Employers' Innovative Network, LLC et al v. Bridgeport Benefits, Inc. et al

Filing 67

MEMORANDUM OPINION AND ORDER: Granting Capitol Administrators Defendants' 9 Renewed Motion to Set Aside Default, the Nordstrom Defendants' 15 Motion to Set Aside Default and 16 Motion for Leave of Defendant's Capital Securi ty, Ltd., Universal Risk Intermediaries Inc., and Jeana Nordstrom, to File Motion to Dismiss Complaint and directing that the attached motion to dismiss be filed; granting the 8 Renewed Motion to Extend Time to Answer; denying the Plaintiff's 13 Rule 12(f) Motion to Strike Amended Defense and Answers of Capitol Administrators Inc., Mike Tate, Alex Arnet and Lucent Health Solutions, Inc., and Counterclaim and Cross-Claim. Signed by Judge Irene C. Berger on 2/25/2019. (cc: attys; any unrepresented party) (btm)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
BECKLEY DIVISION
EMPLOYERS’ INNOVATIVE
NETWORK, LLC, et al.,
Plaintiffs,
v.

CIVIL ACTION NO. 5:18-cv-01082

BRIDGEPORT BENEFITS, INC., et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
The Court has reviewed Defendants Capitol Administrators Inc. (“Capitol Administrators),
Lucent Health Solutions, Inc. (“Lucent”), Mike Tate and Alex Arnet’s (collectively the “Capitol
Administrators Defendants’”) Renewed Motion to Set Aside Default (Document 9), Plaintiffs’
Response in Opposition to Renewed Motion to Set Aside Default (Document 10), Defendants
Capital Security, Ltd. (Capital Security), Universal Risk Intermediaries, Inc. (Unirisk), and Jeana
Nordstrom’s (collectively the “Nordstrom Defendants’) Motion to Set Aside Default (Document
15), and the Plaintiffs’ Response in Opposition to Motion to Set Aside Default (Document 26).
The Court has also reviewed the Capitol Administrators Defendants’ Renewed Motion to Extend
Time to Answer (Document 8), the Plaintiffs’ Complaint and Petition for Declaratory Judgment
(Document1-4), the Amended Defenses and Answer of Capitol Administrators, Inc., Mike Tate,
Alex Arnet and Lucent Health Solutions, Inc. and Counterclaim and Cross-claim (Document 5),
1

the Plaintiffs’ Rule 12(f) Motion to Strike Amended Defense and Answers of Capitol
Administrators Inc., Mike Tate, Alex Arnet and Lucent Health Solutions, Inc., and Counterclaim
and Cross-Claim. (Document 13) and the Motion for Leave of Defendants Capital Security, Ltd.,
Universal Risk Intermediaries Inc., and Jeana Nordstrom, to File Motion to Dismiss Complaint
(Document 16). For the reasons stated herein, the Court finds that both motions to set aside
default should be granted, the motion for leave to file the motion to dismiss should be granted, the
motion to extend time to answer should be granted, and the motion to strike should be denied.
PROCEDURAL HISTORY AND FACTUAL BACKGROUND
A. The Wyoming County Circuit Court Proceedings
On April 2, 2018, the Plaintiffs, Employers’ Innovative Network, LLC (EIN) and Jeff
Mullins, filed a Complaint and Petition for Declaratory Judgment against the Capitol
Administrators Defendants, the Nordstrom Defendants, Bridgeport Benefits, Inc. (“Bridgeport”),
Voluntary Benefits Specialists, LLC (“VBS”), Stephen Salinas, Wayne Blasman, and Casey
Blasman.
The complaint alleges unauthorized practice of insurance, breach of fiduciary duty, slander,
negligence, breach of contract, fraud in the inducement, fraud in the performance, and civil
conspiracy. The Plaintiffs allege that in 2016, EIN sought an insurance policy to cover its
employees. Steven Nordstrom, then President of Capital Security and Unirisk, introduced EIN to
Mr. Salinas, the Director of Benefits at Bridgeport, which is an insurance broker. Mr. Salinas and
Wayne Blasman, the President of Bridgeport, offered to broker a policy for EIN with Capital
Security, a Bermuda insurance company. The Plaintiffs allege they informed the Defendants that
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the policy had to be fully insured and that the Defendants represented that it was a fully insured
policy. EIN accepted the policy with the belief that it had no financial liability for claims under
the plan after the payment of the monthly premiums, because Capital Security would be
responsible for paying any claims that could not be paid with EIN’s premiums. In November
2017, EIN switched insurance.
Capital Security retained Capitol Administrators as a third-party administrator to
administer claims on the policy.

