McKesson Medical-Surgical Inc. v. Flower Orthopedic Corporation, No. 3:2017cv00631 - Document 22 (E.D. Va. 2018)
Court Description: MEMORANDUM OPINION. Signed by District Judge Robert E. Payne on 2/15/2018. (jsmi, )
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McKesson Medical-Surgical Inc. v. Flower Orthopedic Corporation Doc. 22 IN THE NITED STATES DISTRICT COURT FOR THE EASTEN DISRICT OF VIRGINIA Ricmond Division MCKESSON MEDICAL-SURGICAL, INC. Plaintiff, Civil Action No. 3:17cv631 v. FLOWER ORTHOPEDICS CORPORATION, Defendant. MEMODM OPINION This matter is before the Court on Defendant's MOTION TO SET ASIDE ENTRY OF DEFAULT (ECF No. 15), as well as Plaintiff's MOTION FOR ENTRY OF DEFAULT JUDGMENT (ECF No. 10) and FLOWER ORTHOPEDICS CORPOATION'S MOTION FOR ENARGEMENT OF TIME TO FILE AN ANSWER ND COUNTERCLAIM (ECF No. 17). Defendant seeks to set aside the Clerk of Court's Entry of Default (ECF No. 9) for good cause, asserting that it failed to answer the Complaint because the parties were engaged in ongoing settlement negotiations when Plaintiff sought entry of default. below, For the reasons set forth the MOTION TO SET ASIDE ENTRY OF DEFAULT will be granted; (ECF No. 15) FLOWER ORTHOPEDICS CORPOATION'S MOTION FOR ENLARGEMENT OF TIME TO FILE N NSWER AND COUNTERCLAIM (ECF No. 17) will be granted; and the MOTION FOR ENTRY OF DEFAULT JUDGMENT (ECF No. 10) will be denied as moot. Dockets.Justia.com BACKGROUin? 1. Factual Background McKesson distributor supplies, Medical-Surgical medical of Inc. medical and supplies, medical Corporation ("Flower implants surgical the and wrist, entered hand, into Agreement") lab supplies. Orthopedics")^ instruments shoulder, a ("McKesson") distribution on March 8, 2013, Flower supplies that foot, equipment, are and is a surgical Orthopedics bone-fixation used primarily for ankle. agreement The ("the companies Distribution pursuant to which McKesson would be a non-exclusive authorized distributor of Flower Orthopedics' products. Compl. (ECF No. 1) f 7; id., Ex. 1. On or around amendment part, to of amounts of Flower periods beginning its Agreement, (1) Flower and meet Distribution that: customers; Nonetheless, 2013, the provided distributor September 1, (2) McKesson Orthopedics' August would be in the products purchase products 2013. agreed to which, would Orthopedics' McKesson in the parties for to certain several Compl. H 8; id., an relevant exclusive certain minimum six-month Ex. 2. according to Flower Orthopedics, McKesson failed to minimum purchase commitment after that point, and. ^ The caption of this case incorrectly states Flower Orthopedics' name as "Flower Orthopedic." indeed, sold a minimal amount of during the course of the parties' (ECF No. steps 16-1) nil to train 6-7. As products, distribution network parallel and sales also that to products relationship. Burckhardt Decl. result. McKesson's Orthopedics' strategy a Flower Orthopedics' Flower staff hired would a in sales selling separate, implement McKesson's Orthopedics a took Flower independent co-distribution efforts. Id. 8-9. \ Flower Orthopedics having to take claims these that it actions suffered financial because of harm from McKesson's poor distribution. Id. H 10. Then, on March 4, exclusivity effective provision 120 subsequently (''the 2015, of days a the Repurchase amended that from reached Flower Orthopedics date. termination Agreement") on May terminated the Distribution Compl. t 9. and 8, Agreement, The repurchase 2015, parties agreement which required Flower Orthopedics to repurchase its products from McKesson in accordance with Schedule"). Id. unable parties to pay a particular id. , H 10; schedule When Flower Orthopedics was consistent modified it by Ex. with 3. the agreement on ("the Repurchase February Repurchase Schedule, 1, 2016 the ("the Repurchase Amendment"). Compl. H 11; id., Ex. 4. Flower Orthopedics failed to pay McKesson the full amount required by the modified Repurchase Schedule in the Repurchase Amendment. Compl. 12. As of November 8, 2017, the amount of principal and late charges owed by Flower Orthopedics under the Repurchase Amendment was $2,287,176.00. Ringberg Aff. (ECF No. 10-1) nil 9-12. In or around March Burckhardt the {'"Burckhardt") / repayment McKesson's schedule Vice individuals exchanged with would for proposals Ringberg Orthopedics Flower Orthopedics' discussed President agreement. proposed, 2017, later pay a a possible Erik Supplier but amount of (^'Ringberg") , Management. could to Oliver resolution Ringberg offered larger CEO, not reach settle than The if any Flower Burckhardt but Flower Orthopedics did not agree to had that offer. Burckhardt Decl. H 15. 