the light most favorable to the defendant] J,’ resolving any doubts in [its] favor”
given its “general preference for judgments on the merits”).
Ill. DISCUSSION

After considering the above factors, the Court concludes for the following

reasons that there is good cause to set aside the Clerk’s entry of default.
A. Willful Conduct

The Court first considers whether the default was willful. Dassault
Systemes, 663 F.3d at 839. “To 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.” /d. at 841
(quoting Shepard Claims Serv., Inc. v. William Darrah & Assocs., 796 F.2d 190,
194 (6th Cir. 1986)). Negligent conduct, however, does not establish that
Defendant engaged in the necessary willful conduct. See, e.g., Shepard Claims
Serv., Inc., 796 F.2d at 194-95; Krowtoh II LLC v. ExCelsius Int'l Ltd., 330 F.
App’x 530, 536 (6th Cir. May 19, 2009) (citations omitted).

Plaintiff contends that Defendant's culpable conduct led to the entry of
default, speculating that Defendant’s failure to timely file a responsive pleading
was due to Defendant's indifference to the proceedings. Pl. Resp. 13; ECF No.
11. Plaintiff also argues that Defendant's failure to check its incoming mail
constitutes reckless disregard. /d. at 12.

Defendant represents that the failure to timely file a responsive pleading or

otherwise respond to the complaint was the result of inadvertent neglect arising
Case No. 2:18-cv-526 Page 5 of 11


but did “not specifically advance a defense”). This factor, therefore, weighs in
favor of vacating the entry of default.
D. Conditions

If the entry of default is set aside, Plaintiff asks the Court to impose
conditions for the Defendant’s conduct, including a bond and reimbursement of
attorney's fees incurred in relation to the default proceedings.

Although setting aside an entry of default “does not preclude the district
court from assessing or determining some appropriate penalty or sanction
against the defendant or his counsel for the delay occasioned by [] careless and
inexcusable conduct[,]” Shepard Claims Serv., Inc., 796 F.2d at 195, the Court is
not persuaded that Defendant's conduct warrants the imposition of conditions or
sanctions.

Taking this record as a whole into consideration, Defendant's conduct
does not rise to the level of “careless and inexcusable” behavior warranting
payment of attorneys’ fees. Shepard Claims Serv., Inc., 796 F.2d at 195.
Accordingly, the Court denies the request for bond and attorneys’ fees. The
Defendant is, however, instructed to comply with its obligations under Del. Code
Ann. tit. 6, § 18-804(b)(2) to set aside sufficient funds in the event of a judgment
in this case.

IV. CONCLUSION
For all of these reasons, and in light of the preference to try cases on their

merits, Plaintiff's motion for default judgement, ECF No. 6, is DENIED.
Case No. 2:18-cv-526 Page 10 of 11


satisfying a plaintiff's claim, if it should succeed at trial, is not sufficient prejudice
to require denial of a motion to set aside a default judgment.” United Coin Meter
Co., 705 F.2d at 845.

Plaintiff argues that setting aside the default entry will result in the loss of
evidence because Defendant is in the process of dissolution and winding down
its business operations. Pl. Resp. 7, ECF No. 11; Decl. Jasmani Francis | 4,
ECF No. 13-1. The only support Plaintiff provides for this argument is that
Defendant's failure to produce the underlying contract between the parties
suggests that Defendant's closure is affecting its ability to preserve evidence. /d.
However, Defendant has since produced a copy of the underlying contract. ECF
No. 13-1. Additionally, Plaintiff argues that Defendant’s impending dissolution
will result in difficulties in discovery. PI. Resp. 7-8, ECF No. 11. Plaintiff also
argues that delay will provide a greater opportunity for fraud or collusion,
speculating that employees may destroy evidence or that Defendant may collude
with other creditors to ensure they are paid rather than Plaintiff. /d. at 9.
However, Plaintiff does not provide any evidence that substantiates a risk of
fraud or collusion.

