Western Surety Co. v. Leo Construction LLC et al
RULING (see attached) GRANTING plaintiff's 20 Motion to Amend Complaint and GRANTING the Carlson defendants' 19 Motion to Open Default. Plaintiff shall correct any inaccuracies within its proposed amended complaint and fil e and serve a finalized version thereof on the Carlson defendants on or before January 31, 2013. Absent objection and for "good cause," the default entered against the Carlson defendants (Doc. #14) is set aside pursuant to Fed. R. Ci v. P. 55(c). Robert S. Carlson and Marion T. Carlson must e-file their answer or response to plaintiff's Amended Complaint within fourteen (14) days after that complaint is filed and served, Fed. R. Civ. P. 15(a)(3). Signed by Judge Charles S. Haight, Jr. on January 11, 2013.(Dorais, L.)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
WESTERN SURETY COMPANY,
3:12 - CV - 1190 (CSH)
LEO CONSTRUCTION, LLC, DAVID B.
GREENFIELD, SHARON M. GREENFIELD,
ROBERT S. CARLSON, AND MARION T.
RULING ON PLAINTIFF’S MOTION TO AMEND COMPLAINT AND
THE CARLSON DEFENDANTS’ MOTION TO OPEN DEFAULT
HAIGHT, Senior District Judge:
Plaintiff Western Surety Company (“plaintiff” or “Western”) brings this indemnity action
against Leo Construction, LLC (“Leo”), a contractor and limited liability company, and four
individual defendants, David B. Greenfield, Sharon M. Greenfield, Robert S. Carlson, and Marion
T. Carlson, requesting recovery for obligations Western allegedly incurred pursuant to “Performance
and Labor and Material Payment Bonds” (the “Bonds”) it issued to Leo on November 29, 2009 and
December 21, 2009. Doc. #1, ¶¶10-11. Western issued the Bonds to enable Leo to perform
construction under contracts with the City of Bridgeport and the Housing Authority of the City of
New Haven, respectively. Id. As a condition of Western’s issuance of said Bonds, Leo “executed
a General Agreement of Indemnity (“GAI”) wherein Leo agreed to indemnify Western for any loss,
cost or expense incurred by virtue of having written the Bonds.” Id., ¶12. Similarly, the individual
defendants executed the GAI, individually agreeing to indemnify Western from any such loss, cost
or expense arising under the Bonds. Id., ¶13.
Western alleges that “[i]n connection with the Bonds, claims and demands have been filed
against Western,” payment of which, combined with “costs for consultants and attorneys,” total in
excess of $251,799.78. Id., ¶14. Western has made repeated demands for indemnity under the GAI
from defendants; but defendants have failed and refused “to make payment or deposit collateral
security with Western sufficient to cover the indemnity obligations of the defendants in connection
with the Bonds.” Id., ¶16. Consequently, Western prays for monetary damages, interest, costs,
attorney’s fees, and “[s]uch other further legal or equitable relief as the court deems appropriate.”
Id., p. 5.
Upon review of the Complaint, the Court noted that plaintiff had failed to plead sufficient
facts to support its contention that this Court has subject matter jurisdiction based on diversity of
citizenship.1 Specifically, the Court noted that plaintiff had failed to provide necessary facts for the
Court to make a finding of citizenship as to each of the parties.
Because it is incumbent upon a federal court to determine with certainty whether it has
subject matter jurisdiction over a case pending before it, Joseph v. Leavitt, 465 F.3d 87, 89 (2d
Cir.2006), and then to dismiss the action if such jurisdiction is lacking, Fed. R. Civ. P. 12(h)(3), on
August 29, 2012, the Court directed all parties to this action to file and serve before September 26,
2012, affidavits establishing their citizenship for federal diversity purposes. Doc. #6.
On September 14, 2012, Western complied with the Court’s Order, filing an affidavit to
See 28 U.S.C. § 1332(a)(1) (“The district courts shall have original jurisdiction of all
civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of
interest and costs, and is between – (1) citizens of different States”).
establish its citizenship in South Dakota, averring that it is a South Dakota corporation with its
principal place of business located in Sioux Falls, South Dakota. Doc. #12 (“Affidavit of
Citizenship” of Western’s “authorized representative” Cathleen M. Jareczek), ¶¶2-3. See also 28
U.S.C. § 1332(c)(1) (“a corporation shall be deemed to be a citizen of every State and foreign state
by which it has been incorporated and of the State or foreign state where it has its principal place of
As of November 8, 2012, none of the defendants had complied with the Court’s Order to file
affidavits of citizenship. Moreover, all defendants had failed to appear or plead in the action.
Because more than twenty-one days had elapsed since the date of service of the summons and
complaint upon each defendant herein, August 24, 2012, plaintiff moved for entry of default under
Federal Rule of Civil Procedure 55(a).2 Doc. #13. The Clerk granted the motion as to all
defendants on October 10, 2012.3 Doc. #14.
