DIRECTV, LLC, v. ALVAREZ

Filing 18

OPINION. Signed by Judge Noel L. Hillman on 9/27/2017. (dmr)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
DIRECTV, LLC,
1:15-cv-06827-NLH-KMW
Plaintiff,
OPINION
v.
RIGOBERTO ALVAREZ,
Defendant.

APPEARANCES:
RONALD B. THOMPSON
LAW OFFICE OF RONALD B. THOMPSON
563 BERLIN-CROSS KEYS ROAD
SICKLERVILLE, NEW JERSEY 08081
On behalf of Plaintiff
WAYNE D. LONSTEIN
LONSTEIN LAW OFFICE, P.C.
80 NORTH MAIN STREET
P.O. BOX 351
ELLENVILLE, NEW YORK 12428
On behalf of Defendant
HILLMAN, District Judge
This case concerns Defendant’s alleged violation of the
Cable Communications Policy Act of 1984, 47 U.S.C. §§ 521 to
573.

Presently before the Court is Defendant’s motion to vacate

the default judgment entered against him.

For the reasons

expressed below, Defendant’s motion will be granted in part.
I.
Plaintiff filed a complaint against Defendant on September
14, 2015, alleging Defendant displayed satellite programming at

his Atlantic City bar without a commercial account in violation
of the Cable Communications Policy Act of 1984.

Defendant was

served the complaint, but failed to file an answer or otherwise
respond.
On November 20, 2015, Plaintiff filed a Status and Notice
of Intention to Move for Default.

On December 9, 2015,

Plaintiff moved for entry of default.
on January 13, 2016.

The clerk entered default

On February 29, 2016, Plaintiff filed a

Status and Notice of Intention to File Default Motion.
11, 2016, Plaintiff moved for default judgment. 1

On March

On November 9,

2016, this Court granted Plaintiff’s motion for default
judgment.

Defendant filed a motion to vacate the default

judgment on February 27, 2017.
II.
Federal Rule of Civil Procedure 55(c) provides: “The court
may . . . set aside a final default judgment under Rule 60(b).”
Fed. R. Civ. P. 55(c).

Federal Rule of Civil Procedure 60(b)

provides: “[T]he court may relieve a party . . . from a final
judgment” for “mistake, inadvertence, surprise, or excusable
neglect” or for “any other reason that justifies relief.” Fed.
R. Civ. P. 60(b)(1), (6).
“A decision to set aside . . .

1

a default judgment pursuant

Defendant was served a copy of all of these filings.
2

to Fed. R. Civ. P. 60(b) is left primarily to the discretion of
the district court.” United States v. $55,518.05 in U.S.
Currency, 728 F.2d 192, 194 (3d Cir. 1984)(footnote omitted)
(citing Tozer v. Charles A. Krause Milling Co., 189 F.2d 242,
244 (3d Cir. 1951)).

The Third Circuit “does not favor

defaults,” and, “in a close case[,] doubts should be resolved in
favor of setting aside the default and reaching a decision on
the merits.” Gross v. Stereo Component Sys. Inc., 700 F.2d 120,
122 (3d Cir. 1983) (citing Farnese v. Bagnasco, 687 F.2d 761,
764 (3d Cir. 1982)).
A district court must consider four factors in determining
whether to vacate a default judgment: “(1) whether lifting the
default would prejudice the plaintiff; (2) whether the defendant
has a prima facie meritorious defense; (3) whether the
defaulting defendant’s conduct is excusable or culpable; and (4)
the effectiveness of alternative sanctions.” Emcasco Ins. Co. v.
Sambrick, 834 F.2d 71, 73 (3d Cir. 1987). 2
III.
This Court will consider each of the four Emcasco factors
in turn.

First, Plaintiff will not be prejudiced if the default

2

Emcasco was a Rule 60(b)(1) case; it “does not provide a test
that is applicable to a Rule 60(b)(6) motion.” Budget Blinds, Inc.
v. White, 536 F.3d 244, 257-58 (3d Cir. 2008). However, we need
not address Rule 60(b)(6), as we are resolving Defendant’s motion
under Rule 60(b)(1).
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judgment is lifted.

Plaintiff argues lifting the default would

cause prejudice because of the increased difficulties in
conducting discovery and the loss of evidence.

Plaintiff

specifically argues installation records are not retained for
more than three years and, if an installer visited Defendant’s
establishment as Defendant claims, the installer is likely no
longer employed with Plaintiff.
“[T]o support a finding of prejudice,” a party can
“suggest[] that its ability to pursue the claim has been
hindered since the entry of the default judgment” such as by
“loss of available evidence, increased potential for fraud or
collusion, or substantial reliance upon the judgment.” Feliciano
v. Reliant Tooling Co., 691 F.2d 653, 657 (3d Cir. 1982).

In

this case, however, the evidence Plaintiff claims could be lost
is within Plaintiff’s control.

