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Canopius US Insurance, Inc. v. Middleton

United States District Court, D. South Carolina, Charleston Division

January 11, 2016

CANOPIUS U.S. INSURANCE, INC., Plaintiff,
v.
CHARLES MIDDLETON, JR., d/b/a/ CHARLEY O'S, OMAR HAMILTON, JAMAR HAMILTON, ANTWONIA HEYWARD, BRANDON GREENE, and LATEIKA JONES, Defendants.

ORDER

DAVID C. NORTON, District Judge.

This matter is before the court on defendant Charles Middleton ("Middleton") d/b/a Charley O's motion to set aside default. For the reasons set forth below, the court grants Middleton's motion.

I. BACKGROUND

Plaintiff Canopius U.S. Insurance, Inc. ("Canopius") is an eligible surplus lines insurer organized under the laws of Delaware. Compl. ¶ 1. Canopius issued a commercial general liability insurance policy to Middleton. Id . ¶ 6. Middleton leased the insured property and utilized it as a restaurant known as Charley O's. Id . ¶ 7. On February 22, 2015, multiple gunshots were fired inside and outside of Charley O's. Id . ¶ 8. Several people were alleged to have been shot, including defendants Omar Hamilton ("Hamilton"), Jamar Hamilton ("Jamar"), Antwonia Heyward ("Heyward"), Brandon Greene ("Greene"), and Lateika Jones ("Jones"). Id . The victims of the shooting sued Middleton, alleging that Charley O's was not operated in a manner so as to provide a safe environment, which resulted in their injuries.

Canopius filed the present action on September 15, 2015 pursuant to the federal declaratory judgment act, 28 U.S.C. § 2201, requesting that the court declare that it has no obligation to indemnify Middleton and/or the underlying claimants for any bodily injuries sustained at Charley O's on or about February 22, 2015. Canopius served Middleton with the complaint on September 22, 2015. On September 30, 2015, Canopius filed a Proof of Service as to Middleton.

On October 14, 2015, Canopius filed a request for entry of default as to Middleton. The court filed an entry of default on October 28, 2015. On November 3, 2015, Middleton's attorney Jonathan Krell ("Krell") sent Canopius's attorney Morgan Templeton ("Templeton") an email requesting that Middleton be relieved from the entry of default because: (1) he allegedly suffers from health issues that affect his cognition; and (2) an attorney advised Middleton's son that his father should not seek legal counsel. Resp. Ex. 2. On November 6, 2015, Templeton indicated that Canopius was not willing to lift the entry of default. Id . On November 24, 2015, Middleton filed the present motion to set aside default. Canopius filed a response in opposition to the motion on December 8, 2015, and Middleton filed a reply on December 17, 2015. The motion has been fully briefed and is now ripe for the court's review.

II. STANDARD

Federal Rule of Civil Procedure 55(c) provides that "[f]or good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b)." Fed.R.Civ.P. 55(c). The Fourth Circuit Court of Appeals has held that "although the clear policy of the Rules is to encourage dispositions of claims on their merits, trial judges are vested with discretion, which must be liberally exercised, in entering [default] judgments and in providing relief therefrom." United States v. Moradi, 673 F.2d 725, 727 (4th Cir. 1982) (citations omitted). Furthermore, the decision to set aside an entry of default is "committed to the sound discretion of the trial court" and should only be disturbed upon a finding of an abuse of discretion. See Lolatchy v. Arthur Murray, Inc., 816 F.2d 951, 954 (4th Cir. 1987); see also Williams v. Blitz, 226 F.2d 463 (4th Cir. 1955); Papagianakis v. The Samos, 186 F.2d 257, 263 (4th Cir. 1950). Generally speaking, "a default should be set aside where the moving party acts with reasonable promptness and alleges a meritorious defense." Consol. Masonry & Fireproofing, Inc. v. Wagman Constr. Corp., 383 F.2d 249, 251 (4th Cir. 1967). This "good cause" standard is liberally construed "in order to provide relief from the onerous consequences of defaults...." Lolatchy v. Arthur Murray, Inc., 816 F.2d 951, 954 (4th Cir. 1987); see also Tolson v. Hodge, 411 F.2d 123, 130 (4th Cir. 1969) ("Any doubts about whether relief should be granted should be resolved in favor of setting aside the default so that the case may be heard on the merits.").

In Palmetto, this court reviewed the standards used in Rule 55 and Rule 60 cases in the Fourth Circuit and determined that a party attempting to have a default judgment set aside bears a heavier burden than a party that is simply in default. Palmetto Fed. Sav. Bank of S.C. v. Indus. Valley Title Ins. Co., 756 F.Supp. 925, 931 (D.S.C. 1991) vacated, No. 1:90-cv-1599-1, 1991 WL 832830 (D.S.C. May 15, 1991) (vacated upon request of the parties as part of a compromised settlement). However, this court did note that "the factors set forth in Moradi, though they were applied to a Rule 60(b) motion, also provide useful guidelines in a motion to set aside an entry of default." Id . In short, the factors that determine whether an entry of default should be set aside include (1) the promptness of the defaulting party, (2) the presence or absence of a meritorious defense, (3) whether the party or counsel bears the responsibility for the default, (4) the prejudice that would result to the innocent party, (5) whether the defaulting party has a history of dilatory conduct, and (6) the availability of sanctions less drastic. Moradi, 673 F.2d at 728. Of the Moradi factors, courts have placed the greatest significance on the first one. See Moradi, 673 F.2d at 728; Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843 F.2d 808, 811 (4th Cir. 1988); Lolatchy, 816 F.2d at 953; Palmetto, 756 F.Supp. at 932. The court should always keep an eye toward the preference for meritorious resolutions of disputes. Palmetto, 756 F.Supp. at 932.

III. DISCUSSION

Middleton asks this court to set aside the entry of default "upon the grounds that there is good cause." Def.'s Mot. 1. The court will apply the factors set forth in Moradi to determine whether Middleton has established good cause to warrant his request to set aside the entry of default.

A. Promptness of Defaulting Party

The court filed an entry of default on October 28, 2015, and Middleton filed the present motion on November 24, 2015. Canopius does not contest Middleton's promptness in filing his motion to set aside default. Thus, the ...


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