UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

SOUTHERN DIVISION 

CONTINENTAL CASUALTY COMPANY, 

Plaintiff, 

v. Case No. 15-11943 

 HON. TERRENCE G. BERG 

WILLIAM C. HARSHA, et al. HON. DAVID R. GRAND 

 

Defendants. 

 / 

ORDER DENYING DEFENDANT ANGELA THOMPSON’S 

MOTION TO SET ASIDE A CLERK’S ENTRY OF DEFAULT (DKT. 60) 

 This is a declaratory judgment action. On May 29, 2015, Plaintiff Continental 

Casualty Company filed suit against members of a law firm and others, some 14 

Defendants in all, seeking a determination that it is not liable to pay claims under a 

professional liability insurance policy. (See dkt. 1.) On July 23, 2015, Plaintiff filed 

its First Amended Complaint. (Dkt. 18.) The First Amended Complaint omitted 

Defendant Angela Thompson, who had been named in the original complaint, 

because Defendant Thompson had voluntarily filed for bankruptcy. (Id. at ¶ 20.) 

Plaintiff explained in its motion that it intended to file “a motion with the 

Bankruptcy Court seeking leave to further amend its complaint in this action to 

rename Thompson as a defendant.” (Id.) As a result of the bankruptcy filing, the 

Court entered a notice on July 28, 2015 staying all proceedings in this case against 

Defendant Thompson in accordance with 11 U.S.C. § 362(a). (Dkt. 23.) 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 1 of 12 Pg ID 1585
2 

 On August 3, 2015, Plaintiff was granted relief from the automatic stay in 

Defendant Thompson’s bankruptcy case. (Dkt. 62-7.) In the bankruptcy court order, 

the stay was lifted “for the limited purpose of allowing Continental to continue to 

prosecute the declaratory judgment action styled Continental Casualty Co. v. 

William C. Harsha, et al., Case No. 15‐cv‐11943 (E.D. Mich.) against debtor Angela 

Thompson”. (Id. at ¶ 2.) The stay was also lifted to allow “Continental to pay ‘claim 

expenses,’ as defined by the Policy, incurred by Thompson in connection with 

certain third‐party liability claims asserted by former clients” of the law firm. (Id. at 

¶ 3.) 

 On August 13, 2015, Plaintiff requested leave to file its Second Amended 

Complaint “for the sole purpose of renaming Angela Thompson” as a Defendant in 

this case. (Dkt. 26, p. 1.) Plaintiff also requested that all defendants be ordered to 

respond to the Second Amended Complaint within 14 days of its filing. (Id. at 16.) 

No defendant challenged the motion, and Plaintiff’s Second Amended Complaint 

was accepted for filing on September 3, 2015. (Dkt. 28.) Defendants were also 

ordered to respond within 14 days of the date of the Order. (Id. at 3.) In its order 

granting Plaintiff leave to file its Second Amended Complaint, this Court explicitly 

stated that “[o]n August 3, 2015, Plaintiff was granted relief from the automatic 

stay in Defendant Thompson’s bankruptcy case.” (Id. at 1.) 

 The Second Amended Complaint renames Angela Thompson and asserts that 

the bankruptcy stay imposed in her bankruptcy proceeding has been lifted “for the 

limited purpose of allowing Continental to continue to prosecute this action against 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 2 of 12 Pg ID 1586
3 

Thompson” and for Plaintiff to pay certain “claim expenses” incurred by Thompson. 

(Dkt. 26-3, ¶ 107.) Defendant Thompson did not respond to the Second Amended 

Complaint or otherwise appear in this action. On November 4, 2015, Plaintiff 

requested a clerk’s entry of default against Defendant Thompson and two other 

defendants. (Dkts. 44-46.) The defaults were entered on November 5, 2015. (Dkts. 

47-49.) 

