KMB Argo-Chemicals, LLC v. Plastic World Recycling, Inc.
Filing
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MEMORANDUM OPINION - For the foregoing reasons, the Court will deem Defendant's Motion to Dismiss (Doc. 11) as withdrawn and grant Defendant's Motion to Set Aside Default (Doc. 18). A separate Order follows.Signed by Honorable Robert D. Mariani on 1/4/17. (jfg)
THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
KMB AGRO-CHEMICALS, LLC,
Plaintiff,
v.
3:16-CV-02258
(JUDGE MARIANI)
PLASTIC WORLD RECYCLING, INC.,
Defendant.
MEMORANDUM OPINION
Presently before the Court are two motions filed by Defendant Plastic World
Recycling, Inc. (hereinafter "Plastic World"): (1) a"Motion to Dismiss Complaint, Motion for
Preliminary Injunction and Request for Entry of Default for Failure to Comply with Federal
Rule of Civil Procedure § 7. f' (Doc. 11) and {2} a Motion to Set Aside Default (Doc. 18).
The Court will address each motion in turn.
A. "Motion to Dismiss Complaint, Motion for Preliminary Injunction and Request for
Entry of Default for Failure to Comply with Federal Rule of Civil Procedure § 7.1"
On December 4,2016, Plastic World filed a "Motion to Dismiss Complaint, Motion for
Preliminary Injunction and Request for Entry of Default for Failure to Comply with Federal
Rule of Civil Procedure § 7.1" {Doc. 11} arguing that because Plaintiff KMB Agro-Chemicals,
LLC {hereinafter "KMB"} failed to file a Disclosure Statement pursuant to Federal Rule of
Civil Procedure 7.11, Plaintiffs Complaint should be dismissed as well as Plaintiffs motion
motion cites to Federal Rule of Bankruptcy Procedure § 7.1 instead of Federal Rule
of Civil Procedure § 7.1. (See Doc. 11, at 1). However, because there is no § 7.1 in the Federal Rules of
Bankruptcy Procedure and Defendant's citation to the rule is adirect quotation of the language contained in
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for preliminary injunction and that Plaintiff "should be deprived of its ability to enter default in
[the] underlying Complaint since the Complaint itself was improperly filed." Defendant never
filed a brief in support of this motion despite Plaintiff's assertion in its reply to Defendant's
motion that the motion should be stricken for failure to comply with the Middle District of
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Pennsylvania Local Rules requiring the filing of a brief in support of a motion such as
Defendant's (see Doc. 22, ~ 5).
Plaintiff filed adisclosure statement pursuant to Rule 7.1 on December 5,2016.
(Doc. 13). On December 12, 2016, Defendant filed an Answer to Plaintiffs Complaint.
(Doc. 20).
Pursuant to the Middle District o'f Pennsylvania Local Rules U{w]ithin fourteen (14)
days after the filing of any motion, the party filing the motion shall file a brief in support of
the motion.... If a supporting brief is not filed within the time provided in this rule the
motion shall be deemed to be withdrawn." M.D. Pa. L.R. 7.5. Here, over one month has
passed and Defendant has failed to file any brief in support of its motion. As a result, the
Court deems Defendant's motion withdrawn. 2
Federal Rule of Civil Procedure § 7.1, the Court deems Defendant's one reference to the Bankruptcy rules
to be an unintentional and harmless error.
2 Even if Defendant had complied with the Local Rule requiring the submission of a brief in support
of its motion, the motion would have been without merit. An examination of Federal Rule of Civil Procedure
12(b), and specifically the defenses recognized therein which may be raised by motion, makes clear that
they do not encompass and clearly may not be founded upon a claim that an action may be dismissed for
failure to file a Disclosure Statement pursuant to Rule 7.1.
