InProcessOut, LLC v. World Tech Toys, Inc.

Western District of Texas, txwd-5:2018-cv-00869

Docket No. 35

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Case Case5:18-cv-00869-FB 5:18-cv-00869-FB Document Document38-1 35 Filed Filed06/14/19 06/17/19 Page Page11ofof77 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION INPROCESSOUT, LLC, § § Plaintiff, § § VS. § CIVIL ACTION NO. SA-18-CA-0869-FB § WORLD TECH TOYS, INC., § § Defendant. § ORDER CONCERNING PENDING MOTIONS Before the Court are: (1) Defendant World Tech Toys, Inc.'s Motion to Dismiss (docket #19); (2) Plaintiff's Motions to Strike Late Filed Pleading (docket numbers 21 and 22); (3) Plaintiff's Motion to Extend Time to Respond (docket #23); (4) Defendant's Opposition to Plaintiff's Motion to Strike Defendant's Motion to Dismiss and Request to Set Aside Any Default Entered by the Court's Clerk (docket #25); (5) Defendant's Opposition to Plaintiff's Motion for Default Judgment (docket #26); (6) Defendant's Opposition to Plaintiff's Motion to Extend Time to Respond to Defendant's Motion to Dismiss (docket #27); (7) Plaintiff's Response to Motion to Dismiss (docket #28); (8) Defendant's Motion for Extension of Time to File Reply to Plaintiff's Opposition to Defendant's Motion to Dismiss (docket #29); and (9) Defendant's Reply to Plaintiff's Opposition to Defendant's Motion to Dismiss (docket #30). As the record in this case reflects, plaintiff filed its Original Complaint in this case on August 23, 2018 (docket #1). Thereafter, defendant requested, through a motion filed by the plaintiff, four separate extensions of time because the parties were "engaged in discussions that may resolve the Case." The Court granted all of the agreed to extensions of time to answer, move, or otherwise respond to the Original Complaint, and by the fourth extension, defendant's deadline was extended, Case Case5:18-cv-00869-FB 5:18-cv-00869-FB Document Document38-1 35 Filed Filed06/14/19 06/17/19 Page Page22ofof77 as requested, to Wednesday, December 5, 2018 (docket #15). At 12:17 p.m. on December 6, 2018, plaintiff's filed its Request for Entry of Default Against World Tech Toys, Inc. (docket #16), and a Clerk's Entry of Default Against Defendant World Tech Toys, Inc. was entered by the Clerk at 4:06 p.m. on December 6, 2019 (docket #17). Although not officially entered on the Court's docket until December 7, 2018, defendant traditionally filed its Motion for Admission Pro Hac Vice (docket #18), Motion to Dismiss (docket #19), and Declaration in Support of the Motion to Dismiss (docket #20) on December 6, 2019, as indicated by the Clerk's file stamp on each of the documents. The time of the traditional filing, however, is unknown. In its Request to Set Aside Default, defendant notes the entry of default was improper because the Request for Entry of Default and the Entry of Default by the Clerk occurred on the day its responsive pleading was due. Defendant acknowledges that the deadline set forth in this Court's order set December 5, 2018, as the deadline but contends that because President Trump signed an executive order closing the federal government as a mark of respect for the forty-first president of the United States, George Herbert Walker Bush, its deadline was extended to December 6, 2018, a deadline which it met. The Court disagrees. Although defendant argues that Rule 6 of the Federal Rules of Civil Procedures extends its deadline to December 6, Commentary to the Rule provides otherwise to instances, such as the case here, where a fixed time is set by the Court. Specifically, the Advisory Committee Notes to the 2009 Amendment provides the following explanation of rule 6(a): Subdivision (a) has been amended to simply and clarify the provisions that describe how deadlines are computed. Subdivision (a) governs the computation of any time period found in the rules, in any local rule or court order, or in any statute that does not specify a method of computing time. In accordance with Rule 83(a)(1), a local rule may not direct that a deadline be computed in a manner inconsistent with subdivision (a). -2- Case Case5:18-cv-00869-FB 5:18-cv-00869-FB Document Document38-1 35 Filed Filed06/14/19 06/17/19 Page