 For approximately six months afterward, Defendant Thompson continued to 

ignore this case. During that time, those parties that did participate engaged in 

complex settlement negotiations before United States Bankruptcy Court Judge 

Mark Randon. (See dkt. 56.) As part of this Court’s facilitation order, a stay was 

imposed in this matter prohibiting “discovery, responses to discovery, or 

disclosures” and “motions, responses to motions already filed, or responsive 

pleadings”. (Id. at ¶ 8.) On May 23, 2016, the parties filed a status report with the 

undersigned notifying the Court that a settlement was reached in principle on 

March 11, 2016 and that term sheets had been signed on May 12, 2016. (Dkt. 59, p. 

1.) Accordingly, the parties requested a 45-day continuance of the stay to allow the 

settlement to be finalized. (Id. at 2.) That continuance expired on July 7, 2016. 

 On May 31, 2016, Defendant Thompson filed a motion to set aside the clerk’s 

entry of default judgment that was filed on against November 5, 2015. (Dkt. 60.) In 

her motion, Defendant Thompson argues that, as a lay person, she did not 

“understand or appreciate” that she was required to take any action in this case and 

asserts that she has a meritorious defense. (Id. at 11-12.) Although she admits to 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 3 of 12 Pg ID 1587
4 

receiving Plaintiff’s Second Amended Complaint renaming her as a Defendant and 

alleging that the bankruptcy stay had been lifted for the explicit purpose of 

pursuing this action against her, as well as this Court’s September 3, 2015 Order 

stating the same, Defendant Thompson maintains that she believed these 

proceedings remained stayed. (Id. at 12.) Defendant Thompson’s motion is notably 

silent on the question as to whether she or her bankruptcy attorney received the 

August 3, 2015 order lifting the bankruptcy stay and ordering Plaintiff to pay 

certain expenses on behalf of Defendant Thompson.1 (See id.) 

 On June 14, 2016, Plaintiff filed a response to Defendant Thompson’s motion, 

arguing that it would be significantly prejudiced if Defendant Thompson were 

permitted to litigate this matter now, on the eve of settlement. (Dkt. 62, p. 14.) 

Plaintiff also asserts that Defendant Thompson’s conduct is sufficiently culpable to 

merit denying her motion and that she has not asserted a meritorious defense to 

Plaintiff’s claims. (Id. at 9, 12.) 

 Plaintiff’s motion is joined by Defendants Edward Szachta and Mary Van 

Hevele, who did defend themselves in this matter and who urge the Court to deny 

Defendant Thompson’s motion to set aside the Clerk’s entry of default in part 

because significant prejudice will result to everyone involved in the settlement. 

(Dkt. 63.) Defendants Szachta and Van Hevele assert that Defendant Thompson 

should not be considered a “lay person” because she “was a legal assistant or legal 

                                                            

1 At a status conference held in this matter on June 24, 2016, Defendant Thompson’s counsel, who is 

not the attorney representing her in her bankruptcy proceeding, admitted that he did not know 

whether she had received the order lifting the bankruptcy stay. Defendant Thompson did not file a 

reply brief addressing this question. 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 4 of 12 Pg ID 1588
5 

secretary for 38 years” and “the office manager at the firm” from 1999 to 2014 and 

thus “very familiar with legal pleadings and papers, including summonses, 

complaints, and defaults, and the consequences of a default”. (Id. at 2.) Defendant 

Thompson did not file a reply brief and, pursuant to Local Rule 7.1, the time to do 

so has passed; she therefore leaves these assertions unchallenged. 

 Defendant Thompson’s motion fails to show good cause to set aside the 

default and therefore it will be DENIED.2 The decision whether to set aside an 

entry of default is discretionary. Shepard Claims Serv., Inc. v. William Darrah & 

Assocs., 796 F.2d 190, 193 (6th Cir.1986). A district court may set aside an entry of 

default “[f]or good cause shown.” Fed. R. Civ. P. 55(c). In ruling upon a motion 

seeking to set aside a clerk’s entry of default, the court must weigh whether: 1) the 

other parties will be prejudiced; 2) the defaulted defendant has articulated a 

meritorious defense or claim; and 3) the defaulted defendant’s culpable conduct led 

to the default. Berthelsen v. Kane, 907 F.2d 617, 620 (6th Cir. 1990). The Court 

undertakes this balancing test in light of this circuit’s “somewhat more lenient 

standard” with respect to “Rule 55(c) motions where there has only been an entry of 

default, than to Rule 60(b) motions where judgment has been entered.” Shepard 

Claims Serv., 796 F.2d at 193. 

