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Roby v. Elite Security Consultants, LLC

United States District Court, N.D. Ohio, Eastern Division

December 27, 2019




         Before the Court is the motion of defendants Elite Security Consultants LLC (“ESC”) and Timothy Boyle (“Boyle”) (collectively, “defendants”)[1] to set aside the clerk's entry of default and for leave to file their answer. (Doc. No. 25 [“Mot.”].[2]) Plaintiffs filed a brief in opposition (Doc. No. 27 [“Opp'n”]) and defendants filed a reply (Doc. No. 28 [“Reply”]). For the reasons set forth herein, defendants' motion is granted.

         I. Background

         On July 17, 2019, plaintiff Heidi Roby and nine others (“plaintiffs”) commenced this action under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (“FLSA”), seeking to recover, inter alia, back overtime pay. (Doc. No. 1.) On October 22, 2019, the Court issued an order for plaintiffs to show cause by October 30, 2019 why the case should not be dismissed for want of prosecution. (See Doc. No. 13.)

         On October 23, 2019, without first seeking an entry of default by the Clerk as required by Fed.R.Civ.P. 55(a), plaintiffs filed a motion for default judgment under Rule 55(b).[3] (Doc. No. 14.)[4] The next day, plaintiffs belatedly applied to the clerk for entry of default against defendants ESC and Boyle, attesting by affidavit that they had each been served on September 11, 2019. (See Doc. No. 15.) The clerk noted the default of these two defendants on November 4, 2019. (See Doc. No. 19.) The docket contains a notation that the entry of default was mailed to ESC and to Boyle on that same day.

         On November 15, 2019, an attorney appeared for ESC and Boyle. The instant motion to set aside the default was filed on November 19, 2019. Having been fully briefed, it is ripe for determination.

         II. Discussion

         Fed. R. Civ. P. 55(c) provides that “[t]he court may set aside an entry of default for good cause, and it may set aside a default judgment under Rule 60(b).” The rule distinguishes between an entry of default and a judgment of default.

         To set aside an entry of default, there must only be “good cause.” Three equitable factors are considered in determining whether good cause has been shown: “(1) whether culpable conduct of the defendant led to the default, (2) whether the defendant has a meritorious defense, and (3) whether the plaintiff will be prejudiced.” Burrell v. Henderson, 434 F.3d 826, 831-32 (6th Cir. 2006)[5] (quoting Waifersong, Ltd. v. Classic Music Vending, 976 F.2d 290, 292 (6th Cir. 1992) (further citation omitted)). Balancing the three equitable factors is required and, in “consider[ing] the first factor, defendant's culpability, [the court does so] in the general context of determining whether a petitioner is deserving of equitable relief.” Waifersong, 976 F.2d at 292. “When a defendant seeks relief from a default that has been entered by the clerk upon a plaintiff's request, the district court enjoys considerable latitude under the ‘good cause shown' standard.” Id.[6]

         Defendants here seek equitable relief under Rule 55 from the entry of default against each of them, as well as leave under Fed.R.Civ.P. 6 to file untimely responses to plaintiffs' complaint. (Mot. at 107-09.) Although Boyle now acknowledges that service was signed for on September 11, 2019 by a former employee, he attests in a sworn affidavit that the employee, who left the company on September 20, 2019, never provided him with copies of the summonses and complaint or told him about the lawsuit. (Doc. No. 25-2, Affidavit of Timothy Boyle [“Boyle Aff.”], ¶¶ 4- 5.)[7] Boyle claims he only learned of the lawsuit when he received the entry of default by regular mail, at which time he diligently sought the services of an attorney. Plaintiffs do not refute this with any sworn testimony or evidence in opposition;[8] therefore, the Court takes Boyle's attestation as true for purposes of this motion.

         “To 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.” Shepard Claims Serv., Inc. v. Wm. Darrah & Assocs., 796 F.2d 190, 194 (6th Cir. 1986). Plaintiffs do not allege that this standard was met or that Boyle himself was somehow responsible for the signing employee's failure to report service of the lawsuit to him. Therefore, this Court finds no culpable conduct on the part of ESC and/or Boyle.

         The second element to be considered is prejudice to the plaintiffs if the default is set aside. “[D]elay alone is not a sufficient basis for establishing prejudice.” INVST Fin. Grp., Inc. v. Chem-Nuclear Sys., Inc., 815 F.2d 391, 398 (6th Cir. 1987) (citations omitted). “To establish prejudice, the plaintiff must show that the delay will result in the loss of evidence, increased difficulties in discovery, or greater opportunities for fraud and collusion.” Berthelsen v. Kane, 907 F.2d 617, 621 (6th Cir. 1990) (citing INVST Fin. Grp., 815 F.2d at 398). Plaintiffs do not argue that they will be prejudiced in any way, and the Court perceives no prejudice. This case was filed barely five (5) months ago and no defendant has yet filed a responsive pleading.

         Finally, the Court considers the third element-meritorious defense. “In determining whether a defaulted defendant has a meritorious defense, likelihood of success is not the measure. Rather, if any defense relied upon states a defense good at law, then a meritorious defense has been advanced.” United Coin Meter Co. v. Seaboard Coastline RR, 705 F.2d 839, 845 (6th Cir. 1983) (internal citations and quotation marks omitted). Here, the proposed answer lists several affirmative defenses, including certain statutory bars and exemptions, which meet this standard of a “meritorious defense.”

         III. ...

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