The Plaintiffs allege that in early January 2018, Capitol

Administrators accidentally sent EIN a report revealing over five million dollars of unpaid claims
that Capitol Administrators neither paid nor disclosed to EIN. As a result of the report, EIN
contacted Capital Security, which informed EIN that it was not responsible for the unpaid claims
because the policy was self-insured, not fully insured. In January 2018, EIN alleges it was made
aware that its employees, covered under the policy, were receiving third-party collection notices
for medical bills that were submitted to Capitol Administrators but had not been paid. 1 Finally,
the complaint alleges that Bridgeport, Capitol Administrators, and Capital Security are not
registered with the West Virginia Insurance Commission or licensed to conduct insurance business
in the state.
The Capitol Administrators Defendants’ answer or responsive pleading was due by May 3,
2018, but on May 3, 2018, counsel for the Capitol Administrators Defendants filed a motion for
an extension of time to file an answer, which the Plaintiffs opposed on May 9, 2018. 2 On June 7,

1 The Complaint alleges that the Plaintiffs paid Capitol Administrators over four million dollars to ensure payment
of the unpaid claims.
2 Counsel for the Capitol Administrator Defendants requested an extension in part because of the passing of his

3

2018, the Wyoming County Circuit Court Clerk entered default against the Capitol Administrators
Defendants.

On June 8, 2018, the Capital Administrators Defendants filed an answer and

requested an extension of time through June 8, 2018. On June 13, 2018, the state court held a
hearing to address the entry of default, but the case was removed prior to the issuance of a ruling.
B. Federal Court Proceedings
On June 27, 2018, the Nordstrom Defendants removed this case pursuant to 28 U.S.C §§
1332, 1441 and 1446. In the notice of removal, the Nordstrom Defendants alleged that the action
may be removed to this Court “because it is a civil action between citizens of different states
wherein the amount in controversy exceeds the sum or value of $75,000.00 exclusive of interest
and cost.” (Document 1-6, ¶¶ 7-8). On June 29, 2018, the Capitol Administrators Defendants
filed an answer as well as a counterclaim and cross-claim to the complaint. On July 3, 2018, the
Capitol Administrators Defendants filed a renewed motion to extend time to answer the complaint
and a renewed motion to set aside the default entered in state court. 3 On July 17, 2018, the
Plaintiffs filed a motion for entry of default against the Nordstrom Defendants as well as a motion
to strike the Capitol Administrators Defendants’ answer, counterclaim and cross-claim. On July
18, 2018, the Clerk for this Court entered a default against the Nordstrom Defendants.

mother, and before this matter was removed to this Court, the Capitol Administrators Defendant retained new counsel
and the state court issued an Order granting substitute counsel.
3 The Capitol Administrators Defendants’ Renewed Motion to Extend Time to Answer (Document 8) appears to have
a typographical error. The Capitol Administrators Defendants state that they filed their answer on June 29, 2018, but
only request an extension until June 19, 2018 for the filing to be considered timely. The Court has reviewed the motion
as a request to have an extension until June 29, 2018.

4

On July 27, 2018, the Plaintiffs filed a motion to remand the case to the Circuit Court of
Wyoming County, which the Nordstrom Defendants opposed on August 10, 2018. 4 The Court
denied the motion and found that the Court has jurisdiction over the case, and further found that
abstention was inappropriate. (Document 66). Now that the Court has addressed the motion to
remand, the Court will address the entry of default in state court against the Capitol Administrators
Defendants, the entry of default entered in this Court against the Nordstrom Defendants, and
motions related to the Defendants’ answers to the complaint.
STANDARD OF REVIEW
Under the Federal Rules of Civil Procedure, a court may set aside an entry of default for
good cause or pursuant to Rule 60(b). Fed. R. Civ. P. 55(c). The Fourth Circuit has established
that district courts should consider the following factors when considering motions to set aside
default pursuant to Rule 55(c): “whether the moving party has a meritorious defense, whether it
acts with reasonable promptness, the personal responsibility of the defaulting party, the prejudice
to the party, whether there is a history of dilatory action, and the availability of sanctions less
drastic.” Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 204-05 (4th Cir. 2006). It has
also “repeatedly expressed a strong preference that, as a general matter, defaults be avoided and
that claims and defenses be disposed of on their merits.” Colleton Preparatory Acad., Inc. v.
Hoover Universal, Inc., 616 F.3d 413, 417 (4th Cir. 2010).

