Cooper et al v. Regent Asset Management Solutions - Kansas, LLC et al

Filing 49

MEMORANDUM AND ORDER. The Motion to Intervene on Behalf of Regent Asset Management Solutions, Inc.; Regent Asset Management Solutions North America and Regent Asset Management Solutions Kansas (Doc. 40) is denied; and Defendant Scata and Duprey' ;s Pro Se Motions to Set Aside Clerks Entry of Default (Docs. 42, 43) are granted;IT IS FURTHER ORDERED that the Motion to Set Aside Default as to the RAMS Defendants (Doc. 41) is stricken;IT IS FURTHER ORDERED that Defendants Scata and Duprey's Motions to File Amended Answers Out of Time (Docs. 42, 43) are granted. Defendants shall file the Amended Answers attached to each of their motions within ten (10) days. Signed by District Judge Julie A. Robinson on 8/7/2012. (pp)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

CHLOE COOPER, et al.,
Plaintiffs,
On behalf of themselves and all others
similarly situated,
vs.
REGENT ASSET MANAGEMENT
SOLUTIONS–KANSAS, LLC, et al.,
Defendants.

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Case No. 10-2634-JAR-KGG

MEMORANDUM AND ORDER
This case is before the Court on the following motions filed by Defendants Matt Duprey
and Michael Scata: (1) Motion to Intervene on Behalf of Regent Asset Management Solutions,
Inc.; Regent Asset Management Solutions North America and Regent Asset Management
Solutions Kansas (Doc. 40); and (2) Pro Se Motions to Set Aside Clerks Entry of Default (Docs.
41, 42, 43) on behalf of the corporate Defendants and each individual Defendant. Plaintiffs have
responded and oppose the motions. As discussed more fully below, the Court denies the motion
to intervene as moot, strikes the motion to set aside default as to the corporate Defendants, and
grants the pro se individual Defendants’ motion to set aside default and file their Amended
Answers out of time.
Background
On October 25, 2011, Magistrate Judge Gale conducted a telephonic scheduling
conference with the parties. Plaintiffs appeared through counsel Rowdy Meeks. Defendants

Matt Duprey and Michael Scata appeared pro se. Defendants Regent Asset Management
Solutions-Kansas, LLC, Regent Asset Management Solutions North America, LLC, and Regent
Asset Management Solutions, Inc. (collectively “RAMS”) did not appear. The three corporate
Defendants have been without counsel since August 3, 2011—over one year. It appears that the
case was stayed prior to the October 25 scheduling conference in order to provide Defendants
with a period of time to obtain counsel given the well-established rule that business entities may
only appear in court by a licensed attorney.1 The RAMS Defendants never did retain counsel.
The minute entry for the October 25 scheduling conference indicates that Plaintiffs were
directed to file a motion for leave to amend the complaint and add parties by November 8, 2011.
The scheduling conference was continued “pending service on new parties or denial of motion to
amend/add, at which time plaintiffs’ counsel will contact court for new scheduling conference
date.”2
Plaintiffs moved for leave to amend by the deadline, which was granted on November 23,
2011 (Doc. 30). The Amended Complaint was filed on December 2, 2011; it added another
series of class claims based on new allegations of unlawful time clock rounding and purported to
add a new party, Imperial Recovery Partners, LLC.3 Plaintiffs served Defendants by regular first
class mail pursuant to Fed. R. Civ. P. 5(b)(2)(C). Because Defendants did not answer within
twenty-one days of service of the Amended Complaint, the Clerk entered default under Fed. R.

1

See Tal v. Hogan, 453 F.3d 1244, 1255 (10th Cir. 2006); Harrison v. Wahatoyas, LLC, 253 F.3d 552,
556–57 (10th Cir. 2001).
2

Minute Order (Oct. 25, 2011).

3
Although Defendant Imperial Recovery Partners LLC was named in the Amended Complaint, it was never
served and Plaintiffs eventually dismissed it as a party. See Docs. 37, 38.

