Summary
denying a motion to vacate a default judgment after the defendant failed to timely appear and where the Prothonotary had entered damages of $753,959.44
Summary of this case from BDO U.S., LLP v. JSCO Enters.Opinion
Civil Action N21C-08-143 WCC
07-05-2022
JUMPCREW, LLC. Plaintiff, v. BIZCONNECT, INC., Defendant.
ORDER
Martin B. O'Connor Commissioner
Before the Court is Defendant Bizconnect, Inc.'s ("Defendant") Motion to Vacate Judgment entered by this Court in favor of Plaintiff JumpCrew, LLC ("Plaintiff'). The Court entered default judgment for Plaintiff after Defendant failed to timely appear, plead, or otherwise defend the lawsuit. Defendant argues its failure to timely respond to the Complaint amounts to excusable neglect, and the Court should vacate the default j udgment. For the reasons that follow, Defendant's Motion to Vacate Judgment is DENIED.
BACKGROUND
On August 17, 2021, Plaintiff filed a Complaint against Defendant, alleging that on March 23, 2021, Plaintiff and Defendant entered into a written agreement ("Agreement") whereby Defendant would pay Plaintiff for sales and marketing services. The Complaint alleged Defendant breached the Agreement, and it was entitled to damages in an amount not less than $750,000.
Compl., Ex. A (Docket Item ("DI") 1).
Id., p. 3-4.
On August 17, 2021, Plaintiff requested the New Castle County Sheriff serve a Summons and Complaint upon Defendant's registered agent, Corporation Trust Company ("CTC"). On August 25, 2021, the New Castle County Sheriff served a copy of the Summons and Complaint upon CTC. On September 16, 2021, pursuant to Superior Court Civil Rule 55(b)(1), Plaintiff moved for default judgment against Defendant, because Defendant "failed to file an answer or otherwise respond to the Complaint or appear in this action." On this same date, the New Castle County Prothonotary entered default judgment against Defendant in the amount of $753,959.44.
Praecipe (DI 2).
New Castle County Sheriffs Writ Return (DI 3).
Direction of Entry of Default Judgment, Affidavit of Jonathan M. Stemerman, Esquire, ¶ 9 (DI 4).
Motion to Vacate Judgment, Ex. B, New Castle County Civil Docket (DI 7). See JumpCrew, LLC v. Bizconnect, Inc., Case No. A-21-842960-F, Dept. 30 (District Court, Clark County, NV).
On October 21, 2021, Plaintiff sought to domesticate the Delaware judgment by filing an Application of Foreign Judgment in the Clark County (Nevada) District Court. Plaintiff served Defendant, by certified mail, the Notice of Filing Application for Foreign Judgment and Affidavit of Judgment Creditor at: Bizconnect, Inc., 8670 West Cheyenne Avenue, Building # 120, Las Vegas, NV, 89129.
Id. (DI 7).
Motion to Vacate Judgment, Ex. B (DI 7). In July 2021, Defendant changed its address to 8550 West Charleston Blvd., Suite 102, Box 359, Las Vegas, NV 89129. Motion to Vacate Judgment, See Unsworn Declaration of Russell Wong Pursuant to 10 Del. C. § 3927 In Support of Motion To Vacate Default Judgment ("Wong Declaration") ¶ 5 (DI 7). Defendant arranged for mail received at its (former) West Cheyenne Avenue address to be forwarded to the West Charleston Blvd, address, and on November 8, 2021, Defendant received the Application for Foreign Judgment and related paperwork. Id. ¶¶ 5,6.
On November 8, 2021, Defendant first "became aware of the Delaware lawsuit." On December 9, 2021, more than three months after Plaintiff served the Complaint on CTC, Defendant's counsel entered an appearance in this litigation.On December 10, 2021, Defendant filed a Motion to Vacate Judgment, asserting, inter alia, that its failure to answer the Complaint amounted to excusable neglect.
Motion to Vacate Judgment, ¶ 10. Defendant became aware of the Delaware lawsuit after it received notice of the Application of Foreign Judgment. Motion to Vacate Judgment, See Wong Declaration, ¶¶ 1, 4-5 (DI 7).
DI 6.
Motion to Vacate Judgment, ¶ 2 (DI 7). Defendant identified Bizconnect, Inc., a Nevada corporation (hereinafter "Bizconnect Nevada") as the entity that entered the Agreement with Plaintiff.
