Tegrity Contractors, Inc. v. Spectra Grp., Inc.

TEGRITY CONTRACTORS, INC.

v.THE SPECTRA GROUP, INC. ET AL.

CIVIL ACTION NO. 12-2555

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA SECTION "F"

Dated: February 21, 2013

ORDER AND REASONS

Before the Court are two motions: (1) the defendants's motion to set aside the entry of default, and (2) the defendants's motion to transfer. For the reasons that follow, the motion to set aside the entry of default is GRANTED, and the motion to transfer is DENIED.

Background

This dispute arises out of the construction of a shopping center.

In early 2009, Tegrity Contractors, Inc., as general contractor, entered into a contract with The Spectra Group, Inc. and Boutte Shopping Center, LLC, for the construction of a shopping center and retail store located in Boutte, Louisiana. Tegrity alleges that it completed all the required work and provided all necessary materials under the terms of the contract; however, Spectra and Boutte Shopping have failed to pay Tegrity the agreed upon sum. Tegrity asserts that it is still owed a minimum of $253,751.74.

On October 19, 2012, Tegrity filed suit in this Court, invoking the Court's diversity jurisdiction, naming as defendants Spectra; Boutte Shopping; and Jeff H. Farmer, Spectra's agent.¹ Tegrity alleges claims for breach of contract, open account, unjust enrichment, and statutory and contractual attorney's fees. On December 5, 2012, all three defendants jointly filed a motion for an extension of time to answer plaintiff's complaint. The Court granted the motion on December 6, 2012, providing defendants twenty-one additional days to file responsive pleadings. Therefore, required responsive pleadings were due on or before December 27, 2012.

On January 28, 2013, thirty days after the December 27, 2012 deadline, plaintiff moved for entry of default under Federal Rule of Civil Procedure 55(a), which the Clerk of Court granted on the same day. Defendants now move to set aside the default entry and to transfer the case to the Western District of Tennessee.

I.

A.

Federal Rule of Civil Procedure 55(c) authorizes the Court to "set aside an entry of default for good cause." Fed. R. Civ. P. 55(c). The Fifth Circuit has observed that good cause "is notsusceptible 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." Dierschke v. O'Cheskey, 975 F.2d 181, 183 (5th Cir. 1992). Thus, "the requirement of 'good cause' . . . ha[s] generally been interpreted liberally." Effjohn Int'l Cruise Holdings, Inc. v. A&L Sales, Inc., 346 F.3d 552, 563 (5th Cir. 2003) (alteration in original) (quoting Amberg v. Fed. Deposit Ins. Corp., 934 F.2d 681, 685 (5th Cir. 1991)).

To determine whether good cause has been shown, the Court considers three nonexclusive factors: (1) whether the failure to act was willful; (2) whether setting the default aside would prejudice the adversary; and (3) whether a meritorious defense has been presented by the defaulting party. Id. Other factors, such as whether the party acted expeditiously in correcting the default, whether there was a significant financial loss to the defendant, and whether the public interest may be implicated by the default, may also be considered. Dierschke, 975 F.2d at 184. These factors should be applied consistent with the principle that defaults are generally disfavored and that resolving cases on the merits is preferable. See Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000)("[F]ederal courts should not be agnostic with respect to entry of default judgments, which are generally disfavored in the law and thus should not be granted on theclaim, without more, that the defendant had failed to meet a procedural time requirement." (internal quotation marks omitted)); see also Amberg, 934 F.2d at 686 ("The Federal Rules are diametrically opposed to a tyranny of technicality and endeavor to decide cases on the merits. Strict enforcement of defaults has no place in the Federal Rules.").

B.

The defendants have shown good cause to set aside the entry of default entered against them.

Applying the first factor, which requires determining whether the failure to act was willful, the Court finds that the defendants's failure to answer amounts to excusable neglect rather than willful misconduct. See Broadwing Commc'ns, Inc. v. Harris, No. 00-1125, 2000 WL 1059863, at *2 (E.D. La. Aug. 1, 2000). This is further supported by the fact that the defendants did file a motion for an extension of time in which to file responsive pleadings, which the Court granted. Moreover, counsel for the defendants represents that he was in communication with the plaintiff's attorney and attempted to schedule mediation in this case before the default was entered. Therefore, the Court cannot conclude that this is a case of "an uncooperative party or an obstructionist adversary." Id.; see also Bona Fide Demolition & Recovery, LLC v. Crosby Constr. Co., No. 07-3115, 2009 WL 4060192, at *2 (E.D. La. Nov. 20, 2009) ("Though defendantsreceived proper service of [plaintiff's c]omplaints, their continued participation in . . . settlement discussions suggest that their lateness was more akin to inadvertent oversight than deliberate recalcitrance. . . . Defendants were not unavailable or otherwise unresponsive, as is commonly the case when a plaintiff moves for an entry of default." (citations omitted)).

