Pelichet et al v. Lyon et al

Filing 151

ORDER GRANTING Defendant's 143 Motion to Set Aside 143 MOTION to Set Aside Entry of Default pursuant to FED. R. CIV. PROC. 55(c) --Signed by Magistrate Judge Anthony P. Patti. (MWil)

Case 2:18-cv-11385-APP ECF No. 151, PageID.3939 Filed 01/29/21 Page 1 of 6

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DARRYL PELICHET, et al.,
Case No. 2:18-cv-11385
Magistrate Judge Anthony P. Patti

Plaintiffs,
v.
NICK LYON, et al.,
Defendants.
______________________________/

ORDER GRANTING DEFENDANT HEGIRA PROGRAM, INC.’S
MOTION (ECF No. 143) TO SET ASIDE ENTRY OF DEFAULT (ECF
No. 89)
A.

Background

Currently before the Court is Defendant Hegira Programs, Inc.’s
motion to set aside entry of default. (ECF No. 143.) By way of background,
Plaintiffs initiated this case on May 2, 2018 and filed proof that Defendant
Hegira was served in May 2018. (ECF No. 1, ECF No. 6, PageID.213-214.)
Hegira filed answers on June 6, 2018. (ECF Nos. 17, 18.)
On August 3, 2018, Plaintiffs filed a motion as to Defendants Carelink
Network, Inc. and Lisa Medoff for leave to amend complaint to add more
parties and to raise allegations against added parties (ECF No. 31), attached
to which was a proposed first amended complaint (ECF No. 31-1). On
September 13, 2018, via a text-only order, the Court granted this motion “as
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unopposed and because ‘leave shall be freely granted when justice so
requires.’” Fed. R. Civ. P. 15(a)(2).
B.

The Amended Complaint

In the wake of Plaintiffs’ September 14, 2018 amended complaint
(ECF No. 44), several motions to dismiss were filed (ECF Nos. 49, 56, 62,
63, 64). The Court addressed these motions at length in September 2019.
(ECF No. 90.) Since then, only then-Defendant Stern and the MDHHS
Defendants have filed an answer to the amended complaint. (ECF Nos. 92,
96.)1
On September 23, 2019, approximately one year after the amended
complaint was filed, Plaintiffs requested entry of default as to Hegira, for its
failure to respond to the first amended complaint (ECF No. 44). (ECF No.
88.) The Clerk entered default on September 24, 2019. (ECF No. 89.) On
September 18, 2020, approximately one year after default was entered,
counsel entered an appearance on behalf of Defendant Hegira. (ECF No.
131.) On October 6, 2020, Defendant Hegira filed a witness list. (ECF No.
139.)

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It does not appear that Hegira participated in Judge Borman’s March 2019
or February 2020 hearings (ECF Nos. 82, 83, 105, 106), nor did Hegira
appear before the Undersigned at the June 5, 2020 telephonic scheduling
conference and motion hearing (ECF No. 126).
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C.

The Instant Motion

Defendant Hegira’s November 3, 2020 motion (ECF No. 143) to set
aside alleges, inter alia: “Due to the addition of unsuspected, new
allegations against it, Hegira reasonably neglected to file an Answer to
Plaintiffs’ First Amended Complaint addressing these new allegations,
having already filed an Answer to the initial Complaint. Notwithstanding,
Hegira had already generally denied the allegations presented in Plaintiffs’
Counts I and II in its timely initial Answer.” (ECF No. 143, ¶ 6.)
The individual Plaintiffs have filed a response (ECF No. 146) and
Defendant Hegira has filed a reply (ECF No. 147). On January 29, 2021, I
conducted a remote video motion hearing. (ECF Nos. 150.) Attorneys Ian
T. Cross and James M. Gallagher appeared on behalf of the individual
Plaintiffs, Attorney Simon Frederick Zagata appeared on behalf of Plaintiff
Michigan Protection and Advocacy Service, Inc., Attorneys Thomas G.
Cardelli and David Armando Occhiuto appeared on behalf of Defendant
Hegira, and Assistant Attorneys General Katherine J. Bennett and Ashlee
Lynn appeared on behalf of the MDHHS Defendants.
D.

