To vacate a default judgment a court must find good cause to vacate the judgment

Minneapolis, Minnesota lawyers know that federal courts to determine if a default judgment should be vacated will examine whether good cause exists,
the … court should weigh whether the conduct of the defaulting
party was blameworthy or culpable, whether the defaulting party has
a meritorious defense, and whether the other party would be
prejudiced if the default were excused.

 

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 11-2526(DSD/AJB)
James Bigham, John Quarnstrom,
Robert Vranicar, Steve Ritchie,
Marty Strub, and Richard Leitschuh
as Trustees of the Sheet Metal
Local #10 Control Board Trust Fund,
and the Sheet Metal Local #10
Control Board Trust Fund,
Plaintiffs,
v.
Vogt Heating, Air Conditioning &
Plumbing, LLC,
Defendant.
Amy L. Court, Esq., Carl S. Wosmek, Esq., Christy E.
Lawrie, Esq. and McGrann, Shea, Carnival, Straughn &
Lamb, 800 Nicollet Mall, Suite 2600, Minneapolis, MN
55402, counsel for plaintiffs.
Alec J. Beck, Esq. and Ford & Harrison, 225 South Sixth
Street, Suite 3150, Minneapolis, MN 55402, counsel for
defendant .
This matter is before the court upon the motion for entry of
judgment by plaintiff Sheet Metal Local #10 Control Board Trust
Fund (Trustees) and the motion to set aside entry of default by 1
defendant Vogt Heating, Air Conditioning & Plumbing LLC (Vogt
Trustee plaintiffs include James Bigham, John Quarnstrom, 1
Robert Vranicar, Steve Ritche, Mary Strub and Richard Leitschuh.
CASE 0:11-cv-02526-DSD-AJB Document 31 Filed 04/23/12 Page 1 of 7
Heating). Based on a review of the file, record and proceedings
herein, and for the following reasons, the court grants the motion
by Vogt Heating.
BACKGROUND
In this benefits dispute, the Trustees allege that Vogt
Heating failed to submit employee reports and contributions to the
fringe-benefit fund. The collective-bargaining agreement, entered
into by the parties on December 2, 1992, requires Vogt Heating to
submit a report of hours worked by union employees and a
corresponding payment to the Trustees by the tenth day of each
month. See Compl. ¶ 13; Rice Aff. ¶ 2. Contributions not received
within five days, or the first working day thereafter, are
considered delinquent. Id. ¶¶ 13-14.
On September 1, 2011, the Trustees filed a complaint alleging
that Vogt Heating failed to submit its July 2011 report and
payment. Id. ¶ 18. Vogt Heating did not respond to the complaint
and the Trustees filed a motion for entry of default. See Court
Aff. ¶¶ 2-4, ECF No. 4. The clerk of court granted the motion,
see ECF No. 6, and the court scheduled a hearing for entry of
judgment. Prior to the hearing, Vogt Heating filed a motion to set
aside the default judgment, arguing that it overpaid $258,468.71
for an employee, John Super, who was not covered by the collectivebargaining
agreement. At oral argument, the court requested that
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the parties confer regarding whether Super should have been covered
by the collective-bargaining agreement. The parties did not reach
agreement, and the court now addresses the motions.
DISCUSSION
“The entry of default judgment should be a ‘rare judicial
act.’” Comiskey v. JFTJ Corp., 989 F.2d 1007, 1009 (8th Cir. 1993)
(quoting Edgar v. Slaughter, 548 F.2d 770, 773 (8th Cir. 1977)).
“There is a judicial preference for adjudication on the merits, and
it is likely that a party who promptly attacks an entry of default,
rather than waiting for grant of a default judgment, was guilty of
an oversight and wishes to defend the case on the merits.” Johnson
v. Dayton Elec. Mfg. Co., 140 F.3d 781, 784 (8th Cir. 1998)
(citations omitted); see United States v. Harre, 983 F.2d 128, 130
(8th Cir. 1993).
A “court may set aside an entry of default for good cause.”
Fed. R. Civ. P. 55(c). “When examining whether good cause exists,
the … court should weigh whether the conduct of the defaulting
party was blameworthy or culpable, whether the defaulting party has
a meritorious defense, and whether the other party would be
prejudiced if the default were excused.” Stephenson v. El-Batrawi,
524 F.3d 907, 912 (8th Cir. 2008) (citation and internal quotations
marks omitted).
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I. Blameworthy or Culpable
The court “focus[es] heavily on the blameworthiness of the
defaulting party,” and “distinguish[es] between contumacious or
intentional delay or disregard for deadlines and procedural rules,
