COURTNEY et al v. IVANOV et al
Filing
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MEMORANDUM OPINION & ORDER granting 28 Motion for Extension of Time to Answer; PROMPT LOGISTICS (CANADA) answer due 5/29/2014; PROMPT LOGISTICS (USA) answer due 5/29/2014; granting 30 Motion to Set Aside Default; granting 34 Motion to Set Aside Default; denying as moot 46 Motion for Leave to File Reply, and as more fully stated in said Memorandum Opinion & Order. Signed by Judge Kim R. Gibson on 5/19/2014. (dlg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
EDDIE L. COURTNEY, JR. and
KREILKAMP TRUCKING, INC.,
Plaintiffs,
v.
YURIY IVANOV, et al.,
Defendants.
)
)
)
)
) CIVIL NO. 3:13-227
)
) JUDGE KIM R. GIBSON
)
)
)
MEMORANDUM OPINION
I.
INTRODUCTION
This matter is before the Court on four related motions, all filed jointly by
Defendants Prompt Logistics (Canada) and Prompt Logistics (USA) (collectively, “Prompt
Logistics”): (1) a motion for extension of time to file an answer (ECF No. 28); (2) a motion
to set aside default as to Prompt Logistics (USA) (ECF No. 30); (3) a motion to set aside
default as to Prompt Logistics (Canada) (ECF No. 34); and (4) a motion for leave to file a
reply (ECF No. 46). Plaintiffs oppose all four motions. (See ECF Nos. 45, 47). For the
reasons that follow, the Court will GRANT both motions to set aside default, GRANT the
motion for extension of time to file an answer, and DENY the motion for leave to file a
reply.
II.
JURISDICTION
The Court has diversity jurisdiction under 28 U.S.C. § 1332(a). Venue is proper
under 28 U.S.C. § 1391(b)(2).
III.
BACKGROUND
This case arises from personal injuries and property damage sustained when a
tractor-trailer, driven by Plaintiff Eddie L. Courtney, Jr., collided with a tractor-trailer
driven by Defendant Yuriy Ivanov. Plaintiffs allege the following facts in their complaint.
The Defendants in this case, including Prompt Logistics, operated under certain
contracts and agreements to transport and deliver cargo. (ECF No. 1 ¶¶ 17-19). On
August 2, 2012, Defendant Ivanov was driving a tractor-trailer on Interstate 80. (Id. ¶ 22).
Defendant Ivanov stopped the tractor-trailer in the West-bound, right-hand lane of
Interstate 80 without warning and without activating any kind of signal device or light.
(Id. ¶¶ 24-25). Plaintiff Courtney, who was also driving his tractor-trailer in the Westbound, right-hand lane of Interstate 80, collided with the rear of Defendant Ivanov’s
tractor-trailer. (Id. ¶¶ 21, 26). As a result of the accident, Plaintiff Courtney sustained
personal injuries and his tractor-trailer, owned by Plaintiff Kreilkamp Trucking Inc.,
sustained property damage. (Id. ¶¶ 31-39).
Plaintiffs filed an eleven-count complaint (ECF No. 1) against Defendants on
September 27, 2013.
The complaint asserts the following claims against the Prompt
Logistics Defendants:
negligent hiring (Count V); negligent entrustment (Count VI);
negligence/restatement (Second) of Torts, § 428 (Count VII); joint venture liability (Count
VIII); vicarious liability/respondeat superior (Count IX); and damages caused by
violations of Motor Carrier Act/federal motor carrier safety rules (Count X).
On December 30, 2013, the Clerk of Court issued a summons to both Prompt
Logistics Defendants. (ECF No. 15). Service was perfected as to Prompt Logistics (USA)
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on January 9, 2014 (see ECF No. 22), and as to Prompt Logistics (Canada) on January 15,
2014 (see ECF No. 27). On February 17, 2014, Plaintiffs filed a request for entry of Default
against Prompt Logistics (USA) (ECF No. 23) and a request for entry of Default against
Prompt Logistics (Canada) (ECF No. 24). The Clerk entered default as to Prompt Logistics
(USA) on February 18, 2014, (ECF No. 26), and as to Prompt Logistics (Canada) on
February 21, 2014 (ECF No. 33).
On February 20, 2014, Prompt Logistics filed a motion for extension of time to file
an answer or otherwise plead (ECF No. 28). Prompt Logistics also filed a motion to set
aside default as to Prompt Logistics (USA) on February 20, 2014, (ECF No. 30), and a
motion to set aside default as to Prompt Logistics (Canada) on February 24, 2014 (ECF No.
