Cotter v. Gwyn et al

Filing 112

ORDER AND REASONS granting 83 Motion to Set Aside Default entered in Bankruptcy Court against defendant, Bruce Gwyn. Counsel for Bruce Gwyn shall file an answer or responsive pleading within 14 days of this Order. Signed by Judge Jane Triche Milazzo. (ecm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

PATRICK C. COTTER

CIVIL ACTION

VERSUS

No. 15-4823

BRUCE A. GWYN ET AL.

SECTION H

ORDER AND REASONS
Before the Court is Defendant Bruce Gwyn’s Motion to Set Aside Default
(Doc. 83). For the following reasons, the Motion is GRANTED.
BACKGROUND
This matter was initially referred to the bankruptcy court, but the
referral was later withdrawn. While this matter was pending in the
bankruptcy court, however, Defendant Bruce Gwyn was served, failed to
appear, and default was entered against him. Notwithstanding this, Gwyn
filed an answer and cross-claims in the matter pending before the district
court. On May 12, 2016, Defendants Michael Lapat and Turn Key Hedge
Funds, Inc. (collectively “TK&L”) moved for dismissal of the cross-claims
asserted against them by Defendant Bruce Gwyn. On August 25, 2016, this
Court granted their motion, stating that:
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TK&L correctly point out that prior to the withdrawal of the
reference, the bankruptcy court had entered default against Gwyn
for failure to file an answer or otherwise defend the case. Gwyn
has not sought relief from default from either this court or the
bankruptcy court, nor has he asked this court to review the
bankruptcy court’s entry of default. The filing of an answer cannot
cure a default. Accordingly, Defendant Bruce Gwyn’s answer is
stricken from the record. 1
Defendant Gwyn then asked this Court to reconsider its decision to strike his
answer from the record. This Court denied that request, stating that Gwyn
had not identified a manifest error but inviting him to move to set aside the
entry of default. On February 7, 2017, Gwyn filed the instant Motion to Set
Aside Default.
LEGAL STANDARD
Rule 55(c) permits the trial court to set aside an entry of default for “good
cause.” 2 To determine whether “good cause” has been shown, a district court
should consider (1) whether the default was willful; (2) whether granting the
motion would prejudice the non-moving party; and (3) whether a meritorious
defense is presented. 3 These factors, however, are not “talismanic” and the
Court may consider others such as whether the public interest was implicated,
whether there was significant financial loss to the defendant, and whether the
defendant acted expeditiously to correct the default. 4 In deciding a Rule 55(c)
motion, the Court is mindful that default judgments are generally disfavored
by the law and that any doubt should be resolved in favor of the movant. 5

Doc. 61.
Fed. R. Civ. P. 55(c).
3 Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000).
4 Dierschke v. O’Cheskey, 975 F.2d 181, 184 (5th Cir. 1992).
5 See Lacy, 227 F.3d at 292.
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LAW AND ANALYSIS
This Court holds that the balance of factors weighs in favor of setting
aside default in this matter. First, this Court does not believe that the default
was willful. Gwyn alleges, and the Trustee does not dispute, that service was
done pursuant to the bankruptcy rules by uncertified mail to an address he
had previously shared with his wife from whom he was separated. Gwyn
alleges that he never received service but that he prepared an answer within
weeks of becoming aware of the complaint against him. Although the Trustee
makes compelling arguments that Gwyn should have been aware of the
litigation in sufficient time to timely file an answer, doubts must be resolved
in favor of the Movant. Second, any potential prejudice Plaintiff would suffer
as a result of setting aside default is negligible. There are are no trial or pretrial dates set in this matter, and the parties contend that no discovery has
taken place. In addition, the Trustee failed to bring Gwyn’s default to this
Court’s attention or object to his participation in the litigation. Accordingly,
he cannot now say that setting aside the default so that Gwyn may properly
participate will prejudice him. Finally, Gwyn has set forth a meritorious
defense including 14 affirmative defenses. For the foregoing reasons, this
Court holds that good cause exists to set aside the default entered against
Bruce Gwyn.
CONCLUSION
For the foregoing reasons, Defendant Bruce Gwyn’s Motion to Set Aside
Default is GRANTED, and he shall file an answer or responsive pleading
within 14 days of this Order.

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New Orleans, Louisiana this 18th day of May, 2017.

____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE

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