FIDELITY WARRANTY SERVICES, INC. v. EDISON MOTOR CARS, INC.
3:16-cv-05728
| D.N.J. | Feb 7, 2022Background
- Plaintiffs Fidelity Warranty Services, Inc. and Jim Moran & Associates sued Edison Motor Cars, Inc. and others; Brad W. Benson was served but an entry of default was entered against him after he did not timely respond.
- The Court previously granted Benson leave to file a renewed motion to vacate the default; Benson filed that renewed motion asserting meritorious defenses and denying bad faith in his delay.
- Plaintiffs opposed, arguing vacatur would prejudice them, Benson lacks meritorious defenses, and his litigation conduct was culpable.
- The case experienced significant delay (including a stay pending another proceeding); another defendant recently answered a five‑year‑old complaint, reducing prejudice concerns from delay.
- Applying Rule 55 and Third Circuit precedent (the Feliciano factors), the Court found no substantial prejudice, Benson’s proffered defenses were not facially unmeritorious, and Benson’s delay did not constitute culpable conduct.
- The Court granted Benson’s motion to vacate the default and ordered him to file a responsive pleading by February 28, 2021 (per the Order).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Prejudice from vacating default | Vacatur would prejudice Plaintiffs (loss of evidence, reliance on judgment) | Minimal prejudice given long stay and lack of litigation progress | No substantial prejudice; vacatur appropriate |
| Meritorious defense requirement | Benson failed to show a valid defense to unjust enrichment and declaratory relief claims | Benson contends Plaintiffs conferred no direct benefit and declaratory judgment claim is deficient | Benson’s defenses are not facially unmeritorious; sufficient for vacatur stage |
| Culpable conduct (bad faith/delay) | Benson’s delays and litigation conduct demonstrate bad faith | Benson’s delay was short/not culpable and he sought relief | Delay not sufficiently culpable to deny vacatur |
Key Cases Cited
- Catanzaro v. Fischer, [citation="570 F. App'x 162"] (3d Cir. 2014) (courts prefer merits adjudication over default judgment)
- Hritz v. Woma Corp., 732 F.2d 1178 (3d Cir. 1984) (preference for deciding cases on merits)
- Feliciano v. Reliant Tooling Co., 691 F.2d 653 (3d Cir. 1982) (three‑factor test for vacating default)
- United States v. $55,518.05 in U.S. Currency, 728 F.2d 192 (3d Cir. 1984) (application of factors for setting aside default)
- Gross v. Stereo Component Sys., Inc., 700 F.2d 120 (3d Cir. 1983) (close cases should favor vacatur)
- Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863 (3d Cir. 1984) (dismissals/defaults are drastic sanctions)
- Emcasco Ins. Co. v. Sambrick, 834 F.2d 71 (3d Cir. 1987) (on vacatur, a proffered defense need not be decided, only not facially unmeritorious)
- Farnese v. Bagnasco, 687 F.2d 761 (3d Cir. 1982) (close cases resolved in favor of reaching the merits)