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Welch v. State Farm Mutual Automobile Insurance Co.

United States District Court, N.D. Mississippi, Oxford Division

May 7, 2019

SIDNEY WELCH, et al. PLAINTIFFS
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, et al. DEFENDANTS

          ORDER

          DEBRA M. BROWN UNITED STATES DISTRICT JUDGE

         This insurance dispute is before the Court on State Farm Mutual Automobile Insurance Company's motion to set aside entry of default. Doc. #12.

         I

         Procedural History

         On September 25, 2018, Sidney Welch and Shauna Welch, individually and on behalf of M.W, [1] filed a complaint in the United States District Court for the Northern District of Mississippi against State Farm Mutual Automobile Insurance Company and certain fictitious persons. Doc. #1. In the complaint, the Welches allege that their vehicle, which was insured by State Farm, was struck by an automobile, also insured by State Farm, negligently driven by Linda Toland.[2] Id. at 2. The Welches also allege that State Farm wrongly denied them uninsured motorist benefits to which they are entitled under an insurance policy. Id. at 3. A copy of the summons and complaint was served on State Farm on October 2, 2018. Doc. #3-1.

         On October 24, 2018, the Welches filed a motion for entry of default. Doc. #4. The Clerk of the Court entered default in their favor the next day. Doc. #5. Five days after the entry of default, State Farm filed an answer to the complaint. Doc. #6.

         On November 21, 2018, State Farm filed a motion to set aside the default. Doc. #12. The Welches responded in opposition to the motion, one day after the deadline to do so, on December 6, 2018. Doc. #16. State Farm replied on December 12, 2018. Doc. #18.

         II

         Analysis

         Pursuant to Federal Rule of Civil Procedure 55(c), a “court may set aside an entry of default for good cause.” “To decide if good cause exists, courts consider three non-exclusive factors: ‘whether the default was willful, whether setting it aside would prejudice the adversary, and whether a meritorious defense is presented.'” Koerner v. CMR Const. & Roofing, L.L.C., 910 F.3d 221, 225 (5th Cir. 2018) (quoting Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000)). Because “[d]efaults are generally disfavored, ” a motion to set aside an entry of default should be granted “[u]nless it appears that no injustice results from the default ….” Id. (quoting Mason & Hanger-Silas Mason Co. v. Metal Trades Council of Amarillo, Tex. & Vicinity, AFL-CIO, 726 F.2d 166, 168 (5th Cir. 1984); In re OCA, Inc., 551 F.3d 359, 370-71 (5th Cir. 2008)).

         A. Willfulness

         Although the good cause factors are non-exclusive, “[a] finding of willful default ends the inquiry ….” Id. “A willful default is an ‘intentional failure' to respond to litigation.” In re OCA, Inc., 551 F.3d at 370 n.32 (quoting Lacy, 227 F.3d at 292) (emphasis omitted)). A finding of negligence, in contrast, may warrant setting aside default. Id.

         “The defendant has the burden of showing by a preponderance of the evidence that its neglect was excusable, rather than willful.” Wooten v. McDonald Transit Assocs., Inc., 788 F.3d 490, 500-01 (5th Cir. 2015) (citation omitted). Thus, when a defendant fails to explain the reason for its delay, a willful default is presumed. Id. Where a reason is offered, “perfection of service is not determinative-the defendant's knowledge of the perfected service, and the defendant's actions post-service … play a role in measuring the willfulness of [the] default.” Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 123 (5th Cir. 2008). In the absence of “a legitimate claim of prejudice that would arise from setting aside the default, ” a court should resolve all doubts in favor of the defaulting party. Id.

         State Farm argues that its failure to timely answer is not willful. In this regard, State Farm submitted the affidavit of Ronelle Krenke, the claims specialist assigned ...


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