CHASE v. MERSON et al

Filing 38

MEMORANDUM DECISION AND ORDER on 15 Motion for Entry of Default and Default Judgment and 12 Motion to Extend Time to File Answer By MAGISTRATE JUDGE JOHN H. RICH III. (jwr) Modified on 7/16/2018 to correctly link to motions (jwr).

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE

JOHN F. CHASE,
Plaintiff
v.
ARTHUR MERSON, et al.,
Defendants

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No. 2:18-cv-00165-NT

MEMORANDUM DECISION AND ORDER ON MOTIONS FOR ENTRY OF DEFAULT
AND DEFAULT JUDGMENT AND MOTION TO EXTEND TIME TO FILE ANSWER
In this case alleging that the defendants conspired to induce the plaintiff, John F. Chase,
into investing $500,000 in a fraudulent investment scheme, see Complaint (ECF No. 1) at 2,
defendant Robert Cloutier moved for an extension of time to answer the complaint nunc pro tunc,
and, nearly simultaneously, the plaintiff moved for both the entry of default and default judgment
against him, see Defendant Robert Cloutier’s Motion To Extend Deadline To Answer or Otherwise
Respond to Complaint (“Motion To Extend Time”) (ECF No. 12); Application for Entry of Default
and Default Judgment Against Plaintiff Robert Cloutier (“Default Motions”) (ECF No. 15). I held
oral argument on the motions following which I granted the defendant’s motion and deemed the
plaintiff’s motions moot, see ECF No. 33, and now set forth in writing the bases for my oral ruling.
I. Background
The plaintiff filed the instant complaint on April 19, 2018, alleging that 10 named
defendants fraudulently induced him to invest $500,000 in standby letters of credit by promising
a $10 million return in seven to 12 days on every $250,000 invested. See Complaint at 2. The
plaintiff alleges, in relevant part, that:

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1.

Defendants Arthur Merson and Keith Roy informed his attorney that, in exchange

for introducing him to this opportunity, they and four other defendants, Endeavor Project
Consultants, LLC, Don Patch, Mark Cloutier, and Robert Cloutier (together, the “Consultants”),
would require a collective fee of 17.5 percent of the plaintiff’s proceeds from the investment. See
id. ¶ 32.
2.

In late March 2017, the Consultants presented him with an Irrevocable 17.5%

Success Fee Participation & Payorder Agreement (the “Success Fee Agreement”). See id. ¶ 33
& Success Fee Agreement, Exh. 1 (ECF No. 1-1) thereto.
3.

On March 29, 2017, he and the Consultants executed the Success Fee Agreement,

and, pursuant to a separate agreement with defendant Stellar Enterprises, Inc., through defendant
Christopher M. Ochoa, he wired $500,000 to the IOLTA trust account of defendant The Law
Office of Chris Ochoa, P.A., the same day. See Complaint ¶¶ 36, 48-49.
4.

Pursuant to that separate agreement, the plaintiff’s funds were not to be disbursed

from the trust account until Ochoa provided him proof that two banking instruments, including a
standby letter of credit, had been issued and transmitted. See id. ¶¶ 43-44, 46.
5.

In fact, the plaintiff’s funds were immediately disbursed from the trust account

without the promised proof, and, as of the date of the filing of the instant complaint more than a
year later, despite inquiries and/or demands, the plaintiff still had not received proof of the issuance
and transmission of the banking instruments, any return on his investment, or a refund of any
portion of the $500,000 that he invested. See id. ¶¶ 50, 52-54, 58-61.
Robert Cloutier was served with a summons and copy of the complaint on April 30, 2018,
triggering a May 21, 2018, deadline to answer, see ECF No. 6, and Mark Cloutier was served on

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May 7, 2018, resulting in a May 29, 2018, deadline to answer, see ECF No. 8. According to Robert
Cloutier, the following series of events then transpired:
1.

He and Mark Cloutier, who is his brother, reviewed the complaint together and

discussed how to respond.1 See Declaration of Robert Cloutier (ECF No. 24-1), attached to
Defendant Robert Cloutier’s Objection to Application for Entry of Default and Default Judgment
(“Defendant’s Objection”) (ECF No. 24), ¶¶ 3-4.2 They agreed that Mark, who was more
experienced in legal matters, would coordinate with their cousin Jim Cloutier, an attorney, to
respond appropriately to the complaint and protect their rights. See id. ¶¶ 15, 17.
2.

