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U.S. EX REL. B.K. ENGINEERS & CONSTRUCTORS v. FEDERAL INS.

June 13, 2005.

UNITED STATES OF AMERICA ex rel. B.K. ENGINEERS & CONSTRUCTORS, INC., Plaintiff
v.
FEDERAL INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: YVETTE KANE, District Judge

MEMORANDUM AND ORDER

THE PROCEDURAL BACKGROUND OF THIS ORDER IS AS FOLLOWS:

The above-captioned action was commenced by complaint filed December 18, 2003. Defendant was served with a summons on July 1, 2004. (Doc. No. 4.) When, after more than five months had passed without Defendant Federal Insurance Company filing an to answer the complaint, entering an appearance, assisting in the preparation of a joint case management plan, or communicating in any way with the Court regarding any negotiations or other discussions with Plaintiff regarding this dispute, Plaintiff moved this Court to enter default against Defendant. On November 22, 2003, the Clerk of Court entered default and the Court entered judgment on behalf of Plaintiff in the amount of $274,537.86. (Doc. Nos. 12, 13.) On December 3, 2004, Plaintiff filed a motion seeking attorneys' fees and costs pursuant to Rules 16(f) and 54(d)(2).

  Several weeks later, Defendant's counsel entered its appearance.*fn1 (Doc. No. 15.) On December 14, 2004, the parties submitted a stipulation to afford Defendant a period of time to contest the entry of default judgment and to otherwise "attempt to negotiate an amicable resolution of this matter." (Doc. No. 16.) By order dated December 15, 2004, the Court approved the terms of the stipulation. (Doc. No. 17.) On January 10, 2005, Defendant filed a motion to set aside the entry of default judgment and seeking leave to file an answer to the complaint. (Doc. No. 18.) Thereafter, Plaintiff moved to strike Defendant's motion to set aside the default. (Doc. No. 23.)

  In summary, the following motions — each of which of which were filed after entry of default in this case — have been fully briefed and are ripe for disposition: (1) Plaintiff's motion for attorneys' fees and costs (Doc. No. 14); (2) Defendant's motion to set aside the entry of default judgment and requesting leave to answer the complaint (Doc. No. 18); and (3) Plaintiff's motion to strike (Doc. No. 23). On March 11, 2005, the Court held a telephone conference with counsel for each party to discuss the pending motions and the current posture of the litigation.

  I. Factual Background

  Plaintiff asserts causes of action against Defendant for breach of contract and quantum meruit arising out of Defendant's alleged failure to pay Plaintiff under the terms of a payment bond provided by Defendant, as surety, and Eichelberger Construction, Inc. ("ECI"), as principal on a construction project for the Defense Distribution Center ("DDC") at the New Cumberland Army Depot. Plaintiff was one of ECI's subcontractor's on the project. In particular, ECI performed as the general prime contractor on the Underground Heat Distribution Project ("Project") for the Army Depot. (Doc. No. 18, Ex. 3, Aff. of Eichelberger, ¶ 2) ("Eichelberger Aff."). ECI entered into a subcontract agreement with Plaintiff, by which Plaintiff agreed to furnish and install the underground heat distribution system for the Project. (Eichelberger Aff., Ex. A.) Pursuant to the subcontract, ECI would make payments to Plaintiff after receiving payment for the work from the DDC. (Id., ¶ 1.) ECI did not remit any payment to Plaintiff when DDC did not pay ECI for the services rendered. (Eichelberger Aff., ¶ 5.)

  Over the course of the project, disputes arose between Plaintiff and DDC regarding the scope and appropriateness of various services Plaintiff allegedly provided for the project. (Eichelberger Aff., Ex. B.) Plaintiff claimed that it incurred certain expenses for additional work that it purportedly performed on the Project. These claims form the basis for Plaintiff's complaint against Defendant. It is apparently undisputed that DDC has not paid Plaintiff for the additional claims, and DDC may in fact have questioned the appropriateness of the amounts Plaintiff claimed for the work. (Id.)

  II. Discussion

  A. Defendant's Motion to Set Aside Default

  Defendant moves the Court to set aside the default judgment entered in Plaintiff's favor, and for leave to file an answer to the complaint, claiming that (1) lifting the default would not prejudice Plaintiff; (2) Defendant has meritorious defenses to Plaintiff's claims; and (3) Defendant's conduct prior to the entry of default wa "excusable as a matter of law." (Doc. No. 19, at 1.) Plaintiff generally disputes each of these arguments.

  Rule 55(c) of the Federal Rules of Civil Procedure 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)." Fed.R.Civ.P. 55(c). Rule 60(b) authorizes a court to set aside default judgment "upon such terms as are just" for "mistake, inadvertence, surprise or excusable neglect" or "for any other reason justifying relief from the operation of the judgment." Fed.R.Civ.P. 60(b).

  In considering whether to exercise discretion in vacating a default under Rule 55(c), courts are to consider whether vacating the default will cause prejudice to the plaintiff, whether the defendant has proffered a meritorious defense, and the defendant's culpability in allowing the default to be entered. Farnese v. Bagnasco, 687 F.2d 761, 764 (3d Cir. 1982); Feliciano v. Reliant Tooling Co., LTD., 691 F.2d 653, 656 (3d Cir. 1982) (holding that three factors enumerated in Farnese applicable where default judgment has been entered).*fn2 The Third Circuit has emphasized that it does not favor defaults and that "in a close case doubts should be resolved in favor of setting aside the default and obtaining a decision on the merits." Farese, 687 F.2d at 764.

  In order to establish prejudice sufficient to preclude a court from vacating a default judgment, a plaintiff must show its "ability to pursue [its] claim has been hindered since the entry of the default judgment by loss of evidence or otherwise." Feliciano, 691 F.2d at 657; see also Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir. 1987) (loss of relevant evidence may establish prejudice). In this case, the Court finds insufficient evidence to support a finding that Plaintiff will be unduly prejudiced by setting aside the default judgment entered in this case. Indeed, in Plaintiff's response to Defendant's motion to set aside the judgment, Plaintiff does not offer any substantial argument to support its claim that it would be prejudiced if the judgment is vacated. Instead, Plaintiff merely claims that to "allow a defendant with such unclean hands to set aside a default judgment under the equitable principles of Rule 60(b) would have the effect of awarding FIC a second, unwarranted bite at the apple." (Doc. No. 24, at 13-14.) This assertion is irrelevant to the question of whether Plaintiff faces prejudice if the default judgment is vacated. The Court does not find that Defendant delayed unreasonably in moving the Court to vacate the default, and there is no indication that ...


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