2. Procedural Background After those negotiations were unsuccessful, McKesson filed its Complaint here on September 19, 2017. ECF No. 1. It asserted three claims: related to Repurchase FIRST Flower Amendment; CLAIM FOR Orthopedics' and SECOND RELIEF, Breach failure CLAIM to FOR of pay Contract, under RELIEF and the THIRD CLAIM FOR RELIEF, Account Stated and Open Account, respectively, for the summons unpaid and a amount. copy of Id. til 6-22. the Complaint McKesson on then Flower served a Orthopedics, through its vice president, on September 26, 2017. ECF No. 7. On October 12 and received the Complaint, ("Marcus")/ Garfinkle When 13, 2017, after Flower its New Jersey counsel, G. Orthopedics Robert Marcus left two voicemails with McKesson's counsel, ("Garfinkle")• Garfinkle Garfinkle returned those Decl. calls (ECF on No. October Jeffrey 20-1) 13, H 11. Marcus explained why Flower Orthopedics did not accept Ringberg's last settlement offer, (ECF No. offer 16-2) % 3. would Marcus and then made a need sent Garfinkle to be Garfinkle counter-proposal. Marcus Decl. indicated in writing, an e-mail that any Garfinkle later that settlement Decl. H 12, so day confirming the details of the earlier offer, Marcus Decl. H 3. None of Marcus's communications although referenced both litigation attorneys in their Marcus Reply Decl. McKesson unacceptable, the Complaint expressed a conversation. (ECF No. 21-1) apparently or general Garfinkle this litigation, desire to avoid Decl. HH 12-13; ^ 3. found the October 13 offer and Garfinkle never responded to Marcus. Garfinkle Decl. K 14. Having not received any response, Marcus claims that he called Garfinkle and left a voicemail on October 20, 2017. Marcus Decl. K 4; Marcus Reply Decl. H 6. Garfinkle asserts that he never received that message. Garfinkle Decl. HH 15-16. In any event. Flower Orthopedics did not file an answer or otherwise respond to the Complaint within the required twenty- one days. October See 25, Fed. 2017, R. Civ. P. McKesson 12(a) (1) (A) (i) . requested that enter default against Flower Orthopedics. then entered default on November 6, Marcus had left another 2017. As the a Clerk ECF No. ECF No. voicemail result, 8. of on Court The Clerk 9. with Garfinkle on November 3, but Garfinkle was unable to respond until November 6. called Marcus When he on that date, Garfinkle informed him that McKesson had rejected the October 13 settlement offer, and that the Clerk had entered default against Flower Orthopedics. Marcus Decl. H 4; Garfinkle Decl. H 17. Garfinkle also rejected Marcus's request to have the entry of default set aside. Marcus Decl, H 6. Shortly thereafter, have the Court Orthopedics. ECF on November 8, enter No. 10. opposition to that motion, default Flower 2017, McKesson moved to judgment against file an instead moved on November 13 but Orthopedics did not Flower to have the Clerk's entry of default set aside.^ ECF No. 15. Flower Orthopedics also moved to enlarge attaching a ^ Thus, the time to proposed Answer and Counterclaim. this motion effectively serves as McKesson's motion for default judgment, file an answer, ECF No. 17; id.. an opposition to which would have been analyzed under the same standard as a motion to set aside entry of default. See Vick v. Wong, 263 2009). 6 F.R.D. 325, 329 (E.D. Va. Ex. A. McKesson has only responded to Flower Orthopedics' motion to set aside the entry of default. See ECF No. 20. DISCUSSION 1. Legal Standard Entry of default is mandatory where, failed to plead or otherwise defend, by affidavit." Fed. R. Civ. P. as here, a party "has and that failure 55(a). However, is shown "[t]he court may set aside an entry of default for good cause." Id. 55(c). Courts analyze six factors when deciding whether good cause "whether the moving party has a meritorious defense, acts with reasonable promptness, the defaulting party, is a history sanctions Brake, of less 439 drastic." F.3d 198, 204-05 Masonry & Fireproofing. 249, 251 (4th Cir. action, Payne Inc. 1967) ex (4th v. whether it the personal responsibility of the prejudice to the party, dilatory exists: and rel. Cir. the Wagman Constr. ("Generally a availability Estate 2006); whether there of see Calzada also Corp., default of v. Consol. 