As to the second factor, the Court finds that the plaintiff would not be prejudiced by setting aside the entry of default. In fact, this case is in the early stages of litigation; no trial date has been set, and discovery has not commenced. The mere fact that setting aside the default would require the plaintiff to litigate the dispute is insufficient prejudice to require the default to stand. See, e.g., Broadwing, 2000 WL 1059863, at *2; C&G Boats, Inc. v. Tex. Ohio Servs., Inc., 164 F.R.D. 57, 59 (E.D. La. 1995). The defendants seek to defend the plaintiff's allegations by showing that the plaintiff's construction of the shopping center fell substantially behind the contractually agreed upon schedule, causing the defendants to incur substantial damages; thus, under the third factor, the defendants have shown that, if proven in Court, they could have meritorious defenses as to both liability and damages.

Other considerations weigh in favor of relieving the defendants from the entry of default. The defendants acted expeditiously in correcting the default: this motion was filedone day after entry of default and a motion to transfer was filed two days after default. The defendants will also likely incur significant financial loss if the default entry stands, because the plaintiff's claim exceeds $250,000.

Accordingly, the Court finds that the defendants have shown good cause for setting aside the entry of default against them. The Court must now consider the defendants's request to transfer this case.

II.

A.

The Court may transfer an action to a more convenient forum as long as the transferee court is one in which the action could have been initially brought. 28 U.S.C. § 1404(a) ("For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."). Indeed, the Court has broad discretion in determining whether to transfer a case pursuant to § 1404(a). Balawajder v. Scott, 160 F.3d 1066, 1067 (5th Cir. 1998) (quoting Caldwell v. Palmetto State Sav. Bank, 811 F.2d 916, 919 (5th Cir. 1987)). The plaintiff's choice of forum places a "good cause" burden on the defendant seeking transfer. In re Volkswagen of Am., Inc. (Volkswagen II), 545 F.3d 304, 315 n.10 (5th Cir. 2008) (enbanc); see also In re TS Tech USA Corp., 551 F.3d 1315, 1320 (Fed. Cir. 2008). As a result, the moving party must show that transfer is "clearly more convenient." Volkswagen II, 545 F.3d at 315 (emphasis added). Transfer would meet the convenience test, but defendants' somewhat feeble submissions flunk the "clearly convenient" test. Defendants seem to take their burden lightly.

B.

The threshold question under § 1404(a) is whether the lawsuit "might have been brought" in the transferee venue. The defendants seek transfer of this case to the Western District of Tennessee. Regarding venue, a civil action may be brought in "a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located." 28 U.S.C. § 1391(b)(1). A corporation "resides" in any judicial district "in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question." Id. § 1391(c)(2). The parties do not dispute that all three defendants reside in Memphis, Tennessee;² thus, plaintiff's suit could have been filed in the proposed transferee forum.

C.

The Court next determines whether the moving party hasdemonstrated that the Western District of Tennessee is "clearly more convenient" than the Eastern District of Louisiana. To do so, the Court balances relevant private and public interest factors. To weigh the convenience of the two forums, the Fifth Circuit instructs the Court to consider the following private factors:

(1) the relative ease of access to sources of proof;

(2) the availability of compulsory process to secure the attendance of witnesses;

(3) the cost of attendance for willing witnesses;

(4) all other practical problems that make trial of a case, easy, expeditious, and inexpensive;

In addition, the Court is instructed to examine public interest factors such as:

(1) the administrative difficulties flowing from court congestion;

(2) the local interest in having localized interests decided at home;

(3) the familiarity of the forum with the law that will govern the case; and

(4) the avoidance of unnecessary problems of conflict of laws [or in] the application of foreign law.

Volkswagen II, 545 F.3d at 314. Just as this list of factors is not...