On January 7, 2022, Plaintiff filed an Opposition to Defendant's Motion to Vacate Judgment. Plaintiff contends Defendant cannot establish excusable neglect, and its claimed defenses lack merit. On January 14, 2022, the Court held oral argument on Defendant's Motion. On February 1, 2022, the Court granted Plaintiffs request to conduct limited discovery in relation to Defendant's Motion to Vacate Judgment.
Plaintiffs Opposition to Motion to Vacate Judgment (DI 8).
Id.
Order to Extend Filing Deadline (DI 14).
PARTIES' CONTENTIONS
Defendant claims this Court should vacate the entry of default judgment under a claim of excusable neglect pursuant to Superior Court Civil Rule 60(b).Defendant asserts its "actions were excusable neglect as it acted promptly upon being made aware of [the Delaware litigation] as well as the default [judgment] entered [in Nevada] on November 8, 2021." Defendant suggests service from CTC to Leah Martin Law, its actual or de facto receiving agent in Nevada for service of process, may have been defective. Specifically, Defendant acknowledges CTC sent the service package to Leah Martin Law's address at 3100 West Sahara, Suite #202, Las Vegas, NV, 89102. But, Defendant suggests it did not receive the service package because Leah Martin Law had moved its physical office in May 2021 to 601 South Rancho Drive, Suite C-26, Las Vegas, NV 89106. And, while Leah Martin Law requested mail forwarding service from the United States Postal Service ("USPS"), Defendant suggests the USPS may not have forwarded the service package to its new address due to the manner in which the service package was addressed to Defendant. Specifically, Defendant indicates CTC sent the service package to "Giang Hoang, Biz Connect" at the 3100 West Sahara address, "without the name Leah Martin Law on it." Defendant speculates that without the specific name of the law firm on the address provided on the service package, the USPS may not have forwarded the package to Leah Martin Law's new office, and therefore the law firm did not receive, nor forward to Defendant, any information regarding the Delaware litigation.
Motion to Vacate Judgment, ¶ 8 (DI 7). Superior Court Civil Rule 60(b) provides, in pertinent part:
(b) Mistake; inadvertence; excusable neglect; newly discovered evidence; fraud, etc. On motion and upon such terms as are just, the Court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1) Mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.
Motion to Vacate Judgment, ¶ 15 (DI 7).
Defendant directed CTC to forward service packages, like the one Plaintiff served in August 2021, to Defendant at the Leah Martin Law firm as receiving agent. Leah Martin Law is also the "registered agent of BizConnect Incorporation, a Nevada entity." Motion to Vacate Judgment. See Unsworn Declaration of Kevin Hejmanowski Pursuant to 10 Del. C. § 3927 In Support of Motion to Vacate Judgment ("Hejmanowski Declaration"), ¶ 2 (DI 7).
Motion to Vacate Judgment, ¶ 13 (DI 7).
Id. ¶ 14.
Id. ¶ 13.
Id. Defendant does not claim CTC failed to properly address the service package to Defendant's receiving agent in Nevada.
Id. ¶ 13. Leah Martin Law "did not forward the service package to [the Defendant]." Id. ¶ 14.
Defendant asserts it first became aware of the Delaware default judgment on November 8, 2021, after Plaintiff submitted an Affidavit of Foreign Judgment to the Clark County District Court. Once Defendant became aware of the Delaware judgment, it retained counsel and attempted to determine why it did not receive notice of the Delaware litigation. CTC subsequently informed Defendant that it had sent the service package received August 25, 2021 from the New Castle County Sheriff to the attention of "Giang Hoang, BizConnect, 3100 West Sahara, Suite #202, Las Vegas, Nevada." This was also the address of Leah Martin Law, and Leah Martin Law was accepting service of process on Defendant's behalf.
Id. ¶10.
Giang Hoang is Defendant's "President." Motion to Vacate Judgment, ¶ 13, n.4 (DI 7).
Id. ¶ 14. The Motion to Vacate Judgment states "Leah Martin Law's address is listed as the service address of Bizconnect DE." Motion to Vacate Judgment, See Hejmanowski Declaration, ¶ 2 (DI 7). But, the Hejmanowski declaration, which the Motion to Vacate cites, only indicates "Leah Martin Law was set up as the registered agent of Bizconnect, Inc., a Nevada entity.' Id., Hejmanowski Declaration, ¶ 2 (emphasis added) (DI 7).