383 F.2d should be set aside where the moving party acts with reasonable promptness and alleges a meritorious defense."). Deciding whether a "is a matter discretion." however, which Payne, 43 9 defaulting party has lies F.3d largely at 204. shown good cause within the [Court's] The Fourth Circuit, has "repeatedly expressed a strong preference that, as a general matter, defaults be avoided and defenses be disposed of on their merits." Acad., Cir. Inc. v. 2010) ; see Comp. Program, 1990) ("The matter . 954 that . Hoover Universal, also U.S. law . Tazco, 616 v. Dir., Dep^t of Labor, disfavors 1987) [Rule] (" [A] n 55 (c) provide relief defaults . . must . ." Office judgments .") ; Lolatchy v. Arthur Murray, (4th Cir. F.3d 413, 895 F.2d 949, default claims and Colleton Preparatory Inc., Inc. that 417 of 950 as Inc., (4th Workers (4th Cir. a general 816 F.2d 951, extensive line of decisions has held be from liberally the construed onerous in order consequences (internal quotations omitted)). to of Moreover, the burden on a defendant seeking relief from entry of default under Rule 55(c) judgments is lower under Rule than the 60(b). burden Although provisions implicate similar factors, standard . . . is more for relief analyses from default under both "Rule 55(c)'s ^good cause' forgiving of defaulting parties because it does not implicate any interest in finality," as no judgment has been entered. Colleton Preparatory Acad., 616 F.3d at 420. 2. Motion to Set Aside Entry of Default The parties' arguments focus reasons for Flower Orthopedics' its personal meritorious responsibility, defense. They almost exclusively on the failure to answer, which bear on and largely the ignore availability the remaining of a four Payne factors.^ However, the factual record before the Court is developed enough for it to examine all the factors here. so leads to the conclusion that the entry of Doing default against Flower Orthopedics should be set aside. A. To Meritorious Defense show the existence of a meritorious defense only "requires a proffer of evidence which would permit a finding for the defaulting counterclaim." party or Augusta which Fiberglass Contracting Corp., standard is "not onerous," IT Exp. Corp., ''all that evidence, the is jury to Moradi, 673 Fiberglass, 843 F.2d if believed, find for F.2d 843 is . . . whether 812 Pinpoint necessary . . . is establish Coatings, 808, 812 F. Supp. 2d 710, which, would (4th a 727 F.2d there v. Fodor 1988) . This L.L.C. v. Atlas 2011); indeed, presentation or proffer of would permit either the Court or (4th at Cir. (E.D. Va. the defaulting party," 725, valid Inc. IT Servs., 724 a Cir. 812 is some 1982); ("The United States v. see also Augusta underlying possibility concern that the outcome . . . after a full trial will be contrary to the result ^ McKesson contends that Flower Orthopedics' failure to address these factors implies that they are either irrelevant or weigh in McKesson's favor. That argument has effectively been mooted by Flower Orthopedics' discussion of each factor in its reply. Moreover, McKesson also failed to address those factors, so it is unclear why they would automatically weigh in its favor even in the absence of argument. 9 achieved by the added) (internal defenses must default." (alterations quotations 'allege [ ] factors, the proffered (3d Cir. Court defense has or {emphasis Nonetheless, ''the specific facts beyond simple denials Pinpoint IT Servs., (quoting United States v. 728 F.2d 192, 195 original) omitted)). or conclusionary statements.'" 2d at 724 in 812 F. $55,518.05 in U.S. Supp. Currency, 1984)). As with the other good cause the discretion counterclaim is to decide whether meritorious, id., a but disputed factual questions should be resolved in the defaulting party's 263 favor, F.R.D. at Flower see Augusta Fiberglass, contends affirmative defense prior Orthopedics' view, the minimum based Orthopaedics, P.C. prior Cropscience LP v. 2017) (same). that it material when it failed effectively and commitments. McKesson Orthopedics Cir. thereto purchase (explaining of products Orthopedics, 812; Vick, has viable In breach. a Flower McKesson breached the Distribution Agreement amendment Orthopedics' F.2d at 330. Orthopedics and 843 cannot on v. breach Albemarle Corp., Because any 261 Va. 696 F. its says Flower against Flower 142, see Countryside 154 and (2001) also App'x 617, Second Flower fulfill See doctrine); McKesson's 10 not claims contract. Peyton, material did distribute Consequently, bring that to Bayer 622 Third (4th Claims are derivative of its First Claim for