Unreported / Non-Citable
Background
This indemnity dispute arose after FCCI Insurance Company filed suit on June 2, 2025, against Artisan Masonry, Inc., A&A Granite & Limestone, LLC, and individual defendants Robert E. Gladu and Lacy Gladu. Defendants were served on June 6, 2025. On August 11, 2025, FCCI requested that the clerk enter a default against defendants for failure to respond within the required time. The clerk obliged and entered the default on that date.
On September 9, 2025, defendants moved under Fed. R. Civ. P. 55(c) to set aside the clerk’s entry of default. In their motion, defendants explained through Robert Gladu’s affidavit that he had forwarded the process to his corporate attorney of over twenty years, but that attorney was on vacation in June and did not respond until July, at which point he informed Gladu he no longer practiced litigation. Gladu then attempted to engage a second attorney, whose schedule was booked for several weeks and who was ultimately conflicted out. On August 21, 2025, Gladu contacted his current counsel and retained them the following day.
The Court’s Holding
Judge Amos L. Mazzant granted defendants’ motion to set aside the default entry. The court applied the three-factor test established by Fifth Circuit precedent to determine whether “good cause” existed under Rule 55(c): (1) whether the failure to act was willful; (2) whether setting the default aside would prejudice the adversary; and (3) whether a meritorious defense has been presented. The court emphasized that the requirement of good cause has been interpreted liberally and that default judgments are generally disfavored in federal law.
On the willfulness factor, the court found that defendants’ default was not willful. Although FCCI argued that Gladu had actual notice of the lawsuit and could have sought counsel sooner, the court concluded that Gladu’s documented efforts to engage two sets of counsel before securing representation demonstrated a lack of intentional failure to respond. The court distinguished cases requiring deliberate election to avoid litigation and found none here.
Regarding prejudice, the court held that FCCI had shown none. The court noted that mere delay alone does not constitute prejudice—instead, FCCI would have needed to demonstrate that delay would result in loss of evidence, increased discovery difficulties, or greater opportunities for fraud and collusion. The court also rejected FCCI’s argument that litigation expenses and costs already incurred amounted to prejudice, noting that “litigation expenses alone are typically not enough” to establish prejudice. Finally, on the meritorious defense factor, the court found that defendants’ dispute over the amount of damages owed qualified as a meritorious defense under Fifth Circuit law, pointing to precedent holding that “a significant dispute about damages may qualify as a meritorious defense.” Defendants had alleged they owed substantially less than the amount FCCI sought.
Key Takeaways
- Default entries under Rule 55(c) are reviewed under a “good cause” standard that is “less rigorous” than the Rule 60(b) standard for relief from final judgments.
- A defendant’s reasonable but ultimately unsuccessful attempts to secure counsel can demonstrate lack of willfulness, even where the defendant had actual notice of suit.
- Plaintiff’s litigation expenses and costs incurred in pursuing a default are generally insufficient, standing alone, to establish prejudice warranting denial of Rule 55(c) relief.
- Fifth Circuit law recognizes that a significant dispute regarding damages can constitute a “meritorious defense” for purposes of Rule 55(c) analysis, not just disputes regarding liability.
- Where good cause factors weigh in favor of the moving defendant and no intervening equities exist, doubts should be resolved in favor of setting aside the default to secure a trial on the merits.
Why It Matters
This decision reaffirms the Fifth Circuit’s strong policy preference for resolving disputes on the merits rather than through default. The opinion clarifies that Rule 55(c) offers a meaningful and liberal pathway for defendants to avoid entry of default when they can show any reasonable explanation for their failure to respond—particularly where they acted diligently once the default became apparent. For defendants struggling to secure counsel, this decision provides valuable authority that earnest but unsuccessful efforts to find representation will not be held against them.
The court’s treatment of the meritorious defense factor also expands opportunities for defendants facing default. By holding that a quantitative dispute over damages suffices to show a meritorious defense (citing Fifth Circuit precedent in *In re OCA, Inc.*), the opinion suggests that defendants need not attack liability itself; a plausible claim that the plaintiff’s damage calculations are inflated may be enough. This standard thus protects defendants from default judgment in indemnity and damages-focused disputes and ensures that indemnitors and sureties can present evidence challenging the amounts they are allegedly obligated to cover.