Plaintiff also argues that it will be prejudiced if the Court sets aside the
entry of default because it will threaten Plaintiff's ability to recover in this case.
PI. Resp. 5, ECF No. 11. However, Plaintiff has made a written demand
pursuant to Delaware law for Defendant to set aside funds in the event of a

judgment. See Del. Code Ann. tit. 6, § 18-804(b)(2); PI. Resp. Ex. B-5, ECF No.
Case No. 2:18-cv-526 Page 7 of 11


from Defendant's General Counsel being away from the office. Def Mot. 2, ECF
No. 9; Decl. Jasmani Francis { 3, 5, ECF No. 13-1. Defendant concedes that
its statutory agent was served on June 4, 2018, making its answer due June 25,
2018. Def Mot. 2, ECF No. 9. When Defendant’s General Counsel first became
aware of the action she contacted Plaintiff's counsel and within two days
Defendant retained counsel and filed a notice of intent to oppose Plaintiff's
motion for default judgment. /d. at | 3; ECF No. 7.

The record does not support a finding that the Defendant displayed either
an intent to thwart judicial proceedings or a reckless disregard for the effect of
their conduct on those proceedings. See Dassault Systemes, 663 F.3d at 841.
Nothing in this record persuades the Court that Defendant's failure in this regard
amounted to anything more than potentially negligent conduct. Such conduct
does not establish that Defendant engaged in the necessary willful conduct to
support default judgment. See, e.g., Shepard Claims Serv., Inc., 796 F.2d at
194-95; Krowtoh II LLC, 330 F. App’x at 536. Accordingly, this factor weighs in
favor of vacating the entry of default.

B. Prejudice

Next, the Court considers whether Plaintiff will be prejudiced if the entry of
default is set aside. To establish prejudice, a plaintiff must show that “delay will
‘result in the loss of evidence, create increased difficulties of discovery, or provide
greater opportunity for fraud and collusion.” /nvst Fin. Grp., Inc., Inc., 815 F.2d at

398 (quoting Davis v. Musler, 713 F.2d 907, 916 (2d Cir. 1983)). “Mere delay in
Case No. 2:18-cv-526 Page 6 of 11


litigate the case.”). Accordingly, this factor weighs in favor of setting aside the
entry of default.
C. Meritorious Defense

The Court also considers whether Defendant has a meritorious defense to
Plaintiff's claims. A defense is meritorious if it is “good at law[.]” $22,050 U.S.
Currency, 595 F.3d at 326 (quoting Williams v. Meyer, 346 F.3d 607, 614 (6th
Cir. 2003)). This standard does not require “that a defense be supported by
detailed factual allegations to be deemed meritorious.” /d. “Instead, all that is
needed is ‘a hint of a suggestion’ which, proven at trial, would constitute a
complete defense.” /d. (quoting /nvst Fin. Grp., Inc., 815 F.2d at 399).

In this case, Defendant denies that it owns or employs machinery that has
the capacity to dial numbers randomly or sequentially. Def. Mot. 5, ECF No. 9;
Def. Reply 6-8, ECF No. 15. Defendant also asserts that Plaintiff provided
express written consent to allow Defendant to use an Automated Telephone
Dialing System. Def. Mot. 5, ECF No. 9; Def. Reply 8-9, ECF No. 15.

While Plaintiff contends that the asserted defenses are insufficient, “even
conclusory assertions may be sufficient to establish the ‘hint of a suggestion’
needed to present a meritorious defense.” Dassault Systemes, 663 F.3d at 843
(citations omitted). Based on the present record, the Court cannot say that
Defendant's defense is meritless. Id.; see also Perez v. Here To Help Learning
Acad., LLC, No. 2:15-cv-1997, 2016 WL 3182673, at *2 (S.D. Ohio June 8, 2016)

(finding meritorious defenses where the defendants made “broad contentions”
Case No. 2:18-cv-526 Page 9 of 11


UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

Adrian Forrest,

Plaintiff, Case No. 2:18-cv-526
v. Judge Michael H. Watson
Magistrate Judge Deavers

Honor Finance, LLC

Defendant.

