United States District Court, E.D. Kentucky, Southern Division
NEW LONDON TOBACCO MARKET, INC. and FIVEMILE ENERGY, LLC, Plaintiffs,
KENTUCKY FUEL CORPORATION and JAMES C. JUSTICE COMPANIES, INC., Defendants.
MEMORANDUM OPINION & ORDER
Gregory Pvan Tateiiliove United States District Judge
matter is before the Court on Defendants' Motion to Set
Aside Default. [R. 304.] After extensive briefing, on
September 30, 2014, this Court entered Default as to
liability against Defendants according to Federal Rule
37(b)(2)(A). [R. 206.] Defendants request that this Court
overturn the finding of default liability, but the factors
for consideration of overturning a default weigh heavily in
favor of maintaining default as to liability. Accordingly,
the Motion to Set Aside Default [R. 304] is DENIED.
have a long history of contumacious practice in this case
that began in 2012. Their violations occurred in four large
the obstruction started with the very first deadline in the
pretrial scheduling order. Defendants were to serve their
initial disclosures on October 3, 2012, and they did not
comply. [See R. 80-1 at 1.] After a conference call,
Defendants were admonished by the Magistrate Judge to comply
with the scheduling order and produce documents no later than
November 27, 2012. [See R. 24] In defiance of the
Court's order, Defendants produced documents postmarked
November 28, 2012. [See R. 80-1 at 2.]
Defendants failed to follow the Court's order when
obtaining counsel. Defendants' first counsel of record,
Billy Shelton, indicated he would be withdrawing from the
case on February 15, 2013, and indicated replacement counsel
would be shortly forthcoming. [R. 56-5 at 5.] On March 4,
2013, Defendants indicated they had obtained replacement
counsel, Allen W. Dudley, Jr., but had not yet submitted
paperwork for him to be admitted pro hac vice. [See
R. 36.] The Magistrate Judge ordered that Defendants submit
the required paperwork by filed promptly. [Id.]
Again defying the Court's order, Mr. Shelton actually
withdrew his representation on June 24, 2013, and Mr. Dudley
entered as counsel on July 29, 2013. [R. 60; R. 95.] On July
22, 2013, three attorneys from Frost Brown Todd entered their
appearance and quickly withdrew their appearance on July 26,
2013. [R. 79; R. 89.] Defendants blame much of their lack of
response to discovery requests on this inability to obtain
counsel, though they indicated in March that they had
obtained Mr. Dudley. [See R. 169.]
Defendants did not respond to discovery requests. Plaintiffs
entered their First Set of Interrogatories and Requests for
Production of Documents on January 4, 2013, and Defendants
were to respond within thirty (30) days. [R. 80-1.]
Plaintiffs entered their Second Set of Requests for
Production of Documents on January 18, 2013, and Defendants
were again required to respond within thirty (30) days.
[Id.] Defendants missed both deadlines and
Plaintiffs requested a telephone conference with the
Magistrate Judge, which was held on February 27, 2013. [R.
33.] The Magistrate Judge set new deadlines for responding to
Plaintiff's requests and Defendants complied. However,
Plaintiffs believed that Defendants' responses were
incomplete as to the Fivemile leases and permits [R. 56-1],
leading to another telephone conference on May 6, 2013. This
series of exchanges led to the Magistrate Judge granting
Plaintiff's motion to compel Defendants to produce the
Fivemile leases and permits. [R. 99.] Defendants were given
seven (7) days from July 30, 2013, to comply with the
Magistrate's order and they did not comply. Defendants
instead filed a motion for a protective order. [R. 103.]
Magistrate Ingram again held a telephonic conference on
August 13, 2013. [R. 114.] After briefing, the Magistrate
granted in part and denied in part the Defendants'
protective order. [R. 122.] The Court again ordered
Defendants to produce the Fivemile leases and permits that
were not protected by the Protective Order on September 19,
2013. [R. 124.] Plaintiffs filed for sanctions on October 8,
2013, as the discovery Defendants had turned over was likely
incomplete. [R. 131.] Indeed, on October 25, 2013, Defendants
turned over nearly 1, 000 emails related to the Fivemile
leases, over a month after the Magistrate Judge ordered. [R.
144.] Further, Plaintiffs reported that discovery responses
concerning minimum royalty payments to Fivemile landowners
were not provided and a deposition revealed some information
previously provided to Plaintiffs was inaccurate. [R. 150 at
on January 4, 2013, in Plaintiffs' First set of Written
Interrogatories and Requests for Production, they requested
information on Defendants' finances. [R. 80-1 at 3.]
