United States District Court, Middle District of Pennsylvania
December 3, 1991
ACCU-WEATHER, INC., PLAINTIFF,
REUTERS LIMITED, AND REUTERS INFORMATION SERVICES, INC., DEFENDANTS.
The opinion of the court was delivered by: McCLURE, District Judge.
Plaintiff Accu-Weather, Inc. ("Accu-Weather") entered a
default against defendants Reuters Limited and Reuters
Information Services, Inc. (hereafter jointly "Reuters") on
September 6, 1991 pursuant to Fed.R.Civ.P. 55(a).*fn1 Four
days after the default was entered, defendants filed a motion
(record document no. 22) to have it set aside. Fed.R.Civ.P.
In deciding whether to set aside an entry of default, the
district court must consider four factors and make explicit
findings as to each. The factors are: (1) whether lifting the
default will prejudice the plaintiff; (2) whether the defendant
has a prima facie meritorious defense; (3) whether the
defaulting defendant's conduct is excusable or culpable; and
(4) the effectiveness of alternative sanctions. Emcasco
Insurance Co. v. Sambrick, 834 F.2d 71, 73-74 (3d Cir. 1987).
The Third Circuit does not favor defaults. If there is any
doubt as to whether the default should be set aside, the court
should err on the side of setting aside the default and
reaching the merits of the case. Zawadski de Bueno v. Bueno
Castro, 822 F.2d 416, 420 (3d Cir. 1987).
Prejudice to the plaintiff
Prejudice exists if circumstances have changed since entry of
the default such that plaintiff's ability to litigate its claim
is now impaired in some material way or if relevant evidence
has become lost or unavailable. International Brotherhood of
Electrical Workers v. Skaggs, 130 F.R.D. 526, 529 (D.Del.
1990), citing Emcasco, supra, 834 F.2d at 73. Detriment in the
sense that plaintiff will be required to establish the merit of
its claims does not constitute prejudice in this context. Nash
v. Signore, 90 F.R.D. 93, 95 (E.D.Pa. 1981).
In this case, Accu-Weather will not be prejudiced if the
default is set aside. There is no contention on plaintiff's
part that evidence has been lost or has become unavailable, or
that something has occurred since entry of the default which
will hinder plaintiff's ability to litigate this case.
Plaintiff's contention that granting the motion will "severely
prejudice Accu-Weather's right to prepare for trial, by
requiring Accu-Weather either to engage immediately in `shot
gun' discovery (by guessing at what issues Defendants might
raise in an actual answer)"*fn3 is without merit. The type of
harm which plaintiff seeks to call "prejudice" is not the sort
of harm which the courts consider prejudicial in this context.
Moreover, plaintiff's contention is without merit. The
discovery deadline has been extended. (See: record document no.
29, filed October 9, 1991). Additionally, although the August
hearing on plaintiff's motion for a preliminary injunction did
not explore fully the merits of the case, it certainly gave
plaintiff some idea as to the defenses defendants intend to
raise, such that it is not completely "in the dark" on this
issue, as it would have
the court believe. Plaintiff also knew from the pleadings,
briefs, etc. in the declaratory judgment action filed by
Reuters in the United States District Court for the Eastern
District of Pennsylvania*fn4 what defendants' position is on
the issues of this case. Further, defendants filed a proposed
answer with their reply brief (record document no. 28, filed
October 3, 1991). Finally, plaintiff's argument on this issue
is directly contrary to its assertion on page four of its brief
that it has
used the default mechanicism [sic] to squarely
frame the positions of the parties and to effect
the judicial economy desirable in cases of this
nature. All the contract documents are before the
Court. No parol evidence is needed. What more can
If defendants cannot possibly have any defense to raise with
which plaintiff is not already familiar, how then can
plaintiff's conduct of discovery be hindered by the absence of
an answer. We find such blatantly inconsistent and unfounded
arguments insulting to the court. Moreover, plaintiff appears
to labor under the misapprehension that the court should allow
the default to stand because it will not put plaintiff to the
"unnecessary bother" of trying this case.
