Marcum v. Retirement Plan for Hourly-Rated Employees of Noranda Aluminum, Inc. et al

Filing 28

MEMORANDUM AND ORDER IT IS HEREBY ORDERED that deft.'s 20 MOTION to Set Aside Default Judgment is granted. Signed by Honorable Jean C. Hamilton on 4/21/11. (CLA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

JAMES MARCUM,
Plaintiff,
vs.
RETIREMENT PLAN FOR
HOURLY-RATED EMPLOYEES OF
NORANDA ALUMINUM, INC., et al.,
Defendants.

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Case No. 4:10CV02217 JCH

MEMORANDUM AND ORDER
Defendants Retirement Plan for Hourly-Rated Employees of Noranda Aluminum (“the Plan”)
and Noranda Aluminum, Inc. (“Noranda”) (collectively “Defendants”) move to set aside the default
judgment entered in favor of Plaintiff James Marcum (“Plaintiff”). (Doc. No. 20). Defendant’s
Motion to Set Aside Default Judgment (“Motion”) is fully briefed and ready for disposition.
BACKGROUND
Plaintiff filed this action against Defendants on November 29, 2010, seeking early retirement
benefits under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132.
(Complaint, Doc. No. 1). Plaintiff was employed by Noranda and worked at Noranda’s facility in
New Madrid, Missouri. (Affidavit of Wendy Boehme (“Boehme Aff.”), Doc. 21-1, ¶ 7). Plaintiff
served process in the instant case upon Noranda’s registered agent in the state of Missouri, CT
Corporation. (Response in Opposition to Defendants’ Motion to Set Aside Default Judgment
(“Response”), Doc. No. 26, p. 4; Bohme Aff., ¶¶ 12–13). CT Corporation had been instructed by
Noranda to forward legal documents to Noranda’s headquarters in Tennessee. (Bohme Aff., ¶ 12).
CT Corporation, however, forwarded the service of process in the instant case to Noranda’s branch

in New Madrid, Missouri, where Plaintiff worked. (Bohme Aff., ¶¶ 7, 13). This branch office does
not have a legal department; the Tennessee headquarters handles all litigation matters on behalf of
Noranda. (Id., ¶ 14). Noranda’s then-Vice President of Human Resources, Alan K. Brown, claims
that he never received a copy of the summons or Complaint in this case until after Defendants’ time
for filing had past. (Affidavit of Alan K. Brown (“Brown Aff.”), Doc. No. 21-2, ¶ 4). Moreover,
Defendants claim to have conducted a diligent search but have been unable to locate either the
original summons or Complaint. (Bohme Aff., ¶ 15; Brown Aff., ¶ 7). Defendants claim that they
did not respond to the Complaint within the required time for these reasons. (Defendants’
Memorandum in Support of Defendants’ Motion to Set Aside Default Judgment (“Memorandum”),
Doc. No. 20, p. 1).
On January 12, 2010, this Court entered a default judgment in Plaintiff’s favor after
Defendants failed to file the responsive pleading required by Federal Rule of Civil Procedure 12.
(Doc. No. 11).1 Plaintiff alleges that he mailed the motion for default that precipitated this judgment
to both Defendants at the Tennessee headquarters. (Response, p. 2). This mailing did not contain
an attention line. (See id.). Defendants claim that they were never aware of this mailing. (Brown
Aff., ¶¶ 8, 10).
Defendants move to set aside the default judgment under Federal Rules of Civil Procedure
55© and 60(b). This Motion was filed on February 7, 2011, which was sixty-one days after the
summons and Complaint were served on CT Corporation, and twenty-six days following the entry
of default judgment. (Doc. No. 20; see also Memorandum, p. 9).