34). Prompt Logistics filed briefs in support of each motion (ECF Nos. 29, 31, 35). On
March 13, 2014, Plaintiffs filed a brief in opposition to the motions (ECF Nos. 45), after
which Prompt Logistics filed a motion for leave to file a reply (ECF No. 46), which
Plaintiffs oppose (ECF No. 47). These motions are now ripe for adjudication.
IV.
STANDARD OF REVIEW
Under Rule 55(c), a court may set aside an entry of default for good cause. Fed. R.
Civ. P. 55(c). The Third Circuit has identified four factors a district court must consider
when deciding whether to set aside a default: (1) whether setting aside the default would
prejudice the plaintiff; (2) whether the defendant has a meritorious defense; (3) whether
the default was the result of the defendant’s culpable conduct; and (4) whether lesser
sanctions would better serve the interests of justice. World Entm’t Inc. v. Brown, 487 F.
3
App’x 758, 761 (3d Cir. 2012); United States v. $55,518.05 in United States Currency, 728 F.2d
192, 195 (3d Cir. 1984); Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 73 (3d Cir. 1987).
The decision to set aside an entry of default is within the discretion of the district
court. Bailey v. United Airlines, 279 F.3d 194, 204 (3d Cir. 2002). Generally, the entry of
default is disfavored because it prevents the claims from being decided on the merits.
Scholz Design, Inc. v. Costa, No. 2:10-cv-1640, 2011 WL 635277, at *2 (W.D. Pa. Feb. 11, 2011)
(citations omitted). Likewise, the Third Circuit has instructed that courts must liberally
construe a motion to set aside an entry of default with an eye toward resolving litigation
on the merits. Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984); Medunic v. Lederer,
533 F.2d 891, 893-94 (3d Cir. 1976).
V.
DISCUSSION
A. Prompt Logistics’ motions to set aside default
Prompt Logistics assert that good cause exists to set aside the entry of defaults
because Defendants “were trying to assess whether Plaintiffs had properly identified the
‘Prompt Logistics’ entities in the Complaint, which in turn prolonged the filing of a timely
responsive pleading to the Complaint.” (ECF No. 30 ¶ 18). The Court will separately
evaluate the factors under the applicable test, as set forth above.
1.
Meritorious Defense
The threshold inquiry in deciding whether to open a default is whether the
defendant has asserted a meritorious defense. Hritz, 732 F.2d at 1181. A defaulting party
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does not need to prove that it will win at trial, but must only show that it has a defense,
which at least has merit on its face. Scholz Design, 2011 WL 635277, *5.
In their motions to set aside the defaults, Prompt Logistics assert: “[T]he Movants
will present a meritorious defense to the allegations asserted in the Complaint.” (ECF No.
30, ¶ 19; ECF No. 34 ¶ 18). In their briefs, Prompt Logistics contend that they are not
proper defendants to this action and assert that the reason for the delay in responding to
the complaint was Prompt Logistics’ attempt to determine whether they were proper
parties to the action. Accordingly, the Court will construe this assertion as a defense.
This defense—while only marginally supported by Prompt Logistics—is
sufficiently meritorious on its face. The correspondence between Prompt Logistics and
the Plaintiffs prior to the filing of Plaintiffs’ complaint verifies Prompt Logistics’ assertion
of this defense and demonstrates good cause to set aside the defaults. Specifically, on
January 8, 2013, Dora Freedman, the Office Manager for Prompt Logistics (Canada), sent a
letter to Plaintiffs’ counsel advising that
Prompt Logistics has no involvement in this incident as this was not our
vehicle or load. Kindly address any issues and correspondence regading
[sic] Kreilkamp Trucking, Inc/Eddie Courtney, Jr. & Freightlion Logistics
LLC directly with Freightlion Logistics. Freightlion Logistics has
contacted their insurance company who is handling this matter.
(See ECF No. 45-3 at 2). Thus, while Prompt Logistics have only minimally asserted a
defense, their assertion that they believe they are not proper defendants is, on its face, a
meritorious defense, which the Court finds weighs in favor of setting aside the defaults.
Plaintiffs argue that Prompt Logistics have not asserted a meritorious defense.
Even if the Court were to accept this argument, this Court has previously noted that “[i]n
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cases where default judgment has not been entered, courts in this circuit seem unwilling
to deny the motion to set aside entry of default solely on the basis that no meritorious
defense exists.” Conference Archives, Inc. v. Sound Images, Inc., No. 3:06-cv-76, 2007 WL
870116 (W.D. Pa. Mar. 20, 2007) (quoting Mike Rosen & Assocs., P.C. v. Omega Builders, 940
F.Supp. 115, 121 (E.D. Pa. 1996)).
