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Summit Financial Resources L.P. v. Big Dog Enterprises Logistics

March 12, 2008

SUMMIT FINANCIAL RESOURCES L.P., PLAINTIFF,
v.
BIG DOG ENTERPRISES LOGISTICS, LLC, D/B/A FREIGHT HAULING LOGISTICS, DAVID HURSEY, THE CONSOLIDATED WITH HURSEY GROUP, LLC, AND PEERLESS-PREMIER APPLIANCE CO., DEFENDANTS.
PEERLESS PREMIER APPLIANCE CO., COUNTERCLAIM/INTERPLEADER PLAINTIFF,
v.
SUMMIT FINANCIAL RESOURCES L.P., COUNTERCLAIM/INTERPLEADER DEFENDANT.
PEERLESS PREMIER APPLIANCE CO., CROSS-CLAIM/INTERPLEADER PLAINTIFF,
v.
BIG DOG ENTERPRISES LOGISTICS, LLC, D/B/A FREIGHT HAULING LOGISTICS, DAVID HURSEY, THE HURSEY GROUP, LLC, AND CSX INTERMODAL, INC., ESTES EXPRESS LINES, FED EX FREIGHT-EAST, LANDSTAR RANGER, OVERNIGHT TRANSPORT-UPS FREIGHT, SCHNEIDER NATIONAL CARRIERS, AND YELLOW TRANSPORTATION, INC., CROSS-CLAIM/INTERPLEADER DEFENDANTS.



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

MEMORANDUM and ORDER

A. Introduction and Background

On March 15, 2007, Summit Financial Resources filed the above-captioned action against Defendants Peerless-Premier Appliance Co., Big Dog Enterprises Logistics, The Hursey Group, LLC, and David Hursey (Doc. 2). On May 4, 2007, Peerless filed its Answer and initiated an interpleader action against "Overnight Transport-UPS Freight" and others (Doc. 24). In fact, it appears that Peerless intended to interplead "Overnite Transportation Co., Inc." and/or "UPS Freight."*fn1 Despite the misnomer, Peerless was able to serve Overnite's statutory agent with its interpleader action on May 15, 2007 (see Doc. 41).

On August 24, 2007, the Court granted Summit's motion for default judgment against several cross-claim interpleader defendants who had not yet answered, including Overnite (Doc. 126). On September 6, 2007, Summit sent a Notice of Entry of Default and a copy of the Court's Order to Overnite (See Doc. 130). On December 21, 2007, Overnite moved to vacate the default judgment (Doc. 175). The Court ordered any party objecting to Overnite's motion to respond by January 7, 2008, and Summit was the only party to file an objection (Doc. 181).

Having fully considered the parties' filings, the Court now GRANTS Overnite's motion to vacate default judgment (Doc. 175).

B. Analysis

Federal Rule of Civil Procedure 60(b)(1) provides: "On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect . . . ." The movant has the burden to prove that excusable neglect exists. Jones v. Phipps, 39 F.3d 158, 162 (7th Cir. 1994). In order to prove excusable neglect, the movant must show "(1) 'good cause' for the default; (2) quick action to correct the default; and (3) the existence of a meritorious defense to the original complaint." Id.

1. Good Cause

Overnite argues that good cause exists here because it has a system in place to safeguard against default judgments. In spite of this system, however, Overnite states that its failure to timely answer was due to the fact that the action named "Overnight" as a party rather than "Overnite." Additionally, Overnite is a subsidiary of UPS and argues that UPS has an internal system in place to prevent the entry of default judgment and that its failure to answer "was the product of isolated human error" because the legal documents were misplaced. In order to verify these facts, Overnite has submitted an affidavit from Burt Mallinger, Litigation Counsel for UPS Freight (Doc. 178-2). Additionally, Overnite points to cases in other circuits finding that similar factual circumstances have been found to constitute good cause for the purposes of an excusable neglect analysis. See Owens-Illinois, Inc. v. T&N Ltd., 191 F.R.D. 522 (E.D. Tex. 2000).

First, the Court finds Overnite's argument that Peerless misspelled its name in the caption insufficient for a showing of good cause. Overnite admits that though there are many other carriers with a similar name, its statutory agent was served with process and that it had possession of the documents. Moreover, the caption names "Overnight Transport-UPS Freight," and Overnite does not allege that any other similarly named party is affiliated with UPS Freight. Finally, Overnite does not state that its failure to respond to the complaint was caused by the misnomer, or that it was confused as to its involvement in the action. Rather, Overnite alleges that it failed to respond because the documents were misplaced. Therefore, the misnomer is not a sufficient excuse to make a proper showing of good cause.

However, the fact that Overnite maintains a system of procedural safeguards to prevent default judgment but failed to respond because of an isolated human error does indicate good cause. See Owens-Illinois, Inc. v. T&N Ltd., 191 F.R.D. 522 (E.D. Tex. 2000). According to Overnite's motion and the accompanying affidavit, UPS has an intake office to receive and distribute legal documents. Though the complaint was apparently received, Overnite claims that it was lost at some point in the intake process.

The Court recognizes that no system is perfect, and it appears that UPS's system is reliable given the large number of legal actions it properly handles each year. Having reviewed Overnite's motion and supporting affidavit, the Court finds that Overnite's internal procedures are adequate and reliable and that its failure to answer the complaint was the product of isolated human error. Though it is not entirely clear at which juncture the system failed in this particular case, the facts indicate that the default judgment against Overnite was the result of excusable neglect. Consequently, the Court is satisfied that Overnite has shown good cause for its default.

2. The Existence of a Meritorious Defense

The Court is also satisfied that Overnite may have a meritorious claim to the interpleader stake. Overnite states that Peerless and/or Big Dog owe payment on outstanding accounts totaling approximately $75,000. If the Court does not vacate the default judgment, Overnite would lose its claim to the stake. Consequently, the ...


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