TRUSTEES OF THE UFCW LOCAL 152 HEALTH AND WELFARE FUND FOR AND ON BEHALF OF THEMSELVES AND SAID FUND AND THE BOARD OF TRUSTEES et al v. AVON FOODS, INC.
Filing
23
OPINION. Signed by Judge Robert B. Kugler on 2/1/2019. (dmr)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
:
TRUSTEES OF THE UFCW LOCAL 152
:
HEALTH AND WELFARE FUND FOR AND :
ON BEHALF OF THEMSELVES AND SAID :
FUND, et al.,
:
:
Plaintiffs,
:
v.
:
:
AVON FOOD, INC.,
:
:
Defendant.
Civil No. 17-2178 (RBK/KMW)
OPINION
Kugler, United States District Judge:
This matter is before the Court on Defendant Avon Food, Inc.’s motion to vacate default
judgment and Defendant’s motion for order to show cause to stay collection pending resolution
For the reasons below, Defendant’s motion to
of the motion to vacate. (Doc. Nos. 18, 19.)
vacate default judgment is DENIED, and Defendant’s motion for order to show cause is
DENIED AS MOOT.
I.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Plaintiffs Trustees of the UFCW Local 152 Health and Welfare Fund and Trustees of the
UFCW Local 152 Retail Meat Pension Fund (“Plaintiffs”) filed this action against Defendant on
March 31, 2017, claiming that Defendant failed to remit contributions for the benefit of its
employees under a Collective Bargaining Agreement (“CBA”) between Defendant and Plaintiffs.
(Doc. No. 1 (“Compl.”).) Defendant company is owned and operated by Mr. Manjit “Manny”
Singh. (Doc. No. 18-2 at ¶ 3.)
1
As alleged in the Complaint, Plaintiffs conducted a payroll audit under the CBA and
discovered that Defendant was delinquent on various required contributions. (Compl. at ¶¶ 15–
17.)
Plaintiffs repeatedly sent letters notifying Defendant of the unpaid contributions and
requesting payment, but Plaintiffs’ attempts proved fruitless. (Id. at ¶ 17.)
Plaintiffs then filed this lawsuit for failure to remit contributions, and Defendant was
properly served on April 9, 2017. (Doc. No. 4.) After Defendant failed to respond or otherwise
defend against the Complaint, the Clerk entered a default against Defendant on May 16, 2017.
Thereafter, Plaintiffs moved for default judgment, which this Court granted on January 11, 2018.
(Doc. Nos. 7, 10–11.)
Five months later, on June 8, 2018, Defendant finally entered an
appearance, which came four days after the Court ordered BB&T Bank to release funds owed to
Plaintiffs. (Doc. Nos. 15, 16, 17.) Three days after finally appearing, Defendant filed this
motion to vacate the default judgment. (Doc. No. 18 (“Def.’s Br.”).) Mr. Singh now avers that
he, on behalf of the Defendant company, did not reply to any correspondence because
“Defendant lacks the understanding of the legal requirements, has misunderstood the
consequences of not timely filing an Answer or Motion to Dismiss, and had to save money in
order to afford legal representation.” (Id. at ¶¶ 3–4.)
II.
LEGAL STANDARD
Federal Rule of Civil Procedure 55(c) permits a court to vacate a default judgment in
accordance with Federal Rule of Civil Procedure 60(b)—a decision left to the trial court’s
discretion. See United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194 (3d Cir. 1984)
(citing Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)). Rule 60(b)
allows a court to set aside a default judgment for six reasons:
(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly
discovered evidence . . . ; (3) fraud . . . , misrepresentation, or
2
misconduct by an opposing party; (4) the judgment is void; (5) the
judgment has been satisfied, released, or discharged; it is based on
an earlier judgment that has been reversed or vacated; or applying
it prospectively is no longer equitable; or (6) any other reason that
justifies relief.
Fed. R. Civ. P. 60(b).
Here, Defendant fails to identify which specific portion of Rule 60(b) Defendant believes
applies. But having reviewed Defendant’s submissions, the Court finds that only Rule 60(b)(1)
could plausibly apply, particularly in light of Defendant’s claim that Defendant ignored the
filings due to a “lack[] [of] understanding of the legal requirements,” a “misunderst[anding] [of]
the consequences of not timely filing an Answer or Motion to Dismiss,” and a need “to save
money in order to afford legal representation.” (Def.’s Br. at ¶ 4.) And although Defendant fails
to specifically invoke Rule 60(b)(6), the Court will extend Defendant the benefit of the doubt and
analyze the claim under it as well, given that the Third Circuit disfavors default judgments. See
U.S. Currency, 728 F.2d at 194.