4 On August 10, 2018, Mr. Arnet, Capitol Administrators, Lucent, and Mr. Tate joined the Nordstrom Defendants’
response in opposition. That same day, Casey Blasman, Wayne Blasman, Bridgeport, Mr. Salinas and VBS also joined
the response. (Document 35 and 36)

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DISCUSSION
A. The State Entry of Default Against the Capitol Administrators Defendants
First, the Court will address the Capitol Administrators Defendants’ motion.

The

Wyoming Court Circuit Court Clerk entered default against the Capitol Administrators
Defendants. Before the motion to set aside default was resolved in state court, the case was
removed to this Court.
As an initial matter, the Court must determine whether to apply state or federal law, since
default was entered in state court before the case was remanded to this Court. 5 This invokes issues
of Erie R. Co. v. Tompkins, which requires a federal court sitting in diversity to apply the
substantive law of the state while applying federal procedural law. 304 U.S. 64, 78 (1938). It is
clear to the Court that W. Va. R. Civ. P. 55 is procedural in nature. An entry of default is

5 W. Va. R. Civ. P. 55(c) states:
“Setting Aside Default. For good cause shown the court may set aside an entry of default and, if a judgment by default
has been entered, may likewise set it aside in accordance with Rule 60(b).”
W. Va. R. Civ. P. 60(b) states:
“(b) Mistakes; Inadvertence; Excusable Neglect; Unavoidable Cause; Newly Discovered Evidence; Fraud, etc.
On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final
judgment, order, or proceeding for the following reasons: (1) Mistake, inadvertence, surprise, excusable neglect, or
unavoidable cause; (2) newly discovered evidence which by due diligence could not have been discovered in time to
move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic),
misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been
satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated,
or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying
relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2),
and (3) not more than one year after the judgment, order, or proceeding was entered or taken. A motion under this
subdivision (b) does not affect the finality of a judgment or suspend its operation. This rule does not limit the power
of a court to entertain an independent action to relieve a party from a judgment, order or proceeding, or to grant
statutory relief in the same action to a defendant not served with a summons in that action, or to set aside a judgment
for fraud upon the court. Writs of coram nobis, coram vobis, petitions for rehearing, bills of review and bills in the
nature of a bill of review, are abolished, and the procedure for obtaining any relief from a judgment shall be by motion
as prescribed in these rules or by an independent action.”

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procedural in nature because it is interlocutory, and a mechanism to provide notice to the defaulting
party before a court enters a default judgment. Carbon Fuel Co. v. USX Corp., 1998 WL 480809
*1, *3 (4th Cir. 1998) (unpublished) (citing 10A Charles Allen Wright et al., FEDERAL
PRACTICE & PROCEDURE § 2692 (3rd ed.1998)). The judgment is not final until the nondefaulting party moves for a default judgment. Id. Since the issue is procedural, the Court finds
that Fed. R. Civ. P. 55(c) applies. Thus, the Court will examine the Payne factors in determining
whether to set aside the entry of default. 6
1. Meritorious Defense
The Capitol Administrators Defendants argue that they have a meritorious defense to the
claim. (Document 9, ¶ 18). Specifically, they assert that “Plaintiffs’ allegations of fault are
disputed and denied,” and further allege that “Plaintiff, EIN and Defendant Capital Security have
both agreed to indemnify and hold harmless [Capitol Administrators] from any and all actions,
causes of action, claims, demands, liabilities, damages, costs and expenses . . ..” (Capitol
Administrators Defs.’ Renewed Mot. to Set Aside Default ¶ 18). The Plaintiffs respond that the
answer contains boilerplate defenses and general denials, which they contend do not amount to a
genuine material defense. In the alternative, they argue that even if the answer is sufficient to be
considered a meritorious defense, the answer should be stricken, because it was not filed in

6 The Plaintiffs chose not to address the Payne factors, and instead argued the factors a West Virginia state court is
to consider when setting aside an entry of default. However, the Court has considered their arguments and applied
them to the Payne factors where appropriate.

