Default in fair housing suit vacated

Where landlords sued for allegedly violating federal and Virginia fair housing laws showed that they acted promptly after receiving notice of the default, there was no real prejudice to the renters if default was vacated, there was no history of dilatory action by the landlords in this action and there were lesser available sanctions, the default was vacated.

Background

Plaintiffs are a married couple with a child. They bring this action against their landlords under the federal Fair Housing Act, or FHA, and the Virginia Fair Housing Law, or VFHL. Plaintiffs have moved for entry of default judgment. Defendants have filed a motion to vacate entry of default and opposition to the motion for entry of default judgment.

Analysis

Rule 55(c) provides, in relevant part, that “[t]he court may set aside an entry of default for good cause.” In so ruling, a district court should consider “[1] whether the moving party has a meritorious defense, [2] whether it acts with reasonable promptness, [3] the personal responsibility of the defaulting party, [4] the prejudice to the party, [5] whether there is a history of dilatory action, and [6] the availability of sanctions less drastic.”

The defendants allege having learned of the court’s entry of default on Sept. 14, 2022. They returned from a three-month trip to Spain and found a copy of the complaint on their door, then immediately contacted a friend who is an attorney and learned of the default. On Sept. 30, 2022, defendants contacted and engaged counsel, who filed a notice of appearance that same day.

And on Oct. 4, 2022, defendants, through counsel, filed their motion to set aside the entry of default pursuant to Rule 55(c). The Fourth Circuit and courts within the circuit have previously held that a defendant acted reasonably promptly when filing a motion to vacate a default after a longer delay than here. As defendants contacted and engaged counsel around two weeks after learning of entry of default, the reasonable promptness factor weighs in favor of the defendants’ motion to set aside the default. And in light of the Fourth Circuit’s “strong preference that, as a general matter, defaults be avoided,” because there is no sign of failing to take personal responsibility, this weighs in favor of their motion to set aside the default.

Regarding prejudice, plaintiffs allege that they already engaged in the administrative process for resolving their claims and voluntarily withdrew their claims after two years in that process. The plaintiffs are already familiar with the facts and likely defenses in the case. The record does not indicate any particular prejudice to the plaintiff if default is set aside, just the existence of delay.

Plaintiffs argue that “Defendants’ delays in discovering this lawsuit and in retaining counsel are part of a longstanding pattern of dilatory conduct related to this action.” They support this argument by describing that defendants improperly withheld plaintiffs’ security deposit in violation of the parties’ lease terms, failed to refund the deposit plus costs and interests for three weeks after the Charlottesville General Court ordered defendants to do so and only made a partial payment when they did make the payment. These tactics may be unfavorable for plaintiffs, but they are not dilatory tactics, i.e., methods by which a party abuses the rules of procedure to delay legal proceedings. Thus, this factor weighs in favor of defendants motion to vacate entry of default judgment.

Finally, there are certainly sanctions less drastic than entering default. In vacating entry of default or default judgment, the court may “impose other sanctions against the offending attorney, such as awarding the non-movant’s costs and attorney’s fees.” For all these reasons, the court need not, at this time, determine whether defendants mount a meritorious defense, as no other factor weighs in plaintiffs’ favor when considering whether to vacate entry of default.

Plaintiffs’ motion for entry of default judgment denied. Defendants’ motion to vacate entry of default granted.

Payton v. Guallart, Case No. 3:22-cv-00042, Nov. 2, 2022. WDVA at Charlottesville (Moon). VLW 022-3-485. 13 pp.