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KAUFFMAN v. CAL SPAS

March 2, 1999

DANIEL M. KAUFFMAN
v.
CAL SPAS.



The opinion of the court was delivered by: Joyner, District Judge.

MEMORANDUM AND ORDER

This is an employment discrimination action brought by the plaintiff, Daniel M. Kauffman ("Kauffman") alleging the defendant, California Acrylic Industries, Inc. d/b/a Cal Spas ("Cal Spas") discriminated against him on the basis of his affliction with Crohn's disease in violation of the Americans With Disabilities Act ("ADA"), 42 U.S.C. § 12101 et seq. Before the court is Cal Spas' motion to set aside the default judgment. For the following reasons, Cal Spas' motion will be denied.

I. BACKGROUND

The defendant, Cal Spas is a California corporation with a principal place of business in Pomona, California and retail facilities in Chadds Ford, Pennsylvania and Ontario, California. Cal Spas employed Kauffman at its Chadds Ford facility from 1993 to 1995. On December 30, 1995 Kauffman was fired. He alleges Cal Spas fired him because of his Crohn's disease affliction.

On June 5, 1997 Kauffman filed the complaint in federal court. He sent the summons and the complaint to Cal Spas' Chadds Ford facility on September 15, 1997. All case-related material was forwarded to Cal Spas' office responsible for overseeing litigation. An employee at this office, however, filed away the material without notifying her superiors.

Consequently, Cal Spas did not enter an appearance or answer the complaint. Cal Spas also failed to respond to Kauffman's subsequent motion for default judgment. On December 11, 1997 the court granted the motion and scheduled a hearing to determine damages. Cal Spas did not respond to the default judgment order.

On January 6, 1998 the damages hearing was conducted after Kauffman's counsel twice telephoned Cal Spas' Chadds Ford office. On this same day the superiors at Cal Spas' "litigation" office first became aware of the Kauffman litigation. Their response was to notify Cal Spas' insurance carrier and request coverage.

On January 14, 1998 the insurance carrier sent Cal Spas a letter denying coverage. The superiors at the "litigation" office were unaware of this letter because it was misfiled. On January 23, 1998 an order calculating the damages was issued. It is assumed that this order also was misfiled.

On August 29, 1998 Cal Spas fired the employee who misfiled the case-related material on grounds unrelated to the Kauffman litigation. But Cal Spas failed to discover the misfiled material. Cal Spas, therefore, did not know that this employee misfiled the Kauffman litigation material and still was unaware that its insurance carrier was not providing a defense. Cal Spas became aware when Kauffman requested a levy on properties at Cal Spas' Chadds Ford facility on October 9, 1998.

Cal Spas' Chief Administrative Officer, Lee Wendt ("Wendt") contacted Kauffman's counsel on October 23, 1998 and told him to hold off on a sheriff sale because within a week a check would be sent to satisfy the judgment. The check was not sent and Kauffman's counsel telphoned Wendt. Wendt told Kauffman's counsel to be patient and wait for the completion of a trade show in which Cal Spas was taking part. After Cal Spas' president refused to approve of the check, Cal Spas retained Philadelphia counsel. On November 12, 1998 Cal Spas filed the present motion.

I. DISCUSSION

Federal Rule of Civil Procedure 55(c) provides that "[f]or good cause shown the court may set aside an entry of default, and if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b)." In either situation, see Feliciano v. Reliant Tooling Co. Ltd., 691 F.2d 653, 657 (3d Cir. 1982) (noting that court should apply same factors in both setting aside default entry and opening default judgment), the court must consider the following factors: 1) whether lifting the default would prejudice the plaintiff; 2) whether the defendant has a meritorious defense; 3) whether the defendant's conduct is excusable or culpable; and 4) the possibility of effective alternative sanctions. See Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 73 (3d Cir. 1987). Default judgments, however, are greatly disfavored by the courts "and in a close case, doubts should be resolved in favor of setting aside the default and reaching the merits." Zawadski De Bueno v. Bueno Castro, 822 F.2d 416, 420 (3d Cir. 1987).

Cal Spas argues that all four factors weigh in favor of opening the default judgment. Kauffman argues that Cal Spas' inexcusable and culpable conduct outweighs all other factors. The U.S. Court of Appeals for the Third Circuit provides little guidance as to how to balance the four factors. See Grow Tunneling Corp. v. Conduit & Foundation Co., Inc., Civ.A. No. 96-3127, 1996 WL 411658, at *3 (E.D.Pa. July 16, 1996). The court in Scottsdale Ins. Co. v. Littlepage, CIV.A. No. 92-2734, 1993 WL 275162 at *5-6 (E.D.Pa. July 16, 1993), ...


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