7

compliance with W. Va. Code § 33-44-10, which requires an unauthorized insurer to pay a fee
before filing a pleading. 7
The Plaintiffs’ general assessment of the defenses presented in the Capitol Administrators
Defendants’ answer does not negate the merit of the defenses.

Here, the answer provides

affirmative defenses and responses to every allegation pled in the complaint. A claimant’s alleged
defense in an answer need not be proven at this stage of the case for it to be “meritorious” for
purposes of the Court’s determination. Wainwright's Vacations, LLC v. Pan Am. Airways, Corp.,
130 F.Supp.2d 712, 718 (D. Md. 2001) (“[T]he moving party does not have to prove conclusively
that he would prevail, only that there is sufficient evidence to permit a court to find in his favor.”).
“A meritorious defense requires a proffer of evidence which would permit a finding for the
defaulting party or which would establish a valid counterclaim.” Augusta Fiberglass Coatings,
Inc. v. Fodor Contracting Corp., 843 F.2d 808, 812 (4th Cir.1988). In fact, even if the Capitol

7 W. Va. Code § 33-44-10 states:
(a) Before any unauthorized insurer shall file or cause to be filed any pleading in any action, suit or proceeding
instituted against it, or any notice, order, pleading or process in an administrative proceeding before the commissioner
instituted against the insurer, the unauthorized insurer shall either:
(1) Deposit with the clerk of the court in which the action, suit or proceeding is pending, or with the
commissioner in an administrative proceeding, cash or securities or file with the clerk or the commissioner a bond
with good and sufficient sureties, to be approved by the court or the commissioner, in an amount to be fixed by the
court or commissioner sufficient to secure the payment of any final judgment which may be rendered in the action or
administrative proceeding; or
(2) Deposit with the clerk of the court in which the action, suit or proceeding is pending, or with the
commissioner in an administrative proceeding, cash or securities or file with the clerk or the commissioner a bond
with good and sufficient sureties, to be approved by the court or the commissioner, in an amount required to procure
a license to transact insurance in this state pursuant to the provisions contained within article three of this chapter. (b)
The court or the commissioner in any action, suit or proceeding in which service is made in the manner provided in
subsection (d) or (e), section five of this article, may, in its, his or her respective discretion, order the postponement
as may be necessary to afford the responding party reasonable opportunity to comply with the provisions of subsection
(a) of this section and thereafter to defend the action or proceeding.

