Colleton Preparatory Acad., Inc. v. Hoover Universal

616 F.3d 413 (4th Cir. 2010)

 

RULE:

When deciding whether to set aside an entry of default, a district court should consider whether the moving party has a meritorious defense, whether it acts with reasonable promptness, the personal responsibility of the defaulting party, the prejudice to the party, whether there is a history of dilatory action, and the availability of sanctions less drastic.

FACTS:

A college sued two companies alleging claims for negligence and violations of the state Unfair Trade Practices Act. The college incurred damage to its roof caused by fire-retardant substances the defendants used in their work for the school. One defendant, Beazer, filed an answer denying liability. The other defendant, Hoover, failed to answer and the plaintiff obtained a default judgment against it. However, the plaintiff initially sued the wrong defendant. It sued Hoover Treated Wood Products instead of Hoover Universal. The court allowed the plaintiff to amend its complaint. However, Hoover Universal also failed to answer, and thus, the court entered default against it, too. At trial, Hoover Universal moved to vacate the entry of default. The district court denied.

ISSUE:

Is the defendant, Hoover Universal, entitled to a vacated entry of default since the service processor erred in notifying it of the suit?

ANSWER:

Yes.

CONCLUSION:

The lower court applied the Payne factors in making its determination not to vacate the entry of default. The deciding court should consider (1) whether the moving party has a defense to the claims brought, (2) whether it acts with reasonable promptness, (3) the personal responsibility of the defaulting party, (4) the prejudice to the party, (5) whether there is history of delayed action, and (6) the availability of less dramatic consequences. The appellate court applied the same factors and found that there would not be undue prejudice against the defendant if the judgment was vacated. Further, despite significant evidence to approve of the motion, it held that the lower court abused its discretion in denial.

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