Koerner v. Vigilant Insurance Company

Filing 60

ORDER AND REASONS: ORDERED that CMR's 50 motion to set aside the Clerk's entry of default and this Court's partial default judgment are GRANTED and that the 36 entry of default and 46 default judgment are VACATED. FURTHER ORDERED that all dates and deadlines are continued, and will be reset at a scheduling conference with the Court's case manager on 5/23/2017 at 10:15am. Signed by Judge Lance M Africk on 5/10/2017.(blg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
LOUIS R. KOERNER, JR

CIVIL ACTION

VERSUS

No. 16-13319

VIGILANT INSURANCE COMPANY

SECTION I

ORDER AND REASONS
Before the Court is a motion 1 filed by CMR Construction & Roofing, LLC to set
aside the entry of default and to reconsider the partial default judgment that has
been entered against it. For the following reasons, the Court grants the motion.
I.
Koerner’s suit against Vigilant Insurance Company was removed to this Court
on July 27, 2016. On November 14, 2016, Koerner filed a second amended complaint
joining CMR as a defendant and alleging claims of breach of warranty, breach of
contract, detrimental reliance, redhibition, and negligence.
A summons was issued to CMR’s registered agent in Louisiana on December
14, 2016, meaning that CMR’s answer was due on January 4, 2017. After CMR failed
to appear, Koerner obtained an entry of default from the Clerk on January 18, 2017.
On February 21, 2017, Koerner and Vigilant entered a joint stipulation dismissing
Koerner’s claims against Vigilant without prejudice. On March 9, 2017, this Court
granted in part Koerner’s motion for entry of a default judgment against CMR.

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R. Doc. No. 50.

Judgment was entered against CMR for the sum of $497,257.71, although no final
judgment was entered.
II.
A.
Rule 55(c) of the Federal Rules of Civil Procedure sets forth the standard for
setting aside the Clerk’s entry of default. It provides that “[t]he court may set aside
an entry of default for good cause.” To determine whether good cause exists, courts
consider a number of factors including: (1) whether the default was willful, (2)
whether setting the default aside would prejudice the adversary, and (3) whether a
meritorious defense is presented. Buckley v. Donohue Indus. Inc., 100 F. App’x 275,
278 (5th Cir. 2004). These three factors are not “exclusive” or “talismanic,” and the
Court can consider other factors including whether the “public interest was
implicated,” whether “there was a significant financial loss to the defendant,” and
whether “the defendant acted expeditiously to correct the default.” In re Dierschke,
975 F.2d 181, 183-84 (5th Cir. 1992).
Federal courts disfavor resolving cases through default judgments and have a
strong policy in favor of decisions on the merits. See Lindsey v. Prive Corp., 161 F.3d
886, 893 (5th Cir. 1998).

“[E]ntries of default are serious; where there are no

intervening equities, any doubt should be resolved in favor of the movant to the end
of securing a trial upon the merits.” Effjohn Int’l Cruise Holdings, Inc. v. A&L Sales,
Inc., 346 F.3d 552, 563 (5th Cir. 2003) (internal quotation marks omitted).

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B.
Rule 54(b) of the Federal Rules of Civil Procedure sets forth the standard for
reconsideration of interlocutory orders. See Austin v. Kroger Texas, L.P., No. 1610502, 2017 WL 1379453, at *8 (5th Cir. Apr. 14, 2017). Because the Court only
entered a partial default judgment against CMR, its order was interlocutory and
must be considered under Rule 54(b). See Halliburton Co. Benefits Comm. v. Graves,
191 F. App'x 248, 250 (5th Cir. 2006) (partial judgment is an interlocutory order).
“Under Rule 54(b), the trial court is free to reconsider and reverse its decision for any
reason it deems sufficient, even in the absence of new evidence or an intervening
change in or clarification of the substantive law.” Id. at 9 (internal quotation marks
omitted).
III.
The Court first considers CMR’s request to vacate the Clerk’s entry of default,
examining each factor in turn.
A.
CMR asserts that its failure to timely respond to the complaint was not willful
but instead was caused by a number of mistakes. CMR’s President, Steven Soule,
explains in an affidavit that he believed it was too late for Koerner to sue CMR, as
the allegations date from 2005 and 2006. Soule further believed that CMR was not
actually involved in the lawsuit because the only defendant named in the caption was
Vigilant and because the cover sheet sent to CMR by its registered agent was
incorrectly addressed to “CMR Construction & Roofing of Texas, LLC” instead of