The installation records are

presumably within the exclusive control of Plaintiff, meaning
Plaintiff could have (upon Defendant’s motion or earlier)
preserved any applicable records for discovery if need be.

As

to an installer no longer being employed with Plaintiff, this is
hypothetical, as Plaintiff claims there was no such
installation. In any event, there is no indication this was not
the case prior to the default judgment.
Plaintiff further argues it would be prejudiced by having
to incur additional costs to further litigate this matter.
4

However, the Third Circuit has held that costs associated with
continued litigation cannot typically constitute prejudice. See
id. at 656-57 (“Delay in realizing satisfaction on a claim
rarely serves to establish the degree of prejudice sufficient to
prevent the opening a default judgment entered at an early stage
of the proceeding.”).

This Court finds Plaintiff will not be

prejudiced by lifting the default judgment.
Second, we find that while Defendant lacks a prima facie
meritorious defense as to liability, he has a possible
meritorious defense as to damages.

“The showing of a

meritorious defense is accomplished when ‘allegations of
defendant’s answer, if established on trial, would constitute a
complete defense to the action.’” $55,518.05 in U.S. Currency,
728 F.2d at 195 (quoting Tozer, 189 F.2d at 244).

To assert a

meritorious defense, Defendant must “allege[] specific facts
beyond simple denials or conclusory statements.” Id. 3
Defendant claims an installer set up boxes both at his
residential house and at his commercial establishment, but the
installer never told him the viewing of his subscription was
prohibited in the bar.

Defendant further claims there were

3

Defendant never filed an answer to the complaint, but the
allegations in Defendant’s motion to set aside the default judgment
will be considered. See, e.g., Kauffman v. Cal Spas, 37 F. Supp.
2d 402, 404 n.1 (E.D. Pa. 1999).
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“ambiguous and vague terms and conditions for the viewing of
broadcasts.” 4

Congress “ma[de] the statute strict liability,

providing for enhanced damages for willful violations, and
creating an exception for non-willful violations.” Joe Hand
Promotions, Inc. v. Yakubets, 3 F. Supp. 3d 261, 290 n.46 (E.D.
Pa. 2014).

This was accomplished by developing an “enhanced

damages rubric, which requires a showing of willfulness,” and
also a “statutory damages provision, which imposes strict
liability.” Id. at 275. 5
Although this defense does not go to liability, it is a
meritorious defense as to the extent of damages.

Plaintiff was

awarded both statutory damages as well as enhanced damages for a
willful violation.

If defendant’s argument is successful,

damages for the willful violation would be inappropriate.

While

some cases have held that a meritorious defense as to damages is

4

Defendant argues disposition on the merits would allow for
contribution from the installer. Defendant further states
Plaintiff made an offer of accord and satisfaction where, if
Plaintiff would accept an additional two year subscription instead
of pursuing monetary damages. Defendant does not claim to have
accepted this offer.
5

Compare 47 U.S.C. § 605(e)(3)(c)(i)(II) (“[T]he party
aggrieved may recover an award of statutory damages for each
violation . . . in a sum of not less than $1,000 or more than
$10,000 . . . .”), with id. § 605(e)(3)(c)(ii) (“In any case in
which the court finds that the violation was committed willfully
and for purposes of direct or indirect commercial advantage or
private financial gain, the court in its discretion may increase
the award of damages, whether actual or statutory, by an amount of
not more than $100,000 for each violation of subsection (a).”).
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sufficient, see, e.g., Ferrostaal Metals Corp. v. Carle Shipping
Corp., No. 93-3041, 1994 WL 2517, at *3 (E.D. Pa. Jan. 4, 1994)
(“A limitation on the amount of damages can constitute a
‘meritorious defense’ because, although it does not completely
bar . . . recovery, it may bar its recovery above the statutory
maximum.”), other have required a complete defense. See Atlas
Commc’ns, Ltd. v. Waddill, No. 97-1373, 1997 WL 700492, at *3
(E.D. Pa. 1997)(Third Circuit “Court of Appeals has always
described this element as requiring a ‘complete defense.’”).
Here we find that Defendant has only tendered a partial defense
going only to damages and not a complete defense rendering this
factor neutral.
We next consider whether Defendant’s conduct is excusable
or culpable.

“The standard for ‘culpable conduct’ in this

Circuit is the ‘willfulness’ or ‘bad faith’ of a non-responding
defendant.” Hritz v. Woma Corp., 732 F.2d 1178, 1182 (3d Cir.
1984).

“Appropriate application of the culpable conduct

standard requires that as a threshold matter more than mere
negligence be demonstrated.” Id. at 1183.

“Reckless disregard

for repeated communications from plaintiffs and the court,
combined with the failure to investigate the source of a serious
injury, can satisfy the culpable conduct standard.” Id.
In his February 24, 2017 certification, Defendant certified
he “became aware of this lawsuit because the Summons and
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Complaint were served on [him] in or around the end of 2015.”
Accordingly, Defendant knew there was suit filed against him in
this Court.

