Central Illinois Carpenters Health and Welfare Trust Fund et al v. Rice Equipment Co.
Filing
16
OPINION: Defendant's Motion to Set Aside Default 8 is GRANTED and Plaintiffs' Motion for Default Judgment Against Defendant Rice Equipment Co. 7 is DENIED. It is ORDERED that the Order of Default 5 against Defendant be set aside. Defendant's Answer and Affirmative Defenses 9 is deemed properly filed. (SEE WRITTEN OPINION) Entered by Judge Sue E. Myerscough on 7/15/2015. (GL, ilcd)
E-FILED
Thursday, 16 July, 2015 09:08:34 AM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
CENTRAL ILLINOIS CARPENTERS )
HEALTH AND WELFARE TRUST
)
FUND, et al.
)
)
Plaintiffs,
)
)
v.
)
)
RICE EQUIPMENT CO.,
)
)
Defendant.
)
No. 14-3390
OPINION
SUE E. MYERSCOUGH, U.S. District Judge.
This cause is before the Court on Defendant Rice Equipment
Co.’s Motion to Set Aside Default (d/e 8). Because Defendant has
shown good cause for the default, quick action to correct it, and a
potentially meritorious defense to the Complaint, the Motion is
GRANTED. Plaintiffs’ Motion for Default Judgment Against
Defendant Rice Equipment Co. (d/e 7) is DENIED.
I. BACKGROUND
On December 17, 2014, Plaintiffs, employee benefit plans
within the meaning of the Employee Retirement Income Security Act
of 1974 (ERISA), filed a Complaint against Defendant.
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The Complaint alleges that Defendant is a signatory to an
“Agreement Recognizing the Mid-Central Illinois District Council of
Carpenters as Exclusive Bargaining Representative and Adopting
All Collective Bargaining Agreement to Which That Labor
Organization is a Party” (Recognition Agreement) and the Collective
Bargaining Agreement Between Central Illinois Builders of A.G.C.
Greater Peoria Contractors and Suppliers Association, Inc. and MidCentral Illinois Regional Council of Carpenters (Mid-Central Master
Agreement). Compl. ¶¶ 13, 16. The Complaint further alleges that
Defendant employs individuals who are participants in the
employee benefit funds administered by the Plaintiff Funds and is
required to report the hours worked by its employees and make
prompt payment of the contributions to the Plaintiff Funds
pursuant to the Agreement, Declarations of Trust, and policies
adopted by the Trustees of the Plaintiff Funds. Id. ¶¶ 19, 20. The
Mid-Central Master Agreement, Declarations of Trust, and/or the
policies adopted by the Trustees also authorize the Trustees to
conduct audits of contributing employers. Id. ¶ 22.
Plaintiff Funds allege that demand has been made upon
Defendant for an audit to determine Defendant’s compliance with
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its fringe benefit reporting and payment obligations. Id. ¶ 24.
Defendant has refused to allow an audit to take place. ¶ 25.
Plaintiff Funds request an interlocutory order that Defendant
submit to an audit, at Defendant’s cost, and an order awarding
Plaintiffs all contributions determined to be due, as well as
liquidated damages, prejudgment interest, attorney’s fees and costs,
and postjudgment interest. Compl., Prayer for Relief.
Summons was served on Defendant on January 7, 2015. See
Summons (d/e 3). Therefore, an Answer was due on January 28,
2015. No answer was filed.
On January 30, 2015, Plaintiffs filed a Motion for Entry of
Default (d/e 4). The Motion was granted that same day. See Order
of Default (d/e 5).
On February 2, 2015, Plaintiffs filed a Motion for Default
Judgment (d/e 7). Plaintiffs sought entry of a default judgment and
an order directing Defendant to submit to an audit.
On February 17, 2015, Defendant filed the Motion to Set Aside
Default (d/e 8) at issue herein. Thereafter, the parties filed a Status
Report indicating that the parties were attempting to schedule an
audit and asked the Court for 60 days within which to advise the
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Court of the status of the case. See Status Report (d/e 11). The
May 2015 Status Report indicated the audit was completed. See
Status Report (d/e 12). The June 2015 Status Report stated that
the parties conferred regarding the audits, the Motion to Set Aside,
and the possibility of settlement. However, Defendant retained new
counsel and Plaintiffs requested leave to respond to the pending
Motion to Set Aside (d/e 14).
On July 6, 2015, Plaintiffs filed their Memorandum in
Opposition to Defendant Rice Equipment Co.’s Motion to Set Aside
Default (d/e 15).
II. ANALYSIS
Plaintiffs initially ask the Court to strike Defendant’s Motion to
Set Aside Default for failure to comply with Local Rule 7.1(B)(1).