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“CMR Construction & Roofing, LLC.” Soule did not contact an attorney until after
he received notice of the Court’s order granting the default judgment.
A finding of willful default may be considered dispositive. See In re Chinese
Manufactured Drywall Products Liab. Litig., 742 F.3d 576, 594 (5th Cir. 2014).
Willfulness has been defined by the Fifth Circuit as “an intentional failure to respond
to litigation.” In re OCA, 551 F.3d 359, 370 n. 32 (5th Cir. 2008). Courts have also
framed a finding of willfulness in terms of whether a party is being “uncooperative”
or “obstructionist.” Broadwing Commc'ns, Inc. v. Harris, No. 00-1125, 2000 WL
1059863, at *2 (E.D. La. Aug. 1, 2000) (Vance, J.).
The Court does not find CMR’s actions to be willful as defined by the Fifth
Circuit. Although Soule certainly acted unwisely in failing to contact an attorney
upon receiving the summons for this litigation, under the circumstances Soule’s
negligence is insufficient to warrant a finding of willfulness. CMR has provided
evidence that the cover sheet sent by its registered agent in Louisiana incorrectly
named CMR. This information in combination with the affidavit provided by Soule
provides sufficient evidence for this Court to conclude that CMR was not
intentionally failing to respond to litigation or trying to be uncooperative or
obstructionist.

B.
Koerner argues that he will suffer undue prejudice if the motion to set aside
the default judgment is granted. He stresses that he has engaged experts to evaluate
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damages, has already been deposed once, and has “extensively briefed” his claims in
support of his motion for default judgment. Koerner also claims in his brief that he
will be prejudiced because he stipulated to a dismissal without prejudice of the
homeowner’s insurer, though Koerner conceded during a telephone conference with
the Court that he entered into the stipulation to dismiss Vigilant for strategic reasons
and that he has no intention of rejoining Vigilant in this lawsuit.
The Fifth Circuit has held that mere delay “does not alone constitute
prejudice.” Lacy v. Sitel Corp., 227 F.3d 290, 293 (5th Cir. 2000). Rather, there must
be a showing that the delay will result in “the loss of evidence, increased difficulties
in discovery, or greater opportunities for fraud or collusion.” Id. When the only harm
to the plaintiff is having to prove his case, that harm does not constitute prejudice.
Side by Side Redevelopment, Inc. v. City of New Orleans, No. 09-03861, 2010 WL
375237, at *3 (E.D. La. Jan. 25, 2010) (Africk, J.).
Koerner has not shown prejudice other than delay and the inconvenience that
he be required to prove his case on the merits. The work which he has already
invested in this litigation will still be useful to him in a contested action. Although
Koerner voluntarily dismissed Vigilant, he admitted that the dismissal was not due
to CMR’s failure to appear. In any event, because Vigilant was dismissed without
prejudice, Koerner may seek leave to re-join Vigilant as a party once new dates and
deadlines are set—though he admits that he has no intention of doing so.
C.
CMR asserts that it has presented a number of meritorious defenses in its
proposed answer. Koerner argues that CMR’s defenses have no merit and CMR
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cannot prevail on them. When analyzing this factor, the “[l]ikelihood of success is not
the measure,” rather, a defendant’s allegations are considered to be meritorious “if
they contain even a hint of a suggestion which, proven at trial, would constitute a
complete defense.” Side by Side Redevelopment, Inc., 2010 WL 375237 at *3 (internal
quotation marks omitted). Because CMR has provided a number of defenses that if
proven at trial would constitute a complete defense, the meritorious defense prong is
satisfied.
D.
Considering the other relevant factors, this Court notes that when CMR
became aware that an entry of default was entered against it and that it was a proper
defendant, CMR “acted expeditiously to correct the default.” In re Dierschke, 975
F.2d at 184. Additionally, the sum involved in this case is $497,257.71—not an
insignificant amount of money. Certainly, a half million dollars is a sum “substantial
enough to merit caution before denying defendant a defense on the merits.” See
Harris, 2000 WL 1059863, at *2.
After considering all of the appropriate factors, the Court determines that the
motion to vacate the entry of default should be granted.
IV.
With respect to CMR’s request for reconsideration of the default judgment, the
Court concludes that reconsideration is appropriate. This Court is free to reconsider
and reverse its decision for “any reason it deems sufficient.”

Austin, 2017 WL

1379453, at *9. Because the default in this case was not willful, the amount at issue
is a substantial sum, the movant has at least provided a hint or suggestion of a
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meritorious defense, and in light of the strong federal policy in favor of decisions on
the merits, the Court concludes that the motion to reconsider and vacate the default
judgment should be granted.
V.
For the foregoing reasons,
IT IS ORDERED that CMR’s motion to set aside the Clerk’s entry of default
and this Court’s partial default judgment are GRANTED and that the entry of
default and default judgment are VACATED.
IT IS FURTHER ORDERED that all dates and deadlines in the abovecaptioned matter are continued, and will be reset at a scheduling conference with the
Court’s case manager on Tuesday, May 23, 2017 at 10:15am.

New Orleans, Louisiana, May 10, 2017.

_______________________________________
LANCE M. AFRICK
UNITED STATES DISTRICT JUDGE

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