United States District Court, W.D. North Carolina, Statesville Division
C. MULLEN UNITED STATES DISTRICT JUDGE.
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.
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.
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.
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.
STANDARD OF REVIEW
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).
Motion to Vacate Entry of Default
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).
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.
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.
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