United States District Court, D. Colorado
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
KRISTEN L. MIX, Magistrate Judge.
This matter is before the Court on Defendants All Around Roustabout, LLC, All Around Trucking, LLC, Reliable Field Services, LLC, and Ace Energy Services, LLC's (the "Defendants") Motion to Set Aside Clerk's Entry of Default and for Leave to Answer or Otherwise Plead [#20] (the "Motion"). Plaintiff filed a Response to the Motion (the "Response") [#28], and Defendants filed a Reply (the "Reply") [#29] in further support of the Motion. The Court has reviewed the Motion, the Response, the Reply, the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Court respectfully RECOMMENDS that the Motion [#20] be GRANTED.
The Court has jurisdiction pursuant to 28 U.S.C. § 1332. Plaintiff is a citizen of Montana and Defendants are citizens of Colorado. See Verified Complaint [#1] at 1-2.
A. Factual and Procedural Background
Prior to filing this action, counsel for the parties engaged in written correspondence regarding termination of Plaintiff's employment with the Defendant companies. Motion [#20] at 1; Response [#28] at 1. Written communication between counsel did not resolve the dispute and Plaintiff filed this action on March 24, 2015. Motion [#20] at 2; See Verified Complaint [#1] at 11. Plaintiff filed a Return of Service showing that Defendants were served on March 31, 2015. See generally Return of Service [##5-8]. Defendants did not respond to the Complaint. Plaintiff's counsel filed a Motion for Entry of Default and, on May 15, 2015, the Clerk of the Court entered default against Defendants. See generally Clerk's Entry of Default [#11]. Defendants allege that they received notice of the Entry of Default on June 3, 2015 and immediately contacted their counsel. Motion [#20] at 3. Defendants maintain that prior to June 3, 2015, their counsel was unaware of the commencement of this lawsuit or the Entry of Default. Id. On June 10, 2015, Defendants filed the instant Motion.
B. The Motion
In the Motion, Defendants argue that the Entry of Default should be set aside pursuant to Fed.R.Civ.P. 55(c). Motion [#20] at 4. Defendants rely on three factors (the " Gilmore factors") to persuade the Court to set aside the Entry of Default. Id. at 5, 1-3. The Gilmore factors are: (1) whether culpable conduct led to the default, (2) whether plaintiff will be prejudiced by setting aside the entry of default, and (3) whether defendant has a meritorious defense. Gilmore v. Carlson, 72 F.Appx. 798, 801 (10th Cir. 2003) (table decision). Defendants argue that under Rule 55(c), they have shown good cause to set aside the Entry of Default. See generally Motion [#20] at 5.
Defendants address each of the Gilmore factors separately. First, Defendants argue that their failure to respond was an honest mistake. Id. at 6, 1-3. Though Defendants concede that the Complaint was properly served, Defendants allege they mistakenly assumed that a copy of the Complaint was also served on their counsel. Id. at 3, 1-5. Defendants state that this assumption was based on Plaintiff's counsel's previous direct contact with defense counsel. Id. Defendants contend that an honest mistake does not constitute culpable conduct. Id. at 6, 9-12. Second, Defendants argue that Plaintiff's ability to prosecute the case has not been prejudiced because the time delay did not cause material harm to Plaintiff, and thus, the delay is not prejudicial. Id. at 7-8. Third, Defendants argue that they have meritorious defenses to Plaintiff's claims. Id. at 9.
In support of their factual allegations, Defendants attach five exhibits. First, Defendants provide the Declaration of Frank Nisenboim, the Executive Vice President of Business Development for Defendants All Around Roustabout, LLC and Reliable Field Services, LLC. See generally Motion, Ex. 1 [#20-1] (the "Nisenboim Declaration"). Second, Defendants attach the termination letter sent to Plaintiff by Defendants. See generally Motion, Ex. 2 [#20-2] (the "Termination Letter"). Defendants include the demand letter sent by Plaintiff's counsel prior to the filing of this action. See generally Motion, Ex. 4 [#20-4] (the "Demand Letter). Defendants also include their response to Plaintiff's Demand Letter. See generally Motion, Ex. 3 [#20-3] (the "Demand Letter Response"). Finally, Defendants attach the Declaration of Sang-yul Lee, an attorney representing Defendants. See generally Motion, Ex. 5 [#20-5] (the "Lee Declaration").
In the Response, Plaintiff argues that the Motion should be denied because Defendants fail to meet the good cause standard. Response [#28] at 4. First, Plaintiff argues that Defendants acted with reckless disregard when they did not contact their counsel on being served. Id. at 7. Plaintiff asserts that reckless disregard is sufficient to establish culpable conduct. Id. Under the second Gilmore factor, Plaintiff argues that his case will be prejudiced for three reasons: (1) the "erosion of memories and dispersion of witnesses, " (2) expended attorney's fees, and (3) a risk that Defendants might be unable to pay in full any recovery resulting from this lawsuit. Id. at 8. Specifically, Plaintiff is seeking unpaid wages under the Colorado Wage Claim Act, which are subject to accruing interest. Id. Plaintiff alleges that there is a risk that Defendants, should Plaintiff be entitled to recovery, might be unable to pay the damages sought in the Complaint or the interest accrued under the Colorado Wage Claim Act. Id at 9. Finally, Plaintiff argues that the defenses asserted by Defendants have no factual support and, therefore, are not meritorious defenses. Id.
In support of his arguments, Plaintiff attaches a January 22, 2015 email from Frank Nisenboim, in which Nisenboim urges Plaintiff to engage in a settlement conversation. See generally Response, Ex. 1 [#28-1] (the "January 22 Email").
In the Reply, Defendants reiterate that their failure to respond was an honest mistake, remedied as soon as defense counsel received actual notice of the Complaint, and therefore does not constitute culpable conduct. See Reply [#29] at 2. Defendants dispute Plaintiff's allegation that defense counsel was unresponsive to Plaintiff's counsel. Id. at 4. Specifically, defense counsel assert that they contacted Plaintiff's counsel to accept service should a complaint be filed and to inform Plaintiff's counsel that a response to the Demand Letter was being finalized. Id. Defense counsel state that in response to that conversation, "Plaintiff's counsel indicated that she would temporarily forego any filing in anticipation of receiving a response to her client's demand." Reply, Ex. 1 [#29-1] (the "Williams Affidavit") ¶5. Defendants also refute Plaintiff's allegation that Defendants did not contact their counsel for 71 days; Defendants claim that the number of days elapsed from the service of the Complaint to when Defendants contacted ...