Wood and Bricks, LLC v. TD Development, LLC et al
ORDER. As set forth herein, the Court will grant the Motion to Set Aside Default 83 only upon satisfaction of the following conditions. Within 14 days of this Order, Wood and Bricks shall file an affidavit setting forth the fees and costs incurred for: the Motion for Default Entry 70 , the Motion for Default Judgment 72 , the November 2, 2016 telephonic status conference 75 , the November 22, 2016 telephonic status conference 80 , and the brief in opposition to the Motion to Set Aside Defa ult 85 . Within 7 days of the filing of such affidavit, TD Development shall file either proof of payment of the requested fees and costs, or any objection to their reasonableness. If TD Development does object, the Court will rule on the objection, and TD Development will then have 7 days from such ruling to file proof of payment of the Court-determined fees and costs. Further, within 30 days of this Order, TD Development shall file a certificate of compliance with all outstanding discovery r equests; no objections to the discovery requests (apart from privilege objections) may be made or served because they would be untimely and there is no excuse for the delay.The joint statement described in the Court's November 22, 2016 Order 81 will be due 14 days after the issuance of the final order on the Motion to Set Aside Default. Signed by Judge Michael P. Shea on 12/19/16. (Tegeler, D.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
WOOD AND BRICKS, LLC,
No. 3:16-cv-123 (MPS)
TD DEVELOPMENT, LLC, ET AL.,
RULING AND ORDER
Defendant TD Development, LLC (“TD Development”) has moved to set aside the
Court’s entry of default against it in this case arising out of an agreement to demolish buildings
and salvage materials on an industrial site in Moosup, Connecticut. Plaintiff Wood and Bricks,
LLC (“Wood and Bricks”) opposes the motion on the grounds that the default was willful and
setting it aside would result in prejudice. As set forth more fully below, given both the strong
preference for resolving cases on the merits and the need to avoid undue prejudice, the Court will
grant the Motion to Set Aside Default (ECF No. 83) on the condition that TD Development pay
Wood and Bricks for reasonable costs and fees associated with the default.
This case was removed from state court by the two defendants, TD Development and
Todd Clifford, on January 28, 2016. (ECF No. 1.) On August 12, 2016, counsel for Wood and
Bricks and then-counsel for Defendants, Garret Flynn, submitted a joint status report stating that
they had participated in a settlement conference with Magistrate Judge Merriam and that while
the case did not settle, “they continue to engage in fruitful settlement negotiations.” (ECF No. 60
at 2.) However, the report also stated, “[y]esterday, Defendants’ counsel of record informed
counsel for Wood & Bricks and Mr. Sullivan that the Defendants intend to replace him with new
counsel. It is not clear when the new counsel will be filing an appearance or how this will affect
the parties’ settlement negotiations.” (Id.)
On August 22, 2016, Attorney Flynn along with counsel for Wood and Bricks
participated in a telephonic status conference, in which Attorney Flynn stated that he intended to
file a motion to withdraw. The Court’s order following the status conference specified that
Defendants would have seven days to file an appearance, and, “[i]f no appearance is filed in
those 7 days, Plaintiff shall file a motion for default judgment.” (ECF No. 64.) The Court
explained that an LLC could not appear pro se, and that “because Defendants have apparently
taken no action to retain alternate counsel since filing the joint status report, any new defense
counsel to enter an appearance should be prepared to proceed expeditiously.” (Id.) The Court
also required Attorney Flynn to serve a copy of the order and the motion to withdraw on his
client, which he did. (ECF Nos. 64, 66.)
On August 24, 2016, the Court granted Mr. Flynn’s motion to withdraw. (ECF No. 71.)
No attorney appeared for the Defendants within the required time frame, although Mr. Clifford
entered a pro se appearance. (ECF No. 68.) On September 1, 2016, Wood and Bricks filed a
motion for Default Entry against TD Development under Fed. R. Civ. P. 55(a). (ECF No. 70.)
The Court granted the motion and entered default on September 19, 2016, requiring Wood and
Bricks to file a Motion for Default Judgment. (ECF No. 71.) On October 17, 2016, 47 days after
the Court’s original deadline for Defendants to obtain new counsel and in accordance with the
Court’s Order, Wood and Bricks filed a 12-page motion for default judgment under Fed. R. Civ.
P. 55(b), along with affidavits and supporting documentation. (ECF No. 72.)
Then, on November 2, 2016, counsel for Wood and Bricks along with Mr. Clifford,
appearing pro se, attended a telephonic status conference. At the telephonic status conference,
the Court granted Mr. Clifford an additional 14 days to find counsel for TD Development. (ECF
No. 76.) On November 16, 2016, new counsel for TD Development entered an appearance. (ECF
No. 78.) The Court held another telephonic status conference on November 22, 2016, and on
December 2, 2016, TD Development, through counsel, moved to set aside the earlier default.
(ECF No. 83.)
Under Fed. R. Civ. P. 55(c), “the court may set aside an entry of default for good cause.”
To determine whether there is good cause, the Court must assess: “(1) whether the default was
willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a
meritorious defense is presented.” Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993).