In support of its Motion to Vacate Judgment, Defendant also identifies several potential defenses, including: (1) Plaintiff sued the wrong entity; (2) Plaintiff breached the Agreement by "failing to recruit and retain appropriate sales representatives," and was unable to cure the breach; and (3) breach of contract. It also claims Plaintiff will not be prejudiced if the Court vacates the default judgment.
Id. ¶¶ 17-20.
Plaintiff opposes the Motion to Vacate. It argues that Defendant cannot establish excusable neglect pursuant to Superior Court Civil Rule 60. Plaintiff contends Defendant does not deny its Delaware registered agent, CTC, was properly served with the Summons and Complaint on August 25, 2021, and CTC properly forwarded the service package to the address it maintained for Defendant. Plaintiff asserts that Defendant's failure to properly update its address with a registered agent for service of process does not constitute excusable neglect, and Plaintiff s failure to update CTC of its receiving agent's current address was not the act of a reasonably prudent person. Because Defendant cannot demonstrate excusable neglect, Plaintiff asserts this Court need not consider Defendant's remaining potential defenses and prejudice.
Plaintiffs Opposition to Motion to Vacate Judgment (DI 8).
Id. ¶ 3.
Id. ¶ 8.
Id. ¶ 9.
DISCUSSION
A motion to vacate a default judgment is addressed to the sound discretion of the Court. As a general proposition, Delaware Courts favor the disposition of cases on their merits while providing the parties their day in court. To the extent there are doubts raised by the motion to vacate, those doubts are to be resolved in favor of the moving party.
Verizon Delaware Inc. v. Baldwin Line Construction Co., Inc., 2004 WL 838610 at *1 (Del. Super. Apr. 13, 2004) (citing Bataglia v. Wilmington Sav. Fund Soc 'y, 379 A.2d 1132, 1135 (Del. 1977)).
Id. (citing Keystone Fuel Oil Co. v. Del-Way Petroleum, Inc., 364 A.2d 826, 828 (Del. 1976)).
Id. (citing Cohen v. Brandywine Raceway Assn., 238 A.2d 320, 325 (Del. Super. 1968)).
A party seeking to vacate a judgment pursuant to Superior Court Civil Rule 60(b)(1) must satisfy three elements before the Court will grant a motion to vacate. These elements are:
(1) excusable neglect in the conduct that allowed the default judgment to be taken; (2) a meritorious defense to the action that would allow a different outcome to the litigation if the matter was heard on its merits; and (3) a showing that substantial prejudice will not be suffered by the plaintiff if the motion is granted.The Court should only consider the second and third elements of the test if a "satisfactory explanation has been established for failing to answer the complaint, e.g., excusable neglect or inadvertence." "Excusable neglect" is defined as "that neglect which might have been the act of a reasonably prudent person under the circumstances." It is the movant's burden to demonstrate "excusable neglect.
Perry v. Wilson, 2009 WL 1964787 at *1 (Del. Super. July 8, 2009) (quoting Verizon Delaware, 2004 WL 838610, at *1 (Del. Super. Apr. 13, 2004)).
Id. (quoting Apartment Cmtys. Corp. v. Martinelli, 859 A.2d 67, 72 (Del. 2004)).
Id. (citing Battaglia, 379 A.2d at 1135, n. 4).
Id. (citing Martinelli, 859 A.2d at 72).
Neither party disputes that on August 25,2021, Plaintiff properly served CTC, Defendant's registered agent for service of process. And, Defendant has not claimed that CTC did not send the service package to the address it provided to CTC to receive service of process - 3100 West Sahara, Suite #202, Las Vegas, NV 89102. Further, Defendant has not claimed that when CTC forwarded the service package to Leah Martin Law, that CTC incorrectly addressed the package. Based on the record, CTC's receipt and forwarding of the service package to Defendant's designated receiving agent were performed as Defendant directed, and the disposition of the service package after leaving CTC for Nevada has not been definitively explained.