breach of contract, defense would, if meritorious, this apply to all three of McKesson's claims. In response, McKesson argues that the prior material breach doctrine cannot reasons. the supply a First, it says, Repurchase Agreement meritorious defense here for two that doctrine does not apply because was a novation of the Distribution Agreement, and thus extinguished any obligations the parties had under the Distribution Agreement. breach of the Distribution As such, Agreement is McKesson's alleged irrelevant validity of its claims under the Repurchase Agreement extension, that, the Repurchase Amendment). even if the Repurchase Second, Agreement was to the (and, by McKesson asserts not a novation, Flower Orthopedics waived the right to assert a prior material breach defense when Distribution Agreement it continued to perform under the even after McKesson allegedly breached that contract. Neither of McKesson's assertions are compelling here. With respect to its first argument, a novation is a mutual agreement . . . for discharge of a valid existing obligation by the substitution of a new valid obligation on the part of the debtor . . . . To effect a novation there must be a clear and definite intention on the part of all concerned that such is the purpose of the agreement . . . . Its essential requisites are a previous 11 valid obligation, the agreement of all parties to the new contract, the extinguishment of the old contract, and the validity of the new contract. Honeywell, Inc. v. asserting a Elliott, novation 213 Va. bears the 86, 89-90 burden of (1972) . The party showing all these elements with "clear and satisfactory" proof. Id.; see also Dere V. Montgomery Ward & Co. , whether the parties determined from new all agreement.'" intended the 277, 281 create (1982) . a and circumstances S. Ry. Co. v. In addition, novation Drummond 2016 WL 4532411, at *6 "'is to incident to Coal be the Sales, (W.D. Va. Aug. 29, (quoting Dillenberg v. Thott, 217 Va. 433, 435 Here, (1976)). the parties agree that the Distribution Agreement was followed by the parties, but they dispute the to facts Norfolk Inc., No. 7:08cv00340, 2016) 224 Va. latter Repurchase Agreement and the same the underlying intent and effect of agreement. McKesson contends Agreement Repurchase involved clearly shows that the Section parties' 8 of the intent to extinguish the Distribution Agreement. That provision states, in relevant part, that: "The Distribution Agreement, including without limitation any provisions therein relating to the return of inventory, is hereby terminated by mutual consent, without limitation. Agreement. their terms Section 7 Provisions survive in the including (Exclusivity) of the Distribution Distribution Agreement termination are 12 which by incorporated by reference herein . . parties . Flower did not Distribution Agreement Orthopedics, intend to Agreement or the release by however, claims executing Repurchase asserts In the the under arising either Amendment. that the Repurchase fact, as Flower Orthopedics explains, although McKesson initially sought to have Flower Orthopedics Agreement, release McKesson agreement when such removed Flower a claims in release Orthopedics the Repurchase provision refused to from agree that to it. Burckhardt Decl. ^ 14; Marcus Reply Decl., Ex. A. It may turn out to be true that the Repurchase Agreement is a novation, after the parties have had a chance to conduct full discovery. But resolving that issue here would be premature. The facts provided in the Burckhardt Declaration establish McKesson may have breached the Distribution Agreement, such breach Agreement intend and to still Repurchase fully Distribution might could the the parties as obligations Burckhardt arising Decl. HH 6-14. under This not the breach it cannot "presented no the to statement of Flower underlying Orthopedics' did McKesson under those latter agreements. Based on these facts, that Flower Repurchase to said eliminate under and that liability be or alleged Amendment, release Agreement. reduce be that Orthopedics facts . . . to has enable court appraise the merits of the claimed defense." Consol. Masonry & 13 Fireproof inq, 383 F.2d at 252; see also Red Light Mgmt. , Inc. v. Dalton, 315 F.R.D. 65, 70-72 (W.D. Va. 2016) (defaulting party failed to establish meritorious defense where he ''rel [ied] purely legal argument" without any supporting facts, defenses were inconsistent with available on a and claimed evidence). construing these facts in