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Shepard Claims Serv., Inc. v. William Darrah & Assocs. - 796 F.2d 190 (6th Cir. 1986)

Rule:

To be treated as culpable, the conduct of a defendant must display either an intent to thwart judicial proceedings or a reckless disregard for the effect of its conduct on those proceedings.

Facts:

On August 21, 1984 Plaintiff Shepard Claims Services, Inc. (Shepard) filed this contract action in the district court against defendant William Darrah & Associates (Darrah), with jurisdiction based on diversity of citizenship. The complaint alleged essentially that Darrah, a South Carolina-based insurance broker, failed to pay Shepard, a Michigan independent claims adjuster, for services rendered. Following some difficulty in service by mail, service in person was carried out on February 7, 1985. Darrah’s attorney's secretary secured by telephone an extension of time for filing an answer. By April 10, 1985, Darrah had not filed an answer. Shepard filed a motion for default judgment, which was entered, and Darrah filed a motion to set aside entry of default. The lower court denied Darrah's motion to set aside entry of default. The court entered an order granting an interlocutory appeal. 

Issue:

Did the lower court err in denying Darrah's motion to set aside entry of default caused by the attorney's neglect and inattention?

Answer:

Yes

Conclusion:

The court vacated the order of the lower court and remanded for further proceedings. The court held that the strong policy in favor of deciding cases on their merits outweighed any inconvenience to the lower court or plaintiff resulting from the relatively short delay in answering. The court did not believe that Darrah had to suffer the ultimate sanction of losing its case without any consideration of the merits because of its attorney's neglect and inattention. The court held that its disposition of the case would not preclude the lower court from assessing or determining some appropriate penalty or sanction against Darrah or its counsel for the delay.

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