Opinion
04 Civ. 6543 (PKC).
January 20, 2006
MEMORANDUM AND ORDER
The complaint in this case was filed on August 13, 2004. Plaintiff asserts two claims against defendant and argues that this Court has diversity jurisdiction over those claims. (Compl. ¶¶ 4, 10-11, 17) On September 30, 2004, plaintiff served defendant by leaving a copy of the summons and complaint with a person of suitable age and discretion at defendant's dwelling and mailing a copy to defendant. (Docket Entry No. 4) Despite scheduling and rescheduling an initial pretrial conference numerous times, neither defendant nor his counsel appeared in my courtroom. On March 24, 2005, the Clerk issued a certificate of default. On March 30, 2005, plaintiff moved for the entry of default judgment as to defendant. (Docket Entry No. 5) After I scheduled and repeatedly adjourned an inquest hearing, I held an inquest on November 15, 2005. Plaintiff's counsel represented that defendant had been placed on notice of the inquest. (Nov. 15, 2005, Inquest Hr'g Tr. at 9) On November 15, 2005, I granted plaintiff's application for a default judgment and ordered the plaintiff to submit, on notice to the defendant, a proposed judgment in the amount of $151,000 within ten days. (Nov. 15, 2005, Inquest Hr'g Tr. at 13) On November 23, 2005, plaintiff served personally attorney Bertram Brown at his office. Previous communications by Mr. Brown to this Court had indicated that he represented defendant, but defendant him-self never informed this Court of his representation or lack thereof. (Docket Entry, No. 10)
On November 28, 2005, defendant filed with this Court a document entitled "Affidavit of Defaulting Defendant". In this affidavit, defendant asserted that he had not received proper service of process by plaintiff and offered substantive defenses to plaintiff's claims. Defendant explained that he had been suffering from Guillain-Barre Syndrome, a debilitating neurological disease, since February 2004. The affidavit stated that Mr. Brown could not represent defendant and therefore defendant was proceeding pro se. Furthermore, the affidavit stated that defendant opposed the "entry of Plaintiff's proposed Default Judgment".
On December 20, 2005, plaintiff responded to defendant's November 28 filing with documents of his own entitled "Affirmation in Support of Plaintiff's Default Judgment." In an affidavit, counsel for plaintiff recalled the length of the current litigation and his extensive efforts to resolve the issues raised in the complaint. Furthermore, counsel argued that defendant's failure to respond was willful, that defendant has not presented a meritorious defense to plaintiff's claims, and that plaintiff has been prejudiced by the delay. (Giuliano Affirmation ¶¶ 15-21). Defendant submitted a reply affidavit on January 10, 2006. To this day, I still have not signed the proposed default judgment submitted by plaintiff.
A federal court may set aside the entry of default for a party for "good cause shown". Fed.R.Civ.P. 55(c). The Federal Rules do not explain how a court should determine "good cause shown," but the Second Circuit has explained that the standard is less rigorous than is required for the vacatur of a default judgment under Rule 60(b). See New York v. Green, 420 F.3d 99, 109 (2d Cir. 2005). In determining whether good cause has been shown, a district court should "consider principally `(1) whether the default was willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a meritorious defense is presented.'" Powerserve Int'l, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2001) (quoting Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993)). A court may also consider "whether the failure to follow a rule of procedure was a mistake made in good faith and whether the entry of default would bring about a harsh or unfair result." Enron, 10 F.3d at 96. Moreover, "concerns regarding the protection of a litigant's rights are heightened when the party held in default appears pro se." Id. Because there is a "preference for resolving disputes on the merits," doubts "should be resolved in favor of the defaulting party." Id. at 95-96.
Ordinarily, an application to set aside a default arises in the context of a motion under Rule 55(c), Fed.R.Civ.P. In such a circumstance, the burden of showing "good cause" rests upon the movant, who is usually the party seeking to set aside the default. See Ferraro v. Arthur M. Rosenberg, Co., 156 F.2d 212, 214 (2d Cir. 1946). "While default judgments are disfavored, and while the factors set forth above are to be construed generously in favor of a defaulting party, these policies do not relieve such a party completely of its burden, under [Rule] 55(c), to show good cause for setting aside a default." Dixon v. Ragland, 2005 WL 2649484, *10 (S.D.N.Y. Oct. 14, 2005). Here, the issue arises in opposition to plaintiff's motion for a default judgment. I will deem defendant's opposition to plaintiff's motion to be a motion by defendant to set aside the default under Rule 55(c) and will hold defendant to the burden of showing "good cause". Moreover, defendant is the proponent of the factual assertions under the three-prong standard articulated inPowerserve Int'l, 239 F.3d at 508, and logically ought to bear the burden of proof.
I have read the parties submissions and carefully considered plaintiff's motion to enter a default judgment against defendant. Plaintiff has failed to meet the burden required under the law to impose a default judgment. In his reply affidavit, defendant has explained that he has suffered from Guillain-Barre Syndrome for almost two years and that existed any finder's fee agreement between himself and plaintiff and that he satisfied whatever debt he owed AHFG. Lack of formation is a valid defense to a claim for breach of contract, and satisfaction of an outstanding debt is a valid defense to a claim based on that debt. Plaintiff argues that defendant has failed to come forward with admissible evidence constituting such a defense, but at this stage of litigation, no such thing is required of defendant. (Giuliano Affirmation ¶ 17) Rather, "to make a sufficient showing of a meritorious defense . . ., the defendant need not establish his defense conclusively, but he must present evidence of facts that, if proven at trial, would constitute a complete defense." New York, 420 F.3d at 99. Finally, there will be no serious prejudice to plaintiff in allowing defendant to litigate the merits of his claimed defense.
The Second Circuit has identified three factors a Court should consider on a motion under Rule 55(c) to set aside the entry of default against a defendant, and defendant has met his burden because he has satisfactorily demonstrated "good cause" with regard to these factors. As a result, I will set aside the November 15, 2005, entry of default against defendant Lowenstein. Plaintiff's motion for a default judgment (Docket Entry No. 5) is denied.
SO ORDERED.