Flower Orthopedics' favor, Rather, they are a sufficient proffer of a meritorious defense. McKesson's argument about Flower performance fails for the same reason. Orthopedics' continued As interpreted recently by the Fourth Circuit, the prior material breach doctrine does not plaintiff bar a breaching "from suing [defendant] for [defendant]'s subsequent breaches of contract when both parties continued to perform under the contract." Bayer Cropscience, 696 F. App'x at 623. This argument whether Flower Orthopedics McKesson's breach by has thus presents waived the continuing to the right question of to perform challenge under the Distribution Agreement. And waiver is generally a factual issue that depends on a party's conduct, acts, or course of dealing. See Bernsen v. Innovative Legal Mktg., LLC, 833-34 (E.D. Va. 2012). Burclchardt Declaration, Considering the facts proffered in the it is impossible to conclude with any certainty that Flower Orthopedics' breach effected a 885 F. Supp. 2d 830, waiver of its 14 continued performance postright to assert a breach of contract claim against McKesson. Accordingly, Flower Orthopedics has presented enough evidence to show that its claimed defense is not ''without any merit," Pinpoint IT Servs. , 812 F. Supp. 2d at 725, so this factor weighs in its favor here. B. Reasonable Promptness The reasonable promptness factor similarly weighs in favor of setting aside the entry of default. taken 'reasonably prompt' "Whether a party has action . . . must be gauged in light of the facts and circumstances of each [case]." Moradi, 673 F.2d at 727. Nonetheless, "courts routinely look at other courts' decisions to determine whether a delay is reasonable." Burton v. The TJX Cos. , Inc. , No. 3:07-CV-760, 2008 WL 1944033, at *3 (E.D. Va. May 1, 2008). There promptly is little here. dispute The Clerk that entered Flower Orthopedics default against acted Flower Orthopedics on November 6, 2017, and Flower Orthopedics moved to set that default aside—and also filed its proposed answer—only seven days later. The Fourth Circuit has concluded that moving to set aside entry of default within nine days is reasonably prompt. See Colleton Preparatory Acad. , Tazco, 895 F.2d at 950 answer "[w]ithin eight default award"). days 616 F.3d at 418; see (party acted promptly where it filed of receiving notification of the Courts have also found reasonable promptness 15 where defaulting relief. parties See JTH Tax, 3035279, at reasonable *9 waited Inc. v. {E.D. Va. promptness much longer Callahan, June 6, in moving No. 2013) to set before seeking 2:12CV691, 2013 WL (defendant aside acted with default sixteen days after default was entered); Burton, 2008 WL 1944033, at *3 ("District defendant courts acted in the Fourth reasonably Circuit promptly when have found waiting that a seventeen, twenty-one, and thirty-two days after default was entered before attempting to set it aside." (citing United States v. $10,000.000 in United States Currency, No. 1;OO-CV-0023, 2002 WL 1009734, at *3 (M.D.N.C. Jan. 29, 2002); Esteppe v. Patapsco & Back Rivers R.R. Co., No. Civ. H-00-3040, 2001 WL 604186, at *4 (D. Md. May 31, Airways Corp., 2001) ; Wainwright's Vacations, 130 F. Supp. 2d 712, 718 LLC v. (D. Md. Pan Am. 2001))). Therefore, this factor weighs in Flower Orthopedics' favor here. C. Personal Responsibility This factor is neutral at worst, and at best, weighs in favor of setting default aside. Courts may decline to set aside an entry of default "when the party's default was intentional or the result of negligence." Pinpoint IT Servs., 812 F. Supp. 2d at 726. At the same time, negligence, "when . . . default was the result of the Court may consider whether the negligence was excusable" in weighing this factor. 16 Id. The pertinent issue is whether the defaulting party is "ultimately responsible" for the failure to respond. Id. Deciding that question requires courts to "focus on the source of the default" and "distinguish between the fault of [the defaulting party]'s attorney and the fault, any, of F.2d at party [the defaulting party] 811. not attorney "[J]ustice," be itself." Augusta Fiberglass, after all, disadvantaged by which cause proceedings." Moradi, a the final, "demands that a errors or involuntary if 843 blameless neglect of termination his of 673 F.2d at 728. In recognition of these principles, courts in the Fourth Circuit have consistently found that defaulting defendants were not to personally responsible their attorneys 616 