HARNDEN v. YORK INSURANCE COMPANY OF MAINE, et al.

Filing 61

MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S MOTION TO SET ASIDE DEFAULT AND FILE LATE ANSWER granting 45 Motion for Leave to File; granting 45 Motion to Set Aside 45 MOTION for Leave to File Late Answer MOTION to Set Aside Default By JUDGE LANCE E. WALKER. (CJD) (Main Document 61 replaced on 2/6/2019) with dated order (jgd).

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE

PATRICIA HARNDEN,

)
)
Plaintiff
)
)
)
V.
)
YORK INSURANCE COMPANY OF )
)
MAINE, et al.,
)
Defendants

1:18-CV-00013-LEW

MEMORANDUM OF DECISION AND ORDER ON
DEFENDANT’S MOTION TO SET ASIDE DEFAULT AND FILE LATE ANSWER
Defendant, Netherlands Insurance Company moves to set aside the default entered
against it on March 23, 2018 and to file a late answer. The Plaintiff, Patricia Harnden,
opposes that request. For the following reasons, the Court GRANTS Defendant’s Motion
to Set Aside Default and File Late Answer.
PROCEDURAL BACKGROUND
On January 10, 2018, Harnden filed a complaint against National General Insurance
seeking a declaratory judgment and asserting claims for breach of contract, violation of the
Maine Unfair Claims Settlement Practices Act, and violation of the Maine Unfair Trade
Practices Act. Complaint (ECF No. 1). On February 6, 2018, Harnden filed her First
Amended Complaint which removed National General Insurance as a defendant and named
two new defendants: Netherlands Insurance Company and York Insurance Company of
Maine. Amended Complaint (ECF No. 6). On March 23, 2018, Harnden moved for default

against Netherlands and submitted a Proof of Service indicating that Netherlands had been
served through its agent of service, Corporation Service Company (“CSC”), on February
8, 2018. Motion for Default (ECF No. 15, #45); Motion for Default, Ex. A, 2 (ECF No.
15-1, #49). When no response was received from Netherlands, a clerk’s default was
entered on March 23, 2018. Order Granting Motion for Entry of Default (ECF No. 16).
Harnden then moved for Default Judgment on April 13, 2018, and a damages hearing was
scheduled for February 11, 2019. Motion for Default Judgment (ECF No. 19); Notice of
Damages Hearing (ECF No. 41).
Pursuant to this Court’s order, Harnden served Netherlands with notice of the
damages hearing on December 18, 2018, once again serving Netherlands through CSC.
Proof of Service (ECF No. 46). On December 21, 2018, Netherlands filed the instant
motion. Motion for Leave to File Late Answer (ECF No. 45). On January 3, 2019,
Netherlands filed a memorandum in support of its motion asserting that it “did not receive
notice of the complaint or the instant action when CSC was originally served.”
Memorandum in Support of Defendant’s Motion (“Motion Memo”), 2 (ECF No. 48, #115).
DISCUSSION
Under Federal Rule of Civil Procedure 55(a), the clerk must enter default against a
party who has “failed to plead or otherwise defend.” However, in cases where “good
cause” is shown, the Court may set aside the entry of default. Fed. R. Civ. P. 55(c).

