## Facts

- Pretzel & Stouffer, a Chicago law firm, sued Imperial Adjusters, an insurance adjusting firm, seeking about $132,000 in unpaid legal fees.
- Imperial appeared and answered the original complaint.
- Pretzel sought leave to file, and then filed, a First Amended Complaint that retained the fee claim and added an Illinois Consumer Fraud and Deceptive Business Practices Act claim alleging Imperial misrepresented its intent to pay to induce continued legal services.
- The district court ordered Imperial to answer the amended complaint by March 5, 1992, and set a status hearing for March 24, 1992.
- Imperial neither answered by the deadline nor appeared through counsel at the March 24 status hearing; the court entered default and set a prove-up hearing.
- Imperial moved to vacate the default and tendered an answer late, but did not seek leave to file out of time and did not serve the tendered answer on opposing counsel.
- Imperial’s counsel attributed the missed answer deadline to poor communication with the client and the missed status hearing to a calendaring error.
- The district court denied the motion to vacate and entered default judgment, finding no good cause and no meritorious defense to the consumer-fraud count.

## Issues

1. Whether the district court abused its discretion under Federal Rules of Civil Procedure 55(c) and 60(b) by refusing to set aside the entry of default and default judgment based on Imperial’s asserted excusable neglect.
2. Whether Imperial presented a meritorious defense sufficient to justify vacating the default, particularly as to the Illinois consumer-fraud claim added in the amended complaint.

## Decision

- The Seventh Circuit affirmed the denial of Imperial’s motion to set aside default and affirmed the default judgment.
- The court held Imperial failed to show good cause or excusable neglect for missing the answer deadline and the status hearing.
- The court held Imperial failed to proffer a meritorious defense to the amended complaint’s consumer-fraud/misrepresentation claim.
- Because relief from default is discretionary and the record supported the district court’s findings, there was no abuse of discretion.

## Legal Principles

- Motions to set aside an entry of default or default judgment under Rules 55(c) and 60(b) generally require: (1) good cause or excusable neglect, (2) timely action to correct the default, and (3) a meritorious defense.
- Attorney carelessness, inattentiveness, poor client communication, and ordinary calendaring errors typically do not constitute excusable neglect; counsel’s neglect is ordinarily imputed to the client.
- A “meritorious defense” must be supported by specific factual allegations that, if proven, would defeat liability on each material claim; conclusory assertions or defenses addressing only some counts are insufficient.
- Appellate review of a refusal to vacate default is for abuse of discretion, with substantial deference to the district court’s assessment of diligence, prejudice, and case management.

## Conclusion

The Seventh Circuit left the default judgment in place because Imperial’s failures to timely respond and appear were not excused by counsel’s asserted mistakes, and Imperial did not supply a fact-based defense to the newly added consumer-fraud claim, making the district court’s refusal to reopen the case a permissible exercise of discretion.


Pretzel & Stouffer, Chartered v. Imperial Adjusters, Inc., 28 F.3d 42 (7th Cir. 1994)