Aprile Horse Transportation, Inc et al v. Prestige Delivery Systems, Inc. et al

Filing 32

MEMORANDUM OPINION & ORDER granting 20 Motion to Set Aside 14 Order on Motion for Default Judgment. Signed by Senior Judge Thomas B. Russell on 9/16/2013. cc:counsel (KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CIVIL ACTION NO. 5:13-CV-00015-TBR
APRILE HORSE TRANSPORTATION, INC., et al.

Plaintiffs

v.
PRESTIGE DELIVERY SYSTEMS, INC., et al.

Defendants

MEMORANDUM OPINION AND ORDER
This matter is before the Court upon Defendant Prestige Delivery Systems,
Inc.’s (Prestige) “Motion Pursuant to F.R.C.P. 55(c) To Set Aside Default Judgment.
(Docket No. 20.) Plaintiffs Aprile Horse Transportation, Inc., and Great West Casualty
Company have responded in opposition, (Docket No. 27), and Prestige has replied,
(Docket No. 29). This matter is now ripe for adjudication. For the reasons that follow,
Prestige’s Motion will be GRANTED, and the default judgment entered June 20, 2013,
will be set aside.
BACKGROUND
Plaintiffs initiated this action on February 4, 2013. (See Docket No. 1.) The
record reflects that the Summons and Complaint were served on Prestige via certified
mail on February 7, 2013. (See Docket No. 4.) After no answer or other response was
filed, Plaintiffs moved for default judgment on May 21, 2013. (Docket No. 7.) Prestige
did not respond to that motion, and, on June 18, 2013, the Court granted Plaintiffs’
motion for default judgment and entered judgment in Plaintiffs’ favor against Prestige.
(Docket No. 14.)
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Then on July 25, 2013, Prestige filed its instant Motion to set aside the default
judgment entered against it. (Docket No. 20.) Prestige points out that four days after
the filing of Aprile’s Complaint, a separate lawsuit for injury arising out of the same
operative facts was filed in this Court by Plaintiffs Malissa Stack and Michael Stack. 1
Prestige avers that confusion arose, apparently, from a combination of (1)
miscommunication between Prestige’s President, Joe Bernon, and Prestige’s attorney in
Cleveland, Ohio, coupled with (2) Mr. Bernon’s out-of-town absence on a family
vacation the week during and around the time the two Complaints were served on
Prestige. (See Docket No. 20, at 2-3.) Prestige attaches Mr. Bernon’s affidavit in
support of this explanation. (Docket No. 20-6.) In essence, Prestige explains its failure
to respond to Aprile’s Complaint as a result of its mistaken belief that the two lawsuits
were one and the same, or, stated differently, its unawareness that Aprile’s Complaint
was a separate and distinct cause of action from the Stacks’ Complaint. Prestige argues
that it has shown good cause why the Court should set aside the default judgment
entered against it, insisting that it has a meritorious defense to Aprile’s vicarious
liability claim, that there would be no prejudice to the Plaintiffs, and that the delay was
not the result of willful or culpable conduct.
STANDARD
Federal Rule of Civil Procedure 55(c) provides that “[t]he court may set aside
an entry of default for good cause, and it may set aside a default judgment under Rule
60(b).” When a defendant seeks relief from entry of default, the Court must consider
three equitable factors to determine whether “good cause” is shown: “(1) whether
1

That action, styled Malissa Stack et al. v. Prestige Delivery Systems, Inc., No. 5:13-CV-00018TBR, has since been consolidated with the above captioned matter. (See Docket No. 30.)

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culpable conduct of the defendant led to the default, (2) whether the defendant has a
meritorious defense, and (3) whether the plaintiff will be prejudiced.”

Burrell v.

Henderson, 434 F.3d 826, 831 (6th Cir. 2006) (quoting Waifersong, Ltd. v. Classic
Music Vending, 976 F.2d 290, 292 (6th Cir. 1992)). However, when a defendant seeks
relief from a default judgment—as is the case here—the Court must consider those
three equitable factors in light of the stricter requirements of Rule 60(b). Id. (citing
Thompson v. Am. Home Assurance Co., 95 F.3d 429, 433 (6th Cir. 1996)).
DISCUSSION
When relief is sought under Rule 60(b)(1), the first equitable factor—whether
culpable conduct of the defendant led to the default—“is framed in terms of ‘mistake,
inadvertence, surprise, or excusable neglect.’” Id. (quoting Waifersong, 976 F.2d at
292). Prestige must therefore prove that its default was due to one or more of these
explanations before the Court need consider whether Prestige can satisfy the two
remaining equitable factors. Id. (citing Williams v. Meyer, 346 F.3d 607, 613 (6th Cir.
2003)). Where a case has not been heard on the merits, the determination whether a
party’s neglect is excusable involves consideration of five factors: “(1) the danger of
prejudice to the other party, (2) length of delay, (3) its potential impact on judicial
proceedings, (4) the reason for the delay, and (5) whether the movant acted in good
faith.” Jinks v. AlliedSignal, Inc., 250 F.3d 381, 386 (6th Cir. 2001). Furthermore,
while there is a strong public policy favoring the finality of judgments and the
termination of litigation, Burrell, 434 F.3d at 832 (citing Waifersong, 976 F.2d at 292),
there is a competing policy consideration that values the resolution of cases on their
merits, id. (citing INVST Fin. Grp., Inc. v. Chem-Nuclear Sys., Inc., 815 F.2d 391, 398
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(6th Cir. 1987)). This latter policy dictates that the Court “should . . . construe[] all
ambiguous or disputed facts in the light most favorable to the defendant[].”