8

Administrators Defendants’ defenses are tenuous, the “meritorious defense” factor should weigh
in favor of granting a motion to set aside entry of default. See Rasmussen v. Am. Nat’l Red Cross,
155 F.R.D. 549, 552 (S.D. W. Va. 1994) (Haden, C.J.) (“Although the Court finds the Defendant's
‘meritorious defense’ argument tenuous, it nonetheless recognizes the general policy of deciding
cases on their merits.”). “[A]ll that is necessary to establish the existence of a ‘meritorious
defense’ is a presentation or proffer of evidence, which, if believed, would permit either the Court
or the jury to find for the defaulting party.” United States v. Moradi, 673 F .2d 725, 727 (4th
Cir.1982). Therefore, under the circumstances presented here, the Court finds that the answer is
a sufficient proffer of “evidence” to establish that the Capitol Administrators Defendants have
presented a meritorious defense.
The Plaintiff’s argue that to avoid issues with Erie, the Court should apply state law and
strike the Capitol Administrators Defendants’ answer because it was filed in violation of W. Va.
Code § 33-44-10. On its face, W. Va. Code § 33-44-10 appears to be procedural because it clearly
lays out how an unauthorized insurer is to proceed in West Virginia state courts. However, the
Plaintiffs argue, albeit implicitly, that W. Va. Code § 33-44-10 is a substantive state law that this
Court should be bound by because it is hearing this case upon removal pursuant to its diversity
jurisdiction.
The Court must determine whether to apply this state statute or the federal rule. The
seminal case addressing this question is Hanna v. Plumer, 380 U.S. 460 (1965). In Hanna, the
court held that when both a state law and a federal rule are potentially applicable, a district court
must determine whether the state provision conflicts with the federal rule. Id. at 471. If a conflict
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exists, the court must apply the federal rule unless it is beyond the scope of the Rules Enabling
Act, the law which gave the judiciary the power to promulgate the federal rules or is
unconstitutional. 8 Id. Here, the issue the Court faces is whether to apply W. Va. Code § 33-4410 or Federal Rule 5(d)(1)(A), which governs the serving and filing of pleadings.
In Hanna, an Ohio citizen filed a diversity action in Massachusetts federal court as a result
of injuries caused by a Massachusetts citizen. Id. at 461. Service was at issue in the case. The
defendant argued that state law required in-hand service, and the plaintiff argued that the state law
was not applicable, but that Fed. R. Civ. P. 4 applied. Id. at 461-62. In holding that the federal
rule applied, the Supreme Court reasoned that the federal rule was broad enough to cover the issue
presented and noted that Rule 4 was “designed to control service of process in diversity actions.”
Id. at 463. The Hanna Court looked at whether the federal or state rules apply in a diversity case.
The Supreme Court relied on the power granted to federal courts by Congress in the Rules Enabling
Act and held that the federal rule controlled, and an Erie analysis was not required. Id. at 463-4,
471. “The [Erie] rule has never been invoked to void a Federal Rule” Id. at 470. As such, the

8 The Rules Enabling Act states:
(a) The Supreme Court shall have the power to prescribe general rules of practice and procedure and rules
of evidence for cases in the United States district courts (including proceedings before magistrate judges
thereof) and courts of appeals.
(b) Such rules shall not abridge, enlarge or modify any substantive right. All laws in conflict with such
rules shall be of no further force or effect after such rules have taken effect.
(c) Such rules may define when a ruling of a district court is final for the purposes of appeal under section
1291 of this title.
28 U.S.C § 2072.

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rule from Hanna is that when an issue is addressed by a federal rule, but is silent on a requirement
under state law, the federal rule controls. Federal Rule 5(d)(1)(A) is silent as to the requirement
of WV Code 33-44-10 that an unauthorized insurer pay a fee or post bond before filing a pleading
but was drafted to control how parties make filings in federal courts in response to a complaint. 9
“When a situation is covered by one of the Federal Rules, the question facing the
court is a far cry from the typical, relatively unguided Erie Choice: the court has
been instructed to apply the Federal Rule, and can refuse to do so only if the
Advisory Committee, this Court, and Congress erred in their prima facie judgment
that the Rule in question transgresses neither the terms of the Enabling Act nor
constitutional restrictions.”
Id. at 471.
Under Hanna, the Court must first determine if the federal rule is broad enough to resolve
the conflict between the state law and the federal rule. Rule 5(d)(1)(A) governs any papers,
including pleadings filed after a complaint. Here, the Defendants have served and filed an answer
to a complaint which falls squarely under Rule 5(d)(1)(A). Although Rule 5(d)(1)(A) is silent as
to the requirement of cash or bond for an unauthorized insurer to file a pleading, it clearly requires
that any paper after a complaint be filed and served with no exceptions. In keeping with the
Supreme Court’s guidance in Hanna, the Court finds that this procedural requirement in the federal
rule is both broad and clear enough to control in this case. Moreover, the Court in Hanna found

9 Fed. R. Civ. P. 5(d)(1)(A) states:
Papers after the Complaint. Any paper after the complaint that is required to be served must be filed no
later than a reasonable time after service. But disclosures under Rule 26(a)(1) or (2) and the following
discovery requests and responses must not be filed until they are used in the proceeding or the court orders
filing: depositions, interrogatories, requests for documents or tangible things or to permit entry onto land,
and requests for admission.

