APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. D.C. Civil Action No. 74-1002.
Hunter, Kalodner and Garth, Circuit Judges.
In this diversity action for damages, allegedly incurred in an automobile accident, a default was entered against the defendant-appellant Louis W. Lederer for failure to answer or otherwise plead to the plaintiffs-appellees' complaint within 20 days after its service. The district court subsequently orally denied the defendant's motion to set aside the default and forthwith proceeded to a non-jury trial on the issue of damages only.*fn1 Thereafter, the district court filed a "Memorandum" in which it grounded its denial of the motion to set aside the entry of default on "'gross,' or 'inexcusable'" negligent failure to answer the complaint. 64 F.R.D. 403, 406 (E.D. Pa. 1974). The Memorandum was accompanied by an Order denying defendant's motion.
The district court later filed "Findings of Fact and Conclusions of Law"*fn2 in which it assessed damages in the amount of $4,250 in favor of the plaintiff-appellee Eli L. Medunic and $14,250 in favor of the plaintiff-appellee Dolores M. Medunic.
The defendant contends on this appeal that the district court erred (1) in abusing its permissible discretion in denying his motion to set aside the entry of default, (2) in ordering him to stand trial on the issue of damages "without the benefit of an opportunity for discovery or for obtaining medical examination of the plaintiffs," and (3) in permitting the plaintiffs to testify as to their injuries and medical bills, and loss of earnings, without corroborative medical testimony and proof of their earnings.
We do not reach the defendant's second and third contentions since we are of the opinion that the district court abused its permissible discretion in denying the defendant's motion to set aside the entry of default on its narrow finding that the defendant's insurance company was guilty of "'gross,' or 'inexcusable'" negligence "in permitting a default or default judgment*fn3 to be filed against its insured." 64 F.R.D. at 406.
Discussion of our holding must be prefaced by this summarization of the facts:
On April 18, 1974 the plaintiffs, Pennsylvania residents, filed a complaint against the defendant, a resident of New York. It alleged that the plaintiffs were injured when the defendant's automobile, suddenly and without warning, attempted to make a left hand turn in front of their automobile forcing it to swerve off the road into a telegraph pole in order to avoid a head-on collision.
The plaintiffs' complaint was endorsed with notice to plead within 20 days. It was served on the defendant by registered mail on May 2, 1974, and he mailed it to his insurance agent who in turn forwarded it to the Nationwide Insurance Company, the defendant's insurer.
The defendant failed to plead or respond to the complaint and a default was entered against him on June 4, 1974, at the plaintiffs' instance, pursuant to Fed. R. Civ. P. 55(b)(1).
On June 11, 1974 the district court sent a notice to the defendant that the case would be scheduled for pre-trial conference.
On June 18, 1974, the defendant was notified that the case would be listed for trial as to damages on July 8, 1974.
On July 8, 1974, counsel for the parties met with the trial judge in his chambers. The defendant's counsel at that time requested a continuance of the scheduled trial and at the same time filed a motion to set aside the entry of the default. In doing so, the defendant's counsel stated that he had earlier contacted the plaintiffs' counsel and without avail had requested vacation of the default. The motion to set aside the default stated that the defendant's failure to enter his appearance was due "to inadvertence and excusable neglect of defendant's insurance carrier," and that ...