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Fresenius Medical Care Holdings, Inc. v. Town of Lillington

United States District Court, E.D. North Carolina, Western Division

May 10, 2019

FRESENIUS MEDICAL CARE HOLDINGS, INC. doing business as FRESENIUS MEDICAL CARE NORTH AMERICA, Plaintiff,
v.
TOWN OF LILLINGTON, et al., Defendants.

          ORDER

          W. Earl Britt Senior U.S. District Judge

         This matter is before the court on the motion for default judgment filed by plaintiff Fresenius Medical Care Holdings, Inc. (“Fresenius”), (DE # 54), as well as the motion to set aside entry of default filed by the remaining defendant, No. 1 Chinese Restaurant (“No. 1 Chinese”), (DE # 57). No. 1 Chinese filed a response in opposition to Fresenius' motion for default judgment, (DE # 60), and Fresenius filed a reply, (DE # 61). Fresenius also filed a response in opposition to No. 1 Chinese's motion to set aside default, (DE # 59). No. 1 Chinese filed a motion for leave to file a reply (out of time) to this response, along with its reply, (DE ## 62, 63). These motions are ripe for disposition.

         I. BACKGROUND

         The parties dispute the propriety of Fresenius naming No. 1 Chinese as a defendant in this action. According to Fresenius, “[No. 1 Chinese] is an unincorporated North Carolina business with its principal place of business located at 20 Lillington Square in Lillington, North Carolina.” (DE # 1, at 2.) According to No. 1 Chinese, No. 1 Restaurant at Lillington, Inc. (“No. 1 at Lillington”), owned by Mei Feng Xiao, is actually the entity which has operated at 20 Lillington Square since 2009.[1] (DE # 57, at 1-2.)

         On 4 May 2017, Fresenius filed this action alleging damages to its facility resulting from a clogged sewer line, allegedly caused by “[No. 1 Chinese's] continued dumping of grease and kitchen waste in its kitchen drains.” (DE # 1, at 3.) On 11 August 2017, Fresenius served Xin Hua Guo, Xiao's wife, with a copy of the complaint and summons directed to No. 1 Chinese. (DE ## 27, 27-1.)

         Xiao immediately hired Edgar Bain as counsel for No. 1 at Lillington, who wrote Fresenius' attorney on 14 August 2017. (DE # 57, at 4; DE # 57-5.) The letter informs Fresenius' attorney that No. 1 Chinese is “a non-existent entity” and suggests correcting the pleadings accordingly. (DE # 57-5.) On 30 August 2017, Kevin Chignell, insurance defense counsel for No. 1 at Lillington, also informed Fresenius' attorney that No. 1 at Lillington has operated the restaurant at 20 Lillington Square since 2009. (See DE # 57-6.) Chignell likewise suggested that Fresenius amend its complaint to add No. 1 at Lillington as a defendant and offered to accept service on its behalf. (Id. at 4-5.) Additionally, on 31 August 2017, No. 1 at Lillington filed a motion to dismiss the complaint, contending that it “was the entity operating the restaurant at 20 Lillington Square at the time of the events alleged in the complaint, ” (DE # 40, at 4), and therefore that it is the proper party to this action, (id. at 1).

         Nonetheless, on 14 September 2017, Fresenius moved for entry of default as to No. 1 Chinese, sought to strike the affidavit of Xiao-filed in support of No. 1 at Lillington's motion to dismiss-and urged the court not to consider the motion of non-party No. 1 at Lillington. (See DE ## 33, 36, 37.) On 24 September 2018, this court, deeming it inappropriate to consider filings from a non-party, denied No. 1 at Lillington's motion to dismiss. (DE # 52.) The court also granted entry of default against No. 1 Chinese, which had not yet made any appearance in the case. (Id.) Thereafter, on 30 October 2018, Fresenius filed its motion for default judgment and No. 1 Chinese filed its motion to set aside default, its first filing in this litigation. (DE ## 54, 57.)

         II. ANALYSIS

         The court first considers No. 1 Chinese's motion to set aside default. In reviewing this motion, the court did not consider the untimely reply brief filed by No. 1 Chinese, (DE # 62). As such, the motion for leave to file the reply brief, (DE # 63), will be denied as moot.

         No. 1 Chinese contends good cause exists to set aside the entry of default because: (1) No. 1 Chinese was not properly served; (2) Fresenius is knowingly proceeding against the wrong party; and (3) No. 1 Chinese has multiple meritorious defenses. (DE # 57, at 6-7.) To the contrary, Fresenius contends default should not be set aside because No. 1 Chinese: (1) deliberately took a “wait and see” approach; (2) was properly served; and (3) lacks any meritorious defenses. (See DE # 59.)

         Federal Rule of Civil Procedure 55(c) allows an entry of default to be set aside “for good cause.” Fed.R.Civ.P. 55(c). “Rule 55(c) motions must be ‘liberally construed in order to provide relief from the onerous consequences of defaults and default judgments.'” Colleton Preparatory Acad., Inc. v. Hoover Universal, 616 F.3d 413, 421 (4th Cir. 2010) (internal citation omitted) (quoting Lolatchy v. Arthur Murray, Inc., 816 F.2d 951, 954 (4th Cir. 1987)). 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.” Id. at 417 (citations omitted). As such, the district court retains wide discretion, “which must be liberally exercised, ” when providing relief under Rule 55(c). United States v. Moradi, 673 F.2d 725, 727 (4th Cir. 1982).

         When considering a Rule 55(c) motion, the 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 Preparatory, 616 F.3d at 417 (citing Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 204-05 (4th Cir. 2006)). In applying these factors, the court should resolve all doubts in favor of hearing the case on the merits. Vick v. Wong, 263 F.R.D. 325, 329 (E.D. Va. 2009) ...


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