Robert did not focus on the fact that he had apparently been served with the

complaint a few days earlier than Mark and that, as a result, his response was due sooner. See id.
¶ 16.
3.

When Robert and Mark learned that Jim Cloutier was unable to represent them

because of a conflict of interest, Mark called the plaintiff’s attorney and advised that he and Robert
needed more time to find counsel and respond. See id. ¶¶ 17-18. The plaintiff’s attorney agreed
to give Mark additional time to do so. See id. ¶ 18. Mark reassured Robert that, although the
plaintiff’s attorney had told him that Robert’s response was already “one day late,” he (the
plaintiff’s attorney) would “not enforce it.” Id.

For ease of reference, I hereinafter refer to Mark Cloutier as “Mark” and Robert Cloutier as “Robert.”
Although Robert’s affidavit was filed in support of his opposition to the plaintiff’s motions for the entry of default
and default judgment against him, the facts presented therein were integral to the consideration of all three related
motions. Hence, I took that affidavit, as well as a responsive affidavit of Attorney Piper, see Declaration of Benjamin
S. Piper (“Piper Decl.”) (ECF No. 27-1), attached to Plaintiff[]’s Reply in Support of Application for Entry of Default
and Default Judgment (ECF No. 27), into account in ruling on Robert’s motion to extend time.
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4.

At Mark’s suggestion, Robert promptly called the plaintiff’s attorney and was told

that because he was already “a day late[,]” he would simply have to explain why he was a day or
two late and would be allowed to go forward, or words to that effect. See id. ¶ 19.
5.

Robert felt reassured and believed the matter was under control, and was surprised

to learn that the plaintiff was seeking a default judgment against him. See id. ¶¶ 20-21.
Plaintiff’s attorney Benjamin Piper confirms that, on Friday, May 25, 2018, prior to the
Memorial Day weekend, he received separate calls from both Mark and Robert. See Piper Decl.
¶¶ 2, 6. However, his account of those conversations differs in some respects from that set forth
by Robert, and he describes a further conversation with each brother on Tuesday, May 29, 2018.
See id. ¶¶ 3-16. Specifically, he avers that:
1.

On May 25, 2018, he told Mark that he needed to speak with the partner managing

the case, Attorney Timothy Bryant, to determine whether the requested extension was acceptable
but that, because Mark’s deadline to respond did not expire until May 29, 2018, he would not seek
to default him before he got back to him regarding his request for an extension. See id. ¶¶ 3-4.
Mark did not purport to be seeking an extension on Robert’s behalf, and Attorney Piper did not
make any representation regarding the plaintiff’s position as to Robert. See id. ¶ 5.
2.

When Robert called Attorney Piper minutes later, seeking an extension of time to

respond to the complaint, Attorney Piper informed him that he could not tell him at that time
whether the plaintiff would grant him an extension. See id. ¶¶ 6, 8-9. Attorney Piper also told
Robert that (i) his deadline to respond had expired four days earlier, (ii) if he wished to defend
himself, he would need to get an attorney or otherwise appear as soon as possible, and (iii) there
could be consequences for his failure to serve a timely response. See id. ¶ 9. He denies assuring
Robert that the plaintiff would not seek a default against him or telling him that his response to the

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complaint was only one day late and that he would simply have to explain his lateness to the court
and would be allowed to go forward. See id. ¶¶ 10-12. He did tell Robert that an explanation for
his lateness likely would be necessary, but not necessarily sufficient, to allow him to go forward.
See id. ¶ 12.
3.