OPINION AND ORDER

On June 26, 2018, Adrian Forrest (“Plaintiff”) obtained an entry of default
against Honor Finance, LLC (“Defendant”). ECF No. 5. Pursuant to Federal
Rule of Civil Procedure 55, Plaintiff now moves for default judgment, ECF No. 6,
and Defendant moves to set aside the entry of default, ECF No. 9. For the
following reasons, the Court GRANTS Defendant’s motion to set aside default,
ECF No. 9, and DENIES as moot Plaintiff's motion for default judgement, ECF
No. 6.1 The Clerk is DIRECTED to VACATE the entry of default, ECF No. 5, and
Defendant is DIRECTED to file its answer or otherwise respond to Plaintiff's
complaint WITHIN TEN DAYS. Defendant is also instructed to comply with its
obligations under Del. Code Ann. tit. 6, § 18-804(b)(2) to set aside sufficient

funds in the event of a judgment in this case.

Plaintiff requests oral argument on the pending motions. ECF No. 11. However, the
written briefs were sufficient; therefore, Plaintiff's request is DENIED.


Defendant's motion to set aside the entry of default, ECF No. 9, is GRANTED.
The Clerk is DIRECTED to VACATE the Clerk’s entry of default against
Defendant, ECF No. 5. Defendant is ORDERED to file a responsive pleading
within TEN DAYS from the date of this Opinion and Order. Defendant is also
instructed to comply with its obligations under Del. Code Ann. tit. 6, § 18-

804(b)(2) to set aside sufficient funds in the event of a judgment in this case.

Walzmn

MIGHAEL H. WATSON, JUDGE
UNITED STATES DISTRICT COURT

IT IS SO ORDERED.

Case No. 2:18-cv-526 Page 11 of 11


11-8. Defendant acknowledges receipt of this written demand. Def. Mot. 6, ECF
No. 9. Del. Code Ann. tit. 6, § 18-804(b)(2) requires a dissolved limited liability
company to “make such provision as will be reasonably likely to be sufficient to
provide compensation for any claim against the limited liability company which is
the subject of a pending action, suit or proceeding to which the limited liability
company is a party.” This requirement reduces the concern that Plaintiff will be
unable to recover in the event of judgement.

Moreover, in Wilson v. Blanton the plaintiff also argued that it would be
prejudiced if default was set aside because defendant was “in the process of
dissolution.” No. 2:16-cv-390, 2016 U.S. Dist. LEXIS 133421, at *4 (S.D. Ohio
Sept. 28, 2016). However, the court found that it was an insufficient ground to
deny the motion to set aside default. /d. Although there may be some ambiguity
or conflict in the record as to prejudice due to Defendant’s impending dissolution,
“any doubt should be resolved in favor of the petition to set aside the judgment
so that cases may be decided on their merits.” United Coin Meter Co., 705 F.2d
at 846.

To the extent that Plaintiff complains about increased litigation costs,
complaints of additional expense do not generally establish prejudice. See, e.g.,
Dassault Systemes, 663 F.3d at 842; $22,050.00 U.S. Currency, 595 F.3d at 325
(‘[I]t does not make intuitive sense that simply claiming an increase in litigation
cost should be sufficient to establish prejudice. Setting aside default will always

increase litigation cost to the plaintiff because the plaintiff will actually have to
Case No. 2:18-cv-526 Page 8 of 11


ll. STANDARD

Federal Rule of Civil Procedure 55 provides that courts “may set aside an
entry of default for good cause.” Fed. R. Civ. P. 55(c). In evaluating whether the
movant has sufficiently established good cause, the United States Court of
Appeals for the Sixth Circuit instructs that courts must “assess ‘whether (1) the
default was willful, (2) a set-aside would prejudice plaintiff, and (3) the alleged
defense was meritorious.” Dassault Systemes, SA v. Childress, 663 F.3d 832,
838-39 (6th Cir. 2011) (quoting United Coin Meter Co. v. Seaboard Coastline R.R.,
705 F.2d 839, 844 (6th Cir. 1983)).

