Gallagher v. Pajevic

• Court: U.S. District Court — Northern District of Indiana
• Writing for the Court: MAGISTRATE JUDGE JOSHUA P. KOLAR UNITED STATES DISTRICT COURT
• Decision Date: 15 August 2019
• Docket Number: CAUSE NO.: 2:15-CV-410-JPK
• Citation: Gallagher v. Pajevic, CAUSE NO.: 2:15-CV-410-JPK (N.D. Ind. Aug 15, 2019)
• Parties: ROBERT GALLAGHER, Plaintiff, v. NADA PAJEVIC, Defendant.

ROBERT GALLAGHER, Plaintiff, v. NADA PAJEVIC, Defendant.

CAUSE NO.: 2:15-CV-410-JPK

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA HAMMOND DIVISION

August 15, 2019

OPINION AND ORDER

This matter is before the Court on a Motion for Default Judgement on Sum Certain [DE 25], filed by Plaintiff Robert Gallagher, pro se, on August 31, 2017. Defendant Nada Pajevic is also litigating pro se.

PROCEDURAL BACKGROUND

Gallagher initiated this cause of action by filing a complaint on November 5, 2015. He filed an amended complaint on December 22, 2015. On April 25, 2016, the Court issued a notice pursuant to Federal Rule of Civil Procedure 4(m) that the action may be dismissed for failure to serve process. On May 10, 2016, Gallagher filed the summons returned executed showing that Pajevic was served on January 11, 2016. On June 23, 2016, Gallagher filed a motion for Clerk's Entry of Default. A Clerk's Entry of Default was entered on June 24, 2016.

On July 12, 2016, Pajevic filed a document that she termed a "plead and response." The Court struck this document because Pajevic was in default and therefore the default needed to be set aside before she could file an answer. On December 29, 2016, the Court issued a notice to Gallagher that the case may be dismissed for want of prosecution. Gallagher filed an "Answer to the Courts Notice" on January 18, 2017.

On August 31, 2017, Gallagher filed the instant motion for default judgment, accompanied by an affidavit. On October 10, 2017, District Court Judge Rudy Lozano entered an order referring this matter to Magistrate Judge Paul R. Cherry, who held a hearing and issued a report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B) and (C) on December 19, 2017. Judge Cherry retired, and the undersigned was subsequently referred to this case as magistrate judge.

On June 21, 2019, the case was reassigned, upon the written consent of the parties, to the undersigned as the presiding judge to conduct all further proceedings and to order the entry of a final judgment. See 28 U.S.C. § 636(c).

STANDARD OF REVIEW

Under 28 U.S.C. § 636(b)(1)(B), a judge may designate a magistrate judge to conduct hearings and submit proposed findings of fact and recommendations for disposition of dispositive motions. The court "may accept, reject, or modify, in whole or in part," the magistrate judge's report. Id. at § 636(b)(1). Parties have fourteen days after being served with the magistrate judge's report to file written objections to the proposed findings and recommendations. Id. "A judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." Id. Portions of the report to which there is no objection are reviewed for clear error. Johnson v. Zema Sys. Corp., 170 F.3d 734, 739 (7th Cir. 1999) (citing Goffman v. Gross, 59 F.3d 668, 671 (7th Cir. 1995); Campbell v. United States Dist. Court, 501 F.2d 196, 206 (9th Cir. 1974)).

JUDGE CHERRY'S REPORT AND GALLAGHER'S OBJECTIONS

In his December 19, 2017 report, Judge Cherry recommended that the Clerk's Entry of Default be set aside sua sponte—that is, by the Court acting on its own without a party's motion—and that the motion for default judgment be denied.¹ Judge Cherry further recommended that a deadline be set for Pajevic to file an answer to the amended complaint and that she be advised of certain procedural matters.

Gallagher filed objections with the Court. Gallagher did not date the objections, but the Court stamped the document as filed on January 8, 2018. Gallagher's certificate of service states that service of the objections was made on Pajevic on January 4, 2018. Because parties have fourteen days within which to file exceptions and because an extra three days are added when service is made by mail, see Fed. R. Civ. P. 6(d), objections to Judge Cherry's report were due on January 5, 2018. It appears that Gallagher attempted to timely file his objections, but they were ultimately filed on the first business day after the deadline expired. However, Pajevic has not argued that the filing is untimely. In the interest of justice, the Court accepts the objections as if timely filed.