On November 5, 2012, plaintiff moved for default judgment against all defendants pursuant
to Federal Rule of Civil Procedure 55(b). Doc. #15. In so moving, Western sought a sum certain
“in the amount of $254,731.88, including the costs of filing fee and service,” and declared that “none
of the defendants are minors or incompetent persons.” Id., p. 1-2. In support of the motion, Western
filed affidavits of its authorized representative, Cathleen M. Jareczek, and counsel, R. Bradley
The case docket indicates that “a summons was issued, and the complaint was served
on each of the defendants as shown on the Marshal’s returns of service ([Doc. Nos.] 7, 8, 9, 10 and
11), service having been made on August 24, 2012.” Doc. #13, p. 2. In general, under Federal Rule
of Civil Procedure 12(a)(1)(A)(i), “[a] defendant must serve an answer: (i) within 21 days after
being served with the summons and complaint.”
Under Rule 55(a), the Clerk must enter a default “[w]hen a party against whom a
judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is
shown by affidavit or otherwise.” Fed. R. Civ. P. 55(a).
Wolfe. Doc. #15-1 & #15-2. The Court deduced that plaintiff sought entry of default judgment by
the Clerk. See Fed. R. Civ. P. 55(b)(1).
Despite the circumstances of default, the Court was unable to direct the Clerk to enter
judgment for the plaintiff due to the continuing ambiguity regarding the Court’s subject matter
jurisdiction. Absent affidavits from the defendants and without sufficient facts pled in the
Complaint, the Court remained unable to confirm its subject matter jurisdiction. Consequently, any
default judgment entered could later be deemed void or subject to being vacated. The Court thus
denied plaintiff’s motion for default judgment without prejudice and ordered plaintiff to, on or before
December 31, 2012, amend its Complaint and/or file affidavit(s) to make a prima facie showing of
the defaulting defendants’ citizenship.4 Absent plaintiff’s timely cure of the jurisdictional defects,
the Court would dismiss the action without prejudice.
On November 9, 2012, Attorney James G. Verrillo entered an appearance on behalf of
individual defendants Robert S. Carlson and Marion T. Carlson (herein collectively the “Carlson
defendants”). On November 30, 2012, the Carlson defendants filed an affidavit to establish their
citizenship in the state of Connecticut for purposes of this action. Doc. #18. Contemporaneously
with the affidavit, the Carlsons filed the pending “Motion to Open Default.” Doc. #19.
On December 13, 2012, Western filed its “Motion to Amend Complaint” addressed herein.
In the proposed Amended Complaint, Western has pled facts to establish its own citizenship, as well
as that of the defendants. Plaintiff supports its proposed amendment with the previously filed
As the Court explained, “[t]he burden of demonstrating subject-matter jurisdiction lies
with the party asserting it” – in this case, plaintiff Western. MLC Fishing, Inc. v. Velez, 667 F.3d
140, 141 (2d Cir. 2011) (quoting Mathirampuzha v. Potter, 548 F.3d 70, 85 (2d Cir.2008)). See also
Sharkey v. Quarantillo, 541 F.3d 75, 82-83 (2d Cir. 2008) (“The party invoking federal jurisdiction
bears the burden of establishing that jurisdiction exists.”)(internal quotations and citation omitted).
affidavit of its representative, Cathleen Jareczek (Doc. #12); the affidavit of the Carlson defendants
regarding their citizenship (Doc. #18); and facts revealed upon investigation into the citizenship of
the limited liability company, Leo, and individual defendants David B. Greenfield and Sharon M.
Greenfield (collectively, the “Greenfield defendants”).
The Court shall first address Western’s motion to amend the Complaint to determine whether
the proposed amendments are sufficient to establish diversity of citizenship between plaintiff and
all defendants. In the event that subject matter jurisdiction remains inadequately pled or otherwise
lacking, the Court must dismiss the action. If the Court grants leave to Western to file the Amended
Complaint, finding that there is a sufficiently pled factual basis for subject matter jurisdiction, the
Court will then turn to the Carlson defendants’ motion to open the default entered against them.
Western’s Motion to Amend the Complaint
Under Federal Rule of Civil Procedure 15(a)(2), “a party may amend its pleading only with
the opposing party’s written consent or the court’s leave” and “[t]he court should freely give leave
when justice so requires.”5 Fed. R. Civ. P. 15(a)(2). “In the absence of any apparent or declared
A party may also “amend its pleading once as a matter of course within:
(A) 21 days after serving it, or
(B) if the pleading is one to which a responsive pleading is required, 21 days after
service of a responsive pleading or 21 days after service of a motion under Rule
12(b), (e), or (f), whichever is earlier.”
Fed. R. Civ. P. 15(a)(1)(A)-(B). Neither situation applies here and thus plaintiff may only amend
with written consent of the opposing parties or the court’s leave. Id. 15(a)(2). It is not surprising
that under the present circumstances, where all defendants are currently in default, there has been
no written consent by the defendants.
reason – such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure
to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by
virtue of allowance of the amendment, futility of the amendment, etc.– the leave sought should, as
the rules require, be ‘freely given.’” Foman v. Davis, 371 U.S. 178, 182 (1962). See also Milanese
v. Rust-Oleum Corp., 244 F.3d 104,110 (2d Cir. 2001) (“Leave to file an amended complaint ‘shall
be freely given when justice so requires,’ Fed.R.Civ.P. 15(a), and should not be denied unless there
is evidence of undue delay, bad faith, undue prejudice to the non-movant, or futility.”). Moreover,
it is a “rare” event when “such leave should be denied.” Ricciuti v. N.Y.C. Transit Authority, 941
F.2d 119, 123 (2d Cir. 1991).
