Virginia Lawyers Weekly VA Lawyers Weekly
Where defendants showed they had meritorious defenses to the breach of contract suit, that they acted with reasonable promptness and there was no prejudice to the plaintiff or history of dilatory action by the defendants, the default judgment was vacated.
Background
Dongguan Jianqun Shoes Company Ltd. sued Consolidated Shoe Company Inc., Consolidated Shoe Company Ltd. and Trade Winds Importing, LLC for allegedly failing to pay for products they ordered from plaintiff. The court previously granted default judgment and denied defendants’ motion for extension of time to file an answer. Defendants now move for reconsideration.
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.”
First, defendants offer the defense that defendants are separate legal entities, thereby contradicting the allegation that each defendant is the alter ego of the others. They further argue that “[i]n their Answer, CSC and TWI specifically aver and deny that any of the defendants are the alter ego of the others.” Due to the low pleading requirement for a meritorious defense, the court finds that this factor weighs in favor of vacating default.
Second, because defendants filed their opposition to plaintiff’s motion for default, and a motion for an extension of time to file an answer only four days after learning of the motion for default and filed their motion to vacate 12 after the court entered default, the reasonable promptness factor weighs in favor of setting aside the default.
Third, there is no indication that CSC or TWI bear personal responsibility for failing to file a responsive pleading within 14 days of the court’s order dismissing the motion to dismiss. Plaintiff argues that “Defense counsel’s mistake does not excuse their party from their mistake at the expense of Plaintiff, who has followed the Rules of Procedure.” But in light of the Fourth Circuit’s “strong preference that, as a general matter, defaults be avoided,” this factor, without any sign of defendants failing to take personal responsibility, weighs in favor of vacating default.
Fourth, the plaintiff is 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.
Fifth, there is no evidence of a history of dilatory action, and this factor thus weighs in favor of vacating default. Finally, since the other factors weigh in favor of vacating default, the court finds that imposing attorney’s fees and costs plaintiff incurred in seeking to obtain and retain its default is an appropriate and warranted sanction, less drastic than default itself.
Defendants’ motion to vacate entry of default granted. Plaintiff’s motion for default judgment denied.
Dongguan Jianqun Shoes Company Ltd., v. Consolidated Shoe Company Inc., Case No. 6:21-cv-00048, Feb. 10, 2023. WDVA at Lynchburg (Moon). VLW 023-3-056. 9 pp.