Defendants were to respond within thirty (30) days but they
did not. On April 9, 2013, the Magistrate ordered Defendants
to produce redacted copies of pages from their tax returns.
[R. 47.] Plaintiff agreed to allow Defendants additional time
to produce these documents while a Motion to Dismiss was
pending. Plaintiffs filed a Motion to Compel on July 18,
2013, [R. 76] and after briefing, the Magistrate ordered
Defendants to produce documents by October 15, 2013. [R.
128.] Defendants objected on October 15, 2013, [R. 133] and
this Court overruled their objections on December 16, 2013.
[R. 156.] Essentially, Defendants never produced the required
tax returns and continued making objections and motions for
reconsideration and not complying with the Court's
repeated order. In fact, Defendants turned over their tax
returns on March 10, 2016, over three (3) years later. [R.
265.] On March 15, 2016, Plaintiffs, noticing discrepancies
in the tax returns, emailed Defendants to inquire if the tax
returns they had received were actual tax returns. [See
id.] They were not, but were forms prepared by
accounting firms and Defendants then agreed to submit their
actual tax returns on April 1, 2016. [See id.]
Plaintiffs outlined the differences between the first and
second set of tax returns, proving that, even with their
extremely late compliance with the Court's order, they
did not actually comply at all. [Id. at 5.]
James C. Justice, II was to be deposed on July 31, 2013, at
9:00 a.m. [R. 66.] Following a Motion for Protective Order
[R. 90], Motion for Extension of Time [R. 91], and Motion for
Withdrawal of Counsel [R. 89], the Magistrate Judge again
held a telephonic conference, parties agreed to continue with
the deposition. [R. 98.] After a considerable amount of
effort from Plaintiffs to schedule the deposition, Mr.
Justice did not actually appear for his deposition that was
eventually scheduled for November 7, 2013, at 9:00 a.m. [R.
170-1 at 3.] Mr. Justice has never been deposed.
Federal Rule of Civil Procedure 55(c), “[t]he court may
set aside an entry of default for good cause.”
“When a defendant seeks relief from a default . . . the
district court enjoys considerable latitude under the
‘good cause shown' standard.” Waifersong,
Ltd. v. Classic Music Vending, 976 F.2d 290, 292 (6th
Cir. 1992). “What constitutes good cause for setting
aside an entry of default is within the discretion of the
court.” Seye v. Community Yellow Cab NKMgmt.,
LLC, 2011 WL 3739142, *1 (E.D. Ky. Aug. 2, 2011) (citing
10A Fed. Prac. & Proc. § 2696 (2011)); see also
Krowtoh II LLC v. ExCelsius Intern., Ltd., 330 Fed.Appx.
530, 534 (6th Cir. 2009) (“This Court reviews a
district court's decision to deny a motion to set aside
an entry of default for an abuse of discretion.”).
determining whether there is “good cause” to set
aside an entry of default, the Sixth Circuit has instructed
courts to consider three equitable factors: “(1)
whether culpable conduct of the defendant led to the default,
(2) whether the defendant has a meritorious defense, and (3)
whether the plaintiff will be prejudiced.” Burrell
v. Henderson, 434 F.3d 826, 831-32 (6th Cir. 2006)
(quoting Waifersong, Ltd., 976 F.2d at 292) (citing
United Coin Meter Co. v. Seaboard Coastline R.R.,
705 F.2d 839, 844-46 (6th Cir. 1983) (setting forth the
“good cause” standard in the Sixth Circuit and
finding that the district court erred in reaching a
determination of no good cause without considering all three
factors). These factors are to be “balanced” and
will be addressed in turn. Waifersong, Ltd., 976
F.2d at 292.
the first factor, when determining whether a defendant's
culpable conduct led to the default, the court should
consider the defendant's behavior “in the general
context of determining whether a petitioner is deserving of
equitable relief.” Waifersong, Ltd., 976 F.2d
at 292. For a defendant's conduct to be treated as
culpable, “mere carelessness is not enough; rather,
there must be ‘either an intent to thwart judicial
proceedings or a reckless disregard for the effect of its
conduct on those proceedings.'” Southern Elec.
Health Fund v. Bedrock Servs., 146 Fed.Appx. 772, 777
(6th Cir. 2005) (quoting Shepard Claims Serv., Inc. v.
William Darrah & Assocs., 796 F.2d 190, 194 (6th Cir.
1986)). Further, a defense of ineffective assistance of
counsel is not ...