In the case at bar, in compliance with this Court’s Ruling of November 27, 2012 (Doc. #17),
plaintiff seeks leave to amend its complaint to “allege the proper citizenship of the parties.” Doc.
#20, p. 1. First, in its proposed Amended Complaint, plaintiff incorporates the facts necessary to
establish its own citizenship, namely that it “is incorporated as a South Dakota corporation with a
principal place of business at 101 South Reid Street, Sioux Falls, South Dakota 57103.” Doc. #20
(“Proposed Amended Complaint), p. 4 (¶1). Plaintiff supports these facts with the affidavit of its
representative. Doc. #12 (Jareczek affidavit), p. 4 (¶¶2-3).
Next, plaintiff attempts to set forth the citizenship of defendant Leo, “a Connecticut limited
liability company with its principal place of business at 470 Beechwood Avenue in Bridgeport,
Connecticut.” Doc. #20, p. 5 (¶2). As described in this Court’s previous Order (Doc. #6, p. 4),
“[t]he citizenship for diversity purposes of a limited liability company . . . is the citizenship of each
of its members.” Wise v. Wachovia Securities, LLC, 450 F.3d 265, 267 (7th Cir. 2006)(emphasis
added), cert. denied, 549 U.S. 1047 (2006). In Handelsman v. Bedford Village Associates Ltd.
Partnership, 213 F.3d 48 (2d Cir.2000), the Second Circuit articulated the rule that “for purposes
of diversity jurisdiction, a limited liability company has the citizenship of its membership.”
Therefore, “citizenship of a limited liability company is not the state in which it is organized or has
its principal place of business, but rather, each of the states in which it has members.” Lewis v. Allied
Bronze LLC, No. 07 Civ. 1621(BMC), 2007 WL 1299251, at *1-2 (E.D.N.Y. May 2, 2007) (citing
Handelsman, 213 F.3d at 51-52).6
In the proposed Amended Complaint, plaintiff specifies that the members of the Leo limited
liability company are: “David B. Greenfield and SRK, LLC,” which “is registered as a Connecticut
Domestic Limited Liability Company located at 68 Soundview Drive, Easton, Connecticut,” and is
in turn comprised of two members: “defendants Robert S. Carlson and Marion T. Carlson.” Doc.
#20, p. 5 (¶2). According to Western, individual defendant David B. Greenfield is “a citizen of
Stratford, Connecticut.”7 Id. (¶3). Moreover, the Carlson defendants, the two named members of
See also City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 127 n. 13 (2d
Cir. 2011) (citing Handelsman v. Bedford Vill. Assocs. Ltd. P’ship, 213 F.3d 48, 51–52 (2d Cir.
2000), as the appropriate “test for determining the citizenship of a limited-liability company”).
Plaintiff represents that it has based its amendments with respect to the citizenship of
Leo and its members on “an examination of the records of the Secretary of the State of Connecticut,”
which “revealed that the members of the LLC are the Greenfields and another LLC whose members
are the Carlson defendants.” Doc.#20 (Motion to Amend Complaint), p. 2 (emphasis added). There
is thus disparity between the proposed Amended Complaint and plaintiff’s motion to amend as to
whether Sharon M. Greenfield is a member of Leo Construction, LLC – i.e., the proposed Amended
Complaint does not include Sharon M. Greenfield as a member of Leo but the motion in support of
amendment states that the members of Leo include “the Greenfields” (plural), Doc. #20, p. 2. If it
be the fact, plaintiff should amend its complaint to include Sharon M. Greenfield as a member of
Leo. Nonetheless, whether or not Sharon M. Greenfield is a member of Leo, diversity with Western
will remain intact because, according to Western’s amended complaint, Sharon M. Greenfield, is “a
citizen of Stratford, Connecticut.” Doc. #20, p. 5 (¶4).
Also of note, in its motion to amend, plaintiff bases its proposed amendment “as to the
Greenfield [d]efendants . . . upon an investigation that revealed their ownership of real and personal
SRK, LLC who are also individual defendants, are both citizens of Easton, Connecticut. Id. (¶¶5-6).
See also Doc. #18, p. 2 (¶2) (affidavit of Robert S. Carlson attesting that both Marion T. Carlson and
[Robert S. Carlson] are citizen[s] of the State of Connecticut [who] reside at 68 Soundview Drive,
Easton, CT 06612”).8 Based on the allegations contained in the proposed Amended Complaint, the
Court concludes that all members of the Leo limited liability company are citizens of Connecticut,
and hence Leo is a citizen of Connecticut.
Furthermore, plaintiff has alleged that all individual defendants, both the Greenfields and
Carlsons, are “citizens” of Stratford and Easton, Connecticut respectively. Doc. #20, p.5 (¶¶3-6).
According to plaintiff, all four individual defendants are thus citizens of Connecticut.9
property in Connecticut and their registration as electors in this State [of Connecticut] under C.G.S.
[Connecticut General Statute] § 9-13.” Doc. #20, p. 2. That provision, captioned “Electors:
Qualifications and Admission, Blind persons,” states that “[n]o applicant, otherwise qualified to be
an elector in this state, shall be ineligible by reason of blindness or defective sight.” Unless the
Greenfields are both blind, the Court suggests that the provision plaintiff intended to cite is
Connecticut General Statutes §9-12, which sets forth the general provisions regarding “[w]ho may
be admitted” as an elector. See Conn. Gen. Stat. §9-12 (a) (“Each citizen of the United States who
has attained the age of eighteen years, and who is a bona fide resident of the town to which the
citizen applies for admission as an elector shall, on approval by the registrars of voters or town clerk
of the town of residence of such citizen, as prescribed by law, be an elector . . . .”).
