1Under § 205(a)(5) of the E-Government Act of 2002 and the

definition of “written opinion” adopted by the Judicial Conference

of the United States, this is a “written opinion[ ] issued by the

court” because it “sets forth a reasoned explanation for [the]

court’s decision.” It has been written, however, primarily for the

parties, to decide issues presented in this case, and not for

publication in an official reporter, and should be understood

accordingly.

 IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

VERITY INSTRUMENTS, INC., §

et al., §

 §

Plaintiffs, §

 § Civil Action No. 3:06-CV-0005-D

VS. §

 § 

KLA-TENCOR CORPORATION, §

 §

Defendant. §

MEMORANDUM OPINION

 AND ORDER 

Plaintiffs Verity Instruments, Inc. (“Verity”) and Arun A.

Aiyer move the court for a default judgment against defendant

Kla-Tencor Corporation (“KTC”). KTC opposes the motion and moves

the court to set aside the default entered by the clerk of court on

February 28, 2006. For the reasons that follow,1 the court grants

KTC’s motion, sets aside the entry of default, and orders KTC to

move, answer, or otherwise respond to plaintiffs’ complaint no

later than May 1, 2006. The court denies both sides’ requests for

attorney’s fees.

 

 Case 3:06-cv-00005-D Document 16 Filed 04/10/06 Page 1 of 8 PageID 248
- 2 -

I

Plaintiffs filed this lawsuit on January 3, 2006. They seek

a declaratory judgment that Verity is the sole owner of all right,

title, and interest in U.S. Patent No. 6,768,543 and that they have

not, and are not, misappropriating or otherwise wrongfully using

the intellectual property, trade secrets, or confidential

information of KTC or Candela Instruments. Plaintiffs moved on

February 27, 2006 for entry of a default and a default judgment.

On February 28, 2006 the clerk entered the default. That same day,

KTC filed a motion under Fed. R. Civ. P. 55(c) to set aside entry

of default and to set deadline to answer, move, or otherwise

respond to plaintiffs’ complaint. Because both motions present the

same ultimate issue, the court will address them together. 

II

A

Rule 55(c) provides that, “[f]or good cause shown the court

may set aside an entry of default[.]” 

The requirement of good cause has generally

been interpreted liberally. Three factors are

examined for determining good cause vel non:

(1) whether the failure to act was willful;

(2) whether setting the default aside would

prejudice the adversary; and (3) whether a

meritorious claim has been presented. These

factors are not exclusive; instead, they are

to be regarded simply as a means to identify

good cause. Other factors may be considered,

such as whether the party acted expeditiously

to correct the default.

Effjohn Int’l Cruise Holdings, Inc. v. A&L Sales, Inc., 346 F.3d

 

 Case 3:06-cv-00005-D Document 16 Filed 04/10/06 Page 2 of 8 PageID 249
2

KTC proposes a deadline of March 24, 2006. In view of the

briefing allowed under the local civil rules and the date of

- 3 -

552, 563 (5th Cir. 2003) (citations, internal quotation marks,

brackets, and ellipsis omitted). The term “‘good cause’ is not

susceptible of precise definition, and no fixed, rigid standard can

anticipate all of the situations that may occasion the failure of

a party to answer a complaint timely.” In re Dierschke, 975 F.2d

181, 183 (5th Cir. 1992). 

[W]hile courts apply essentially the same

standard to motions to set aside a default and

a judgment by default, the former is more

readily granted than a motion to set aside a

default judgment. The willful failure to

answer, the lack of any meritorious defense,

and the existence of resulting prejudice to

the plaintiff, depending on the circumstances,

typically can provide adequate cause for the

court to deny a motion to set aside a default.

 

Id. at 184 (footnote omitted). “These factors are not

‘talismanic,’ and we will consider others. The ultimate inquiry

remains whether the defendant shows ‘good cause’ to set aside the

default. The district court need not consider all of these

factors.” CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60,

64 (5th Cir. 1992) (citations omitted).

B

KTC maintains on several grounds that the entry of default was

improper in the first place. It also posits that, if the default

is set aside, it is willing to waive service under Rule 4(d) and to

answer, move, or otherwise respond by a deadline set by the court.2

 

 Case 3:06-cv-00005-D Document 16 Filed 04/10/06 Page 3 of 8 PageID 250
today’s decision, that deadline must be adjusted accordingly.

3

Although the court doubts the validity of KTC’s argument that

the clerk cannot enter a default in a declaratory action because

such an action does not seek affirmative relief within the meaning

of Rule 55(a), it need not decide this question.

4The court cites the affidavit rather than KTC’s appendix

because, as it explains infra at note 6, KTC (and plaintiffs) have

failed to follow the local civil rules in briefing these motions.

- 4 -

Even if the court assumes arguendo that KTC’s arguments

directed at the validity of the default itself are incorrect,3

 the

court in its discretion holds that KTC has satisfied the factors

that warrant granting relief under Rule 55(c).

