Next, Plaintiff's withdrawal of its motion for default judgment and Defendant’s filing of
its answer to Plaintiff's original complaint—not its amended complaint—the day before this
Court entered a default order does not show that Defendant had good cause. Neither act changes
the undisputed fact that Defendant’s answer was untimely. Defendant’s answer was due on July
16. Fed. R. Civ. P. 15(a), 6(a), (e). It was filed seven days late on July 23. “[A] defendant who
fails to answer within the time specified by the rules is in default even if that fact is not officially
noted.” 10A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2692
(3d ed. 2003). Neither act explains why Defendant failed to answer Plaintiff's complaint in a
timely fashion.

Next, Plaintiff's failure to properly serve Defendant with this Court’s minute orders is not
good cause. Defendant’s corporate counsel was served on May 14; he also received this Court’s
June 26 minute order, which granted Plaintiff leave to proceed with its amended complaint.
Defendant knew that the complaint was filed and that the legal action was proceeding; it certainly
was aware of its responsibility to answer the complaint. Defendant suggests that Plaintiff should
have informed Defendant that its answer was due. (R. 28, Def.’s Reply at 7.) The fact that
Plaintiff did not remind Defendant of its legal obligations is definitely not good cause.

Next, the untimely vacations and health problems that beset Defendant’s counsel and
manager do not constitute excusable neglect. Kain returned from vacation on July 7, (R. 29,
Def.’s Exs., Ex. C, Kain’s Aff. § 3), and Gallinal was aware of Plaintiff's complaint before
leaving for vacation, (R. 29, Def.’s Exs., Ex. D, Gallinal’s Aff. {{] 2, 7). Their travel schedules
were not so burdensome as to excuse Defendant’s negligence. Although this Court fully

understands that health problems, as suffered by Cohen, can constitute good cause for missing a



filed its answer and Plaintiff withdrew its motion for default judgment before this Court’s entry
of default; (3) Plaintiff failed to properly serve it with this Court’s May 21 order dismissing its
original complaint without prejudice and this Court’s June 26 order requiring a joint status
report; (4) Defendant’s failure to answer was the result of excusable neglect because corporate
counsel, Mark Cohen, suffered health problems, one of Defendant’s managing members, Juan
Gallinal, and Defendant’s lead counsel, Robert Kain, were on long-planned vacations; and (5)
Plaintiff suffered no prejudice as it was aware that Defendant intended to file an answer. (R. 28,
Def.’s Reply at 2-3, 6-7.) Plaintiff argues, unsurprisingly, that Defendant did not have good
cause and that the default should not be set aside because Defendant acted in bad faith as
Defendant’s corporate counsel, Marc Cohen, stated on May 29 that Plaintiff should abandon their
complaint because, as Defendant was a shell corporation without assets, it would file bankruptcy
to avoid paying damages. (R. 23, Pl.’s Response, Ex. B., Doellinger Aff.)

First, on-going settlement discussions are not good cause for failing to answer a pleading
Chase Int'l, Inc. v. Link and Pan of Tex., Inc., No. 94 C 6533, 1995 WL 506056, at *3 (N.D. ILI.
Aug. 17, 1995); Chandler Leasing Corp. v. UCC, Inc., 91 F.R.D. 81, 83 n.5 (NLD. Ill. 1981).
Settlement discussions occur, or at least should occur, in every dispute. A party’s belief that a
case will settle does not justify its failure to answer a complaint. And when settlement
discussions have not resolved the issue, they cannot even begin to constitute good cause for
default. In this case, settlement discussions apparently ended before June 23. (R. 23, PL.’s
Response, Ex. A, Cohen Fax.) Thus, settlement discussions were not on-going and are not good

cause.



filing, this Court does not believe that Defendant has established that Cohen’s health problems
excuse Defendant’s negligence. When unpredictable and unfortunate circumstances arise, such
as heart palpitations, counsel should inform the court before the filing deadline passes why he
will be unable to comply, and if that is not possible, should inform the court as soon as
practicably possible why the filing was late. Cohen’s health problems were not brought to this
Court’s attention until Defendant’s reply brief. This Court is not convinced that, but for Cohen’s
health problems, Defendant would have timely answered Plaintiff's amended complaint. Even
considering the scheduling difficulties created by all these events, this Court does not find that
Defendants have shown excusable neglect. Additionally, the Cohen’s statements regarding
Defendant’s status as a shell corporation that intended to avoid damages through bankruptcy
indicate bad faith. See Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380,
398 (1993) (stating that it could not find that the lower court “abused its discretion in declining to
find the neglect to be ‘excusable”” if there was “any indication at all of bad faith”).

Finally, Defendant’s assertion that Plaintiff suffered no prejudice is not relevant. A
motion to set aside a default judgment will be granted upon a showing of good cause, timely
action and a meritorious defense. Prejudice to the plaintiff, frankly, is not part of the analysis. In
sum, even when liberally construing the test for setting aside an entry of default, this Court finds

that Defendant has not shown good cause for its untimely answer.



