Vargas v. Vieja Azteca Bakery, Inc. et al

Filing 45

MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, Defendants' motion 22 to quash the citation to discover assets is denied; Defendants' motion 36 to continue is denied; and Pla intiff's motion 40 to quash is granted. The citation is enforceable against both Defendants. The response to the citation is due by 11/26/2018, and the parties shall arrange for the citation examination to occur at Plaintiff's counsels offices by 12/17/2018. Status hearing of 11/29/2018 is vacated. Emailed notice(slb, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JAIME VARGAS
Plaintiff,
v.
VIEJA AZTECA BAKERY, INC. and
ALFREDO SANCHEZ,
Defendants.

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No. 14 C 8850
Judge Edmond E. Chang

MEMORANDUM OPINION AND ORDER
In November 2014, Jaime Vargas filed a complaint against Vieja Azteca
Bakery, Inc. and its owner, Alfredo Sanchez, for alleged violations of the Fair Labor
Standards Act, 29 U.S.C. § 201, et seq. (FLSA) and the Illinois Minimum Wage Law,
820 ILCS § 105/1, et seq. (IMWL). R. 1, Compl.1 According to Vargas, he was never
paid overtime during the two years that he worked there, despite consistently
working more than 40 hours each week. Neither Azteca nor Sanchez answered the
Complaint, so the Court entered a default judgment against them in March 2015. R.
16, Default Judgment.2 Around three years later, Vargas filed a citation to discover
Azteca’s assets. R. 20, Citation. In response to the citation, Azteca finally entered an
appearance in the case and moved to vacate the judgment and quash the citation. R.
22, Mot. to Quash. For the reasons discussed below, the motion is denied. Azteca has

Citations to the record are noted as “R.” followed by the docket number and the page
or paragraph number.
2The Court has subject matter jurisdiction over Vargas’s FLSA claim under 28 U.S.C.
§ 1331 and the accompanying state claim under 28 U.S.C. § 1367(a).
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failed to show that service of summons was improper; provides no good cause for its
failure to respond to the Complaint; did not act quickly to rectify the default; and does
not have a meritorious defense to the claims.
I. Background
Jaime Vargas, who usually goes by his middle name, Gerardo, R. 34, Pl. SurReply, Exh. 1, Vargas Aff. ¶ 4, worked at Vieja Azteca Bakery from September 2011
to September 2013, R. 33, Def. Reply, Exh. A, Sanchez Dec. ¶ 4. Vargas alleged that,
during those two years, he consistently worked 72 to 84 hours per week but was never
paid overtime. See R. 13, Mot. for Default Judgment, Exh. B, Calculation of Overtime
Hours. After Vargas filed this lawsuit and submitted returns of service of the
summons, Compl., R. 8, 9, neither Azteca nor Sanchez ever responded to the
Complaint. On Vargas’s motion, the Court entered a default judgment awarding him
$47,139.81 in damages and $3,834.00 in attorneys’ fees, for a total of $50,973.81. R.
13, Mot. for Default Judgment ¶¶ 6-7; R. 16, Default Judgment. Around three years
later, in April 2018, Vargas filed a citation to discover Azteca’s assets so that he could
collect on the default judgment. See Citation. In response, Azteca moved to quash
the citation and, essentially, to vacate the default judgment, contending that this was
the first it had ever heard of the lawsuit. Mot. to Quash.

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II. Analysis
A. Procedural Background
As an initial matter, Azteca’s3 opening motion to quash was a procedural
mystery, because it cited no Federal Rule of Civil Procedure and no case law. R. 22,
Motion to Quash. Instead, the motion asserted that Azteca had previously settled
overtime claims with Vargas via a settlement with the United States Department of
Labor. Mot. to Quash at 1. Really, then, Azteca was arguing to vacate the default
judgment. Yet Azteca’s six-sentence motion made no attempt to set forth any
procedural basis to vacate, let alone the showing required for vacatur of a default
judgment. Indeed, in light of the absence of any developed argument, the Court would
likely have been within its discretion to deny the motion outright. But because the
motion asserted a potentially compelling argument—that Azteca had already paid
Vargas what was due under a settlement agreement—the Court called for a response
from Vargas. In any event, the Court will analyze the motion as if it were properly
filed motion to vacate the default judgment.
B. Service of Process
Azteca presents two arguments in an effort to vacate the default judgment.
First, Azteca argues that it was improperly served—or never served at all.—in which
case the Court did not have personal jurisdiction over it. Def. Reply at 7-8. “Under
Federal Rule of Civil Procedure 60(b)(4), a movant may attack the judgment for lack
of jurisdiction over the person at any time since a judgment rendered without

3The

Defendants are collectively referred to as “Azteca” throughout the Opinion,
unless reference to Sanchez as an individual is necessary.

