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First American Financial Corporation v. Homefree Usa, Inc.

United States District Court, Fourth Circuit

June 12, 2013

FIRST AMERICAN FINANCIAL CORPORATION Plaintiff
v.
HOMEFREE USA, INC. Defendant.

REPORT AND RECOMMENDATION

SUSAN K. GAUVEY, Magistrate Judge.

There are three motions presently pending before the court: Defendant's Motion to Vacate Order of Default Judgment and Leave to File Answer (ECF No. 15), defendant's Motion for Leave of Court to File Memorandum of Law in Support of Defendant's Motion to Vacate Order of Default (ECF No. 23) and plaintiff's Motion for Entry of Default Judgment by Clerk (ECF No. 18). Briefing is complete. By orders of reference dated December 12, 2012 and April 12, 2013, the Honorable Ellen L. Hollander referred the above motions to a magistrate judge for review (ECF Nos. 19 and 25). For the following reasons, I recommend that defendants' motions be GRANTED and the plaintiff's motion be DENIED.

I. Background

A. Factual Background

Plaintiff First American Financial Corporation ("First American") alleges the following in its complaint. On or about October 25, 2006, defendant Homefree USA Inc. ("Homefree"), entered into a loan agreement with NHSA JPS, LLC ("NHSA") whereby NHSA agreed to make loan advances to HomeFree not to exceed the sum of two million dollars. (ECF No. 1, ¶ 6). On or about September 22, 2009, NHSA and Homefree entered into a First Amended Loan Agreement. (Id.). Pursuant to the Loan Agreement as Amended, NHSA made advances of $2, 173, 824.26 to Homefree. ( Id., ¶ 7). NHSA's rights under the loan were subsequently assigned to plaintiff. (Id. at ¶ 8). Defendant failed to make any payments on the loan. (Id. at ¶ 12). Defendant was given notice of its default but all loan payments remain outstanding. (Id. at 13). As a result, plaintiff asks for judgment in the amount of $2, 500, 000, prejudgment interest through the date of judgment, costs and expenses, and reasonable attorney's fees. (Id. at 14).

B. Procedural Background

Plaintiff filed a complaint based on diversity jurisdiction on September 27, 2012. (ECF No. 1). Defendant was served on October 19, 2012. (ECF No. 9). Its answer was due on or before November 9, 2012. On November 9, defendant's counsel, Robert Sharp Jr., filed a motion for admission pro hac vice. (ECF No. 10). The motion was rejected, however, due to Mr. Sharp's failure to sign the document. (ECF No. 12).

On November 14, the Clerk entered an entry of default. (ECF No. 13). On November 28, Mr. Sharp filed a corrected motion to appear pro hac vice. (ECF No. 14). On the same day, defendant filed a motion to vacate the entry of default. (ECF No. 15). Plaintiff filed a response opposing this motion on December 3, 2012, and a motion for default judgment on December 4, 2012. (ECF No. 17; ECF No. 18). Defendant filed an opposition to plaintiff's motion for default judgment on December 21, 2012. (ECF No. 21).

On April 9, 2013, defendant filed a motion requesting the Court's leave to file a memorandum and affidavit in support of its November 28 motion to vacate the entry of default. (ECF No. 23). Defendant acknowledges that Local Rule 105.1 requires that a memorandum be attached to defendant's initial motion to vacate, but asks for the Court's leave to belatedly file its memorandum and affidavit in support of the motion. Defendant's memorandum and affidavit were attached to the motion. On April 19, plaintiff filed its opposition to this motion. Briefing is complete on all the three motions.

II. Analysis

A. Motion for Leave of Court to File Memorandum of Law in Support of Defendant's Motion to Vacate Order of Default (ECF No. 23)

At the outset, the Court must determine whether to consider defendant's late submission of a memorandum and two affidavits in support of its motion to vacate entry of default. Pointing to Fed.R.Civ.P. 6(b), plaintiff argues that defendant has failed to demonstrate "excusable neglect" sufficient to allow the Court to consider its untimely submission. (ECF No. 26, 3-4). In reply, defendant argues that the strong preference that defaults be avoided mandates that its submission be reviewed. (ECF No. 27, 2).

The Fourth Circuit has interpreted "excusable neglect" to encompass "late filings caused by inadvertence, mistake, or carelessness, as well as by intervening circumstances beyond the parties control." Symbionics Inc. v. Ortlieb , 432 Fed.Appx. 216, 219 (4th Cir. 2011)(quoting Pioneer Inv. Servs. v. Brunswick Assocs. Ltd. P'ship , 507 U.S. 380, 388 (U.S. 1993)). The Supreme Court has found that the inquiry is "at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission, " including:

the danger of prejudice to the [non-movant], the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of ...

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