                                                            

2 The Court acknowledges that Defendant Thompson’s motion is inappropriate in light of the 

discovery and motion practice stay imposed on January 26, 2016 and extended through July 7, 2016. 

(See dkts. 28, 56.) Rather than strike the motion, the Court will address its merits given that 

Plaintiff and two Defendants have responded, and given the potential impact of this motion on the 

settlement negotiations in this matter. 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 5 of 12 Pg ID 1589
6 

1. The Other Parties will be Significantly Prejudiced 

 The other parties will be significantly prejudiced if Defendant Thompson is 

permitted to set aside the clerk’s entry of default. A plaintiff must point to 

something more than mere delay in order to establish prejudice. Thompson v. Am. 

Home Assurance Co., 95 F.3d 429, 433 (6th Cir.1996). Rather, “the delay must 

result in tangible harm such as loss of evidence, increased difficulties of discovery, 

or greater opportunity for fraud or collusion.” Id. at 433–34. 

 As a threshold matter, this case was filed over a year ago and has been 

stayed since January 26, 2016 while the parties engaged in settlement discussions. 

As a result, Plaintiff asserts that it has not taken any discovery in this matter 

during this time or filed any of its intended motions for default judgment or for 

partial judgment on the pleadings. (Dkt. 62, p. 20.) If Defendant Thompson were 

able to set aside the clerk’s entry of default now, the parties would have to reinitiate 

discovery after a considerable amount of time during which, according to Plaintiff, 

some witnesses may no longer be available to testify at trial because they have 

changed positions and employers. (Id.) 

 Moreover, allowing Defendant Thompson to step in at the last minute would 

be highly prejudicial to all the parties that participated in the settlement 

negotiations in good faith. Plaintiff asserts that, in the six months since the default 

was entered against Defendant Thompson, the other parties have spent much time 

engaged in complex settlement negotiations before Judge Mark Randon and 

undoubtedly incurred significant legal fees. Defendants Szachta and Van Hevele 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 6 of 12 Pg ID 1590
7 

add that, on March 11, 2016, a seven-hour settlement conference took place 

involving six attorneys and a majority of the parties, including several who were 

proceeding pro se.3 (Dkts. 62, p. 12; 63, p. 4.) 

 After the settlement conference, negotiations continued for weeks until term 

sheets were drafted and signed in May 2016. (Id.) Per the term sheets, one of the 

conditions for settlement is that this Court will grant Plaintiff’s yet-to-be filed 

motion for default judgment against Defendant Thompson and the other defendants 

who did not respond to the Second Amended Complaint (Leo Foran and David 

Priehs). (Dkt. 62-10, p. 20.) Accordingly, allowing Defendant Thompson to litigate 

this case now would threaten to undo the binding settlement agreement to which 

the other parties have agreed. Defendant Thompson could have participated in 

these negotiations, even on a pro se basis, but she chose not to do so. This factor 

weighs heavily against granting Defendant Thompson’s motion. 

2. Defendant Thompson States a Meritorious Defense to One Claim 

 Defendant Thompson has articulated a meritorious defense to one, but not to 

both, of Plaintiff’s claims. In the Sixth Circuit, a defendant must state “a defense 

good at law” in order to establish a meritorious defense. INVST Fin. Group, Inc. v. 

