Enora Perez v. Wdlls Fargo N.A.
774 F.3d 1329
| 11th Cir. | 2014Background
- Perez, owner of a small business, had three Wells Fargo business accounts frozen and closed in 2012, with nearly $100,000 held; Wells Fargo later returned most funds but kept about $10,000 claiming costs and attorneys’ fees.
- Wells Fargo removed the state suit to federal court, answered, and asserted a counterclaim (including interpleader), alleging Perez used accounts for unauthorized MSB activity and that the Business Account Agreement authorized Wells Fargo’s actions.
- Perez failed to file a timely answer to the counterclaim; Wells Fargo moved for judgment on the pleadings, treating the unopposed counterclaim allegations as admitted and asking the court to grant judgment and fees.
- Perez moved for leave to file an out‑of‑time answer and to amend her complaint; the district court denied leave applying Rule 6(b)(1)(B)’s "excusable neglect" standard, deemed Wells Fargo’s counterclaim allegations admitted, granted judgment on the pleadings to Wells Fargo, denied amendment as futile, and awarded fees.
- The Eleventh Circuit reversed: it held Perez’s request should have been evaluated under Rule 55(c)’s "good cause" standard (setting aside default), not Rule 6(b)(1)(B), and that the district court erred in treating Wells Fargo’s contractual characterization as an admitted legal conclusion without considering the actual contract.
Issues
| Issue | Plaintiff's Argument (Perez) | Defendant's Argument (Wells Fargo) | Held |
|---|---|---|---|
| Appropriate standard to allow out‑of‑time answer to counterclaim | Apply Rule 55(c) "good cause" to set aside default; counsel error, no prejudice, meritorious defense | Rule 6(b)(1)(B) "excusable neglect" because no formal default entry; higher standard applies | Use Rule 55(c) "good cause"; Perez entitled to consideration under default‑setting standard |
| Whether motion for judgment on the pleadings was proper while counter‑defendant had not answered | Deny — pleadings not closed; motion effectively sought default judgment | Motion proper; counterclaim allegations should be deemed admitted | Motion premature/erroneous; pleadings were not closed and motion amounted to seeking default relief |
| Whether Wells Fargo’s characterization of contract terms can be treated as admitted facts | Characterization is a legal conclusion; court must examine the actual account agreement | Allegations about contract authorized actions and fees are factual admissions | Legal conclusions about contract construction cannot be deemed admitted; the contract must be examined by the court |
| Denial of leave to amend as futile | Amendment could state viable claims; futility cannot be decided on deemed legal conclusions | Deeming contract authorized Wells Fargo’s actions makes amendment futile | Reversed: cannot conclude futility without considering the actual agreement; leave to amend cannot be denied on that basis |
Key Cases Cited
- Cannon v. City of W. Palm Beach, 250 F.3d 1299 (11th Cir.) (standard for judgment on the pleadings)
- Betty K Agencies, Ltd. v. M/V MONADA, 432 F.3d 1333 (11th Cir.) (failure to answer counterclaim does not justify draconian dismissal absent willfulness)
- D.H. Blair & Co. v. Gottdiener, 462 F.3d 95 (2d Cir.) (default is admission of well‑pleaded allegations)
- Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267 (11th Cir.) (defaults do not admit legal conclusions)
- Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200 (5th Cir.) (legal conclusions are not deemed admitted on default)
- Horsley v. Feldt, 304 F.3d 1125 (11th Cir.) (documents outside pleadings may be considered when central and authentic)