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Kinsinger v. Good

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

March 4, 2019



          Frank D. Whitney, Chief United States District Judge

         THIS MATTER is before the Court on Defendant Jared Crook's Motion to Set Aside Default. (Doc. No. 83). Plaintiffs have responded to the motion, (Doc. No. 87), Defendant Crook has replied, (Doc. No. 88), and the matter is now ripe for review. For the reasons stated below, the Court GRANTS Defendant Crook's Motion.


         Plaintiffs filed their amended complaint on January 8, 2018, alleging that Defendants had misappropriated employee health insurance contributions, refused to pay a valid claim under the health insurance policy, and failed to pay wages to Plaintiff Eric Kinsinger, a former employee at SmartCore. (See generally Doc. No. 3). Defendant Crook acknowledges service of the lawsuit in February 2018. (Doc. No. 88, p. 3). Nonetheless, Defendant Crook did not file an answer or any other response in this lawsuit. On December 19, 2018, Plaintiffs moved for an entry of default against Defendant Crook, and the Clerk entered default against Defendant Crook on December 27. (Docs. No. 71, 76). Defendant Crook subsequently retained counsel and filed the present Motion to Set Aside Default on January 30, 2019. (Doc. No. 83).

         Legal Standard

         Rule 55(c) of the Federal Rules of Civil Procedure allows the Court to set aside an entry of default for “good cause.” Fed.R.Civ.P. 55(c). To determine whether “good cause” exists to set aside the default, courts consider the following factors: 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) prejudice to the non-defaulting party, 5) a history of dilatory action, and 6) the availability of less drastic sanctions. Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 204-05 (4th Cir. 2006). The Fourth Circuit has “repeatedly expressed a strong preference that, as a general matter, defaults be avoided and that claims and defenses be disposed of on their merits.” Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc., 616 F.3d 413, 417 (4th Cir. 2010).


         Based on a weighing of the factors in Payne, the Court finds that there is good cause to set aside the entry of default. See 439 F.3d at 204-05. A. Meritorious defense Plaintiffs' lawsuit currently involves two sets of claims. The first set of claims revolve around the allegations involving ERISA: that Defendants misappropriated withheld wages for an employee healthcare plan and failed to pay a valid claim. The second set of claims arise out of breach of contract and the North Carolina Wage and Hour Act for SmartCore's failure to pay Eric Kinsinger wages.[1] With regards to both sets of claims, the Court finds that Defendant Crook has presented a meritorious defense.

         An individual may be liable under ERISA if they act as a fiduciary and breach their fiduciary duties to the plan. See 29 U.S.C. § 1109 (2018). ERISA defines a fiduciary as:

[A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

29 U.S.C. § 1002(21)(A). Thus, employees or managers are not individually liable under ERISA simply based on their employment title, rather, their liability is determined by the scope of their authority. See Mertens v. Hewitt Assocs., 508 U.S. 248, 262 (1993) (stating that ERISA does not provide for damages “on the part of persons who had no real power to control what plan did”).

         Similarly, while employees or managers can be individually liable under the North Carolina Wage and Hour Act for a failure to pay wages, their individual liability is contingent upon them acting as an “employer.” See Powell v. P2Enterprises, LLC, 786 S.E.2d 798, 801 ( N.C. Ct. App. 2016). North Carolina law defines “employer” for the purposes of labor regulations as: “any person acting directly or indirectly in the interest of an employer in relation to any employee.” N.C. Gen. Stat. § 95-25.2. The question of whether an individual is an “employer” turns on “the totality of the circumstances to determine whether the individual has sufficient operational control over the workers in question and the allegedly violative actions to be held liable for unpaid wages or other damages.” Powell, 786 S.E.2d at 801.

         Here, Defendant Crook has stated, via affidavit, that his job title at SmartCore was a “Field Supervisor and Procurement Manager” and he had no role “with any aspect of employment benefits and/or payroll.” (Doc. No. 84, p. 6). This purported lack of authority is a meritorious defense as to liability under ERISA and under the NC Wage and Hour Act. In making this present finding, the Court does not make any ultimate factual or legal conclusions as to whether Defendant Crook was indeed acting as a “fiduciary” or “employer.” Rather, the assertion of the meritorious defense strongly favors setting aside the entry of default at this stage for a later resolution of the case on its substantive merits. See Colleton Preparatory, 616 F.3d at 417.

         B. Personal responsibility ...

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