The opinion of the court was delivered by: Bumb, United States District Judge
[Dkt. Nos. 30, 31, 37, 38]
This matter comes before the Court upon Plaintiff XL Specialty Insurance Company's ("XL") motion for default judgment as to Defendants Donald T. Baldi, Anthony S. Antonelli, and Doreen Riordan Sarama (collectively, the "Individual Defendants") [Dkt. No. 31]; and three motions by the Individual Defendants to vacate the Clerk's entry of default against the Individual Defendants, entered on June 23, 2008 [Dkt. Nos. 30, 37, 38].
On May 17, 2007, XL filed a Complaint in this Court against Torchio Brothers, Inc. ("Torchio Brothers"), Gregory V. Torchio, Vincent A. Torchio, and the Individual Defendants, seeking contractual indemnification in the amount of $572,898.28 for losses sustained in connection with XL's issuance of surety bonds to Torchio Brothers. The Complaint alleged that on or about February 17, 2004, Defendants Torchio Brothers, Gregory Torchio, Vincent Torchio, and the Individual Defendants executed and delivered a General Agreement of Indemnity (the "Indemnity Agreement") in favor of XL, as indemnitee, in order to induce XL, as surety, to issue bonds on behalf of Torchio, as principal.
On or about June 6, 2007, service of the Complaint was effectuated on all Defendants. Torchio Brothers filed its Answer and Crossclaims on July 30, 2007 and Gregory and Vincent Torchio filed their Answer on August 8, 2007. [See Dkt. Nos. 3, 7]. The Individual Defendants never filed an answer or otherwise moved before the Court within the time allotted under Fed. R. Civ. P. 12(a).
On June 17, 2008, XL filed a motion for summary judgment against Gregory and Vincent Torchio and Torchio Brothers. [Dkt. No. 21]. After reviewing the moving papers and receiving no opposition thereto, the Court granted XL's motion for summary judgment on July 23, 2008. [Dkt. No. 28]. In the meantime, XL obtained a Clerk's entry of default against the Individual Defendants on June 23, 2008. Thereafter, on July 31, 2008, XL filed the present motion seeking default judgment against the Individual Defendants. Since the Clerk's entry of default on June 23, 2008, each of the Individual Defendants has filed a motion to vacate the entry of default (and an accompanying proposed answer) as follows: Antonelli filed his motion on July 28, 2008, and Baldi and Sarama filed their motions on August 28, 2008.
Pursuant to Fed. R. Civ. P. 55(c), "[t]he court may set aside an entry of default for good cause..." While judgments based on default are not favored, the decision whether to set aside an entry of default under Rule 55(c) is left to the discretion of the district court. United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194-95 (3d Cir. 1984). "[D]oubtful cases [are] to be resolved in favor of the party moving to set aside the default judgment 'so that cases may be decided on their merits.'" Id. (citing Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)). In making a decision, the Court "must consider the following three factors: (1) whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious defense; and (3) whether the default was the result of the defendant's culpable conduct." Gold Kist, Inc., v. Laurinburg Oil Co., Inc., 756 F.2d 14, 19 (3d Cir. 1985).*fn1 The Court will address each of these factors in turn.
A. Prejudice to Plaintiff
As to the issue of prejudice, XL argues that it will be prejudiced if the Court sets aside each default because "XL has spent more than a year prosecuting this matter after suffering losses of nearly $500,000 due to the default of [Defendants]." (Pl. Reply, dated Sept. 14, 2008 [Dkt. No. 41] at 4). However, as Defendant Antonelli points out, XL's prosecution of the case against the Individual Defendants has not involved a great deal of effort on the part of XL. (See Def. Antonelli Reply, dated Sept. 18, 2008 [Dkt. No. 42] at 2). Indeed, it appears that the only actions XL has taken against the Individual Defendants up to this point are: filing/serving the Complaint, requesting a Clerk's entry of default, and filing a motion for default judgment. Accordingly, while setting aside the default might render XL's minimal efforts thus far a waste, in this Court's view, such result would not constitute prejudice to XL. This factor weighs in favor of setting aside the entries of default against the Individual Defendants.
The second factor, whether the defendant has established a meritorious defense, is deemed a "threshold question" because without it, the defendant could not win at trial and, thus, "there would be no point in setting aside the default... ." $55,518.05, 728 F.2d at 195. A meritorious defense is shown "when 'allegations of defendant's answer, if established on trial, would constitute a complete defense to the action.'" Id. (citing Tozer, 189 F.2d at 244; Farnese v. Bagnasco, 687 F.2d 761, 764 (3d Cir. 1982)). As the Third Circuit has emphasized, the allegations in the defendant's answer must contain "specific facts beyond simple denials or conclusory statements." Id. (citing Gross v. Stereo Component Systems, Inc., 700 F.2d 120, 123 (3d Cir. 1983); Feliciano v. Relian Tooling Co., Ltd., 691 F.2d 653, 657 (3d Cir. 1982); ...