Opinion
No. 3:01-CV-1889-G
July 5, 2002
MEMORANDUM ORDER
Before the court is the motion of William J.M. Tarter ("Tarter") to set aside a default entered against him and for relief from the judgment rendered as a result of the default. For the following reasons, Tarter's motion is denied.
I. BACKGROUND
The TXU Retirement Plan ("TXU") brought the instant action for declaratory relief against Tarter and his ex-wife Ola J. Helms ("Helms"). TXU is requesting a declaration as to the amount that the plan owes Helms pursuant to a Qualified Domestic Relations Order ("QDRO") entered in the divorce proceedings of Tarter and Helms. Complaint at 2. Helms asserts that the amount TXU has paid her is less than what she is due under the QDRO, and has requested that TXU pay her the full amount. Id. at 2-3. TXU requests that if the court finds that TXU has underpaid Helms, the court order Tarter to reimburse TXU the amount of money he received in an amount equal to the amount Helms is due. Id. at 4.
TXU filed its complaint in this case on September 21, 2001. Complaint at 1. Tarter was served with the complaint on October 26, 2001, and the court received a signed copy of the Waiver of Service on November 5, 2001. Motion to Set Aside Both Entry of Default and Judgment by Default ("Motion") at 2. Tarter did not file an answer or any motion in response to TXU's complaint, and the court entered a default judgment on March 4, 2002. Id. Tarter filed this motion on March 20, 2002. Id.
II. ANALYSIS
The decision to set aside an entry of default under Federal Rule of Civil Procedure 55(c) or to grant relief from a default judgment under Federal Rule of Civil Procedure 60(b) is within the discretion of the district court. See CJC Holdings, Inc. v. Wright Lato, Inc., 979 F.2d 60, 63 (5th Cir. 1992). Under either rule, the court considers the same factors: (1) whether the default resulted from excusable neglect; (2) whether setting aside the entry of default or the default judgment would prejudice the adversary; and (3) whether a meritorious defense is presented. See id. at 64. "The ultimate inquiry remains whether the defendant shows `good cause' to set aside the default." Id.
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). FED. R. CIV. P. 55(c).
On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect FED. R. CIV. P. 60(b).
Before CIC Holdings, Fifth Circuit law provided that the court should inquire as to whether the default was "willful." CJC Holdings, 979 F.2d at 64. However, in CIC Holdings the Fifth Circuit recommended that in all future cases the district court should apply an "excusable neglect" standard. Id.
Courts sometimes consider other factors such as: (1) whether the public interest was implicated; (2) whether there was a significant financial loss to the defendant; and (3) whether the defendant acted expeditiously to correct the default. See Matter of Dierschke, 975 F.2d 181, 184 (5th Cir. 1992) (citations omitted).
A. Excusable Neglect
Tarter argues that his failure to file a timely response to TXU's complaint constitutes excusable neglect. Brief in Support of Motion to Set Aside Both Entry of Default and Judgment by Default at 2. Tarter contends that when he first read the complaint, he was of the belief that TXU "was basically on his side." Id. According to Tarter, he was not aware of the nature of the relationship in this suit until he spoke to TXU's counsel. Id. It was at that time that Tarter first obtained his own attorney and discovered the court's entry of the default judgment. Id. Tarter directs the court's attention to the fact that he filed this motion within three weeks of the entry of the default judgment. Id.; see Matter of Dierschke, 975 F.2d at 184 (in deciding a motion to set aside a default, courts have considered whether the defendant acted expeditiously to correct his default).
TXU argues that Tarter "willfully chose not to answer the lawsuit based on his mistaken belief that his interests were not adverse to TXU's." Plaintiff's Response to Motion to Set Aside Both Entry of Default and Judgment by Default ("Response") at 2. TXU refers to the "willful" language used prior to the Fifth Circuit's modification to the more objective "excusable neglect" standard. CJC Holdings, 979 F.2d at 64. By characterizing Tarter's inaction as willful "[e]ven if it was based on a mistaken belief that his interests were not adverse to TXU's," Response at 3, TXU has failed to provide the court with any information tending to show that Tarter's failure to respond to the complaint was not excusable neglect.