1

The Clerk’s entry of default was filed on December 27, 2010. (Doc. No. 8).
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DISCUSSION
Defendants’ Motion is based on two arguments. First, Defendants argue that the judgment
was void, at least as to the Plan, for lack of proper service of process. (Motion, ¶ 1.) Second,
Defendants argue that they failed to respond to the Complaint as a result of mistake, inadvertence,
or excusable neglect. (Id., ¶ 2).
In determining whether the excusable neglect standard of Federal Rule of Civil Procedure
60(b)(1) is satisfied, the Court must not “focus narrowly on the negligent act that caused the default.”
See Union Pac. R.R. Co. v. Progress Rail Servs. Corp., 256 F.3d 781, 782 (8th Cir. 2001). Rather,
the proper inquiry is whether the act was excusable, which requires a consideration of “‘all relevant
circumstances surrounding the party’s omission.’”2 Id. (quoting Pioneer Investment Servs. Co. v.
Brunswick Assocs. Ltd., 507 U.S. 380, 395 (1993)). The factors relevant to this analysis are the
length of the delay and its potential impact on judicial proceedings; the reason for the delay, including
whether it was within the reasonable control of the movant; whether the movant acted in good faith;
the danger of prejudice to the non-moving party; and whether there is a meritorious defense to the
claim underlying the default judgment. Id. In weighing these factors, the Court is mindful of the
Eighth Circuit’s “frequently endorsed [and] strong judicial policy against default judgments.” See
Oberstar v. F.D.I.C., 987 F.2d 494, 504 (8th Cir. 1993); see also Johnson v. Dayton Elec. Mfg. Co.,
140 F.3d 781, 785 (8th Cir. 1998) (“[W]hen the grant of a default judgment precludes consideration
of the merits of a case, even a slight abuse of discretion merits reversal.”). This equitable analysis is
to be conducted within this Court’s sound discretion. See Johnson, 140 F.3d at 785; Union Pac.,
256 F.3d at 782.
2

Excusable neglect “is understood to encompass situations in which the failure to comply with a filing
deadline is attributable to negligence.” Union Pac., 256 F.3d at 782. The dispute as to this issue
turns on whether Defendants’ negligence was excusable, not whether it was negligent. (See
Response, p. 7 (characterizing failure to respond as “[i]nexcusable [n]egligence”)).
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1.

Length of the Delay and Its Potential Impact on Judicial Proceedings

In Union Pacific, the defaulting party acted promptly upon learning of the default judgment;
it filed its motion to set aside the default judgment three weeks after it had notice of the default,
which was less than six months after the filing of the complaint. See 256 F.3d at 783. The Eighth
Circuit held that such a “short-term delay [did not] undermine [the non-defaulting party’s] ability to
advance its claim.” Id.
In the instant case, Defendants’ Motion was filed just over three weeks after the default
judgment was entered and approximately two months after the Complaint was filed. Because the
timing of Defendants’ response in this case is substantially similar to that of the defendants in Union
Pacific, this factor “weighs heavily in favor of [the] motion to set aside the default judgment.” See
id.
2.

Reason for the Delay And Whether It Was Within the Reasonable Control of
Movant

In Feeney v. AT & E, 472 F.3d 560 (8th Cir. 2006), the defaulting party was properly served
with a motion for summary judgment by mail and, when he failed to respond, received a letter from
the presiding judge warning that default judgment would be entered against him if he did not respond
properly. Id. at 562. The defaulting party’s travel obligations made it difficult for him to regularly
check his mail, so he asked a relative to do so for him. Id. at 563. The defaulting party, however,
failed to make the proper arrangements when his private mailbox company began to require written
authorization of the mailbox owner for another person to retrieve the mail. Because the defaulting
party was traveling for two months, during which time the motion and the warning letter were sent,
he did not receive them. Id. The Eighth Circuit reasoned that it was “careless to the point of

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indifference” for the party to leave town for two months with a lawsuit pending without making
adequate arrangements to receive his correspondence. See id.
Unlike the defaulting party in Feeney, Noranda made arrangements to receive legal
documents. Noranda instructed CT Corporation, its registered agent in Missouri, to forward legal
documents to its Tennessee headquarters. Despite this instruction, CT Corporation sent the
documents to Noranda’s New Madrid branch, where the documents were last seen. Although
Noranda’s system was not perfect, it was certainly not “careless to the point of indifference” to rely
on the professionals at CT Corporation to carry out Noranda’s specific instructions. See id.; see also
Union Pac., 256 F.3d at 782–83 (recognizing that logistical errors by a corporation’s legal department
can constitute excusable neglect).
The fact that Defendants did not receive the notice of default judgment that Plaintiff served
by mail upon Noranda’s Tennessee headquarters, however, suggests that Noranda may have had
some level of indifference to logistical matters within its reasonable control. See Feeney, 472 F.3d
at 563. If this notice had made it into the hands of the appropriate decision maker, which it appears
not to have done, this matter may have been resolved before the default judgment was entered.
Nevertheless, because Defendants were not actually aware of the pendency of this action before this
motion was served upon them, Defendants cannot be said to be as culpable as the defaulting party
in Feeney, who left his home for two months when he knew he was a party to litigation without
arranging for appropriate mail delivery, thereby effectively shutting himself off from any way of
learning about developments in his case. See id.
Thus, Noranda had a reasonable system for handling service of process, which weighs in
Defendants’ favor, and Noranda failed to have a mail system in place that would ensure that the

