PHP Agency Inc v. Martinez et al

Filing 124

MEMORANDUM OPINION AND ORDER re: 82 Motion to Vacate Default. The Court DENIES the Pitzner Defendants motion. (Ordered by Judge Brantley Starr on 9/14/2022) (chmb) Modified docket text on 9/15/2022 (oyh).

Case 3:21-cv-00418-X Document 124 Filed 09/14/22

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
PHP AGENCY INC,
Plaintiff,
v.
JOSE MARTINEZ, ET AL.,
Defendants.

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Civil Action No. 3:21-CV-00418-X

MEMORANDUM OPINION AND ORDER
Before the Court is defendants Tony Martinez’s and Maria Elizarraga’s
(referred to by the parties as the “Pitzner Defendants” based on the name of their
attorney, Steven R. Pitzner) motion to vacate the clerk’s entrance of default against
them. [Doc. No. 82]. On March 5, 2022, Plaintiff PHP Agency Inc. (“PHP”) requested
that the clerk enter default against the Pitzner Defendants after they had failed to
timely answer PHP’s second amended complaint. [Doc. No. 80]. On March 7, 2022,
the clerk entered default against the Pitzner Defendants. [Doc. No. 82]. On March
16, 2022, the Pitzner Defendants filed the present motion to vacate the clerk’s entry
of default.
Under Federal Rule of Civil Procedure 55(c), “[t]he court may set aside an
entry of default for good cause.” 1 In determining whether such good cause exists,
The Pitzner Defendants do not address Rule 55(c) or its good cause standard in their briefing.
In fact, the only legal authority whatsoever that they cite to is an 83-year-old Texas Supreme Court
case, Craddock v. Sunshine Bus Lines, 133 S.W.2d 124 (Tex. 1939). According to the Pitzner
Defendants, “ruling(s) of this Court are to be governed by Texas law,” and the Court “is required under
Texas law to vacate the clerk entered default judgment in accordance with existing law as stated in
[Craddock] where the court stated under similar facts that it was an abuse of discretion for the trial
court to not grant a new trial under similar circumstances.” Doc. No. 84 at 2. But even when Federal
1

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courts “consider three non-exclusive factors: ‘whether the default was willful,
whether setting it aside would prejudice the adversary, and whether a meritorious
defense is presented.’” 2 The Fifth Circuit says these three factors are “not talismanic”
and should be treated in the disjunctive. 3 Because they are not exclusive factors, the
Fifth Circuit also looks to other factors, including whether “the defendant acted
expeditiously to correct the default.” 4 Regardless of what factors the Court considers,
what is “imperative is that they be regarded simply as a means of identifying
circumstances which warrant the finding of ‘good cause’ to set aside a default.” 5
Willful neglect is a threshold finding: “when the court finds an intentional
failure of responsive pleadings there need be no other finding.” 6 The “willfulness
factor is reviewed under the ‘excusable neglect’ standard of Federal Rule of Civil
Procedure 60(b).” 7 “Excusable neglect is intended and has proven to be quite elastic

Courts are required to apply state substantive law, they still apply federal procedural law. See, e.g.,
Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins. Co., 801 F.2d 512, 517 (5th Cir. 2015). And
the Pitzner Defendants provide absolutely no reason for the Court to think that Federal Rule of Civil
Procedure 55(c) is substantive rather than procedural. Moreover, even if the Court were to apply
Texas law in considering the Pitzner Defendants’ motion, it is not at all clear that Craddock would
require a vacatur of the clerk’s entrance of default.
2 Koerner v. CMR Constr. & Roofing, L.L.C., 910 F.3d 221, 225 (5th Cir. 2018) (quoting Lacy v.
Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000)).

Matter of Dierschke, 975 F.2d 181, 183–84 (5th Cir. 1992) (“We perceive a variance among
our circuit colleagues as to whether the court must consider and note its disposition of all three factors
on the record. Decisions of three circuits may be read to require such consideration by the trial court.
Others have treated the factors in the disjunctive. We find the latter course more persuasive.”
(internal citations omitted)).
3

4

Id. at 184.

5

Id.

6

Id.

Reyelts v. Cross, 2013 WL 4874090, at *1 (N.D. Tex. Apr. 23, 2013) (citing CJC Holdings, Inc
v. Wright & Lato, Inc., 979 F.2d 60, 62 (5th Cir. 1992)). See CJC Holdings, Inc., 979 F.2d at 64 (“We
suggest that district courts should use the less subjective excusable neglect standard in the future
[when determining whether a party’s conduct is willful].”). See also, e.g., Heeling Sports Ltd. v. Paskey,
7

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in its application. In essence it is an equitable concept that must take account of all
relevant circumstances of the party’s failure to act within the required time.” 8 It
“encompasses ‘late filings [that] were due to mistake, inadvertence or carelessness
and not to bad faith[.]’” 9
Here, the Pitzner Defendants offer several explanations for their default.
First, although PHP filed its second amended complaint electronically on February
7, 2022, they claim that there were “problems in the filing of same . . . with the federal
e-file system such that counsel for the Pitzner Defendant did not receive said filing
. . . and were first made aware of same in mid-March 2022.” 10 When they did learn
of the second amended complaint, the Pitzner Defendants say that they “immediately
contacted counsel for PHP and were granted 30 days to file an answer to such
amended complaint which would provide the Pitzner Defendants until on or about
April 15, 2022 to file an answer.” 11

