Gulf Coast Bulk Handling, LLC v. G&C Construction, LLC et al
Filing
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ORDER & REASONS granting 18 Motion to Set Aside Default re 13 Order on Motion for Entry of Default. Signed by Judge Helen G. Berrigan on 07/27/2012. (kac, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
GULF COAST BULK HANDLING,
LLC.
CIVIL ACTION
V.
NO. 12:893
G&C CONSTRUCTION, LLC and
U.S. SPECIALTY INSURANCE COMPANY
SECTION "C" (2)
JUDGE HELEN G. BERRIGAN
ORDER & REASONS1
Before the Court is Defendant G&C Construction, LLC's Motion to Set Aside Entry of
Default. (Rec. Doc. 18). Plaintiffs oppose this motion. (Rec. Doc. 21). Having reviewed the
record, memoranda of counsel, and the law, the motion is GRANTED for the following reasons.
I.
Factual Background
On April 5, 2012, Plaintiff Gulf Coast Bulk Handling, LLC filed their Complaint against
Defendants G&C Construction, LLC (“G&C”) and U.S. Specialty Insurance to recover the
alleged balance of a payment due to Plaintiff. (Rec. Doc. 1). A summons was issued to both
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Rachael McMillan, a second-year law student at Tulane University Law School,
contributed to the research and preparation of this order.
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parties on April 6, 2012. (Rec. Doc. 3). The summons issued to G&C was personally served on
Keith Fogg, the Registered Federal Agent of G&C, on April 23, 2012. (Rec. Doc. 10). Plaintiff
filed a Motion for Entry of a Default against G&C on May 17, 2012 after G&C failed to make an
appearance, file a responsive pleading, or enter an answer within 21 days of the date of service.
(Rec. Doc. 12-1 at 1). The Entry of Default was granted and entered by the Clerk of Court on
May 18, 2012. (Rec. Doc. 13). Plaintiff also filed its Motion for Entry of Default on a Sum
Certain against G&C on May 17, 2012; however, this Motion was deficiently filed and never
refiled. (Rec. Doc. 14). G&C filed its Answer to Plaintiff's Complaint on May 30, 2012. (Rec.
Doc. 16). G&C now moves to set aside the entry of default. (Rec. Doc. 18).
II.
Applicable Law
Federal Rule of Civil Procedure 55(c) provides that a district court may set aside an entry
of default "for good cause shown," Fed. R. Civ. Pro. 55(c). "Good cause" is not defined in the
rule. In examining whether "good cause" has been shown, the district court should consider: (1)
whether the default was willful; (2) whether setting aside the default would prejudice the
adversary; and (3) whether the defaulting party has presented a meritorious defense to the claims
against it. Lacy v. Sitel Corp, 227 F.3d 290, 292 (5th Cir. 2000); Dierschke v. O'Cheskey, 975
F.2d 181, 183 (5th Cir. 1992).
The Fifth Circuit further explains that “there 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. It
has decided nothing against it except that it cannot continue to hold the sweeping [relief] it
obtained ... without a trial and by default. All that ... has [been] done is to give the defendants
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their day in court.’” Lacy, 227 F.3d at 293 (citing Gen. Tel. Corp. v. Gen Tel. Answering Serv.,
277 F.2d 919, 921 (5th Cir. 1960)). Furthermore, in the Eastern District of Louisiana, a party is
not prejudiced if setting aside the default causes a delay in the "collection of the amount in
dispute" because the amount in dispute may still be attained in the course of litigation. C&G
Boats, Inc. v. Tex. Ohio Servs., Inc., 164 F.R.D. 57, 59 (E.D.La. 1995).
The district court may also consider whether the public interest is implicated by the
default, whether there was a significant financial loss to the defendant and whether the defendant
moved expeditiously to cure the default. Dierschke, 975 F.2d at 184. The time frame for a
defendant to move expeditiously to cure the default in the Fifth Circuit may be as short as within
30 days of the entry of default. Reynal v. United States, 153 F.2d 929, 931-32 (5th Cir. 1945).
Conversely, a motion to cure default filed nine months after a default judgment did not constitute
acting expeditiously. Formal Specialists Ltd. v. Wilbert Lyons Inc., 98 F. App'x 284, 286 (5th
Cir. 2004). "All of these factors should be viewed against the background principals that cases
should, if possible, be resolved on the merits and that defaults are generally disfavored."
Lambert, et. al. v. Bd. of Comm'rs. of the Orleans Levee Dist., et. al., 2006 WL 1581262, at *2
(E.D.La.) (citing Lacy, 227 F.3d at 292).
III.
Analysis
Defendant makes several arguments in its Motion to Set Aside Entry of Default. (Rec.
Doc. 18-1). First, Defendant asserts that the default was not willful due to counsel's recent
retainment. (Rec. Doc. 18-1 at 3). Second, Defendant argues that Plaintiffs will not suffer
prejudice if the entry of default is set aside because the delay in litigation will only force Plaintiff
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to argue the merits of its case. (Rec. Doc. 18-1 at 3-4). Third, Defendant presents potentially
meritorious defenses to Plaintiff's complaint in its answer. (Rec. Doc. 18-1 at 4, See Rec. Doc.
