352 F. Supp. 3d 529
E.D.N.C.2018Background
- Plaintiffs sued MorGreen Solar Solutions, LLC and its owner Darrin Green ("MorGreen defendants") alleging FLSA and North Carolina wage-and-hour violations for work on a solar project; Vaughn Industries (Vaughn) filed cross-claims against MorGreen for breach of subcontract, indemnification, and contribution.
- MorGreen defendants were served in August 2017 but did not retain counsel or file an answer until April 12, 2018; counsel entered appearance March 14, 2018.
- Plaintiffs moved for entry of default in January 2018; clerk entered default on March 16, 2018. Vaughn separately moved for default as to its cross-claims on March 15, 2018.
- MorGreen moved to set aside the default and submitted an unverified affidavit from Green describing efforts to find counsel and statements that firms told him to do nothing; plaintiffs and Vaughn opposed.
- The court directed MorGreen to file sworn affidavits with detailed chronology of contacts with counsel; MorGreen filed an affidavit from Green but omitted many requested specifics.
- The court found MorGreen failed to show a meritorious defense, acted dilatorily and bore personal responsibility for delay, and that plaintiffs/Vaughn would be prejudiced if default was set aside; court denied motion to set aside, granted Vaughn's motion for entry of default, and struck MorGreen's late answer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to set aside entry of default under Fed. R. Civ. P. 55(c) | Default should remain because MorGreen failed to timely answer and caused delay and prejudice | Default should be set aside for good cause/excusable neglect; MorGreen tried to find counsel and filed an answer soon after | Denied — MorGreen failed to show a meritorious defense, bore personal responsibility for delay, and prejudice/dilatory history weighed against relief |
| Whether Vaughn is entitled to entry of default on its cross-claims | Vaughn sought default because MorGreen failed to timely defend cross-claims | MorGreen opposed for same reasons as above | Granted — same Payne-factor analysis supports default against cross-claims |
| Whether MorGreen’s late answer should be struck under Rule 12(f) | Strike the untimely answer as it was filed seven-plus months after service and after default entered | MorGreen offered no justification making answer timely; sought hearing instead | Granted — court struck the answer as untimely given default and findings |
| Whether less drastic alternatives should be used instead of default | Plaintiffs argued default appropriate given circumstances and prejudice post-settlement | MorGreen argued the court could hold evidentiary hearing and decide on merits | Rejected — availability of alternatives did not overcome other Payne factors favoring default |
Key Cases Cited
- Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198 (4th Cir. 2006) (sets out factors to consider in deciding whether to set aside default)
- Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc., 616 F.3d 413 (4th Cir. 2010) (strong preference for adjudicating claims on the merits but defaults disfavored only where Payne factors permit)
- United States v. Moradi, 673 F.2d 725 (4th Cir. 1982) (definition of "meritorious defense" for vacating defaults)
- Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843 F.2d 808 (4th Cir. 1988) (timeliness and standards for vacating default judgments)
- Home Port Rentals, Inc. v. Ruben, 957 F.2d 126 (4th Cir. 1992) (prejudice from vacating default when defendant ceased operations supports denying relief)
- Lolatchy v. Arthur Murray, Inc., 816 F.2d 951 (4th Cir. 1987) (less drastic alternatives to default may be available, such as sanctions)
- Consolidated Masonry & Fireproofing, Inc. v. Wagman Const. Corp., 383 F.2d 249 (4th Cir. 1967) (district court discretion to permit evidentiary hearings even if default not set aside)