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The phrase “good cause” is construed liberally 1 and Courts are not required to
adhere to a rigid or “mechanical formula” when considering whether good cause exists. In
re Game Tracker, Inc., 746 F. Supp. 2d 207, 217 (D. Me. 2010). In this determination,
courts are permitted to consider a variety of relevant factors, which often include: “(1)
whether the default was willful, (2) whether setting it aside would prejudice the adversary,
(3) whether the defaulting party presents a meritorious defense, (4) the explanation for the
default, (5) the good faith of the parties, (6) the amount of money involved, and (7) the
timing of the motion.” Lucerne Farms v. Baling Techs., Inc., 208 F.R.D. 463, 465 (D. Me.
2002) (citing Coon v. Grenier, 867 F.2d 73, 76 (1st Cir. 1989)). As the overriding
philosophy of the federal rules is that “actions should ordinarily be resolved on their
merits,” I must “resolve doubts in favor of a party seeking relief from the entry of a
default.” Coon, 867 F.2d at 76 (citations omitted).
I. JUSTIFICATION FOR DEFAULT
Three of the “good cause” factors—namely the proffered explanation for default,
whether the default was “willful,” and whether the defaulting party acted in “good faith”—
concern whether Netherlands has offered an adequate “justification for its default” and I
will consider them together. See Lucerne Farms, 208 F.R.D. at 465.
In its motion, Netherlands asserts it was not aware of the instant lawsuit until it
received notice of the damages hearing on December 18, 2018. Netherlands explains:
CSC is a Commercial Registered Agent (“CRA”) services provider in
the State of Maine, and happens to be the CRA for Netherlands as well
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“Unlike the more stringent standard of ‘excusable neglect’ applied to a motion for relief from final
judgments pursuant to Federal Rule of Civil Procedure 60(b), the ‘good cause’ criterion applied to
motions to set aside entries of default is more liberal, setting forth a lower threshold for relief.” Snyder v.
Talbot, 836 F.Supp. 26, 28 (D. Me. 1993) (citations omitted).
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as for York, the other defendant in this matter. . . . CSC received via
personal service a single copy of a summons and the complaint issued
in this action on February 8, 2018. The copy of the summons received
had both York and Netherlands underlined by hand. On February 9,
2018, CSC determined that the summons should be provided to York
because it was York’s CRA and York was the first defendant
underlined. CSC processed the summons and Complaint as directed
to York. . . . In accordance with its own policies, CSC did not send
the summons and complaint to Netherlands or provide any type of
notice to Netherlands. 2
Motion Memo, 2 (ECF No. 48, #115) (record citations omitted). These assertions are
supported by affidavits of representatives from CSC 3 as well as Liberty Mutual Group,
Inc. 4 Affidavit of Caitlin Alaburda (ECF No. 48-1, #121), Affidavit of Janet Nolan (ECF
No. 48-4, #151). Harnden denies Netherlands’ “specious argument,” instead asserting that
“the proofs of service clearly indicate that each Defendant was served with separate process
of the Amended Complaint.” Plaintiff’s Objection, 4 (ECF No. 55, #247).
Resolving doubts in favor of the movant, Netherland’s proffered explanation
provides “reasonable justification” for their initial lack of response. Snyder v. Talbot, 836
F. Supp. 26, 29 (D. Me. 1993) (citing Coon, 867 F.2d at 76). The circumstances leading

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Netherlands asserts it received the notice of the damages hearing because unlike the summons,
Netherlands was highlighted and “clearly designated as the party to whom the document was directed.”
Motion Memo, 2 (ECF No. 48, #115). CSC forwarded the document to Netherlands on December 18,
2018. Id.

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Caitlin Alaburda, a CSC employee who is responsible for reviewing summons and communicating with
customers of CSC asserts that based on her personal knowledge and upon a review of CSC’s business
records, because CSC received only one copy of the Summons and Amended Complaint, CSC served the
documents to the first-underlined defendant, York Insurance Company, only. Affidavit of Caitlin
Alaburda ¶¶ 2, 10 (ECF No. 48-1, # 126).

