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Tygris Asset Finance, Inc. v. Szollas

June 7, 2010

TYGRIS ASSET FINANCE, INC., A DELAWARE CORPORATION, SUCCESSOR TO MARCAP CORP., PLAINTIFF,
v.
ROSEMARY SZOLLAS AND CYNTHIA BARSA, DEFENDANTS.
ROSEMARY SZOLLAS, CROSS-PLAINTIFF,
v.
CYNTHIA BARSA, AND OASIS CENTER FOR WELLNESS AND BEAUTY, LLC, A FLORIDA LIMITED LIABILITY CORPORATION, CROSS-DEFENDANTS.



The opinion of the court was delivered by: Joan B. Gottschall United States District Judge

Judge Joan B. Gottschall

MEMORANDUM OPINION AND ORDER

Plaintiff Tygris Asset Finance, Inc. ("Tygris") brought this action against Defendants Rosemary Szollas and Cynthia Barsa to recover damages for breach of a lease agreement. (Compl., Doc. No. 1.) Szollas, in turn, filed claims against Cross-Defendant Barasa and Third-Party Defendant Oasis Center for Wellness and Beauty, LLC ("Oasis"), seeking indemnification for any judgment entered against Szollas in favor of Tygris, and a declaration of non-liability under the lease agreement. (Answer to Compl., Affirmative Defenses, and Crosscl., Doc. No. 21.) This matter comes before the court on Szollas' "motion for default and default judgment" against Barsa and Oasis. (Doc. No. 29.) For the reasons set forth below, Szollas' motion is granted in part and denied in part.

I. BACKGROUND

According to the complaint, Oasis entered into an agreement to lease a "Cynosure Apogee Elite Laser System and Tri-Active System" from Tygris. (Compl. ¶ 7.) Barsa and Szollas allegedly signed the lease as Oasis' guarantors, "unconditionally, jointly and severally, guarantee[ing] the prompt payment . . . of Oasis to Tygris." (Id. ¶¶ 16-17; see also Lease Agreement, Ex. 1 to Compl., Doc. No. 20.) Tygris delivered the laser to Oasis, but Oasis allegedly failed to make the monthly payments required under the lease. (Compl. ¶¶ 8-10.) When Oasis ignored Tygris' demand for payment, Tygris filed suit against Szollas and Barsa pursuant to the guaranty. (Id.)

Szollas filed a cross-claim against Barsa and a third-party complaint against Oasis, seeking indemnification for any judgment entered against Szollas in favor of Tygris, and a declaration of non-liability under the guaranty. (Answer to Compl. and Affirmative Defenses, Crosscl.) Summonses were served on Barsa and Oasis, and returned executed on October 1, 2009. (Summonses, Doc. Nos. 27 and 28.) Under Federal Rule of Civil Procedure 12(a)(1)(B), Barsa and Oasis were required to respond to Szollas' cross-claim and third-party complaint on or before October 21, 2009, but failed to do so. (Supplement to Mot. ¶ 3, Doc. No. 38.)

On November 9, 2009, attorney Philip A. Creed entered an appearance on behalf of Barsa. (Appearance, Doc. No. 31.) Szollas filed the instant motion for entry of default and default judgment two days later. (Mot.) The court subsequently granted Barsa's oral motion for leave to file an answer to Szollas' cross-claim, and Barsa filed her answer to the cross-claim on December 16, 2009. (Minute Entry, Nov. 19, 2009, Doc. No. 32; Answer to Cross-cl., Doc. No. 33.) Oasis has yet to enter an appearance or respond to Szollas' third-party complaint.

II. LEGAL STANDARD

"Federal Rule of Civil Procedure 55 governs default judgments in federal court." Silberman v. Wigod, 914 F.2d 260 (Table), 1990 WL 127568, at *4 (7th Cir. 1990); see Fed. R. Civ. P. 55.It is important to note that Rule 55 "draws a distinction between an entry of a default, [in] Rule 55(a), and the entry of judgment by default, [in] Rule 55(b)." Thacker v. Menard, Inc., 86 F.3d 1158 (Table), 1996 WL 267456, at *1 (7th Cir. 1996).

