RightCHOICE Managed Care, Inc. et al v. Hospital Partners, Inc. et al

Filing 149

ORDER denying 126 motion for entry of default; granting 128 Motion for Extension of Time. Signed on December 14, 2018, by Chief District Judge Greg Kays. (Law Clerk)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
ST. JOSEPH DIVISION
RIGHTCHOICE MANAGED CARE, INC.,
et al.,
Plaintiffs,
v.
HOSPITAL PARTNERS, INC., et al.,
Defendants.

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No. 5:18-cv-06037-DGK

ORDER DENYING PLAINTIFFS’ REQUEST FOR ENTRY OF DEFAULT AND
GRANTING DEFENDANT JAMES F. PORTER, JR.’S MOTION FOR EXTENSION OF
TIME TO RESPOND TO PLAINTIFFS’ THIRD AMENDED COMPLAINT
This action arises out of an alleged pass-through billing scheme for laboratory tests at a
rural Missouri hospital. Pending before the Court is Plaintiffs’ request for entry of default against
Defendant James F. Porter, Jr. (“Porter”) (Doc. 126). Also before the Court is Porter’s motion for
extension of time to respond to Plaintiffs’ third amended complaint (Doc. 128). Because Porter
has shown good cause for setting aside default, the Court DENIES Plaintiffs’ request for entry of
default and GRANTS Porter’s motion for extension of time, which the Court construes as a motion
to set side default and for leave to respond out of time.
Background
Plaintiffs first named Porter a defendant in this action in their third amended complaint
(Doc. 57), filed July 17, 2018. Porter was served on September 24, making his response due on
October 15. Fed. R. Civ. P. 12(a)(1)(A)(i). He missed this deadline, filing a motion to dismiss
(Doc. 124) approximately three weeks late on November 6. Later that day, Plaintiffs filed their
instant motion requesting that the Court enter default against Porter. Porter filed the pending

motion for an extension of time to respond to Plaintiffs’ complaint on November 9. The clerk did
not enter default, and the parties briefed all three motions simultaneously.
Porter claims he failed to timely respond to Plaintiff’s complaint because of financial
hardship and difficulty securing local counsel. He states that he was struggling financially due to
the closure of two businesses he managed, Hospital Laboratory Partners, LLC, and RAJ
Enterprises of Central Florida, LLC, which are also defendants in this action. This hardship
supposedly rendered him unable to retain counsel until late October. Porter points out that once
he did secure representation, his attorney immediately requested an extension of time from
Plaintiffs’ counsel and began seeking local counsel admitted to this Court.
Plaintiffs dispute that Porter’s financial situation precluded him from a timely response.
They describe their difficulties serving Porter and claim he owns many expensive properties and
recently purchased several vehicles. They also note that Hospital Laboratory Partners voluntarily
dissolved the day it was served with Plaintiffs’ complaint and RAJ Enterprises dissolved a few
months later. Plaintiffs ask the Court to either enter default against Porter or permit them to
conduct tailored discovery into his reasons for defaulting.
Discussion
Federal Rule of Civil Procedure 12(a)(1)(A) requires a defendant to respond to a complaint
within twenty-one days of being served. Otherwise, the clerk must enter the party’s default. Fed.
R. Civ. P. 55(a). “[A] defendant who fails to answer within the time specified by the rules is in
default even if that fact is not officially noted.” 10 Charles A. Wright, Arthur R. Miller, and Mary
K. Kane, Federal Practice and Procedure § 2692 (4th ed. 2018). Porter therefore defaulted after
he failed to respond to Plaintiffs’ complaint within twenty-one days, even though the clerk had not
entered notice of this fact. The Court thus construes Porter’s motion for an extension of time,