Chem–Nuclear Sys., Inc., 815 F.2d 391, 398–99 (6th Cir.1987). The asserted 

meritorious defense will be deemed sufficient so long as it contains “‘even a hint of a 

                                                            

3 Although Defendant Thompson did not participate in the settlement negotiations, the other parties 

discussed whether to release her from liability in any final agreement. At the status conference held 

in this matter on June 24, 2016, the parties that did participate in the settlement conference 

confirmed that they discussed how to include Defendant Thompson in the final agreement and it was 

determined that she would not be released because she was not similarly-situated to those parties 

being released from liability; instead, the parties agreed to treat Thompson like Defendant Brian 

Benner because some of the parties insisted that she and Defendant Benner were co-conspirators 

who intentionally committed wrongdoing. 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 7 of 12 Pg ID 1591
8 

suggestion’ which, [if] proven at trial, would constitute a complete defense.” Id. A 

defendant need not demonstrate a likelihood of success on the merits. Berthelsen, 

907 F.2d. at 621–22. Finally, all ambiguous or disputed facts must be resolved in 

the light most favorable to the defendant. INVST Fin. Group, 815 F.2d at 398. 

 In the Second Amended Complaint, Plaintiff asserts two counts: (1) for a 

declaration that the 2014-2015 Lawyers Professional Liability Policy is void ab 

initio due to misrepresentations in the application; and (2) for a declaration that, 

even if the 2014-2015 Policy were not rescinded and void ab initio, it would not 

afford coverage for any of the liability claims asserted by third parties against 

Defendants. (Dkt. 26-3, ¶¶ 3-4.) 

 In her motion, Defendant Thompson asserts that she has a meritorious 

defense to these claims because “Plaintiff wrongfully failed and refused to provide a 

defense and indemnification of Ms. Thompson under the insurance policies,” 

resulting in a breach of the insurance policies that are the subject of this action. 

(Dkt. 60, pp. 13-14.) According to Defendant Thompson, “Plaintiff never 

demonstrated that the claims against Ms. Thompson were outside the scope of 

coverage of the insurance policies and, wrongfully and unilaterally, ceased 

providing insurance coverage to Ms. Thompson, an insured person.” (Id. at 13.) 

 As Plaintiff notes, however, this defense speaks only to Plaintiff’s second 

claim – whether the policy in question affords coverage, as a contractual matter, for 

the third-party liability claims asserted against Defendants in relation to the 

suspected misappropriation of settlement funds. Defendant Thompson articulates 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 8 of 12 Pg ID 1592
9 

no defense to Plaintiff’s first claim – that the policy was void from the beginning 

because of material misrepresentations made in the application. Without a defense 

to the claim that Plaintiff is entitled to rescind the policy in question, setting aside 

the clerk’s entry of default against Defendant Thompson will not result in a 

different outcome, even if this matter were to proceed to trial. 

 Accordingly, although Defendant Thompson is able to articulate a defense to 

one of Plaintiff’s two claims, this second factor does not, on balance, weigh in favor 

of granting Defendant Thompson’s motion. 

3. Defendant Thompson Willfully Disregarded these Proceedings 

There is no evidence that Defendant Thompson deliberately attempted to 

thwart these proceedings, but the record supports the conclusion that Defendant 

Thompson acted in a careless and inexcusable manner by not responding to the 

Second Amended Complaint despite repeated notice from two courts that the 

bankruptcy stay had been lifted with respect to this case and that this case was 

proceeding against her. 

 Proceedings against Defendant Thompson were stayed in this matter when 

she filed for bankruptcy. Defendant Thompson admits, however, that she received 

the Second Amended Complaint and this Court’s January 26, 2016 Order granting 

Plaintiff leave to file said complaint. (Dkt. 60, p. 9) Both of these documents 

explicitly state that any stay previously in effect in this case has been lifted and 

that this case is now proceeding against Defendant Thompson. Moreover, the 

bankruptcy court’s order lifting its stay for the explicit purpose of allowing Plaintiff 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 9 of 12 Pg ID 1593
10 

to proceed against Defendant Thompson in this court was entered three months 

before the clerk’s entry of default was granted. Defendant Thompson does not deny 

that she was served with this order4 or with Plaintiff’s motion for relief from the 

bankruptcy stay that preceded it. 

 In short, Defendant Thompson had ample notice that Plaintiff was seeking 

relief from the stay, was granted that relief, and had renamed her as a defendant in 

this case before the clerk’s entry of default was granted. Even after the clerk’s entry 

of default was granted, Defendant Thompson continued to do nothing, seemingly 

acquiescing in the clerk’s entry of default. In total, Defendant Thompson allowed 

the default to sit unchallenged for over six months, only stirring to action after the 

other parties had hammered out a settlement which Defendant Thompson perhaps 

sees as unfavorable to her. 