The Pitzner Defendants provide no email

documentation or other record to support this claim. And per emails filed by PHP,

2008 WL 4566479, at *1 (N.D. Tex. Oct. 10, 2008) (“First, in determining whether a default is willful,
the court considers whether there has been excusable neglect.”).
Mattress Giant Corp. v. Motor Advert. & Design, Inc., 2008 WL 898772, at *2 (N.D. Tex. Mar.
31, 2008) (quoting 4B Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedures, § 1165,
at 533–34 (3d ed. 2002)).
8

9

Id. (quoting Panis v. Mission Hills Bank, N.A., 60 F.3d 1486, 1494 (10th Cir. 1995)).

Doc. No. 84 at 3. The Pitzner Defendants do not specify what these problems in the e-filing
system were in their brief in support of their motion, although in their reply brief they suggest it had
to do with their attorney’s use of a new email address. See Doc. No. 90 at 1. Per emails between the
parties filed by PHP, the Pitzner Defendants’ attorney, Steven Pitzner, had previously complained to
PHP that they had made filings on the Court’s e-filing system that had been directed to an old email
address. See Doc. No. 89-12 at 2. But as PHP explained to Pitzner as far back as December 2021, it
was his obligation to provide an update for the Court’s system had his email address changed. Doc.
No. 89-13 at 1.
10

11

Doc. No. 84 at 2.

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PHP wrote to the Pitzner Defendants’ attorney on February 23, 2022, that the Pitzner
Defendants’ answer to the second amended complaint was overdue and that if none
was filed PHP would request a default. 12 PHP again warned the Pitzner Defendants
that they were preparing to request a default against them on March 3, 2022, and
advised that “if you intend to answer, file your answer immediately because she will
be defaulting your clients shortly.” 13
But even if the Pitzner Defendants’ contention is accepted as true, based on
the timeline they suggest the clerk entered default a week before the Pitzner
Defendants claim this extension agreement was reached. Moreover, the Federal
Rules of Civil Procedure provide deadlines for the filing of documents with the Court,
including answers to a complaint.

Parties may move for extensions of those

deadlines, and where they agree to those extensions they may do so jointly, but those
extensions must be granted by the Court. And the Pitzner Defendants filed no motion
for an extension of time to file an answer either before or after the clerk’s entrance of
default, nor do they offer any explanation for their failure to do so.
The Pitzner Defendants also claim that, after they became aware of the second
amended complaint, “PHP somehow sent a proposed order and/or informal request
(i.e., no motion was filed in accordance with the court’s record) for entry of a clerk’s
default judgment and apparently PHP secured said clerk’s entry of default judgment
against said Defendants totally absent any filed motion requesting such default

12

Doc. No. 89-8 at 1.

13

Doc. No. 89-12 at 3.

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judgment.” 14 According to the Pitzner Defendants, this constitutes a “total denial of
due process.” 15 But PHP requested that the clerk enter default against the Pitzner
Defendants on March 5, 2022, as reflected on the docket for this case. 16 And, based
on the Pitzner Defendants’ failure to timely answer, the clerk entered default against
them on March 7, 2022. 17
In sum, the Pitzner Defendants have completely failed to demonstrate the
requisite good cause under Rule 55(c) for the Court to vacate the clerk’s entry of
default.

They have not addressed whether “setting [the default] aside would

prejudice [PHP], and whether a meritorious defense is presented.” 18 They have
provided the Court with no basis to conclude that their failure to timely answer was
“due to mistake, inadvertence or carelessness and not to bad faith,” 19 as the
explanations they do provide are either flatly contradicted by the record or
insufficient on their own terms. They have not shown that they acted expeditiously
to address the default: they apparently took no action after being warned by PHP on
February 23, 2022, and again on March 3, 2022, that PHP’s request for default was
imminent, and then waited a week and a half to file anything with the Court after

Id. at 2. Throughout their briefing, the Pitzner Defendants often refer to the clerk’s entrance
of a default as a default judgment. But there has thus far only been an entrance of default and no
default judgment in this case.
14

15

Id.

16

Doc. No. 80.

17

Doc. No. 81.

18

Koerner, 910 F.3d at 225.

19 Mattress Giant Corp., 2008 WL 898772, at *2. They do not, for example, suggest that the
failure to answer was due to simple negligence or some other mistake by them or by their attorney.

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PHP finally requested that the clerk enter default on March 5, 2022, and the clerk
actually entered it on March 7, 2022. 20

And the Pitzner Defendants have not

suggested that any other circumstances exist which would warrant a finding of good
cause. 21 Accordingly, the Court cannot conclude that there is good cause to set aside
the entrance of default. So, the Court DENIES the Pitzner Defendants’ motion.
IT IS SO ORDERED this 14th day of September, 2022.

BRANTLEY STARR
UNITED STATES DISTRICT JUDGE

20

Matter of Dierschke, 975 F.2d at 184.

21

Id.

6