Peter Carolino Company ("Carolino"), and that Carolino had later reassigned the copyright to Plaintiff Rosen for purposes of this action. Service was alleged to have taken place on April 12, 1996 and when Defendant Omega did not plead or otherwise defend the Clerk of Courts entered default on May 14, 1996, pursuant to Fed. R. Civ. P. 55(a).
On August 8, 1996 Defendant Omega filed a Motion to Set Aside Entry of Default, with an affidavit of Defendant Omega's president, affidavits of counsel, and a proposed answer and counterclaim. Although Defendant Omega has advanced arguments that service was improper, these arguments appear to have been made solely for the purpose establishing that Defendant Omega lacked culpable conduct with regard to the entry of default. Accordingly, we believe that the parties concur that service was effective.
Nevertheless, the issue of whether or not Defendant Omega is entitled to have the default set aside remains for our consideration.
We note that Defendant Omega maintains by affidavits that its president, Dionisias Kotsakis ("Kotsakis"), did not know that he had been personally served by Plaintiff's counsel Scott Miller, Esq. ("Miller") at a meeting on April 12, 1996; that Kotsakis had thought he would be meeting only with Plaintiff Rosen on that date, not Plaintiff's counsel; that Miller's meeting with Kotsakis was, a surprise, unethical, and a violation of Pa.R.P.C. 4.2; that attorney Miller had already been notified by letter that Defendant Omega was represented by counsel; that there was even discussion at the meeting about the subject of Defendant Omega's representation; and that all subsequent pleadings were sent by mail to the wrong address.
Plaintiff Rosen filed a response to Defendant Omega's motion on August 26, 1996 which contained a copy of a deposition and several unsworn exhibits. In this response to the motion, Plaintiff Rosen did not deny that attorney Miller personally served Kotsakis and had received a letter indicating that Defendant Omega was represented by counsel. Plaintiff Rosen did deny Defendant Omega's other allegations and claims attorney Miller only told Kotsakis at the meeting that he was served with process.
In addition, Plaintiff Rosen has provided an unsworn listing for "Omega Builders Ltd" from the 1995 Bell Atlantic Yellow Pages with an address that corresponds to the one used by Plaintiff Rosen for all subsequent pleadings.
A. General Legal Standard
A court may set aside the entry of default for "good cause shown." Fed. R. Civ. P. 55(c).
A decision to vacate entry of default is in the discretion of the court. United States v. $ 55,518.05 in U.S. Currency, 728 F.2d 192, 194-95 (3d Cir. 1984) (citing Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)). However, "This court does not favor defaults and...in a close case doubts should be resolved in favor of setting aside the default and reaching a decision on the merits." Gross v. Stereo Component Sys., Inc., 700 F.2d 120, 122 (3d Cir. 1983). In ruling on a motion to set aside an entry of default under Fed. R. Civ. P. 55(c), a district court should consider whether (1) the plaintiff will be prejudiced; (2) the default was the result of the defendant's culpable conduct; and (3) the defendant has a meritorious defense. Gold Kist, Inc. v. Laurinburg Oil Co., Inc., 756 F.2d 14, 19 (3d Cir. 1985). In addition, the court should consider the effectiveness of alternative sanctions. Emcasco Insurance Co. v. Sambrick, 834 F.2d 71 (3d Cir. 1987).
B. Plaintiff's Prejudice
Because Plaintiff Rosen will not be prejudiced by setting aside the entry of default, the first factor weighs in favor of Defendant Omega. "Delay in realizing the satisfaction on a claim rarely serves to establish the degree of prejudice sufficient to prevent the opening of a default. . .entered at an early stage of the proceeding." Feliciano v. Reliant Tooling Co., 691 F.2d 653, 656-57 (3d Cir. 1982). Likewise, there is no indication that Plaintiff Rosen will be prejudiced by "loss of available evidence, increased potential for fraud or collusion, or substantial reliance" upon the entry of default. Id. at 657. In fact, Plaintiff Rosen's only argument that it has suffered prejudice stems from its allegations that Defendant Omega has no meritorious defense. This argument is unpersuasive at this point because the existence of a meritorious defense is a separate inquiry.
C. Defendant's Culpable Conduct
The second factor requires that we determine whether the default was the result of the defendant's culpable conduct. This factor also weighs in favor of Defendant Omega. In evaluating this factor, "culpable conduct means actions taken willfully or in bad faith." Gross v. Stereo Component Systems, Inc., 700 F.2d 120, 124 (3d Cir. 1983). At this time, it appears that a large part of the blame for the entry of default in this case rests with attorney Miller. He personally served Kotsakis at a meeting between the parties at which no counsel should have been or was expected to be present. Pa.R.P.C. 4.2 provides:
In representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.