Plus Medical, LLC v. United States ( 2014 )

In the United States Court of Federal Claims
No. 14-600C
(E-Filed: October 27, 2014)
)
PLUS MEDICAL, LLC, )
)
Plaintiff, ) RCFC 55(c); Good Cause to
) Set Aside Default
v. )
)
THE UNITED STATES, )
)
Defendant. )
)
Gregory N. Ullman, Pompano Beach, Fla., for plaintiff.
Gregg M. Schwind, Senior Trial Counsel, with whom were Joyce R. Branda, Acting
Assistant Attorney General; Robert E. Kirschman, Jr., Director; and Steven J.
Gillingham, Assistant Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice, Washington, D.C., for defendant.
ORDER
Presently before the undersigned is defendant’s unopposed motion to vacate the
Rule 55(a) default entered by the Clerk of Court, as well as defendant’s unopposed
motion for an enlargement of time in which to file its answer. For the reasons set forth
below, the undersigned GRANTS defendant’s motions.
I. Background
Plaintiff filed its complaint on July 14, 2014, in which it alleges claims for breach
of contract and an uncompensated taking of property. Compl. ¶¶ 29-33, ECF No. 1.
Plaintiff requests damages and just compensation, with no specifics as to amounts. Id. at
9.
On July 15, 2014, the court notified plaintiff’s counsel, Mr. Gregory Ullman, that
it had no record of his admission to the Bar of the United States Court of Federal Claims,
a requirement for practice in this court. See R. Ct. Fed. Cl. (RCFC) 83.1. The court
afforded Mr. Ullman until October 2, 2014 to complete the admission process.
Defendant’s answer was due on September 12, 2014, nearly three weeks before plaintiff’s
counsel’s deadline for becoming a member of the court’s Bar. See RCFC 12(a)(1)(A).
Defendant did not file timely either an answer or a motion for extension of time in which
to answer. On September 16, 2014, defendant’s counsel appeared in this matter.
On September 30, 2014, Mr. Ullman completed the admission process. That same
day, plaintiff moved for entry of default pursuant to Rule 55(a), as defendant “has failed
to answer or otherwise defend.” Pl.’s Mot. Default 1, ECF No. 11. Rule 55(a) provides
that “[w]hen a party against whom a judgment for 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.” In accordance with the court’s rules, the Clerk of Court
entered default on October 2, 2014.
Five days later, on October 7, 2014, defendant filed a motion to vacate the default
under Rule 55(c). Def.’s Mot., ECF No. 13. According to defendant, there is good cause
to vacate the default because (1) defendant understood that the case was stayed until
plaintiff’s counsel was admitted to the court’s Bar, (2) plaintiff failed to satisfy the Rule
55(a) requirement of showing that defendant “failed to plead or otherwise defend” the
action, as defendant’s counsel had entered an appearance, and (3) the Clerk of Court
entered default prior to allowing defendant time to file a response to plaintiff’s motion for
default.1 Id. at 2-3.
Defendant also seeks an enlargement of time until October 27, 2014 in which to
respond to plaintiff’s complaint. Id. at 3.
On October 15, 2014, plaintiff filed a brief response in which it stated, “[n]ow that
Plaintiff has reviewed and considered Defendant’s Motion, it withdraws its opposition.”
Pl.’s Resp., ECF No. 14.
II. Legal Standard
1
Contrary to the assertion of defendant’s counsel, the Clerk of Court correctly
applied Rule 55(a). Even if the court were to accept defendant’s argument that an entry
of appearance is sufficient to satisfy the Rule 55(a) requirement of “otherwise defend”—
a position for which defendant provides no authority—the court cannot credit defendant
for doing so; counsel did not enter his appearance until after the time to answer had
expired. Nor does Rule 55(a) provide defendant an opportunity to respond. Rather, it
requires the Clerk to enter default upon plaintiff’s showing of defendant’s failure to plead
or otherwise defend.
2
The court’s rules provide that “[t]he court may set aside an entry of default for
good cause, and it may set aside a default judgment under RCFC 60(b).”2 RCFC 55(c).
Good cause is determined by a three-factor test that considers “whether (1) the
default was willful, (2) the non-movant would be prejudiced if the default were set aside,
and (3) the movant has raised a meritorious defense.” Westec Co. v. United States, 32
Fed. Cl. 576, 578 (1995) (citing, inter alia, Jackson v. Beech, 636 F.2d 831, 836 (D.C.
Cir. 1980)); accord Mohamad v. Rajoub, 634 F.3d 604, 606 (D.C. Cir. 2011); Dassault
Systemes, SA v. Childress, 663 F.3d 832, 838-39 (6th Cir. 2011).
A movant is not required to satisfy all three elements in order to prevail; rather the
court may balance the three factors to reach a decision. See Westec Co., 32 Fed. Cl. at
578; accord Dassault Systemes, SA, 663 F.3d at 844. As the court balances the factors,
“all doubts are resolved in favor of the party seeking relief.” Jackson, 636 F.2d at 836;
accord Dassault Systemes, SA, 663 F.3d at 844.
The Federal Circuit has stated that “trial on the merits is favored over default
judgment and . . . close cases should be resolved in favor of the party seeking to set aside
default judgment.” Info. Sys. & Networks Corp. v. United States, 994 F.2d 792, 795
(Fed. Cir. 1993).
III. Discussion
Although defendant did not directly address the three factor analysis employed by
this court, the limited record in this matter does provide sufficient information for the
court to evaluate good cause.