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Civ. P. 55(a) against Defendants Regent Asset Management Solutions – Kansas, LLC, Regent
Asset Management Solutions North America, LLC, Regent Asset Management Solutions, Inc.,
Michael Scata, and Matt Duprey.
Motion to Intervene and Motion to Set Aside as to RAMS
Defendants Scata and Duprey responded to the Clerks Entry of Default with several
filings. First, they ask to “intervene on behalf of” RAMS under Rule 24. But Defendants
misunderstand Rule 24. Rule 24 permits intervention of parties, it does not govern
representation of existing parties. Scata and Duprey are already named as defendants in this
action in their individual capacities, so granting them leave to intervene would be an exercise in
futility. RAMS has been without counsel since August 3, 2011. In his Order allowing
Defendants’ counsel to withdraw, Judge Gale warned Defendants that business entities may not
appear pro se and provided them with a period of time to obtain counsel. They failed to do so,
and over one year has now passed. Accordingly, Scata and Duprey’s motion to set aside default
on the RAMS Defendants’ behalf is unavailing and that motion (Doc. 40) shall be stricken.
Motion to Set Aside Entry of Default as to Scata and Duprey
The Court proceeds to consider the motions to set aside entry of default filed by Scata
and Duprey in their individual capacities. They argue that they did not understand that the
federal rules required them to file an Amended Answer since the Amended Complaint did not
change the allegations against them as compared to the Original Complaint. Under Rule 55(c),
the Court may set aside a clerk’s entry of default if good cause is shown. When making this
determination, the Court must consider “whether the default was willful, whether setting it aside

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would prejudice the adversary, and whether a meritorious defense is presented.”4 The Court
need not consider all of these factors, but is mindful that “willful failure alone may constitute
sufficient cause for the court to deny the motion.”5 The Tenth Circuit has counseled that
default judgment must normally be viewed as available only when
the adversary process has been halted because of an essentially
unresponsive party. In that instance, the diligent party must be
protected lest he be faced with interminable delay and continued
uncertainty as to his rights. The default judgment remedy serves
as such a protection.6
The standard is “fairly liberal because ‘[t]he preferred disposition of any case is upon its merits
and not by default judgment.’”7 The good cause standard in Rule 55(c) is a lesser standard than
the excusable neglect standard that applies to a motion for relief from judgment under Rule
60(b).8
With respect to willfulness, a defendant’s conduct is considered culpable if he defaulted
willfully or has no excuse for the default.9 Scata and Duprey argue that they did not believe they
were required to answer under the federal rules because the Amended Complaint did not add any
new claims against them. They believed they could stand by the Answers to the Original
Complaint, filed on January 12, 2011, by their previous counsel. Defendants are mistaken that

4

See, e.g., Guttman v. Silverberg, 167 F. App’x 1, 3 (10th Cir. 2005).

5

Id.

6

In re Rains, 946 F.2d 731, 732–33 (10th Cir. 1991) (quoting Cessna Fin. Corp. v. Bielenberg Masonry
Contracting, Inc., 715 F.2d 1442, 1444 (10th Cir. 1983)).
7

Crutcher v. Coleman, 205 F.R.D. 581, 584 (D. Kan. 2001) (quoting Gomes v. Williams, 420 F.2d 1364,
1366 (10th Cir. 1970)).
8

Id.

9

United States v. Timbers Preserve, Routt Cnty., Colo., 999 F.2d 452, 454 (10th Cir. 1993).