Local Rule 7.1(B)(1) provides that “[e]very motion raising a question
of law . . . must include a memorandum of law including a brief
statement of the specific points or propositions of law and
supporting authorities upon which the moving party relies, and
identifying the Rule under which the Motion is filed.” CDIL-LR
7.1(B)(1).
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Plaintiffs are correct that Defendant did not comply with the
Local Rule because Defendant only filed a motion and did not
include a “memorandum of law.” However, the Motion does include
a brief statement of the specific points or propositions of law on
which Defendant relies (although it does not cite any case law) and
identifies the Rule under which the motion is filed. Moreover, if the
Court did strike the Motion, the Court would grant Defendant leave
to refile, which would only delay the case further. Therefore, the
Court will not strike the Motion to Set Aside Default but reminds
Defendant that the Court expects the parties to comply with the
Local Rules. The Court now turns to the merits of the Motion to Set
Aside Default.
“T]he Court may set aside an entry of default for good cause.”
Fed. R. Civ. P. 55(c). A party seeking to vacate an entry of default
prior to the entry of final judgment must show: “(1) good cause for
the default; (2) quick action to correct it; and (3) a meritorious
defense to the complaint.” Sun v. Bd. of Trs. of the Univ. of Ill., 473
F.3d 799, 810 (7th Cir.2007); see also Fed. R. Civ. P. 55(c). This is
the same test that applies to motions for relief from default
judgment under Rule 60(b), but the test is more liberally construed
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under Rule 55(c). Cracco v. Vitran Express, Inc., 559 F.3d 625, 631
(7th Cir. 2009) The Seventh Circuit has articulated a “policy of
favoring trial on the merits over default judgment.” Cracco, 559
F.3d at 631 (citations omitted).
A.
Defendant Has Shown Good Cause for Setting Aside the
Default
In support of the assertion that there is good cause for setting
aside the default, Defendant submitted the Affidavit of Joshua
Avigad of Kaplan Associates LLC, Defendant’s former counsel. Mr.
Avigad states that on February 17, 2015, he and attorney Lawrence
Kaplan received a phone call from the principal of Defendant, who
advised that he had just become aware of a default judgment. See
Avigad Aff. ¶ 3. The principal also advised that he sent a copy of
the Complaint to Kaplan Associates, LLC prior to the entry of
default with the understanding that Kaplan Associates, LLC would
enter an appearance and file an answer. Id. ¶ 4. However, Kaplan
Associates, LLC did not receive the Complaint and had no notice of
the filing until February 17, 2015. Id. at ¶ 5. It was Mr. Avigad’s
understanding that Kaplan Associates, LLC’s spam filter prevented
“transmission” (he may have meant “receipt”) of the Complaint and
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the request for Kaplan Associates, LLC to enter an appearance. Id.
¶ 6.
Plaintiffs object to this affidavit because Mr. Avigad is not
competent to testify as to Defendant’s intentions, anything Mr.
Avigad says about Defendant’s intentions is hearsay, and Mr.
Avigad has not properly established that his firm’s spam filter was
the culprit behind the alleged failure to receive the email prior to
the entry of default. Pls. Mem. at p. 6.
While Plaintiffs objections may have some merit, this Court
will accept the representations of Defendant’s former counsel (who
was counsel for Defendant at the time the motion was filed, see d/e
10) as an officer of this Court. Defendant’s excuse for not
answering or otherwise pleading in a timely manner is not strong.
However, Defendant did not act willfully or as a result of gross
negligence. Defendant apparently attempted to obtain counsel prior
to the entry of default but Kaplan Associates, LLC did not receive
the transmission of the Complaint. See, e.g., Bluegrass Marine,
Inc. v. Galena Road Gravel, Inc., 211 F.R.D. 356, 358 (S.D. Ill.
2002) (finding good cause where there was no evidence that the
default was willful or the result of gross negligence but was the
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result of a misunderstanding; the defendant did not attempt to
avoid service, did not deny that it was served, and responded to the
plaintiff’s complaint informally through letters denying liability).
Therefore, this Court finds Defendant has established good cause.
See Cracco, 559 F.3d at 631 (district court did not abuse its
discretion by finding good cause where the defendant “did not
willfully ignore the pending litigation, but, rather, failed to respond
to the summons and complaint through inadvertence”).
B.
Defendant Acted Quickly in Response to the Entry of
Default
Plaintiffs do not appear to dispute that Defendant acted
quickly in response to the entry of default. The entry of default was
entered on January 30, 2015. On February 2, 2015, Plaintiffs filed
the Motion for Default Judgment. The Motion to Set Aside Default
was filed on February 17, 2015. The Motion for Default Judgment
remains pending.