Rule 55(a) provides that "[w]hen 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." Fed. R. Civ. P. 55(a). The entry of a default "is merely a formal matter and does not constitute entry of a judgment." 10A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2682 (3d ed. 2010); see also U.S. v. Hansen, 795 F.2d 35, 36 (7th Cir. 1986) ("[A]n order of default is not a final judgment, though a default judgment is. . . . .[A] default order [is] an intermediate, ministerial, non-judicial, virtually meaningless docket entry . . . .")."Although Rule 55(a) . . . refers to entry of default by the clerk, it is well-established that a default also may be entered by the court." Breuer Elec. Mfg. Co. v. Toronado Sys. of Am., Inc., 687 F.2d 182, 185 (7th Cir. 1982). When motion is made to the court for entry of a default, "the decision to enter default lies within the district court's discretion." Arnold v. Boatmen's Nat'l Bank of Belleville, 89 F.3d 838 (Table), 1996 WL 359778, at *2 (7th Cir. 1996); O'Brien v. R.J. O'Brien & Assoc's, Inc., 998 F.2d 1394, 1398 (7th Cir. 1993).

Under Rule 55(b)(2), "the court may enter a default judgment if the amount at issue is for a sum certain." Am. Nat'l Bank & Trust Co. of Chi. v. Alps Elec. Co., No. 99 C 6990, 2002 WL 484845, at *1 (N.D. Ill. Mar. 29, 2002) (citing Fed. R. Civ. P. 55(b)(2)). "A party is not entitled to a default judgment as a matter of right." Jordan v. Van Dyke, No. 99 C 5357, 2000 WL 126784, at *2 (N.D. Ill. Feb. 1, 2000). Rather, "[t]he decision to enter a default judgment lies within the discretion of the district court." Am. Nat'l Bank & Trust, 2002 WL 484845, at *1. The court can "decline[] to enter a default judgment . . . even if it may be technically justified." Jordan, 2000 WL 126784, at *2. In determining whether to enter a default judgment, courts consider "[t]he amount of money potentially involved, the presence or absence of disputed factual issues or issues of public importance, whether the default was largely technical, whether the plaintiff was substantially prejudiced by the delay, and whether the grounds for default are clearly established . . . ." Am. Nat'l Bank & Trust, 2002 WL 484845, at *1.

"It would be an inefficient use of the parties' and this court's time and resources to grant Plaintiff's motion for a default judgment knowing that such judgment would be promptly set aside pursuant to Rule 55(c) [or Rule 60(b)]." Macri v. Yamauchi, No. 01 C 50168, 2002 WL 390223, at *4 (N.D. Ill. Mar. 11, 2002).As a result, courts often consider Rules 55(c) and 60(b) in determining whether to enter a default or default judgment. See id.Rule 55(c) provides that "[t]he court may set aside an entry of default for good cause, and it may set aside a default judgment under Rule 60(b)." Fed. R. Civ. P. 55(c). Rule 60(b), in turn, provides that "[o]n motion and just terms, the court may relieve a party . . . from a final judgment . . . for," among other reasons, "mistake, inadvertence, surprise, or excusable neglect." Fed. R. Civ. P. 60(b)(1).Courts have recognized that "'good cause' [under Rule 55(c)] is not sharply distinguishable from 'excusable neglect' [under Rule 60(b),] if it is distinguishable at all."*fn1 Conn. Nat'l Mortgage Co. v. Brandstatter, 897 F.2d 883, 885 (7th Cir. 1990).A party seeking to vacate an entry of default or default judgment must show: "(1) good cause for the default; (2) quick action to correct it; and (3) a meritorious defense to the complaint." Cracco v. Vitran Exp., Inc., 559 F.3d 625, 630 (7th Cir. 2009); see also Jones v. Phipps, 39 F.3d 158, 163 (7th Cir. 1994). "While the same test applies for motions seeking relief from default judgment under both Rule 55(c) and Rule 60(b), the test 'is more liberally applied in the Rule 55(c) context,'" which is to say before judgment has actually been entered. Cracco, 559 F.3d at 631 (quoting U.S. v. Di Mucci, 879 F.2d 1488, 1495 (7th Cir. 1989)). This is consistent with the Seventh Circuit's "policy of favoring trial on the merits over default judgment." Cracco, 559 F.3d at 631.

III. ANALYSIS

A. Entry of Default and Default Judgment ...


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