WERNER DECONSTRUCTION, LLC v. SITEWORKS SERVICES NY, INC. et al

Filing 97

MEMORANDUM OPINION filed. Signed by Magistrate Judge Tonianne J. Bongiovanni on 7/18/2019. (km)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
WERNER DECONSTRUCTION, LLC,
Civil Action No. 15-7682 (PGS)
Plaintiff,
v.
MEMORANDUM OPINION
SITEWORKS SERVICES NY, INC., et al.,
Defendants.

BONGIOVANNI, United States Magistrate Judge
Currently pending before the Court is Defendant Siteworks Services NJ, Inc.’s (“SSNJ”)
Motion to Vacate the Clerk’s Entry of Default. (Docket Entry No. 89). Plaintiff opposes SSNJ’s
Motion. The Court has fully reviewed and considered all arguments raised in favor of and in
opposition to SSNJ’s Motion. The Court considers the Motion without argument pursuant to
L.Civ.R. 78.1(b). For the reasons set forth below, SSNJ’s Motion to Vacate the Clerk’s Entry of
Default is GRANTED.
I.

Background and Procedural History

The Court and the parties are familiar with the facts underlying this case as well as its
procedural history. As a result, neither will be restated at length herein. Instead, only those facts
most relevant to the pending Motion to Vacate the Clerk’s Entry of Default are included.
On December 7, 2018, Plaintiff filed an Amended Complaint that names SSNJ as a
defendant. (Docket Entry No. 69). Plaintiff served SSNJ with the Amended Complaint on
January 19, 2019, making SSNJ’s answer due on February 11, 2019. (Docket Entry No. 84).
SSNJ failed to timely respond to Plaintiff’s Amended Complaint. As a result, on March 15,

2019, Plaintiff requested that the Clerk enter default against SSNJ, which the Clerk did. (See Pl.
Request for Default, Docket Entry No. 86; Clerk’s Entry of Default of 3/15/2019). In response,
on March 25, 2019, SSNJ filed the current Motion to Vacate Clerk’s Entry of Default. (Docket
Entry No. 89). As noted above, Plaintiff opposes SSNJ’s Motion.
II.

Legal Standard

Pursuant to FED.R.CIV.P. (“Rule”) 55(a): “[w]hen a party against whom a judgment for
affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by
affidavit or otherwise, the clerk must enter the party’s default.” However, the Court may vacate
the entry of default. See Rule 55(c). The decision to set aside a clerk’s entry of default “‘is left
primarily to the discretion of the district court.’” Bailey v. United Airlines, 279 F.3d 194, 204 (3d
Cir. 2002) (quoting Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984)). Rule 55(c)
provides that “[t]he court may set aside an entry of default for good cause[.]” In deciding
whether there is good cause to vacate the entry of default, courts examine: “(1) whether the party
subject to default has a meritorious defense, (2) the prejudice suffered by the party seeking
default, and (3) the culpability of the party subject to default.” Doug Brady, Inc. v. N.J. Bldg.
Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008). Because default is consider an
“extreme sanction . . . of last resort[,]” any doubts must be resolved in favor of vacating default
and “proceeding on the merits.” Id.
III.

Discussion

The Court considers the aforementioned factors as well as the preference for cases to be
decided on their merits in determining whether to vacate default as requested by SSNJ. The
threshold question for the Court is whether SSNJ has a meritorious defense. “The showing of a
meritorious defense is accomplished when ‘allegations of defendant’s answer, if established on

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trial, would constitute a complete defense to the action.’” United States of America v.
$55,518.05 in U.S. Currency, 728 F.2d 192, 195 (3d Cir. 1984) (quoting Tozer v. Charles A.
Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)). Here, the Court finds that SSNJ has a
meritorious defense. First, SSNJ disputes Plaintiff’s ability to pierce SSNY’s corporate veil.
Second, even if Plaintiff is able to do so, SSNJ argues that Plaintiff cannot establish its liability
both because the contracts at issue purportedly do not provide for the payments to subcontractors alleged by Plaintiff and because, regardless, SSNJ “has played no part and was not
involved in the events this action is about[,]” including not receiving any money properly
payable to Plaintiff. (Def. Br. at 3, 4; Docket Entry No. 89-1). Indeed, SSNJ argues that Plaintiff
has failed to find any transactions involving funds going from SSNY to SSNJ. (See Def. Reply at
4; Docket Entry No. 92). If true, these arguments would provide SSNJ with a complete defense
to Plaintiff’s claims. Therefore, the Court finds that SSNJ has a meritorious defense.
Next, the Court considers whether Plaintiff will suffer prejudice if the entry of default is
vacated. SSNJ filed the present Motion on March 25, 2019, less than two weeks after Plaintiff
requested and the Clerk entered default, and just over a month after its Answer was due. (Docket
Entry No. 89). Notably, delay in the adjudication of a claim “rarely serves to establish the degree
of prejudice” sufficient to warrant the denial of a motion to vacate an entry of default. Feliciano
v. Reliant Tooling Co. Ltd., 691 F.2d 653, 657 (3d Cir. 1982); New Jersey Right to Life
Committee, Inc. v. New Jersey Republican Profile Coalition, Civil Action No. 05-5443 (DMC),
2006 WL 2252375, at *2 (D.N.J. Aug. 7, 2006). Here, the Court finds that Plaintiff will not be
prejudiced if default is vacated. Not only is the delay here minimal, but discovery is ongoing.
Further, regardless of whether SSNJ is allowed to proceed, this action will continue as to its codefendants. Under these circumstances, the Court is not persuaded that Plaintiff will suffer any

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prejudice if default is vacated and this matter, including SSNJ’s defense, is allowed to proceed
on the merits.
Third, the Court considers whether the entry of default was a product of SSNJ’s culpable
conduct. “[T]he standard for ‘culpable conduct’ in this Circuit is the ‘willfulness’ or ‘bad faith’
of a non-responding defendant.” Hritz v. Woma Corp., 732 F.2d 1178, 1182 (3d Cir. 1984).
Negligence is insufficient. Instead, there needs to be a knowing or, at least, “[r]eckless disregard
for repeated communications from plaintiffs and the court[.]” Id. at 1183. Despite Plaintiff’s
claims to the contrary, the Court finds that SSNJ’s failure to timely answer did not result from its
culpable conduct. While SSNJ was certainly aware of these proceedings, it did not knowingly or
recklessly disregard its need to participate. Instead, SSNJ argues that its failure to answer, move
or otherwise respond to Plaintiff’s Amended Complaint within the time prescribed was due to the
fact that it had not been operational for a substantial period, and deciding whether to mount a
defense and fund counsel required time to consult with shareholders. (See Def. Reply at 4).
While the better course of action would have been for SSNJ to have sought an extension of time
to answer, there is no persuasive evidence that its failure to act timely resulted from willfulness
or bad faith. As a result, the Court finds that the entry of default, here, cannot be attributed to
any “culpable conduct” on SSNJ’s part.

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Under these circumstances, especially when considering the preference that civil actions
be decided on their merits, the Court finds good cause under Rule 55(c) to vacate default.
SSNJ’s Motion to Vacate the Clerk’s Entry of Default is therefore GRANTED. SSNJ is directed
to answer, move or otherwise respond to Plaintiff’s Complaint within two weeks of a decision on
the pending Motion to Withdraw (Docket Entry No. 94).
Dated: July 18, 2019
s/ Tonianne J. Bongiovanni
HONORABLE TONIANNE J. BONGIOVANNI
UNITED STATES MAGISTRATE JUDGE

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