’

Minate Order Ferm (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge Ruben Castillo Sitting Judge if Other ~]
or Magistrate Judge than Assigned Judge
CASE NUMBER 03 C 3184 DATE 10/24/2003

CASE Medline Industries, Inc. vs. Medline RX Financial, LLC
TITLE
[In the following box (a) indicate the party filing the motion, e.g,, plaintiff, defendant, 3rd party plaintil, and (b) slate briefly the nature
MOTION: of the motion being presented.}
DOCKET ENTRY:
() Oo Filed motion of [ use listing in “Motion” box above.]
Q) Qa Brief in support of motion due
(3) Qa Answer brief to motion due . Reply to answer brief due.
(4) 0 Ruling/Hearing on set for at .
(5) a Status hearing set for 11/12/2003 at 9:45 A.M..
(6) o Pretrial conferencefheld/continued to} (set for/re-set for] on set for at :
(7) a Trial[set for/re-set for])on at.
(8) a [Bench/Jury trial] [Hearing] held/continued to at
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
QFRCP4(m) C1 Local Rule 41.1. OO FRCP41(a)(1) 1 FRCP41(a)(2).
ao «ff [Other docket entry] Enter Memorandum Opinion and Order. Defendant’s motion to set aside the
default order is denied.

dl ff [For further detail see order attached to the original minute order.]

No notices required, advised in open court. Document

| Number
No notices required, npber of uotices
Notices mailed by judge’s staf. ICT ) 7 2003

Notified counsel by telephone.
J | Docketing to mail notices.
Mail AO 450 form.

Copy to judge/magistrate judge.

courtroom
RO deputy’s
initials

huang pan
ERGO La

S10 SA

HO ee

Date/time received'in
‘ceytral Clerk's Office

dave dooketed
doskgitha

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late mailed notice

_maiting deputy initials

3



CONCLUSION

For the reasons stated above, Defendant’s motion to set aside the default order is denied.

(R. 26-1.)

Judge Ruben Castillo
United States District Court
Dated: October 23, 2003



UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
MEDLINE INDUSTRIES, INC., )
Plaintiff, }
v. ; No. 03 C 3184
)
MEDLINE RX FINANCIAL, LLC, } Judge Ruben Castillo OCT 97 2003
Defendant. )

MEMORANDUM OPINION AND ORDER

Defendant’s motion to set aside the default order entered against it is presently before this
Court. Defendant claims it had good cause for the default, acted quickly to correct it and have a
meritorious defense to Plaintiffs claims. For the reasons provided below, Defendant’s motion is
denied. (R. 26-1.)

RELEVANT FACTS

Plaintiff Medline Industries, Inc. filed its complaint against Defendant Medline Rx
Financial, LLC on May 13,' (R. 1, Compl.) Defendant’s corporate counsel, Marc Cohen, was
served on May 14. (R. 8, Return of Service.) This Court dismissed Plaintiff's complaint without
prejudice on May 21. (R. 5, May 21 Minute Order.) Plaintiff filed an amended complaint on
June 3. (R. 7, Pl.’s Amended Compl.) On June 26, this Court granted Plaintiff leave to proceed
with its amended complaint, ordered the parties to file a joint status report and ordered Plaintiff
to notify Defendant of this order. (R. 10, June 26 Minute Order.) Plaintiff filed a motion for

default judgment on July 18. (R. 14, Pl.’s Mot. for Default.) On July 23 Plaintiff filed a motion

‘All events occurred in 2003.

3]



to withdraw its July 18 motion for default judgment and Defendant filed its belated answer to
Plaintiff's original complaint. (R. 13, Pl.’s Mot. to Withdraw, R. 20, Def.’s Answer.) The next
day this Court entered a default order against Defendant, granted Plaintiffs motion to withdraw
its motion for default judgment and ordered Defendant to answer or otherwise plead to the
amended complaint. (R. 15, July 24 Minute Order.) The Court indicated that Defendant needed
to explain the reasons for its late answer. Finally, on July 25 Defendant filed this motion to set
aside the default. (R. 26, Def.’s Mot. to Set aside Default.)
LEGAL STANDARDS

Federal Rule of Civil Procedure 55(c) provides that “[flor good cause shown the court
may set aside an entry of default....” Fed. R. Civ, P. 55(c). “In order to vacate an entry of
default the moving party must show: (1) good cause for default (2) quick action to correct it and
(3) meritorious defense to plaintiff's complaint.” Pretzel & Stouffer, Chartered v. Imperial
Adjusters, Inc., 28 F.3d 42, 45 (7th Cir. 1994). The test for setting aside an entry of default is the
same as the test for setting aside a default judgment, but it is applied more liberally. United
States v. Di Mucci, 879 F.2d 1488, 1495 (7th Cir. 1989). A showing of “excusable neglect” can
establish good cause for the default. See Robb v. Norfolk & Western R.R. Co., 122 F.3d 354, 359
(7th Cir. 1997).

ANALYSIS

Defendant asserts that the default entered against it should be set aside because it has
shown good cause, quick action to correct it and a meritorious defense. The only disputed issue
is whether Defendant has shown good cause. Defendant claims that the following facts establish

good cause: (1) the parties were discussing settlement prior to the entry of default; (2) Defendant