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Sam Yang (U.S.A), Inc. v. ENI Dist, Inc.

United States District Court, D. Maryland

December 9, 2016

SAM YANG (U.S.A.), INC., Plaintiff
v.
ENI DIST, INC., Defendant

          MEMORANDUM AND ORDER

          James K. Bredar United States District Judge.

         I. Background

         Plaintiff Sam Yang (U.S.A.), Incorporated (“SYUSA”), brought suit against Defendant ENI Dist, Incorporated (“ENI”), alleging tortious interference with contractual and economic relations, Lanham Act violations, state law trademark infringement, and unfair competition. (Compl., ECF No. 1.) ENI was served on September 6, 2016, and its answer was due September 27, 2016. (ECF No. 7.) On September 27, ENI filed its motion to transfer venue to the Central District of California pursuant to 28 U.S.C. § 1404(a) or, in the alternative, to stay proceedings pending adjudication of a related case in that district. (ECF No. 8.)

         On November 8, the Clerk entered a default against ENI upon SYUSA's motion and after ENI had failed to file an answer in the time allotted under Federal Rule of Civil Procedure 12. (ECF No. 11.) A few days later on November 14, ENI filed its answer. (ECF No. 12.) The Court directed ENI to file a motion, supported by good cause, for leave to late-file its answer. (ECF No. 14.) On November 15, ENI filed a motion to set aside the default entered against it (ECF No. 13), and on November 28, it filed its motion for leave to deem its answer timely filed (ECF No. 15). SYUSA has responded to the motion to change venue and the motion for leave to late-file ENI's answer and has asked the Court to strike ENI's answer. (ECF Nos. 9, 16.) No hearing is necessary. Local Rule 105.6 (D. Md. 2016). ENI's motions as to the timeliness of its answer and entry of default will be granted, SYUSA's motion to strike will be denied, and ENI's additional motion will be denied as to transfer of venue and granted as to its request for stay.

         II. Standard for Vacating an Entry of Default

         Rule 55(c) of the Federal Rules of Civil Procedure permits a district court to set aside an entry of default for good cause. The Fourth Circuit has provided guidance as to how a district court determines whether good cause exists:

When deciding whether to set aside an entry of default, a district court should consider whether the moving party has a meritorious defense, whether it acts with reasonable promptness, the personal responsibility of the defaulting party, the prejudice to the party, whether there is a history of dilatory action, and the availability of sanctions less drastic.

Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 204-05 (4th Cir. 2006). Further, the Fourth Circuit has “repeatedly expressed a strong preference that, as a general matter, defaults be avoided and that claims and defenses be disposed of on their merits.” Colleton Preparatory Academy v. Hoover Universal, 616 F.3d 413, 417 (4th Cir. 2010). Thus, both Rule 55(c) and Rule 60(b) “are to be liberally construed in order to provide relief from the onerous consequences of defaults and default judgments.” Tolson v. Hodge, 411 F.2d 123, 130 (4th Cir.1969). If any doubt exists as to whether relief should be granted, it is to be “resolved in favor of setting aside the default so that the case may be heard on the merits.” Id.

         III. Analysis of Motions for Leave to Late-File Answer and to Vacate Default

         The determination of whether to permit ENI to file its answer out of time is bound up in the determination of whether to vacate the default entered against it. ENI's counsel has acknowledged that she mistakenly believed the motion she filed for change of venue or, alternatively, to stay proceedings pending the outcome of the California case operated as a motion under Federal Rule of Civil Procedure 12 to toll the time for filing an answer to the complaint. (Mot. Leave Supp. Mem. 1; Ex. C, Choi Aff.) She has cited no persuasive authority for this proposition, and the Court knows of none.[1] Nevertheless, the Court accepts that counsel's mistake was made in good faith and will permit ENI's answer to be deemed timely filed. The Court also concludes that vacating the default is appropriate so that the case may be considered on its merits. In that vein, ENI's prompt response to the default, the absence of a history of dilatoriness by ENI, the proffer of a meritorious defense, and the lack of any prejudice to SYUSA favor a finding of good cause to vacate the default.

         IV. Analysis of Motion for Transfer or, Alternatively, for Stay

         A. Motion for Transfer

         ENI has brought its motion for transfer of venue under 28 U.S.C. § 1404(a), which states,

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district ...

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