The Court notes a lack of precision in the language employed by the Carlson
defendants, asserting that they are “citizens” of Connecticut and yet providing the location of their
residence, as opposed to their domicile. It is “well-established that allegations of residency alone
cannot establish citizenship,” Canedy v. Liberty Mut. Ins. Co., 126 F.3d 100, 102-03 (2d Cir. 1997),
because an individual’s citizenship for diversity purposes is determined by his or her domicile, not
residence, Palazzo v. Corio, 232 F.3d 38, 42 (2d Cir. 2000). Because, however, the Carlson
defendants have also attested that they are “citizens” of Connecticut, listing their sole place of
residence as Easton, Connecticut, the Court will accept their representation regarding citizenship,
deeming Easton as the place of their “domicile.”
The Court has previously reminded plaintiff that domicile is the key determining fact
with respect to an individual’s citizenship. See Doc. #17, p. 10-11; see also n.8, supra. If plaintiff
intends to allege that the individual defendants are citizens of Connecticut, plaintiff should more
correctly state that each is domiciled in Connecticut.
Because plaintiff is a citizen of South Dakota and all named defendants are allegedly citizens
of Connecticut, and the damages sought exceed the jurisdictional minimum of $75,000, this Court
finds that, pursuant to the facts alleged in the proposed Amended Complaint, there is “diversity of
citizenship” subject matter jurisdiction, 28 U.S.C. § 1332(a)(1).10
In sum, the Court finds that Western’s proposed amendment of the Complaint serves the
interests of justice by clarifying and demonstrating this Court’s subject matter jurisdiction over the
case. Moreover, defendants have filed no objection to plaintiff’s motion for leave to amend and the
twenty-one-day period to make such an objection has expired. See D. Conn. L. Civ. R. 7(a)(1)
(“[u]nless otherwise ordered by the Court, all memoranda in opposition to any motion shall be filed
within twenty-one (21) days of the filing of the motion”).11 Plaintiff filed the motion on December
13, 2012, so that defendants had until January 3, 2013 to object and failed to do so. In the interests
of justice, and absent objection, the Court will grant plaintiff’s “Motion to Amend Complaint.”
Plaintiff shall correct any inaccuracies (e.g., possible failure to include Sharon M. Greenfield
as a member of Leo) or misstatements of language (e.g., residence versus domicile) referenced in
Because Western seeks damages in excess of $251,799.78, those damages well exceed
the requisite jurisdictional amount of $75,000 under U.S.C. § 1332(a)(1). Doc. #20 (Proposed
Amended Complaint), p. 7 (¶14).
The Court reminds plaintiff that a motion to amend a pleading pursuant to Fed. R.
Civ. P. 15(a) must “include a statement of the moving counsel that: (1) he or she has inquired of
opposing counsel and there is agreement or objection to the motion; or (2) despite diligent effort, he
or she cannot ascertain opposing counsel’s position.” D. Conn. L. Civ. R. 7(f). Plaintiff herein
made no such statement in its motion to amend. However, as of the date plaintiff filed the motion,
default had been entered against all defendants for failure to plead or otherwise defend. Under such
circumstances, where defendants had no counsel of record, although the Court cautions plaintiff to
include the requisite statement regarding inquiry into counsel’s position as to any future motion to
amend, the Court will exercise its discretion to consider the pending motion at this time.
this Ruling (see n. 7 & 9) and then e-file its amended complaint on or before January 31, 2013. All
defendants in the action as of the date the amended complaint is filed shall e-file their answers or
responses “within 14 days after service of the amended pleading” or once again risk default. Fed.
R. Civ. P. 15(a)(3).
Carlson Defendants’ Motion to Open Default
Pursuant to Federal Rule of Civil Procedure 55(c), the Carlson defendants move the Court
to set aside the default entered against them. Doc. #19. “A motion under Rule 55(c) to set aside an
entry of default is addressed to the sound discretion of the district judge.” State Farm Mut. Auto.
Ins. Co. v. Cohan, 409 F. App’x 453, 455 (2d Cir. 2011)(quoting Marziliano v. Heckler, 728 F.2d
151, 156 (2d Cir.1984)). “Because the trial judge is the person most familiar with the circumstances
of the case and is in the best position to evaluate the good faith and credibility of the parties, a
reviewing court will defer to his decision unless it is clearly wrong.” State Farm Mut. Auto. Ins. Co.,
409 F. App’x at 455 (citations omitted).
Under Federal Rule of Civil Procedure 55(c), “[t]he court may set aside an entry of default
for good cause.” Although the rule does not define “good cause,” the Second Circuit has “ advised
district courts to consider three factors in deciding a Rule 55(c) motion: (1) whether the default was
willful; (2) whether the moving party has presented a meritorious defense; and (3) whether setting
aside the default would prejudice the party for whom default was awarded.” State Farm Mut. Auto.
Ins. Co., 409 F. App’x at 455 (citing Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir.1993)).
