment must proceed under
Federal Rule of Civil Procedure 60(b). Gulf Coast Fans, Inc. v. Midwest Electronics
Importers, Inc., 740 F.2d 1499, 1507 (11th Cir. 1984). “The importance of
distinguishing between an entry of default and a default judgment lies in the
standard to be applied in determining whether or not to set aside the default.”
E.E.O.C. v. Mike Smith Pontiac GMC, Inc., 896 F.2d 524, 528 (11th Cir. 1990). The
excusable neglect standard that courts apply in setting aside a default judgment is
more rigorous than the good cause standard that is utilized in setting aside an entry
of default. Id. (citing Jones v. Harrell, 858 F.2d 667, 669 (11th Cir. 1988)).
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court.” Id. at 1317 (quoting Wahl supra).
Applying the above factors, it is clear that the entry of default in this case
should be set aside. First, Defendant’s purported default was not culpable or
willful. See Kelly v. Florida, 233 F. App'x 883, 885 (11th Cir. 2007) (“[T]he district
court properly set aside its entry of default against the [defendant], as the
[defendant] was never correctly served [plaintiff's] complaint and thus had good
cause not to timely respond to that complaint.”). Federal Rule of Civil Procedure
4(h) governs service of process upon a corporation. Rule 4(h) allows a plaintiff to
serve a defendant in accordance with Rule 4(e)(1), by following state law for serving
a summons, or “by delivering a copy of the summons and of the complaint to an
officer, a managing or general agent, or any other agent authorized by appointment
or by law to receive service of process…” FED. R. CIV. P. 4(e)(1). Alabama's service
rule states that as to a “domestic or foreign corporation or upon a partnership,
limited partnership, limited liability partnership, limited liability company, or
unincorporated organization or association,” service shall be made “by serving an
officer, a partner (other than a limited partner), a managing or general agent, or
any agent authorized by appointment or by law to receive service of process.” ALA.
R. CIV. P. 4(c)(6). Neither method appears to have been followed in this case.
Second, the record is devoid of any evidence to indicate that Plaintiff would
experience any particular prejudice from setting aside default. Cf. United States v.
Andrews, 2010 WL 2507278, at *2 (M.D. Ga. June 15, 2010) (“The [plaintiff] would
suffer prejudice in a general sense as a result of setting aside the default. However,
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the [plaintiff] has put forth no evidence showing that it would suffer any particular
prejudice, like the loss of evidence.”). Although Plaintiff has experienced delay
because of the default, Plaintiff can now proceed to litigate the case. The Third
Circuit has noted that a plaintiff’s need to litigate its case on the merits, rather
than proceed by default, does not establish prejudice. See Choice Hotels Int'l, Inc. v.
Pennave Assoc., Inc., 192 F.R.D. 171, 174 (3d Cir. 2000). The Eleventh Circuit has
echoed this same sentiment in dicta. See Connecticut State Dental Ass'n v. Anthem
Health Plans, Inc., 591 F.3d 1337, 1357 (11th Cir.2009) (citing Lacy v. Sitel Corp.,
227 F.3d 290, 293 (5th Cir. 2000) for the proposition that “[t]here is no prejudice to
the plaintiff where the setting aside of the default has done no harm to plaintiff
except to require it to prove its case”).
Third, Defendant purports to have a meritorious defense to Plaintiff's claims.
As mentioned above, Defendant raises the defense of insufficient service of process.
Defendant also argues that Plaintiff failed to provide notice of an underlying
settlement that occurred prior to the filing of Plaintiff’s complaint. Defendant
argues that Plaintiff is attempting to assert uninsured motorist claims against it for
an accident that Plaintiff already litigated against other defendants and settled.
Moreover, Defendant contends it has legal defenses related to the fact that Plaintiff
received criminal citations related to the accident that would indicate Plaintiff was
culpable and/or contributorily negligent.
Finally, Defendant promptly acted to correct the default. Default was
entered on August 27, 2015 (Doc. 11), and Defendant filed its motion to set aside
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default only 15 days later, on September 11, 2015. Additionally, Defendant reports
that it only learned of the entry of default less than 48 hours before filing its motion
to set aside.
Accordingly, the motion of GEICO General Insurance Company to set aside
clerk’s entry of default (Doc. 13), is GRANTED. The Clerk is hereby ORDERED to
set aside the entry of default, dated August 27, 2015 (Doc. 11). Plaintiff’s motion for
default judgment (Doc. 10), is now MOOT.
Since GEICO General Insurance Company has now clearly been made aware
of this matter, GEICO General Insurance Company is ORDERED to file an Answer
or other responsive pleading on or before October 5, 2015.
DONE and ORDERED this 15th day of September, 2015.
/s/ Callie V. S. Granade
UNITED STATES DISTRICT JUDGE

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