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Hidden Valley Ranch Holdings, LLC v. Luxury Auctions Marketing, Inc.

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

May 14, 2018

HIDDEN VALLEY RANCH HOLDINGS, LLC, Plaintiffs,
v.
LUXURY AUCTIONS MARKETING, INC. d/b/a GRAND ESTATES AUCTION COMPANY, JEREMY LECLAIR, SOURCE AUCTION, LLC., and AMERICAN HOME TITLE INC., Defendants.

          ORDER

          Robert J. Conrad, Jr. United States District Judge

         THIS MATTER comes before the Court on defendants Source.Auction, LLC (“Source”) and Grandeur Luxury Auctions, Inc.'s (“Grandeur”) Motions to Set Aside Default, (Doc. Nos. 34, 35); their Motions for Leave to File Supplemental Briefs, (Doc. Nos. 36, 38); and their Motion for Leave to File Answer Out of Time, (Doc. No. 44). The Court has also considered Plaintiff's Responses to the defendants' motions, (Doc. No. 43), and Defendant's Reply, (Doc. No. 46). The matters are now ripe and ready for the Court's decision.

         I. BACKGROUND

         This action is brought by Plaintiff alleging “negligence, gross negligence, misrepresentation, breach of contract, fraud, fraud in the inducement, breach of fiduciary duty, breach of the duty of good faith and fair dealing, violations of the North Carolina Unfair & Deceptive Trade Practices Act, N.C. G.S. § 75-1 and for indemnity….” (Doc. No, 50 at 1-2).

         Plaintiff filed its Complaint on June 6, 2017. (Doc. No. 1). On July 21, 2017, defendants Source and Grander filed Motions to Dismiss in Lieu of Answer, (Doc. Nos. 16, 17), which the Magistrate Judge struck without prejudice due to a failure to file corresponding briefs, (Doc. No. 25). Source and Grandeur failed to file a responsive pleading within 14 days of the Court's Order striking their Motions to Dismiss. Accordingly, Plaintiff filed a Motion for Entry of Default on December 7, 2017. (Doc. No. 26). Source and Grandeur then jointly filed a late answer on December 8, 2017, without a corresponding Motion to File Out of Time or Response to Plaintiff's Motion to Enter Default. (Doc. No. 27). Plaintiff thereafter filed its Second Motion for Entry of Default on January 11, 2018. (Doc. No. 28).

         On January 22, 2018, the Clerk of Court entered default against Grandeur and Source. (Doc. No. 29). On January 25, Source and Grandeur, through new counsel, filed Motions to Set Aside Default. (Doc. Nos. 34, 35). Those Motions were filed on the same day that Source's and Grandeur's new counsel filed a Notice of Appearance on behalf of Source; Grandeur; and Defendants Luxury Auctions Marketing, Inc. and Jeremy LeClair. (Doc. Nos. 30-33).

         II. STANDARD OF REVIEW

         Rule 55(a) of the Federal Rules of Civil Procedure states that when a defendant fails to plead or otherwise defend his case “the clerk must enter the [defendant] party's default.” Fed.R.Civ.P. 55(a). Rule 55(c) further explains that “[t]he court may set aside entry of default for good cause.” Fed.R.Civ.P. 55(c).

         A district court has broad discretion in decided whether to set aside a Clerk's entry of default. Consol. Masonry & Fireproofing, Inc. v. Wagman Constr. Corp., 383 F.2d 249, 251 (4th Cir.1967) (holding “[t]he disposition of motions made under Rules 55(c) and 60(b) is a matter which lies largely within the discretion of the trial judge and his action is not lightly to be disturbed by an appellate court.”). Indeed, “[a]ny doubts about whether relief should be granted should be resolved in favor of setting aside the default so that the case may be heard on the merits.” Tolson v. Hodge, 411 F.2d 123, 130 (4th Cir.1969). The Fourth Circuit determined that “relief from a judgment of default should be granted where the defaulting party acts with reasonable diligence in seeking to set aside the default and tenders a meritorious defense.” United States v. Moradi, 673 F.2d 725, 727 (4th Cir.1982); see also Tolson, 411 F.2d at 130 (“Rules 55(c) and 60(b) are to be liberally construed in order to provide relief from the onerous consequences of defaults and default judgments.”).

         III. DISCUSSION

         To support their Motions to Set Aside Default, Source and Grandeur frankly admit that they have no proffered excuse for why their joint Answer was filed late. Source's and Grandeur's current counsel, Paul Vancil, seems to have been unable to obtain an explanation from John Hanzel. The defendants' memorandum merely states, “despite efforts to reach Hanzel, Vancil has been unable to obtain any explanation from Hanzel as to why he failed to seek leave to file out of time or why he has failed to respond to the plaintiffs' Second Motion for Entry of Default.” (Doc. No. 34-1 at 2).

         Plaintiff opposes the defendants' Motions to Set Aside, arguing that the motions failed to address the six-factor test used in Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc., 616 F.3d 413 (4th Cir. 2010). (Doc. No. 43 at 4). In that case, the Fourth Circuit stated that "[a] district court should consider whether the moving party has a meritorious defense, whether it acts with reasonable promptness, the personal responsibility of the defaulting party, the prejudice to the party, whether there is a history of dilatory action, and the availability of sanctions less drastic." Colleton, 616 F.3d at 417 (quoting Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 203 (4th Cir.2006)).

         Source and Grandeur addressed these factors in their Reply to Plaintiff's Response to the Motions to Set Aside Default. (Doc. No. 46). Defendants argue that they fulfill the six-factor test because:

(1) Acting with reasonable promptness: Default was entered by the Clerk on January 22, 2018. Following the Notices of Appearance of new counsel on January 25, 2018, Grandeur and Source moved on the same day to set ...

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