Wuertzer et al v. Stadium International Trucks, Inc.

Filing 29

ORDER denying 13 Motion for Default Judgment; granting 21 Motion to Set Aside Default. Signed by U.S. District Judge Karen E. Schreier on 7/25/2016. (JLS)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
CURTIS WUERTZER AND CURTIS
WUERTZER d/b/a C&L TRUCKING,
Plaintiffs,
vs.
STADIUM INTERNATIONAL TRUCKS,
INC.,
Defendant.

CIV. 15-4140-KES
ORDER DENYING PLAINTIFFS’
MOTION FOR DEFAULT JUDGMENT
AND GRANTING DEFENDANT’S
MOTION TO SET ASIDE ENTRY OF
DEFAULT

Plaintiffs, Curtis Wuertzer and Curtis Wuertzer d/b/a C&L Trucking,
brought this lawsuit against defendant, Stadium International Trucks, Inc.
Plaintiffs move for a default judgment after the Clerk’s entry of default.
Defendant moves to set aside the entry of default. For the reasons stated below,
the court denies plaintiffs’ motion for default judgment and grants defendant’s
motion to set aside the entry of default.
BACKGROUND
Plaintiffs Curtis Wuertzer and Curtis Wuertzer d/b/a C&L Trucking
(collectively referred to as Wuertzer) are a South Dakota public entity engaged
in the trucking business. Docket 1 at ¶ 3. Wuertzer owned a 2006 International
Truck, Model 94001 (the Truck). Docket 1 at ¶ 7. The Truck was recalled due
to an issue with the engine compartment. Docket 1 at ¶ 8.
Defendant Stadium International Trucks is a New York corporation and
authorized dealer of International trucks. Docket 1 at ¶ 4. Stadium also

performs repair work on International trucks. Id. at ¶ 4. On June 15, 2007,
Stadium repaired the Truck’s engine compartment. Id. at ¶ 9.
On June 9, 2014, a fire stared in the Truck’s engine compartment.
Docket 1 at ¶ 10. Wuertzer alleges that Stadium’s inadequate repair work
caused the fire. Id. at ¶ 11. Wuertzer’s loss from the fire exceeds $400,000.
Docket 1 at ¶ 20.
On September 14, 2015, Wuertzer filed suit against Stadium alleging
negligence, breach of express and/or implied warranties, and breach of
contract. Docket 1. When Stadium received the complaint, Stadium’s
president, Gary Devennie, forwarded the email to Shephard Insurance. Docket
22. The email failed. Id. Because of that failure, Stadium did not answer. Id. On
January 21, 2016, Wuertzer moved for default judgment. Docket 11. The Clerk
made an entry of default that same day. Docket 12. Wuertzer then moved for
default judgment on February 11, 2016. Docket 13. That same day, Stadium
answered and filed a motion to set aside the entry of default. Docket 20, 21.
Wuertzer opposes the motion to set aside the default. Docket 26.
DISCUSSION
“Entry of a default under Federal Rule of Civil Procedure 55(a) is not, as
such, entry of a judgment; it merely permits the plaintiff to move for a default
judgment under Rule 55(b)(2), assuming that the default is not set aside under
Rule 55(c).” Inman v. Am. Home Furniture Placement, Inc., 120 F.3d 117, 118
n.2 (8th Cir. 1997). Here, the Clerk entered the default of Stadium pursuant to

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Rule 55(a), and the court must now decide whether to set aside the default
under Rule 55(c).
Rule 55(c) of the Federal Rules of Civil Procedure provides that the
district court may set aside a clerk’s entry of default “[f]or good cause.” “When
examining whether good cause exists, the district court should 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.’ ”1 Stephenson v. El-Batrawi, 524
F.3d 907, 912 (8th Cir. 2008) (quoting Johnson v. Dayton Elec. Mfg. Co., 140
F.3d 781, 784 (8th Cir. 1998)).
Stadium alleges that it can show good cause for its failure to answer the
complaint in a timely manner. Wuertzer argues that Stadium cannot show
good cause.
I.

Culpability or Blameworthiness
When the default is the result of inadvertence or mistake, and not an

intentional disregard of procedural rules, the default is set aside. Union Pac. R.
Co. v. Progress Rail Servs. Corp., 256 F.3d 781, 782 (8th Cir. 2001).