A meritorious defense is one which, if proven at trial, will
bar plaintiff's recovery. Emcasco, supra, 834 F.2d at 74. The
defendant is not required to prove beyond the shadow of a doubt
that it will win at trial, but merely to show that it has a
defense to the action which at least has merit on its face.
Emcasco, supra, 834 F.2d at 74.
Accu-Weather seeks to enforce a contract to supply Reuters
with weather information for its global news service and data
base. Accu-Weather contends that a contract signed on July 5,
1983 has been extended by various addenda and is in effect
until "at least" July 1, 1998. Reuters takes the position that
there are no currently enforceable extensions of the 1983
agreement in effect and that it legally terminated its
contractual relationship with Accu-Weather effective July 1,
1991. Accu-Weather seeks a court order compelling Reuters to
continue purchasing weather information and services from it
through the 1998 contract termination date, as well as monetary
damages allegedly caused by Reuters' refusal to utilize its
services on or after approximately July 1, 1991.
In addition to denying plaintiff's claims that there is a
contract currently in effect, defendants raise three
affirmative defenses: (1) failure to state a claim upon which
relief can be granted; (2) laches; and (3) the existence of an
adequate remedy at law. (These defenses are pled in defendants'
proposed answer, which is attached to record document no. 28,
filed October 3, 1991, as exhibit "A").
This court has more than passing familiarity with the merits
of this case and with Reuters' defenses, having conducted an
evidentiary hearing in August of this year on plaintiff's
motion for a preliminary injunction. At that time the court
heard limited testimony on the merits of plaintiff's claim and
Reuters' asserted defenses in the context of deciding whether
plaintiff had shown a likelihood of success on the merits.
Based on the evidence taken at that hearing as well as the
briefs filed in support of defendants' motion to set aside the
judgment, we find that Reuters has demonstrated meritorious
defenses to plaintiff's claim. If defendants prevail on their
contention that the addenda which purportedly extend the
contract termination date have no legal effect, such that there
is no contract currently in effect, and that defendants had a
legal right to cancel the contract effective July 1, 1991,
plaintiff has no claim. Additionally, plaintiff has no right to
injunctive relief if, as defendants contend, it has an adequate
remedy at law in the form of monetary damages.
Culpable conduct of defendant
A defendant's motion to set aside a default should not be
granted if the defendant exhibited some degree of culpable
conduct in failing to respond to pleadings. In this context,
conduct is considered culpable, "if it is `willful' or `in bad
faith' . . . [Citation omitted.] . . . or if it is part of a
deliberate trial strategy." Skaggs, supra, 130 F.R.D. at 529.
Plaintiff argues strenuously that defendants' failure to file
an answer was a calculated strategy intended to delay
proceedings in this matter. Plaintiff accuses defense counsel
of engaging in repeated "foot-dragging" throughout these
proceedings. We find no basis for these accusations and
disagree strongly with plaintiff's characterization of various
acts by defendants. Plaintiff's characterization is a
distortion of defendants' conduct and we refuse to attribute to
defendants the motives plaintiff ascribes to them. We find
nothing dilatory or improper about the way in which defendants
have proceeded before this court and take exception to
plaintiff's mischaracterization of such conduct as dilatory or
There is, we find, no evidence of willful misconduct or
purposeful delay on the part of defendants. To the contrary, we
find, as stated in the affidavit of defendants' counsel, that
the failure to file an answer in timely fashion was merely an
oversight on the part of counsel, attributable in large part to
the flurry of activity in this case surrounding the August 8
and 9, 1991 hearing on plaintiff's motion for a preliminary
injunction. Plaintiff's amended complaint was filed shortly
before commencement of the hearing*fn5 and we can certainly
understand how counsel overlooked the fact that no answer had
been filed. See, e.g., Emcasco, supra, 834 F.2d at 75 and de
Bueno, supra, 822 F.2d at 420-21.
Since all four factors weigh in defendants' favor, we are led
to the "inescapable conclusion" that the default should be set
aside and that defendants should be granted leave to file an
answer to the amended complaint. See: Emcasco, supra, 834 F.2d