NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

 :

UNITED STATES OF AMERICA, : CIVIL ACTION NO. 11-2518 (MLC)

for the benefit of PACE :

CONSTRUCTION INC., : MEMORANDUM OPINION

 :

Plaintiff, :

 :

v. :

 :

UNIVERSAL CONSTRUCTION COMPANY, :

INC., REGIMENT CONSTRUCTION :

CORP., and INTERNATIONAL :

FIDELITY INSURANCE COMPANY, :

 :

Defendants. :

 :

IN THIS ACTION to recover payments allegedly owed for work

performed on a federal construction project: (1) the defendant

Regiment Construction Corp. (“RCC”) was the general contractor;

(2) the defendant International Fidelity Insurance Company

(“IFIC”) was RCC’s surety, which provided a payment bond for the

project; (3) the defendant Universal Construction Company, Inc.

(“UCCI”) was RCC’s subcontractor; and (4) the plaintiff, Pace

Construction Inc. (“PCI”), was UCCI’s subcontractor. PCI asserts

that it was not paid for its work. (See dkt. entry no. 1, Compl.

at 4-6; dkt. entry no. 63, UCCI Mem. of Law at 2; dkt. entry no.

64, RCC-IFIC Joint Mem. in Opp’n at 3.)

THE COURT granted the part of PCI’s motion seeking entry of

default judgment on the issue of liability against UCCI on

November 7, 2011. (See dkt. entry no. 19, 11-7-11 Order.) On

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January 25, 2012, the Clerk of the Court entered default against

UCCI as to the cross-claims asserted by RCC and IFIC against UCCI

(“Cross-Claims”). (See unnumbered dkt. entry following dkt.

entry no. 33.) RCC and IFIC have not moved for entry of default

judgment against UCCI.

WHEN the aforementioned relief was awarded, UCCI had yet to

retain counsel. But counsel appeared on UCCI’s behalf on March

29, 2013. (See dkt. entry no. 57, 3-29-13 Notice of Appearance.)

UCCI is now represented by counsel and moves — by a motion

filed on June 21, 2013 (“Motion”) — to set aside (1) the default

judgment on the issue of liability entered in PCI’s favor (“PCI

Liability Judgment”), and (2) the entry of default in favor of

RCC and IFIC (“RCC-IFIC Default”). (See generally dkt. entry no.

63.) PCI has not filed opposition to the Motion, but RCC and

IFIC have filed opposition jointly. (See generally dkt. entry

no. 64.) The Court will address the Motion upon review of the

papers. See L.Civ.R. 78.1(b). The Court will grant the part of

the Motion seeking to set aside the RCC-IFIC Default. In

addition, the Court will deny the part of the Motion seeking to

set aside the PCI Liability Judgment, but with leave to UCCI to

seek further relief in part.

UCCI argues in support of the Motion that: (1) it can assert

meritorious claims and defenses, e.g., RCC failed to pay UCCI,

and RCC and IFIC actually owe PCI the payment at issue; (2) there

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would be no prejudice suffered here because there has been little

discovery — e.g., only UCCI’s principal has been deposed — and

RCC has a paper file reflecting any payments made; (3) the delay

in retaining counsel was due to UCCI’s financial inability to do

so — about which UCCI’s principal advised the Court — and not the

result of contumacious conduct; and (4) UCCI’s principal attempted

to proceed on its behalf in the interim. (See UCCI Mem. of Law

at 1-5, 8-13; dkt. entry no. 67, UCCI Reply Br. at 2.)

RCC AND IFIC in their joint opposition: (1) refute UCCI’s

financial-hardship argument, asserting that UCCI received

approximately $105,000 for the project; (2) argue that the

Magistrate Judge repeatedly advised UCCI’s principal to retain

counsel; and (3) argue that they “have incurred substantial

expenses for the many conferences conducted over the past two

years”. (RCC-IFIC Joint Mem. in Opp’n at 2.)

RCC AND IFIC also argue that RCC “has taken an assignment of

[PCI’s] claim and its rights under [PCI’s Liability Judgment]”,

and RCC and PCI “would not have reached that agreement if [UCCI]

was going to be given another opportunity to proceed with its

affirmative claims”. (Id.) Indeed, following the filing of

opposition papers by RCC and IFIC, a stipulation of dismissal was

filed as to the claims asserted by PCI against RCC and IFIC. 

