United States District Court, S.D. West Virginia, Huntington Division
GENERAL ASSURANCE OF AMERICA INC., a Virginia Corporation, Plaintiff,
ARCH INSURANCE COMPANY, a Missouri Corporation, Defendant.
MEMORANDUM OPINION AND ORDER
C. CHAMBERS UNITED STATES DISTRICT JUDGE.
December 28, 2017, Plaintiff General Assurance of America,
Inc. (GAA) filed a Complaint against Arch Insurance Company
(Arch). The West Virginia Office of the Secretary of State
served the Complaint upon Arch's designated agent
Corporation Service Company (CSC) on March 26, 2018. However,
Arch failed to appear, plead, or otherwise defend the action
within the allowed time. Therefore, GAA filed a Motion for
Entry of Default. The Court granted the motion and ordered
GAA “to file the appropriate motion and affidavits, or
to arrange for the necessary evidentiary hearing, to
facilitate the entry of default judgment, pursuant to
Fed. R. Civ. P. 55(b), within twenty days[.]”
Order, ECF No. 12. On April 23, 2018, GAA filed its
Motion for Entry of Default Judgment with supporting
documentation. ECF No. 15.
April 27, 2018, Arch filed a Motion to Vacate Entry of
Default and for Leave to File a Late Response. ECF No. 18. In
support of its motion, Arch asserts that on March 29, 2018,
it received 112 pages of documents from CSC that CSC had
identified as a demand letter. Consistent with its internal
procedures, the “demand letter” was sent to
Arch's claims department. Arch states that it did not
realize a Complaint was included in the documents until it
received the Court's Entry of Default.
55(c) of the Federal Rules of Civil Procedure provides, in
part, that “[t]he court may set aside an entry of
default for good cause[.]” Fed.R.Civ.P. 55(c), in part.
In applying that rule, federal courts must “[b]alance
against the manifest preference for trials on the merits[, ]
. . . our interests in finality and repose, and our concern
lest an already-burdened judicial system be compromised by
frivolous and unnecessary proceedings.” United
States v. Moradi, 673 F.2d 725, 727-28 (4th Cir. 1982).
In considering whether a default should be set aside, the
Fourth Circuit has held 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
Payne ex rel. Estate of Calzada v. Brake, 439 F.3d
198, 204-05 (4th Cir. 2006) (citations omitted); see also
Consolidated Masonry & Fireproofing, Inc. v. Wagman
Constr. Corp., 383 F.2d 249, 251 (4th Cir. 1967)
(stating that “[g]enerally a default should be set
aside where the moving party acts with reasonable promptness
and alleges a meritorious defense” (citation omitted)).
Moreover, the Fourth Circuit has long held that “[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)
applying these criteria to the present case, the Court finds
that Arch's failure to respond to the Complaint was an
inadvertent oversight. When CSC accepted service on behalf of
Arch, it obviously did not realize that amongst the numerous
documents it received was a Complaint. As a result, CSC
misidentified all the documents as a demand letter and, as a
result, they were sent to the wrong department of Arch.
Although Arch's failure to respond to the Complaint
ultimately is its sole responsibility and it should be more
diligent in the future, the Court finds its failure was
unintentional and not the type of mistake that weighs in
favor of granting a default judgment. Additionally, once Arch
learned that the Court had entered default, it promptly moved
to vacate entry of default and requested leave to file a late
response. There is no evidence of a history of dilatory
action by Arch, and the Court finds Plaintiff will not be
unfairly prejudiced by the lifting the default. Moreover,
although the parties hotly contest whether Arch has a
meritorious defense to Plaintiff's claims, the very
nature of their briefing leads the Court to find this matter
is best resolved on the merits rather than by virtue of a
default judgment based upon an inadvertent mistake.
for good cause shown, the Court GRANTS
Arch's Motion to Vacate Entry of Default and for Leave to
File a Late Response. ECF No. 18. The Court
DIRECTS Arch to file an Answer or otherwise
file a responsive pleading to GAA's Complaint on
or before June 6, 2018. Having resolved this motion,
the Court further DENIES GAA's Motion
for Entry of Default Judgment (ECF No. 15),
DENIES Arch's Motion to Strike
Plaintiff's Surreply Brief (ECF No. 24), and
DENIES Arch's Motion to Hold in Abeyance
the Motion on behalf of GAA for Entry of Default Judgment.
ECF No. 26.
addition, as Arch is responsible for the entry of default,
the Court finds it must reimburse GAA for its attorneys'
fees and costs associated with the entry of default, seeking
default judgment, and all briefing related to the issues
addressed in this Memorandum Opinion and Order. Therefore,
the Court DIRECTS GAA to file an affidavit
itemizing its attorney's fees and costs on or
before June 8, 2018. GAA also may file a memorandum
in support of the requested award. If Arch objects to
GAA's claim, the Court DIRECTS Arch to
respond on or before June 15, 2018. GAA
shall have until on or before June 20, 2018,
in which to reply.
Court DIRECTS the Clerk to send a copy of
this Order to counsel of record and ...