2
A court may set aside a default judgment for, inter alia, excusable neglect on the
part of the defaulting party. RCFC 60(b)(1). Good cause under Rule 55(c) and excusable
neglect under Rule 60(b)(1) examine the same factors, although a stronger showing is
required to set aside a default judgment under Rule 60(b)(1). See Advanced Commc’n
Design, Inc. v. Premier Retail Networks, Inc., 46 F. App’x 964, 969 (Fed. Cir. 2002)
(citing Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 783-84 (8th Cir. 1998)); accord
Dassault Systemes, SA v. Childress, 663 F.3d 832, 839 (6th Cir. 2011); Enron Oil Corp.
v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993).
“[I]nterpretation of the court’s rules will be guided by case law and the Advisory
Committee Notes that accompany the Federal Rules of Civil Procedure.” RCFC rules
committee’s note (2002), at 1. RCFC 55(c) is identical to Fed. R. Civ. P. 55(c), and
RCFC 60(b)(1) is identical to Fed. R. Civ. P. 60(b)(1). Therefore, the court relies on
cases interpreting both federal rules, as well as the court’s rules.
3
Regarding the first factor, the Federal Circuit has provided explicit direction on
what constitutes willful conduct in considering whether to set aside a default judgment
under Rule 60(b)(1). The Federal Circuit counsels that when determining whether
culpable conduct of the defaulting party led to the default, the inquiry is whether the
defaulting party “intended to violate court rules and procedures.” Info. Sys. & Networks
Corp., 994 F.2d at 796. Thus “mere failure to answer” can fall within the definition of
Rule 60(b)(1) excusable neglect, requiring a court to “inquire whether the defaulting
party willfully declined to follow a court’s rules and procedures.” Id.; see Westec Co., 32
Fed. Cl. at 578 (finding default was not willful where attorney neglected to properly
calendar due date); see also Sea Hope Navigation Inc. v. Novel Commodities SA, 978 F.
Supp. 2d 333, 337 (S.D.N.Y. 2013) (interpreting “willfulness” in the context of a default
to refer to conduct that is “more than merely negligent or careless”); Harvey v. Knight-
Celotex, LLC, No. 13-cv-17, 2013 WL 6190433, at *5 (D. Me. Nov. 26, 2013) (finding
default was not willful where defendant showed neither contempt for the court’s
procedures nor an effort to evade its authority).
In this case, defendant’s counsel explained that his failure to defend resulted from
his confusion regarding the status of the case. Counsel believed the case was stayed
pending the admission of plaintiff’s counsel to this court’s Bar.
Counsel was mistaken, however. The court had not stayed the case.
Defendant’s counsel has shown neither an intention to ignore this court’s rules nor
a contempt for the rules; nor does it appear that he has attempted to evade the court’s
authority. See, e.g., Info. Sys. & Networks Corp., 994 F.2d at 796; Harvey, 2013 WL
6190433, at *5. Rather, counsel appears to have made a mistake that, in the court’s view,
does not rise to the level of willfulness. This factor militates in defendant’s favor.
The second factor of the analysis, prejudice to the non-movant, requires a showing
of ‘“delay [that] will result in the loss of evidence, create increased difficulties of
discovery, or provide greater opportunity for fraud and collusion.”’ Dassault Systemes,
SA, 663 F.3d at 842 (quoting INVST Fin. Grp., Inc. v. Chem-Nuclear Sys., Inc., 815 F.2d
391, 398 (6th Cir. 1987)). To this end, a showing of mere delay is insufficient to show
prejudice. Id.; see also Westec Co., 32 Fed. Cl. at 579 (finding no prejudice where, inter
alia, discovery had not begun and the non-defaulting party alleged no prejudice if the
court set aside the default).
The delay occasioned by the default in this matter has been brief. Defendant’s
answer was due September 12, 2014, and defendant has sought leave to file its response
by October 27, 2014. This six week delay does not endanger any evidence in this matter,
4
or imperil plaintiff’s ability to obtain discovery. See Dassault Systemes, SA, 663 F.3d at
842. Moreover, the court infers, from plaintiff’s election not to oppose defendant’s
request for additional time in which to respond, that plaintiff perceives no harm. This
factor also weighs in defendant’s favor.
The third factor of the analysis is whether a meritorious defense has been raised.
Such defense is one that if established at trial, would be a complete defense to plaintiff’s
claims. See Westec Co., 32 Fed. Cl. at 579. In its motion, defendant was silent about its
expectation to defend against either plaintiff’s breach of contract or takings claims.
Defendant was further silent about its expectation to defend against plaintiff’s general
claim for damages or just compensation, should plaintiff prevail on liability. Absent
comment from defendant, the court cannot evaluate the merits of defendant’s defense on
this record.
On balance the court finds that defendant’s default was not willful and plaintiff
will suffer no prejudice from the attendant delay. Defendant’s silence on its defense,
however, precludes a finding in defendant’s favor on the third factor. Yet, the court is
mindful of the strong preference expressed in the case law for a judgment on the merits,
rather than for a default triggered by a technical failure on the part of defendant. See
Info. Sys. & Networks Corp., 994 F.2d at 795. For these reasons, the court decides that
the overall balance of the analytical factors favors permitting defendant an opportunity to
defend and thus, resolving this matter on the merits.
IV. Conclusion
Pursuant to Rule 55(c), the entry of default is set aside.
Defendant’s motion for an enlargement of time in which to file answer plaintiff’s
complaint is GRANTED. Defendant shall file its answer no later than Monday,
November 10, 2014.3
IT IS SO ORDERED.
s/ Patricia Campbell-Smith
PATRICIA CAMPBELL-SMITH
Chief Judge
3
Defendant is afforded an additional two weeks in which to file its Answer, in
consideration of the filing date of this order.
5