Page33ofof77 The time-computation provisions of subdivision (a) apply only when a time period must be computed. They do not apply when a fixed time to act is set. The amendments thus carry forward the approach in Violette v. P.A. Days, Inc., 427 F.3d 1015, 1016 (6th Cir. 2005) (holding that Civil Rule 6(a) "does not apply to situations where the court has established a specific calendar day as a deadline"), and reject the contrary holding of In re American Healthcare Management, Inc., 900 F.2d 827, 832 (5th Cir. 1990) (holding that Bankruptcy Rule 9006(a) governs treatment of date-certain deadlines set by court order). If, for example, the date for filing is "no later than November 1, 2007," subdivision (a) does not govern. But if a filing is required to be made "within 10 days" or "within 72 hours," subdivision (a) describes how that deadline is computed. (Emphasis added).1 Accordingly, defendant's deadline remained the date certain requested by the parties and ordered by this Court--December 5, 2018, and the entry of default was not in error. See Miller v. City of Ithaca, No. 3:10-cv-597, 2012 WL 1589249, at *1-3 (N.D.N.Y. May 4, 2012) (explaining that court set specific deadline thereby making Federal Rule of Civil Procedure 6(a) inapplicable and requiring papers to be filed on specific date regardless of whether that date was a weekend or holiday). Moreover, even if Federal Rule of Civil Procedure 6(a) would have been applicable in this case, it appears the argument concerning the inaccessibility of the Clerk's Office 1 See Steven S. Gensler, 1 Federal Rules of Civil Procedure, Rules and Commentary Rule 6, Practice Commentary (2019 Update) which provides: Time-computations rules do not apply to fixed-date deadlines. The time-computation rules do not apply to fixed-date deadlines. When the court sets a fixed-date deadline, there is no time period to compute. The deadline that the court sets is fixed and controls. Practitioners should watch out for two situations. The first situation is when a fixed-date deadline ends on a weekend or holiday. While Rule 6(a)(1)(C) would extend the deadline for a computed period, it will not apply to the fixed-date deadline. That means that lawyers presented with fixed-date deadlines should think about how they intend to meet those deadlines and plan accordingly. One option, of course, is to make plans to file early during the preceding week. Registered CM/ECF users also have the option of filing electronically on the actual weekend or holiday due date. The second situation to watch out for is when the clerk's office is inaccessible on the fixed due date. While Rule 6(a)(3) would automatically extend a computed period, it will not apply to the fixed-date deadline. In this context, advance planning cannot be expected, since the lawyer cannot know in advance whether or not the clerk's office will be inaccessible on the due date. The best solution seems to be to file the paper in question as soon as the clerk's office is again accessible and seek a post- deadline extension under Rule 6(b)(1)(B). Assuming that the lawyer made a diligent effort to file and did not otherwise contribute to the missed deadline, the inaccessibility of the clerk's office should constitute both the good cause and the excusable neglect needed for a post-deadline extension. (Footnotes omitted). -3- Case Case5:18-cv-00869-FB 5:18-cv-00869-FB Document Document38-1 35 Filed Filed06/14/19 06/17/19 Page Page44ofof77 on December 5, 2018, would also fail due to the availability of CM/ECF. See Domazet v. Willoughby Supply Co., Inc., No. 1:14-cv-1455 (GLS), 2015 WL 4205279 at *3 (N.D.N.Y. Jul. 10, 2015) (noting that courts appear "inclined to conclude that, given the advent of electronic case filing (ECF), a clerk's office is no longer 'inaccessible' just because it may be physically closed on a particular day" and collecting cases holding the same); Miller v. City of Ithaca, No. 3:10-cv-597, 2012 WL 1589249, at *3 (N.D.N.Y. May 4, 2012) (foreclosing any argument by defendants that the Clerk's office was inaccessible because deadline fell on Saturday and finding "[t]hrough use of CM/ECF (electronic case filing), Defendants could have accessed the Clerk's office