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Netherlands is a subsidiary of Liberty Mutual Group, Inc. As testified by Liberty’s representative, Janet
Nolan, “when lawsuits are filed against The Netherlands Insurance Company, those suits are forwarded
to Liberty Mutual Group, Inc. to manage.” Affidavit of Janet Nolan ¶ 3 (ECF No. 48-4, #151). Nolan
testifies that based on a review of Liberty Mutual Group, Inc.’s database, “there was no notice of the
lawsuit provided at or near the date of the complaint and no notice of the lawsuit until December 18,
2018.” Id. ¶ 7.
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to Netherlands’ failure to respond—specifically CSC’s failure to provide any form of
notice to Netherlands pursuant to its internal protocols—were “out of [Netherlands’]
control.” Winslow Marine, Inc. v. J. Supor & Son Trucking & Rigging, Inc., 2016 WL
7235670, at *2 (D. Me. Dec. 14, 2016) (granting a motion to vacate default judgment when
a corporation received no notice of the suit filed against them due to their “inadvertent
oversight” of failing to update their corporate address with their registered agent).
Without notice of the lawsuit, Netherlands’ default can hardly be considered
‘willful’ or to “show contempt for the court’s procedures or an effort to evade the court’s
authority.” Lucerne, 208 F.R.D. at 466. Furthermore, the record lacks allegations or
indications of bad faith. In my view, the facts as asserted lead to the opposite conclusion—
by responding once it was aware of Harnden’s claims, Netherlands acted in good faith and
exhibited a willingness to participate fully in the ongoing legal process.
II. MERITORIOUS DEFENSE
In order to allege a meritorious defense, “a party seeking relief from entry of default
must present more than general denials or conclusory statements.” Curtin v. Proskauer,
Rose Goetz & Mendelsohn Grp. Long Term Disability Plan, 2002 WL 273300, at *3 (D.
Me. Feb. 27, 2002) (citing Maine Nat'l Bank v. F/V Cecily B, 116 F.R.D. 66, 69 (D.
Me.1987)). Courts set aside an entry of default when “it appears that the defaulting party
might prevail if the case were allowed to proceed” or, in other words, when a party’s
assertions “plausibly suggest the existence of facts which, if proven at trial, would
constitute a cognizable defense.” Lucerne Farms, 208 F.R.D. at 466 (quoting Coon, 867
F.2d at 77).
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Netherlands asserts that under the terms of the insurance policies at issue,
“Netherlands is entitled to the full amount of the offset, which in practice serves to
eliminate any responsibility of Netherlands to pay Plaintiff.” 5 Motion Memo, 4 (ECF No.
48, #117).

To support their argument, Netherlands cites to the record 6 as well as

established caselaw. 7 Harnden contests Netherlands entitlement to an offset and counters
that the Court cannot evaluate Netherlands claims because Netherlands has not provided a
copy of the York policy. Plaintiff’s Objection, 5-6 (ECF No. 55, #248-49).
Without predicting the outcome of this case, it is clear Netherlands has provided
specific denials to liability and has “plausibly suggest[ed] the existence of facts which, if
proven at trial, would constitute a cognizable defense”—the fundamental requirements of
a meritorious defense. Coon, 867 F.2d at 77; see also Phillips v. Weiner, 103 F.R.D. 177,
181 (D. Me. 1984) (relying on the moving party’s assertions and finding that “neither

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The basis of this action arises out of a car accident in which Harnden was a passenger in a vehicle driven
and owned by Sylvia Parsons. Motion Memo, 4 (ECF No. 48, #117). In this claim, Harnden is seeking
compensation from Netherlands because her damages “exceeded the tendered available insurance policy
limits from the fault party.” Amend. Compl. ¶ 8 (ECF No. 6, #25). Harnden argues she is entitled to
payment from Netherlands under its “underinsured motorist” provision because it “does not get credit
against the potential judgment for the full amount of coverage available under the terms of the York
policy.” Plaintiff’s Objection, 5 (ECF No. 55, #5).

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Netherlands asserts the record provides sufficient evidence demonstrating that “its policy is excess.”
Plaintiff’s Objection, 5 (ECF No. 57, #270). Specifically, Netherlands cites “statements made by the
Plaintiff and York in their own court filings,” “the specific language of the Netherlands’ policy,” and
Harnden’s responses to discovery requests and filings. Id..