This determination is “left to the sound discretion of a district court because it is in the best
position to assess the individual circumstances of a given case and to evaluate the credibility and
good faith of the parties.” Id. at 95. However, “[b]ecause there is a preference for resolving
disputes on the merits, doubts should be resolved in favor of the defaulting party.” Powerserve
Int'l, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2001) (internal citation and quotation marks
omitted). The Second Circuit has emphasized that “a default judgment is the most severe
sanction which the court may apply. A trial court's desire to move its calendar should not
overcome its duty to do justice.” N.Y. v. Green, 420 F.3d 99, 104 (2d Cir. 2005) (internal citation
and quotation marks omitted).
The Court considers each of the factors set forth in Diakuhara. First, “willfulness in the
context of a judgment by default requires something more than mere negligence, such as
egregious or deliberate conduct, although the degree of negligence in precipitating a default is a
relevant factor to be considered.” Green, 420 F.3d at 108 (internal citations and quotation marks
omitted). The “purpose of default judgment is to protect parties from undue delay-harassment.”
Id. (internal citation and quotation marks omitted). TD Development is correct that the Court
granted an extension of time to find new counsel after the initial default, and there is no
indication that new counsel for TD Development is unreasonably delaying or harassing Wood
and Bricks. However, Wood and Bricks is also correct that the earlier conduct here went beyond
mere negligence: TD Development was well informed of the consequences of having its attorney
withdraw and not retaining a new attorney, and allowed significant time periods to elapse during
which it could have corrected any negligent mistake. See, e.g. McLean v. Wayside Outreach Dev.
Inc., 624 F. App'x 44, 45 (2d Cir. 2015) (summary order) (finding willfulness where the party
“fail[ed] to appear at the… pretrial conference after its representatives were informed… that it
needed to do so” and “wait[ed] three months to retain counsel and over two more months to
petition the court to set aside the default.”)
Second, in terms of prejudice, Wood and Bricks has incurred costs and experienced over
three months of delay, all while diligently following the Court’s orders. However, the costs can
be addressed without resorting to the severe sanction of default judgment. See Powerserve, 239
F.3d at 515 (“In determining whether to exercise its discretion to set aside a default… a district
court has inherent power to impose a reasonable condition on the vacatur in order to avoid undue
prejudice to the opposing party.”); Grosso v. Radice, 2007 WL 4441022, at *3 (E.D.N.Y. Dec.
10, 2007) (conditioning the decision to set aside the default entry on defendant’s payment of
“reasonable costs and attorneys' fees in bringing the motion for default.”). And “delay standing
alone does not establish prejudice” in this context. Diakuhara, 10 F.3d at 98.
Third, “[a] defendant seeking to vacate an entry of default must present some evidence
beyond conclusory denials to support his defense. The test of such a defense is measured not by
whether there is a likelihood that it will carry the day, but whether the evidence submitted, if
proven at trial, would constitute a complete defense.” Id. TD Development did earlier file an
answer to the complaint with affirmative defenses and counterclaims. (ECF No 19.) However, in
its motion to set aside the default, TD Development stated only, “Defendant has discovered new
evidence and seeks the opportunity to defend itself on the merits of its case-in-chief, and the
counter-claim therein.” (ECF No. 83 at 2.) The motion did not specify what this alleged new
evidence might be.
The above factors call into question the good faith of TD Development. However, the
preference for resolving cases on the merits weighs heavily here, as does the need to resolve any
doubts in favor of the defaulting party. See Powerserve, 239 F.3d at 514. Therefore, the Court
will set aside the default under Fed. R. Civ. P. 55(c), but only on the condition that TD
Development rectify the prejudice that Wood and Bricks suffered by compensating it for
reasonable costs and attorneys’ fees associated with the default.
Accordingly, the Court will grant the Motion to Set Aside Default (ECF No. 83) only
upon satisfaction of the following conditions. Within 14 days of this Order, Wood and Bricks
shall file an affidavit setting forth the fees and costs incurred for: the Motion for Default Entry
(ECF No. 70), the Motion for Default Judgment (ECF No. 72), the November 2, 2016 telephonic
status conference (ECF No. 75), the November 22, 2016 telephonic status conference (ECF No.
80), and the brief in opposition to the Motion to Set Aside Default (ECF No. 85). Within 7 days
of the filing of such affidavit, TD Development shall file either proof of payment of the
requested fees and costs, or any objection to their reasonableness. If TD Development does
object, the Court will rule on the objection, and TD Development will then have 7 days from
such ruling to file proof of payment of the Court-determined fees and costs. Further, within 30
days of this Order, TD Development shall file a certificate of compliance with all outstanding
discovery requests; no objections to the discovery requests (apart from privilege objections) may
be made or served because they would be untimely and there is no excuse for the delay.
The joint statement described in the Court’s November 22, 2016 Order (ECF No. 81) will
be due 14 days after the issuance of the final order on the Motion to Set Aside Default.
IT IS SO ORDERED.
Michael P. Shea, U.S.D.J.
December 19, 2016
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