The Delaware Supreme Court considered the obligations of a Delaware corporation in relation to service of process in Apartment Communities Corp. v. Martinelli, where the plaintiff below/appellee ("plaintiff') sued the defendant/appellant ("defendant") in a tort action for injuries related to defendant's failure to properly maintain a premises, resulting in an injury to plaintiff. In Martinelli, defendant's full-time employee of approximately five years was served with the complaint, but the employee failed to notify management that suit had been filed, and defendant did not answer the complaint. The plaintiff ultimately obtained a default judgment due to defendant's failure to respond to the complaint.Defendant then filed a motion to vacate the judgment, asserting that the failure to do so was the result of excusable neglect. At a hearing on the motion to vacate, defendant argued that the employee who accepted service of the complaint was a "low level employee" who did not understand the legal process, a description this Court observed was inconsistent with the employee's current job responsibilities. The Superior Court concluded the employee's failure to timely notify management of the lawsuit was not the conduct of a reasonably prudent person, and the Court denied the motion to vacate judgment.
Martinelli, 859 A.2d at 69.
Id.
Id.
Id.
Id. at 70.
On appeal, the Delaware Supreme Court concluded that the evidence that the employee was incapable of understanding the significance of the lawsuit was "contradicted by the responsibilities of her job as a leasing agent." Moreover, the Court concluded the defendant "should have implemented internal procedures to avoid the failure to respond to the Complaint." The Court discussed the obligation of a corporation when an agent accepts service of process on its behalf. Specifically, when service on an agent of a corporation is "proper and timely, as it was here:
Id. at 71.
Id.
it is the responsibility of the defendant [] to ensure that all employees who are capable of accepting service of process know when and to whom the complaint should be forwarded. Where the sheriff has properly served process upon a defendant corporation, that corporation is thereby responsible for dealing with the complaint in a timely manner. When service of a complaint is 'complete and legal, it is immaterial . . . that the agent does not communicate the fact of service to [the] principal.Here, Defendant had an obligation to inform CTC of the current address for its receiving agent, Leah Martin Law, which had moved in May 2021, approximately three months before CTC sent the Complaint and Summons to the firm's address, and almost four months after CTC mailed Defendant's receiving agent of record in Nevada before Defendant sought to vacate the default judgment.
Id. at 72 (internal citations omitted).
Approximately one month after learning of the Delaware lawsuit, Defendant s counsel entered an appearance in the litigation.
Consistent with Martinelli, Delaware corporations are, by law, required to "have and maintain in this State a registered agent," and are required to "provide to its registered agent and update from time to time as necessary the name, business address and business telephone number of a natural person who is an officer, director, employee or designated agent of the corporation, who is then authorized to receive communications from the registered agent." Plaintiff reasonably complied with this Court's rules regarding service on Defendant's registered agent, and it bears no responsibility for the conduct of Defendant or its receiving agent. Defendant had a legal obligation to provide to CTC a current business address and contact information for its receiving agent, Leah Martin Law, and should have timely provided that information to CTC. It did not do so.
From May 2021, when Leah Martin Law moved its business, through at least August 25, 2021, when CTC received the Summons and Complaint and mailed it to Nevada, Defendant did not provide CTC updated address information for its receiving agent. Just as in Martinelli, where a Defendant bears the sole responsibility to "ensure that all [internal] employees who are capable of accepting service of process know when and to whom a summons and complaint should be forwarded,"Defendant bears the sole responsibility to ensure that its registered agent, CTC, is informed when and to whom a summons and complaint should be forwarded. This includes an obligation to provide a correct address for CTC to serve the receiving agent. While what actually happened to the service package once CTC mailed it to Leah Martin Law's 3100 West Sahara address remains unresolved, Defendant failure to provide CTC with its receiving agent's updated address in Nevada does not constitute excusable neglect.
Id. at 72.
See also Dexta Federal Credit Union v. Holly Oak Towing and Non-Arbitration Service Center, Inc., 2008 WL 867946 (Del. Com. Pl. Mar. 31, 2008) (Defendant did not demonstrate excusable neglect when it failed to "notify its [registered] agent of address changes so that it could receive any legal documents properly served upon the corporation." Id. at *3.)
Because Defendant cannot demonstrate excusable neglect, the Court need not consider whether Defendant is able to assert a meritorious defense, or whether Plaintiff would be prejudiced by an order vacating the default judgment.
CONCLUSION
For the reasons stated above, Defendant's Motion to Vacate is DENIED.
IT IS SO ORDERED.