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motion for default judgment would be delivered to the proper individual, which weighs in Plaintiff’s
favor. The Court finds that this factor is essentially neutral.
3.

Movant’s Good Faith

Plaintiff argues that Defendants’ failure to respond to the Complaint in a timely fashion is not
an isolated mistake because Defendants did not respond within the designated time to Plaintiff’s claim
for benefits and to Plaintiff’s administrative appeal from Defendants’ denial of benefits. (Response,
pp. 7–8). Defendants, however, acted promptly after they first learned of the instant litigation, i.e.,
the entry of the default judgment. Defendants’ quick response to the default judgment suggests that
Defendants were exercising some meaningful level of responsibility in their legal affairs. See Union
Pac., 256 F.3d at 782–83 (acting promptly after discovering error made by legal department
constituted excusable neglect). A basic concern in determining whether a mistake is excusable is how
the party behaved once it had actual notice of the pending litigation. See id. at 783 (reasoning that
a mistake that left a party unaware of a pending lawsuit is evidence of excusability); cf. Feeney, 472
F.3d at 563 (reasoning that negligence “at a time when [a party is] a defendant in a pending legal
proceeding” is evidence of a lack of excusability). Defendants’ failure to respond timely to Plaintiff’s
ERISA claim provides some evidence of lack of good faith in its pre-litigation actions. Defendants’
prompt action once Defendants were actually aware of the current litigation, however, outweighs any
inference that can be drawn from Defendants’ actions before the complaint was filed. Therefore, the
Court finds that this factor weighs slightly in favor of Defendants.
4.

Danger of Prejudice to the Non-Moving Party

“[P]rejudice may not be found from delay alone or from the fact that the defaulting party will
be permitted to defend on the merits.” Johnson, 140 F.3d at 785. The party supporting the default

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judgment must be prejudiced “in a more concrete way, such as ‘loss of evidence, increased difficulties
in discovery, or greater opportunities for fraud and collusion.’” Id. (citation omitted).
More than fifteen months have passed since Plaintiff filed his claim application for benefits
with Defendants. (Response, p. 9). “[T]he hardship [P]laintiff has faced by being deprived of the
rights promised under the Plan document” is the prejudice of which Plaintiff complains. (Id.) But
a delay in receiving the desired relief is not the type of prejudice for which the excusable neglect
standard is concerned. See Johnson, 140 F.3d at 785. In reaffirming this rule, the Johnson court was
addressing a products liability claim that arose out of a fire that claimed the life of children and the
plaintiff’s home. Id. at 782. The defendant, who manufactured the product at issue, missed a filing
deadline and had a default judgment entered against it. Id. at 782–83. Noting the “potential
injustice” to the defendant if the case were disposed of by default, the Eighth Circuit reaffirmed what
“numerous decisions make clear[:] prejudice may not be found from delay alone or from the fact that
the defending party will be permitted to defend on the merits.” See id. at 785. This was so even
though a year and a half had passed since the plaintiff first filed her lawsuit by the time the Eighth
Circuit reversed the trial court’s failure to set aside the default judgment. See id. at 781–82.
Plaintiff’s argument simply does not address the relevant types of prejudice such as lost
evidence, discovery complications, and greater opportunities for fraud and collusion. See id. at
785. Although the one and a half years that have passed since Plaintiff began his attempt to attain
ERISA benefits are no doubt a hardship to Plaintiff, this does not constitute prejudice, just as the
one and a half years that had passed in Johnson did not. Therefore, this factor weighs in favor of
Defendants.

