ICON Health & Fitness v. NVC Logistics Group
Filing
65
MEMORANDUM DECISION AND ORDER finding as moot 56 Icons Sworn Request for Entry of Default Judgment; granting 57 NVCs Motion to Vacate Entry of Default re 54 Clerk's Entry of Default Certificate. The parties are hereby ORDERED to comply with the deadlines set in the Scheduling Order 49 entered on October 30, 2017. Signed by Judge Jill N. Parrish on 6/14/2018. (jds)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
ICON HEALTH & FITNESS, INC., a
Delaware corporation,
Plaintiff,
MEMORANDUM DECISION AND
ORDER GRANTING MOTION TO
VACATE ENTRY OF DEFAULT
v.
NVC LOGISTICS GROUP, INC., a New
Jersey corporation,
Case No. 1:16-cv-00167-JNP
District Judge Jill N. Parrish
Defendant.
I.
BACKGROUND
Icon Health & Fitness, Inc. sells fitness equipment, such as treadmills. Towards the end
of 2014, Icon engaged the services of a shipping company, NVC Logistics Group, Inc. NVC
agreed to arrange the “final stretch” of delivery of Icon products to Icon customers. The parties
never executed a written agreement but did business for several years. During this time, Icon
products were allegedly lost, stolen, and damaged while in transit. Icon requested reimbursement
by submitting claims to NVC. But, according to Icon, NVC refused to pay valid claims.
Consequently, Icon brought suit on December 12, 2016, alleging that NVC is liable for the value
of the lost, stolen, and damaged goods.
NVC is a New Jersey corporation. On or about November 23, 2016, NVC retained Floyd
Cottrell and Andrew Pinon to serve as lead counsel in connection with this case. Messrs. Cottrell
and Pinon work at Cottrell Solensky, P.A., a law firm based out of Newark, New Jersey. After
being retained as lead counsel, Messrs. Cottrell and Pinon engaged the services of Michael Mills.
Mr. Mills works at Bauman Lowe Witt & Maxell, PLLC, a law firm based out of Las Vegas,
Nevada. NVC understood that Mr. Mills would act as local counsel. Mr. Mills is a member of the
Utah State Bar and admitted to practice in United States District Court for the District of Utah.
But he informed NVC that he could not “formally” act as local counsel as he did not have an
office in Utah.
On January 24, 2018, Mr. Mills filed a motion to withdraw as counsel. Mr. Mills stated
that he had unpaid invoices dating back to January 2017 and that NVC had failed to pay the
invoices, despite numerous requests for payment. Mr. Mills further stated that he had sent a copy
of the motion to withdraw to Francis J. McCabe, the President and General Counsel of NVC.
According to NVC, it received a letter from Mr. Mills on January 24. The letter contained
Mr. Mills’ motion to withdraw. But NVC “mistakenly believed that the envelope containing the
Motion to Withdraw was a hard copy of [Icon’s] discovery demands.” So, presumably, NVC
threw away the letter without looking at the contents. 1 Mr. Mills also sent NVC an email on the
same day. According to NVC, the email concerned Mr. Mills’ correspondence with Icon and
“did not mention the filing of, or serving [of], the Motion to Withdraw.”
The court granted Mr. Mills’ motion on January 26. The court also ordered that NVC, as
a corporation, was required to be represented by an attorney who is admitted to practice in the
United States District Court for the District of Utah. The court specified that NVC’s “new
counsel” was required to file a notice of appearance within twenty-one days from the date of the
court’s order. That is, whomever NVC retained as local counsel was required to file a notice of
appearance before February 16.
1
NVC is cryptic on this point. It states that it believed that Mr. Mills’ letter contained Icon’s
discovery demands, and “[a]s a result NVC did not realize that the Motion to Withdraw had been
filed.” The only reasonable explanation as to how NVC was unaware of the motion to withdraw
is that it discarded the letter without reading it. Perhaps NVC believed the letter was another
request for payment.
2
According to NVC, it failed to retain local counsel by February 16 because it was not
aware that Mr. Mills withdrew as local counsel. On March 6, Icon moved for the entry of a
default against NVC based on the fact that no appearance on behalf of NVC had been filed. On
March 21, the court directed the clerk of the court to enter a default against NVC. The clerk of
the court issued a default certificate two days later.