The case here presents the presumably rare situation where a magistrate judge is presiding by consent of the parties and there is a pending report and recommendation written by another magistrate judge pursuant to an order of referral issued by a previously assigned district court judge. At a hearing held July 25, 2019, the Court indicated that it planned to use Judge Cherry's report and the objections filed to that report in ruling on the motion for default judgment. The Court asked if there was any objection to that plan, and both parties stated that they did not object. Because "[a] judge of the court may accept, reject, or modify" a magistrate judge's report, 28 U.S.C. § 636(b)(1), and the undersigned—by virtue of the parties' written consent—"may conduct any or all proceedings" in this civil matter, id. § 636(c)(1), the undersigned concludes that 28 U.S.C. § 636 authorizes him to accept, reject, or modify Judge Cherry's report.

ANALYSIS

Judge Cherry recommended that the Court sua sponte set aside the Clerk's Entry of Default. Federal Rule of Civil Procedure 55 provides that "[t]he court may set aside an entry of default for good cause." Fed. R. Civ. P. 55(c). The Seventh Circuit Court of Appeals has indicated that a court may, for good cause, sua sponte set aside an entry of default. Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 386 (7th Cir. 2008). It is easier to meet the standard to set aside an entry of judgment than to meet the standard to set aside a default judgment. Id.

"A party seeking to vacate an entry of default prior to the entry of final judgment must show: '(1) good cause for the default; (2) quick action to correct it; and (3) a meritorious defense to the complaint.'" Cracco v. Vitran Exp., Inc., 559 F.3d 625, 630-31 (7th Cir. 2009) (quoting Sun v. Bd. of Trs. of the Univ. of Ill., 473 F.3d 799, 810 (7th Cir. 2007)). Good cause is not synonymous with excusable neglect; good cause can be met "even though there is no good excuse for the defendant's inattention to the case." Sims v. EGA Prods., Inc., 475 F.3d 865, 868 (7th Cir. 2007); accord JMB Mfg., Inc. v. Child Craft, LLC, 799 F.3d 780, 792 (7th Cir. 2015) ("As we explained in Sims, an entry of default may be set aside for 'good cause,' which does not necessarily require a good excuse for the defendant's lapse." (citations omitted)). "Damages disproportionate to the wrong afford good cause for judicial action, even though there is no good excuse for the defendant's inattention to the case." Sims, 475 F.3d at 868. "Good cause" is easier to satisfy where it is only default, and not default judgment, that is sought to be set aside. Id.

Even in the default judgment context, the meritorious defense only needs to be "set forth" rather than "beyond a doubt, succeed in defeating a default judgment." Wehrs v. Wells, 688 F.3d886, 890 (7th Cir. 2012). However, the defense must be supported by a developed legal and factual basis. Id.

Judge Cherry found that the good cause required by Rule 55 exists in this case. He provided several reasons which he found to collectively meet Rule 55's standard. He noted that Pajevic provided testimony of potential defenses, filed an answer to the amended complaint less than three weeks after Gallagher filed the motion for entry of default (though the answer was stricken for procedural reasons), noted that Pajevic is litigating pro se, and found that Pajevic did not appear to be willfully flaunting the Court's rules. Judge Cherry also noted that, though Pajevic has delayed this litigation by not timely filing her answer, Gallagher has also, on occasion, not acted timely. Specifically, notices were entered on the docket for Gallagher's failure to timely file proof of service and for failure to prosecute. Judge Cherry also noted that Gallagher has requested damages of over $1,100,000.

Gallagher objects to this recommendation, so the Court's review is de novo. Gallagher argues that cases cited by Judge Cherry are distinguishable and that the Court should look to other cases. Gallagher also argues that he has been treated unfairly by the Court and Pajevic. The Court will first address the case law objections and then turn to the objections based on treatment of Gallagher.

Gallagher argues that Judson Atkinson Candies, Inc., Cracco, Sims, and JMB Mfg., Inc., cited by Judge Cherry in his report and by the Court above, are distinguishable. However, with one exception (which will be addressed below), these cases are cited for the general statements of the law that they contain and not because of factual similarities between those cases and the situation here. Therefore, the objections based on factual dissimilarities between this case and Judson Atkinson Candies, Inc., Cracco, Sims, and JMB Mfg., Inc. are overruled.

Gallagher also quotes, with alterations, the following passage from JMB Mfg., Inc.: "the special relationship between two prospective adoptive parents and a social worker employed by a hospital is simply not comparable to an arm's-length commercial transaction between two merchants for the sale of goods." 799 F.3d at 789. Gallagher argues that Judge Cherry made such an impermissible comparison. However, the quoted language comes from the court's analysis in rejecting the argument that a supplier's president owed a special duty to a manufacturer such that the manufacturer could assert a negligent misrepresentation claim against the president. The JMB Mfg., Inc. court refused to find that a case involving a social worker's special duty to prospective adoptive parents could be extended by analogy to the manufacturer-supplier case. The quoted language is about the substantive question of whether a duty existed for a tort claim and does not...