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Delta Logistics, LLC v. CMC Food, Inc.

United States District Court, D. New Jersey

October 25, 2018

CMC FOOD, INC., Defendant.


          Hon. Madeline Cox Arleo United States District Judge.

         THIS MATTER comes before the Court on Third-Party Defendant Lehigh Valley Lines, Inc.'s (“Lehigh”) Motion to Vacate Default against it, ECF No. 35, and Defendant/Counterclaim Plaintiff/Third-Party Plaintiff CMC Food, Inc.'s Motion for Default Judgment (“CMC”), ECF No. 26. For the reasons stated herein, Defendant's motion is GRANTED.

         I. Background

         CMC is a New Jersey corporation with its principal place of business located at 282 South Avenue, Fanwood, New Jersey. Third Party Compl. ¶ 1. CMC is in the business of wholesale egg sales and marketing of farm fresh shell eggs and egg products. Id. ¶ 3.

         Underlying the instant motions is a suit brought by Plaintiff Delta Logistics, LLC (“Delta”) against Defendant CMC. See Compl., ECF No. 1, Ex. B. Delta alleged that it performed transportation brokerage services at CMC's request, subject to written contracts. Id. ¶ 3. Delta alleged that CMC refused to pay for its services and sued, inter alia, for breach of contract and unjust enrichment. See id. Delta purported to have acted as a broker between CMC and various carriers, one of whom is Lehigh, and demanded the payment of broker fees allegedly owed by CMC to Delta. Among those fees were fees related to a Lehigh shipment that is the subject of the instant motions.

         CMC's Third-Party Complaint alleges that Lehigh agreed to provide freight transportation services for the transportation of organic eggs from CMC's offices in Clark, New Jersey to Schwenksville, Pennsylvania. Third-Party Complaint (“CMC Compl.”) ¶ 5, ECF No. 6. On or about February 8, 2016, a truck picked up a load of organic eggs from CMC's offices in Clark, New Jersey. Id. ¶ 6. The truck thereafter transported the eggs to Schwenksville, Pennsylvania; however, upon arrival, the eggs were allegedly destroyed and rendered unmarketable. Id. ¶ 7-8.

         CMC filed its Answer, Counterclaim, and Third-Party Complaint, asserting claims against Lehigh on December 22, 2017. ECF No. 6. On January 12, 2018, Lehigh was served, via hand delivery, with a copy of the Answer, Counterclaim, and Third-Party Complaint. ECF No. 9. Accordingly, Lehigh's answer or response to the Third-Party Complaint was due on February 2, 2018. Lehigh failed to appear, plead, or otherwise defend within the time allowed. Accordingly, default was entered against Lehigh. ECF No. 15. On March 27, 2018, CMC moved for default judgment against Lehigh. ECF No. 26. On May 5, 2018, Lehigh moved to vacate default. ECF No. 35. The Court will address both motions here.

         II. Standard of Review

         Fed. R. Civ. P. 55(c) permits a District Court to set aside an entry of default for good cause. The Court must consider 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) (citing Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984)). Courts, in some circumstances, also consider the effectiveness of alternative sanctions. See, e.g., National Specialty Ins. Co. v. Papa, No. 11-2798, 2012 WL 868944, *2 (D.N.J. Mar.14, 2012) (citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 73 (3d Cir.1987)).

         “A decision to set aside an entry of default pursuant to Fed. Civ. P. 55(c) is left primarily to the discretion of the District Court.” Bailey v. United Airlines, 279 F.3d 194, 204 (3d Cir. 2002) (quoting Hritz, 732 at 1180). Courts generally disfavor entry of defaults. Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 982 (3d Cir. 1988). Accordingly, “any doubt should be resolved in favor of the petition to set aside” default. Medunic v. Lederer, 533 F.2d 891, 894 (3d Cir. 1976). “[T]he standard for setting side a default is less stringent than for setting aside a default judgment.” Mettle v. First Union Nat. Bank, 279 F.Supp.2d 598, 601 (D.N.J. 2003) (citing Feliciano v. Reliant Tooling Co., Ltd., 691 F.2d 653, 656 (3d Cir. 1982)).

         III. Legal Analysis

         Lehigh contends that: (1) CMC will not be prejudiced by vacating default; (2) Lehigh has a meritorious defense; and (3) the default was not the result of Lehigh's culpable conduct. Plaintiff disputes each contention. Given the disfavor for entry of defaults, the Court agrees with Defendant.

         A. Prejudice

         Lehigh argues that CMC cannot establish prejudice because this matter is still in the early stages. Lehigh points out that CMC allegedly suffered damages in 2016 and filed suit in 2017, thus weakening CMC's argument that it would be prejudiced if the Court allowed Lehigh to prepare a defense. CMC contends that, due to Lehigh's initial lack of response, it was concerned that Lehigh would neither participate nor provide discovery “which may have been of use vis Delta's purported brokerage claims regarding the shipment at ...

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