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B&B Golf Carts, Inc. v. GRC Golf Products, LLC

United States District Court, S.D. Illinois

May 23, 2017

B&B GOLF CARTS, INC., Plaintiff,
v.
GRC GOLF PRODUCTS, LLC, IRISH CAPITAL, LLC, GRC GOLF CARTS, RICHARD NIBLOCK, GARY NIBLOCK, and CHAD LEIBY, Defendants.

          MEMORANDUM AND ORDER

          NANCY J. ROSENSTENGEL, United States District Judge

         This matter comes before the Court on the Motion to Set Aside Default and Motion to Stay All Claims Against GRC Golf Products, LLC, and Irish Capital, LLC, filed by Defendants GRC Golf Carts, GRC Golf Products, LLC, and Irish Capital, LLC (Doc. 51). For the following reasons, the motion is granted in part and denied in part.

         Background

         This case arises from agreements between Plaintiff B&B Golf Carts, Inc. (“B&B”), and GRC Golf Products, LLC (“GRC”), for the purchase of golf carts (Doc. 1, ¶¶ 12, 41). During 2016, B&B placed numerous orders for various types of golf carts from GRC. At the time the Complaint was filed, GRC still owed B&B 34 golf carts for which B&B had already paid (Id., ¶ 38). Furthermore, 39 of the golf carts delivered to B&B had worn tires and wheels, which GRC had agreed to replace (Id., ¶ 39). In sum, B&B alleges GRC owes it $108, 950 for the golf carts, tires, and wheels (Id., ¶ 40).

         On September 19, 2016, B&B filed an 11-count Complaint stating a variety claims against Defendants GRC, Irish Capital, GRC Golf Carts, Richard Niblock, Gary Niblock, and Chad Leiby (Doc. 1). Defendants GRC and Irish Capital were served with the Complaint on December 6, 2016 (Docs. 16, 17), and their responsive pleadings were due December 27, 2016. Both entities failed to answer the Complaint or otherwise plead. On February 21, 2017, B&B moved for an order of default against GRC and Irish Capital (Docs. 41, 44). On February 22, 2017, the Clerk of Court entered default against GRC and Irish Capital pursuant to Rule 55(a) of the Federal Rules of Civil Procedure (Doc. 48).

         On February 24, 2017, GRC and Irish Capital (herein, “Defendants”) filed a motion to set aside default, as well as to stay all claims against GRC (Doc. 51). Defendants argue good cause exists to set aside the entry of default because the Complaint contains no claims against Irish Capital, LLC, and GRC is subject to the automatic bankruptcy stay provided by 11 U.S.C. § 362(a). Defendants assert that GRC is merely a “d/b/a” of GRC Investments, LLC, which filed for Chapter 7 bankruptcy on June 30, 2016.

         Legal Standard

         Relief from entry of a default requested prior to entry of judgment is governed by Federal Rule of Civil Procedure 55(c), which provides that “the court may set aside an entry of default for good cause . . . .” Fed.R.Civ.P. 55(c). A party wishing to have entry of default vacated prior to entry of a default judgment must show: (1) good cause; (2) quick action to correct the default; and (3) a meritorious defense to the complaint. Sun v. Board of Trustees of University of IL, 473 F.3d 799, 810 (7th Cir. 2007). “Rule 55(c) requires ‘good cause' for the judicial action, not ‘good cause' for the defendant's error.” Sims v. EGA Prods., 475 F.3d 865, 868 (7th Cir. 2007) (“Damages disproportionate to the wrong afford good cause for judicial action, even though there is no good excuse for the defendant's inattention to the case.”). The standard is essentially the same as that for vacating a default judgment under Rule 60(b); however, relief under Rule 55(c) is more readily granted, where relief under Rule 60(b) is more “limited and stringent.” Jones v. Phipps, 39 F.3d 158, 162 (7th Cir. 1994); see Cracco v. Vitran Exp., Inc., 559 F.3d 625, 631 (7th Cir. 2009).

         The Seventh Circuit Court of Appeals has repeatedly expressed a policy of favoring trial on the merits over default judgment. Cracco, 559 F.3d at 631; Sun, 473 F.3d at 811 (citing C.K.S. Eng'rs, Inc. v. White Mountain Gypsum Co., 726 F.2d 1202, 1205 (7th Cir. 1984)). Thus, a default should “only be employed in extreme situations, or when less drastic sanctions have proven unavailing, or when a party willfully disregards the litigation.” Local No. 1118 Indiana Const. Trades Health and Welfare Trust Fund Painters v. Forsey Const. Inc., No. 3:11-CV-168, 2012 WL 12674, at *2 (N.D. Ind. Jan. 3, 2012) (citing Sun, 473 F.3d at 811)).

         Discussion

         I. Motion to Set Aside Entry of Default

         A. Irish Capital, LLC

         Defendants argue that good cause exists to set aside the entry of default against Irish Capital because no claims have been asserted against that defendant. Defendants aver that Irish Capital is not named in the heading of any counts in the Complaint, and the only claim where it is even mentioned (Count X - Pierce the Corporate Veil) is directed at the individual defendants, not at Irish Capital. In light of the lack of claims against it, as well as its prompt response to the entry of default, Irish Capital asks the Court to set aside the default and grant it leave to file a responsive pleading.

         In response, B&B argues that Irish Capital has provided no reasoning whatsoever for failing to respond to the Complaint and, thus, it has not shown good cause. B&B also claims that it has stated two causes of action against Irish Capital: Count X - Piercing the Veil and Count XI - RICO. Thus, Irish Capital's defense of failure ...


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