Order

Upon consideration of the motion papers and oral argument, and for
the reasons stated on the record, all of which are incorporated by reference
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as if restated herein, Defendant Hegira Program, Inc.’s motion (ECF No.
143) to set aside entry of default (ECF No. 89) is GRANTED.
Preliminarily, to be clear, “[g]enerally, amended pleadings supersede
original pleadings.” Hayward v. Cleveland Clinic Found., 759 F.3d 601,
617 (6th Cir. 2014) (citing 6 Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1476 (3d ed.2010)). Thus, the Court is not
persuaded by Defendant Hegira’s argument that Fed. R. Civ. P. 15 does not
nullify its answers (ECF Nos. 17, 18) to the original complaint.
More to the point, keeping in mind that “[t]he court may set aside an
entry of default for good cause,” Fed. R. Civ. P. 55(c), and considering the
appropriate factors, all of which were discussed on the record at length
during the Court’s bench ruling, see, e.g., Dassault Systemes, SA v.
Childress, 663 F.3d 832 (6th Cir. 2011) and United Coin Meter Co. v.
Seaboard Coastline RR., 705 F.2d 839 (6th Cir. 1983), I conclude that: (1)
Defendant Hegira has a meritorious defense; (2) the prejudice to Plaintiffs is
limited but remediable; and, (3) although there is a close call on whether
there was reckless disregard on the part of Hegira or its prior counsel,
Defendant Hegira has the edge. Moreover, my decision is informed by
United States v. $22,050.00 U.S. Currency, 595 F.3d 318, 322 (6th Cir.
2010) (“cases discussing motions to set aside default under Rule 55(c) are
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extremely forgiving to the defaulted party and favor a policy of resolving
cases on the merits instead of on the basis of procedural missteps.”), as well
as Vance v. Rice, 524 F. Supp. 1297, 1300 (S.D. Iowa 1981) (“[a] lawsuit is
a search for the truth.”).
Nonetheless, in order to ameliorate any prejudice resulting to
Plaintiffs, the Court imposes the following adjustments to the case
management scheduling order (ECF No. 122): (1) discovery as to Hegira
only (i.e., discovery from Plaintiffs to Hegira or from Hegira to Plaintiffs) is
extended from February 5, 2021 to May 5, 2021; and, (2) the dispositive
motion deadline for all parties is extended from March 8, 2021 to June 8,
2021 (although Hegira has waived its right to file a motion based on
qualified immunity, as discussed on the record and as addressed in the
Court’s prior order (ECF No. 122, PageID.2825)).
Moreover, Plaintiffs’ anticipated redepositions of Craig Lemmen and
Marway Johnson, to be conducted solely for the purpose discovery regarding
Hegira, may not exceed 2 hours each. Additionally, Plaintiffs are permitted
their two anticipated, initial depositions of Hegira representatives, each of
which shall be done in accordance with Fed. R. Civ. P. 30. Within fourteen
days from the date of this order, Hegira shall reimburse counsel for the
individual Plaintiffs, counsel for Plaintiff MPAS, and counsel for the
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MDHHS Defendants (each of whom is represented by the Michigan
Attorney General’s Office) in the amount of $2,000, which is comprised of:
(1) $1,000 in attorney fees for the redepositions of Lemmen and Johnson;
and, (2) $500 in attorney fees for each of two Hegira representative
depositions. In other words, Hegira is to make a combined total of $6,000 in
payments. Finally, Hegira shall cover the costs of court reporters and all
transcripts (for all parties) for these four depositions. Hegira shall file its
answer and affirmative defenses on or before February 12, 2021.
IT IS SO ORDERED.
Dated: January 29, 2021

__________________________________
Anthony P. Patti
UNITED STATES MAGISTRATE JUDGE

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