F.3d at 419-20 for or agents. defaults that were attributable See Colleton Preparatory Acad., (defendant's agent received summons and complaint but forwarded to third party instead of defendant); Augusta Fiberglass, 843 F.2d at 811-12 (defendant's attorney was served with amended complaint but never sent it to defendant); Lolatchy, 816 F.2d at 952-53 (default followed repeated failure of respond defendants' attorney to to plaintiff's discovery requests); Moradi, 673 F.2d at 727-28 (default occurred because, after defendant retained counsel, attorney failed to obtain local counsel to submit pleadings). In contrast, defendants have been considered personally responsible where they took minimal 17 steps to obtain counsel receiving the complaint. 73 (although defendant with plaintiff, communicate with See Red Light Mgmt., hired counsel to counsel 315 F.R.D. negotiate after at 72- settlement defendant did not contact attorney when served with process); (defendant or Pinpoint IT Servs. , only sent single 812 e-mail F. to Supp. try 2d at 726-27 and obtain local counsel despite knowing for weeks that plaintiff would initiate suit). Flower Orthopedics' its default was contention that any neglect leading to attributable to its attorney is persuasive. Burckhardt and Ringberg had engaged in settlement negotiations well before Orthopedics Complaint, counsel, McKesson was its filed served 13, 2017, its answer pursuant a copy Marcus, of Then, the reached after summons out to Flower and the McKesson's previous Marcus and Garfinkle spoke on October only four days before Flower Orthopedics had to file any attempt Complaint. seemingly to continue the parties' settlement negotiations. reach with attorney, Garfinkle, its to Rule resolution, to contact for 12. After the whatever Garfinkle again reason, until, attorneys did not Marcus at the did not earliest, October 20,^ after the answer deadline had passed. Garfinkle did ^ Marcus and Garfinkle Garfinkle on this date, dispute whether Marcus ever called but that disagreement is immaterial to 18 not respond until November 6, when default was entered, and Flower Orthopedics filed this motion shortly thereafter. Given this Orthopedics to background, received the determine if it appears Complaint, McKesson would Marcus be that, after Flower contacted Garfinkle willing to resolve the parties' contract dispute without litigation. Marcus likely took these steps at the direction of Flower Orthopedics, particularly because he was also—as stated to Garfinkle—a member of the company's board of directors. Garfinkle Decl. K 12. As a result, it is also reasonable to infer that Marcus was responsible for notifying Flower Orthopedics of the progress, or lack thereof, of the settlement negotiations, and the need to respond to the Complaint by a certain date. See Burton, 2008 WL 1944 033, at *4 (inferring answer that, [the] ^^since complaint, [defendant]'s she was attorney was responsible for hired to the answer's lateness"). Thus, Flower Orthopedics' failure to answer was most likely caused Orthopedics negotiations. by of It Marcus's the is lack true failure of that, to timely success in apprise the unlike in some of Flower settlement the cases which the defendants were not personally responsible. in Flower Orthopedics actually received the Complaint, which suggests that it bears more responsibility than those defendants. However, the whether Flower Orthopedics or Marcus was failure to file a timely answer. 19 responsible for the circumstances here do not indicate that Flower Orthopedics was primarily responsible because it did not simply sit on its hands after receiving the Complaint, as in Red Light Management or Pinpoint IT Services. See Red Light Mgmt, 315 F.R.D. at 12-12-, Pinpoint IT Servs. , 812 F. Supp. 2d at 126-21. To the contrary. Flower Orthopedics enlisted Marcus to take certain actions, and Marcus did not update the company as he should have when those actions failed to produce the desired result. See Burton, 2008 WL 1944033, at *4, Consequently, even if Flower Orthopedics is not blameless, it is not the party responsible for the missed deadline. This factor therefore weighs in favor of setting aside default. Furthermore, there is no question that relying on settlement negotiations as a basis for not responding to the Complaint does not excuse Flower Orthopedics' failure to respond to the Complaint. But McKesson's citation of establishing that proposition misses the point. no attempt Marcus's, as to the