16 at 1, 3-4). Fourth, Defendant would incur a substantial financial loss of over $90,000 if the
entry of default is not set aside. (Rec. Doc. 18-1 at 4). Finally, Defendant argues that it has
acted expeditiously to correct the default by taking “swift actions” to file an answer once they
were put in default and before a default judgment by this Court. (Rec. Doc. 18-1 at 4). The
Record shows that Defendant filed its Motion to Set Aside Entry of Default 27 days after the
Entry of Default. (See Rec. Docs. 13, 18).
Plaintiff responds to Defendants' Motion in its Opposition to G&C Construction, LLC's
Motion to Set Aside Entry of Default. (Rec. Doc. 21). First, Plaintiff emphasizes that it filed a
Motion for Entry of Default Judgment on a Sum Certain; however, this Motion was marked as
deficient and is therefore treated as if it was never filed. (Rec. Doc. 21 at 1-2; Rec. Doc. 14).
Second, Plaintiff claims that it will be prejudiced if the entry of default is set aside because of the
"additional costs of litigation to the Plaintiff who can simply receive the money they are owed
without the added expense of trial." (Rec. Doc. 21 at 2). Third, Plaintiff asserts that it will incur
a substantial financial loss because Defendant owes Plaintiff a significant sum of money. (Rec.
Doc. 21 at 3). Fourth, Plaintiff contends that Defendants have not acted expeditiously because it
took Defendants forty-seven days to file an answer and sixty-two days to file the motion in
question after Plaintiffs initiated the lawsuit. (Rec. Doc. 21 at 3). Plaintiff does not dispute that
Defendant has filed a meritorious defense in its answer. (Rec. Doc. 18-1 at 4).
The Court is not persuaded that Plaintiff will suffer undue prejudice if the entry of default
is set aside and agrees with Defendant's assertion that the Motion spares Plaintiff of any
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prejudice recognized by the Fifth Circuit. (Rec. Doc. 18-1 at 3-4). Fifth Circuit jurisprudence
clearly establishes that a party is not prejudiced by setting aside an entry of default if it only
requires that "the plaintiff prove its case" and perform normal litigation activities. Lacy, 227
F.3d at 293 (citing Gen. Tel. Corp, 277 F.2d at 921). In this case, the Court rejects Plaintiff's
argument that "additional costs of litigation to the Plaintiff who can simply receive the money
they are owed without the added expense of trial" is an undue burden. (Rec. Doc 21 at 2).
Plaintiff's claim of prejudice reflects precisely what the Fifth Circuit has determined does not
constitute prejudice. Lacy, 227 F.3d at 293; (Rec. Doc 21 at 2). Thus, Plaintiff's assertion that it
will be prejudiced because it must litigate the issue instead of simply receiving a check by
Defendants is flawed. (Rec. Doc. 21 at 2). Defendant's motion will not prejudice Plaintiff.
The Court does not conclude that Defendants' motion will cause a significant financial
loss for Plaintiff. First, Plaintiff repeats the same flawed argument as it did in alleging prejudice
by claiming that it must shoulder the burden of paying for the additional costs of its lawsuit if its
Motion for Default Judgment on a Sum Certain is not granted. (Rec. Doc. 21 at 3). This
argument fails not only for the reasons outlined above, but also because Plaintiff's motion was
deficient and therefore treated as though it was never filed. (Rec. Doc. 14); See Lacy, 227 F.3d
at 293. Second, Plaintiff asserts that it will bear a significant financial loss because Defendant
owes a large amount of money which Plaintiff can no longer receive through a swift default
judgment. (Rec. Doc. 21 at 3). However, a delayed “collection of the amount in dispute” does
not unduly prejudice a plaintiff because the amount in dispute may still be attained in the course
of litigation. C & G Boats, Inc., 164 F.R.D. at 59. Hence, Plaintiff's arguments that it will bear
a significant financial burden lack merit.
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Finally, the Court concludes that Defendant's motion was filed expeditiously. Plaintiff
argues that Defendant has not acted expeditiously throughout the litigation process because
Defendant did not file an answer until forty-seven days after Plaintiff filed suit and did not file
the instant motion until sixty-two days after the suit was initiated. (Rec. Doc. 21 at 3).
Defendant filed its Motion to Set Aside the Entry of Default on June 14, 2012, twenty seven days
after the Clerk of Court entered default on May 18, 2012. (Rec. Docs.13, 18). Thus, Defendant
acted expeditiously to cure the default because Defendant's motion was filed within thirty days
of the entry of default. See Reynal, 153 F.2d at 931-32. This is a far cry from the delay of nine
months which that Fifth Circuit has ruled as untimely. See Formal Specialists Ltd., 98 F. App’x.
at 286. Thus, Defendant acted expeditiously to cure the entry of default.
IV.
Conclusion
Accordingly,
IT IS ORDERED that Defendant's Motion to Set Aside Entry of Default is GRANTED.
New Orleans, Louisiana, this 27th day of July, 2012
______________________________
HELEN G. BERRIGAN
UNITED STATES DISTRICT JUDGE
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