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jurisdiction over the person is void.” Homer v. Jones-Bey, 415 F.3d 748, 752 (7th Cir.
2005) (cleaned up).4 In determining whether service was accomplished, “[a] signed
return of service constitutes prima facie evidence” that service was properly
effectuated. O’Brien v. R.J. O'Brien & Assocs., Inc., 998 F.2d 1394, 1398 (7th Cir.
1993) (cleaned up). If the plaintiff provides a signed return of service, then the
defendant must present “strong and convincing evidence,” id., showing that “service
was not received,” Homer, 415 F.3d at 752.5
Here, Vargas presents ample evidence that at the very least makes a prima
facie showing that Azteca was properly served. Along with two signed affidavits of
service included in the original motion for default judgment, Mot. for Default
Judgment, Exh. C, Affidavits of Service, Vargas obtained another affidavit from the
special process server to rebut Azteca’s motion, Pl. Sur-Reply, Exh. 2, Pluss Aff.
There, the special process server affirms that she served Sanchez in November 2014,
both for himself individually and Azteca Bakery. Id. ¶¶ 4, 7. She even includes
pictures of Sanchez’s house from each date of service. Id., Exh. B; id., Exh. F.6 And
those initial affidavits are accorded special significance—they are not hindsight

This opinion uses (cleaned up) to indicate that internal quotation marks, alterations,
and citations have been omitted from quotations. See Jack Metzler, Cleaning Up Quotations,
18 Journal of Appellate Practice and Process 143 (2017).
5If Azteca had moved for an evidentiary hearing, then live-witness testimony would
have been evaluated by the Court, along with all the circumstances. But no one sought an
evidentiary hearing, so the record evidence is based on the affidavits and exhibits—which
overwhelmingly favor Vargas.
6The photos also each include the same home and car, which, according to the special
process server, is registered to Azteca Bakery. Pluss Aff. ¶¶ 5, 8. Although the photos first
were filed as exhibits to Vargas’s sur-reply, the Defendants did not ask for a further response
to try rebutting the photos.
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musings, but hard evidence of service presented at the time of the original judgment.
What’s more, Vargas’s former attorney, Raisa Alicea, avers that she spoke with
Sanchez about a possible settlement, and Sanchez even mentioned that he had been
in settlement discussions with the Labor Department as well. Pl. Sur-Reply, Exh. 3,
Alicea Aff. ¶¶ 4-5.
In the face of Vargas’s substantial evidence, Azteca offers Sanchez’s averment
that he was not served at his house on the asserted dates of service. Sanchez Dec.
¶¶ 23-24. But those bare denials do not overcome the detailed affidavits of the process
server, which initially included physical descriptions of Sanchez, R. 8, 9, and now also
include photographs of his house and car, Pluss. Aff., Exhs. B, F. Indeed, the presence
of the car in both photographs tends to show that he was home when the process
server took the photos. Sanchez offers nothing in the way of evidence, beyond his
denials, that he was not at home on those dates and times.
Sanchez also contends that he had no contact with Vargas’s former attorney
about settling the claims. Sanchez Dec. ¶¶ 25, 28. Again, however, the evidence
readily supports Alicea’s version. Back on December 16, 2014, Alicea filed an initial
status report just as the case was starting out, but after the November 2014 service
dates. R. 6, 1/27/15 Status Report. The initial status report recounted the contact with
the Defendants:
Defendants have not answered Plaintiff’s Complaint at this time. However,
Defendants contacted Plaintiff’s counsel to engage in settlement discussions due to
a prior settlement agreement between Defendants and the Department of Labor.
Therefore, Plaintiff would like to not set any future discovery deadlines at this
time.

