Keystone Industrial Services, Inc. v. Real Alloy Recycling, LLC
3:24-cv-00631
| N.D. Ind. | May 9, 2025Background
- The case concerns a contract dispute over payments for a roof repair construction project, leading to multiple counterclaims and crossclaims involving subcontractors.
- Real Alloy Recycling asserted counterclaims against Keystone Industrial Services and added Mannely Jones and her businesses (the “Mechanical Defendants”) as third-party defendants.
- The Mechanical Defendants were served at Jones's registered address; Jones spends very little time at that address, and did not become aware of the complaint until after the deadline to answer had passed.
- Real Alloy Recycling quickly sought and obtained a Clerk’s Entry of Default after the answer deadline passed, but did not seek a default judgment.
- Shortly after becoming aware of the case, Jones retained counsel, who moved to set aside the default and filed proposed answers; Keystone did not object to a late answer.
- The matter was referred to the magistrate judge, who reviewed whether the default should be set aside under Fed. R. Civ. P. 55(c).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether default should be set aside for good cause | Default should stand, defense is not meritorious | Delay was inadvertent; acted quickly upon learning | Motion to set aside default granted |
| Whether there was quick action to correct default | Not specifically contested in response | Acted promptly after learning of complaint | Mechanical Defendants acted quickly |
| Whether a meritorious defense exists | Defendants have no meritorious defense | Assert factual bases for defenses beyond denials | Sufficient facts for meritorious defense |
| Application of FRCP 55(c) standard | None specifically articulated | Standard met: good cause, quick action, meritorious | Rule 55(c) standard satisfied |
Key Cases Cited
- Cracco v. Vitran Express, Inc., 559 F.3d 625 (7th Cir. 2009) (establishes three-part test to set aside default: good cause, quick action, meritorious defense)
- Swaim v. Moltan Co., 73 F.3d 711 (7th Cir. 1996) (court’s discretion in setting aside defaults given great deference)
- Sims v. EGA Prods., 475 F.3d 865 (7th Cir. 2007) (purpose of Rule 55(c) is to promote decisions on the merits rather than defaults)