Brief Fact Summary. Shepard Claims Services, Inc. (Plaintiff), filed a contract action in the district court against William Darrah & Associates, alleging that an insurance broker (Defendant), failed to pay Plaintiff for services rendered. Defendant appeals from the district court’s denial of Defendant’s Motion to Set Aside Entry of Default.
Synopsis of Rule of Law. In order to have an order of default set aside, the defendant must make a motion and show a meritorious defense.
Issue. Whether Defendant’s Motion to Set Aside Entry of Default should be granted based on good cause?
Held. Yes. Judgment is reversed and remanded for further proceedings. In order to determine whether a motion for default should be entered, the court must determine whether the plaintiff will be prejudiced, whether the defendant has a meritorious defense, and whether defendant’s conduct was culpable. Here, Plaintiff suffered no prejudice, and Defendant presented a meritorious defense in its answer. To prove culpable conduct, the conduct of a defendant must display intent to frustrate judicial proceedings or reckless disregard for the effect of conduct on proceedings. However, when the first two factors militate in favor of setting aside the entry it is an abuse of the district court to deny the motion to set aside the default. Furthermore, it is not necessary that conduct be excusable to qualify for relief under the good cause standard. Strong policy exists in favor of deciding cases on their merits and is outweighed by the slight delay experienced by the court. A default judgment deprives the client of his day in court and should not be used as a means to punish attorneys. Therefore, despite evidence of disarray on the part of the Defendant, the Defendant should not be deprived of his opportunity to present his defense at trial.
Discussion. As a matter of law, a default judgment establishes that defendants are liable to plaintiff for each cause of action alleged in the complaint. Since the effect of a default judgment is so harsh, this court is opposed to denying the party of his day in court. Absent the intent to frustrate the judicial process or reckless disregard for the party’s actions on the court system, the court will generally find good cause to set aside a default judgment.