Opinion ID: 511037
Heading Depth: 2
Heading Rank: 1

Heading: Default Judgment Against Lexington

Text: 3 Lexington was added as a party defendant in this action after the case was originally filed. The summons and complaint were served on Lexington's legal department on June 3, 1985. The legal department then transferred the process to the claims department, which was responsible for retaining counsel. Additional mailings alerted Lexington to appellants' request for and receipt of default judgments against AAA and Lexington. The claims department, however, did not retain counsel or otherwise take action to defend Lexington. 4 AAA assigned all of its policy rights to appellants, who then sought to enforce the default judgment against Lexington, in a Massachusetts state court. Lexington, in response to the Massachusetts litigation, moved to set aside the default judgment. The district court vacated the default judgment, holding that it had the power under Fed.R.Civ.P. 54(b) to revise its order, and under Fed.R.Civ.P. 60(b) to do justice in a particular case. It concluded that even though Lexington's neglect was inexcusable, justice would be served by allowing the case to proceed to trial. The court stated that the very large judgment, the fact that Lexington appeared to have a meritorious defense, and the fact that the rest of the action (involving Angelina) was still pending, militated in favor of vacating the judgment. Mem.Op. of February 23, 1987 at 5. 5 Appellants argue first that the trial court had no jurisdiction to relieve Lexington from the default judgment under Fed.R.Civ.P. 60(b), because Lexington, despite receiving notice of judgment, failed to appeal or seek other relief. They assert that relief under Rule 60(b) is not appropriate where the party seeking relief has full knowledge of the proceedings and entry of judgment but fails to act. Appellants argue alternatively that the district court abused its discretion by granting Lexington relief from the default judgment. They assert that Lexington has not demonstrated the requisite elements for relief from a default judgment: good cause for the default, coupled with quick action to correct it, and a meritorious defense to the complaint. United States v. One 1979 Rolls-Royce Corniche, 770 F.2d 713, 716 (7th Cir.1985). 6 Lexington responds that the court's action was proper under Fed.R.Civ.P. 54(b) because there were multiple claims and defendants, and a final judgment adjudicating all claims had not been rendered--therefore, the rule allows for revision of the earlier judgment. Lexington then argues that the court did not abuse its discretion in setting aside the judgment under Rule 54(b). 2 7 We believe that the district court's order vacating the default judgment was appropriate under Rule 54(b). That rule clearly provides in part that in an action involving multiple claims or multiple parties (as is the case here), where a partial judgment has been rendered: 8 any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties. 9 Fed.R.Civ.P. 54(b). Accordingly, because under Rule 54(b) the district court retains the power to alter rulings until final judgment is entered on a cause, see Paramount Pictures Corp. v. Thompson Theatres, Inc., 621 F.2d 1088, 1090 (10th Cir.1980), the district court had the authority to vacate the default judgment in this case. We need not examine Lexington's other arguments on this issue.