IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

ROBERT GREEN, as Trustee of the § GREEN CHILDREN’S TRUST, § § Plaintiff, § § v. § CIVIL ACTION NO. 3:19-CV-00731-E § L. CADE HAVARD and AMANDA HAVARD, § § Defendants.M EMORANDUM OP§I NION AND ORDER

Before the Court is Defendant L. Cade Havard’s Motion to Set Aside Default Judgment, Motion for Leave to File Answer, and Memorandum of Law in Support (Doc. No. 19) and Plaintiff’s Response and Supplemental GRResApNoTnsEeD thereto (Doc. Nos. 22 & 26). For the following reasons, Havard’s motions areB ackground. In October 2018, plaintiff Robert Green, as trustee of the Green Children’s Trust, obtained a judgment against Health:ELT, LLC n/k/a Coord, LLC (COORD) after COORD failed to pay amounts due under a promissory note. On March 25, 2019, Green filed his complaint in this case against defendants L. Cade Havard and Havard’s daughter Amanda, executive chairman and chief executive officer of COORD respectively, alleging Havard and Amanda made misrepresentations to induce Green to invest in COORD. Green asserts claims for fraud and negligent misrepresentation and also seeks recovery from Havard and Amanda for COORD’s obligations to Green under an alter ego theory of liability. 1 Havard was served the summons and complaint on March 29, 2019 (Doc. Nos. 3 & 5). On April 16, 2019, COORD filed for Chapter 11 bankruptcy relief. Havard did not file an answer in this case, and the clerk entered default against him on May 2, 2019 (Doc. Nos. 6 &

7). On May 3, 2019, Green filed a motion for default judgment, and the Court entered a default judgment on May 13, 2019 (Doc Nos. 8 &10). Havard now moves the Court to set aside the default judgment and for leave to answer (Doc. No. 19). He explains that he conferred with his bankruptcy counsel prior to the deadline for answering, and, based on counsel’s advice, believed that because of the automatic stay in the bankruptcy proceeding he did not have to respond to this lawsuit. In an affidavit attached to Havard’s motion, his bankruptcy counsel represents he advised Havard that the continuation of this case “violated the automatic stay in the Debtor’s

bankruptcy case because alter Aegpop laicctaiobnles Lbaelwon agn tdo Athnea Dlyesbisto r’s estate.”

The Fifth Circuit disfavors default judgments, and “where there are no intervening equities[,] any doubt shEofufjlodh .n . I. nbte'l rCersuoislvee Hdo ilnd ifnagvso, rI nocf. tvh. eA &mLo vSaanlets t, oIn tch.e end of securing a trial upon the merits.” ,

, 563 (5th Cir. 2003) (internal citation omitted). Federal Rule of Civil Procedure 55(c) authorizes a court to “set aside an entry of default for good cause, and it may set aside a final default judgment under Rule 60(b).” Fed. R. Civ. P. 55(c). Here, the Court’s default judgment is not

a final judgment because it does not adjudicate Green’s claims against Amanda, who has filed an answer. Accordingly, tSheee C Koouerrt nmera yv .s CetM aRs iCdoen tshter .i n&t eRroloofciuntgorLy. Ld.Cef.ault judgment for good cause under rule 55(c). , ,

, 225-26 2 see also (5th Cir. 2018); Fed. R. Civ. P. 54(b) (authorizing a court to revise any order or other decision, however designated, until final judgment is entered). To determine if there is good cause to set aside a default, courts consider whether (1)

the default resulted from excusable neglect, (2) setting aside the defaSuelte w Eoffujoldh pn rIenjut’dl iCceru tihsee pHloalidnitnifgfs, , aInncd. (3) the defendanCt JCp rHeoslednitnsg sa, Imnce.r vit. oWriroiguhs t d&e fLeantsoe, .I n c. , 346 F.3d at 563; ,

(5th Cir. 1992). “These factors are Enfofjto ehxnc Ilunst’ilv Cer; uiinsset Heaodld, itnhgesy, Ianrce. to be regarded simply as a means to identify good cause.” , 346 F.3d at 563. Excusable neglect “encompasses both simPpiolen,e efaru Ilntlve. sSse orvms.i sCsoio. nv.s Btrou nacswt aicnkd A, smsoocrse. Lcotdm. mP’sohnilpy, omissions caused by carelessnseeses .”W esson v. City of Dallas ,