Attorney Piper again spoke separately with both Mark and Robert on May 29, 2018,

advising Mark that the plaintiff would give him an extension until June 1, 2018, to find counsel
and would consider a further extension request from counsel, and advising Robert that, because
his deadline to respond to the complaint had expired before he requested an extension, the plaintiff
would not consent to an extension. See id. ¶¶ 13-15.
Following the Cloutier brothers’ conversations with Attorney Piper, they retained Attorney
Edward MacColl, who entered an appearance on their behalf on May 31, 2018, 10 days after
Robert’s answer was due and a day prior to the June 1, 2018, extension of Mark’s deadline to
retain counsel to which the plaintiff had agreed. See ECF Nos. 13, 14. That same day, Attorney
MacColl filed Robert’s motion to extend time, time-stamped at 2:04 p.m. See ECF No. 12. The
plaintiff filed his motions for the entry of default and default judgment against Robert later that
afternoon, time-stamped at 3:15 p.m. See ECF No. 15. Mark’s consented-to motion to extend the
deadline to answer was filed on June 1, 2018, see ECF No. 17, and was granted, extending his
deadline to June 14, 2018, see ECF No. 20. Mark and Robert filed their consolidated answers to
the complaint on June 13, 1018. See ECF No. 29.
II. Applicable Legal Standard
Because Robert’s motion to extend time was filed after the expiration of his deadline to
answer the complaint, Federal Rule of Civil Procedure 6(b)(1)(B) applies. That rule states: “When
an act may or must be done within a specified time, the court may, for good cause, extend the time

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. . . on motion made after the time has expired if the party failed to act because of excusable
neglect.” Fed. R. Civ. P. 6(b)(1)(B).
III. Discussion
Although Robert’s motion and those of the plaintiff were filed nearly simultaneously,
Robert’s was filed first, and so I consider it first. Because I find it meritorious, the plaintiff’s
motions for competing relief are moot.
As Robert observed, see Defendant Robert Cloutier’s Reply Memorandum in Support of
Motion To Extend Deadline (“Defendant’s Reply”) (ECF No. 28) at 1, “excusable neglect” is an
“elastic concept” that “is not limited strictly to omissions caused by circumstances beyond the
control of the movant[,]” Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S 380,
392 (1993) (footnotes and internal quotation marks omitted). Indeed, the Supreme Court has
explained:
[T]he determination is at bottom an equitable one, taking account of all relevant
circumstances surrounding the party’s omission. These include . . . the danger of
prejudice to [the nonmovant], the length of the delay and its potential impact on
judicial proceedings, the reason for the delay, including whether it was within the
reasonable control of the movant, and whether the movant acted in good faith.
Id. at 395 (citation and footnotes omitted).
Each of these factors favor Robert.
First, there is minimal delay or prejudice to the plaintiff. As of the date Robert filed the
instant motion, no defendant had answered the complaint; as of the time of oral argument, only
two had answered: Robert and Mark. The plaintiff confirmed at oral argument that he was likely
to seek leave from the court to serve several of the defendants by alternative means because he had
not as yet been able to locate them, and he has now done so. See Motion to Extend Time for

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Service of Process and to Authorize Service by Publication (ECF No. 37). In short, this case has
just begun.
Nor has the plaintiff shown “prejudice” for purposes of Rule 6(b)(1)(B), which “does not
refer to a situation in which the party who would obtain a legal advantage from default is deprived
of that advantage.” Robinson v. Wright, 460 F. Supp.2d 178, 180 (D. Me. 2006) (citation omitted).
“Instead, cognizable prejudice is, for example[,] lost evidence.” Id. (citations and internal
punctuation omitted). There has been no such showing here. At oral argument, the plaintiff
identified only the cost and time entailed in filing his motions for default and the entry of default
against Robert.
The First Circuit has characterized the next relevant Pioneer factor, “the asserted reason
for the mistake[,]” as “by far the most critical[.]” Dimmitt v. Ockenfels, 407 F.3d 21, 24 (1st Cir.
2005). However, contrary to the plaintiff’s assertion at oral argument, excusable neglect does not
categorically exclude any mistake that is of the party’s own making. See, e.g., Pratt v. Philbrook,
109 F.3d 18, 19 (1st Cir. 1997) (“The [Supreme] Court declined to limit the ‘neglect’ which might
be excusable to those circumstances caused by intervening circumstances beyond a party’s
control.”) (discussing Pioneer Investment).
Instead, recognizing that excuses for a late filing could range from “an act of God or
unforeseeable human intervention” at one end of the spectrum to “simply . . . choos[ing] to flout a
deadline” at the other, the Supreme Court held that the range of conduct in between, including
“late filings caused by inadvertence, mistake, or carelessness[,]” could, “where appropriate,”
constitute “excusable neglect.” Pioneer, 507 U.S. at 387-88 (emphasis added).
The delay at issue here was not the result of forces beyond Robert’s control; however, it
also was not the result of indifference to the matter of the need to respond to the complaint. Even

