United States District Court, W.D. North Carolina, Charlotte Division
D. Whitney, Chief United States District Judge
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.
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).
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).
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. With regards to both sets of claims, the
Court finds that Defendant Crook has presented a meritorious
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
[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”).
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.
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.
Personal responsibility ...