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B. Motion to Set Aside Default
Plastic World's second motion requests that the Court set aside Plaintiffs Request
for Entry of Default against Defendant because Plaintiff "failed to file its Disclosure
Statement prior to the Request for Entry of Default." (Doc. 18, ~ 6). Defendant's brief in
support of this motion argues that "[t]his Court should vacate default because good cause
exists; it was not the result of egregious behavior, and vacating default will not result in any
prejudice to Plaintiff." (Doc. 19, at 1).
Preliminarily, the Court notes that although Plaintiff did file a Request for Entry of
Default (Doc. 9), the docket reflects that the Clerk of Court never entered default in this
action. Therefore, common sense dictates that a default cannot be set aside when it has
never been entered. In that case, Defendant's motion would be unnecessary.
In the alternative, assuming that there is a default which Defendant must now seek
to set aside, the Court will engage in an analysis of Federal Rule of Civil Procedure 55.
Federal Rule of Civil Procedure 55(a) provides: "When 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,
"[t]he court may set aside an entry of default for good cause." Fed. R. Civ. P. 55(c). "A
decision to set aside the entry of default ... is left primarily to the discretion of the district
court." United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194 (3d Cir. 1984). The
Third Circuit "does not favor entry of defaults" but rather "require[s] doubtful cases to be
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resolved in favor of the party moving to set aside the default judgment 'so that cases may
be decided on their merits.'" Id. at 194-95 (quoting Tozer v. Charles A. Krause Milling Co.,
189 F.2d 242, 245 (3d Cir. 1951)). Adistrict court must consider the following factors in
exercising its discretion over a motion to set aside default: "(1) whether lifting the default
would prejudice the plaintiff; (2) whether the defendant has aprima facie meritorious
defense; (3) whether the defaulting defendant's conduct is excusable or culpable; and (4)
the effectiveness of alternative sanctions." Emcasco Ins. Co. v. Sambrick, 834 F.2d 71,73
(3d Cir. 1987). Although the factors for determining whether to set aside a default judgment
are the same as those used when determining whether to set aside an entry of default,
these factors should be applied even more liberally when deciding whether to set aside a
default. Jackson v. Delaware Cnty, 211 F.R.D. 282 (E.D. Pa. 2002).
When the Court balances the above factors in light of our Circuit's disfavor of
judgments by default, it becomes clear that good cause exists for setting aside the entry of
default.
First, the delay has caused Plaintiff no legally significant prejudice. "Under Rule 55,
the prejudice requirement compels plaintiffs to demonstrate that the plaintiffs claim would
be materially impaired because of the loss of evidence, an increased potential for fraud or
collusion, substantial reliance on the entry of default, or other substantial factors." Dizzley v.
Friends Rehab. Program, Inc., 202 F.R.D. 146, 147-48 (E.D. Pa. 2001); see also AccuWeather, Inc. v. Reuters Ltd., 779 F. Supp. 801, 802 (M.D. Pa. 1991) ("Prejudice exists if
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circumstances have changed since entry of the default such that plaintiffs ability to litigate
its claim is now impaired in some material way or if relevant evidence has become lost or
unavailable. Detriment in the sense that plaintiff will be required to establish the merit of its
claims does not constitute prejudice in this context."). Here, Defendant entered an
appearance two days after Plaintiff filed its request for the entry of default and filed a motion
to dismiss that same day. Although the Court recognizes the importance of a defendant
quickly responding to a motion for a preliminary injunction, Defendant entered an
appearance less than one month after this motion was filed and almost immediately began
filing responses to Plaintiffs filings as well as participating in a conference call with Plaintiffs
counsel and the Court to schedule an evidentiary hearing on Plaintiffs preliminary injunction
motion. Further, in the two days between the time that Plaintiff requested that default be
entered against Defendant and Defendant entering an appearance, nothing in the case
changed. Nor has Plaintiff offered the Court anything to show that it suffered from
Defendant's delay aside beyond the harm inherent in the passage of time itself. Thus, the
"prejudice" prong favors setting aside the entry of default.
