Defendant H.W. Ellis Painting Company, Inc. ("Ellis") has filed motions to set aside the entry of default and to vacate the default judgment entered on behalf of the International Painters and Allied Trades Industry Pension Fund ("the Fund"), which had filed this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. § 1145. Because the Court finds defendant's proposed defenses to be without merit, its failure to answer was deliberate, and a potential for prejudice to plaintiff if defendant's motions are granted, the entry of the default judgment will not be disturbed.
Defendant Ellis entered into a collective bargaining agreement with the International Union of Painters and Allied Trades District Council 11, which requires it to submit monthly contributions to the Fund on behalf of all employees in the bargaining unit.*fn1 The agreement also provides for audits of the employer's books in connection with these contributions, and the imposition of damages for an employer's failure to contribute to the Fund.
Ellis fell delinquent in its Fund payments and failed to submit required remittance reports. The Fund filed a complaint for legal and equitable relief under ERISA on May 23, 2003, and effected service on Ellis on July 8, 2003. Ellis failed to answer or otherwise respond by July 28, 2003, the deadline imposed by Fed. R. Civ. P. 12.
During July Ellis requested and received documentation from the Fund related to its claims, as well as an itemization of the amounts claimed to be in arrears. (Pl.'s Resp. at 3-4, Ex. 4-5.) Ellis provided the Fund with a written settlement offer on July 25, 2003, enclosing overdue remittance reports and requesting an informal extension of time of at least two weeks to respond to the complaint. (Id. Ex. 6.) On July 30, 2003, the Fund counter-offered and agreed to extend the time for Ellis to answer until August 13, 2003. (Id. at 5, Ex. 7.) Ellis rejected the Fund's counter-offer on August 7, but paid a portion of the overdue contributions (i.e., $15,612.30) on that date. (Id. at 5, Ex. 8.) On August 12, the Fund's attorney confirmed receipt of the partial payment and set a final deadline of August 27, 2003 for Ellis to answer or otherwise respond to the complaint:
I am willing to extend the time for HW Ellis to file its Answer until August 27, 2003. If by that time, the parties have not reached settlement and/or HW Ellis has not filed its Answer, I, on behalf of the Pension Fund, will promptly file the appropriate pleadings pursuant to Fed. R. Civ. P. 55.... I strongly suggest that you contact me to discuss resolution of outstanding amounts owed to the Pension Fund. No further filing extensions will be granted.
(Id. Ex. 9) (emphasis added.)
The parties did not settle, and the August 27 deadline came and went. Meanwhile, on August 12, the Court, being unaware of the negotiations between the parties, issued an Order threatening dismissal if the Fund did not, by September 2, 2003, file a motion for entry of default, or in the alternative, submit an explanation as to why it had not done so. Complying with the Court's Order, the Fund filed a request for default on August 28, which the Clerk of Court entered on September 5. Thereafter, the Fund filed its motion for default judgment on September 2, and since defendant, as far as the Court was aware, had never appeared in the case even though service had been effected over two months earlier, the Court entered judgment on September 10, 2003.*fn2
The first submission Ellis made to the Court was its Motion to Set Aside Entry of Default and in Opposition to Plaintiff's Motion for Default Judgment filed on September 11, 2003, along with an answer. Ellis supplemented that filing with a Motion for Relief from Default Judgment on September 24, 2003. To explain its delinquency, Ellis claims that it assumed that it would have additional time to file a responsive pleading due to the "continuing" settlement discussions between counsel. (H.W. Ellis Painting Co., Inc.'s Motion for Relief from Default Judgment ["Mot. for Relief"] at 3.)
Default judgments are generally disfavored by courts, because entering and enforcing judgments as a penalty for delays in filing is often contrary to the fair administration of justice. See Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir. 1980). The decision whether a default judgment should be set aside is nonetheless committed to the sound discretion of the trial court. Keegel v. Key West & Caribbean Trading Co., 627 F.2d 372, 373 (D.C. Cir. 1980); see also In re Chalasani, 92 F.3d 1300, 1307 (2d Cir. 1996).
Fed. R. Civ. P. 55(c) allows for the setting aside of an entry of default for "good cause," and Fed. R. Civ. P. 60(b)(1) provides for relief from a final judgment arising from a defendant's "mistake, inadvertence, surprise, or excusable neglect." While the Rule 60(b) standard is a more rigorous one because "the concepts of finality... are more deeply implicated" in default judgment cases, courts consider the same criteria when applying either standard. Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993); see also CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60, 64 (5th Cir. 1992). The factors that must be balanced are whether: (1) the default was willful, (2) the alleged defense was meritorious, and (3) a set-aside would prejudice plaintiff. Jackson, 636 F.2d at 835 (quoting Keegel, 627 F.2d at 374).
Default judgment was entered on September 10, 2003, and Ellis submitted its Motion to Set Aside the default one day later, apparently before it was aware that the final judgment had been issued. (See Mot. for Relief at 1.) There was not a significant delay between the entry of default and the judgment. It may, therefore, be more appropriate to apply the Rule 55(c) standard, instead of the more stringent Rule 60(b) one. The Court need not resolve this issue, however, because under either standard, defendant is not entitled to relief.*fn3
I. Willfulness of defendant's failure to answer
A finding of bad faith is not a necessary predicate to the conclusion that a defendant acted "willfully." Gucci Am., Inc. v. Gold Center ...