separate Flower Orthopedics' Fourth Circuit has done, numerous cases McKesson makes culpability from and that distinction is critical here. Moreover, even if Flower Orthopedics could be considered personally responsible, courts should not "place[] overarching emphasis on a single Payne factor," especially where a defaulting party seeks relief from an entry of default instead 20 of a default judgment. Colleton Preparatory Acad., 419-21. Therefore, 616 F.3d at even if this factor weighs against Flower Orthopedics, it is not dispositive in the good cause analysis. D. History of Dilatory Action McKesson has not shown any evidence that Flower Orthopedics has a history of dilatory action. In these circumstances, where a defaulting party has not engaged in delays preceding the entry of default, courts consider whether the party has acted timely during the pending litigation. See Red Light Mgmt., at 73 (factor weighed in defendant's 315 F.R.D. favor where he had ^^no previous history of dilatory action" and his "filings ha[d] been timely since he entered this action"); Pinpoint IT Servs., 812 F. Supp. 2d at 727 {despite lack of previous history of delay, factor weighed against defaulting party because it "had more than one instance of dilatory action in this matter"). Here, Flower Orthopedics' only other filing since appearing in this action-its reply in support of the motion to set aside the entry of default—was timely. Consequently, this factor weighs in favor of setting aside the entry of default. E. Prejudice to the Plaintiff This factor also weighs in Flower Orthopedics' favor. To assess the prejudice to the non-defaulting party, courts examine whether the delay: (1) made it impossible for the non-defaulting 21 party to present some of its evidence; (2) made it more for the non-defaulting party to proceed with trial; (3) hampered the non-defaulting party's ability to complete discovery; and (4) was used by the defaulting party to collude or commit a fraud. See Lolatchy, 816 F.2d at 952-53. Courts give the most weight to 1944033, (citing at *4 the first two factors. Lolatchy, 816 Burton, F.2d at 2008 WL 952-53). In addition, mere inconvenience or "delay in and of itself does not constitute prejudice." Colleton Preparatory Acad., 616 F.3d at 418; see also Lolatchy, 816 F.2d at 953. McKesson has not demonstrated that it would be prejudiced by letting this case proceed on the merits. There are no facts suggesting that Flower Orthopedics' late response has affected McKesson's ability to present evidence, proceed with trial, or complete discovery. Indeed, this action is at such an early stage, and Flower Orthopedics rectified its error so quickly, that the scheduling impact of the delay has likely been minimal. Accordingly, this factor weighs in favor of setting aside default. F. Availability of Lesser Sanctions Neither party has identified any lesser sanctions that are appropriate here besides default, but such lesser sanctions undoubtedly exist. For instance, courts have "commonly imposed 22 alternative monetary sanctions on attorneys who are responsible for a party's default." Vick, 263 F.R.D. at 331 (citing, inter GNB, Inc. V. Tropex, Inc. , 849 F.2d 605, 1988 WL 60618, at *2 (4th Cir. June 3, 1988) (alternative sanction of attorney's fees appropriate); Lolatchy, 816 F.2d at 953-54 (sanctions short of default such as costs, attorneys' fees, or contempt of court would have likely cured attorney's failure to respond); Smith v. Bounds, 813 F.2d 1299, 1304 (4th Cir. 1987) (contempt sanctions appropriate as an alternative to default judgment)). Here, as discussed, to the delay appears to be largely attributable Marcus's failure to ensure that Flower Orthopedics responded to the Complaint while he was engaged in settlement negotiations with Garfinkle. Thus, monetary sanctions on Marcus is a possible alternative to the drastic sanction of entry of default. And, even if Flower Orthopedics was more responsible than Marcus for the delay, the Court could simply require Flower Orthopedics to pay McKesson's fees and costs associated with seeking entry of default and default judgment. See Red Light Mgmt., 315 F.R.D. at "73; Pinpoint IT Servs. , 812 F. Supp. 2d at 728. Therefore, given the availability of sanctions other than entry of default or default judgment, this factor weighs in Flower Orthopedics' favor. 