United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
STEPHEN N. LIMBAUGH, JR. UNITED STATES DISTRICT JUDGE.
Timothy Johnson, Terry Prince, and Garnett Kinkade brought
this action against their former employer, defendant Lucas
Industries, L.L.C., for violations of the Fair Labor
Standards Act, 29 U.S.C § 215 (“FLSA”).
Lucas did not respond to the complaint, and plaintiffs sought
and received a default judgment against the defendant. (#16.)
Two weeks later, counsel filed an appearance for Lucas. Then,
on the day the Court granted plaintiffs' motion for an
award of damages and attorneys' fees, counsel for Lucas
filed a motion to set aside the default judgment supported by
Lucas states that its owner, Billy Johns, believed that the
lawsuit had been settled through negotiations between Johns
and plaintiff Johnson, who is related to both of the other
plaintiffs. It was only after learning that Johnson would not
or could not dismiss the lawsuit that Lucas hired defense
counsel and discovered that a default judgment had been
entered against Lucas. Defendant Lucas states that its owner
was “whipsawed” by the plaintiffs and that the
judgment should be set aside.
Federal Rule of Civil Procedure 55(c), the Court “may
set aside an entry of default for good cause, and it may set
aside a final default judgment under Rule 60(b).”
Because a default judgment has been entered, the Court looks
to Rule 60(b). That rule states that the Court may
“relieve a party…from a final judgment”
due to “mistake, inadvertence, surprise, or excusable
neglect.” Fed.R.Civ.P. 60(b)(1).
defendant argues that its neglect was excusable because it
believed the matter had been settled. A short recitation of
events is necessary. Defendant Lucas is a recycling and
pallet provider in Missouri and Illinois. Plaintiffs Timothy
Johnson, Johnson's brother-in-law Terry Prince, and
Garnett Kinkade, are all former employees of defendant.
Plaintiff Johnson was promoted to a managerial position in
2015. In or about March 2016, defendant's owner, Billy
Johns, learned that employees at plaintiff Johnson's
plant were stealing pallets and selling them on the black
market. To deter further such conduct, defendant requested
that all employees (including Johnson and the other two
plaintiffs) sign non-competition agreements. However, Johnson
and his brother-in-law Prince quit their jobs instead. This
lawsuit was filed five months later, on September 1, 2016.
Plaintiffs allege that defendant underpaid them in violation
of the FLSA. Defendant denies that it improperly paid its
employees, but defendant's owner nonetheless approached
Johnson through an intermediary to inquire about resolving
the dispute amicably. According to defendant, Johnson
proposed that he would drop the lawsuit if defendant paid him
$10, 000, rehired him at a higher hourly rate, and rehired
his brother-in-law without requiring a non-compete. Defendant
paid Johnson $4, 000 of the $10, 000 up front, and both
Johnson and Prince resumed their jobs. Defendant did not hire
legal counsel in reliance on the deal that Billy Johns
understood had been made.
to defendant, plaintiff Johnson told defendant's owner in
November 2016 that the lawsuit would not be dismissed.
Defendant asserts that Johnson said that his attorney told
him he would be “held in contempt” if he stopped
pursuing his case. Defendant says that Billy Johns's
mother, Nancy, caught Johnson sneaking into Johns's
locked office with a stolen key, and that Johnson was
terminated as a result. Prince was also terminated according
to defendant because there was no work for him to do.
tell a slightly different story. Johnson says he agreed to
return to defendant's employ in exchange for $20/hour (a
$4/hour wage increase), health insurance, and a $10, 000
signing bonus. He resumed working for defendant on October 4,
2016. He admits he was paid $4, 000 but says he was not
provided with health insurance. Johnson denies that he ever
told defendant's owner that he would drop the lawsuit,
and he denies that he ever said he would be “held in
contempt” if the lawsuit were dropped. Johnson also
states that, once he was rehired, Johns asked him repeatedly
to dismiss the lawsuit, but Johnson says he did not feel
comfortable discussing the subject of dismissing the lawsuit
without the aid of his attorneys, so Johnson “put off
Johns's repeated overtures.” (#23 at 5.)
Eventually, on November 4, 2016, Johns's mother Nancy
told Johnson that he was being “laid off” due to
the lawsuit and that Terry Prince was also being laid off.
party discusses any interactions with plaintiff Kinkade
following the filing of the lawsuit.
Clerk entered default against defendant on November 2, 2016.
The Court entered the default judgment on November 4, and the
Court awarded damages and attorneys' fees on December 2,
2016. Defendant meanwhile hired counsel, who entered an
appearance for defendant on November 16 and filed the instant
motion to set aside default on December 2, 2016 (#21).
defendant clearly failed to appreciate the import of being
served with a lawsuit for alleged FLSA violations and should
have hired counsel immediately, the Court is mindful that
there is a “judicial preference for adjudication on the
merits.” Oberstar v. F.D.I.C., 987 F.2d 494,
504 (8th Cir. 1993). To determine whether the default
judgment should be set aside, the Court looks to whether
defendant's conduct was blameworthy or culpable, whether
defendant has a meritorious defense, and to whether the other
party would be prejudiced if the default were excused.
Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 784
(8th Cir. 1998).
oppose defendant's motion because defendant had not
communicated with all the plaintiffs and thus could not have
believed he had settled the lawsuit. According to
declarations, however, defendant's owner, who is not a
lawyer, believed he had resolved the issues by rehiring
Johnson and Prince and making a partial payment on the $10,
000 offer. Plaintiffs call defendant's story about
settlement a “contrivance, ” but plaintiffs do
not dispute that Johnson and Prince were rehired at higher
salaries and that Johnson was paid $4, 000 of the $10, 000
negotiated “bonus.” It stands to reason that
Johns intended to pay the remainder of the amount due upon
dismissal of the lawsuit. Although Kinkade did not return to
work for defendant, Johns states in his declaration that he
believed he was speaking with Johnson as a representative for
the two other plaintiffs, who were Johnson's
brother-in-law (Prince) and cousin (Kinkade). Mistaken belief
that settlement has been reached is “precisely the type
of mistake that Rule 60(b) is intended to redress.”
MIF Realty L.P. v. Rochester Associates, 92 F.3d
752, 757 (8th Cir. 1996).
plaintiffs suggest that defendant's actions following the
filing of the lawsuit constitute yet more FLS A violations,
defendant insists that it has meritorious legal defenses to
the FLSA lawsuit as it was filed. As for whether plaintiffs
will be prejudiced, the delay has been minimal. Defendant
sought counsel as soon as Johns realized Johnson was not
going to dismiss the lawsuit, and counsel filed the instant
motion and an answer soon thereafter. Although plaintiffs
suggest that defendant intends to bring improper
counterclaims, plaintiffs are free to move to dismiss those
counterclaims should they see fit to do so.
IT IS HEREBY ORDERED that defendant's
motion to set aside the ...