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Admiral Home Appliances v. Tenavision Inc.

May 23, 1984

ADMIRAL HOME APPLIANCES, A DIVISION OF MAGIC CHEF, INC., A DELAWARE CORPORATION
v.
TENAVISION, INC., A NEW JERSEY CORPORATION, APPELLANT



Appeal from the United States District Court for the District of New Jersey

Before SEITZ, Chief Judge, GARTH, Circuit Judge, and DIAMOND, District Judge.*fn*

Per Curiam

This is an appeal from an order of the district court in a diversity action granting plaintiff a default judgment against defendant.

A complaint alleging breach of contract and a summons were served on defendant on May 14, 1982. On June 9, 1982, a default was entered by the clerk pursuant to Fed. R. Civ. P. 55(a) because of the defendant's failure to appear.

On June 28, 1982, defendant filed a notice of a motion to vacate the default and to allow an answer to be filed. After affidavits were filed, the district court held a hearing and denied the motion in a memorandum and order entered August 5, 1982. Thereafter, plaintiff moved for a default judgment on notice. Defendant did not appear and a monetary judgment was entered. This appeal followed.

Defendant first argues that the district court erred in not setting aside the default and the default judgment on grounds of inadequate notice. This argument is frivolous. Rule 55(a) does not require notice to the defaulting party before the clerk can enter a default. Defendant was given ample notice on the face of plaintiff's summons, which defendant's president concededly received, that a default could be entered if no answer was filed within 20 days.

The only notice requirement concerns the entry of a default judgment rather than a default. Rule 55(b)(2) requires that written notice of an application for a default judgment must be served on the party in default at least 3 days in advance of the hearing date. Here, however, plaintiff met that requirement by mailing to defendant on January 24, 1983, written notice of an application for a default judgment to be heard on February 14, 1983. We conclude that there was no infirmity in the notice given defendant.

Defendant's second assignment of error is that the district judge abused his discretion by not vacating the default on the grounds of defendant's excusable neglect, and because plaintiff and its counsel misrepresented to defendant's president, a lay person, the time available before he needed to enter a defense in this matter.

A fair reading of the district court's August 5, 1982 memorandum denying defendant's motion to vacate the default is that the distinct court found that defendant failed to show excusable neglect, inadvertence or mistake, and that he was not misled by plaintiff's counsel. The defendant's conduct need only be something more than mere negligence to be sufficiently culpable for this court to uphold the district judge's refusal to set aside the default. Hritz v. Woma Corp., No. 82-5607, slip op. at 9 (3d Cir. April 23, 1984). The record showed that defendant's president had notice of the pending action but chose to harass plaintiff and its counsel rather than obtain legal advice, although plaintiff's counsel repeatedly advised him to do so. These conversations took place on May 17 and 28, after the suit was filed and well before the date defendant's answer would have been due. The district court correctly found neither neglect, inadvertence nor mistake, but rather a knowing refusal by defendant to appear in this action and present its defenses in court.

Defendant's president also maintained in an affidavit that he had been misled by plaintiff and its counsel into believing that he would be given time to attempt to resolve the dispute before he would have to file an answer. The district judge found this affidavit inconsistent with a prior affidavit which did not mention any misleading statements by plaintiff. He also found that the affidavit failed to show what, if anything, defendant's president was attempting to do to resolve the dispute, and that it did not controvert the affidavits of plaintiff's counsel that repeated advice was given defendant's president to obtain legal counsel. On the basis of these findings, the district judge did not abuse his discretion by holding that this affidavit failed to show that defendant's default was the result of its president having been misled by plaintiffs.

Our prior cases make it clear that the party in default must show that the default was not caused by his own culpable conduct in order to have it set aside. Defendant has not made such a showing. The findings made by the district judge in his August 5, 1982 opinion are sufficient for this court to know the basis for his refusal to vacate the default. Farnese v. Bagnasco, 687 F.2d 761, 765-66 (3rd Cir. 1982). We conclude that the district judge was well within his discretion in refusing to vacate the default entered by the clerk on June 9, 1982. On appeal defendant has not attacked the default judgment entered on February 15, 1983. It follows that the district court's February 15, 1983 order entering a default judgment in plaintiffs' favor will be affirmed.

GARTH, J., dissenting:

It is the settled doctrine in this circuit that a standard of liberality should apply in determining whether to set aside default judgments. See, e.g., Gross v. Stereo Component Systems, Inc., 700 F.2d 120, 122 (3d Cir. 1983). In my opinion, it is impossible to determine on this record whether the district court correctly applied this standard to the present case, or even considered the three factor analysis mandated by our cases. I would therefore remand the matter for proceedings consistent with our precedents. Accordingly, I respectfully dissent.

Whether or not to reopen a default judgment is a decision generally committed to the discretion of the trial court. Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951). Yet in exercising that discretion, this Court has established several factors which the trial judge must consider: 1) whether the plaintiff will be prejudiced if the default is lifted; 2) whether the defendant has a meritorious defense; and 3) whether the default was the result of ...


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