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Prince Payne Enterprises, Inc. v. Tigua Enterprises, Inc.

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

March 6, 2019

PRINCE PAYNE ENTERPRISES, INC., United States for the Use and Benefit of Prince Payne Enterprises, Inc., Plaintiff,
v.
TIGUA ENTERPRISES, INC. and RESTORATION SPECIALISTS LLC, Defendants.

          ORDER

          DAVID C. NORTON UNITED STATES DISTRICT JUDGE.

         The following matter is before the court on plaintiff Prince Payne Enterprises, Inc.'s (“Prince Payne”) motion for default judgment, ECF No. 5, and defendant Tigua Enterprises, Inc.'s (“Tigua”) motion to set aside default judgment, ECF No. 8. For the reasons set forth below, the court grants Tigua's motion to set aside default and denies the motion for default judgment as to Tigua and denies without prejudice the motion for default judgment as to defendant Restoration Specialists LLC (“Restoration Specialists”).[1] In addition, the court awards attorney's fees and costs to Prince Payne for litigating this issue.

         I. BACKGROUND

         This case arises out of a payment dispute between a contractor and subcontractors. Tigua entered into a contract with the United States Department of State to perform certain operations and maintenance services. Tigua subcontracted with defendant Restoration Specialists LLC (“Restoration Specialists”) (collectively with Tigua, “defendants”) to perform work at a Department of State site in North Charleston. Restoration Specialists in turn subcontracted portions of this work to Prince Payne. Prince Payne alleges that it performed the work until Restoration Specialists stopped paying Prince Payne's invoices in August 2017, and defendants now owe Prince Payne $50, 233.75.

         Prince Payne filed this suit on September 17, 2018, alleging a violation of the Miller Act, breach of contract, unjust enrichment, and a violation of South Carolina Unfair Trade Practices Act (“SCUTPA”). Prince Payne served its complaint, summons, and response to interrogatories via certified U.S. mail to defendants. Tigua's documents were addressed to John Kealey, the project manager for Tigua for the Naval Nuclear Power Training Command and the registered agent of Tigua. The certified mail for Tigua was accepted on November 9, 2018.[2] However, the person who accepted the mail, as indicated by the signature of the mail receipt, was Max Jacobs, a person who is not affiliated with Tigua and was probably an employee in the mailroom at the Naval Weapons Station. Tigua explains that its physical address is 2316 Red Bank Road, Building 206, Suite 142, Goose Creek, SC, which is located on the Naval Weapons Station and is the address Prince Payne used for service; however, since the Air Force took charge of the Naval Weapons Station, all mail addressed to Tigua is delivered to the Air Force Post Office. Tigua states that sometimes it is not informed that it has mail at the Air Force Post Office until several months after the mail is delivered.

         On January 16, 2019, an employee of the Air Force Post Office contacted Mr. Kealey and told him that he had a certified letter addressed to Mr. Kealey. When Mr. Kealey retrieved the letter, he realized what it was a complaint and summons and gave it to Neil Butler, the project manager for Tigua at another project in Charleston, who sent the complaint and summons to Tigua's corporate offices. Tigua then realized Prince Payne filed a motion for default judgment in the case and entered an appearance on January 31, 2019.

         The return receipt for Restoration Specialists was returned to Prince Payne as “Moved, Unable to Forward, ” so Prince Payne served Restoration Specialists through the Secretary of State of South Carolina on November 5, 2018. Restoration Specialists has still not entered an appearance in the case.

         Prince Payne filed a motion for default judgment as to both defendants on January 17, 2019. ECF No. 5. On January 31, 2019, Tigua responded to the motion, ECF No. 9, and also filed a motion to set aside default, ECF No. 8. On February 7, 2019, Prince Payne replied to its motion for default judgment, ECF No. 12, and on February 14, 2019, Prince Payne responded to Tigua's motion to set aside default judgment, ECF No. 13. Prince Payne requested entry of default as to Tigua from the clerk on February 26, 2019, ECF No. 14, which the clerk granted on February 27, 2019, ECF No. 15. The court held a hearing on the motions on February 27, 2019.

         II. DISCUSSION

         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). 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.”). The decision to set aside an entry of default is “committed to the sound discretion of the trial court.” Lolatchy, 816 F.2d at 954.

         The Fourth Circuit has identified several factors that a court should consider when determining whether to set aside an entry of default: “whether the moving party has a meritorious defense, whether it acts with reasonable promptness, the personal responsibility of the defaulting party, the prejudice to the party, whether there is a history of dilatory action, and the availability of sanctions less drastic.” Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 204-05 (4th Cir. 2006). When considering these factors, the Fourth Circuit has “repeatedly expressed a strong preference that, as a general matter, defaults be avoided and that claims and defenses be disposed of on their merits.” Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc., 616 F.3d 413, 417 (4th Cir. 2010). Here, Tigua argues that default should be set aside by primarily focusing on its meritorious defenses while also briefly touching on the other factors. In response, Prince Payne argues that Tigua cannot show good cause for setting aside default because Tigua was properly served via certified mail pursuant to South Carolina's rules of service

         The issue here is not whether Tigua was properly served; it is whether Tigua has shown good cause for setting aside the entry of default. Tigua does not seem to contest the propriety of the service. Instead, it argues that pursuant to the factors enumerated by the Fourth Circuit, it can show good cause to set aside the entry of default. Based on these factors, the court agrees that good cause exists to set aside Tigua's default.

         A. Reasonable Promptness

         Tigua argues that it acted with reasonable promptness when it became aware of the complaint and summons. When courts consider the reasonable promptness factor, they do so beginning at the time the defaulting party learned of the lawsuit and not necessarily at the time at which it was served. For example, in Colleton Prep. Academy, Inc., the Fourth Circuit found no error in the district court finding that the defaulting party acted promptly when it acted within nine days after its counsel learned about the case, even though the party's agent had been properly served several months before. 616 F.3d at 418. Similarly, courts consider the promptness with which the defaulting party responded to the other party's motion for default judgment. See LM General Ins. v. Frederick, 2019 WL 689570, at *3 (D.S.C. Feb. 19, 2019) (finding defendant acted with reasonable promptness when default was entered on June 29, the plaintiff moved for default judgment on July 23, and the defendant moved to ...


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