Under Rule 60(b)(1), a court considers three factors in exercising its discretion to uphold
or vacate a default judgment: (1) whether vacating the judgment will prejudice the plaintiff; (2)
whether the defendant has a meritorious defense; and (3) whether the default was the result of the
defendant’s culpable conduct. Id. at 195. Those seeking relief under Rule 60(b)(6), by contrast,
must demonstrate that extraordinary circumstances justify relief. See Budget Blinds, Inc. v.
White, 536 F.3d 244, 255 (3d Cir. 2008); Smith v. Kroesen, No. 10-cv-5723, 2016 WL 5402211,
at *2 (D.N.J. Sept. 27, 2016) (“For a motion based on Rule 60(b)(6), the three-part test does not
apply, and instead a court must consider whether the defendant has demonstrated the existence of
‘extraordinary circumstances’ that justify reopening the judgment.”).
As explained below,
Defendant cannot obtain relief under either provision, and the default judgment must stand.
3
III.
DISCUSSION
A. Rule 60(b)(1)
Defendant is not entitled to relief under Rule 60(b)(1) because Defendant has not alleged
any meritorious defenses and Defendant’s failure to respond was the result of Defendant’s
culpable conduct.
Thus, even if Plaintiffs will not be prejudiced by vacating the default
judgment, the factors support upholding the default judgment.
1. Meritorious Defenses
Defendant has not shown that it has a meritorious defense. See U.S. Currency, 728 F.2d
at 195 (explaining that there “would be no point in setting aside the default judgment” without
showing a meritorious defense).
A meritorious defense is shown if the “allegations of
defendant’s answer, if established on trial, would constitute a complete defense to the action.”
Id. (emphasis added).1 The movant must state grounds for its alleged defense with “some
specificity.” Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 982 (3d Cir. 1988). “[S]imple
denials or conclusionary statements” are insufficient. U.S. Currency, 728 F.2d at 195. In
assessing the claimed defense, courts must consider its “substantive sufficiency” and may not
“merely facially scrutinize[]” it. Harad, 839 F.2d at 982; see also Nationwide Mut. Ins. Co. v.
Starlight Ballroom Dance Club, Inc., 175 F. App’x 519, 522 (3d Cir. 2006) (explaining that
although a court need not decide the legal issue at this stage, the meritorious defense test requires
a court to “look at the substance of that defense to determine whether it is meritorious”). Here,
Defendant alleges four defenses. None of them are meritorious.
Defendant has not filed a proposed answer with its submissions as required. See Gov’t
Employees Ins. Co. v. Hamilton Health Care Ctr. P.C., No. 17-cv-0674, 2018 WL 2383153, at
*6 (D.N.J. May 25, 2018) (citing cases). Despite this procedural infirmity, substantive reasons
exist to deny Defendant’s motion based on the meritorious defenses alleged in Defendant’s brief
and accompanying certification from Mr. Singh.
1
4
i. Defense One
First, Defendant claims that “Avon Foods, Inc. has and continues to be in compliance
with the Collective Bargaining Agreement between Avon Foods, Inc. and Plaintiffs.” (Def.’s Br.
at 5, 8.) This is merely a flat denial of Plaintiffs’ claim—that Defendant failed to properly remit
payments under the CBA. (Compl. ¶¶ 14, 18, 19.) Because Defendant’s assertion is simply a
“[s]elf-serving conclusory statement” lacking the requisite specificity, Smith, 2016 WL 5402211,
at *3, the Court finds this alleged defense “facially unmeritorious,” Emcasco Ins. Co. v.
Sambrick, 834 F.2d 71, 74 (3d Cir. 1987), particularly under the circumstances of this case, in
which Plaintiffs supported their motion for default judgment with documentation showing their
entitlement to the contributions claimed. Defendant’s conclusory claim does not convince the
Court of the contrary.
ii. Defense Two
Second, Defendant asserts that “Avon Foods, Inc. has and continues to properly remit
contributions to be made to the Local 152 Funds on behalf of employees of [Defendant], and that
Defendant is not aware of any requirement that [it] would still have to pay into the fund after the
retirement of an employee.” (Def.’s Br. at 5, 8.) Without more, neither part of this assertion is
sufficient to show a complete defense. Like its first defense, Defendant’s claim that it has and
continues to properly remit contributions is conclusory and not meritorious, particularly when
Plaintiffs supported their motion for default judgment with documentation showing entitlement
to the contributions claimed.