 Although Defendant Thompson is not an attorney, according to the record she 

worked as a legal assistant or legal secretary in a law firm setting for 

approximately 38 years. (Dkt. 63, p. 2.) For 29 years, she was Defendant Benner’s 

legal assistant and served as the office manager of Defendant Benner’s law firm for 

15 of those years. (Id.) Based on this experience in a law firm setting, Defendant 

Thompson would appear to possess an above-average familiarity with court filings, 

related legal documents, and the significance of meeting filing dates and keeping 

current with the Court’s docket. 

                                                            

4 Given that the bankruptcy court’s order lifting its stay with respect to this case also orders Plaintiff 

to pay certain “claim expenses” incurred by Defendant Thompson, it seem unlikely that the order 

would have escaped Defendant Thompson’s notice. 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 10 of 12 Pg ID 1594
11 

Accordingly, the Court does not give weight to Defendant Thompson’s 

assertions that she simply did not understand, despite repeated notice, that the 

bankruptcy stay had been lifted to allow Plaintiff to pursue this action, or that she 

did not fully appreciate the consequence of having a clerk’s entry of default entered 

against her. Even if the Court gave weight to these assertions, Defendant 

Thompson benefitted from the assistance of counsel throughout her bankruptcy 

proceedings. Her counsel would have received electronic notice of the bankruptcy 

court’s order lifting the stay and would have been responsible for bringing this 

important order to her attention. Defendant Thompson does not assert otherwise. 

 Defendant Thompson has not articulated good cause justifying her delay in 

appearing in this matter. “[I]t is not necessary that conduct be excusable to qualify 

for relief under the ‘good cause’ standard of Rule 55(c).” Shepard Claims Serv., 796 

F.2d at 194. The Sixth Circuit has made it clear that “[t]o be treated as culpable, the 

conduct of a defendant must display either an intent to thwart judicial proceedings 

or a reckless disregard for the effect of its conduct on those proceedings.” Id. 

 While there is no evidence in the record indicating that Defendant Thompson 

deliberately attempted to thwart these proceedings, there is ample proof that she 

recklessly disregarded the effect her dilatory conduct would have. Defendant 

Thompson willfully disregarded these proceedings after receiving repeated notice 

that the bankruptcy stay had been lifted. Defendant Thompson was given due 

warning that the case was proceeding against her and she had every opportunity to 

litigate it. While her conduct does not rise to the level of “an intent to thwart” the 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 11 of 12 Pg ID 1595
12 

proceedings, it is strongly suggestive of a reckless disregard for the effect her 

conduct would have on the proceedings. Though this factor is less compelling than 

the other two, it also weighs in favor of denying relief. 

 On balance, the Court finds that the circumstances in this case do not 

support setting aside the clerk’s entry of default against Defendant Thompson and 

allowing her to proceed on the merits at this late stage. The Court makes this 

determination with the understanding that the burden Defendant Thompson must 

meet is lighter than that imposed on a party seeking to set aside a default 

judgment. 

Accordingly, Defendant Angela Thompson’s Motion to Set Aside Clerk’s Entry 

of Default (Dkt. 60) is DENIED. Moreover, given that the continuance requested by 

the parties in their May 23, 2016 status report expired on July 7, 2016, the parties 

are directed to file their settlement documentation. (See dkt. 59, p. 2.) 

SO ORDERED. 

s/Terrence G. Berg 

TERRENCE G. BERG 

UNITED STATES DISTRICT JUDGE 

Dated: July 12, 2016 

Certificate of Service 

I hereby certify that this Order was electronically submitted on July 12, 2016, using 

the CM/ECF system, which will send notification to each party. 

 By: s/A. Chubb 

Case Manager 

4:15-cv-11943-TGB-DRG Doc # 64 Filed 07/13/16 Pg 12 of 12 Pg ID 1596