2.
Prejudice
Plaintiffs argue that they will suffer prejudice if the Court sets aside the entry of
default. “Prejudice arises where the setting aside of the entry of default results in the loss
of relevant evidence or some other occurrence that tends to impair the plaintiff’s ability to
pursue the claim.” Momah v. Albert Einstein Med. Ctr., 161 F.R.D. 304, 307 (E.D. Pa. 1995)
(citing Emcasco, 834 F.2d at 74).
According to Plaintiffs, Prompt Logistics’ dilatory actions have significantly
delayed this case from moving forward. Plaintiffs explain that, if the Court were to set
aside the default and grant Prompt Logistics leave to file a response, then Plaintiffs might
lose the opportunity to litigate all of its claims under the applicable statute of limitations.
Plaintiffs explain in their brief that the applicable statute of limitations will expire on
August 2, 2014. (ECF No. 45 at 16).
Despite Plaintiffs’ argument that the applicable statute of limitations deadline is
fast approaching, Plaintiffs have failed to identify any actual prejudice that will result
because of Prompt Logistics’ dilatory conduct if the Court sets aside the entries of default.
Instead, Plaintiffs have only identified the possibility of prejudice at some future time. As
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will be discussed below, other measures less drastic than default are available to ensure
that Plaintiffs do not suffer the alleged prejudice. Thus, this factor weighs in favor of
setting aside the defaults.
3.
Culpable Conduct
The next factor requires the Court to consider whether Defendants’ failure to
timely answer was culpable. Gross v. Stereo Component Sys., Inc., 700 F.2d 120, 123 (3d Cir.
1983). “For the purposes of Rule 55, culpable conduct is dilatory behavior that is willful
or in bad faith.” Scholz Design, 2011 WL 635277, *5 (citations omitted); see also Momah v.
Albert Einstein Med. Ctr., 161 F.R.D. 304, 308 (E.D. Pa. 1995) (“To be ‘culpable,’ the conduct
leading to the entry of default must have been willful, intentional, reckless or in bad faith.
More than mere negligence is required.”).
Plaintiffs assert that Prompt Logistics’ dilatory conduct was culpable. Specifically,
several months before the complaint was filed, Plaintiffs notified Prompt Logistics that
Plaintiffs were contemplating litigation against them.
Prompt Logistics responded,
stating that they had nothing to do with the events underlying the litigation. Plaintiffs
argue that this response shows that Prompt Logistics were on notice of the pending
litigation, and that they had ample time to determine whether or not they were proper
defendants. Plaintiffs also note that it was not until after Plaintiffs had moved for the
entry of default that Prompt Logistics finally took action in this case.
Nevertheless, the Court finds that, while Prompt Logistics’ explanation for their
failure to timely answer may demonstrate negligence that had a dilatory result, it does not
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demonstrate willful intent or bad faith. Dizzley v. Friends Rehab. Program, Inc., 202 F.R.D.
146, 148 (E.D. Pa. 2001). Prompt Logistics have provided a valid explanation for the
delay, and that explanation is sufficient to convince the Court that they did not engage in
any culpable conduct. Because there does not appear to be any willful intent or bad faith,
this factor weighs in favor of setting aside the entry of default.
4.
Other Available Sanctions
The Court must also consider whether sanctions other than default can adequately
redress the Defendants’ dilatory conduct. “The alternative sanctions factor is motivated
by the court’s recognition that default is a harsh sanction and that lesser sanctions may
adequately deter bad conduct while allowing cases to be decided on their merits.” Nat’l
Specialty Ins. Co. v. Papa, No. 11-cv-2798, 2012 WL 868944, *6 (D.N.J. Mar. 14, 2012) (citing
Emcasco, 834 F.2d at 73).
Typically, monetary sanctions, such as the imposition of
attorney’s fees and costs, are imposed to serve as a “wake-up call.”
See Conference
Archives, Inc. v. Sound Images, Inc., No. 3:06-cv-76, 2007 WL 870116, *4 (W.D. Pa. Mar. 20,
2007); Jackson v. Delaware Cnty., 211 F.R.D. 282, 285 (E.D. Pa. 2002).
