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SEA Horse Marine Inc. v. Black Elk Energy Offshore Operations, LLC

United States District Court, E.D. Louisiana

July 6, 2015




Before the Court is Defendant Black Elk Energy Offshore Operations, L.L.C.'s ("BEEOO") "Motion to Set Aside Default."[1] Having considered the motions, the memoranda in support and in opposition, the record, and the applicable law, the Court will grant the motion.

I. Background

On April 6, 2015, Plaintiff Sea Horse Marine, Inc. ("Sea Horse") filed a complaint seeking payment due and owing for providing goods, equipment, supplies, and services to BEEOO in connection with an oil and gas well identified as Lease No. OCS-G-13563, located on the Outer Continental Shelf, West Cameron Area, Block 269, off the Coast of Cameron Parish, Louisiana.[2] Sea Horse additionally alleges that, pursuant to Louisiana law, it properly preserved and perfected a lien and privilege securing the above-described debts.[3] Sea Horse seeks recognition of the lien and damages in the amount of $350, 075, as well as accruing contractual interest, late charges, attorneys' fees, and costs.

On April 16, 2015, the complaint was served on BEEOO through its agent for service of process in Louisiana, CT Corporation Systems, Inc., located in Baton Rouge, Louisiana.[4] Pursuant to Federal Rule of Civil Procedure 12(a)(1)(A), a defendant must serve an answer within 21 days after being served, unless it has timely waived service under Rule 4(d). BEEOO did not waive service; therefore, it was required to file an answer or responsive pleading by May 7, 2015. BEEOO did not timely file an answer or otherwise defend itself in this lawsuit.

On May 8, 2015, Sea Horse filed a motion for default judgment based on BEEOO's failure to plead or otherwise defend in this litigation.[5] The Clerk of the Court granted Sea Horse's request, and a default was entered on May 11, 2015.[6] BEEOO filed the pending Motion to Set Aside Default on May 18, 2015.[7] Sea Horse filed a memorandum in opposition on June 2, 2015, [8] and BEEOO filed a memorandum in further support of its motion on June 9, 2015.[9]

Law and Analysis

A. Standard for Setting Aside an Entry of Default

Rule 55(c) of the Federal Rules of Civil Procedure provides that the Court may set aside an entry of default if the party seeking relief shows good cause.[10] "The decision to set aside a default decree lies within the sound discretion of the district court."[11] However, "because modern federal procedure favors trials on the merits, " should a district court not set aside default, "an abuse of discretion need not be glaring to justify reversal."[12] Defaults are extreme sanctions reserved for rare occasions, and doubts as to whether or not a defendant has shown good cause should be resolved in favor of setting aside the default.[13] While a motion to set aside an entry of default is similar to a motion to set aside a default judgment under Rule 60(b), the Fifth Circuit has stated that a motion to set aside the entry of default "is more readily granted than a motion to set aside a default judgment."[14] The standard used when setting aside an entry of default is "good cause."[15]

Under Rule 55(c), good cause "is not susceptible of precise definition, and no fixed, rigid standard can anticipate all of the situations that may occasion the failure of a party to answer a complaint timely."[16] When utilizing the "good cause" standard, courts typically consider (1) whether default was willful; (2) whether setting it aside would prejudice the adversary; and (3) whether a meritorious defense is presented.[17] In the Fifth Circuit, the "good cause" test is disjunctive.[18] Moreover, these three factors are not exclusive, and courts have relied on other factors to determine whether "good cause" exists, such as: (1) whether the public interest was implicated; (2) whether there was a significant financial loss to defendant; and (3) whether the defendant acted expeditiously to correct the default.[19] "Whatever factors are employed, the imperative is that they be regarded simply as a means of identifying circumstances which warrant the finding of good cause' to set aside a default."[20] "All of these factors should be viewed against the background principles that cases should, if possible, be resolved on the merits and that defaults are generally disfavored."[21] Additionally, "where there are no intervening equities any doubt should, as a general proposition, be resolved in favor of the movant to the end of securing a trial upon the merits."[22] As such, "the requirement of good cause has generally been interpreted liberally."[23]

B. Analysis

1. Whether Default was Willful

BEEOO argues that its default was not willful because its agent for service of process was served with Sea Horse's complaint on April 16, 2015, and BEEOO forwarded the complaint to its counsel on or around April 24, 2015.[24] BEEOO states that "as a result of a calendaring error and the filing of numerous similar suits against [BEEOO], counsel inadvertently failed to timely answer Plaintiff's Complaint. Undersigned counsel was in the process of finalizing [BEEOO's] answer when made aware of the granting of the Entry of Default."[25]

In response, Sea Horse contends that BEEOO's default was "at least inexcusably neglectful."[26] Sea Horse contends that BEEOO has failed to provide evidence of the alleged calendaring error, and accordingly it has not proven that its conduct was not willful.[27] Sea Horse argues that BEEOO admits that it was properly served and that its counsel was in receipt of the complaint.[28] Moreover, according to Sea Horse, Black Elk has previously failed to respond to communications and demands by Sea Horse in connection with this dispute.[29] BEEOO, in reply, states that inadvertence or mistake of counsel alone is not ...

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