Case 4:14-cv-00708-ALM Document 33 Filed 11/15/17 Page 1 of 6 PageID #: 301
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`United States District Court
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`M.B., I.B., and J.S.
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`v.
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`MATTHEW G. LANDGRAF
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`MEMORANDUM OPINION AND ORDER
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`Civil Action No. 4:14-CV-00708
`Judge Mazzant
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`Pending before the Court is Defendant Matthew Landgraf’s Motion for Relief from Final
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`Default Judgment Pursuant to Fed. R. Civ. P. 60(b)(1) (Dkt. #22). After reviewing the relevant
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`pleadings and motion, the Court finds the motion should be granted.
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`BACKGROUND
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`On April 12, 2012, a federal grand jury indicted Defendant on two counts of production of
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`child pornography in violation of 18 U.S.C. §§ 2251 (a) and (e). Subsequently, Defendant entered
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`a guilty plea in connection with the indictment. As a result of Defendant’s conduct, on November
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`7, 2014, Plaintiffs M.B., I.B., and J.S. initiated this suit seeking damages (Dkt. #1). On July 31,
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`2015, as a result of Defendant’s failure to answer, the Clerk filed an Entry of Default (Dkt. #9).
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`On April 4, 2016, the Court entered a Final Default Judgment (Dkt. #18) against Defendant.
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`On April 4, 2017, Defendant filed a Motion for Relief from Final Default Judgment (Dkt.
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`#22). Plaintiffs filed their response (Dkt. #26) on April 18, 2017, and Defendant filed his reply
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`(Dkt. #29) on April 25, 2017.
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`LEGAL STANDARD
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`Federal Rule of Civil Procedure 55(c) provides that a “court may set aside an entry of
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`default for good cause, and it may set aside a default judgment under Rule 60(b).” FED. R. CIV. P.
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`55(c). Rule 60(b) lists five reasons for which relief may be granted and contains a sixth catch-all
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`category for reasons not specifically listed. FED. R. CIV. P. 60(b). “[F]ederal courts should not be
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`agnostic with respect to the entry of default judgments, which are generally disfavored in the law
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`and thus should not be granted on the claim, without more, that the defendant had failed to meet a
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`procedural time requirement.” Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000). “Thus,
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`where there are no intervening equities any doubt should, as a general proposition, be resolved in
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`favor of the movant to the end of securing a trial upon the merits.” Id.
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`ANALYSIS
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`Here, Defendant seeks to have the default judgment set aside under both Rule 60(b)(1) and
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`60(b)(6).1 The Court finds it is only necessary to address Defendant’s Rule 60(b)(1) argument.
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`I. Rule 60(b)(1)
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`“On motion and just terms, the court may relieve a party or its legal representative from a
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`final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise,
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`or excusable neglect . . . .” FED. R. CIV. P. 60(b)(1). When a party seeks to set aside a default
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`judgment pursuant to Rule 60(b)(1), the Court takes into consideration three primary factors:
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`(1) whether the defendant willfully defaulted; (2) whether a meritorious defense is presented; and
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`(3) whether setting aside the default judgment prejudices the plaintiff. Scott v. Carpanzano, 556
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`F. App’x 288, 293 (5th Cir. 2014); accord Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 119
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`(5th Cir. 2008); Lacy, 227 F.3d at 292. “Of these factors, two can be determinative: a district court
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`may refuse to set aside a default judgment if it finds either that the default was willful or that the
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`defendant failed to present a meritorious defense.” Scott, 556 F. App’x at 293–94. Other factors
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`the Court may consider are whether the defendant acted expeditiously to correct the default and
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`1 In Plaintiffs’ Response (Dkt. #26), Plaintiffs attempt to classify Defendant’s arguments as being grounded in Rule
`60(b)(2). The Court is unpersuaded. Further, in Defendant’s Reply (Dkt. #29), Defendant makes an argument under
`Rule 60(b)(3). Because Defendant did not raise this argument in its original motion (Dkt. #22), the Court will not
`address it.
