The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge
Pending before the Court are Plaintiff's MOTION FOR HEARING ON DAMAGES (Document No. 64) and the MOTION OF DEFENDANTS ALL CREDIT FINANCE INC., ELLENI KLIMANTIS-BERGER AND RANDY BERGER TO OPEN ENTRY [OF DEFAULT] PURSUANT TO RULE 55(c) OF THE FEDERAL RULES OF CIVIL PROCEDURE (Document No. 65), with brief in support (Document No. 67).
This case was filed on June 4, 2008 and involves, inter alia, a claim that All Credit Finance, Inc. ("All Credit") failed to rescind a mortgage agreement. Monte Rabner entered his appearance on behalf of All Credit and filed an answer on August 8, 2008. Subsequently, Fred Rabner also entered an appearance on behalf of All Credit. On January 14, 2009, Plaintiff filed a Motion to Compel Discovery in which he outlined the numerous difficulties he had experienced in obtaining the cooperation of All Credit and Mr. Rabner. The Court granted the Motion to Compel on January 29, 2009. On February 12, 2009, Plaintiff took the deposition of Elleni Klimantis-Berger, who invoked her Fifth Amendment right against self-incrimination. Based on information obtained during that deposition, Plaintiff filed a motion to add five additional defendants, Elleni Klimantis-Berger, Randy Berger, Emanual Klimantis, Vasilia KlimantisBerger and Jay Berger (collectively, the "Individual Defendants"), which the Court granted on February 27, 2009. An Amended Complaint was filed on April 3, 2009 and Plaintiff filed proofs of service as to the newly-named Defendants on April 27, 2009.
On March 10, 2009, pursuant to a stipulation, the case against Defendant Equifirst Corporation was dismissed with prejudice. On April 3, 2009, the Court denied the Rabners' motion to withdraw as counsel for All Credit because replacement counsel had not entered an appearance and a corporation cannot represent itself. No lawyer ever entered an appearance on behalf of any of the Individual Defendants and none of the Defendants answered the Amended Complaint.
There was no activity of record for the next approximately five months. On September 14, 2009, Plaintiff filed requests for Entry of Default against All Credit and the Individual Defendants, which the clerk of courts entered on September 15, 2009.*fn1 Plaintiff then filed the instant motion for a non-jury hearing to determine damages and for entry of judgment against all remaining Defendants. Also on September 15, 2009, attorney Rabner filed the pending motion to set aside default, on behalf of Defendants All Credit, Elleni Klimantis-Berger and Randy Berger (the "Moving Defendants"). To date, no response has been filed by the other remaining Defendants. The Court turns now to the outstanding motions.
A. Motion to Set Aside Default
Federal Rule of Civil Procedure 55(c) states that a "court may set aside an entry of default for good cause." If in doubt, the Court should err on the side of setting aside the default and reaching the merits of the case. In Budget Blinds, Inc. v. White, 536 F.3d 244, 257 (3d Cir. 2008), the Court of Appeals for the Third Circuit*fn2 set forth the analysis that must be performed:
We require the district court to consider the following factors in exercising its discretion in granting or denying a motion to set aside a default under Rule 55(c) or a default judgment under Rule 60(b)(1): (1) whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious defense; (3) whether the default was the result of the defendant's culpable conduct.
1. Prejudice to Plaintiff
This case was filed well over a year ago. As set forth in the Complaint, Plaintiff is an individual of modest financial means who is seeking redress for Defendants' failure to rescind a loan on his personal residence. Defendants' alleged conduct has significantly affected Plaintiff's credit rating and personal finances. Despite the diligent efforts of Plaintiff's counsel, he has been unable to secure the cooperation of Defendants or their attorney to advance this case. While defense counsel believes that the relationship between the respective lawyers was "one of mutual respect and cooperation," he does not deny Plaintiff counsel's averment that he never personally returned phone calls. Moreover, Defendants concede that they did not file an Answer and that after the beginning of April, "activity in the case became non-existent." The substantial additional delay that would be occasioned by permitting Defendants to reopen the entry of default would significantly prejudice Plaintiff.
2. Existence of a Meritorious Defense
Defense counsel has attached a proposed Answer and Affirmative Defenses, purportedly on behalf of the three Moving Defendants.*fn3 The proposed pleading avers that Allegheny Credit Finance, Inc. is a duly-organized corporation owned by Elleni Klimantis-Berger and that All Credit Finance was a fictitious name. However, defense counsel has not explained why this fact, even if true, should be dispositive and has not otherwise articulated what the "meritorious defense" would be.
The proposed pleading also avers that Plaintiff failed to properly rescind the loan. This would ordinarily create a disputed question of fact. However, when Plaintiff took the deposition of Elleni Klimantis-Berger, she invoked her Fifth Amendment right against self-incrimination as to virtually all substantive questions. Defendants have failed to point to any evidence that might sustain a meritorious defense. Moreover, because Ms. Klimantis-Berger exercised her Fifth Amendment right and refused to testify, Plaintiff is entitled to ...