(See dkt. entry no. 68, Stipulation of Dismissal.) The CrossClaims presumably remain viable. 

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BUT THE COURT notes that PCI has not filed opposition to the

part of the Motion seeking to set aside the PCI Liability

Judgment. Also, despite the assertions by RCC and IFIC that they

have taken an assignment of PCI’s rights under the PCI Liability

Judgment, the Court’s electronic docket reveals that PCI’s

counsel remains unchanged from when the action was brought. (See

Docket, PCI Attorney To Be Noticed.) The standing of RCC and

IFIC to oppose the part of the Motion seeking to set aside the

PCI Liability Judgment is unclear.

THE PART of the Motion seeking to set aside the PCI

Liability Judgment is controlled by Federal Rule of Civil

Procedure (“Rule”) 60(b). See Fed.R.Civ.P. 55(c). But UCCI has

not referred to Rule 60(b) in support of that part of the Motion.

UCCI filed the Motion in June 2013, more than one year after

the entry of the PCI Liability Judgment in November 2011. To the

extent that UCCI could have been afforded relief pursuant to Rule

60(b)(1) (concerning, inter alia, excusable neglect), Rule

60(b)(2) (concerning newly discovered evidence), or Rule 60(b)(3)

(concerning, inter alia, fraud), such relief is time-barred. See

Fed.R.Civ.P. 60(c)(1) (stating motion under (b)(1), (b)(2), or

(b)(3) “must be made . . . no more than a year after the entry of

the judgment or order”). Thus, the part of the Motion seeking

relief, in effect, under Rule 60(b)(1), 60(b)(2), and 60(b)(3)

will be denied.

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BUT it is plausible that UCCI could argue for relief under

the other subsections of Rule 60(b) (“Other Subsections”). See

Fed.R.Civ.P. 60(c)(1) (stating also that motion under Other

Subsections “must be made within a reasonable time”). In the

interests of justice, the Court will afford UCCI an opportunity

to properly brief such an argument with specific references to

the Other Subsections, Rule 60(c)(1), and the relevant case law. 

See Farnese v. Bagnasco, 687 F.2d 761, 764 (3d Cir. 1982)

(stating default judgments are highly disfavored). Thus, the

part of the Motion seeking relief, in effect, under the Other

Subsections will be denied without prejudice. In doing so, the

Court anticipates that PCI may respond with a proper opposition

brief on its own behalf.1

THE PART of the Motion seeking to set aside the RCC-IFIC

Default is controlled by Rule 55(c), which permits such relief

“for good cause”. Fed.R.Civ.P. 55(c). The decision whether to

set aside an entry of default is in the Court’s discretion. See

Farnese, 687 F.2d at 763-64. Here, the Court must address

whether (1) RCC and IFIC will be prejudiced, (2) UCCI has a

 The Court notes the argument by RCC and IFIC that RCC 1

would not have taken an assignment of PCI’s rights if UCCI would

be given another opportunity to proceed. However, the Court also

refers RCC and IFIC to Rule 60(b) and Rule 60(c), and the case

law generated therefrom, permitting a default judgment to be set

aside. Furthermore, such an agreement between certain parties

does not necessarily prevent a different party from otherwise

defending itself on the merits.

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litigable defense to the Cross-Claims, and (3) the default is the

result of UCCI’s culpable conduct. See id. at 764. 

THE COURT FINDS that RCC and IFIC will not be prejudiced if

the default is set aside, as they (1) do not allege that their

ability to pursue the Cross-Claims will now be hampered, (2) do

not refute UCCI’s assertion that discovery has been limited so

far, and (3) can ascertain the amount of damages to which they

are allegedly entitled if UCCI is held solely liable. (See UCCI

Mem. of Law at 1, 10-11; UCCI Reply Br. at 3, 6.) UCCI has

indeed presented litigable defenses to the Cross-Claims. It also

appears that UCCI’s conduct — insofar as it pertains to RCC and

IFIC — was not willful or in bad faith, particularly in view of

the fact that counsel for UCCI has been retained. Furthermore,

in view of the circumstances and the efforts of UCCI’s counsel to

now oversee UCCI’s representation, the lapse of time between the

entry of the RCC-IFIC Default and the Motion does not bar the

Court from setting aside that default.

FOR GOOD CAUSE APPEARING, the Court will issue an appropriate

order.

 s/ Mary L. Cooper 

MARY L. COOPER

United States District Judge

Dated: February 21, 2014

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