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Central Laborers' Pension, Welfare and Annuity Funds v. W.C. Beiser Concrete Company

April 21, 2011

CENTRAL LABORERS' PENSION, WELFARE AND ANNUITY FUNDS, PLAINTIFF,
v.
W.C. BEISER CONCRETE COMPANY, INC. AND KENNETH BEEMER, INDIVIDUALLY, DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert District Judge

MEMORANDUM AND ORDER

This matter comes before the Court on Plaintiff Central Laborers' Pension, Welfare and Annuity Funds' ("Central") Motion for Default Judgment (Doc. 9) and Memorandum (Doc. 10) in support thereof. Specifically, having obtained Entry of Default (Doc. 8) against Defendants W.C. Beiser Concrete Company, Inc. and Kenneth Beemer (individually referred to as "W.C. Beiser" and "Beemer" respectively and collectively referred to as "Defendants") on November 16, 2010, Central now seeks default judgment against Defendants. W.C. Beiser did not respond thereto. Meanwhile, Beemer responded by filing a Motion to Set Aside Entry of Default and Motion to Dismiss (Doc. 11); Central filed a Response (Doc. 13) thereto, to which Beemer filed a Reply (Doc. 14).*fn1

The motions of Central and Beemer shall be addressed in kind.

I. Motion for Default Judgment as to W.C. Beiser

Ordinarily, a default judgment should not be entered against one defendant until the matter has been resolved as to all defendants. Home Ins. Co. of Ill. v. Adco Oil Co., 154 F.3d 739, 741 (7th Cir. 1998) (citing Frow v. De La Vega, 82 U.S. (15 Wall.) 552 (1872)). Because this litigation will be continuing against Beemer for reasons discussed infra, the Court denies default judgment against W.C. Beiser as premature.

II. Beemer's Motion to Set Aside Entry of Default

Pursuant to Federal Rule of Civil Procedure 55(c), "[t]he court may set aside an entry of default for good cause[.]" For instance, if damages are disproportionate to the wrong, they may "afford good cause for judicial action, even though there is no good excuse for the defendant's inattention to the case." Sims v. EGA Prods., Inc., 475 F.3d 865, 868 (7th Cir. 2007) (emphasis in original). Binding case law has elaborated upon Rule 55(c) by requiring vacatur if the defendant shows (1) good cause for his default; (2) quick action to correct it; and (3) a meritorious defense to the complaint. Pretzel & Stouffer v. Imperial Adjusters, Inc., 28 F.3d 42, 45 (7th Cir. 1994); O'Brien v. R.J. O'Brien & Assocs., 998 F.2d 1394, 1401 (7th Cir. 1993); United States v. Di Mucci, 879 F.2d 1488, 1495 (7th Cir. 1989).

The first consideration - good cause for the defendant's default - may consist of "mistake, inadvertence, surprise, or excusable neglect." Fed. R. Civ. P. 60(b)(1);*fn2 Tate v. Riverboat Servs., Inc., 305 F. Supp. 2d 916, 919 (N.D. Ind. 2004). The second consideration - quick action to correct - looks at the time that passed between entry of default and the defendant's motion, yet it ultimately turns on the particular situation presented. See Jones v. Phipps, 39 F.3d 158, 165 (7th Cir. 1994). Factors that define such a situation are the litigant's reason for delay, his ability to learn about the grounds for judgment earlier, and the extent of prejudice suffered by the party seeking default. Tate, 305 F. Supp. 2d at 923 (relying upon Kagan v. Caterpillar Tractor Co., 795 F.2d 601, 610 (7th Cir. 1986)). Finally, the third consideration - the existence of a meritorious defense - does not necessarily require a winning defense but instead calls for "one which at least raises a serious question regarding the propriety of a default judgment and which is supported by a developed legal and factual basis." Jones, 39 F.3d at 165. In other words, a general denial or a bare legal conclusion that a defense exists will not suffice. See Pretzel & Stouffer, 28 F.3d at 46.

Here, there is good cause to set aside the default entered against Beemer. First, Beemer has demonstrated good cause for his default; namely, he did not know that he had been sued as a defendant in his individual capacity. This is perhaps best evidenced by the 16-page, operative Complaint (Doc. 2), which only refers to Beemer "individually" three times and does so in an unnecessarily confusing manner.*fn3 Count II, which is asserted against Beemer in his individual capacity for alleged violation of §1145 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., actually refers to "James Quirin" in its opening paragraph and only refers to W.C. Beiser in its prayer for relief. While these references are most likely the result of typographical errors, Central should not be allowed to proceed under the path of default against Beemer individually when it could not even properly refer to him in its complaint. More importantly, Count II centers around the Restated Agreement and Declaration of Trust of the Central Laborers' Pension Fund ("Restated Trust") (Doc. 2-4), which, for reasons discussed infra, Beemer signed in his official capacity and thought did not expose him to personal liability. This constitutes excusable neglect and possible surprise that represents good cause for allowing default to enter.

Next, Beemer took quick action to correct the entry of default against him. Although Beemer waited nearly four months to vacate entry of default, the Court's analysis of this factor turns on the particular situation presented. Like the complaint, Central's Motion for Entry of Default (Doc. 7) merely mentions Beemer "individually" in passing, namely once in the motion's case caption. And, perhaps more notably, the Clerk of Court's entry of default does not once refer to the individual liability of Beemer. When Central eventually filed its motion for default judgment, which repeatedly referred to Beemer individually and cited specific damages, Beemer took just four days in getting his motion to vacate on file.

Looking at this chronology as a whole, it is clear that Beemer's failure to timely file the answer was inadvertent and the result of a misunderstanding, not the type of willful refusal to follow court rules that justifies refusing to vacate entry of default. See Davis v. Hutchins, 321 F.3d 641, 646 (7th Cir. 2003). Furthermore, Beemer's behavior does not reflect the kind of repeated delinquencies that justified denying a motion to vacate default in Pretzel & Stouffer, where counsel missed the deadline to answer, failed to move for leave to file the answer out of time, failed to provide a copy of the answer to opposing counsel, and failed to appear at a status hearing without a valid excuse. See Pretzel & Stouffer, 28 F.3d at 45-46. And, notably, Central has not alleged that it suffered prejudice from Beemer's delay as contemplated by Tate. Being fully advised of the premises, the Court finds that Beemer took quick action to correct the Clerk's entry of default.

Beemer wins the day on the Court's third and final consideration due to the existence of a meritorious defense. Beemer's primary defense is that he cannot be personally liable under the Restated Trust because he signed said agreement as president of W.C. Beiser. Indeed, if Beemer did not obligate himself personally under the agreement, he cannot be held personally liable thereunder. See infra p. 7-8.

As evidence that the potential liability of Beemer would be limited to his representative capacity, Beemer touts the parties' "Participation Agreement" (Doc. 2-2) and Exhibit 2 to Central's complaint, both of which Beemer signed under the "Employer" heading as "President" (the Participation Agreement even included Beemer's "Authorized Signature").*fn4 At this time, it is impossible to determine the likelihood of success of this defense, but it is obvious the defense carries some factual and legal support and casts serious doubt on the propriety of the entry of default against Beemer.*fn5 This is all that is required of a meritorious defense under Jones.

Because Beemer has demonstrated good cause for his default, quick action to correct it, and a meritorious defense to Central's complaint, the Court can and will set aside the entry of default entered against him. This obviously ...


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