Opinion
Civil Action No. 00-1125, Section: "R" (4).
August 1, 2000.
ORDER AND REASONS
Before this Court are plaintiff's application for default judgment by court and defendant's motion to set aside entry of default. For the following reasons, plaintiff's application is denied, and defendant's motion is granted.
I. Background
Plaintiff Broadwing Communications, Inc., f/k/a Network Long Distance, Inc. ("Broadwing") filed a complaint on April 12, 2000, alleging that defendant Gene W. Harris owed Broadwing for telecommunications services provided pursuant to a Resale Agreement and a Personal Guarantee. On the same day, plaintiff mailed certified copies of the Summons and Complaint to defendant, which defendant received on April 18, 2000. On April 26, 2000, plaintiff filed an affidavit evidencing service of the summons and complaint. Because no answers were filed within thirty days, plaintiff filed a Request for Default, which the Clerk of Court signed and entered on June 2, 2000. Plaintiff now applies for default judgment.
Defendant moves to set aside the entry of default. Although he does not dispute that he was served on April 12, 2000, he blames his failure to respond on his California counsel, who was supposed to forward the complaint to a Louisiana attorney for response. Apparently, through an oversight of an employee of the California counsel, the complaint was not transmitted to Louisiana until June 8, 2000. Louisiana counsel filed a motion to set aside entry of default on June 16, 2000.
II. Discussion
Rule 55(c) of the Federal Rules of Civil Procedure allows a district court to set aside an entry of default "for good cause shown." FED R. CIV. P. 55(c). Good cause, however, "is not susceptible of precise definition, and no fixed, rigid standard can anticipate all of the situations that may occasion the failure of a party to answer a complaint timely." Dierschke v. O'Cheskey, 975 F.2d 181, 183 (5th Cir. 1992). Notwithstanding this ambiguity, in determining whether good cause has been shown three factors are usually analyzed: (1) whether the default resulted from "excusable neglect," (2) "whether setting it aside would prejudice the adversary, and [3] whether a meritorious defense is presented." CJC Holdings, Inc. v. Wright Lato, Inc., 979 F.2d 60, 62 (5th Cir. 1992) (citing United States v. One Parcel of Real Property, 763 F.2d 181, 183 (5th Cir. 1985)). These factors, however, are neither "talismanic" nor "exclusive." Dierschke, 975 F.2d at 184. Other factors that a court may consider include whether "the public interest was implicated," whether "there was a significant financial loss to the defendant," and whether "the defendant acted expeditiously to correct the default." Id. "Whatever factors are employed, the imperative is that they be regarded simply as a means of identifying circumstances which warrant the finding of `good cause' to set aside default." Id. This decision is necessarily "informed by equitable principles," Id., because the "Federal Rules are diametrically opposed to tyranny of technicality and endeavor to decide cases on the merits. Strict enforcement of defaults has no place in the Federal Rules." Amberg v. FDIC, 934 F.2d 681, 686 (5th Cir. 1991).
In balancing these factors, and after having considered the equities of the situation, the Court first finds that, contrary to plaintiff's assertions, this is not a case of an uncooperative party or an obstructionist adversary. Rather, it is one of mistake or inadvertent oversight by defendant's California counsel. While such a mistake merits censure, and while defendant is accountable for the mistakes of his counsel, the Court finds the mistake to be excusable. See Pryor v. U.S. Postal Serv., 769, F.2d 281, 288 (5th Cir. 1985). Second, plaintiff does not even argue that it will be prejudiced if the entry of default is set aside, and the Court sees no prejudice from the record before it. There is no trial date, and discovery has not commenced. Moreover, the mere fact that setting aside the default would delay collection of the amount in dispute if Broadwing were to prevail at trial or would require it to litigate the action is insufficient prejudice to require the default to stand. See CG Boats, Inc. v. Texas Ohio Servs., Inc., 164 F.R.D. 57, 59 (E.D. La. 1995). Third, contrary to plaintiff's assertions, defendant asserts some potentially meritorious defenses that deserve further consideration, e.g., the issue of whether this Court even has jurisdiction over defendant. Fourth, plaintiff seeks a default judgment for $744,388.44, a sum substantial enough to merit caution before denying defendant a defense on the merits. Fifth, the Court finds that defendant's Louisiana counsel acted expeditiously to correct the default by filing a motion to set aside the entry of default a week after receipt of the complaint.
III. Conclusion
For the foregoing reasons, the Court denies plaintiff's application for default judgment and grants defendant's motion to set aside entry of default.
New Orleans, Louisiana, this 1st day of August, 2000.