11

that applying the federal rule was appropriate even when the outcome would be different under
state rules, because of the federal judiciary’s “strong inherent power” to “bring about uniformity
in the federal courts.” Hanna, 380 U.S. at 472-3.
The second prong of the holding from Hanna created a caveat: a rule would not apply if its
promulgation exceeded its authority under the Rule Enabling Act. Id. at 471. In the absence of
any argument to the contrary, however, the Court must rely on the “presumptive validity” afforded
to the federal rules because of “the study and approval given each proposed Rule by the Advisory
Committee, the Judicial Conference, [the Supreme] Court, and the statute requirement that the
Rule be reported to Congress for a period of review before taking effect.” Burlington N. R. Co.
v. Woods, 480 U.S. 1, 6 (1987). After consideration of the applicable law, the Court finds that the
federal rule governing pleadings is applicable to this case.
2. Reasonable Promptness
The Capitol Administrators Defendants contend that they have responded with reasonable
promptness and note that they worked with the Plaintiffs to resolve two petitions for temporary
restraining orders, as well as filing their motions and answer to the complaint. The Plaintiffs
argue that the Capitol Administrators Defendants were the cause of delay in the case and note they
failed to meet the deadline which they, themselves, had requested in a motion for an extension.
The Court must determine if a party acted reasonably promptly to set aside an entry of default “in
light of the facts and circumstances of each occasion.” United States v. Moradi, 673 F.2d 725,
727 (4th Cir. 1982). The Fourth Circuit has held that a movant “did not act promptly” by filing a
motion to set aside an entry of default approximately two and one-half months after the default
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was entered. Consol. Masonry & Fireproofing, Inc. v. Wagman Constr. Corp., 383 F.2d 249, 251
(4th Cir. 1967). In a case in which a motion to set aside a default was filed two months after the
entry of default, a judge in this district found the movant did not act with reasonable promptness.
Cobb v. Equifax Info. Servs., No. 2:18-CV-00992, 2018 WL 6313011, at *2 (S.D. W. Va. Dec. 3,
2018) (Goodwin, J.). In making such finding, the court noted that:
District courts in the Fourth Circuit have found that a defendant acted reasonably
promptly when waiting seventeen, twenty-one, and thirty-two days after default
was entered before attempting to set it aside. See United States v. $10,000.00 in
U.S. Currency, No. 1:00-cv-0023, 2002 WL 1009734, at *3 (M.D.N.C. Jan. 29,
2002); Esteppe v. Patapsco & Back Rivers R.R. Co., No. H-00-3040, 2001 WL
604186, at *4 (D. Md. May 31, 2001); Wainwright's Vacations, LLC v. Pan Am.
Airways Corp., 130 F. Supp. 2d 712, 718 (D. Md. 2001).
Id. Here, default was entered in the state court on June 7, 2018, and the motion to set aside the
default was filed in state court on June 11, 2018. After the case was removed on June 27, 2018,
the Defendants renewed their motion to set aside default on July 3, 2018. The Court finds that
the Capitol Administrators Defendants’ response to the entry of default was, in fact, prompt.
3. Personal Responsibility
The Payne factor of personal responsibility of the defaulting party weighs heavily in favor
of the Capitol Administrators Defendants. Importantly, the Fourth Circuit has recognized that
attorney inaction, without some sort of attendant fault of the defendant, personally, leads to a
finding of no personal responsibility of the defaulting party. See, e.g., Lolatchy v. Arthur Murray,
Inc., 816 F.2d 951, 953 (4th Cir.1987) (“[J]ustice demands that a blameless party not be
disadvantaged by the errors or neglect of his attorney which cause a final, involuntary termination
of proceedings.... Any dilatory action was on the part of the attorney, not the defendants. . ..”
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(internal quotation marks omitted)).