on March 31, 2012 for purposes of filing their motion. Although Rule 6 'did not attempt to define inaccessibility,' leaving it up to development through caselaw, see Fed. R. Civ. P. 6 2009 advisory committee notes to Subd. (A)(3), the Rules appear to contemplate that the Clerk's office is accessible when electronic filing is available."). Here there is no indication or argument by the defendant that the CM/ECF system in the Western District of Texas was inaccessible.2 In its Request to Set Aside Any Default Entered by the Court's Clerk (docket #25), and Opposition to Plaintiff's Motion for Default Judgment (docket #26), defendant not only reasserts its previous argument (addressed above) that the entry of default was premature, defendant also contends entry of default is improper because there was insufficient service of process, and this Court lacks personal jurisdiction. 2 The Court is aware that defendant's counsel did not seek permission to appear pro hac vice until December 6, 2018. However, the docket sheet reflects that counsel obtained two extensions of the answer date (docket numbers 13 and 15) by having plaintiff's counsel electronically file the extension requests. In addition, defendant acknowledges it was common knowledge that on December 3, 2018, President Trump signed the order which closed the federal government on December 5, 2018. Thus, defendant had notice the Clerk's office would be physically closed on December 5 and that either a traditional filing needed to be made on December 4 or and an electronic filing would be needed in order to meet the Court imposed December 5, 2018, deadline. -4- Case Case5:18-cv-00869-FB 5:18-cv-00869-FB Document Document38-1 35 Filed Filed06/14/19 06/17/19 Page Page55ofof77 Although it appears that technically the defendant was in default by not filing its answer or other responsive pleading as ordered on December 5, 2018, presuming at this time that defendant was properly served and this Court has personal jurisdiction over the defendant, the "Fifth Circuit disfavors defaults when, as here, the plaintiff does not allege more than violation of a procedural time requirement." Ponder v. Wersant, Civil Action No. 4:17-CV-00537, 2017 WL 5904720 at *2 (S.D. Tex. Sept. 29, 2017) (recognizing that clerk's entry of default is void where no personal jurisdiction due to lack of proper service; also recognizing that late filings of 12(b) motions, answers, or leave to file answers, even if a few months late, could preclude default citing cases where entry of default was set aside when: (1) an answer filed 49 days late and during the "infancy of the case"; (2) extension request was mailed 2 weeks late; (3) defendants waited 3 months to file their request that entry of default be set aside); see Flores v. Select Energy Servs., L.L.C., 486 F. App'x 429, 431 (5th Cir. 2012) ("'[A] party is not entitled to a default judgment as a matter of right, even where the defendant is technically in default.'"); Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001) (recognizing same concerning Fifth Circuit's holding that default is not a matter of right even when defendant technically defaults, and further recognizing the drastic remedy that default judgments are, their disfavor, and use by courts in extreme situations). Moreover, this Court "'may set aside an entry of default for good cause.'" Gamez v. Hospital Klean of Texas, Inc., Civil Action No. SA-12-CV-517- XR, 2013 WL 1089040 at *1 (W.D. Tex. Mar. 14, 2013). Factors to be considered in this analysis include "whether the default was willful, whether setting it aside would prejudice the adversary, and whether a meritorious defense is presented." Id. Additionally, other factors which have been considered include whether: "'(1) the public interest was implicated, (2) there was a significant financial loss to the defendant, and (3) the defendant acted expeditiously to correct the default.'" Id. -5- Case Case5:18-cv-00869-FB 5:18-cv-00869-FB Document Document38-1 35 Filed Filed06/14/19 06/17/19 Page Page66ofof77 Based on defendant's pleadings, the Court finds that its one day delay in filing its motion to dismiss was not wilful but as a result of an incorrect interpretation of Rule 