DirectBuy Inc v. Next Level Marketing Inc et al
Filing
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OPINION AND ORDER DENYING 53 MOTION to Vacate filed by Parkash Talwar. Signed by Magistrate Judge Andrew P Rodovich on 5/5/11. (kjp)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
DIRECTBUY, INC.,
Plaintiff
v.
NEXT LEVEL MARKETING, INC.,
KARUNA TALWAR, GURMEET W.
TALWAR, PARKASH TALWAR,
SUKPREET TALWAR,
Defendants
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Case No. 2:09 cv 84
OPINION AND ORDER
This matter is before the court on the Motion to Vacate [DE
53] filed by the defendant, Parkash Talwar, on March 25, 2011.
For the following reasons, the motion is DENIED.
Background
The plaintiff, DirectBuy, Inc., filed a complaint against
Dr. Parkash Talwar for $1,197,340.30 based on his personal
guarantee of all the debts of Next Level Marketing, Inc., the
former DirectBuy franchise owned by his son and daughter-in-law.
Parkash answered the original complaint on June 23, 2009, but he
failed to timely respond to the amended complaint DirectBuy filed
on December 1, 2009.
On July 15, 2010, Parkash filed a motion
for leave to answer the amended complaint.
motion for failure to show good cause.
The court denied his
Parkash filed a motion to reconsider the court’s denial of
his motion for leave to answer the amended complaint on November
11, 2010.
In his motion, Parkash argued that his failure to
respond to the amended complaint was excusable neglect and cited
to cases explaining that under Federal Rule of Civil Procedure
60(b), the court may reopen judgments for reasons of mistake,
inadvertence, surprise, or excusable neglect.
See Pioneer Inv.
Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S.
380, 393, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993).
The court
denied his motion, explaining that his arguments for failing to
respond timely to the amended complaint should have been raised
in his initial motion for leave to respond to DirectBuy’s complaint.
The court entered a default judgment against Parkash and
set this matter for a hearing on damages.
Parkash now moves to
vacate the hearing on damages and set aside the default judgment.
Discussion
Parkash first argues that the hearing on damages is not ripe
for determination and must be vacated.
Parkash explains that
DirectBuy seeks to hold him jointly and severally liable for the
personal guaranty with Gurmeet Talwar.
Gurmeet has not received
service of process and, consequently, his liability has not been
determined.
Where defendants are "alleged to be jointly and
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severally liable for the damages claimed . . . a damages hearing
may not be held until the liability of each defendant has been
resolved."
Dundee Cement v. Howard Pipe & Concrete Products,
Inc., 722 F.2d 1319, 1324 (7th Cir. 1983).
The Dundee court
explained that the joint nature of the plaintiff’s claim prohibited different findings of damages against all defendants and,
therefore, the damage hearing could not be held until after
liability of all joint defendants was determined.
Dundee, 722
F.2d at 1324 (citing In re Uranium Antritrust Litigation, 617
F.2d 1248, 1262-63 (7th Cir. 1980)).
However, the court recog-
nized that dismissing the jointly liable defendants against whom
liability had not been fixed would resolve the problem, and the
damage hearing could then proceed.
Dundee, 722 F.2d at 1324.
After Parkash filed this motion, DirectBuy voluntarily
dismissed Gurmeet Talwar, rendering this matter ripe for the
hearing on damages.
Therefore, Parkash’s motion to vacate the
hearing on damages is DENIED.
Parkash also moves to set aside the default judgment entered
against him, arguing that his failure to respond to DirectBuy’s
amended complaint was excusable neglect.
On November 11, 2010,
Parkash filed a motion to reconsider the court’s denial of his
extension of time.
In his motion, Parkash argued that his fail-
ure to file an answer was excusable neglect and referred the
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court to cases explaining the excusable neglect standard under
Federal Rules of Civil Procedure 55 and 60.
The court denied his
motion, and he now effectively raises the same argument, asking
the court to set aside the default judgment for excusable neglect.
See Matter of Busick, 719 F.2d 922, 925 (7th Cir. 1983)
(explaining that a motion for reconsideration for excusable
neglect was substantively a motion to set aside the default
judgment).
Parkash is not entitled to three attempts to seek
leave to file a responsive pleading to DirectBuy’s amended complaint.
The court already denied his motion for leave to file an
answer and his motion to reconsider.
He does not point to new
law or circumstances warranting the court to reconsider its
previous decisions on these motions and to allow him leave to
file an answer.
Moreover, Parkash failed to show that it would be appropriate for the court to set aside the default judgment.
states:
Rule 55(c)
"The court may set aside an entry of default for good
cause, and it may set aside a default judgment under Rule 60(b)."
Rule 60(b)(1) allows a final order to be set aside for mistake,
inadvertence, surprise, or excusable neglect. However, relief
under Rule 60(b) is an "extraordinary remedy" and only given in
"exceptional circumstances."
