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Local 141 v. Gayston Corp.

United States District Court, S.D. Ohio, Western Division

August 29, 2017

LABORERS' INTERNATIONAL UNION OF NORTH AMERICA, LOCAL 141, Plaintiff,
v.
GAYSTON CORP., Defendant.

          DECISION AND ENTRY OVERRULING AS MOOT DEFENDANT'S MOTION TO SET ASIDE CLERK'S ENTRY OF DEFAULT (DOC. #10); SUSTAINING DEFENDANT'S AMENDED MOTION TO SET ASIDE CLERK'S ENTRY OF DEFAULT (DOC. #15); VACATING CLERK'S ENTRY OF DEFAULT (DOC. #8)

          WALTER H. RICE UNITED STATES DISTRICT JUDGE.

         Plaintiff Laborer's International Union of North America, Local 141 ("Local 141" or "Plaintiff"), filed suit against Gayston Corporation ("Gayston" or "Defendant"), alleging: (1) breach of labor agreement; (2) conversion of union deductions from employees' paychecks; and (3) breach of fiduciary duty pursuant to Ohio Rev. Code § 4113.15. This matter is currently before the Court on Defendant's Amended Motion to Set Aside Clerk's Entry of Default, Doc. #15. For the reasons set forth below, that motion is SUSTAINED, and the Clerk's Entry of Default, Doc. #8, is VACATED. Defendant's initial Motion to Set Aside Clerk's Entry of Default, Doc. #10, is OVERRULED AS MOOT.

         I. Background and Procedural History

         Gayston is a corporation and employer incorporated under the laws of the State of Ohio. Local 141 is a labor organization affiliated with the Laborers' International Union of North America. The parties are each bound to a collective bargaining agreement. This Court's jurisdiction is based on Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185. On February 21, 2017, Local 141 filed the instant suit, alleging that Gayston failed to withhold union deductions from the employees' wages, and/or withheld union deductions from the employees' wages but failed to remit them to Local 141. Doc. #1.

         Gayston was served the Summons and Complaint via certified mail on February 24, 2017. Doc. #4. On March 6, 2017, Casey Cain, Gayston's Director of Human Resources, filed a pleading purporting to be an Answer. Doc. #5. It is clearly established that a corporation cannot appear in federal court except through a licensed attorney. Rowland v. California Men's Colony, 506 U.S. 194, 201-202 (1993); Doherty v. American Motors Corp., 728 F.2d 334, 340 (6th Cir. 1 984). Accordingly, Ms. Cain's purported Answer was ineffective. On April 6, 2017, the Court issued an Order requiring Gayston to secure counsel to enter an appearance within twenty-one days. Doc. #6. Gayston did not receive a copy of that Order. Doc. #15-1, PageID#294; Doc. #15-2, PageID#301; Doc. #15-3, PageID#308.

         When Gayston failed to comply with the Court's Order, Local 141 filed an Application for Clerk's Entry of Default. Doc. #7. The Clerk filed an Entry of Default on May 1, 2017. Doc. #8.[1] Local 141, however, did not file a Motion for Default Judgment.

         On May 24, 2017, counsel for Gayston entered an appearance and filed an Answer, Doc. #9, and a Motion to Set Aside Clerk's Entry of Default, Doc. #10. Local 141 opposed the motion. Doc. #13. Gayston then sought, and was given, leave to supplement its Motion to Set Aside Clerk's Entry of Default. Doc. #14. On August 1, 2017, Gayston filed an Amended Motion to Set Aside Clerk's Entry of Default. Doc. #15. The Amended Motion includes Declarations of: (1) Casey Cain; (2) Andrew Sheldrick, Gayston's Chief Operations Officer; and (3) Adam Stone, Gayston's Chief Executive Officer. Local 141 has not filed anything further.

         II. Fed.R.Civ.P. 55

         If a defendant fails to "plead or otherwise defend, " as required by the Federal Rules of Civil Procedure, the clerk must enter default. Fed.R.Civ.P. 55(a). Pursuant to Rule 55(c), the defendant may later petition the Court to set aside the entry of default. Because the law favors trials on the merits over procedural missteps, federal courts tend to be "extremely forgiving" in ruling on motions to set aside entries of default. United States v. $22, 050.00 United States Currency, 595 F.3d 318, 322 (6th Cir. 2010). A stricter standard of review is applied when the Court is asked to set aside a default judgment. O.J. Distrib., Inc. v. Hornell Brewing Co., Inc., 340 F.3d 345, 353 (6th Cir. 2003). An entry of default, however, may be set aside for good cause shown. Fed.R.Civ.P. 55(c).

         III. Analysis

         Factors to be considered in determining whether good cause exists include: (1) the defendant's willfulness; (2) whether the defendant has a meritorious defense; and (3) whether the plaintiff will be prejudiced. $22, 050.00 United States Currency, 595 F.3d at 324. The Court turns first to the question of Gayston's culpability.

         A. Defendant's Willfulness

         The first factor a court must consider is whether Gayston's default was willful. In Shepard Claims Service, Inc. v. William Darrah & Associates, 796 F.2d 190 (6th Cir. 1986), the Sixth Circuit held that "[t]o be treated as culpable, the conduct of a defendant must display either an intent to thwart judicial proceedings or a reckless disregard for the effect of its conduct on those proceedings." Id. at 194. Negligence is not enough; the defendant's conduct must be willful. $22, 050.00 United States Currency, 595 F.3d at 327.

         Gayston's failure to move or plead was not willful. Casey Cain filed a timely Answer to the Complaint. Doc. #5. In her Declaration, she stated that she then called the Clerk of Court to ask if Gayston needed to do anything else at that time. Doc. #15-1, PageID #293. At the conclusion of that call, she mistakenly believed that Gayston would need an attorney only if the case proceeded to trial. Id. In addition, throughout this time, Ms. Cain was attempting to work with counsel for Local ...


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