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`2
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`whether there is a significant financial loss to the defendant. Id. at 294; accord Lacy, 227 F.3d at
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`292.
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`a. Willful Default
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`Defendant argues his default is not the result of willfulness but instead the result of
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`(1) Plaintiffs’ informal agreement with Defendant to forego filing an answer in order to preserve
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`Defendant’s resources, (2) Plaintiffs’ decision to terminate this agreement unilaterally,
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`(3) Plaintiffs’ failure to return records essential to Defendant’s defense, and (4) Defendant’s
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`conclusion that Plaintiffs’ next move included initiating formal discovery, not seeking a default
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`judgment. Conversely, Plaintiffs assert despite any agreement between the parties, Defendant
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`should have filed an answer or obtained a written agreement. Further, Plaintiffs claim seeking a
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`default judgment was implicit in their warnings to Defendant when Defendant failed to adequately
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`respond to Plaintiffs’ requests for documents.
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`“A willful default is an intentional failure to respond to litigation.” Scott, 556 F. App’x at
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`294. Here, Plaintiffs filed suit on November 7, 2014. Subsequently, Defendant and his counsel
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`agreed to postpone filing an answer, pending settlement, in order to preserve resources and increase
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`any potential recovery Plaintiffs might obtain (Dkt. #22, Exhibit 5 at ¶¶ 4–5). Plaintiffs’ counsel
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`knew of Defendant’s approach and presented to the Court their approval of it.2 Further, counsel
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`for both parties engaged in continuous settlement communications from November 26, 2014,
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`through March 24, 2015 (Dkt. #22, Exhibit 2). Taking into account Plaintiffs’ counsel’s
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`knowledge and approval of Defendant’s approach to forego filing an answer pending settlement
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`in conjunction with ongoing settlement discussions, the Court finds Defendant’s failure to file an
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`2 See (Dkt. #22, Exhibit 5 at ¶¶ 4–5); (Dkt. #6 at p. 1) (Plaintiffs’ Status Report stating that “[i]n order to preserve the
`assets available to Defendant to resolve this matter by way of settlement, Plaintiffs have agreed to work with Defendant
`and his attorneys to minimize the attorney[’]s fees incurred by the Defendant in defense of this suit and preserve
`Defendant’s estate for the benefit of the Plaintiffs.”).
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`3
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`answer or make an appearance does not rise to the level of willful default or intentional failure to
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`respond.
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`b. Meritorious Defense
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`A district court maintains the discretion to refuse to set aside a default judgment if the
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`defendant fails to present a meritorious defense sufficient to support a finding on the merits in its
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`favor. Scott, 556 F. App’x at 296 (citing Lacy, 227 F.3d at 293). Generally, this requires the
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`defendant provide definite factual allegations, as opposed to mere legal conclusions in support of
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`his defense. Id. (citing Jenkens, 542 F.3d at 122). “In determining whether a meritorious defense
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`exists, the underlying concern is whether there is some possibility that the outcome of the suit after
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`a full trial will be contrary to the result achieved by the default.” Id. (citing In re OCA, Inc., 551
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`F.3d 359, 373 (5th Cir. 2008)).
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`Plaintiffs claim Defendant invaded Plaintiffs’ right of privacy and violated 18 U.S.C.
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`§ 2255 (Dkt. #1 at ¶¶ 10–13). Under 18 U.S.C. § 2255, “[a]ny person who, while a minor, was a
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`victim of a violation of section . . . 2251 . . . and who suffers personal injury as a result of such
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`violation . . . may sue . . . and shall recover the actual damages . . . and the costs of the suit,
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`including a reasonable attorney’s fee.” 18 U.S.C. § 2255(a) (2013). Further, “any person
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`described in the preceding sentence shall be deemed to have sustained damages of no less than
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`$150,000 in value.” Id.