Although Rule 55(c) vests trial courts with discretion, this Court recognizes
that “[]Judgment by default is a drastic step which should be resorted to only in
the most extreme cases.” United Coin Meter Co., 705 F.2d at 845. “In general,
our cases discussing motions to set aside default under Rule 55(c) are extremely
forgiving to the defaulted party[.]” United States v. $22,050.00 U.S. Currency,
595 F.3d 318, 322 (6th Cir. 2010). Therefore, “any doubt should be resolved in
favor of the petition to set aside the judgment so that cases may be decided on
their merits.” United Coin Meter Co., 705 F.2d at 846 (internal quotation marks
and citations omitted); see also Dassault Systemes, 663 F.3d at 841 (quoting
Invst Fin. Grp., Inc. v. Chem—Nuclear Sys., Inc., 815 F.2d 391, 398 (6th Cir.
1987)) (noting that in conducting reviews of denials of motions to set aside

entries of default, the Sixth Circuit construes “‘all ambiguous or disputed facts in

Case No. 2:18-cv-526 Page 4 of 11


Defendant contends the case did not come to the attention of Defendant's
General Counsel until July 9, 2018, because he was away from the office in June
dealing with personal issues, namely two deaths occurring within weeks of each
other. Def. Mot. 2, ECF No. 9; Decl. Jasmani Francis ff 3, 4, ECF No. 13-1.
Defendant explains this absence created a backlog in handling mail. Decl.
Jasmani Francis 5, ECF No. 13-1.

Defendant’s General Counsel represents that when he learned about the
lawsuit, he contacted Plaintiffs counsel and within two days Defendant retained
counsel and filed a notice of intent to oppose Plaintiff's motion for default
judgment. /d. at 3; ECF No. 7. One week later, on July 18, 2018, Defendant
filed both a motion to set aside the default entry, ECF No. 9, and a response in
opposition to Plaintiff's motion for default judgment, ECF No. 10. The Defendant,
however, did not file the declarations cited in support of its motion to set aside
default until July 24, 2018. ECF No. 13.

Defendant is in the process of dissolution and winding down its business
operations. Decl. Jasmani Francis J 4, ECF No. 13-1. Plaintiff expresses
concern over whether Defendant would set aside sufficient funds in the event of
a judgment. Pl. Resp. 6-7, ECF No. 11.

Defendant's motion to set aside default, ECF No. 9, and Plaintiff's motion

for default judgment, ECF No. 6, are now ripe for resolution.

Case No. 2:18-cv-526 Page 3 of 11


|. BACKGROUND

Defendant is a Delaware limited liability company registered to do business
in Ohio. Compl. | 7, ECF No. 1. More specifically, Defendant is a finance
company that originates, funds, and services below-prime automobile contracts.
Id. at] 6.

In September 2016, Plaintiff and Defendant entered into a written contract
wherein Defendant financed the purchase of Plaintiffs vehicle. /d. at J] 10, 13.
The contract permitted Defendant to contact Plaintiff regarding the servicing and
collecting of payments by such methods as “automatic telephone dialing
systems’ and at any “address or telephone number’ provided to Defendant. Ex.
A to Decl. Jasmani Francis 5, ECF No. 13-1.

On May 30, 2018, Plaintiff filed this action, asserting that Defendant made
repeated calls to Plaintiffs cellular phone demanding payments in violation of the
Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 ef seq., the Ohio
Consumer Sales Practices Act (“CSPA”), Ohio Rev. Code Ann. § 1345.01 et
seq., and Ohio common law. ECF No. 1.

The complaint and summons were served on Defendant's statutory agent
in Ohio on June 4, 2018. ECF No. 3. Although Defendant’s answer was due on
June 25, 2018, no answer was filed. Plaintiff therefore moved for an entry of
default against Defendant, ECF No. 4, and the Clerk entered default on June 26,

2018. ECF No. 5.

Case No. 2:18-cv-526 Page 2 of 11