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ECHO/Tennessee Holdings, LLC v. Avidpath Inc.

United States District Court, N.D. Illinois, Eastern Division

April 29, 2014

ECHO/TENNESSEE HOLDINGS, LLC and ECHO GLOBAL LOGISTICS, INC., Plaintiffs,
v.
AVIDPATH INC., ANGELA SUDDARTH, and WILLIAM H. SUDDARTH, Jr., Defendants.

MEMORANDUM OPINION AND ORDER

VIRGINIA M. KENDALL, District Judge.

Defendants AvidPath, Inc. (formerly known as and referred to herein as Shipper Direct Logistics Inc.), Angela Suddarth, and William Suddarth, Jr. move to set aside this Court's entry of default under Fed.R.Civ.P. 55(c). Plaintiffs Echo/Tennessee Holdings, LLC and Echo Global Logistics, Inc. oppose the Defendants' motion. The Plaintiffs claim that the Defendants have not shown good cause for the default or that they have a meritorious defense. This Court agrees with the Plaintiffs because the Defendants have not shown good cause for the default or a meritorious defense. Therefore, this Court denies the Defendants' motion.

FACTS

The Plaintiffs filed a three-count complaint on January 15, 2013, alleging fraud and breach of contract against Shipper Direct and Angela Suddarth, and conspiracy against all of the Defendants. (Dkt. No. 1.) The Plaintiffs moved for entry of default judgment two months later when the Defendants failed to answer or otherwise plead. (Dkt. No. 11.) Counsel for the Defendants appeared at a hearing on the Plaintiffs' motion for entry of default judgment on March 21, 2013. (Dkt. No. 13.) This Court entered and continued the Plaintiffs' motion for entry of default judgment for four weeks to allow the Defendants to answer or otherwise plead. (Dkt. No. 33 at 6:22-24.) One day before the Defendants were to answer or otherwise plead, counsel for the Defendants moved to withdraw as counsel. (Dkt. No. 27.) This Court granted the motion to withdraw as counsel and extended the date to answer or otherwise plead to May 20, 2013. (Dkt. No. 29.)

This Court also ordered new counsel for the Defendants to appear at a status hearing scheduled for April 30, 2013. (Dkt. No. 56 at 4:20-25.) After counsel for the Defendants failed to appear on that date, this Court expressed its concern about the Defendants' pattern of delay. (Dkt. No. 57 at 3:6-12.) New counsel for the Defendants entered an appearance on May 9, 2013 (Dkt. No. 41), and this Court explained to new counsel for the Defendants that the case had been pending for some time and that the May 20, 2013, date to answer or otherwise plead was firm. (Dkt. No. 58 at 5:18-25.) Although the Defendants filed a motion to dismiss on May 20, 2013 (Dkt. No. 36), this Court struck the motion because the Defendants failed to notice the motion in accordance with the Local Rules.

The Defendants then failed to appear at a May 28, 2013, hearing on the Plaintiffs' motion for entry of default judgment. (Dkt. No. 39.) This Court entered default against the Defendants on May 28, 2013, and set a hearing for prove-up for June 12, 2013. ( Id. ) The next day, the Defendants moved to vacate entry of default. (Dkt. No. 40.) This Court set a briefing schedule on the Defendants' motions to vacate entry of default and to dismiss. (Dkt. No. 62.) This Court also set an evidentiary hearing concerning the Defendants' motion for July 2, 2013.

The Defendants filed a suggestion of bankruptcy on July 2, 2013. (Dkt. No. 71.) The parties filed a joint notice that they asked the bankruptcy court to lift its stay to allow this action to proceed and asked this Court to reschedule the evidentiary hearing on the Defendants' motion. (Dkt. No. 81.) The parties also asked this Court to reschedule a prove-up hearing on the Plaintiffs' motion for entry of default judgment. ( Id. ) This Court held a three-day evidentiary hearing on the Defendants' motion to vacate entry of default between October 28, 2013 and November 1, 2013.

LEGAL STANDARD

This Court can set aside its entry of default for good cause. Sims v. EGA Products, Inc., 475 F.3d 865, 868 (7th Cir. 2007). But the party seeking to have a default set aside must show (1) good cause for the default, (2) quick action to correct the default, and (3) a meritorious defense to the complaint. Cracco v. Vitran Express, Inc., 559 F.3d 625, 630 (7th Cir. 2009). Although courts apply the same test under Fed.R.Civ.P. 55(c) as they would under Fed.R.Civ.P. 60(b), courts should apply the test under Rule 55(c) more leniently than they would under Rule 60(b). Id. at 631.

DISCUSSION

Because the Defendants moved to set aside entry of default one day after this Court entered it, and because the Defendants filed a motion to dismiss that same day, this Court finds that the Defendants took quick action to correct the default. But the Defendants' deliberate pattern of delay precludes a showing of good cause for the default. The Defendants' efforts to manipulate the judicial process and Angela Suddarth's evasive and questionable testimony lead this Court to believe that the Defendants have approached this case with the same fraudulent and deceptive practices they purportedly used in the transaction at issue. Additionally, the Defendants have not presented a meritorious defense to any of the Plaintiffs' claims. For these reasons, this Court denies the Defendants' motion to set aside entry of default.

I. The Defendants Have Not Shown Good Cause for the Default

The Defendants claim that they inadvertently failed to answer or otherwise plead due to a series of mishaps and misunderstandings. After filing their motion to dismiss on May 20, 2013, the Defendants claim that their counsel believed that this Court would set a briefing schedule and hearing date on its own motion. Given that Local Rule 5.3 states "Every motion or objection shall be accompanied by a notice of presentment specifying the date and time on which, and judge before whom, the motion or objection is to be presented, " counsel's mistaken and unfounded belief does not establish good cause for the default.

Nor does the Defendants' claim that their counsel did not receive electronic filing notifications establish good cause for the default. "[A]ttorneys are expected to exercise diligence in monitoring the disposition of their cases." Martinez v. City of Chicago, 499 F.3d 721, 728 (7th Cir. 2007). Counsel for the Defendants admits that he was able to file a pleading electronically with this Court but claims that he did not receive any electronic filing notifications. He does not claim that he could not access the docket electronically to monitor the status of this case. And he does not claim that he could not call this Court's courtroom deputy to confirm his mistaken belief that this Court would set a hearing date on its own. Therefore, this Court rejects the notion that problems receiving electronic filing notifications prevented counsel from learning that this Court struck his improperly noticed motion or that this Court ...


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