See also Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167, 171 (2d Cir.2001) (“When deciding
whether to relieve a party from default or default judgment, we consider the willfulness of the
default, the existence of a meritorious defense, and the level of prejudice that the non-defaulting
party may suffer should relief be granted.”).
“Defaults are not favored, particularly when the case presents issues of fact, and doubts are
to be resolved in favor of a trial on the merits.” Meehan v. Snow, 652 F.2d 274, 277 (2d Cir.
1981)(per curiam)(citing, inter alia, Klapprott v. United States, 335 U.S. 601, [615 ] (1949)).
“While courts are entitled to enforce compliance with the time limits of the Rules by various means,”
default is viewed as an “extreme sanction,” one to be treated as “a weapon of last, rather than first,
resort.” Meehan, 652 F.2d at 277(citations omitted). See also Enron Oil Corp., 10 F3d at 96
(“because defaults are generally disfavored and are reserved for rare occasions, when doubt exists
as to whether a default should be granted or vacated, the doubt should be resolved in favor of the
As part of its analysis, when considering a motion to set aside a default, the Court may
consider equitable factors such as “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 Oil Corp., 10 F.3d at 96. With respect to the result, “good cause” and the criteria for setting
aside a default “should be construed generously,” as a “reflection of [the Second Circuit’s] oft-stated
preference for resolving disputes on the merits.” Id. at 95 -96 (citing, inter alia, Meehan, 652 F.2d
“A motion to vacate a default is subject to a less rigorous standard than applies to a Rule
60(b) motion to vacate a default judgment.” American Alliance Ins. Co., Ltd. v. Eagle Ins. Co., 92
F.3d 57, 59 (2d Cir. 1996) (citing Meehan, 652 F.2d at 276 (which states that “standard for setting
aside the entry of a default pursuant to Rule 55(c) is less rigorous than the ‘excusable neglect’
standard for setting aside a default judgment by motion pursuant to Rule 60(b)”)).12 See also State
Farm Mut. Auto. Ins. Co., 409 F. App’x at 456 (Second Circuit “analyzed [defendants’] claims
under Rule 55(c)’s more forgiving standard for setting aside an administrative default”)(emphasis
added); New York v. Green, 420 F.3d 99, 109 (2d Cir. 2005) (Under Rule 55(c), “a default may be
vacated for ‘good cause shown,’ a less rigorous standard than applies under Rule 60(b).”). When
a district court has erroneously applied the more vigorous standard of Rule 60(b) to consider vacating
a default, versus a default judgment, the Second Circuit has held that such an error “requires
reversal.” Meehan, 652 F.2d at 276.
Applying the three relevant factors supplied by the Second Circuit with respect to “good
In determining whether to set aside a default judgment pursuant to Federal Rule of
Civil Procedure 60(b)(1), courts consider the following factors:
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence, could
not have been discovered in time to move for a new trial under Rule
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged; it is
based on an earlier judgment that has been reversed or vacated; or
applying it prospectively is no longer equitable; or
(6) any other reason that justifies relief.
Fed. R. Civ. P. 60(b)(1)-(6). See also American Alliance Ins. Co., Ltd. v. Eagle Ins. Co., 92 F.3d 57,
59 (2d Cir. 1996) (quoting Davis v. Musler, 713 F.2d 907, 915 (2d Cir. 1983); Gucci Am. v. Gold
Ctr. Jewelry, 158 F.3d 631, 635 (2d. Cir. 1998).
cause” in considering a Rule 55(c) motion, the Court first examines whether the Carlson’s default
was “willful.” Regarding “willfulness,” in the similar, albeit more rigorous, context of default
judgment, the Second Circuit has “implied that it will look for bad faith, or at least something more
than mere negligence.” American Alliance Ins. Co., Ltd., 92 F.3d at 60. “Although courts have an
interest in expediting litigation, abuses of process may be prevented by enforcing those defaults that
arise from egregious or deliberate conduct.” Id. at 61
In the case in suit, the evidence presented indicates no bad faith, egregious behavior or
deliberate default by the Carlsons. The Carlsons appeared in this action on November 9, 2012 –
almost two months after the deadline expired to answer or respond to the Complaint, September 14,
2012, and approximately one month and two weeks after the deadline expired to comply with this
Court’s Order to file affidavits of citizenship, September 26, 2012. Doc. #16. In their motion to
set aside the entry of default against them, the Carlsons explained that their failure to meet the case
deadlines resulted from their usual practice of relying on Leo’s corporate counsel to defend the
action. Doc. #19. Robert S. Carlson stated that he “received a copy of the complaint on or about
August 23, 2012.” Doc. #19-2, ¶3. He thereafter “turned over [the complaint] to the corporate
counsel of defendant company, Leo Construction[,] LLC, in order to appear and defend.” Id., ¶4.
See also Doc. #19, ¶3 (Leo’s “[c]orporate counsel has generally appeared for the individual members
of the company, Leo Construction, LLC.”). “However,” the Carlsons elaborated, “[a]t the time of
the turnover of the Complaint, and soon thereafter, a dispute [arose] between defendants, Robert [S.]