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the Amended Complaint did not add any new claims against them—it adds an entirely new class
of individuals based on new allegations of unlawful time clock rounding. The original
Complaint was based solely on Defendants’ classification of Plaintiffs as independent
contractors. But according to their motion, the Amended Complaint appeared to them only to
add a party, not to add claims to existing parties, so the Court cannot find that the failure to
answer the amended complaint was necessarily willful.
The Court next considers prejudice to the opposing party. Plaintiffs have suffered
prejudice related to the time and expense associated with filing the motion to set
aside—Plaintiffs argue that they have already been forced to litigate this case for over two years
due to Defendants’ counsel withdrawing on the eve of mediation, after the case had already been
stayed for a period of time. The Court agrees that Plaintiffs have suffered prejudice based on the
delay by Defendants, both in refusing to participate in mediation after obtaining an extension of
time to conduct mediation, and in failing to answer the amended complaint. But the Court notes
that this most recent delay after the Amended Complaint was filed is partially attributable to
Plaintiffs—the October 25, 2011 Minute Order makes clear that Plaintiffs were to contact the
Court for a scheduling conference after either service on the new parties, or the denial of a
motion to amend. They failed to do so, necessitating an Order to Show Cause after the answer
deadline expired. The Court does not find that this factor weighs strongly in favor of either
party.
Defendants Scata and Duprey’s motions also seek leave to answer out of time and attach
proposed answers to the Amended Complaint. Determining that Defendants assert a meritorious
defense requires more than general denials, it “requires a sufficient elaboration of facts to permit
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the trial court to judge whether the defense, if movant’s version were believed, would be
meritorious.”10 Plaintiffs complain that the proposed Answer is simply a copy of the original
answer filed by previous counsel that fails to address the time clock class claims alleged in the
Amended Complaint. But the Amended Answer responds to each paragraph of the Amended
Complaint, including the new class time keeping allegations. Scata and Duprey assert general
denials to many of the claims, but also assert several affirmative defenses that, if true, would be
meritorious.
In the absence of evidence that Scata and Duprey’s failure to respond was willful, the
Court finds that the good cause factors counsel in favor of setting aside entry of default against
the individual defendants, Scata and Duprey.
Motion for Leave to File Answer Out of Time
A request to file out of time requires a showing of excusable neglect.11 Excusable neglect
is a somewhat elastic concept and is not limited strictly to omissions caused by circumstances
beyond the control of the movant.12 The determination of whether excusable neglect has been
established is at bottom an equitable one, taking account of all relevant circumstances
surrounding the party’s omission including, (1) the danger of prejudice, (2) the length of the
delay and its potential impact on judicial proceedings, (3) the reasons for the delay which
includes whether it was within the reasonable control of the party seeking to show excusable

10

Crutcher, 205 F.R.D. at 585.

11

See Fed. R. Civ. P. 6(b)(1)(B); D. Kan. R. 6.1(a).

12

Pioneer Inv. Servs. Co. v. Brunswick Assocs. L.P., 507 U.S. 380, 391–92 (1993).

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neglect, and (4) whether that party acted in good faith.13
The Court has already considered the length of delay and the prejudice involved in
Defendants’ failure to answer the Amended Complaint. While this delay caused some prejudice,
the delay was amplified by Plaintiffs’ failure to seek relief until the Court issued an Order to
Show Cause. Despite the fact that Defendants were apparently served on December 2, 2011,
nothing was filed and Plaintiffs failed to contact the Court for a scheduling conference setting.
Defendants contend that their lack of familiarity with the federal rules, as pro se litigants, caused
them to mistakenly believe they need not answer the Amended Complaint. The Court finds that
under the circumstances of this case, Defendants have shown excusable neglect and the Court
will allow them to file their Answer out of time. While the Court finds Defendants’ ignorance of
the rules probative of Defendants’ good faith in failing to answer, they are reminded that pro se
litigants are not excused from complying with the rules of the court and are subject to the
consequences of noncompliance.14 The Court admonishes Defendants that while default will be
set aside and they are granted leave to filed Amended Answers out of Time, they may not appear
at their pleasure and they are subject to the Federal Rules of Civil Procedure, as well as the local
rules for the United States District Court for the District of Kansas.
IT IS THEREFORE ORDERED that the Motion to Intervene on Behalf of Regent
Asset Management Solutions, Inc.; Regent Asset Management Solutions North America and

13

Id. at 395; see also Bishop v. Corsentino, 371 F.3d 1203, 1206–07 (10th Cir. 2004); City of Chanute v.
Williams Natural Gas, 31 F.3d 1041, 1046 (10th Cir. 1994).
14

Ogden v. San Juan County, 32 F.3d 452, 455 (10th Cir. 1994) (citing Nielsen v. Price, 17 F.3d 1276, 1277
(10th Cir. 1994) (insisting that pro se litigants follow procedural rules and citing various cases dismissing pro se
cases for failure to comply with the rules)).

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Regent Asset Management Solutions Kansas (Doc. 40) is denied; and Defendant Scata and
Duprey’s Pro Se Motions to Set Aside Clerks Entry of Default (Docs. 42, 43) are granted;
IT IS FURTHER ORDERED that the Motion to Set Aside Default as to the RAMS
Defendants (Doc. 41) is stricken;
IT IS FURTHER ORDERED that Defendants Scata and Duprey’s Motions to File
Amended Answers Out of Time (Docs. 42, 43) are granted. Defendants shall file the
Amended Answers attached to each of their motions within ten (10) days.
IT IS SO ORDERED.
Dated: August 7, 2012
S/ Julie A. Robinson
JULIE A. ROBINSON
UNITED STATES DISTRICT JUDGE

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