Northsight Management, LLC v. Homestar Property Solutions, LLC, 2:14-cv-01243

Northsight Management, LLC sued HomeStar Property Solutions, LLC; later filed a Supplemental Complaint adding HomeStar Field Services, LLC (Field Services) alleging fraudulent transfer and civil conspiracy.
Supplemental Complaint and summons were served on Field Services on December 28, 2015; Field Services’ answer was due January 19, 2016 but was not filed.
Northsight requested an entry of default on January 25, 2016; the Clerk entered default on January 26, 2016.
Field Services moved to vacate the Clerk’s entry of default under Fed. R. Civ. P. 55(c), arguing the failure to answer resulted from a miscommunication about counsel’s scope of representation and asserting meritorious defenses (good faith, payment of fair value, and absence of malicious/unlawful conduct).
Northsight opposed, arguing limited representation was clear and that vacating the default would cause delay and additional fees.
The court applied the Sixth Circuit three-factor United Coin Meter test (willfulness, prejudice, meritorious defense) and granted Field Services’ motion, vacating the default.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Clerk’s entry of default should be set aside under Rule 55(c)	Default should remain because Field Services knew counsel’s limited scope and failed to act; relief requires exceptional circumstances	Default resulted from reasonable miscommunication about counsel’s scope; Field Services acted promptly once it learned of default and has defenses	Vacated: good cause under Rule 55(c) to set aside default
Whether Field Services’ failure to answer was willful	Failure to answer reflected inaction despite clear notice of limited representation	Non-willful: miscommunication and prompt corrective action once notified	Court found cannot conclude willfulness; factor neutral
Whether vacating default would prejudice plaintiff	Vacating will delay the case and increase attorney fees	Increased litigation costs and typical delay alone do not establish prejudice; no specific loss of evidence or discovery impairment shown	No sufficient prejudice to Northsight; factor favors vacatur
Whether Field Services has a meritorious defense	Plaintiff asserts transfers were fraudulent and conspiratorial	Field Services claims good faith, fair value paid, and lack of malicious/unlawful conduct	Court finds plausible ("good at law") defenses; factor favors vacatur

Dassault Systemes, SA v. Childress, 663 F.3d 832 (6th Cir. 2011) (articulates trial-on-merits preference and meritorious-defense standard in vacating defaults)
United Coin Meter Co. v. Seaboard Coastline R.R., 705 F.2d 839 (6th Cir. 1983) (establishes three-factor test for setting aside defaults)
United States v. $22,050.00 U.S. Currency, 595 F.3d 318 (6th Cir. 2010) (discusses willfulness and prejudice standards for vacating defaults)
Waifersong, Ltd. v. Classic Music Vending, 976 F.2d 290 (6th Cir. 1992) (explains when culpable conduct can outweigh other factors)
Burrell v. Henderson, 434 F.3d 826 (6th Cir. 2006) (defines "good at law" meritorious-defense threshold)
INVST Fin. Grp., Inc. v. Chem-Nuclear Sys., Inc., 815 F.2d 391 (6th Cir. 1987) (delay alone insufficient to establish prejudice)