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accepting Attorney Piper’s version of events, it is clear that Robert made substantial efforts to
determine what was required of him once he was served with a lawsuit. He coordinated with his
co-defendant brother, who was more experienced in legal matters; they sought representation by
their cousin, whom they assumed for some period of time would serve as their attorney; upon
learning that their cousin could not do so, they both separately called and spoke with the plaintiff’s
attorney; and, despite the fact that this is not a garden-variety civil lawsuit, potentially
complicating a search for an attorney able and willing to take the case, they then swiftly engaged
Attorney MacColl.
On either Robert’s or Attorney Piper’s version of events, Attorney Piper did not inform
Robert on May 25, 2018, that the plaintiff would either refuse to consent to an extension or seek a
default judgment against him. Robert, a non-lawyer relying in part on his non-lawyer brother
Mark’s understanding of his separate conversation that day with Attorney Piper, plausibly, albeit
mistakenly, could have believed that the representations Attorney Piper made to Mark pertained
to him as well and that Attorney Piper’s warnings that he needed to obtain counsel and present an
excuse for his tardiness to the court constituted an assurance that he could go forward. Within two
days of the date on which Attorney Piper did inform Robert that the plaintiff would not consent to
his requested deadline extension, the brothers had secured the services of Attorney MacColl.
Considering Robert’s status as a non-lawyer, this series of actions can fairly be
characterized as diligent, and demonstrate a good-faith effort to comply with the deadline at issue.
The Pioneer factors, hence, all favor Robert.
Beyond this, Robert persuasively argued that the entry of default, and a default judgment
against him for $500,000, would be unjust in view of the minimal part he is alleged to have played

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in a complex multi-defendant scheme and his identification of what he believes to be substantial
defenses to that claim. See Motion To Extend Time at 1-2; Defendant’s Reply at 2-3.
As Robert noted, see Motion To Extend Time at 2, he is named as a defendant in only one
of the plaintiff’s eight causes of action, for breach of contract, see Complaint ¶¶ 87-151. He asserts
that he has substantial defenses to that claim, including (i) the plaintiff’s failure to engage in
binding arbitration as required by the contract at issue, (ii) the plaintiff’s reliance on breach of a
“purpose” that is not enumerated within the four corners of the contract, which contains an
integration clause, and (iii) the plaintiff’s failure to identify any provision or term of the contract
that Robert breached. See Motion To Extend Time at 2; Defendant’s Reply at 3; Defendant’s
Objection at 4-5, 9-10.
Although the notions of unjust outcomes and substantial defenses are not among the nonexhaustive list of factors enumerated in Pioneer, the determination of whether to grant a party’s
motion under Rule 6(b)(1)(B) “is at bottom an equitable one[.]” Pioneer, 507 U.S at 395. At oral
argument, I found Robert’s argument that the denial of his motion would be harsh and inequitable
given these circumstances persuasive, further tipping the balance in favor of the grant of his
motion.
In sum, because Robert made a good-faith effort to comply with his deadline to answer the
plaintiff’s complaint, any delay in the case or prejudice to the plaintiff is minimal, and the denial
of the motion is not in the interests of justice in view of the size of the default judgment sought
and Robert’s representation that he has substantial defenses to the sole claim against him, I
exercised the discretion conferred by Rule 6(b)(1)(B), see, e.g., Cordero-Soto v. Island Fin., Inc.,
418 F.3d 114, 117 (1st Cir. 2005), to grant his motion.

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IV. Conclusion
For the reasons articulated above, I GRANTED Robert’s motion to extend the deadline to
file his answer nunc pro tunc, permitting his answer of June 13, 2018, to stand, and DEEMED the
plaintiff’s motions for the entry of default and default judgment against Robert MOOT.
NOTICE
In accordance with Federal Rule of Civil Procedure 72(a), a party may serve and file an
objection to this order within fourteen (14) days after being served with a copy thereof.
Failure to file a timely objection shall constitute a waiver of the right to review by the
district court and to any further appeal of this order.
Dated this 15th day of July, 2018.
/s/ John H. Rich III
John H. Rich III
United States Magistrate Judge

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