Denton v. Conveyor Technology et al

Filing 73

ORDER denying 71 Motion for Default Judgment. Signed by Judge Kristine G. Baker on 6/1/2013. (jlp)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION

GLORIA DENTON

vs.

PLAINTIFF

No. 4:12-cv-191-KGB

CONVEYOR TECHNOLOGY & COMPONENTS, INC.,
Individually and d/b/a CONVEYOR TECHNOLOGY
AND COMPONENTS, INC., and JUSTIN CARMODY

JUSTIN CARMODY

DEFENDANTS

COUNTERPLAINTIFF

vs.
GLORIA DENTON

COUNTERDEFENDANT

OPINION AND ORDER
Before the Court is defendant/counterplaintiff Justin Carmody’s motion for default
judgment against counterdefendant Gloria Denton (Dkt. No. 58). Mr. Carmody alleges that Ms.
Denton is in default on his counterclaim.
Rule 55 of the Federal Rules of Civil Procedure contemplates a two-step process for the
entry of default judgments. Fraserside IP L.L.C. v. Youngtek Solutions Ltd., 796 F. Supp. 2d
946, 951 (N.D. Iowa 2011) (citation and internal quotation marks omitted). First, pursuant to
Rule 55(a), the party seeking a default judgment must have the clerk of court enter the default by
submitting the required proof that the opposing party has failed to plead or otherwise defend. Id.
Second, pursuant to Rule 55(b), the moving party may seek entry of judgment on the default
under either subdivision (b)(1) or (b)(2) of the rule. Id. Entry of default under Rule 55(a) must
precede a grant of default judgment under Rule 55(b). Id.

Here, the Court construed Mr. Carmody’s motion for default judgment filed on May 29,
2013, as one for entry of default by the clerk of court and for entry of default by this Court.
Accordingly, the Court referred the motion to the clerk of court for consideration (Dkt. No. 65).
The Clerk entered a default (Dkt. No. 66). The Court will consider at the same time the motion
for default judgment pursuant to Rule 55(b) of the Federal Rules of Civil Procedure (Dkt. Nos.
58, 71) and Ms. Denton’s responses in opposition to motion for default judgment, which the
Court construes as motions to set aside the clerk’s default (Dkt. Nos. 63, 69). The Court will
also take up Mr. Carmody’s motion to strike Ms. Denton’s answer to the counterclaim (Dkt. No.
72).
A “default” occurs when a defendant fails to answer or respond to a complaint, or in this
case a counterclaim, and an “entry of default” is what the clerk of the court enters when it is
established that a defendant, or in this case a counterdefendant, is in default. Roberts v. Kevmar
Capital Corp., No. 4:11cv00681 BRW, 2012 WL 1193133 (E.D. Ark. April 10, 2012). The
entry of default is a procedural step in obtaining a default judgment; it is not determinative of
any rights. Id. Pursuant to Federal Rule of Civil Procedure 8(b)(6), “[a]n allegation – other than
one relating to the amount of damages – is admitted if a responsive pleading is required and the
allegation is not denied.” However, Federal Rule of Civil Procedure 55(c) states a court “may
set aside an entry of default for good cause.” The burden is on Ms. Denton here to establish
good cause. Stephenson v. El-Batawi, 524 F.3d 907, 914 (8th Cir. 2008). To determine whether
there is “good cause” to set aside a default judgment, the Eighth Circuit considers: “(1) whether
the conduct of the defaulting party was blameworthy or culpable; (2) whether the defaulting
party had a meritorious defense; and (3) whether the other party would be prejudiced if the
default were excused.” Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 784 (8th Cir. 1998).

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See also Forsythe v. Hales, 255 F.3d 487, 490 (8th Cir. 2001); Winston v. Evans, No.
5:08cv00204 JMM-HDY, 2009 WL 792466 (E.D. Ark. Mar. 23, 2009).
A.

Blameworthy or Culpable Conduct

The Court’s analysis of whether to set aside the default begins with consideration of Ms.
Denton’s culpability for failure to make a timely response to the counterclaim. See Mackie v.
U.S. Mfg., Inc., 219 F.R.D. 639, 641 (N.D. Iowa 2004) (beginning the analysis by considering
culpability). In Sullivan, the defendant delayed filing an answer to the complaint even after
being warned of the consequences. The defendant had received notice of a hearing and a copy of
the entry of default, yet he did not respond with a motion to set aside the default for over three
weeks. Sullivan & Associates, LLC v. Holladay, No. 3:09cv00079 JLH, 2010 WL 582790 (E.D.
Ark. Feb. 16, 2010). Judge Holmes determined that this failure to respond constituted more than
a “marginal failure” to meet the pleading requirements. Id. Judge Holmes observed that “[t]he
Eighth Circuit has rarely, if ever, excused ‘contumacious or intentional delay or disregard for
deadlines and procedural rules,’ but has often granted relief for ‘marginal failures where there
were meritorious defenses and an absence of prejudice.’” Sullivan, 2010 WL 582790, at *2
(quoting Johnson, 140 F.3d at 784).
Like the defendant in Sullivan, here Ms. Denton does not deny receipt of the
counterclaim. Indeed, she filed a motion to dismiss the counterclaim, which this Court denied.
After receiving the Court’s order denying her motion to dismiss the counterclaim, Ms. Denton
failed to respond until confronted with Mr. Carmody’s motion for default judgment.
Immediately, upon receiving the motion for default judgment, Ms. Denton responded by
answering the counterclaim (Dkt. No. 62). She also responded the next day to the motion for

