Trinity Chemical Industries, LLC v. CCP Enterprises, LC et al
OPINION AND ORDER by Judge Claire V Eagan that defendants' Opposed Motion to Answer Allegedly Out of Time and Brief in Support (Dkt. # 24) and defendants' Motion to Set Aside Clerk's Entry of Default (Dkt. # 28) are gr anted. The Court Clerk's entry of defendants' default (Dkt. # 22) is vacated. Defendants are permitted to file answers no later than January 25, 2017. ; vacating/setting aside order(s); setting/resetting deadline(s)/hearing(s): < i> ( Miscellaneous Deadline set for 1/25/2017); granting 24 Motion to File Document Out of Time; granting 28 Motion to Set Aside Clerks Entry of Default (Re: 22 Clerk's Entry of Default, Ruling on Motion for Entry of Default by Clerk, 2 Complaint ) (Documents Terminated: 22 Clerk's Entry of Default, Ruling on Motion for Entry of Default by Clerk ) (RGG, Chambers)
UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA
TRINITY CHEMICAL INDUSTRIES, LLC,
CCP ENTERPRISES, LC,
WASHAKIE RENEWABLE ENERGY, LLC,
and UNITED FUEL SUPPLY, LLC,
Case No. 16-CV-0367-CVE-TLW
OPINION AND ORDER
Now before the Court are defendants’ Opposed Motion to Answer Allegedly Out of Time
and Brief in Support (Dkt. # 24) and defendants’ Motion to Set Aside Clerk’s Entry of Default (Dkt.
# 28). Defendants CCP Enterprises, LC (CCP), Washakie Renewable Energy, LLC (WRE), and
United Fuel Supply, LLC (UFS) ask the Court to set aside the Court Clerk’s entry of default (Dkt.
# 22), and they request leave to file an out-of-time answer to plaintiff’s complaint.
On June 21, 2016, Trinity Chemical Industries, LLC (Trinity) filed this case alleging a
breach of contract claim against CCP, a breach of guaranty claim against WRE, and a conversion
claim against UFS. Trinity leased railcars to CCP and WRE executed a guaranty in the event that
CCP breached the parties’ contract. Dkt. # 2, at 2. Trinity alleges that CCP has breached the
contract and that CCP owes Trinity $1,080,500 in rent and other expenses, and Trinity seeks to
enforce the guaranty executed by WRE. Id. at 5-6 Trinity also alleges that UFS is currently in
possession of 31 railcars owned by Trinity. Id. at 7. On September 6, 2016, the Court entered an
order to show cause directing Trinity to show that defendants had been properly served. Dkt. # 12.
Trinity responded that it had encountered difficulties serving defendants by mail, but general counsel
for defendants, Jason Foulger, had agreed to execute waivers of service for each defendant. Dkt.
# 13, at 3. Waivers of service for each defendant were filed, and defendants’ answers were due no
later than October 28, 2016.
Defendants did not file an answer by that date and, on October 31, 2016, Trinity filed a
motion for entry of default by the Court Clerk. Dkt. # 21. The motion for entry of default was
granted. Dkt. # 22. On November 3, 2016, defendants filed a motion (Dkt. # 24) seeking leave to
file an answer out-of-time, and they subsequently filed a motion (Dkt. # 28) to set aside the Court
Clerk’s entry of default. Foulger states that he spoke to a representative of Trinity before the case
was filed and explained that defendants were in the process of selling assets to pay their outstanding
liabilities. Dkt. # 25, at 1. In the interim, defendants agreed to pay Trinity $5,000 per month and
he later agreed to execute waivers of service on behalf of defendants. Id. at 2. However, Foulger
believed that he had an understanding with Trinity’s attorney, Bradley Brown, that it was
unnecessary for defendants to file an answer or retain local counsel, “because the parties were
waiting on the sale of assets and if an answer were required sufficient time to retain local counsel
and file an answer would be given.” Id. Trinity responds that it agreed to a limited extension of
defendants’ time to answer because defendants were in the process of selling assets, but it did not
agree to an open-ended extension of time for defendants to file answers. Dkt. # 26, at 2. Trinity
claims that it agreed to extend defendants’ deadline to file an answer to October 28, 2016, and it
filed a motion for entry of default by the Court Clerk when this deadline expired. Dkt. # 26-1, at 2.
The Federal Rules of Civil Procedure authorize the entry of default “[w]hen a party against
whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided
by these rules. . . .” Fed. R. Civ. P. 55(a). The court may set aside the entry of default for “good
cause shown.” Fed. R. Civ. P. 55(c). The standard for setting aside entry of default “poses a lesser
standard for the defaulting party than the excusable neglect which must be shown for relief from
judgment under Fed. R. Civ. P. 60(b).” Dennis Garberg & Associates, Inc. v. Pack-Tech Intern.