Carlson and David Greenfield.” Doc. #19-1, p. 1. See also Doc. #19-2, ¶5 (“Corporate counsel
became aware that certain disputes [had] arisen between [Robert S. Carlson] and . . . defendant,
David B. Greenfield”). As a result of the dispute, “regular corporate counsel . . . indicated that he
would not appear for any parties.” Doc. #19-1, p. 1. See also Doc. #19-2, ¶ 6 (“While generally
corporate counsel would appear on behalf of these individuals in all litigation, he would not in this
particular case because of the disputes that ha[d] arisen.”); Doc. #19, ¶3 (“[o]ut of an abundan[ce]
of caution, corporate counsel has refused to appear on behalf of anyone”).
The Carlsons assert that said “[c]orporate counsel did not notify [them] that he would not
appear until the first week in November 2012” – after the Clerk had granted entry of default for
failure to appear.
Doc. #19-2, ¶7. “Immediately thereafter, [they] retained counsel, James G.
Verrillo of Zeldes, Needle & Cooper, P.C. to appear and defend on [their] behalf.” Id. Attorney
Verrillo “immediately filed an appearance on their behalf.” Doc. #19, ¶4.
Applying the “good cause” standard of Rule 55(c), the Court finds no deliberate intent to
default and accordingly no “willfulness” by the Carlsons. First, the Carlsons did not wilfully delay
appearance in the action. Rather, they relied upon Leo’s corporate counsel and failed to monitor the
progress of the case to see if he had appeared on their behalf. As laypersons and members of Leo,
they relied on in-house counsel’s usual practice of representing members of the Leo limited liability
company. Upon learning of the default, the Carlsons swiftly retained their own counsel to appear
on their behalf and to attempt to open the default. Since that time, their attorney has “reached out”
to Western’s counsel and has “been in contact with him on a regular basis,” holding ongoing
“[d]iscussions to resolve all matters . . . at this time.” Doc. #19-1, p.3. Such efforts by the Carlsons
indicate to the Court an intention, albeit belatedly exercised, to comply with its deadlines. In short,
from the evidence presented by the Carlsons, the Court finds that their default was not willful.
Second, in considering the next relevant factor of “meritorious defense,” the Carlsons have
argued that they have both meritorious defenses to this action and grounds for cross-claims against
With respect to “meritorious defenses,” “[t]o satisfy the criterion of a
‘meritorious defense,’ the defense need not be ultimately persuasive at this stage.” American
Alliance Ins. Co., Ltd., 92 F.3d at 61. See also State Farm Mut. Auto. Ins. Co., 409 F. App’x at 456
(“[i]n order to make a sufficient showing of a meritorious defense in connection with a motion to
set aside a default, the defendant need not establish his defense conclusively,” but rather present facts
that would constitute a defense). “A defense is meritorious if it is good at law so as to give the
factfinder some determination to make.” Id. (quoting Anilina Fabrique de Colorants v. Aakash
Chemicals and Dyestuffs, Inc., 856 F.2d 873, 879 (7th Cir.1988)).
In the case in suit, the Carlsons claim that they “have meritorious defenses” they wish to
assert in this action, “including accountings and cross-claims with respect to other defendants.” Doc.
#19, ¶5. The Carlsons state that “they would like to review and inspect all of the payments allegedly
made by the bonding company to ascertain if these were properly done.” Doc. #19-1, p. 3. Robert
S. Carlson has averred that “[t]here are certain defenses in accounting that must be undertak[en] and
provided to [him] and [he] believe[s] that until this information is received,” he “might well have
defenses of contribution with respect to [plaintiff’s] outstanding claims.” Doc. #19-2, ¶8.
Although the Carlsons may be unable to substantiate their alleged defenses prior to
discovery, they have expressed, through the sworn affidavit of Robert S. Carlson, a genuine belief
that such defenses exist. If, as the Carlsons contend, payments were not properly made on the Bonds
at issue (i.e., there were accounting problems in plaintiff’s payment on the Bonds) and/or the
Carlsons have viable cross-claims against the other defendants in the action, such facts may limit or
diminish the indemnification amount, if any, that the Carlsons owe Western.13 A determination on
the facts with respect to any such defense may be made by the trier of fact. Furthermore, given the
law’s general preference for trial on the merits, if default against the Carlsons were to remain in
effect, it might constitute a “harsh” and potentially unjust result with respect to any amount that the
Carlsons owe Western.14 Hence, employing the “forgiving standard” applicable to review defaults,
the Court finds the Carlsons’ earnest, albeit less than fully persuasive, proposition that they possess
a“meritorious defense” sufficient, especially where, as here, the defendants have not defaulted
willfully and plaintiff has presented no opposing argument to their motion.15
Third, “[t]he final factor that a court must consider in determining whether to set aside a
default is the potential that doing so would result in prejudice to the non-defaulting party.” State
Connecticut has recognized a surety’s duty to act in “good faith” when making
payments upon an indemnity bond. See, e.g., Travelers Prop. & Cas. Ins. Co. v. Triton Marine
Const. Corp., 473 F.Supp.2d 321, 330-31 (D.Conn. 2007) (“The implied covenant of good faith and
fair dealing applies in the context of a surety indemnity agreement;” and the Connecticut Supreme
Court has “concluded that a surety’s failure to conduct a sufficient investigation into the validity of
a claim upon a payment bond, when accompanied by other evidence that reflects improper motive,
may be considered evidence of bad faith”) (citing PSE Consulting, Inc. v. Frank Mercede and Sons,
Inc., 267 Conn. 279, 302, 310 (2004)).