First, KTC has demonstrated that its failure to act was not

willful. On January 6, 2006 KTC received a package from Verity’s

President and CEO that contained a courtesy copy of the complaint

and a letter dated January 3, 2006 that stated the complaint had

been filed that day. The letter also expressed, however, Verity’s

desire to resolve the dispute “without the need to proceed further

in the lawsuit.” Bernice Chen, Esq. Aff. ¶ 4.4 During January and

February KTC’s counsel regularly checked the court docket to

determine whether plaintiffs had attempted service, and nothing

indicated that plaintiffs had. On February 24, 2006 counsel

reviewed the docket again and discovered two entries, one filed

February 22, 2006 and one filed February 23, 2006: an affidavit for

service of the summons and complaint, purporting to show service on

January 25, 2006, and proof of service returned executed, showing

 

 Case 3:06-cv-00005-D Document 16 Filed 04/10/06 Page 4 of 8 PageID 251
- 5 -

an answer due date of February 13, 2006. An assistant to the

General Counsel was instructed to search for the summons and

complaint. They were located the same day, but apparently had not

been properly filed, docketed, or brought to the attention of any

attorney within KTC’s legal department. Also that same day, KTC’s

counsel retained outside counsel to represent KTC and requested

that counsel seek an extension from plaintiffs’ counsel to file a

responsive pleading. The court finds that KTC’s failure to file a

responsive pleading was not willful considering plaintiffs’

expressed desire to resolve the litigation without the need to

proceed further with its lawsuit, the diligence of KTC’s counsel in

monitoring the docket for indications that plaintiffs were in fact

proceeding with the lawsuit, and KTC’s prompt action once it

learned that its legal department had overlooked the receipt of the

summons and complaint.

Second, setting aside the default will not unfairly prejudice

plaintiffs. “The mere fact that setting aside the default will

delay [their] recovery or require that [they] litigate [their]

claims is insufficient.” Cordua Rests. L.P. v. Uptown Dining,

Inc., 2005 U.S. Dist. LEXIS 19666, at *5 (N.D. Tex. Sept. 9, 2005

(Fitzwater, J.) (citing United States v. One Parcel of Real Prop.,

763 F.2d 181, 183 (5th Cir. 1985)). Plaintiffs obtained the

default on February 28, 2006. KTC filed its motion that very day.

KTC has agreed to waive service under Rule 4(d), so the issue of

 

 Case 3:06-cv-00005-D Document 16 Filed 04/10/06 Page 5 of 8 PageID 252
- 6 -

service is resolved. 

Third, KTC has a meritorious defense based on its claims that

Verity is using its intellectual property.

C

Plaintiffs request that the court require KTC to reimburse

them for their costs and attorney’s fees. The court denies the

request. 

First, the court has merely assumed arguendo that KTC lacks

any merits-based grounds for setting aside the default. This

approach has enabled the court to resolve these motions more

facilely and promptly by avoiding addressing whether service was

effective under California law. But it has also subjected KTC to

the possibility of paying attorney’s fees and costs as a condition

of granting relief from the entry of a default that arguably was

substantively unwarranted due to the absence of proper service.

Under these circumstances, the court declines to make an award of

costs and attorney’s fees. 

Second, this is a case that arguably should not have resulted

in plaintiffs’ seeking a default in the first place. When

plaintiffs filed suit, they sent KTC a courtesy copy of the

complaint and expressed the desire to resolve the controversy

without further litigation. There is no indication in the record

that KTC ignored the request, engaged in substantial delay, or

filed its own lawsuit in an attempt to forum shop, leaving

 

 Case 3:06-cv-00005-D Document 16 Filed 04/10/06 Page 6 of 8 PageID 253
5

KTC also requests an award of attorney’s fees. It has not

explained the legal grounds for the court to make such an award,

other than that KTC has been required to expend time preparing a

motion to have an improper default set aside. The court denies the

request.

- 7 -

plaintiffs no other reasonable choice than to proceed in earnest

with prosecuting the case. Having once extended to KTC the

courtesy of advising it that they had filed suit, it is

questionable why plaintiffs did not extend a similar courtesy once

they decided to effect service and prosecute the case.5

II

Because the court has granted KTC’s motion to set aside entry

of default and to set deadline to answer, move, or otherwise

respond to plaintiffs’ complaint, the court denies plaintiffs’

motion for entry of default judgment.

* * *

The court grants KTC’s February 28, 2006 motion to set aside

entry of default and to set deadline to answer, move, or otherwise

respond to plaintiffs’ complaint. It denies plaintiffs’ February

27, 2006 motion for entry of default judgment. The default entered

 

 Case 3:06-cv-00005-D Document 16 Filed 04/10/06 Page 7 of 8 PageID 254
6

The court expects the parties to comply with the local civil

rules of this court in briefing further motions. In the motions

decided today, for example, the evidence that plaintiffs submitted

in support of their motion for default judgment, and by KTC in its

response, was not included in an appendix, as required by N.D. Tex.

Civ. R. 7.1(i)(1), and neither side’s brief cited the appendix in

the manner required by Rule 7.2(e). Additionally, none of

plaintiffs’ documents complied with Rule 10.1(e) in that none was

stapled in the upper, left-hand corner or secured with a durable

fastener at the top.

- 8 -

by the clerk of court on February 28, 2006 is vacated. KTC is

ordered to answer, move, or otherwise respond to plaintiffs’

complaint no later than May 1, 2006.6

SO ORDERED.

April 10, 2006.

_________________________________

SIDNEY A. FITZWATER

UNITED STATES DISTRICT JUDGE

 

 Case 3:06-cv-00005-D Document 16 Filed 04/10/06 Page 8 of 8 PageID 255