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Broyhill v. Navient Corp.

United States District Court, W.D. North Carolina, Statesville Division

March 16, 2018

ELIZABETH BROYHILL, Plaintiff,
v.
NAVIENT CORPORATION and NAVIENT SOLUTIONS, LLC, Defendants.

          ORDER

          GRAHAM C. MULLEN UNITED STATES DISTRICT JUDGE.

         THIS MATTER is before the Court on Defendants' Motions to Vacate Entry of Default (Doc. No. 6) and to Compel Arbitration (Doc. No. 3). For the following reasons, both Motions are granted.

         I. BACKGROUND

         This matter arises out of a dispute over a loan repayment plan and late fees charged to the Plaintiff pursuant to an Application and Promissory Note for student loans made between Plaintiff and Defendant Navient Solutions, LLC.[1]

         Plaintiff initially filed this pro se suit against Defendants in the Superior Court of Wilks County, North Carolina, on December 28, 2017. Plaintiff served Defendants' agent for service of process on January 2, 2018. On February 1, 2018, Defendants jointly filed a Notice of Removal in this Court, claiming that this Court has subject matter jurisdiction under both federal question and diversity jurisdiction. After Defendant filed the Notice of Removal in federal court, but before Plaintiff and the Clerk of Court for Wilks County received a copy of the Notice, Plaintiff filed for entry of default in Wilks County. The Clerk of Court for Wilks County entered default against Defendants on February 6, 2018. Plaintiff claims that she received a copy of the Notice on the evening of February 6, 2018. Although it is unclear when exactly the Notice was received by the Superior Court, the Clerk of Court for Wilks County filed a copy of the Notice in the Superior Court docket on February 9, 2018.

         On February 8, 2018, Defendants moved in this Court to dismiss or stay the action and to compel arbitration pursuant to Fed.R.Civ.P. 12(b)(1) and the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq. On February 21, 2018, Defendants moved to vacate the entry of default filed in Wilks County Superior Court.

         II. STANDARD OF REVIEW

         “The court may set aside an entry of default for good cause . . . .” Fed.R.Civ.P. 55(c). The Fourth Circuit has a “strong preference” that default judgments be avoided and cases be decided on the merits. Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc., 616 F.3d 413, 417 (4th Cir. 2010). There are six factors that a district court must consider in deciding whether to set aside an entry of default: (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.” Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 204-05 (4th Cir. 2006).

         III. DISCUSSION

         A) Motion to Vacate Entry of Default

         Defendants first argue that the entry of default in the Superior Court of Wilks County was improper because they had timely removed the case to federal court. The process for removal of civil actions is outlined in 28 U.S.C. § 1446. The first step of removal requires the defendant to file a notice of removal in the district court of the United States for the district and division in which the action is pending. 28 U.S.C. § 1446(a). The notice of removal must be filed within thirty days after the receipt of the initial complaint by the defendant. Id. § 1446(b). The defendant must then “promptly” provide written notice of the removal to all adverse parties and the clerk of the State court, “which shall effect the removal.” Id. § 1446(d).

         As for filing a responsive pleading, under the Rule 12 of the North Carolina Rules of Civil Procedure, a defendant must serve an answer within thirty days after service of the summons and complaint when the State court has jurisdiction. When a defendant fails to answer in State court within thirty days and a plaintiff moves for an entry of default, the clerk must enter default pursuant to Rule 55 of the North Carolina Rules of Civil Procedure. When a defendant removes a case to federal court, it has either twenty-one days from the initial service of process or seven days from filing the notice of removal in federal court to file an answer. Fed.R.Civ.P. 81(c).

         If there is a gap between the filing of a notice of removal in federal court and its filing in state court, there is concurrent state and federal jurisdiction over the matter. Holmes v. AC&S, Inc., 388 F.Supp.2d 663, 667 (E.D. Va. 2004) (citing Burroughs v. Palumbo, 871 F.Supp. 870, 872 (E.D. Va. 1994)). Once the notice of removal is effectively filed in both courts, the federal court takes the case in the posture in which it departed the state court. Id.

         Here, Defendants filed the Notice of Removal in federal court within the time allotted by the Federal Rules. However, the gap in filing the Notice in federal court and its receipt by Plaintiff and the Superior Court of Wilks County led to a period of concurrent jurisdiction over the matter. Concurrent jurisdiction lasted until the Superior Court filed the Notice in State court on February 9, 2018. Thus, the Clerk of Court of Wilks County properly entered Defendants into default on February 6, 2018, as Defendants had not filed a responsive pleading in State court pursuant to Rule 12 of the North Carolina Rules of Civil Procedure. See Burroughs, 871 F.Supp. At 872 (finding that a state court entry of default judgment during a period of concurrent jurisdiction was ...


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