United States District Court, W.D. North Carolina, Charlotte Division
J. Conrad, Jr. United States District Judge
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.
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).
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).
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).
STANDARD OF REVIEW
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).
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.”).
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).
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)).
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 ...