and a ‘marginal failure’ to meet pleading or other deadlines.”
Johnson, 140 F.3d at 784. “‘[E]xcusable neglect’ includes ‘late
filings caused by inadvertence, mistake or carelessness.’” Id.
(quoting Pioneer Inv. Servs. v. Brunswick Assocs., 507 U.S. 380,
388 (1993)).
Vogt Heating alleges that its failure to respond to the
complaint was the result of oversight. Roughly three days after
receiving the complaint in this matter, Vogt Heating received a
notice of dismissal relating to a different dispute with the
Trustees. Winder Aff. ¶ 5. Robert Winder, the President of Vogt
Heating, mistakenly believed this was for the instant motion, but
the notice actually pertained to Vogt Heating’s alleged nonpayment
of its May 2011 contributions. Id.; Court Aff. ¶¶ 4-6. Such
confusion is reasonable and there is no evidence of intentional
delay or disregard for court deadlines. See United States ex rel.
Shaver v. Lucas W. Corp., 237 F.3d 932, 933 (8th Cir. 2001)
(setting aside default judgment when human-resources supervisor
mistakenly believed complaint related to contemporaneously filed
suit between same parties). Therefore, this factor weighs in favor
of setting aside the entry of default.
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II. Meritorious Defense
The defendant need not show that he will succeed on the
merits, but rather only that “the proffered evidence would permit
a finding for the defaulting party.” Johnson, 140 F.3d at 785
(citation and internal quotation marks omitted). “The underlying
concern is … whether there is some possibility that the outcome
… after a full trial will be contrary to the result achieved by
the default.” Stephenson, 524 F.3d at 914 (citations and internal
quotation marks omitted).
Vogt Heating alleges that it made overpayments for Super, and
that it is entitled to recover overpayments to the fund, or to
offset those overpayments against future obligations. In response,
the Trustees argue that an equitable restitution claim requires
more than a showing of overpayment, and that Vogt Heating must 2
demonstrate that equity demands repayment. See UIU Severance Pay
Trust Fund v. Local Union No. 18-U, 998 F.2d 509, 513 (7th Cir.
1993) (noting that court should consider laches, ratification and
unjust enrichment prior to issuing repayment). At this stage,
however, the court need only determine whether the factual support
The Trustees cite Stephenson for the proposition that Vogt 2
Heating has not shown a meritorious defense. In Stephenson, the
defendant made bald assertions denying wrongdoing, but “did not
provide any factual support for those statements.” Stephenson v.
Deutsche Bank AG, Nos. 02-4845, 02-3682, 02-3711, 03-5198, 04-
1469, 2007 WL 763087, at *8 (D. Minn. Mar. 9, 2007), aff’d sub nom.
Stephenson v. El-Batrawi, 524 F.3d 907 (8th Cir. 2008). The
present case is distinguishable, because Vogt Heating submitted
audited overpayment statements. See Winder Aff. Ex. A.
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for a meritorious defense exists. In other words, “[t]he court is
not required to determine the likelihood of success on the merits;
it is only required to determine whether if true, defendant’s claim
presents a meritorious defense.” Metcalf v. E.I. Du Pont De
Nemours & Co., No 05-1035, 2006 WL 1877069, at *5 (D. Minn. July 6,
2006). Therefore, the court finds that this factor weighs in favor
of setting aside the entry of default.
III. Prejudice
“[P]rejudice may not be found from delay alone or from the
fact that the defaulting party will be permitted to defend on the
merits.” Johnson, 140 F.3d at 785 (citation omitted). The court
considers factors such as “loss of evidence, increased difficulties
in discovery, or greater opportunities for fraud and collusion.”
Id. (citation omitted). As the Trustees concede, no such evidence
is present. See Pls.’ Mem. Opp’n 13. Therefore, this factor also
weighs in favor of setting aside the entry of default.
Accordingly, based upon a balancing of the three Johnson factors,
setting aside the entry of default is warranted.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED
that:
1. Plaintiffs’ motion for entry of judgment [ECF No. 8] is
denied;
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2. Defendant’s motion to set aside entry of default [ECF No.
16] is granted.
Dated: April 23, 2012
s/David S. Doty
David S. Doty, Judge
United States District Court
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