Corp., 115 F.3d 767, 775 n.6 (10th Cir. 1997). “In deciding whether to set aside an entry of default,
courts may consider, among other things, ‘whether the default was willful, whether setting it aside
would prejudice the adversary, and whether a meritorious defense is presented.’” Pinson v. Equifax
Credit Information Servs., Inc., 316 F. App’x 744 (10th Cir. Mar. 10, 2009) (quoting Dierschke v.
O’Cheskey, 975 F.2d 181, 183 (5th Cir. 1992)).1 Default judgments are not favored, as the preferred
practice is to decide cases on their merits. Katzson Bros., Inc. v. United States Environmental
Protection Agency, 839 F.2d 1396, 1399 (10th Cir. 1988); Gomes v. Williams, 420 F.2d 1364, 1366
(10th Cir. 1970). The defaulting party has the burden to prove that the entry of default should be
set aside. Nikwei v. Ross School of Aviation, Inc., 822 F.2d 939, 943 (10th Cir. 1987).
Defendants ask the Court to set aside the Court Clerk’s entry of default and allow defendants
to file an answer, because it had a good faith belief that it was unnecessary for defendants to file an
answer and Trinity will not be prejudiced if the entry of default is vacated. Dkt. # 27, at 7. The
Court will initially consider whether plaintiff’s motion for entry of default should have been granted.
The docket sheet shows that Foulger executed waivers of service and that defendants’ answers were
due no later than October 28, 2016. Dkt. ## 14, 15, 16. Defendants did not file a motion for
extension of time to answer and Trinity was permitted to move for entry of default as of October 29,
Unpublished decisions are not precedential, but may be cited for their persuasive value. See
Fed. R. App. 32.1: 10th Cir. R. 32.1.
2016. Trinity’s motion for the Court Clerk’s entry of default was filed on October 31, 2016, and
the motion was properly granted by the Court Clerk. Dkt. ## 21, 22.
Defendants claim that the parties had an informal agreement that it was unnecessary
defendants to file an answer until the sale of assets occurred, and they assert that they had a good
faith belief that it was unnecessary for them to file an answer. Dkt. # 24, at 3. Trinity states that the
waivers of service memorialized the parties’ agreement to a limited extension of defendants’ answer
deadline, and it received no contact from defendants after September 13, 2016. Dkt. # 26-1, at 2.
On October 31, 2016, Trinity’s attorney e-mailed a copy of Trinity’s motion for entry of defendants’
default to Foulger. Id. Foulger immediately retained local counsel for defendants and a motion to
file an answer out-of-time was filed on November 3, 2016. Dkt. # 25, at 2. Before filing a motion
to file an answer out-of-time, local counsel contacted plaintiff’s counsel in an attempt to resolve the
matter but he did not receive a response from plaintiff’s counsel. Id. The actions of defendants
support their argument that they sincerely, even if mistakenly, believed that they had an agreement
with plaintiff to defer the filing of an answer until the sale assets was completed. Defendants acted
promptly after plaintiff filed a motion for entry of default and they sought to file an answer to avoid
any additional delay to plaintiff, and the minimal delay that would have been caused by allowing
defendants to immediately file an answer would not have prejudiced plaintiff.
The Court finds that defendants have established good cause for setting aside the entry of
default. There is no evidence that defendants’ failure to file an answer willful or was intended to
delay the proceedings, and plaintiffs have not identified any prejudice that would result from setting
aside the entry of default. Plaintiff argues that defendants have no meritorious defense to plaintiff’s
claims. Dkt. # 26, at 4. However, the proposed answer submitted by defendants clearly denies
liability as to plaintiff’s claims and also places into dispute the amount of damages recoverable by
plaintiff. Dkt. # 24-1. There is strong preference for resolving cases on the merits and default
judgments are not favored. Katzson Bros., Inc., 839 F.2d at 1399. Defendants’ motion to set aside
the entry of default (Dkt. # 28) should be granted, and defendants should be permitted to file an
IT IS THEREFORE ORDERED that defendants’ Opposed Motion to Answer Allegedly
Out of Time and Brief in Support (Dkt. # 24) and defendants’ Motion to Set Aside Clerk’s Entry of
Default (Dkt. # 28) are granted. The Court Clerk’s entry of defendants’ default (Dkt. # 22) is
vacated. Defendants are permitted to file answers no later than January 25, 2017.
DATED this 18th day of January, 2017.
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