Nothing in the record suggests that the Capitol

Administrators Defendants were the cause of any delay which resulted in the entry of default or
the response to the entry.
4. Prejudice
The Court finds that vacating the default judgment will not prejudice the Plaintiffs. The
Court notes that the parties are still in the discovery phase of the case. Moreover, “[i]n the context
of a motion to set aside an entry of default, . . . delay in and of itself does not constitute prejudice
to the opposing party.” Colleton Preparatory Acad., 616 F.3d at 418. No other actual prejudice
has been presented. The Court finds that a review of the merits in this case would best serve the
interests of justice for all parties concerned.
5. History of Dilatory Action
Further, nothing in the record indicates any previous history of dilatory action by the
Capitol Administrators Defendants, and the Plaintiffs have not asserted that there is a history of
dilatory action.
6. Less Drastic Sanctions
Finally, the Court considers the availability of less drastic sanctions as an alternative to the
entry of default. The Capitol Administrators Defendants argue that no sanction is warranted
because despite the entry of default, they have been engaged in the matter from the onset. The
Plaintiffs have not suggested or sought an alternative sanction, and the Court will not consider
alternative sanctions that have not been requested. The relatively minimal delays involved in this
case clearly do not warrant default as a sanction.
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In sum, the Capitol Administrators Defendants have articulated a meritorious defense, have
responded with reasonable promptness, are not personally responsible for the delay, and no
evidence of a history of dilatory action has been presented. Further, Plaintiffs are not prejudiced
by the delay and although lesser sanctions are available, imposing sanctions is not appropriate
under the circumstances presented here. Accordingly, the Court finds that the state court default
should be set aside.
B. The Entry of Default Against the Nordstrom Defendants
On July 18, 2018, default was entered against the Nordstrom Defendants. Unlike the
default entered against the Capitol Administrators Defendants in state court, this default was
entered by the Clerk of this Court. Despite this fact, the Plaintiffs chose to ignore the Payne
factors and instead argued that this Court should follow W. Va. Code § 33-44-10. Clearly, the
state statute isn’t applicable where the default was entered in federal court.
Applying the Payne factors, the Court notes that the Nordstrom Defendants have not filed
an answer to the complaint but have filed a Motion for Leave to File a Motion to Dismiss and
attached a Motion to Dismiss as well as a Memorandum of Law (Document 16), wherein they
argue that this claim should be dismissed because it is subject to arbitration. As to the second
Payne factor, the Nordstrom Defendants argue and the record reveals that they were reasonably
prompt about responding to the default entry. Two days after the default entry, the Nordstrom
Defendants filed their motion to dismiss. Nothing in the record indicates that there was a delay
in responding to the entry of default. Therefore, the Court does not need to analyze whether to
assign any personal responsibility to the Nordstrom Defendants. As to the fourth Payne factor,
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the Court finds that the Plaintiffs would suffer no prejudice if the default is set aside. The parties
are still in the discovery phase of the litigation. Even if there is a minimal risk of prejudice, it is
offset and outweighed by the legal preference for resolving cases on the merits. Further, there is
nothing in the record that suggests the Nordstrom Defendants have a history of dilatory conduct.
Finally, because a review of the five Payne factors points toward setting aside default against the
Nordstrom Defendants, it is inappropriate to levy a sanction.
C. Plaintiffs’ Rule 12(f) Motion to Strike the Counterclaim and Cross Claim
Lastly, the Plaintiffs filed a motion to strike the Capitol Administrators amended answer,
counterclaim, and crossclaim. First, the Plaintiffs argue that since the Capitol Administrators
Defendants are in default, they cannot contest liability. The Court can quickly dispose of this
argument, because the Capitol Administrators Defendants are no longer in default, for the reasons
stated above, and pursuant to the Order below. Next, the Plaintiffs argue that W. Va. Code § 3344-10 bars the Capitol Administrators Defendants from filing any pleadings. The Court has
discussed why it is not obligated to adhere to this state statute. The motion to strike should be
denied.
CONCLUSION
Wherefore, after thorough review and careful consideration, the Court ORDERS that the
Capitol Administrators Defendants’ Renewed Motion to Set Aside Default (Document 9), the
Nordstrom Defendants’ Motion to Set Aside Default (Document 15) AND Motion for Leave of
Defendant’s Capital Security, Ltd., Universal Risk Intermediaries Inc., and Jeana Nordstrom, to
File Motion to Dismiss Complaint (Document 16) be GRANTED and that the attached motion to
16

dismiss be FILED. The Court further ORDERS that the Renewed Motion to Extend Time to
Answer (Document 8) be GRANTED and, lastly, that the Plaintiffs’ Rule 12(f) Motion to Strike
Amended Defense and Answers of Capitol Administrators Inc., Mike Tate, Alex Arnet and Lucent
Health Solutions, Inc., and Counterclaim and Cross-Claim. (Document 13) be DENIED.
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and to
any unrepresented party.
ENTER:

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February 25, 2019