United States District Court, M.D. Florida, Fort Myers Division
OPINION AND ORDER 
POLSTER CHAPPELL, UNITED STATES DISTRICT JUDGE
Pending before the Court is Plaintiff Hancock Shoppes,
LLC's Objection to Magistrate's February 26, 2018
Order (Doc. 88) and Defendant Retained Subsidiary One,
LLC's response in opposition (Doc. 89). For the following
reasons, the Court overrules Hancock's Objection.
a breach of contract case. It stems from a thirty-year
commercial lease in which Hancock was the landlord and
Defendants Kash N' Karry Food Stores, Inc. and Retained
Subsidiary were the last two tenants. When the lease ended,
Retained Subsidiary surrendered the property to Hancock in an
allegedly “untenantable” condition. (Doc. 2 at
¶ 29). Hancock thus has sued every tenant, including
Kash N' Karry and Retained Subsidiary.
August 2017, United States Magistrate Judge Mac R. McCoy
granted Hancock's motion for a Clerk's default
against Kash N' Karry. (Doc. 59). On the same day that
the Clerk entered the default (Doc. 60), Retained Subsidiary
moved to set it aside for two reasons: (1) Retained
Subsidiary and Kash N' Karry merged in April 2014 with
Retained Subsidiary surviving as the successor in interest;
and (2) Retained Subsidiary did not tell Kash N'
Karry's former registered agent that his/her authority to
accept service expired before Hancock served the Complaint.
(Doc. 62 at 1, 6). Hancock opposed setting aside the
Clerk's default, arguing that Retained Subsidiary lacked
standing under Delaware law to assert any defenses for Kash
N' Karry, and otherwise had not shown good cause to set
aside the default. (Doc. 63).
States Magistrate Judge Carol Mirando sided with Retained
Subsidiary. She found that Retained Subsidiary had
standing to bring the motion to set aside the Clerk's
default on Kash N' Karry's behalf because the two
companies merged more than three years ago. (Doc. 86).
According to the Magistrate Judge,
Kash [N' Karry] was merged out of existence effective
April 12, 2014 and became part of Retained Subsidiary, but
transferred its interest in the relevant commercial property
to Retained Subsidiary before its dissolution . . . Thus, all
debts, liabilities and duties of Kash [N' Karry]
pertaining to the commercial property at issue attach to
Retained Subsidiary, which may be enforced against [Retained
Subsidiary] to the same extent as if said debts, liabilities
and duties had been incurred or contracted by [Retained
(Doc. 86 at 2) (citing 8 Del. C. § 259)). From there,
the Magistrate Judge found good cause to set aside the
Clerk's default because Retained wasted no time and filed
its motion on the same day the Clerk entered the default. She
also found that Kash N' Karry inadvertently failed to
tell its registered agent to stop accepting service of
process. Hancock now objects to these findings.
judge may designate a magistrate judge to hear and determine
any pretrial matter before the court, ” subject to
exceptions not relevant to this case. 28 U.S.C. §
636(b)(1)(A). Federal Rule of Civil Procedure 72 also governs
pretrial matters referred to magistrate judges. Under this
rule, a district court reviewing a magistrate judge's
decision on a non-dispositive issue “must consider
timely objections and modify or set aside any part of the
order that is clearly erroneous or is contrary to law.”
Fed.R.Civ.P. 72(a). Clear error is a highly deferential
standard of review. See Holton v. City of Thomasville
Sch. Dist., 425 F.3d 1325, 1351-52 (11th Cir. 2005).
“A finding is clearly erroneous ‘when although
there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction
that a mistake has been committed.'” Id.
Further, an order “is contrary to the law when it fails
to apply or misapplies relevant statutes, case law, or rules
of procedure.” Malibu Media, LLC v. Doe, 923
F.Supp.2d 1339, 1347 (M.D. Fla. 2013). Under neither standard
does the Court find grounds to modify or set aside the
Magistrate Judge's Order.
stated, Hancock moves to reverse the Magistrate Judge's
Order setting aside the Clerk's default against Kash
N' Karry. It argues the Magistrate Judge erred because
only a court-appointed receiver - not Retained Subsidiary -
has standing to defend the breach of contract claim against
Kash N' Karry and to set aside a Clerk's default
under Delaware law. It also faults the Magistrate Judge for
focusing solely on § 259 of Delaware's corporation
laws and not discussing its referenced case law.
Subsidiary opposes Hancock's objection. To appoint a
receiver under Delaware law, Retained Subsidiary argues that
Kash N' Carry needs to have assets to administer - which
it does not. And even if such assets existed, Retained
Subsidiary maintains Hancock has the burden to move
Delaware's Court of Chancery to appoint the receiver -
which it has not done. Retained Subsidiary also claims it has
standing to set aside the default because, as Kash N'
Karry's successor and assignee, any default judgment
entered against Kash N' Karry will affect it. In addition
to these substantive arguments, Retained Subsidiary makes a
practical one: “It is difficult to identify what end
[Hancock] seeks through its zealous pursuit to enforce a
clerical default against a long-ago dissolved entity with no
assets. This is particularly so here, . . . where [Retained
Subsidiary] . . . does not contest that it assumed [Kash
N' Karry's] obligations under the Lease.” (Doc.
89 at 2).
278 of the Delaware General Corporate Law operates to extend
a dissolved corporation's existence for three years to
wind up its corporate affairs. 8 Del. C. § 278. During
this period, a corporation may be sued in its own name. After
§ 278's three-year period ends, the corporation has
no power to continue its winding-up duties, including to
defend suits. Thus, “a hopeful plaintiff must apply to
the Court of Chancery for the appointment of a receiver who
would then defend suits on behalf of the corporation.”
Weyerhaeuser Co. v. Edward Hines Lumbar Co., No. 91
C 623, 1991 WL 169385, at 6 (N.D. Ill. Aug. 28, 1991);
see alsoIn re Krafft-Murphy Co., Inc., 82
A.3d 696 (Del. 2013) (finding that third-party tort claimants
were able to have a receiver appointed to oversee the
dissolved corporation's ...