Opinion of the Court
For the reasons stated herein, we hold the trial court did not abuse its discretion.
I. Factual and Procedural Background
Builders Mutual Insurance Company and Builders Premier Insurance
Company (collectively “Plaintiffs”) provided workers’ compensation coverage,
commercial package coverage, and commercial auto coverage to Defendants.
Plaintiffs provided workers’ compensation coverage from 22 September 2020 to 12
June 2023, commercial package coverage from 22 September 2020 to 22 September
2022, and commercial auto coverage from 15 September 2023 to 2 October 2023.
Defendants received several notices from Plaintiffs. The notices included four
Revised Audit Bill’s issued on 19 July 2023 and 6 October 2023, one Audit Bill issued
on 8 August 2023, and one Unpaid Premium Late Notice issued on 10 October 2023
all requiring additional premium payments to be made towards past policy periods.
Defendants contested the audit process, alleging Plaintiffs assigned the incorrect
“Class Codes” to some of their employees, resulting in grossly inflated premium
payments.
On 16 November 2023, Defendants’ Attorney, Adam Mlynarczyk
(“Mlynarczyk”), sent an email to Plaintiffs’ Attorney, Will Piner (“Piner”), regarding
the unpaid premium payments. Mlynarczyk asserted bad faith on behalf of Plaintiffs’
“blatant mis-categorizations” of employees and requested to “set up a time to discuss.”
Piner responded to Mlynarczyk on 7 December 2023, rejecting the assertion of bad
faith and stated, “we would be happy to provide additional clarification in efforts to
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resolve the matter before proceeding to litigation.” Mlynarczyk responded to Piner a
final time on 20 December 2023 apologizing for his delayed response and stated that
he “had a surgery last week and [he] will need a little time to get with [his] client on
these.”
On 8 February 2024, Plaintiffs filed a complaint asserting claims for breach of
contract and unjust enrichment to recover over $1.4 million in unpaid insurance
premiums. On 10 April 2024, Plaintiffs filed a motion for entry of default and default
judgment due to Defendants’ failure to answer under Rule 55 of the North Carolina
Rules of Civil Procedure. The following day, 11 April 2024, the Wake County Clerk
of Superior Court entered default and default judgment1 against Defendants
including interests and costs in favor of Plaintiffs. A letter dated 16 April 2024 was
sent to Defendants notifying them of the default judgment that had been obtained
against them in the proceeding.
On 17 May 2024, more than a month after default judgment was entered,
attorney Karl W. Roth (“Roth”) submitted a notice of appearance by counsel on behalf
of Defendants. On the same day, Roth submitted a motion to vacate the default
judgment and for an extension of time. The motion states that Defendants EMPWR
Solar LLC, Douglas Sean Sullivan, and Robert Matthew Edge were served between
20 February 2024, and 4 March 2024. The motion argues that “[a]s this default
1 Entry of default judgment by the Clerk is appropriate as Plaintiffs’ complaint asked for a
sum certain. N.C. Gen. Stat. § 1A-1, Rule 55(b)(1).
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judgment was entered thirty-six (36) days ago, Plaintiff will not be prejudiced by
vacating the default and providing Defendants thirty (30) days in order to have their
attorney respond to this Complaint on the merits and to assert affirmative defenses
and counterclaims as may be necessary.” The motion does not state which affirmative
defenses or counterclaims Defendants would assert if the default judgment were
vacated.
On 16 July 2024, Plaintiffs filed a memorandum in opposition to Defendants’
motion to vacate. Plaintiffs argued the default judgment should not be set aside
because Defendants displayed neither excusable neglect nor a meritorious defense.
On 18 July 2024, a virtual proceeding was held for the trial court to hear the
motion to vacate default judgment. In that proceeding, Defendants acknowledged
that they owed Plaintiffs payment for the insurance premiums, “but it was nowhere
near the judgment that [Plaintiffs] got, which was well over a million dollars.”
Defendants also stated that they had a meritorious defense because of the “many
unresolved factual issues and contesting of the categorization of the employees[.]”
The trial court denied Defendants’ motion. The corresponding order was filed the
same day, stating the motion was denied because the trial court found “Defendants
have shown neither excusable neglect nor the existence of a meritorious defense.” To
correct a clerical error, a consent order to amend the order was filed on 7 August 2024.
The order was corrected, and the amended order was filed on 9 August 2024, with the
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identical reason stated for denial. Defendants filed a written notice of appeal on 12
August 2024.
II. Analysis
Defendants assert one argument on appeal, that the trial court committed
reversible error by denying the Rule 60(b) motion to vacate the default judgment.
Defendants assert that their failure to respond to the complaint was based upon
excusable neglect and based on the totality of the circumstances, the default
judgment should be set aside. Defendants do not challenge the initial Entry of Default
on appeal but do challenge the Default Judgment.
A. Standard of Review
“The decision of whether to set aside an entry of default is within the sound
discretion of the trial court. Likewise, our standard of review of a trial court’s denial
of a Rule 60(b) motion is abuse of discretion.” Cnty. of Mecklenburg v. Ryan, 281 N.C.
