In the UNITED STATES BANKRUPTCY COURT for the

SOUTHERN DISTRICT OF FLORIDA

CASE NO. 18-19121-RAM

In re: CHAPTER 11

1 Global Capital, LLC,

Debtor.

/

1 Global Capital, LLC,

Plaintiff, ADV. NO. 19-01504-RAM

vs.

Maurino Gonzalez 

d/b/a Covenant Contractors, LLC,

Defendant.

/

MOTION TO SET ASIDE DEFAULT

COMES NOW the Defendant, by and through his undersigned attorney, and files this Motion

to Set Aside the Default, and as grounds therefor states:

1. In the motion for default [Doc. #10] Plaintiff failed to comply with Local Rule 7055-1 which

requires that motions for entry of default state “that the defendant has been properly served

with the complaint” [bold emphasis added]. 

2. The motion merely states that the “Plaintiff served a copy of the: (a) Complaint, (b)

Summons, and (c) Pretrial Order on the Defendant.” 

3. Given that service is most often effectuated by mail delivery, the Local Rule evidently

contemplates the possibility that although a summons and complaint are placed in the mail,

delivery by mail might not actually occur or such mail might otherwise be returned, and thus

the requirement for a verification within the motion – aside from the verification made at the

Case 19-01504-RAM Doc 15 Filed 01/16/20 Page 1 of 7
time the summons and complaint were placed in the mail [Doc. #4].

4. Defendant’s affidavit attached to and made a part of this motion, aside from the defective

application for default, demonstrates good cause for the court to set aside the clerk’s entry

of default. 

MEMORANDUM OF LAW 

Defendant’s motion to set aside default is brought pursuant to Rule 55(c) which triggers

application of the lower “good cause” standard for setting aside the default, as opposed to the

somewhat higher standard of “excusable neglect” required to set aside a default final judgment under 

60(b) of the Federal Rules of Civil Procedure. E.E.O.C. v. Mike Smith Pontiac GMC, Inc., 896 F.2d

524 (11th Cir. 1990). However, courts still often look at the same factors in setting aside defaults

prior to judgment, and Defendants are confident that they meet those factors nonetheless. 

The Bankruptcy Court, like the District Court, may set aside default judgments, and of course

defaults, on the basis of “excusable neglect” or “good cause” as the case may be. Fed. R. Civ. P.

60(b)(1), by way of Bankruptcy Rule 9024. In Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd.

Partnership, 507 U.S. 380, 395, 113 S.Ct. 1489,1498 (1993), the United States Supreme Court 

concluded that the determination of what neglect is excusable is “at bottom an equitable one.” Four

factors for determining “excusable neglect” were established by the United States Supreme Court

in Pioneer. Those factors are commonly known as the Pioneer factors. “The equitable factors that 

a court must weigh when determining whether neglect is excusable include: (1) the danger of

prejudice to the debtor; (2) the length of the delay and its potential impact on judicial proceedings;

(3) the reason for the delay, including whether it was within the reasonable control of the movant;

and (4) whether the movant acted in good faith.” In re Emmons, 349 B.R. 780, 788 (Bankr. W.D.

Mo., 2006). 

Case 19-01504-RAM Doc 15 Filed 01/16/20 Page 2 of 7
Pursuant to Bankruptcy 7055, which adopts federal Rule 55(c), “[t]he court may set aside an

entry of default for good cause.” But, “good cause” under Rule 55(c), like “excusable neglect” under

Rule 60(b), is not defined. The Eleventh Circuit Court of Appeals has adopted three widely accepted

criteria for deciding whether to relieve a party from an entry of default. Those factors are: "(1) ...

a meritorious defense that might have affected the outcome; (2) granting the motion would not result

in prejudice to the non-defaulting party; and (3) a good reason existed for failing to reply to the

complaint.” Valdez v. Feltman (In re Worldwide Web Sys., Inc.), 328 F.3d 1291, 1295 (11th Cir.

2003), quoted more recently in Grant v. Pottinger-Gibson, No. 16-11505 (11th Cir., February 13,

2018). 

Good cause should be construed generously, especially when service is on an individual who

is not well aware of the conduct of proceedings and is proceeding upon an understandable

misconception. In many circuits, as in the 11th Circuit, defaults are generally disfavored and reserved

for rare occasions. Valdez v. Feltman (In re Worldwide Web Sys., Inc.), 328 F.3d 1291, 1295 (11th

Cir. 2003) ("There is a strong policy of determining cases on their merits and we therefore view

defaults with disfavor."). Accordingly, doubts as to whether to grant or vacate a default should be

resolved in favor of the defaulting party. For example, the Second Circuit has “expressed on

numerous occasions its preference that litigation disputes be resolved on the merits, not by default.” 

Cody v. Mello, 59 F.3d 13, 15 (2d Cir. 1995) (citing Enron Oil, 10 F.3d at 95; Traguth v. Zuck, 710

F.2d 90, 94 (2d Cir. 1983); Meehan, 652 F.2d at 277). The Eleventh Circuit in Compania

Interamericana Export-Import, S.A. v. Compania Dominicana de Aviacion, 88 F.3d 948, 951 (11th

Cir. 1996) (citing Coon v. Grenier, 867 F.2d 73, 76 (1st Cir.1989)), while also expressing a liberal

interpretation favorable to the movant, stated that the court should consider “whether the default was

culpable or willful, whether setting it aside would prejudice the adversary, and whether the

defaulting party presents a meritorious defense.”