Wuertzer focuses his motion against setting aside the default solely on
whether Stadium was engaged in culpable conduct that led to the default
because he claims any one of the three factors is sufficient to refuse to set
aside the default. Docket 26. But, “[a] district court may exercise its discretion
to deny relief to a defaulting defendant based solely upon a finding of
defendant's culpability, but need not.” Brandt v. Am. Bankers Ins. Co. of Fla.,
653 F.3d 1108, 1112 (9th Cir. 2011). “Rule 55(c) issues are committed to the
district court's discretion” and favors adjudication on the merits. Johnson, 140
F.3d at 785 (8th Cir. 1998).
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Mistakes such as faulty record-keeping, forwarding the complaint to the
incorrect person, poor communication, or believing that the insurance agency
was handling the case have all been excused. Union Pac. R. Co, 256 F.3d at 782
(8th Cir. 2001) (record-keeping); U.S. ex rel. Shaver v. Lucas W. Corp., 237 F.3d
932, 933 (8th Cir. 2001) (incorrect person); Johnson, 140 F.3d at 784 (8th Cir.
1998) (poor communication); Myers v. Oury, No. CIV. 12-5072-KES, 2014 WL
458124, at *2 (D.S.D. Feb. 4, 2014) (insurance agency). The Eighth Circuit has
also recognized that “it 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.” Johnson v. Dayton Elec.
Mfg. Co., 140 F.3d 781, 784 (8th Cir. 1998).
Here, Stadium had actual notice of the lawsuit. The summons notified
Stadium that it had 21 days to answer. Stadium forwarded the summons and
complaint via email to its insurance agency. This was the usual practice
Stadium, so it believed the matter was being handled by the insurance agency.
The email never reached the insurance agency, however. When Stadium
received notice of the entry of default, it again promptly contacted its insurance
agency. This time, the email was successful, and the agency then contacted
legal counsel. The court finds that Stadium’s actions were not an intentional
disregard of the procedural rules, but instead, a communication failure
between Stadium and the insurance agency. The failure was promptly
remedied by Stadium when it received notice of the default. This factor weighs
in favor of Stadium.
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II.

Meritorious Defense
A meritorious defense exists when “the proffered evidence ‘would permit

a finding for the defaulting party.’ ” Johnson, 140 F.3d at 784 (8th Cir. 1998)
(citation omitted). Here, Stadium asserts that its repair of the Truck was not
inadequate and did not cause the fire because seven years elapsed between its
repair and the fire. In that time, the Truck had been driven 300,000 miles. In
addition, Stadium asserts that after the fire, an engineer investigated the Truck
and found no negligence on Stadium’s part. Stadium denies that its repairs
were the cause of the fire and offers an expert’s report in its favor. The time
between the repair and the fire and the report of Stadium’s expert could lead to
a finding for Stadium. Because Stadium has put forth a viable defense, this
factor weighs in its favor.
III.

Prejudice to the Plaintiffs
The Eighth Circuit Court of Appeals has stated that “[s]etting aside a

default must prejudice plaintiff in a more concrete way, such as ‘loss of
evidence, increased difficulties in discovery, or greater opportunities for fraud
and collusion.’ ” Stephenson, 524 F.3d at 915. Here, there is no prejudice in
setting aside the entry of default. First, Wuertzer does not allege that any
prejudice would result. Second, little discovery has occurred, so there is little
chance of evidentiary loss from a seven-year-old fire. Because Wuertzer alleges
no prejudice, the event in question occurred seven years ago, and no discovery
difficulties have been identified, this factor weighs in favor of Stadium.

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In sum, all three factors weigh in favor of setting aside the entry of
default. First, Stadium’s failure to answer was not an intentional disregard of
procedural rules, but instead an error in communication with its insurance
company. Courts have excused this type of error when the default was
promptly addressed, as it was here. Second, Stadium has presented a
meritorious defense: the expert’s report finding no negligence on its part.
Finally, no prejudice to Wuertzer has been shown. Given all these factors and
the judicial preference of adjudication on the merits, all factors weigh in
Stadium’s favor.
CONCLUSION
This court has considered all three Stephenson factors and finds that
they weigh in favor of Stadium. Therefore, the court grants the motion to set
aside the entry of default against Stadium and denies Wuertzer’s motion for
default judgment.
Thus, it is ORDERED that plaintiffs’ motion for default judgment
(Docket 13) is denied.
IT IS FURTHER ORDERED that defendant’s motion to set aside default
judgment (Docket 21) is granted.
Dated July 25, 2016.
BY THE COURT:
/s/Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

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