(1993); adopted, N boy. 3:14-CV-4325-L,

, at *4 (N.D. Tex. Jan. 19, 2016) (Stickney, M.J.),

(N.D. Tex. Mar. 9, 2016) (Lindsay, J.). Havard asserts his failure to answer was not the product of willful indifference. Instead, he consulted his bankruptcy counsel, who led Havard to conclude the automatic stay protections of the bankruptcy proceeding applied to this case. Green, however, directs the Court to Havard’s lack of good faith in filing COORD’s Chapter 11 bankruptcy proceeding on the eve of his deposition in connection with the judgment Green obtained against COORD despite COORD having “no operations, no employees, no assets, and no prospects of reorganization.” And, on October 10, 2019, the bankruptcy court dismissed

the bankruptcy proceeding on Green’s motion to dismiss for bad faith or, in the alternative, motion to convert to Chapter 7. 3 this Green, however, does not address Havard’s explanation for failing to file an answer in case. Moreover, Green previously moved to amend the complaint and interlocutory default judgment to remove the alter ego claims on the ground those claims belonged to the

bankruptcy estate. Green withdrew the motion after the bankruptcy proceeding was dismissed. Because this record clearly indicates some confusion among both parties regarding the interplay of the bankruptcy proceeding with this case, the Court finds Havard’s failure to answer was the result of excusable neglect and not an intentional failure to respond

to litigation. Lacy v. SPirteejlu Cdoircpe. resulting from delay alone is not sufficient to avoid setting aside a default. th ,

(5 Cir. 2000) (a plaintiff must show the delay will result in “loss of evidence, increased difficulties in discovery, or greater opportunities for fraud and collusion.”) (internal citation omitted). Nor is there sufficient Lparceyjudice if setting asGidreea at Ademfa. uInlts .d Cooe.s v n. oG moinore than require the plaintiff to prove its case. ,

; , No. 3:15-CV-75-P,

, at *3 (N.D. Tex. Dec. 16, 2015) (Solis, J.) (finding no prejudice to plaintiff when claims against defendant seeking to set aside default were identical to claims against another defendant). This case is in the earliest stage of discovery, and Green will have to prosecute identical claims against Amanda. Green’s response to Havard’s motion does not identify, or even raise, any possible prejudice that would result from setting aside the default. Accordingly, the Court finds there is no demonstrated prejudice that weighs against setting aside the default judgment. A defendant has a meritorious defense if “there is some possibility that theI no uretc OoCmAe of the suit after a full trial will be contrary to the result achieved by the default.” , 4 Inc. th ,

(5 Cir. 2008) (internal citation omitted). In his affidavit, Havard denies making the specific misrepresentations that form the basis of Green’s fraud and negligent misrepresentation claims. Havard also avers that COORD was solvent and followed all corporate formalities required by law and there was no co-mingling or siphoning of COORD funds. Havard’s affidavit presents a sufficient factual baSseies J tooe rHaaisned s Pormome potoisosnisb, iIlnitcy. tvh. Ae doaumtceome after trial would not mirror the default judgment. , EP-12-CV-141-KC,

, at *3 (W.D. Tex. Aug. 16, 2012) (“defendant’s allegations are meritorious if they contain even a hint of a suggestion which proven at trial, would constitute a complete defense”). Accordingly, the Court finds Havard has met his burden of establishing meritorious defenses to Green’s claims. Consistent with the Court’s analysis of the relevant factors above and mindful of the

GFiRftAhN CTirEcDuit prefOerReDnEceR EtoD resolve cases on the merits, Havard’s motions (Doc. No. 19) are . It is OR tDhaEtR tEhDe entry of default (Doc. 7) and default judgment (Doc. 10) are set aside. Havard is to file an answer within ten days from the date of this Order. SO ORDERED.

Signed November 7, 2019.

________________________________________ ADA BROWN UNITED STATES DISTRICT JUDGE 5