According to Western, “[u]nder the terms of the GAI, each of the defendants is jointly
and severally liable to Western for all of [the] losses [it has incurred on Western’s behalf] including
the costs and fees associated with bringing this action.” Doc. #20, p. 7 (¶15); see also Doc. #1-2
(“General Agreement of Indemnity”), p. 1, para. 3 (in which indemnitors “jointly and severally
agree” with Western).
The Carlson defendants filed their motion to set aside the default on November 30,
2012. Doc. #19. Pursuant to Local Rule of Civil Procedure 7(a)(1), Western had twenty-one days
from that date, until December 21, 2012, to file a memorandum in opposition to the motion, but filed
no such objection. D. Conn. L. Civ. R. 7(a) (“all memoranda in opposition to any motion shall be
filed within twenty-one (21) days of the filing of the motion”). Under Rule 7(a), “[f]ailure to submit
a memorandum in opposition to a motion may be deemed sufficient cause to grant the motion, except
where the pleadings provide sufficient grounds to deny the motion.” Id.
Farm Mut. Auto Ins. Co., 409 F. App’x at 456. As the Carlson defendants suggest, Western will
suffer minimal prejudice if the Carlsons are allowed to participate in the action. The action remains
in its preliminary stages – i.e., the Complaint is about to be amended and discovery has not
proceeded in that the Carlsons are the first and only defendants to have appeared in the action.
Moreover, the Carlsons assert that hereinafter they will cooperate swiftly “to reach the merits of the
matter” in this case.16 Doc. #19-1, p. 3. They have reported that their counsel has “reached out” to
Western’s counsel and has “been in contact with him on a regular basis,” holding ongoing
“[d]iscussions to resolve all matters . . . at this time.” Id.
Finally, Western has made no argument that it will be prejudiced by having to prosecute this
action against the Carlsons. In fact, Western has made no objection to the Carlson defendants’
motion to open the default against them; and the period to object has expired.17
In sum, the Carlsons assert that their lack of willfulness (i.e., justifiable, albeit ineffective,
reliance on corporate counsel), their need to assert meritorious defenses to the action, and the lack
of prejudice to Western all comprise “good cause” to set aside entry of default pursuant to Federal
Rule of Civil Procedure 55 (c). Specifically, the Carlson defendants’ failure to appear in this action
resulted from their prior practice of relying on Leo’s corporate counsel for representation. Upon
discovering that such reliance was misplaced, they retained Attorney Verrillo, who has appeared and
To that end, should the parties seek assistance in resolving the case by engaging in
settlement negotiations before a Magistrate Judge, they are advised to so inform Chambers by joint
See n. 15, supra.
participated in ongoing discussions to resolve this matter in an expeditious fashion. The Carlsons
maintain that they have meritorious defenses and possible cross claims to assert should the action
proceed. Furthermore, the action remains in its preliminary stages so that setting aside the default
against the Carlsons will result in minimal prejudice to plaintiff. Western has filed no objection to
the Carlsons’ motion and thus has made no showing of any resulting prejudice should the default be
For all of the foregoing reasons, the Court finds “good cause” to set aside entry of default
against the Carlson defendants. Accordingly, their “Motion to Open Default” (Doc. #19) will be
granted. The Carlson defendants shall file their answer to the Amended Complaint within fourteen
(14) days after the amended complaint is filed and served. Fed. R. Civ. P. 15(a)(3).18
Defaulting Defendants Leo Construction, LLC and the Greenfield Defendants
Lastly, the fact that the Court will set aside the default against the Carlson defendants has no
bearing on the default entered against defendants Leo and the Greenfields. Those three defendants
have also been defaulted with respect to the original Complaint but unlike the Carlsons have not
moved to open the default. Once found to be in default, a defendant is deemed to have admitted all
of the well-pleaded allegations in the complaint pertaining to liability. See Greyhound Exhibitgroup,
Inc., v. E.L. U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir.1992), cert. denied, 506 U.S. 1080 (1993).
Rule 15(a)(3) delimits the “Time to Respond” to an amended pleading, as follows:
Unless the court orders otherwise, any required response to an amended pleading
must be made within the time remaining to respond to the original pleading or within
14 days after service of the amended pleading, whichever is later.
Fed. R. Civ. P. 15(a)(3) (emphasis added).
As a rule, “[i]t is well established that an amended complaint ordinarily supersedes the
original and renders it of no legal effect.” International Controls Corp. v. Vesco, 556 F.2d 665, 66869 (2d Cir. 1977) (citing, inter alia, Washer v. Bullitt County, 110 U.S. 558, 562 (1884); Miller v.
American Export Lines, Inc., 313 F.2d 218 (2d Cir. 1963) (per curiam)). Moreover, the Second
Circuit has held that the point at which the amended complaint supersedes the original complaint is
the time of service “where . . . the amended complaint is required to be served under Rule 5(a).”
Vesco, 556 F.2d at 669. The original complaint is normally superseded when the plaintiff serves
the amended complaint, as opposed to when plaintiff files it. Id.
However, no service on a defaulting party is required under Federal Rule of Civil Procedure
5(a) if that party has failed to appear and the amended complaint does not assert any new claims
against it. Specifically, Rule 5(a)(2), captioned, “If a Party Fails to Appear,” provides:
No service is required on a party who is in default for failing to appear. But a
pleading that asserts a new claim for relief against such a party must be served on that
party under Rule 4.