Cracco v. Vitran Express, Inc., 559
F.3d 625, 630-31 (7th Cir. 2009). The party asking to vacate an
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entry of default prior to the entry of final judgment must
demonstrate all of the following: (1) good cause for the default;
(2) quick action to correct it; and (3) a meritorious defense to
the complaint.
See Cracco, 559 F.3d at 630 (citing Pretzel &
Stouffer v. Imperial Adjusters, Inc., 28 F.3d 42, 45 (7th Cir.
1994)).
The aforementioned test applies to motions seeking relief
from a default judgment under both Rule 55(c) and Rule 60(b).
However, the standard is applied more strictly for Rule 60(b) as
opposed to Rule 55(c). See generally United States v. Di Mucci,
879 F.2d 1488, 1495 (7th Cir. 1989) (explaining the test "is more
liberally applied in the Rule 55(c) context."). This circuit
favors a policy of promoting a trial based on the merits rather
than default judgments.
Cracco, 559 F.3d at 631; Sun v. Board of
Trustees University of IL, 473 F.3d 799, 811 (7th Cir. 2007);
C.K.S. Eng'rs, Inc. v. White Mountain Gypsum Co., 726 F.2d 1202,
1205 (7th Cir. 1984).
Good cause is shown if a failure to respond to the summons
and complaint was through inadvertence - willfully ignoring the
pending litigation will not suffice.
Cracco, 559 F.3d at 631;
Passarella v. Hilton Int'l Co., 810 F.2d 674, 677 (7th Cir.
1987).
See Hood v. Menard Tactical Team, 2010 WL 1416103, *1, 2
(S.D. Ill. Apr. 1, 2010) (the court did not abuse its discretion
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by refusing to set aside a motion to vacate because defendant's
assumption that he was appointed legal representation did not
constitute excusable neglect when several months passed since the
entry of a default judgment and "any action" by the defaulting
party), Lyons Partnership L.P. v. Welle, 2010 WL 680877, *2 (N.D.
Ill. Feb. 22, 2010) (finding defendant's failure to respond to
hearing because of cash flow problems and subsequent inability to
retain counsel was not considered good cause to vacate default
judgment), and Lauer v. Dave Kieffer Tile, Inc., 2010 WL 411870,
*2 (N.D. Ind. Jan. 29, 2010) (upholding default judgment where
defendant failed to show good cause because claiming that he did
not know the lawsuit was against him personally and believed it
was only against his company was without merit; "[s]imply stating
he did not know he was personally involved is insufficient to
show cause under the exacting standard of Rule 60(b)," especially
considering the face of the complaint, which named him as a
defendant)).
The court, on two separate occasions, has found that Parkash
failed to show good cause for his delay in seeking leave to file
an answer.
In his reply to his original motion for leave to file
an answer, Parkash argued that his failure to answer constituted
excusable neglect because it was unclear whether Bullaro & Carton
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would continue representation.
In its October 28, 2010, Opinion
and Order, the court explained:
By its own admission, Bullaro & Carton was
aware of the time constraints imposed by Rule
15 and ignored the deadline. (Deft. Memo. in
Supp. p. 1)("Thereafter, counsel for Parkash
Talwar exchanged telephone calls and messages, spanning over several weeks, concerning the fact that the representation situation was unsettled as an explanation as to
why Parkash Talwar had not yet answered.").
Bullaro & Carton do not argue that they were
released as Parkash’s counsel at any time, so
they had a continuing duty to represent their
client. They have not provided any reason
why they could not have requested an extension within the deadline pending the resolution of the confusion over representation.
Their failure to comply was not due to carelessness or misinterpretation of the rules.
See In Matter of Plunkett, 82 F.3d 738, 742
(7th Cir. 1996)(finding that it was not excusable neglect to allow the party to amend
its proof of claim where the attorney notified the court of its security interest and
failed to take further action because the
attorney’s inaction was not based on any
interpretation or plausible misinterpretation
of the laws). Rather, Bullaro & Carton chose
to ignore Rule 15. Rule 6 forgives parties
and grants leave to amend for carelessness,
not for a blatant disregard for the rules.
Bullaro & Carton willfully ignored the deadline and cannot now
succeed in showing good cause for failure to timely answer
DirectBuy’s amended complaint.
See Cracco, 559 F.3d at 631.
Blatant disregard for the rules of procedure and the pending
litigation falls far short of satisfying this standard.
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Finally, Parkash has raised the issue of a meritorius
defense for the first time in this motion.
Because the Rule
55(c) standard is in the conjunctive, that argument should have
been raised in the previous motions.
considered at this late date.
Omitted arguments cannot be
See generally Hernandez v. Cook
County Sheriff's Office, 634 F.3d 906, 913 (7th Cir. 2011).
_______________
For the foregoing reasons, the Motion to Vacate [DE 53]
filed by the defendant, Parkash Talwar, on March 25, 2011, is
DENIED.
ENTERED this 5th day of May, 2011
s/ ANDREW P. RODOVICH
United States Magistrate Judge
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