The court finds that it is reasonable for Tarter to have believed that TXU and he were on the same side when TXU stated in the complaint that it owed nothing more to Helms than it has already paid her. Tarter's expeditious filing of this motion further evinces that, had he known of the true adversarial nature of the relationship in this action, Tarter would have likely filed a timely answer to TXU's complaint. Additionally, the expeditious filing of the motion has helped to avoid further delay in the action. See Matter of Dierschke, 975 F.2d at 184. Therefore, the court finds that Tarter's inaction was due to excusable neglect.
B. Prejudice
TXU and Tarter agree that TXU will not be prejudiced if the judgment is set aside. Motion at 3; Response at 3. Therefore, prejudice is not a factor in deciding the instant motion.
C. Meritorious Defense
Tarter asserts as an affirmative defense that "the ERISA federal common law doctrine of estoppel" precludes any judgment against him. Motion at 3. To succeed in setting aside a default judgment, Tarter must establish that he has a fair probability of success on the merits. Federal Savings and Loan Insurance Corporation v. Kroenke, 858 F.2d 1067, 1069 (5th Cir. 1988).
TXU responds that "the Fifth Circuit has routinely refused to recognize, on preemption grounds, estoppel-based arguments in ERISA cases," and that these rulings establish that Tarter does not have a fair probability of success on the merits. Response at 4. In Degan v. Ford Motor Company, 869 F.2d 889, 895 (5th Cir. 1989), the Court of Appeals held that "ERISA precludes oral modifications to benefit plans and . . . claims of promissory estoppel are not cognizable in suits seeking to enforce rights to pension benefits." Since Degan, the Fifth Circuit has consistently held that estoppel claims are precluded by ERISA. See, e.g., Rodrigue v. Western and Southern Life Insurance Company, 948 F.2d 969, 971-72 (5th Cir. 1991) (citing Degan for the proposition that recognizing estoppel-based arguments in ERISA claims could (1) cause ineligible persons to bring claims against plan administrators and (2) "threaten the stability and solvency of many plans upon which so many other employees are dependent"); McCall v. Burlington Northern/Santa Fe Company, 237 F.3d 506, 513 (5th Cir. 2000) ("The Fifth Circuit has never adopted `ERISA estoppel,' and has in fact expressed doubt as to whether a cause of action for estoppel is cognizable under ERISA based upon written statements."), cert. denied, ___ U.S. ___ 122 S.Ct. 57 (2001).
Tarter directs the court's attention to a recent Fifth Circuit decision, Bourgeois v. Pension Plan for Employees of Santa Fe International Corporations, 215 F.3d 475 (5th Cir. 2000), which, according to Tarter, provides plaintiffs in his position with a limited estoppel remedy. Reply to Plaintiff's Response to Set Aside Both Entry of Default and Judgment by Default at 4 (citing Bourgeois, 215 F.3d 475). However, the plaintiff in Bourgeois sought to estop the defendants from asserting a defense of failure to exhaust administrative remedies, and the plaintiff did not raise an issue of promissory estoppel in the context of the plan itself. Id. at 481. Unlike Tarter, "Bourgeois is not seeking benefits based on an estoppel claim nor is he trying to modify the plan." Id. Because Tarter has not raised any issue of exhaustion of remedies, the holding in Bourgeois is distinguishable from the facts in this case.
In light of the Fifth Circuit's reluctance to recognize promissory estoppel arguments in the context of ERISA cases, Tarter has not shown that his claim of ERISA estoppel has a fair probability of success on the merits, even if the default judgment against him were set aside.
III. CONCLUSION
For the reasons discussed above, Tarter's motion to set aside the entry and judgment of default is DENIED.