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together with his briefing opposing the entry of default, as a motion to set aside default under Rule
55(c). See id. (“[C]ourts have shown considerable leniency in treating other procedural steps as
equivalent to a motion, particularly when defendant’s conduct evidences a desire to correct the
default.”); Meehen v. Snow, 652 F.2d 274, 276 (2d Cir. 1981) (treating other pleadings as a motion
to set aside default); Hughes v. Port of Seattle, 848 F.2d 1242, at *3 (9th Cir. 1988) (noting that
“the clerk’s failure to enter a default is not significant to the outcome of this case” and treating the
district court’s denial of a motion for default judgment as having implicitly set aside default).
Rule 55(c) provides that district courts may grant relief from default for “good cause.” In
determining whether good cause exists, courts weigh “whether the conduct of the defaulting party
was blameworthy or culpable, whether the defaulting party has a meritorious defense, and whether
the other party would be prejudiced if the default were excused.” Johnson v. Dayton Elec. Mfg.
Co., 140 F.3d 781, 784 (8th Cir. 1998) (citation omitted). There is additionally a “judicial
preference for adjudication on the merits,” id. (quoting Oberstar v. F.D.I.C., 987 F.2d 494, 504
(8th Cir. 1993)), particularly where a plaintiff seeks substantial financial damages. Swink v. City
of Pagedale, 810 F.2d 791, 792 n.2 (8th Cir. 1987).
Here, good cause exists for setting aside the entry of default.1 For one, Porter’s conduct
does not rise to the level of “contumacious or intentional delay or disregard for deadlines and
procedurals” that typically warrants default. Johnson, 140 F.3d at 784. Granted, Porter should
have requested an extension or attempted to represent himself before the deadline lapsed. But he
promptly involved himself in the case upon retaining lead and local counsel; he filed a motion to

Because Porter requested an extension of time, the parties also briefed whether he satisfies the “excusable neglect”
standard of Rule 6(b)(1)(B), which allows the Court to grant parties leave to file out of time. Porter satisfies this
standard for the reasons set forth in this Order. See Zzipline, LLC v. Solutions Group, Inc., No. 4:12-cv-994-JAR,
2012 WL 3150584, at *1 (E.D. Mo. Aug. 2, 2012) (discussing the equitable standard for obtaining leave to file out of
time under Rule 6(b)(1)(B)).
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dismiss the same day he obtained local representation, and he requested an extension of time three
days later. These actions clearly evince a desire to defend the case on the merits. Id. (“[I]t is
likely that a party who promptly attacks an entry of default, rather than waiting for grant of a
default judgment, was guilty of an oversight and wishes to defend the case on the merits”).
Moreover, the three-week delay more closely constitutes a “‘marginal failure’ to meet pleading
. . . deadlines,” which courts frequently excuse. Id. (citing cases).
Second, Porter has a meritorious defense. A defense is meritorious for purposes of Rule
55(c) where, if believed, it “would permit a finding for the defaulting party . . . .” Id. at 785
(internal quotations and citation omitted). The issue is not whether the defense is undisputed. Id.
Rather, “[t]he underlying concern is whether there is some possibility that the outcome after a full
trial will be contrary to the result achieved by the default.” Stephenson v. El-Batrawi, 524 F.3d
907, 914 (8th Cir. 2008) (internal quotations, citation, and alterations omitted). In his motion to
dismiss, Porter asserts several potentially meritorious defenses to Plaintiffs’ complaint, including
that the Court lacks jurisdiction and that the Employment Retirement Income Security Act of 1974
preempts Plaintiffs’ state-law claims. There is “some possibility” these defenses could produce a
result contrary to default, and so this factor also weighs against its entry.
Finally, setting aside default will not significantly prejudice Plaintiffs. Plaintiffs argue that
allowing Porter to proceed will delay the litigation. But the delay was relatively short, and delay
alone cannot establish prejudice. Johnson, 140 F.3d at 785. Furthermore, the case is still in its
early stages, since the parties have yet to conduct discovery. Plaintiffs add that Porter’s late
response, coupled with the dissolution of the defendant entities he controlled, suggests the risk of
losing evidence. Porter responds that dissolution takes months, and that his companies initiated
the process well before they received Plaintiffs’ complaint. Without more from Plaintiffs, their

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suspicion amounts to speculation, and the Court will not enter default on this basis. The interests
of fairness are best served by expediently proceeding to adjudicate the merits of Plaintiffs’ claims.
Conclusion
There is good cause for setting aside the entry of default against Porter. Accordingly, the
Court DENIES Plaintiffs’ motion for entry of default (Doc. 126) and GRANTS Porter’s motion
for extension of time (Doc. 128). Porter is hereby granted leave to respond to Plaintiffs’ third
amended complaint.
IT IS SO ORDERED.
Date: December 14, 2018

/s/ Greg Kays
GREG KAYS, CHIEF JUDGE
UNITED STATES DISTRICT COURT

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