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Id. at 2 (emphasis added). This report confirms that Alicea did speak with Sanchez
about settling the case, and also supports the process server’s account that service of
process was accomplished, because that is what prompted Sanchez to contact Alicea.
Alicea reported this contact with the Defendants well before any dispute over service
of process arose, which enhances the credibility of the information. The Court credits
Alicea and the process server: service was properly effectuated. Azteca has not
rebutted Vargas’s prima facie presumption of service “merely by offering affidavits
that conclusorily deny that service was effected.” Peralta v. El Tiburon, Inc., 252 F.
Supp. 3d 658, 661 (N.D. Ill. 2017). The challenge to the judgment under Rule 60(b)(4)
for lack of service is rejected.
C. Excusable Neglect
Azteca’s second argument for vacating the judgment is that there are good
reasons why no answer was filed. Presumably, Azteca is invoking Federal Rule of
Civil Procedure 60(b)(1), which authorizes vacatur when there is “excusable neglect.”
Under Rule 60(b)(1), the moving party must show “(1) good cause for the default; (2)
quick action to correct the default; and (3) the existence of a meritorious defense to
the original complaint.” Jones v. Phipps, 39 F.3d 158, 162 (7th Cir. 1994) (cleaned
up). Rule 60(b)(1) sets a relatively high standard for the moving party; it “requires
something more compelling than ordinary lapses of diligence or simple neglect.” Id.
Azteca contends that it meets Rule 60(b)(1)’s good cause requirement because
it did not know about the default judgment until Vargas sought the citation to
discover assets. Def. Reply at 7-8. But a “willful disregard of [its] obligations as a

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litigant” does not amount to good cause. Jones, 39 F.3d at 164. Here, Sanchez asserts
that he was never served with the complaint, Def. Reply at 7-8, but this argument
fails for the same reasons already discussed—presumption of service or not, the
record evidence shows that service was accomplished. Instead, Azteca (through
Sanchez) knew about Vargas’s claims and simply neglected to file an answer.7 That
is not good cause as required by Rule 60(b)(1).
Azteca runs into similar problems with Rule 60(b)(1)’s second requirement,
that the moving party must act quickly to correct the default. Indeed, a Rule 60(b)(1)
motion must be made “no more than a year after the entry of the judgment.” Fed. R.
Civ. P. 60(c)(1). That deadline was not met here: the default judgment was entered in
March 2015 and Azteca did not attempt to vacate it until April 2018. It is true that
Vargas did not attempt to collect on the judgment for almost three years,8 but Rule
60(c)(1) sets the outer limit for a Rule 60(b)(1) motion at one year.
In any event, Azteca also fails to show it has a meritorious defense to Vargas’s
claims. At a minimum, a meritorious defense must “raise[] a serious question
regarding the propriety of a default judgment and [be] supported by a developed legal

7Azteca

also points out that it was never served for the default judgment itself,
supposedly supporting the notion that it had no reason to know the default judgment. Def.
Reply at 8. But Federal Rule of Civil Procedure 5(a)(2) excuses service when a judgment is
entered due to a failure to appear, as is the case here. In other words, Vargas was not
obligated to serve Azteca with the default judgment.
8Although Vargas never explains why he waited three years before seeking the
Citation, he is well within the default judgment’s seven-year lifespan. 735 ILCS 5/12-108; see
Fed. R. Civ. P. 69(a)(1); see also Boim v. Quranic Literacy Inst., 2017 WL 2179457, at *2 (N.D.
Ill. May 18, 2017). And even if Vargas had waited more than seven years, he still could have
revived the default judgment, as long as he did so within 20 years of the judgment’s entry.
735 ILCS 5/2-1602(a).

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and factual basis.” Jones, 39 F.3d at 165. Here, Azteca first argues that Vargas’s
inclusion in the Labor Department Agreement prevents him from seeking
compensation through a separate lawsuit, because doing so would lead to an unjust
double-recovery. Def. Reply at 11-12. But Azteca’s argument ignores the plain
language of the Fair Labor Standards Act, which of course was the statutory basis for
the Labor Department Agreement. R. 22, Mot. to Quash, Exh. 1, DOL Agreement at
1. Employees only waive FLSA claims when they agree to accept settlement payments
and there has been payment in full.9 29 U.S.C. § 216(c).
Here, Azteca cannot show that Vargas agreed to participate in the Labor
Department Agreement. Entering an “agreement” under the FLSA requires more
than merely accepting money; employees must also explicitly consent to waiving their
claims against the employer. See Walton v. United Consumers Club, Inc., 786 F.2d
303, 305 (7th Cir. 1986) (“United treats ‘agreement’ as any act by which an employee
accepts money. The difficulty with this construction is that it removes ‘agreement’
from § 16(c), treating the statute as if ‘payment in full’ were itself sufficient to
abrogate the employee's right to sue.”); Pfefferkorn v. Primesource Health Grp., LLC,
2018 WL 828001, at *12 (N.D. Ill. Feb. 12, 2018) (holding that an employee’s waiver
of FLSA claims must be “informed and meaningful.”) (cleaned up).