Defendant’s passing claim that it was unaware of an obligation to pay contributions for
employees post-retirement falls equally flat. Defendant’s undeveloped assertion seems to imply
that Defendant is required to pay contributions under the CBA, but not for employees once they
5
retire. Defendant appears to further imply that either Defendant is mistaken as to the nuances of
its contractual obligations to pay contributions, or that Plaintiffs are instead mistaken in seeking
some or all of them. Whatever Defendant means to suggest, this alleged defense is devoid of the
necessary factual specificity for the Court to determine its relevance or its potential impact on the
underlying claim. As the court made clear in Smith, “[a] defense must be more than hypothetical
or possible.” Smith, 2016 WL 5402211, at *3. This defense is exactly that. Accordingly,
Defendant has not alleged a sufficient factual basis to convince the Court that these claims could
constitute a complete defense if given the opportunity to proceed.
iii. Defense Three
Third, Defendant states that “Avon Foods, Inc. is routinely audited by the Plaintiffs,
received correspondence confirming compliance with the agreement, and it was never signaled
to Mr. Singh or [Defendant] that problems purportedly existed during the timespan in which
Plaintiffs now claim (thereby creating estoppel arguments).” (Def.’s Br. at 5, 8.) In fact,
Defendant suggests that it corrected any past problems of which it was notified. (Id.) Noticeably
absent from Defendant’s undeveloped parenthetical, however, is any specification of what these
“estoppel arguments” are, lest any explanation or analysis of why they would constitute a
complete defense in this case.
The Court notes that it is Defendant’s burden to show a
meritorious defense. See Reckling v. Okechuku, No. 07-cv-1699, 2007 WL 2473831, at *7
(D.N.J. Aug. 27, 2007) (explaining that “defendant must carry the burden” of showing a defense
with some “specificity”).
But given the Third Circuit’s preference for hearing matters on the merits whenever
practicable, the Court extends Defendant the benefit of all inferences and notes that Defendant
may intend to invoke the doctrine of equitable estoppel or the related doctrine of waiver as
6
defenses here. In other words, Defendant may believe that Plaintiffs are estopped from seeking
the claimed contributions—or waived any legal right to seek them—because Defendant received
correspondence indicating that Defendant was compliant with the CBA, and Plaintiffs did not
inform Defendant during the years in which the deficiencies occurred that Defendant was
improperly paying contributions. Yet on this record, neither defense is meritorious.
To claim estoppel as a complete defense, Defendant’s allegations, if established at trial,
must allow the Court to conclude that: (1) Plaintiffs “engaged in conduct, either intentionally or
under circumstances that induced reliance;” and (2) Defendant “acted or changed [its] position to
[its] detriment.” Ferry v. Black Diamond Video, Inc., No. 15-cv-7723, 2016 WL 3381237, at
*10 (D.N.J. June 14, 2016) (quoting Knorr v. Smeal, 178 N.J. 169, 178 (2003)). Estoppel only
applies “in very compelling circumstances.” Id. (citation omitted). Here, the Court cannot
conclude that Defendant’s reference to estoppel constitutes a complete defense because
Defendant has failed to provide the Court with any indication of how Plaintiffs’ alleged
correspondence and failure to signal that problems existed induced reliance, or that Defendant
changed its position to its detriment in any way based on that conduct.
Any attempted waiver defense also fails. A waiver involves a “voluntary and intentional
relinquishment of a known right.” Knorr, 178 N.J. at 177. “A waiver, to be operative, must be
supported by an agreement founded on a valuable consideration, or the act relied on as a waiver
must be such as to estop a party from insisting on performance of the contract or forfeiture of the
condition.” Barr v. Harrah’s Entm’t, Inc., 242 F.R.D. 287, 293 n.4 (D.N.J. 2007) (quoting W.