He further certified he provided a copy of the

summons and complaint to his attorney.
Defendant was also provided notice multiple times of
Plaintiff’s intention to pursue a default judgment.

Defendant

did nothing until he filed his motion to set aside the default
judgment.

While it appears Defendant willfully did not defend,

where a party’s lack of action appears to be based in active
attempts to settle, courts in this District have not found an
inference of willfulness or bad faith.

See, e.g., 1199 SEIU

United Healthcare Workers E. v. Amboy Care Ctr., Inc., No. 15cv-309, 2015 WL 3649031, at *3 (D.N.J. June 11, 2015) (“[T]he
alleged belief that the case might be settled . . . militates
against a finding of culpable conduct.”); Lentini v. Ruggiero,
No. 12-3586, 2013 WL 5913683, at *3 (D.N.J. Oct. 31, 2013) (“The
Court finds that the record does not support an inference of
willfulness or bad faith on behalf of Defendant. Rather, it
appears that Defendant was actively involved with Plaintiff in
an attempt to settle the dispute.”).

As Defendant argues he

“had been attempting to negotiate a settlement” with Plaintiff
and “believed that the matter would be settled out of court,” we
similarly find this militates against a finding of culpability.
Finally, we consider the effectiveness of alternative
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sanctions.

A default judgment should be a sanction of “last,

not first, resort.” Emcasco, 834 F.2d at 75 (quoting Carter v.
Albert Einstein Med. Ctr., 804 F. 805, 807 (3d Cir. 1986)).
Here, we have founds two prongs weigh in favor of vacating the
default judgment, but find Defendant failed to set forth a
complete meritorious defense.

Although listed second, the Third

Circuit considers the meritorious defense prong to be a
“threshold issue in opening a default judgment.” Hritz, 732 F.2d
at 1181; accord Mike Rosen & Assocs., P.C. v. Omega Builders,
940 F. Supp. 115, 121 (E.D. Pa. 1996) (“[M]ost cases dealing
with the existence of a meritorious defense as a threshold
factor have been cases in which default judgment had been
entered.”).
In cases seeking to vacate only the entry of default, as
opposed to the default judgment, “courts in this circuit seem
unwilling to deny the motion to set aside entry of default
solely on the basis that no meritorious defense exists.” Omega
Builders, 940 F. Supp. at 121.

In this case we deal with a

default judgment, not an entry of default.

Accordingly, a

meritorious defense is treated as a threshold issue.

However,

in In re Mohr, No. 02-10551, 2005 WL 1532648 (E.D. Pa. Bankr.
June 6, 2005), the court considered a motion to vacate a default
judgment and found there was “not . . . a meritorious defense to
liability for the judgment but rather . . . partial defense as
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to damages.” Id. at *5.

The court granted the motion to set

aside the judgment as to amount only, thus “opening the judgment
on very narrow terms.” Id.

We decide similarly, as Defendant

asserted a meritorious defense as to damages, even though
Defendant failed to assert a meritorious defense as to
liability. Defendant’s motion to vacate default judgment is
granted as to amount only.
We lastly address Plaintiff’s request that this Court
require Defendant to post a bond in the amount of $34,323.25 as
a condition of granting Defendant’s motion.

“Rule 60(b) gives

the district court explicit authority to impose terms upon the
opening of a default judgment.”

Wokan v. Alladin Int’l, Inc.,

485 F.2d 1232, 1234 (3d Cir. 1973).

It is “perfectly proper for

a district court in an appropriate case to impose the condition
to vacating a default judgment that the judgment holder not be
deprived of any payment or security he has obtained as a result
of the judgment.”

Id. at 1235; see also Hritz, 732 F.2d at

1182 n.3 (“[P]rejudice suffered by a non-defaulting party can be
rectified through the trial court’s power to impose terms and
conditions upon the opening of a judgment.”). “[A] number of
circuits have approved of conditioning the vacatur of defaults
or default judgments on the posting of security for payment of
all or part of an eventual adjudicated judgment.” Powerserve
Int’l, Inc. v. Lavi, 239 F.3d 508, 515 (2d Cir. 2001).
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Plaintiff received a judgment against Defendant in the
amount of $34,323.25 on February 17, 2017.

We deny Plaintiff’s

request that a bond in this amount be posted.

However, we find

our limited opening of the default judgment warrants a bond be
posted in the amount of $10,000 – the maximum amount of
statutory damages and the amount imposed by this Court in our
grant of default judgment.

47 U.S.C. § 605(e)(3)(C)(i)(II).

The posting of this bond for the statutory damages comports with
our limited opening of the default judgment.
An appropriate Order will be entered.

Date: September 27, 2017
At Camden, New Jersey

s/ Noel L. Hillman______
NOEL L. HILLMAN, U.S.D.J.

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