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`Here, Defendant argues both J.S. and I.B. are precluded from recovering under 18 U.S.C.
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`§ 2255. Specifically, Defendant argues J.S. cannot recover because he “was not a minor when his
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`sexual conduct was recorded.” (Dkt. #22 at ¶ 40). Further, because I.B. “was never recorded
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`except fully clothed in a non-sexual setting” and “the statute requires that I.B. have been recorded
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`engaging in explicit sexual conduct . . . any recording of him did not violate Title 18 U.S.C.
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`4
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`§ 2255. . . .” (Dkt. #22 at ¶ 40). Regarding M.B., while Defendant concedes she is entitled to
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`statutory damages, he disagrees she is entitled to the nearly $5 million in actual damages awarded
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`to her in the default judgment (Dkt. #22 at ¶ 41).3
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`Without inquiring into the merits of the case as a whole, based on Defendant’s factual
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`allegations, it appears that Defendant has submitted evidence which, if proven at trial, constitutes
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`a defense. See Fine v. Evergreen Aviation Ground Logistics Enterprise, Inc., No. 2:07-cv-165,
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`20009 WL 793753, at *3 (E.D. Tex. Mar. 20, 2009).
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`c. Prejudice to Plaintiff
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`To show prejudice, “the plaintiff must show that setting aside the default judgment will
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`result in loss of evidence, increased difficulties in discovery, or greater opportunities for fraud and
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`collusion.” Scott, 556 F. App’x at 298 (citing Lacy, 227 F.3d at 293). “It is not enough that the
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`plaintiff will be required to prove his case or that any potential recovery will be delayed.” Id.
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`Plaintiffs fail to make a showing they will suffer prejudice if the default judgment is set
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`aside, and the Court finds no potential for unfair prejudice in the record.
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`d. Additional Factors
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`Additional factors the Court may consider are whether the defendant acted expeditiously
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`to correct the default and whether there is a significant financial loss to the defendant. Scott, 556
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`F. App’x at 293–94; accord Lacy, 227 F.3d at 292. Plaintiffs argue Defendant did not act within
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`a reasonable time. Defendant contends he timely filed his motion and that not setting aside the
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`default judgment results in a significant financial loss.
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`3 In making this argument, Defendant compares the facts of this case and M.B.’s request for nearly $5 million with
`another case where a minor victim of sexual abuse and child pornography over a two-year period by her uncle sought
`$3.4 million.
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`5
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`Rule 60(c)(1) states that a “motion under Rule 60(b) must be made within a reasonable
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`time—and for reasons (1), (2), and (3) no more than a year after the entry of the judgment or order
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`or the date of the proceeding.” FED. R. CIV. P. 60(c)(1). Here, the Court entered the Final Default
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`Judgment (Dkt. #18) on April 4, 2016. A year later, on Aril 4, 2017, Defendant filed his Motion
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`for Relief from Final Default Judgment (Dkt. #22). While Defendant did not act as quickly as
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`possible, he did file his motion within the limitations period. As such, the Court finds this factor
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`weighs slightly in favor of not setting aside the default judgment or is neutral. Nevertheless, this
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`factor alone is not determinative of the Court’s decision.
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`Additionally, the Court finds Defendant would suffer a significant financial loss if the
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`default judgment is not set aside. Specifically, Defendant’s obligation under the default judgment
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`towards Plaintiffs is nearly $17.8 million. Undoubtedly, a multi-million dollar judgment mitigates
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`strongly in favor of a trial on the merits. See Scott, 556 F. App’x at 299.
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`CONCLUSION
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`It is therefore ORDERED that Defendant’s Motion for Relief from Final Default Judgment
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`Pursuant to Fed. R. Civ. P. 60(b)(1) (Dkt. #22) is hereby GRANTED.
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`Further, the Court sets aside the Final Default Judgment (Dkt. #18) and orders Defendant
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`to file an answer to Plaintiffs’ complaint within ten (10) days of entry of this order.
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`6
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