Here, the Court will set aside the default and allow the claims against Prompt
Logistics to proceed on the merits. The Court will not impose monetary sanctions because
Prompt Logistics’ dilatory conduct was not culpable and because Prompt Logistics moved
to set aside the default almost immediately after the default was entered. Thus, monetary
sanctions are not necessary. See Jackson, 211 F.R.D. at 285.; Tecmarine Lines, Inc. v. CSX
Intermodal, Inc., No. 01-cv-1658, 2001 WL 950155, *4 (E.D. Pa. Aug. 13, 2001).
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However, to ensure that this case moves forward in a just and reasonable fashion
and to minimize the possibility of prejudice to Plaintiffs, the Court will limit Prompt
Logistics’ opportunity to respond to the complaint. Specifically, Prompt Logistics must
answer the complaint within ten (10) days of the filing of this memorandum and order,
and the Court will not grant Prompt Logistics any additional extensions of time.
Furthermore, if Prompt Logistics engage in other dilatory conduct causing further delay,
they risk the imposition of more serious sanctions, such as monetary sanctions or a
default judgment.
5.
Conclusion
After careful consideration of the relevant factors, the Court finds that the entry of
default against the Prompt Logistics Defendants should be set aside pursuant to Rule
55(c).
In particular, the Court is mindful of the preference in the Third Circuit for
resolving claims on the merits. Here, Prompt Logistics have demonstrated good cause for
setting aside the default. Also important is that the default at issue was administratively
entered by the clerk, requiring a liberal standard in favor of setting aside the entry of
default. Schartner v. Copeland, 59 F.R.D. 653, 656 (M.D. Pa. 1973) aff'd, 487 F.2d 1395 (3d
Cir. 1973) (“Where default has been entered, but default judgment not yet granted, an
even more liberal standard is applied to a motion to set aside the entry of default.”).
Nevertheless, the Court does not condone Prompt Logistics failure to comply with
the pleading deadlines, nor does the Court overlook the fact that Prompt Logistics’ actions
have delayed this case, potentially jeopardizing Plaintiffs’ pursuit of certain claims.
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Accordingly, the Court will lift the entries of default, but will limit the time in which
Prompt Logistics’ may respond to the complaint.
B. Prompt Logistics’ motion for extension of time to file answer
Prompt Logistics have moved for an extension of time to file their answer to
Plaintiffs’ complaint. (ECF No. 28). Because the Court grants Prompt Logistics’ motions
to set aside the defaults for the reasons explained above, the Court will also grant Prompt
Logistics’ motion for extension of time to file an answer, but will limit the time within
which to respond.
C. Prompt Logistics’ motion for leave to file reply
On March 14, 2014, Prompt Logistics filed a motion for leave to file a reply brief
(ECF No. 46), which Plaintiffs opposed (ECF No. 47).
The Court will deny Prompt
Logistics’ motion as moot.
VI.
CONCLUSION
In sum, Prompt Logistics have asserted a facially meritorious defense, Plaintiffs
have not sufficiently demonstrated any actual prejudice resulting from Prompt Logistics’
delay, Prompt Logistics’ conduct does not rise to the level of culpable conduct, and the
delay can be adequately remedied by means other than the entry of default. While the
Court does not condone Prompt Logistics’ dilatory conduct, in the interests of justice and
for the reasons explained above, this case should proceed on the merits. Accordingly, the
Court will grant Prompt Logistics’ motions to set aside the defaults and will grant Prompt
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Logistics’ motion for an extension of time to answer the complaint. An appropriate order
follows.
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
EDDIE L. COURTNEY, JR. and
KREILKAMP TRUCKING, INC.,
)
)
)
Plaintiffs,
)
) CIVIL NO. 3:13-227
v.
)
) JUDGE KIM R. GIBSON
YURIY IVANOV, et al.,
)
)
Defendants.
h
AND NOW, this
J9.±
)
ORDER
day of May 2014, for the reasons set forth in the attached
rnernorand urn,
IT IS HEREBY ORDERED that Prompt Logistics' motions to set aside default as
to Prompt Logistics (USA) (ECF No. 30) and Prompt Logistics (Canada) (ECF No. 34) are
GRANTED and the entries of default are set aside pursuant to Fed. R. Civ. P. 55( c).
IT IS FURTHER ORDERED that Prompt Logistics' motion for extension of time
to file an answer (ECF No. 28) is GRANTED. Both Prompt Logistics (USA) and Prompt
Logistics (Canada) shall file an answer within ten (10) days of the date of this Order.
IT IS FINALLY ORDERED that Prompt Logistics' motion for leave to file a reply
brief (ECF No. 46) is DENIED as moot.
BY THE COURT:
KIM R. GIBSON
UNITED STATES DISTRICT JUDGE
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