9Vargas

has yet to receive the full $6,171.68 that the Labor Department Agreement
promises, DOL Agreement, Attach. A, Summary of Unpaid Wages at 1, because the first and
only Labor Department check that he received was for only $4,156.64. Vargas Aff., Exh. A,
Check. Employees are paid in full once they receive the full amount allotted under the
Agreement. See Walton v. United Consumers Club, Inc., 786 F.2d at 305. In any event, Vargas
clearly did not agree to participate in the Agreement in the first place.

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In this case, Vargas never signed a form which stipulated that, by accepting
money from the DOL Agreement, he forfeited his individual claims against Azteca.
On the contrary, the Agreement directly states, “[N]othing in this Agreement shall
be deemed to increase, diminish or affect … the rights of any employee who chooses
not to participate in the back wage distribution under this Agreement.” DOL
Agreement at 7. The fact that Vargas still has the original uncashed check from the
Labor Department clearly demonstrates that he chose not to participate in the
Agreement.10 Vargas Aff. ¶¶ 14-15. So Vargas did not waive his FLSA claims against
Azteca.11
Azteca’s final contention is that Vargas exaggerated the overtime wages he
was owed, unjustly inflating the default judgment. Azteca presents timecards, which
purportedly show that Vargas only worked 50-60 hours per week. Sanchez Dec., Exh.
1, Timecards; Def. Reply at 3. That would be less than the 72-84 hours per week that
Vargas claimed. See Mot. for Default Judgment, Calculation of Overtime Hours. But
the timecards do not help Azteca establish a meritorious defense. First, they do not

10It

is unclear why Azteca never undertook the basic step of checking with the Labor
Department to determine whether Vargas had deposited the check before filing the motion to
quash the citation. Only after the motion was fully briefed (including a sur-reply), did Azteca
try to subpoena the Labor Department. That was too late, especially in light of the fact that,
as described earlier in the Opinion, Azteca’s opening motion did not contain a developed
argument at all. So Azteca’s motion to continue, R. 36, is denied and Vargas’s motion to quash
the subpoena, R. 40, is granted.
11Vargas likely could have cashed or deposited the DOL’s check and still maintained
his right to sue Azteca since, again, he never signed a form that explicitly precluded future
lawsuits to recover the full amount of the unpaid wages. Walton, 786 F.2d at 307 (“The
Department of Labor did not send out form agreements in this case or ask the employees to
surrender any rights. … The employees’ cashing of the checks they received therefore did not
release their full claims against United.”).

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come close to covering the entire time that Vargas worked for Azteca. Azteca admits
that Vargas worked there from late September 2011 to September 2014. Sanchez Dec.
¶ 4. Yet the timecards start in January 2011 and end in October 2011. Id., Exh. 1,
Timecards; see also Pl. Sur-Reply ¶¶ 9-10. So the timecards only cover two months
out of three years that Vargas worked.
Worse, several of the timecards actually support Vargas’s contention that he
typically worked 72-84 hours in a week. Sanchez Dec., Ex. 1, Timecards; see Pl. SurReply ¶ 11. Citing the timecards, Sanchez asserts in his declaration (under penalty
of perjury) that Vargas only worked between 50 and 60 hours per week at Azteca—
and that he never worked 72-84 hours a week. Sanchez Dec. ¶¶ 8-9. Yet the timecards
attached to the declaration show several weeks that exceed 60 hours of work,
including at least one week of 79 hours. See id., Ex. 1, Timecards; Pl. Sur-Reply ¶ 11.
This is an outright contradiction of Sanchez’s declaration under oath. All in all, the
timecards help Vargas’s argument more than Azteca’s, and do not come close to
qualifying as a meritorious defense. Rule 60(b)(1) provides no basis to vacate the
default judgment.
III. Conclusion
For the reasons discussed, neither Rule 60(b)(4) nor Rule 60(b)(1) warrant
vacatur of the default judgment. The citation is enforceable against both Defendants.
The response to the citation is due by November 26, 2018, and the parties shall

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arrange for a citation examination at Plaintiff’s counsel’s offices by December 17,
2018.

ENTERED:

s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: November 5, 2018

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