23 3. Motion for Enlargement of Time to Answer The decision to grant Flower Orthopedics' motion to set aside the entry of default necessitates consideration of Flower Orthopedics' request to file an untimely answer. That request is governed by Rule 6(b); When an act specified cause, (A) may or must be time, the court done may, within a for good motion or extend the time: with or without notice . . . if a request is made, before the original time or its extension expires; or (B) on motion made after the time expired if the party failed because of excusable neglect. Fed. R. Civ. P. 6(b)(1). has to act Flower Orthopedics was required to respond to the Complaint within twenty-one days of service—that is, by October 17, 2017. See id. 12(a) (1) (A) (i) . However, it did not move to extend the time to answer until November 13, 2017, well after that deadline had passed. Therefore, the Court may only grant Flower Orthopedics' motion if it failed to answer because of "excusable neglect," and if there is "good cause" to allow an extension. Deciding whether bottom an equitable a party's [inquiry], neglect is excusable is "at taking account of all relevant 24 circumstances surrounding the party's omission."^ Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 395 (1993). Relevant factors include "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 the movant, and whether the movant acted "[a]1though inadvertence, construing the rules do in good faith.'' Id. Furthermore, ignorance of the rules, not usually or mistakes constitute 'excusable' neglect, it is clear that 'excusable neglect' under Rule 6(b) is a somewhat elastic concept." omitted) . Nonetheless, at 392 excusable demonstrated" under this standard. (internal quotations neglect ''is Thompson v. not E.I. easily DuPont de Nemours & Co., 76 F.3d 530, 534 (4th Cir. 1996). Flower Orthopedics has shown that its neglect in failing to timely respond to the Complaint is excusable. As explained above, the delay here was insignificant and has not prejudiced McKesson in any meaningful way. In addition. Flower Orthopedics appears to have acted in good faith, believing that McKesson would not seek entry of default because of ongoing settlement Although Pioneer interpreted the meaning of "excusable neglect" in the context of the Federal Rules of Bankruptcy Procedure, courts have applied its framework in discussing excusable neglect under Rule 6(b). See, e.g.. Tucker v. Chrysler Credit Cor^^, 149 F.3d 1170, 1998 WL 276266, at *2-3 (4th Cir. May 29, 1998), 25 negotiations and then filing a proposed answer shortly after learning of the Orthopedics' default. delay-the Finally, "most the reason important of for the Flower [Pioneer] factors," id.—indicates that its failure to answer the Complaint was an inadvertent mistake. Flower Orthopedics must be held accountable in this context for the acts and omissions of its attorney, Marcus. Pioneer Inv. Servs., 507 U.S. at 396-97. But, when a defaulting party is not primarily responsible for the default, its neglect. See noted. attorney's Augusta Flower Marcus's Fiberglass, Orthopedics' failure Complaint negligence to during have the settlement negotiations. reasonable, albeit reject Flower McKesson sought account, and Flower mistaken, entry of considering F.2d was at error latest default. be Here, as primarily by respond to Orthopedics' resulted that Taking offer these outlined the would before facts in the view) from Garfinkle settlement factors excusable 811. caused Flower assumption the still Orthopedics (in This Orthopedics' 843 default ongoing can into Pioneer, Marcus's neglect, and thereby Flower Orthopedics', is excusable. In addition, Orthopedics' time there is good to answer the cause for Complaint. extending This Flower opinion has already explained at length why there is good cause for setting aside the entry of default against Flower Orthopedics. See supra 26 Section II. And, as described above. Flower Orthopedics has established that its neglect in responding to the Complaint was excusable. Consequently, extending its time to answer the Complaint under Rule 6(b)(1) is appropriate here. CONCLUSION For the foregoing reasons. ENTRY OF DEFAULT (ECF No. Defendant's MOTION TO SET ASIDE 15) will be granted; FLOWER ORTHOPEDICS CORPORATION'S MOTION FOR ENLARGEMENT OF TIME TO FILE AN ANSWER AND COUNTERCLAIM (ECF No. 17) will be granted; and Plaintiff's MOTION FOR ENTRY OF DEFAULT JUDGMENT (ECF No. 10) will be denied as moot. I t is so ORDERED. /s/ Robert E. Payne Senior United States District Judge Richmond, Virginia Date: February 15, 2018 27
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