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Operating Engineers Local 324 Health Care Plan v. Davis Specialty Contracting

April 9, 2010

OPERATING ENGINEERS LOCAL 324 HEALTH CARE PLAN, ET AL., PLAINTIFFS,
v.
DAVIS SPECIALTY CONTRACTING, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Honorable Denise Page Hood

MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' MOTION TO SET ASIDE DEFAULT

I. INTRODUCTION

Before the Court is Defendants, Davis Specialty Contracting, Inc. and Ronald P. Davis,' Motion to Set Aside Default Judgment, filed on October 19, 2009. On October 22, 2009, Plaintiffs filed a Response to Defendants' Motion to Set Aside Default Judgment.

II. STATEMENT OF FACTS

Plaintiffs initiated the present action on August 28, 2009, alleging the following claims against Defendants: (1) Breach of the Collective Bargaining Agreement; Count I, (2) Breach of Fiduciary Duty under ERISA; Count II, (3) Breach of Fiduciary Duty under the Michigan Building Contract Fund Act ("MBCFA"); Count III. The Complaint was served on Defendants on August 31, 2009.

On September 22, 2009, Defendant Ronald Davis delivered a letter response to Plaintiffs' counsel. Neither Defendant filed an Answer to Plaintiffs' Complaint with the Court. Upon motions by the Plaintiffs, the clerk of the Court entered a default against Defendants on September 28, 2009. On September 29, 2009, the clerk of the Court entered a judgment by default in the amount of $30,770.62 against Defendants Davis Special Contracting, Inc. and Ronald P. Davis. Also on September 29, 2009, Plaintiffs filed a Motion for Judgment Debtor Exam. This Court granted the Plaintiffs' Motion for Judgment Debtor Exam on October 15, 2009. On the same date, Defendants' attorney filed a notice of appearance with this Court.

In support of their Motion to Set Aside Default Judgment, Defendants argue that this Court should set aside the default judgment in this matter because (1) they misunderstood how they were to respond to the Complaint, (2) Defendants have a number of substantive legal defenses to Plaintiffs' claims for breach of fiduciary duty under both Counts II and III, (3) Plaintiffs will not be prejudiced if this Court sets aside the default judgment.

III. APPLICABLE LAW & ANALYSIS

Federal Rule of Civil Procedure 55(c) states that "[t]he court may set aside an entry of default for good cause, and it may set aside a default judgment under Rule 60(b)." Fed. R. Civ. P. 55(c). Rule 55(c) applies if a clerk's entry of default has been entered, and not when the Court has entered default judgment. The clerk entered judgment by default on September 29, 2009, therefore Rule 60(b) applies to the instant matter. Federal Rule of Civil Procedure 60(b) states in pertinent part:

On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; . . . or . . . (6) any other reason justifying relief from operation of the judgment.

Fed. R. Civ. P. 60(b)(1) and (6).

The three factors that must be considered in order to set aside a clerk's entry of default under 55(c) also apply to a Rule 60(b) motion. United Coin Meter Company, Inc. v. Seaboard Coastline Railroad, 705 F. 2d 839, 845 (6th Cir. 1983). The three factors this Court must consider include:

1) whether the plaintiff will be prejudiced; 2) whether the defendant has a meritorious defense; and 3) whether culpable conduct of the defendant led to the default. Shepard Claims Service v. William Darrah & Assoc., 796 F.2d 190, 193 (6th Cir. 1986). "Although the elements for relief under Rule 55(c) and Rule 60(b) are substantially the same, the standards are applied more stringently when considering a motion to vacate judgment under Rule 60(b)." Shepard Claims Service v. William Darrah & Assoc., 796 F.2d 190, 194 (6th Cir. 1986).

In considering Defendant's Motion to Set Aside Default Judgment, the Court is mindful that "[t]rials on the merits are favored in the federal courts . . . ." United Coin Meter, 705 F. 2d at 846. This Court must "apply Rule 60(b) equitably and liberally to achieve substantial justice." Id. at 844-45. Judgment by default "is a drastic step which should be resorted to only in the most extreme cases." Id. at 845. When default is the result of an honest mistake "'rather than willful misconduct, carelessness or ...


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