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Netherlands cites to Levine v. State Farm Mutual Automobile Insurance Co., 2004 ME 33, 843 A.2d 24
(holding that an insurer may offset the amount of coverage available in in a policy providing UM coverage
by the amount paid by the tortfeasor) and Tibbetts v. Dairyland Ins. Co., 2010 ME 61, 999 A.2d 930
(indicating that when two or more UM policies are at issue, “under the gap approach, a court allocates
the offset by first determining the gap in coverage, and then assigning insurers to cover that gap depending
on their status as primary or excess”) in support of their argument that “there is no excess such that
Netherlands has responsibility to pay.” Reply to Plaintiff’s Objection, 5-6 (ECF No. 57, #270-71).
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further factual inquiry nor review of state law is necessary in order to reach the conclusion
that the proffered defenses have merit for pleading purposes”).
III.

PREJUDICE TO PLAINTIFF
Harnden makes two primary arguments regarding the prejudice she would suffer if

the default were lifted. First, she asserts that “[w]hen a defendant is late filing an answer
for months or years, prejudice should be presumed.” Second, she argues that because she
“relied on the existing state of affairs” when settling with York Insurance—primarily, the
assumption that “[t]here was up to $100,000 in coverage available from Netherlands”—
her ability to litigate her claim has been impaired. Plaintiff’s Objection, 7 (ECF No. 55,
#250).
Harnden’s first claim of prejudice clearly fails. It is well established that “prejudice
cannot be inferred merely from the passage of time.” Snyder v. Talbot, 836 F. Supp. 26,
30 (D. Me. 1993).
Likewise, Harnden’s second claim of prejudice is insufficient. While it is true that
“[p]rejudice exists if circumstances have changed since entry of the default such that
plaintiffs’ ability to litigate their claims is now impaired in some material way or if relevant
evidence has become lost or unavailable,” the record in this case is devoid of facts
indicating that Harnden’s ability to litigate her claims will actually be impaired. In re
Game Tracker, Inc., 746 F. Supp. 2d at 218 (citations and alterations omitted).
Traditionally, courts look to factors such as “whether ‘witnesses have died,’ ‘memories
have dimmed beyond refreshment,’ a ‘discovery scheme has been thwarted,’ or ‘evidence
has been lost’ during the time that elapsed from a party’s default” to determine if a party
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will be prejudiced—none of which are alleged in this case. Snyder, 836 F. Supp. at 30
(citing Coon, 867 F.2d at 77); see also In re Game Tracker, Inc., 746 F. Supp. 2d at 218
(indicating a plaintiff would be prejudiced because “six years ha[d] passed since default
was entered” and the plaintiff would be forced to shoulder the “additional burden of finding
new witnesses”).
Despite her heated assertions to the contrary, Harnden will not be prejudiced if the
default is set aside. When she settled with York, Harnden “took a chance” that the default
would not be set aside. See Winslow Marine, Inc., 2016 WL 7235670, at *3 (finding no
prejudice to the third-party plaintiff even though the third-party plaintiff relied on the
assumption that the third-party defendant’s default would allow it to recover some of the
funds it owed to the plaintiff when it entered into a settlement agreement). The fact that
this risk did not pan out in Harnden’s favor does not form the basis of prejudice. Id. By
setting aside the default, Harnden will be obligated to litigate her claim against
Netherlands—a burden no greater than what was required of her when she filed her lawsuit.
CONCLUSION
After consideration of the “good cause” factors and in light of the emphasis placed
on deciding disputes on their merits, I find Netherlands has made a showing of “good
cause” that justifies setting aside the entry of default. Accordingly, I GRANT Netherlands’
Motion to Set Aside Default and File a Late Answer (ECF No. 45), thereby mooting
Plaintiff’s Motion to Continue Damages Hearing (ECF No. 54).
SO ORDERED.
Dated this 6th day of February, 2019.
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/S/ Lance E. Walker
LANCE E. WALKER
UNITED STATES DISTRICT JUDGE

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