465 B.R. 124
6th Cir. BAP2012Background
- Adversary proceeding under 11 U.S.C. § 523(a)(8) seeking dischargeability of student loan; Sallie Mae defaulted after service, then moved to set aside the default judgment; bankruptcy court denied the motion and Sallie Mae appealed.
- Key dates: default judgment entered July 8, 2011; motion to set aside filed July 26, 2011; notice of appeal timely filed October 4, 2011.
- Service issue: summons and complaint served via certified mail; Debtor contends service proper; Sallie Mae challenges service.
- Rule framework: Rule 60(b) grounds for relief from a final judgment; Rule 55(c) governs setting aside a default judgment; 60(b)(1) requires mistake, inadvertence, surprise, or excusable neglect.
- Court applied the United Coin Meter framework and rejected excusable neglect arguments, emphasizing finality and heightened standards after default judgment.
- Local Rule 7007-1(a) does not supplant Rule 5 notice requirements, and Sallie Mae was not entitled to notice as a party in default.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Set aside under Rule 60(b)(1) after default judgment? | Gourlay | Sallie Mae | Affirmed the denial of relief. |
| Excusable neglect as basis to set aside? | Gourlay | Sallie Mae | No abuse of discretion; neglect not excusable. |
| Notice under Local Rule 7007-1(a) vs Rule 5(a)(2) protections? | Gourlay | Sallie Mae | Rule 5(f) controls; no error found. |
| Proper service of summons/complaint? | Gourlay | Sallie Mae | Service proper; officer addressed constitutes valid service. |
| Timeliness of reconsideration under Rule 60(b)(1)? | Gourlay | Sallie Mae | Timeliness not satisfied; 60(b)(1) not available. |
Key Cases Cited
- United Coin Meter Co. v. Seaboard Coastline R.R., 705 F.2d 839 (6th Cir.1983) (three-factor framework for setting aside default; applied to 60(b) context when default judgment is involved)
- Waifersong, Ltd. Inc. v. Classic Music Vending, 976 F.2d 290 (6th Cir.1992) (public-policy emphasis; stringent standard for Rule 60(b))
- Manufacturers’ Ind. Relations Ass’n v. East Akron Casting Co., 58 F.3d 204 (6th Cir.1995) (explanation of Rule 60(b) factors and excusable neglect context)
- O.J. Distrib., Inc. v. Hornell Brewing Co., Inc., 340 F.3d 345 (6th Cir.2003) (default judgment standards and relief standards)
- Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380 (Supreme Court 1993) (defined excusable neglect and equitable considerations; Pioneer cited for factors)
- Jinks v. AlliedSignal, Inc., 250 F.3d 381 (6th Cir.2001) (application of Pioneer to Rule 60(b)(1) and default scenarios)
- Park Corp. v. Lexington Ins. Co., 812 F.2d 898 (4th Cir.1987) (internal controls and excusable neglect considerations)
- Owens-Illinois, Inc. v. T & N Ltd., 191 F.R.D. 522 (E.D. Tex.2000) (minimal internal procedural safeguards; case of isolated error)
- Dassault Systemes, SA v. Childress, 663 F.3d 832 (6th Cir.2011) (distinction between entry of default and default judgment in Rule 60(b) analysis)
- Rogers v. Hartford Life and Acc. Ins. Co., 167 F.3d 933 (5th Cir.1999) (excusable neglect considerations in default scenarios)