6. In addition, the Court finds the plaintiff will not be prejudiced by the setting aside of the entry of default at this early stage of the case, and at this stage of the litigation and current record, this Court cannot find defendant's claimed defenses of improper service and lack of personal jurisdiction completely lack merit. Id. at *2-3. The Court further finds that defendant's action in filing its motion to dismiss one day beyond the designated answer deadline supports setting aside the entry of default. Id. at 4 (finding defendant acted expeditiously in redressing a calendering error by filing its motion to set aside 7 days after learning of the entry of default and appeared in the case 7 days after the entry and "less than two weeks after the answer deadline expired"). Moreover, on December 17, 2018, plaintiff filed its First Amended Complaint (docket #24), which according to Fifth Circuit jurisprudence, "'supersedes the original complaint in its entirety.'" Ponder v. Wersant, Civil Action No. 4:17-CV-00537, 2017 WL 3923544, at *3 (S.D. Tex. Sept. 7, 2017); see Freilich v. Green Energy Resources, Inc., 297 F.R.D. 277, 282 (W.D. Tex. 2014) ("well-settled in the Fifth Circuit that an amended complaint supersedes the original complaint, and the original complaint has no legal effect, except to the extent that it is incorporated by reference into the amended complaint."). As a result, "district courts routinely set aside entries of defaults when plaintiffs file amended complaints." Freilich, 297 F.R.D. at 283; see Ponder v. Wersant, Civil Action No. 4:17-CV-00537, 2017 WL 3923544, at *3 (S.D. Tex. Sept. 7, 2017) (finding that even if service had been proper, "'district courts routinely set aside entries of defaults when plaintiffs file amended complaint'" and collecting cases which so hold). Accordingly, based on the foregoing, the recognized disfavor by the Fifth Circuit of defaults and its preference for "merit based dispositions,"3 and the record in this case, IT IS HEREBY 3 Ponder v. Wersant, Civil Action No. 4:17-CV-00537, 2017 WL 5904720 at *2 (S.D. Tex. Sept. 29, 2017). -6- Case Case5:18-cv-00869-FB 5:18-cv-00869-FB Document Document38-1 35 Filed Filed06/14/19 06/17/19 Page Page77ofof77 ORDERED that Defendant's Request to Set Aside Any Default Entered by the Court's Clerk (docket #25) is GRANTED such that the Clerk's Entry of Default Against Defendant World Tech Toys, Inc. (docket #17) is SET ASIDE. See Waltner v. Aurora Loan Servs., L.L.C., 551 F. App'x 741, 745 (5th Cir. 2013) (default judgment not a matter of right even when defendant is "technically in default'; and noting "we have held that when the plaintiff has made no showing of prejudice stemming from the defendant's delay, a default judgment 'should not be granted on the claim, without more, that the defendant ha[s] failed to meet a procedural time requirement.'"). IT IS FURTHER ORDERED, based on plaintiff's filing of its First Amended Complaint (docket #24), that Defendant World Tech Toys, Inc.'s Motion to Dismiss (docket #19) is DENIED AS MOOT WITHOUT PREJUDICE to refiling. See Meyer v. Shinn Const., PE:18-CV-3-DC-DF, 2018 WL 1905049 at *1 (W.D. Tex. Mar. 3, 2018) ("filing of an amended complaint, which supersedes an original complaint, renders moot a motion to dismiss the original complaint"); Smallwood v. Bank of America, Civil Action No. 3:11-CV-1283-D, 2011 WL 4941044 at *1 (N.D. Tex. Oct. 17, 2011) (granting leave to amend complaint and denying "motion to dismiss without prejudice as moot"); Comb v. Benji's Special Educ. Acad., Inc., 745 F. Supp. 2d 755, 773 (S.D. Tex. 2010) (denying as moot motion to dismiss "without prejudice to refiling in light of Plaintiffs' second amended complaint"). Having denied as moot the pending motion to dismiss, the Motions to Strike Late Filed Pleading (docket numbers 21 and 22), the Motion to Extend Time to Respond (docket #23), and Defendant World Tech Toys, Inc.'s Motion for Extension of Time to File Reply to Plaintiff's Opposition to Defendant's Motion to Dismiss (docket #29) are all DENIED as moot. It is so ORDERED. SIGNED this 14th day of June, 2019. _________________________________________________ FRED BIERY UNITED STATES DISTRICT JUDGE -7-