The Court finds that Defendant acted quickly. Moreover,
Plaintiffs have not suffered any prejudice, particularly in light of the
fact that Plaintiffs’ Motion for Default Judgment seeks an order
requiring Defendant to submit to an audit, and an audit has since
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occurred. See Hamilton v. Illinois Central R.R. Co., No. 07-0383,
2008 WL 78784, at *5 (S.D. Ill. 2008) (finding that the defendant
acted quickly and caused no prejudice to the plaintiff where it filed
its motion to vacate a little over six weeks after the default was
entered); see also, e.g., Smith v. Widman Trucking & Excavating,
Inc., 627 F.2d 792, 798 (7th Cir. 1980) (finding that motion to
vacate pursuant to Rule 60(b)(1) filed within 10 weeks after entry of
the order was “timely” where the plaintiff was not prejudiced).
C.
Defendant Has Asserted a Potentially Meritorious Defense
Defendant asserts three defenses: (1) Defendant disputes it is
obligated to the District Council1 based on the alleged agreement
contained in the Complaint; (2) Defendant disputes the fringe
benefit claims on the ground that the District Council Funds
miscalculated the payments allegedly owed and has no right to
collect the money; and (3) Defendant asserts that it is not required
to make the payments claimed in the Complaint pursuant to the
Standard Agreement entered into with the International Carpenter’s
Defendant refers to Plaintiffs as “District Council Funds.” See Motion ¶ 1 (d/e
8).
1
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Union. The Court has also reviewed Defendant’s proposed Answer
and Affirmative Defenses (d/e 9).
In the Answer and Affirmative Defenses, Defendant raises as
an affirmative defense that the relationship between the parties is
governed by the Standard Agreement, which allows the employer to
submit contributions to the employee’s home-area local union or
district council funds. See Aff. Def. ¶¶ 1, 3. Defendant asserts that
pension and welfare funds required under the Standard Agreement
were paid to Defendant’s home-area district council, the Carpenters
District Council of Greater St. Louis and Vicinity. Id. ¶¶ 2, 4, 5
(citing a provision of the Standard Agreement). Defendant alleges
that because Plaintiffs are bound by the Standard Agreement,
Plaintiffs are estopped from and have waived the right to funds
sought in the Complaint.
Plaintiffs object on the basis that Defendant failed to assert
more than a bare legal conclusion in support of is alleged
meritorious defense. Plaintiffs also point out that Defendant claims
that Plaintiffs miscalculated the payments allegedly owed and Mr.
Avigad asserted that the hours sought by Plaintiffs are in excess of
the hours actually worked. Plaintiffs point out, however, that no
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audit had been performed when the Motion was filed so it was
impossible for Mr. Avigad to know whether the Plaintiffs
miscalculated anything. Pls. Mem. at p. 10.
A “meritorious defense” is not necessarily a winning one, but it
is one which is “supported by a developed legal and factual basis.”
Bluegrass Marine, 211 F.R.D. at 357, quoting Jones v. Phipps, 39
F.3d 158, 165 (7th Cir. 1994) (involving a Rule 60(b) motion).
“General denials and conclusory statements are insufficient to
establish a meritorious defense in order to vacate a default[.]” Lego
Irrigational Int’l, Inc. v. First Nat’l Bank of Northbrook, 108 F.R.D.
9, 11 (N.D. Ill. 1985). Nonetheless, the Court finds, given the
lenient standards of Rule 55(c), that Defendant has set forth a
potentially meritorious defense by notifying this Court and Plaintiff
of the nature of its defense and providing a factual basis for that
defense in its proposed Answer and Affirmative Defenses. See
Cracco, 559 F.3d at 631 (finding the defendant made a sufficient
showing of a meritorious defense where it “notified the plaintiff and
the district court of the nature of [the defendant’s] defense and
provided the factual basis for that defense”).
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In sum, this Court finds that Defendant has shown good cause
for the default, quick action to correct it, and a potentially
meritorious defense to the Complaint. Given the Seventh Circuit’s
preference for trial on the merits over default judgment, this Court
finds that the most appropriate course of action is to allow this case
to proceed on the merits. See, e.g., Parker v. Scheck Mech. Corp.,
772 F.3d 502, 505 (7th Cir. 2014) (“Given the ‘lenient standard’ for
applying Rule 55(c) and the ‘policy of favoring trial on the merits
over default judgment’ [citation omitted], the district court acted
well within its discretion when it set aside the default”).
III. CONCLUSION
For the reasons stated, Defendant’s Motion to Set Aside
Default (d/e 8) is GRANTED and Plaintiffs’ Motion for Default
Judgment Against Defendant Rice Equipment Co. (d/e 7) is
DENIED. It is ORDERED that the Order of Default (d/e 5) against
Defendant be set aside. Defendant’s Answer and Affirmative
Defenses (d/e 9) is deemed properly filed. This case is referred to
Magistrate Judge Tom Schanzle-Haskins for further pre-trial
proceedings.
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ENTERED: July 15, 2015
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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