The opinion of the court was delivered by: Hon. Jerome B. Simandle
[relates to Docket Item No. 22]
This matter having come before the Court upon the motion of defendant Audubon Board of Education ("Defendant") to (1) vacate default that was entered at the request of plaintiffs L.J., a minor, individually and by his parents, V.J. and Z.J. ("Plaintiff") and (2) for leave to file an amended answer [Docket Item No. 22]; and the Court having received opposition to such motion from Plaintiff; and the Court having considered the parties' submissions;
THE COURT FINDS as follows:
1. This matter arises from a special education dispute that was initiated by V.J. and Z.J., the parents of special education student L.J., against Defendant, Audubon Board of Education. After Plaintiff's parents filed a request for a due process hearing the matter was transmitted to the Office of Administrative Law and assigned to the Honorable Joseph F. Martone, Administrative Law Judge ("Judge Martone") for a hearing. After several days of hearings and post-hearing briefs, Judge Martone issued his final decision in the matter in favor of Plaintiff in October of 2006.
2. On November 8, 2006, Plaintiff filed a complaint (the "Complaint") against Defendant seeking attorney's fees as the prevailing party at the administrative level under 20 C.F.R. § 1415(i)(3)(B). [Docket Item No. 1.] On November 13, 2006, Plaintiff returned the summons, having been served by counsel for Plaintiff (Jamie Epstein, Esq.) on a Ms. Debbie Horan, an accounting clerk working for the Audubon Board of Education. [Docket Item No. 3.] On November 17, 2006, Plaintiff filed an amended complaint against Defendant. [Docket Item No. 4.] Because Defendant failed to timely file an answer, Plaintiff filed a request for default on December 7, 2006 [Docket Item No. 9] and the Clerk of the Court entered default on December 8, 2006.
3. According to Defendant, counsel for Defendant (Paul Kalac, Esq.) was informed by Bob Delongowski (Defendant's Business Administrator/Board Secretary) that Delongowski had received email correspondence from Mr. Epstein regarding Mr. Epstein's request for attorney's fees in the underlying special education litigation before the Administrative Law Judge. (Affidavit of Paul C. Kalac, Esq. ¶ 8.) According to his affidavit, Defendant's counsel was not aware that the Complaint had been served on Defendant nor did counsel receive any e-mail filing from the U.S. District Court referencing the filing of the Complaint by Plaintiff. (Id. ¶ 9, 10.) Instead, counsel for Defendant claims to have learned about the Complaint on December 8, 2006 when a "secretary from [counsel's] office, Donna Caloiaro, inquired as to whether [counsel] was aware of an entry of default in this matter." (Id. ¶ 11.) After learning that an Answer was due on December 4, 2006 and that default had been entered against Defendant on December 7, 2006, Defendant filed an Answer on Monday, December 11, 2006. (Id. ¶ 12.) The Answer did not contain a counterclaim. (Id.)
4. On December 1, 2006, Plaintiff filed an order to show cause seeking enforcement of Judge Martone's October 2006 Order. [Docket Item No. 5.] Defendant's counsel claimed that he first learned that the Defendant was served by hand delivering the Complaint to Debbie Horan, an accounting clerk at Defendant's district high school at the settlement conference prior to the order to show cause hearing before this Court on December 18, 2006. (Id. at ¶ 16.)
5. On January 22, 2007, Defendant filed this motion seeking (1) to vacate default and (2) for leave to file an amended answer to insert a counterclaim that this Court should remand the matter back to Judge Martone for further administrative proceedings. Long after opposition was due, Plaintiff filed opposition to Defendant's motion, to which Plaintiff replied. The Court has considered all of the parties submission (even Plaintiff's untimely filed opposition [Docket Item No. 24]) and did not hear oral argument on the motion. See Fed. R. Civ. P. 78.
6. The Court will first address Defendant's motion to vacate default. A motion to vacate default is governed by Rule 55 of the Federal Rules of Civil Procedure. Under Fed. R. Civ. P. 55(c), "[f]or good cause shown the court may set aside an entry of default . . . ." The standard for "good cause" is similar to the standard for setting aside a default judgment under Fed. R. Civ. P. 60(b). Gold Kist, Inc. v. Laurinburg Oil Co., 756 F.2d 14, 19 (3d Cir. 1985). As the Third Circuit has explained, Although this Court has adopted a policy disfavoring default judgments and encouraging decisions on the merits, Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 245 (3d Cir. 1951), the decision to vacate a default judgment is left to the sound discretion of the trial court. In exercising this discretion, however, the court must consider  whether vacating the default judgment will visit prejudice on the plaintiff,  whether the defendant has a meritorious defense, and  whether the default was the result of the defendant's culpable conduct. United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 195 (3d Cir. 1984).
Harad v. Aetna Cas. & Surety Co., 839 F.2d 979, 982 (3d Cir. 1988); Jimenez v. Marnell, No. 06-2676, 2006 U.S. Dist. LEXIS 82860, *5 (D.N.J. Nov. 13, 2006.) Because Defendant has shown good cause for setting aside default, Defendant's motion will be granted.
7. In determining whether good cause exists to set aside default, the threshold issue is whether a meritorious defense has been asserted. See Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984). Although the defendant need not prove its "meritorious defense" at this stage, "a defendant seeking to set aside a default judgment [must] set forth with some specificity the grounds for his defense . . . [and] the court must then evaluate that defense to determine whether it is meritorious." Harad, 839 F.2d at 982. In support of its motion to vacate entry of default, Defendant argues that it seeks leave to amend its Answer asking this Court to overturn the Judge Martone's October 2006 decision, which forms the basis for Plaintiff's attorney's fee application and Plaintiff's motion for an order to show cause. Defendant argues that Judge Martone acted inappropriately when he refused to allow Defendant to present any evidence or testimony due to Defendant's failure to give the Court five days' notice of what was to be presented as required. (Def.'s Br. at 4.) Here, the Court finds that Defendant has put forth, with sufficient specificity, the grounds for a meritorious defense. If the Court were to conclude that the facts alleged by Defendants are true --- i.e., that Judge Martone's failure to allow Defendant to present evidence and witnesses was unreasonable and prejudicial --- the Court would remand the matter to the administrative law judge to conduct a new hearing where Defendant will be allowed to present its case. Thus, Defendant has set forth enough of the grounds for its defense for this Court to determine that, if believed, Defendant's defense may be meritorious. See Harad, 839 F.2d at 982.
8. The Court must also determine whether the default was the result of Defendant's culpable conduct. To make this determination, "the Court must look at whether the defendant acted with 'willfulness' or 'bad faith' by failing to respond to the Complaint." Jimenez, 2006 U.S. Dist. LEXIS 82860 at *10 (quoting Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984)). "Conduct beyond mere negligence is required." Id.
Here, Mr. Kalac's affidavit sets forth a series of events that lead to Defendant's counsel learning that Plaintiff filed the Complaint, including service on Ms. Horan by Mr. Epstein and Defendant's response by filing a late Answer. At worst, the actions of Defendant in failing to ensure that Defendant's counsel was notified of service of the Complaint are negligent. The actions, however, cannot reasonably be perceived as willful or done in bad faith. As Defendant points out, service of process by email is not approved under Fed. R. Civ. P. 4(j)(2) as to service on local governments and New Jersey Court Rules require personal service on the presiding officer of clerk. N.J. Court Rules R. 4:4-4(a)(8).*fn1 Consequently, the Court concludes that allowing an entry of default to remain at this early ...