Opinion
CIVIL ACTION No. 03-1217, SECTION "A" (3).
June 16, 2003.
MINUTE ENTRY
ORDER AND REASONS
Before the Court is the defendants', City of New Orleans, et. al., Motion to Vacate Entry of Default (Rec. Doc. 6). The motion is set for hearing on June 18, 2003, on the briefs, without oral argument. Plaintiffs oppose the motion.
BACKGROUND
Plaintiffs purchased property located in New Orleans, Louisiana, on April 6, 1994. The act of sale was duly and properly recorded in the Orleans Parish Conveyance Office on April 22, 1994. Notwithstanding this recordation, the City of New Orleans (hereinafter the "City") continued (emphasis added) to assess the taxes on the property in the names of its former owners. This taxation continued from 1995 through 2003. The Plaintiffs were never on notice that any taxes were due and owing on the property.
On November 17, 1997, as a result of a purported real estate tax delinquency, the City sold the property at a tax sale and said property was adjudicated to the City. This tax "sale" was recorded in the conveyance records on August 8, 1998. Before and after this "sale", the City continued to assess interest and penalties against the property.
The Plaintiffs were finally put on notice of the delinquent taxes and the adjudication of the property to the City after receiving this information from a title company in New Orleans that examined title to the property in 2003. Upon receiving this information, Plaintiffs' counsel promptly delivered a copy of the recorded act of sale to the Third District Assessor. The Plaintiffs then paid the 2003 taxes on the property and, under protest, the interest and penalties. Counsel for Plaintiffs contacted the City and explained the circumstances, all in an attempt to pay the assessed taxes, but without the interest and penalties, and without the adjudication. Allegedly the City expressly refused to make any adjustments whereupon Plaintiffs filed this suit on April 29,2003. The returns of service were filed into the record on April 30, 2003. Pursuant to Fed. Rule Civ. Proc. 12(a)(1)(A), the defendants had 20 days within which to file an answer or other responsive pleadings. The City failed to do this. Subsequently, on May 23, 2003, the clerk of this Court entered a default against the City and the other defendant.
The City also allegedly stated that it did not negotiate "such matters."
The Court notes that in light of a recent 5th Circuit ruling, this Court may not be the proper forum. See American Civil Liberties Union Foundation of Louisiana v. Cynthia Bridges, Secretary of the Louisiana Department of Revenue, 2003 WL 21362357 (5th Cir. 6/11/03). In fact the Court has been advised by counsel for plaintiff that a motion to dismiss is forthcoming.
The City allegedly received notice of the entry of the default on May 27, 2003. The record indicates that an answer was filed on May 28, 2003. On May 29, 2003, the City filed this motion to vacate the entry of the default.
DISCUSSION
Under Federal Rules of Civil Procedure 55(c) and 60(b), a district court may set aside an entry of default or default judgment for "good cause." To determine whether good cause to set aside a default exists, the Fifth Circuit has "found it useful to consider three factors . . . [:] whether the default was willful, whether setting it aside would prejudice the adversary, and whether a meritorious defense is presented."
Lacy v. Sitel Corp., 227 F.3d 290, 291-92 (5th Cir. 2000); Gen. Tel. Corp., v. Gen. Tel. Answering Serv., 975 F.2d 919, 921 (5th Cir. 1960).
The Court may also consider whether the defendant acted expeditiously to correct the default. Dierschke v. O'Cheskey (In re Dierschke), 975 F.2d 181 (5th Cir. 1992).
Dierschke, 975 F.2d at 184; United States v. One Parcel of Real Property, 763 F.2d 181 (5th Cir. 1985).
The Court first looks to whether the City was willful in failing to file a timely answer or other responsive pleading. A finding of willful default ends the inquiry, for "when the court finds an intentional failure of responsive pleadings there need be no other finding." The City states that its failure to file responsive pleadings was due to "clerical error and miscommunications" between previous counsel assigned to this file and present counsel. Present counsel claims that he was under the impression that a motion for extension of time in which to file responsive pleadings had been filed in this matter. Counsel erroneously calculated that the deadline to file his answer under the extension would extend 25 days after the default was entered on May 23, 2003. Significantly, the City did file an answer on May 28, 2003, less than 24 hours after receiving Plaintiffs' Request for Entry of Default. There is nothing in the record to indicate that the City's failure to respond was willful. Therefore, a denial of its requested relief must rest on some other equitable ground.
Dierschke, 975 F.2d at 184 (5th Cir. 1992).
It is unclear to the Court why a copy of the extension was not part of prior counsel's file and, in fact, no request for an extension is found in this Court's records.
"There is no prejudice to plaintiff where `the setting aside of the default has done no harm to plaintiff except to require it to prove its case. It has decided nothing against it except that it cannot continue to hold the sweeping [relief] it obtained . . . without a trial and by default. All that . . . has [been] done is to give the defendants their day in court.'" As a consequence, a delay in filing responsive pleadings does not alone constitute prejudice. The present claim is document-intensive. The Plaintiffs have not shown that the delay will result in the loss of evidence, increased difficulties in discovery, or greater opportunities for fraud and collusion. There is simply no such showing. Further, because this claim is document-intensive, the Court does not foresee any potential for unfair prejudice to the Plaintiffs.
Lacy v. Sitel Corp., 227 F.3d 290, 291-92 (5th Cir. 2000) citing Gen. Tel. Corp., v. Gen. Tel. Answering Serv., 975 F.2d 919, 921 (5th Cir. 1960). This does not exclude the possibility that plaintiffs may be able to prove their case in a properly supported motion for summary judgment.
Lacy, 227 F.3d at 293.
Lacy, 227 F.3d at 293; citing Berthelsen v. Kane. 907 F.2d 617, 621 (6th Cir. 1990).
The last factor to be considered is whether the City has presented a meritorious defense. Plaintiffs have alleged violations of their constitutional due process rights under federal and state law, the imposition of an ex post facto law forbidden by the United States Constitution, and failure to follow proper procedures in the collection of delinquent taxes. The Plaintiffs also seek costs and attorneys' fees. The City's answer contains general denials and a qualified immunity defense. The Court declines to rule on the merit of these defenses.
More specific claims are made stemming from these claims.
Accordingly,
Having found that the City was not willful in failing to promptly answer the complaint and that there is no unfair prejudice to the Plaintiffs, the Defendants' Motion to Vacate Entry of Default (Rec. Doc. 6) should be and is hereby GRANTED.
Any further failure to strictly adhere to the rules of this Court will be properly sanctioned.