Second, the Defendant has shown a prima facie meritorious defense. "The showing
of a meritorious defense is accomplished when 'allegations of defendant's answer, if
established on trial, would constitute a complete defense to the action.'" $55,518.05,728
F.2d at 195 (quoting Tozer, 189 F.2d at 244). "A court requires the defendant to raise
specific facts beyond a general denial so that it has some basis for determining whether the
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defendant can make out a complete defense." Momah v. Albert Einstein Med. Ctr., 161
F.R.D. 304, 307 (E.D. Pa. 1995). Although Defendant's Answer provides minimal
responses to Plaintiffs Complaint and is devoid of any factual assertions, Defendant's
Answer also raises nineteen "Affirmative Defenses" and includes a Counterclaim against
KMB. (See Doc. 20). Plastic World's Counterclaim appears to arise out of the same
transaction or set of transactions as asserted in Plaintiffs Complaint and sets forth several
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factual allegations that if proven at trial, could constitute a defense to the action or at
minimum significantly limit the amount of damages to which Plaintiff is entitled. Thus, this
prong also favors setting aside the entry of default.
Third, little evidence exists to illuminate whether Defendant's conduct was excusable
or culpable. "In this context culpable conduct means action taken willfully or in bad faith."
Gross v. Stereo Component Sys., Inc., 700 F.2d 120, 123-24 (3d Cir. 1983). Defendant
argues that its conduct was not "willful" for the following reasons:
Defendant's counsel entered his appearance after the Request for Entry of
Default was made by the Plaintiff. Defendant's counsel immediately reviewed
the docket and noticed that Plaintiff failed to comply with the technical
requirements to filing the Complaint. In this case, Counsel for the Plaintiff
failed to file of the required documents, namely, the Disclosure Statement
required by F.R.C.P. Sec. 7.1. As such, Defendant's counsel immediately
filed a Motion to Dismiss the Complaint based upon Plaintiffs technical
default.
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(Doc. 19, at 2). Other than Defendant's first statement regarding the timing of his
appearance, Defendant's assertion has no bearing on the present factor. The question of
whether Plaintiffs failure to file the Disclosure Statement constituted a basis for dismissal of
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the action is irrelevant to a determination of whether Defendant's conduct was excusable,
culpable or willful. Without any explanation for why Defendant's counsel waited until
Plaintiff requested that default be entered against Defendant to enter an appearance, it is
difficult to tell if Defendant's conduct was excusable, as Defendant's counsel has not made
the reasons or justifications for his delay known to the Court. But there is also no reason to
believe that the delay was "culpable." The Court cannot infer merely from the fact that a
brief delay occurred that the delay was somehow willful or in bad faith. And, again, Plaintiff
has offered nothing to demonstrate culpability. Additionally, the Court remains mindful of
the liberal application of the factors that a Court should take when analyzing whether to set
aside default as well as the Third Circuit's requirement that "doubtful cases" be resolved in
favor of the party moving to set aside the default or default judgment. Thus, the
"excusability or culpability" prong weighs in favor of setting aside default.
Finally, refusing to set aside default solely because Defendant was several days late
in responding to the Complaint would constitute an overly severe sanction, especially when,
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as here, the Defendant indicates that it is ready and willing to litigate the case on its merits.
Given courts' strong preference to decide cases on their merits instead of on default and
given the relatively short and not clearly culpable nature of Defendant's delay, the Court
finds it appropriate and just to set aside any entry of default.3
3 Because, to the extent that there was a default in this action, the Court is granting Defendant's
Motion to Set Aside Default, it is unnecessary to address the merits of Defendant's argument that default
should be set aside because Plaintiff "failed to file its Disclosure Statement plior to the Request for Entry of
Default." (Doc. 18, 1f 6).
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C. Conclusion
For the foregoing reasons, the Court will deem Defendant's Motion to Dismiss (Doc.
11) as withdrawn and grant Defendant's Motion to Set Aside Default (Doc. 18). Aseparate
Order follows.
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