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5.

Meritorious Defense

In considering the meritorious defense factor, “the issue is whether the proffered evidence
‘would permit a finding for the defaulting party,’ not whether it is undisputed.” Johnson, 140 F.3d
at 785 (citation omitted). Defendants have put forward evidence that
the Plan Administrator notified [Plaintiff] that he was not eligible for Rule of 65
benefits because he was not permanently disabled under the terms of the Pension Plan.
This determination was based upon medical information submitted by the Plaintiff, an
independent review of [Plaintiff]’s medical records by the Medical Review Institute
of America, and a thorough review of the case by the Plan Administrator.
(Boehme Aff., ¶ 9). In response, Plaintiff argues that “[t]he conclusion of [D]efendants’ medical
reviewer are inaccurate[] for the reasons stated in [P]laintiff’s Motion for Default.” (Response, p.
10). Plaintiff further asserts that Defendants have “deprived themselves of the deferential standard
normally associated with benefit plan determinations” by “failing to timely respond to [P]laintiff’s
administrative appeal.” (Id.)
The mere existence of contradictory testimony does not mean that a defaulting party cannot
prevail at trial. See Johnson, 140 F.3d at 785. Moreover, assuming arguendo that Defendants have
deprived themselves of a deferential review standard, as Plaintiff argues, Defendant nevertheless could
prevail at trial. Therefore, this factor weighs in favor of Defendants.
6.

Weighing the Factors

Based upon the foregoing discussion, the Court finds that the Defendants’ failure to file a
timely responsive pleading was the result of excusable neglect.3 The delay was relatively short once
3

Because Defendants’ failure to file a timely responsive pleading was attributable to excusable
neglect, the Court is not required to, and therefore does not, address Defendants’ argument that the
default judgment was void for improper service of process. This argument turns, at least as to the
Plan, on the effect of 29 U.S.C. § 1132(d)(1). There is some disagreement among other courts as
to whether service that would be proper upon the employer under the general rules of Federal Rule
of Civil Procedure 4(e) can be considered proper service upon the Plan, notwithstanding section
1132(d)(1), when there is a designated plan administrator. Compare Madaffari v. Metrocall Cos.,
No. 02C4201, 2004 WL 783060, at *2 (N.D. Ill. Jan. 12, 2004) (holding that service upon CEO of
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Defendants had actual notice of the instant litigation, there is no risk of prejudice to Plaintiff, and
Defendants’ have a defense that could conceivably prevail at trial. See Johnson, 140 F.3d at 784-85
(holding that where a failure is marginal, relief should be granted if the defaulting party has a
meritorious defense and if the non-defaulting party would not suffer significant prejudice).
With respect to the element of good faith, Plaintiff has put forward a legal argument that, if
accepted, would serve as a sanction for this pre-litigation delay. (See Response, p. 10). Because
Plaintiff will have the opportunity to raise this legal argument during the course of this action, the
good faith factor does not weigh against Defendants.
Finally, even though at least part of the reason for the delay in this case may have been within
the reasonable control of Defendants, this does not change the analysis. See Union Pac., 256 F.3d
at 782–83 (“[A] district court ought not to focus narrowly on the negligent act that caused the
default,” but rather it should “ask whether the act was itself in some sense excusable”). Taking
account of all of the relevant circumstances discussed above, see id. at 782, the Court finds that this
factor is outweighed by the others.

employer rather than officers listed as plan administrator and agent for service of process was
insufficient as to a plan under § 1132(d)(1) regardless of actual notice to plan), with Aronoff v. Serv.
Employees Local 32-BJ AFL-CIO, No. 02civ5386, 2003 WL 1900832, at *1–2 (S.D.N.Y. Apr. 16,
2003) (holding that § 1132(d)(1) is not a mandatory service rule so service upon secretary of
employer was proper under Fed. R. Civ. P. 4(e), especially because there was actual notice to the
plan). Because there was excusable neglect in this case, the Court declines to address this
disagreement.
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CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Defendants’ Motion to Set Aside Default Judgment
(Doc. No. 20) is GRANTED.
Dated this 21st

day of April, 2011.

/s/ Jean C. Hamilton
UNITED STATES DISTRICT JUDGE

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