App. 646, 652, 871 S.E.2d 110, 115-16 (2022) (cleaned up). However, “[w]hether
neglect is ‘excusable’ or ‘inexcusable’ is a question of law” and is reviewed by this
Court de novo. Judd v. Tilghman Med. Assocs., LLC, 272 N.C. App. 520, 526, 847
S.E.2d 45, 49 (2020) (quoting Elliott v. Elliott, 200 N.C. App. 259, 262, 683 S.E.2d
405, 408 (2009)).
B. Motion to Set Aside Default Judgment
Defendants argue that the trial court abused its discretion by denying the
motion to vacate the default judgment because Defendants’ failure to respond was
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based upon excusable neglect. Further, while Defendants acknowledge they “clearly
made a mistake in not responding to the complaint,” they argue the “windfall” award
Plaintiffs received constitutes an extraordinary circumstance based on the totality of
the circumstances. We disagree.
“Inasmuch as the law generally disfavors default judgments, any doubt should
be resolved in favor of setting aside an entry of default.” Granville Med. Ctr. v. Tipton,
160 N.C. App. 484, 486, 586 S.E.2d 791, 794 (2003) (quoting Peebles v. Moore, 48 N.C.
App. 497, 504-05, 269 S.E.2d 694, 698 (1980), modified and aff'd, 302 N.C. 351, 275
S.E.2d 833 (1981)). “To set aside a judgment on the grounds of excusable neglect
under Rule 60(b), the moving party must show that the judgment rendered against
him was due to his excusable neglect and that he has a meritorious defense.” Judd,
272 N.C. App. at 526, 847 S.E.2d at 49 (quoting Elliott, 200 N.C. App. at 262, 683
S.E.2d at 408).
Defendants assert their failure to respond to Plaintiffs’ complaint is excusable
neglect because they “mistakenly believed that the attorneys were still working
through the audit process and towards settlement.” Further, Defendants claim they
were “not aware that Plaintiffs’ counsel failed to advise their South Carolina attorney
that a lawsuit was filed or that Plaintiffs had abandoned further settlement
discussion.” “The standard of care required of the litigant is that which a man of
ordinary prudence usually bestows on his important business.” Judd, 272 N.C. App.
at 527, 847 S.E.2d at 50 (quoting Moore v. Deal, 239 N.C. 224, 227, 79 S.E.2d 507,
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510 (1954)). “Our Supreme Court has repeatedly held: ‘the employment of counsel
does not excuse the client from giving proper attention to the case.’” Judd, 272 N.C.
App. at 527, 847 S.E.2d at 50 (quoting Hyde Cnty. Land & Lumber Co. v. Thomasville
Chair Co., 190 N.C. 437, 438, 130 S.E. 12, 13 (1925)).
It is well settled that provisions relating to the setting aside of default judgments should be liberally construed so as to give litigants an opportunity to have a case disposed of on the merits. However, statutory provisions designed to protect plaintiffs from defendants who do not give reasonable attention to important business affairs such as lawsuits cannot be ignored.
Judd, 272 N.C. App. at 526, 847 S.E.2d at 50 (emphasis added).
Here, we cannot find that Defendants demonstrated reasonable diligence or
exercised the acceptable standard of care over their important business matters. See
Monaghan v. Schilling, 197 N.C. App. 578, 585, 677 S.E.2d 562, 566 (2009); Judd,
272 N.C. App. at 527, 847 S.E.2d at 50. The record is clear that Defendants were
served via the Charleston County, South Carolina Sheriff between 20 February 2024
and 4 March 2024. Defendants make no argument that they attempted to contact
Plaintiffs or even their own attorney after receiving service of the complaint. We
cannot find excusable neglect in ignoring a lawsuit on the mistaken belief that
counsel has it handled. As stated supra, “[o]ur Supreme Court has repeatedly held:
‘the employment of counsel does not excuse the client from giving proper attention to
the case.’” Judd, 272 N.C. App. at 527, 847 S.E.2d at 50.
As Defendants are unable to make a sufficient showing of excusable neglect,
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“the question of a meritorious defense becomes moot and is immaterial.” Judd, 272
N.C. App. at 528, 847 S.E.2d at 50 (quoting Estate of Teel v. Darby, 129 N.C. App.
604, 611, 500 S.E.2d 759, 764 (1998)). Thus, we find the trial court did not abuse its
discretion in denying Defendants’ motion to vacate the default judgment.
III. Conclusion
For the reasons stated herein, we hold the trial court did not err by denying
Defendants’ Rule 60(b) motion to vacate the default judgment as Defendants’ failure
to respond to the complaint was not excusable neglect. Accordingly, Defendants’ issue
of a meritorious defense is immaterial, and we need not address it. We affirm the
order of the trial court.
AFFIRMED.
Chief Judge DILLON and Judge ZACHARY concur.
Report per Rule 30(e).
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