When you last heard about London Leasing LLC v. Arcus, the Business Court had entered a default in March 2015 against two of the Defendants for what I called their "defiant and obnoxious conduct."
It then seemed like the Plaintiff was just a hop, skip, and a jump away from obtaining a default judgment against the Defendants against whom there had been an Entry of Default, but last week Judge McGuire denied a Motion for Default Judgment in an Order in London Leasing LLC v. Arcus, 2015 NCBC 65. In fact, he went further than just denying the Motion for Default Judgment. He actually set aside the Entry of Default he had imposed in the previous unpublished decision.
The ruling didn’t represent a softening of the Court’s heart as to the defiant Defendants. The Court remained annoyed even though one of the defaulted Defendants, JW Ray, filed an Affidavit saying that he had not meant to "disrespect this Honorable Court" and that he was "unaware of the significance of his actions."
Judge McGuire said that "the Defendants have not demonstrated good cause to set aside the entry of default based on Ray’s misunderstanding of his legal obligation in this matter." Order ¶26. He also said that the "Defendants’ conduct that lead to the entry of default pursuant to Rule 37 was inexcusable." Order ¶27 & n.20. The Court said that it would "enter other appropriate sanctions against Defendants at a future date." Id.
So, having said all that about the "inexcusable" nature of the Defendants’ conduct, what was the reason that the Court set aside its Entry of Default? It lay in the Plaintiff’s Motion to Amend its Complaint, adding five new Defendants and seeking to state two new claims against the defaulted Defendants.
The Court said that "it was forced to conclude that Plaintiff’s decision to amend its Complaint provides the ‘good cause’ necessary to set aside the entry of default." Order ¶27 (emphasis added). The Defendants hadn’t had the opportunity to respond to the new allegations and were entitled to defend against them.
The takeaway from the new London Leasing decision is that it is not a good idea to amend your Complaint after you have an Entry of Default in hand. You run a risk of losing the Entry of Default.
By the way, if you noticed that there were no posts on this blog last week, it’s because I was away at the beach last week with my family. The Business Court didn’t take notice of my absence (maybe I need to put in for secured leave next time I go away), and the Court went ahead and issued four opinions while I was gone which I am busy digesting. So, look for more posts later this week.
Please note, as it has always said in the Disclaimer to this Blog, that my posts do not represent the views of Brooks Pierce, but only my own.