Id.

(alterations in original) (quoting INVST Fin. Grp., 915 F.2d at 398). Accordingly, the
above factors should be applied liberally based on the “strong preference for trial on the
merits.” Marbly v. Dep’t of Treasury, 22 F. App’x 371, 372 (6th Cir. 2001).
The Court is satisfied that Prestige’s conduct leading up to the entry of default
judgment was the result of excusable neglect. Prestige filed its instant Motion just over
a month after the Court’s entry of default judgment; thus, the delay here was minimal.
Prestige’s reasons for the delay, while not beyond criticism, are plausible. The Court
has no reason to suspect that Prestige acted to delay the proceeding either for some
unlawful purpose or to gain some advantage. The Court also is satisfied that the impact
of Plaintiff’s delay on judicial proceedings is, or will be, minimal. Finally, as will be
discussed below, there is little danger of prejudice to the Plaintiffs. Accordingly, in
consideration of the aforementioned factors and the strong preference for disposition on
the merits, the Court concludes that Prestige’s delay in this case supports a finding of
excusable neglect.
Because the Court is satisfied that Prestige’s conduct was not culpable within the
meaning of Rule 60(b)(1), the Court next turns to the remaining equitable factors:
whether Prestige has a meritorious defense and whether the Plaintiffs will be prejudiced.
The Court finds that Prestige has shown that it has a meritorious defense. A defense is
meritorious if “there is some possibility that the outcome of the suit after a full trial will
be contrary to the result achieved by the default.” Burrell, 434 F.3d at 834 (quoting
Williams, 346 F.3d at 614). “[T]he test is not whether the defendant will win at trial, but
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rather whether the facts alleged by the defendant would constitute a meritorious defense
if true.” In re Park Nursing Ctr., Inc., 766 F.2d 261, 264 (6th Cir. 1985). “If a defense
is ‘good at law,’ regardless of the likelihood of success, it will be considered
meritorious.” Burrell, 434 F.3d at 834 (citing Williams, 346 F.3d at 614). Prestige
argues that it can have no liability for the negligence of Defendant Roy Hastings
because Hastings was an independent contractor and not an employee of Prestige. To
this end, Prestige has submitted a copy of Hastings’ “Independent Operator Operating
Agreement” and a certificate of liability insurance purporting to show that Hastings
carried his own policy of insurance. (See Docket Nos. 20-1; 20-2.) Construing this
defense in the light most favorable to Prestige, Prestige’s argument creates “some
possibility” of a different outcome in this case and appears “good at law,” regardless of
the likelihood of success. See Burrell, 434 F.3d at 834-35. Thus, the Court is satisfied
that Prestige has raised a meritorious defense to the Plaintiffs’ vicarious liability claims.
Finally, for the third equitable factor, the Court must consider whether the
Plaintiffs will be prejudiced. “[D]elay alone is not a sufficient basis for establishing
prejudice.” Berthelsen v. Kane, 907 F.2d 617, 621 (6th Cir. 1990); see also Burrell, 434
F.3d at 835 (“Delay in adjudicating a plaintiff's claim does not qualify as sufficient
prejudice under Rule 55.”). Instead, the Plaintiffs “would have to show that the delay
would result in a loss of evidence, increased opportunities for fraud, or discovery
difficulties.” Burrell, 434 F.3d at 835 (citing Berthelsen, 907 F.2d at 621). This case
was filed relatively recently, and no significant steps have been taken in this litigation.
Discovery has yet to begin, and there is still the outstanding issue of Aprile’s and the
Stacks’ pending motions for default judgment against Defendant Hastings.
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Since

entering default judgment against Prestige, the Court has not conducted a hearing on
damages, nor have the Plaintiffs’ damages been established.

Plaintiffs have not shown

that Prestige’s delay would result in a loss of evidence, increased opportunities for
fraud, or discovery difficulties, Burrell, 434 F.3d at 835, nor does the Court find any
indication that the delay here has resulted, or necessarily would result, in such tangible
harm, see Thompson, 96 F.3d at 433-34. Accordingly, the Court finds that the delay
here was minimal and is satisfied that there is no discernible prejudice to the Plaintiffs
based on that delay.
CONCLUSION
Therefore, having considered the parties’ respective arguments and being
otherwise sufficiently advised, for the foregoing reasons;
IT IS HEREBY ORDERED that Defendant Prestige Delivery Systems, Inc.’s
“Motion Pursuant to F.R.C.P. 55(c) To Set Aside Default Judgment, (Docket No. 20), is
GRANTED, and the Order and Judgment entered June 20, 2013, (Docket No. 14), is
set aside.
Date:
cc:

September 16, 2013

Counsel

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