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FACTORS:

Prejudice to the Debtor – 

The nature of the particular action is such that the Debtor will not be prejudiced by an order

setting aside the default and judgment thereon. The Trustee’s action is not a core proceeding and

not one for the recovery of any property or right arising under the bankruptcy code nor as a result of

the bankruptcy action. In fact, but for the existence of the bankruptcy of 1 Global, it is an action that

would otherwise have to be filed in either state court or the federal district court (assuming

jurisdiction limitations were met). Accordingly, the bankruptcy estate will suffer no loss as result

of the delay. Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843 F.2d 808 (4th Cir.

1988) (disadvantage suffered by party merely due to loss of quick victory is not sufficient prejudice

to warrant denial of relief by movant).

Length of Delay – 

While this action was commenced on September 13, 2019 there have been two judicial

reassignments of the underlying bankruptcy action resulting in a resetting of the pre-trial conference

to March 11, 2020. The resetting of the pretrial caused the Defendant to delay because of his

misconception of the meaning of a “pretrial” hearing as explained further in his affidavit. 

Subsequently thereto, there was a notice entered that this adversary case had been “closed” which

caused yet further delay because Defendant was under the belief that the action was terminated. 

Soon after receiving a copy of the Plaintiff’s motion for default (filed on December 31, 2019, see

Docket #10) the Defendant acted quickly to employ counsel, respond to the complaint, and file this

motion to set aside the default only 15 days later. Accordingly, the defendants have acted in a timely

fashion seeking this relief. Judgment has not even yet been entered. Yet, a motion for relief within

two weeks after default judgment has been considered timely. See Augusta Fiberglass Coatings,

Inc. v. Fodor Contracting Corp., 843 F.2d 808 (4th Cir. 1988).

Case 19-01504-RAM Doc 15 Filed 01/16/20 Page 4 of 7
Reason for Delay – 

Defendants’ reason for delay is detailed in Defendant’s affidavit filed herewith. Not only was

the Defendant in a distraught and confused state of mind because of his fater-in-law’s illness, he was

also confused by the court’s notice of pretrial date and believed that to be the due date for a response. 

When the original due date for a response came near the Defendant began inquiring of attorneys who

could represent him in this action and was told the case had been “closed” just days before. 

Believing that the there was no need to proceed further, the Defendant ceased seeking out counsel

until receipt of the Plaintiff’s Motion for Default. Melo v. Cuesta Constr. Corp., Case No. 17-21876,

page 4 (S.D. Fla., December 12, 2017) (unintentional misplacement of the pleadings resulting in

default was deemed excusable neglect). In Pioneer Investment Services v. Brunswick Associates,

507 U.S. 380 (1993), the Supreme Court stated what is "excusable" was “an equitable one taking

account of all relevant circumstances surrounding the party's omission . . . , including whether it was

in the reasonable control of the movant.” However, the court went on to state that “'excusable

neglect' under Rule 60(b) is a somewhat "elastic concept" and is not limited strictly to omissions

caused by circumstances beyond the control of the movant."” In such statement the Pioneer court

also stated that “'excusable neglect' is understood to encompass situations in which the failure to

comply with a filing deadline is attributable to negligence." But here, the conditional state of mind

of the Defendant, his failure to pay acute attention to the papers received, and his naivete adds a

higher level of understanding for the delay than mere negligence. 

Good Faith –

Defendant is a very small business owner that has much to lose from the entry of what would

be a huge judgment in relation to the percentage of his annual profits if the default is not set aside

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and a judgment is entered. Compania Interam. Ex.-Im. v. Com. Dom. De Av., 88 F.3d 948 (11th Cir.

1996). In the affidavit in support of this motion that was filed herewith Defendant explains his

excusable neglect in failing to timely respond to the summons and complaint. Considering the

intervening illness of his father, the confusion caused by the resetting of the pretrial, and confusion

caused by the closing of the file, upon receiving the motion for default, Defendant acted reasonably

fast to retain counsel and quickly filed a motion to set aside the default. Defendant always had every

intention of defending his position. Dynomite Mktg., LLC v. Dowd (In re Dowd), Case No.

17-60610-WLH (Bankr. N.D. Ga., March 27, 2018) (defendant satisfied “low standard of Federal

Rule of Civil Procedure 55(c)))”

Meritorious Defense – 

Defendant has filed an answer and defenses to the Trustee’s action along with this motion, 

The answer and defenses demonstrate a meritorious defense to the Trustee’s action. Most

noteworthy, Defendant asserts that the transaction was actually believed to be a loan, and legally

should be considered a loan that charges a criminally usurious rate of interest that is uncollectable.

Defendant has proffered evidence which would permit a finding for him either as a matter of law,

or as a matter of contested fact. Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843

F.2d 808 (4th Cir. 1988); Central Operating Co. v. Utility Workers of Am., 491 F.2d 245 (4th Cir.

1974).

WHEREFORE, the Defendants request an order of this court setting aside the default and

accepting their answer and affirmative defenses as filed.

Case 19-01504-RAM Doc 15 Filed 01/16/20 Page 6 of 7
REX E. RUSSO, ESQ.

2655 LeJeune Road, PH 1-D

Coral Gables, FL 33134

(305) 442-7393

/s/

Rex E. Russo

Florida Bar #0331597

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing was e-mailed through the portal

to Jonathan S. Feldman, attorney for the Plaintiff/Debtor at JFeldman@pbyaLAW.com on this

January 16, 2020.

/s/

Rex E. Russo

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