According to NVC, it received the default certificate on March 27. Two days later, it
learned that the court had directed the clerk of the court to issue a default certificate based on the
fact that no appearance of local counsel on behalf of NVC had been filed. At this point, NVC
claims that it “immediately” began to look for new local counsel. NVC retained new counsel,
Sarah Vaughn, on April 6.
On April 13, NVC, through Ms. Vaughn, filed a motion to vacate the entry of default.
NVC contends that its failure to abide by the court order directing it to obtain local counsel
within twenty-one days was not willful. Accordingly, NVC requests that the court set aside the
certificate of default.
II.
DISCUSSION
Under Rule 55(a) of the Federal Rules of Civil Procedure, “[w]hen a party against whom
a judgment or 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.” The entry of a
default is merely an official recognition that one party is in default—it “is an interlocutory step
that is taken under Rule 55(a) in anticipation of a final judgment by default under Rule 55(b).”
10A Charles A. Wright, et al., Federal Practice & Procedure § 2692 (4th ed.). The court,
however, “may set aside an entry of default for good cause.” Fed. R. Civ. P. 55(c).
“The preferred disposition of any case is upon the merits and not by default judgment.”
Gomes v. Williams, 420 F.2d 1364, 1366 (10th Cir. 1970) (citing Meeker v. Rizley, 324 F.2d 269,
3
271–72 (10th Cir. 1963) (“The law favors the disposition of litigation on its merits.”)). Default
judgments are “not favored.” Barta v. Long, 670 F.2d 907, 909 (10th Cir. 1982). When 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 Info. Servs., Inc., 316 F. App’x 744,
750 (10th Cir. 2009) (quoting Dierschke v. O’Cheskey (In re Dierschke), 975 F.2d 181, 183 (5th
Cir. 1992)).
Here, NVC has shown good cause to set aside the entry of default. First, NVC has shown
that the default was not willful. NVC has put forth evidence showing that it was not aware that
Mr. Mills withdrew as local counsel. And by extension, NVC was unaware that it was required
to retain new counsel. Admittedly, NVC was unaware that Mr. Mills withdrew based on its own
negligence (i.e., discarding Mr. Mills’ letter without reading it). At most, NVC was reckless as to
the fact that it was violating a court order. But there is no indication that NVC willfully ignored
this court’s order. And NVC promptly retained Ms. Vaughn to act as local counsel when it
learned that the clerk had issued a certificate of default. Accordingly, the court concludes that
NVC did not willfully ignore this court’s order.
Second, setting aside the default would not unduly prejudice Icon. As noted above, NVC
promptly retained local counsel when it learned that the clerk of the court had issued a certificate
of default. The clerk of the court issued the certificate of default on March 23 and NVC moved
to set aside the entry of default three weeks later. Moreover, Icon has not shown that it will suffer
any prejudice if the court sets aside the entry of default. While there is admittedly some prejudice
to Icon in that it must litigate the case if the entry of default is set aside, this prejudice is not
undue. Indeed, the preferred disposition of this case, like every other case, is on the merits.
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Third, NVC has presented at least what appear to be potential defenses to liability.
Indeed, Icon concedes that NVC has “asserted the existence of meritorious defenses.” But Icon
takes issue with the fact that NVC has not supported the defenses with evidence. While Icon’s
argument is well taken, the court need not delve into the merits of each defense when the first
two factors weigh in favor of setting aside the entry of default. If NVC cannot support the
defenses upon which it relies, Icon will have little difficulty prevailing on the merits. The court
sees little reason in forcing the parties to litigate the merits at this point, especially when the
default does not appear to be willful and setting aside the default will result in little to no
prejudice to Icon.
Accordingly, NVC has shown good cause to set aside the entry of default. NVC, while
negligent, does not appear to have willfully disobeyed a court order. And Icon has not shown that
it will suffer undue prejudice if the court sets aside the entry of default. Consequently, there is
good cause to set aside the entry of default, thereby allowing the parties to resolve this case on
the merits.
III.
CONCLUSION AND ORDER
For the reasons set forth above, NVC’s Motion to Vacate Entry of Default (ECF No. 57)
is GRANTED. The court hereby VACATES the Default Certificate (ECF No. 54) entered on
March 23, 2018. Icon’s Sworn Request for Entry of Default Judgment (ECF No. 56) is DENIED
AS MOOT. The parties are hereby ORDERED to comply with the deadlines set in the
Scheduling Order (ECF No. 49) entered on October 30, 2017.
Signed June 14, 2018
BY THE COURT
______________________________
Jill N. Parrish
United States District Court Judge
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