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default judgment (Dkt. No. 63) and, when the Court afforded an opportunity for all parties to
supplement briefings regarding the default, did so in a timely manner (Dkt. No. 69).
B.

Meritorious Defense

A meritorious defense is one that would permit a finding for the defaulting party.
Sullivan, 2010 WL 582790, at *3 (citing Johnson, 140 F.3d at 785). Courts must consider
“whether there is some possibility that the outcome. . . after a full trial will be contrary to the
result achieved by the default.” Id. (citing Stephenson, 524 F.3d at 914). In order for the court to
set aside the entry of default, the court must have before it more than just mere allegations that a
defense exists, the defaulting party must show cause for why the entry should be set aside. Id.
“The underlying concern is. . . whether there is some possibility that the outcome. . . after a full
trial will be contrary to the result achieved by the default.” Stephenson, 524 F.3d at 914, (citing
Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843 F.2d 808, 812 (4th Cir.
1988) (per curiam) (quoting 10 Charles Alan Wright, Arthur R. Miller & Mary K. Kane, Federal
Practice and Procedure § 2697 (2d ed. 1983)). In Fink, the court determined that even though
defendants raised two affirmative defenses in their answer, “bald allegation[s]. . . without the
support of facts underlying the defense, will not sustain the burden of the defaulting party to
show cause [for] why the entry of default should be set aside; the trial court must have before it
more than mere allegations that a defense exists.” Fink v. Swisshelm, 182 F.R.D. 630, 633 (D.
Kan. 1998) (followed by Stephenson, 524 F.3d at 914). In Winston, Judge Moody applied “the
more lenient standard for setting aside a default” even though the defendant’s defenses were not
clear at the time. Winston, at *1. However, in both Fink and Winston, the defendants had at the
very least filed an answer, even though it was not timely filed, denying the plaintiff’s allegations.
Id.

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This Court concludes that Ms. Denton has demonstrated through her filings that there is
some possibility that the outcome, after a full trial, will be contrary to the result achieved by the
default.
C.

Prejudice

Ms. Denton has the burden of proving that Mr. Carmody would not be prejudiced if the
motion to set aside were granted. Sullivan, 2010 WL 582790, at *4. In Stephenson, the court
found that “delay alone, or the fact that the defaulting party would be permitted to defend on the
merits, are insufficient grounds to establish the requisite prejudice to the plaintiff.” Stephenson,
524 F.3d at 915 (citing Johnson, 140 F.3d at 785). For the court to set aside an entry of default,
that action must prejudice Mr. Carmody “in a more concrete way, such as ‘loss of evidence,
increased difficulties in discovery, or greater opportunities for fraud and collusion.’” Id. (quoting
Berthelsen v. Kane, 907 F.2d 617, 621 (6th Cir. 1990) (per curiam)).
Here, given that all parties have worked this case up for a trial on the merits set to start
Monday, June 3, 2013, intend to dispute the intertwined and related facts underlying Ms.
Denton’s claims and Mr. Carmody’s counterclaim at trial, and until a matter of days prior to trial
were unaware of the possibility of a default, the Court determines that Mr. Carmody would
suffer little, if any, hardship or prejudice as a result of a Court order allowing Ms. Denton to
defend on the merits against Mr. Carmody’s allegations in his counterclaim.
***
After weighing all three factors, the Court elects to set aside the entry of default as to Ms.
Denton on Mr. Carmody’s counterclaim. Ms. Denton has shown that her conduct in defaulting is
more closely akin to a marginal failure as opposed to contumacious or intentional delay or
disregard for deadlines and procedural rules, that she can present a meritorious defense, and that

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Mr. Carmody would not be prejudiced in setting aside the default. For these reasons, Mr.
Carmody’s motion for default judgment against Ms. Denton is denied (Dkt. Nos. 58, 71), and
Ms. Denton’s request to set aside the clerk’s default is granted.
For these same reasons, the Court denies Mr. Carmody’s motion to strike Ms. Denton’s
answer to the counterclaim, but the Court takes under advisement Mr. Carmody’s request to
strike Ms. Denton’s affirmative defenses raised in her answer to the counterclaim (Dkt. No. 72).
SO ORDERED this the 1st day of June, 2013.

______________________________
Kristine G. Baker
United States District Judge

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