Appealed from: United States Court of Federal Claims. Judge Tidwell
Before Lourie, Rader, and Schall, Circuit Judges.
Information Systems and Networks Corporation (ISN) appeals from the June 16, 1992 order of the United states Claims Court*fn1 denying its motion for relief from default judgment. Information Sys. Networks Corp. v. United States, 26 Cl. Ct. 314 (1992). Because we conclude that the Claims Court abused its discretion in denying ISN's motion, we reverse.
In September, 1988 the United States Air Force and ISN entered into a contract under which ISN was required to, inter alia, convert certain Air Force computer operations from Honeywell equipment to IBM equipment. On May 21, 1991, the Contracting Officer (CO) issued a final decision terminating the contract for default and asserting a government claim for $385,211.32 in damages incurred by the Air Force as a result of ISN's alleged failure to properly complete the required conversions. ISN subsequently filed a complaint with the Claims Court alleging that the government was in breach and that the termination for default was wrongful. ISN then filed a joinder motion pursuant to Rule 14 of the court (RUSCC 14) to join its subcontractors as parties in the action.
The government filed an answer to ISN's complaint on January 27, 1992 and an amended answer and counterclaim on January 31. The counterclaim was based on the CO's final decision and it reasserted the government's claim for damages. ISN did not file an answer to the counterclaim and on February 28, 1992, the Clerk entered default pursuant to RUSCC 55(a).*fn2 On March 20, 1992 the government moved for default judgment, which the Claims Court entered on March 31 for the amount of the counterclaim.
Following the entry of default judgment, ISN, which had been pursuing the case through house counsel, immediately hired outside counsel, who filed a motion for relief pursuant to RUSCC 55(c), which provides:
For 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 RUSCC 60(b).
RUSCC 60(b) provides in pertinent part:
On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect."
(Emphasis added). ISN supported its motion with an affidavit of house counsel stating that he mistakenly believed the joinder motion suspended the requirement to file an answer and that, following the entry of default, he met with government counsel during preparation of the joint preliminary status report and was under the impression that the government did not intend to move for default judgment. Accordingly, ISN argued that its failure to file an answer to the counterclaim was the result of excusable neglect.
The Claims Court denied ISN's motion. 26 Cl. Ct. 314. The court found both that the government would not be prejudiced if it granted ISN's motion and that ISN's complaint established a meritorious defense to the counterclaim, since ISN disputed its liability by alleging that the government breached the contract. Id. at 317. The court concluded, however, that ISN's failure to file an answer after receiving notice of the government's counterclaim constituted "culpable" conduct which was not the excusable neglect required by RUSCC 60(b)(1). Id. at 318.
The sole issue before us is whether the court properly denied ISN's motion for relief under RUSCC 60(b)(1). Since the government does not dispute the court's findings regarding the absence of prejudice and the presence of a meritorious defense, this appeal hinges on the definition of ...