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KMB Argo-Chemicals, LLC v. Plastic World Recycling, Inc.

United States District Court, M.D. Pennsylvania

January 4, 2017

KMB AGRO-CHEMICALS, LLC, Plaintiff,
v.
PLASTIC WORLD RECYCLING, INC., Defendant.

          MEMORANDUM OPINION

          Robert D. Mariani United States District Judge

         Presently before the Court are two motions led by Defendant Plastic World Recycling, Inc. (hereinafter "Plastic World"): (1) a "Motion to Dismiss Complaint, Motion for Preliminary Injunction and Request for Entry of Default for Failure to Comply with Federal Rule of Civil Procedure § 7.1" (Doc. 11) and (2) a Motion to Set Aside Default (Doc. 18). The Court will address each motion in turn.

         A. "Motion to Dismiss Complaint, Motion for Preliminary Injunction and Request for Entry of Default for Failure to Comply with Federal Rule of Civil Procedure § 7.1"

         On December 4, 2016, Plastic World filed a "Motion to Dismiss Complaint, Motion for Preliminary Injunction and Request for Entry of Default for Failure to Comply with Federal Rule of Civil Procedure § 7.1" (Doc. 11) arguing that because Plaintiff KMB Agro-Chemicals, LLC (hereinafter "KMB") failed to file a Disclosure Statement pursuant to Federal Rule of Civil Procedure 7.1[1], Plaintiffs Complaint should be dismissed as well as Plaintiffs motion for preliminary injunction and that Plaintiff "should be deprived of its ability to enter default in [the] underlying Complaint since the Complaint itself was improperly filed." Defendant never filed a brief in support of this motion despite Plaintiffs assertion in its reply to Defendant's motion that the motion should be stricken for failure to comply with the Middle District of Pennsylvania Local Rules requiring the filing of a brief in support of a motion such as Defendant's (see Doc. 22, ¶ 5).

         Plaintiff filed a disclosure statement pursuant to Rule 7.1 on Decembers, 2016. (Doc. 13). On December 12, 2016, Defendant filed an Answer to Plaintiffs Complaint. (Doc. 20).

         Pursuant to the Middle District of Pennsylvania Local Rules "[w]ithin fourteen (14) days after the filing of any motion, the party filing the motion shall file a brief in support of the motion If a supporting brief is not filed within the time provided in this rule the motion shall be deemed to be withdrawn." M.D. Pa. L.R. 7.5. Here, over one month has passed and Defendant has failed to file any brief in support of its motion. As a result, the Court deems Defendant's motion withdrawn.[2]

         B. Motion to Set Aside Default

         Plastic World's second motion requests that the Court set aside Plaintiffs Request for Entry of Default against Defendant because Plaintiff "failed to file its Disclosure Statement prior to the Request for Entry of Default." (Doc. 18, ¶ 6). Defendant's brief in support of this motion argues that "[t]his Court should vacate default because good cause exists; it was not the result of egregious behavior, and vacating default will not result in any prejudice to Plaintiff." (Doc. 19, at 1).

         Preliminarily, the Court notes that although Plaintiff did file a Request for Entry of Default (Doc. 9), the docket reflects that the Clerk of Court never entered default in this action. Therefore, common sense dictates that a default cannot be set aside when it has never been entered. In that case, Defendant's motion would be unnecessary.

         In the alternative, assuming that there is a default which Defendant must now seek to set aside, the Court will engage in an analysis of Federal Rule of Civil Procedure 55.

         Federal Rule of Civil Procedure 55(a) provides: "When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." However, "[t]he court may set aside an entry of default for good cause." Fed.R.Civ.P. 55(c). "A decision to set aside the entry of default... is left primarily to the discretion of the district court." United States v. $55, 518.05 in US. Currency, 728 F.2d 192, 194 (3d Cir. 1984). The Third Circuit "does not favor entry of defaults" but rather "require[s] doubtful cases to be resolved in favor of the party moving to set aside the default judgment 'so that cases may be decided on their merits."' Id. at 194-95 (quoting Tozer v. Charles A. Krause Milling Co., 189 F, 2d 242, 245 (3d Cir. 1951)). A district court must consider the following factors in exercising its discretion over a motion to set aside default; "(1) whether lifting the default would 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 Ins. Co. v. Sambrick, 834 F.2d 71, 73 (3d Cir. 1987). Although the factors for determining whether to set aside a default judgment are the same as those used when determining whether to set aside an entry of default, these factors should be applied even more liberally when deciding whether to set aside a default. Jackson v. Delaware Cnty, 211 F.R.D. 282 (E.D. Pa. 2002).

         When the Court balances the above factors in light of our Circuit's disfavor of judgments by default, it becomes clear that good cause exists for setting aside the entry of default.

         First, the delay has caused Plaintiff no legally significant prejudice. "Under Rule 55, the prejudice requirement compels plaintiffs to demonstrate that the plaintiffs claim would be materially impaired because of the loss of evidence, an increased potential for fraud or collusion, substantial reliance on the entry of default, or other substantial factors." Dizzley v. Friends Rehab. Program, Inc., 202 F.R.D. 146, 147-48 (E.D. Pa. 2001); see alsoAccu-Weather, Inc. v. Reuters Ltd., 779 F.Supp. 801, 802 (M.D. Pa. 1991) ("Prejudice exists if circumstances have changed since entry of the default such that plaintiffs ability to litigate its claim is now impaired in some material way or if relevant evidence has become lost or unavailable. Detriment in the sense that plaintiff will be required to establish the merit of its claims does not constitute prejudice in this context."). Here, Defendant entered an appearance two days after Plaintiff filed its request for the entry of default and filed a motion to dismiss that same day. Although the Court recognizes the importance of a defendant quickly responding to a motion for a preliminary injunction, Defendant entered an appearance less than one month after this motion was filed and almost immediately began filing responses to Plaintiffs filings as well as participating in a conference call with Plaintiffs counsel and the Court to schedule an evidentiary hearing on Plaintiffs preliminary injunction motion. Further, in the two days between the time that Plaintiff requested that default be entered against Defendant and Defendant entering an appearance, nothing in the case changed. Nor has Plaintiff offered the Court anything to show that it suffered from Defendant's delay aside beyond the harm inherent in the passage of time itself. Thus, the "prejudice" prong favors setting aside the entry of default.

         Second, the Defendant has shown a prima facie meritorious defense. "The showing of a meritorious defense is accomplished when 'allegations of defendant's answer, if established on trial, would constitute a complete defense to the action.'" $55, 518.05, 728 F.2d at 195 (quoting Tozer, 189 F.2d at 244). "A court requires the defendant to raise specific facts beyond a general denial so that it has some basis for determining whether the defendant can make out a complete defense." Momah v. Albert Einstein Med. Ctr.,161 F.R.D. 304, 307 (E.D. Pa. 1995). Although Defendant's Answer provides minimal responses to Plaintiffs Complaint and is devoid of any factual assertions, Defendant's Answer also raises nineteen "Affirmative Defenses" and includes a Counterclaim against KMB. (See Doc. 20). Plastic World's Counterclaim appears to arise out of the same transaction or set of transactions as asserted in Plaintiffs Complaint and sets forth several factual ...


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