Barbara Greist, et al. v. LendUS, LLC, et al.

Summary

The United States District Court for the Northern District of California denied CrossCountry Mortgage, LLC’s motion under Federal Rule of Civil Procedure 55(c) to set aside an entry of default in an FLSA collective action. The court found culpable conduct and prejudice to the plaintiffs based on CrossCountry’s delayed and strategic litigation conduct, including its failure to respond to certification-related motions and its delayed motion to set aside default.

Holdings

1. A court may deny a Rule 55(c) motion to set aside an entry of default when any one of the good-cause factors—culpable conduct, lack of a meritorious defense, or prejudice to the opposing party—favors maintaining the default. CrossCountry failed to establish good cause.
2. A defendant's failure to answer is culpable when, after receiving actual or constructive notice of the action, it intentionally fails to respond in bad faith or in a manner designed to manipulate the legal process. CrossCountry's conduct was culpable.
3. Prejudice sufficient to oppose setting aside default may consist of tangible harm that hinders a plaintiff's ability to pursue its claims, not merely delay. Setting aside CrossCountry's default would prejudice plaintiffs.

Questions Presented

1. Whether CrossCountry established good cause under Federal Rule of Civil Procedure 55(c) to set aside the entry of default.
2. Whether CrossCountry's litigation conduct was culpable because it intentionally failed to defend and strategically delayed seeking relief from default.
3. Whether setting aside the default would prejudice plaintiffs by depriving them of the benefits of their tolling agreement and hindering their claims.

Disposition

other