As one district court observed, “the Second Circuit has found that there is nothing improper
about holding one defendant in default of one complaint and other defendants liable on later
complaints.” Finkel v. Hall-Mark Elec. Supplies Corp., No. 08–CV–0446 (RRM)(SMG), 2009 WL
3401747, at *3 (E.D.N.Y. Oct. 21, 2009) (citing Vesco, 556 F.2d at 668 n. 3 (“It is immaterial that
[the plaintiff] is proceeding against certain other defendants on the amended complaint, since they
have been properly served with that complaint.”)). “Otherwise, a plaintiff might be unable to obtain
judgment against a defendant who, although properly served with the original complaint, evades
service of an amended complaint.” Finkel, 2009 WL 3401747, at *3. It thus follows that in
circumstances of default, “the court does not find it significant that two different complaints are
operative against different defendants.” Id. “There is no inconsistency in finding [one defendant]
in default of the First Amended Complaint and the other Defendants in default of the Second
Amended Complaint.” Id.
See also Saint-Gobain Autover USA, Inc. v. Fuyao Glass Industry
Group Co., Ltd., No. 05-71079, 2005 WL 3454402, at *1 (E.D. Mich. Dec. 16, 2005) (“Here,
Plaintiffs’ Amended Complaint did not assert any new claims, but rather filled in the holes in the
Original Complaint in order to survive the motion to dismiss. Because Defendant’s answer to the
Original Complaint had not been received within twenty days of service, Defendant Fuyao China was
in default, and Plaintiffs were not obligated to serve Defendant [who had failed to appear] with the
Here, the Court observes that the proposed Amended Complaint asserts the same indemnity
claim, employing the same language, that is set forth in the original Complaint and adds no new
claims. Only the factual allegations regarding citizenship of the parties have been filled in or
fleshed out to satisfy this Court that it has subject matter jurisdiction. Compare Doc. #1, p. 1-2
(“The Parties”) with Doc. #20, p. 4-5 (“The Parties”). Therefore, service of the amended complaint
upon the defaulted defendants, Leo and the Greenfield defendants, is not required under Rule 5(a).
See Fed. R. Civ. P. 5(a)(2). See, e.g., Finkel, 2010 WL 8445099, at *2 (“Because the amended
complaint does not assert any new claims against [defaulting defendant] Genergy, service of the
amended complaint pursuant to Rule 4 was not required.”). Leo and the Greenfield defendants thus
remain in default as to the original Complaint and now that the Court is satisfied that it has “diversity
of citizenship” subject matter jurisdiction, plaintiff may, if so advised, renew its motion for default
judgment as to these defendants.
Plaintiff’s “Motion to Amend Complaint” (Doc. #20) is GRANTED, absent objection and
because justice so requires. The proposed Amended Complaint is not the product of undue delay
or bad faith and will neither result in undue prejudice to defendants nor be futile in effect. Rather,
that complaint will correct the jurisdictional defects of the prior Complaint, providing the Court with
sufficient allegations to confirm its subject matter jurisdiction based on diversity of citizenship.
Plaintiff shall correct any inaccuracies and/or misstatements of language contained in the proposed
Amended Complaint, as described herein at n.7 and n.9, and e-file and serve the finished product on
or before January 31, 2013 on the relevant defendants, in compliance with Federal Rule of Civil
The Carlson defendants’ “Motion to Open Default” (Doc. #19) is GRANTED, absent
objection and for “good cause.” The record shows that the Carlsons’ understandable mistake,
arising from the prior practice of relying upon defendant Leo’s corporate counsel to represent them,
led to their inadvertent as opposed to willful default. Their immediate retention of counsel upon
learning of their error and prompt entry into the case thereafter evidence their intention to participate
in the action in good faith. Given the Carlsons’ contention that they believe they possess meritorious
defenses and also cross-claims against their co-defendants, the Court finds that it would be in the
interests of justice to allow disposition of this matter on the merits. Prejudice to plaintiff will be
minimal in that the case remains in its earliest stage. Accordingly, pursuant to Rule 55(c) of the
Federal Rules of Civil Procedure and the Second Circuit’s preference for resolving disputes on the
See discussion in Part II.C., supra.
merits, “good cause” exists for this Court to set aside the default against the Carlson defendants, and
I do so.
The Carlson defendants, having been restored as active parties to this action, shall e-file their
answer or response to plaintiff’s Amended Complaint within fourteen (14) days after that complaint
is filed and served or risk re-entry of default.20
It is So Ordered.
Dated: New Haven, Connecticut
January 11, 2013
/s/Charles S. Haight, Jr.
CHARLES S. HAIGHT, JR.
SENIOR UNITED STATES DISTRICT JUDGE
Consistent with Rule 15(a)(3) of the Federal Rules of Civil Procedure and in light of
the anticipated filing of the Amended Complaint, the Court now grants the Carlson defendants
fourteen days, as opposed to ten days, to reply to the Amended Complaint. Cf. Doc. #17, p. 12
(holding that the Carlson defendants “must file their answer or response to the Complaint within ten
(10) days following entry of the [Court’s] ruling,” if any, setting aside the default against them.).
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