Jersey Title & Guar. Co. v. Indus. Tr. Co., 27 N.J. 144, 152–53 (1958)). But Plaintiffs’ alleged
failure to inform Defendant that “problems” existed does not show a “voluntary and intentional
relinquishment” of a right. See Kennedy Univ. Hosp. v. Darwin Nat’l Assurance Co., No. 16-cv-
7
2494, 2017 WL 1352208, at *3 (D.N.J. Apr. 7, 2017) (rejecting waiver defense at summary
judgment when, as here, Plaintiff “appear[ed] to contend that the Defendant relinquished its
rights because it ‘chose not to act’”); see also Barr, 242 F.R.D. at 293 n.4 (finding “alleged
silence” insufficient to support waiver defense). Defendant also fails to provide the Court with
any indication that it secured any alleged waiver through an agreement founded on sufficient
consideration. See id. Thus, the Court cannot conclude that Defendant’s unspecified estoppel or
waiver arguments constitute complete defenses on this record.
iv. Defense Four
Lastly, Defendant alleges that “Plaintiffs have vastly overstated any monies owed well
and beyond what could potentially be owed.” (Def.’s Br. at 5, 9.) Defendant claims any
contribution delinquencies “would be approximately $150,000 less than the $200,000.34 that
Plaintiffs’ [sic] were granted.” (Id. at 6, 9.) Even assuming that Defendant’s argument is not
conclusory and is factually correct, it does not constitute a complete defense to the action. As
one federal court has stated, “even if this were true, an incorrect amount would not be a complete
defense to the action; at most, it would only affect the amount of the judgment, not the fact of it.”
U.S. Bank Nat’l. Ass’n v. Smith, No. 14-cv-4324, 2015 WL 437572, at *4 (E.D. Pa. Feb. 3, 2015)
(emphasis in original). Therefore, this alleged defense fails.
In sum, none of the asserted defenses are meritorious as alleged, and this deficiency alone
warrants denying Defendant’s motion. See United States v. $90,745.88 Contained in Account
No. 9506826724, 465 F. App’x 143, 145 (3d Cir. 2012); see also Re Cmty. Holdings II, Inc. v.
Ecullet, Inc., No. 16-cv-304, 2016 WL 5868072, at *4 (D.N.J. Oct. 7, 2016). But because the
Third Circuit has “urged district courts to make explicit findings” as to all three required factors,
the Court will address the remaining two, only one of which weighs in Defendant’s favor. Id.
8
2. Prejudice to Plaintiffs
Unlike above, the second factor—whether Plaintiff will be prejudiced—favors vacating
the default judgment. “Delay in realizing satisfaction on a claim rarely serves to establish the
degree of prejudice” necessary to decline to vacate a default judgment. Gant v. Advanced Elec.,
Inc., No. 16-cv-1954, 2017 WL 3638762, at *2 (D.N.J. Aug. 23, 2017) (citation omitted).
“Factors that contribute to a showing of prejudice to a plaintiff include loss of available
evidence, increased potential for fraud o[r] collusion, or substantial reliance upon the judgment.”
Id.
Here, Plaintiffs effectively argue that further delay in recovery on its claim has and will
continue to prejudice them, as it must pay beneficiaries, regardless of whether Defendant makes
contributions. (Doc. No. 20 (“Pls.’ Br.”) at 7–8.) But Defendant filed its motion to vacate
default judgment five months after the Court awarded default judgment to Plaintiffs, a delay not
“egregious enough to constitute prejudice.” Gant, 2017 WL 3638762, at *2. Although Plaintiffs
also claim that documents relating to contributions for certain years “may no longer be in
existence,” (Pls.’ Br. at 7 (emphasis added)), that unsupported and equivocal suggestion does not
show prejudice.
3. Defendant’s Culpability
The final factor—Defendant’s culpable conduct—does not support vacating the default
judgment. Culpable conduct includes conduct that constitutes “willfulness or bad faith” and is
“more than mere negligence.” Mrs. Ressler’s Food Prods. v. KZY Logistics LLC, 675 F. App’x
136, 142 (3d Cir. 2017). Although “innocent mishaps or mere mistakes” do not show culpable
conduct, Nationwide, 175 F. App’x at 523, “[r]eckless disregard for repeated communications
from plaintiffs and the court, combined with the failure to investigate the source of a serious
9
injury, can satisfy the culpable conduct standard.” Hritz v. Woma Corp., 732 F.2d 1178, 1183
(3d Cir. 1984).
Here, Defendant ignored several key communications, including: (1) the March 21, 2017
summons and complaint; (2) the May 15, 2017 request for default; (3) the May 16, 2017 entry of
default; (4) the June 22, 2017 motion for default judgment; (5) the January 11, 2018 opinion and
order granting default judgment; and (6) the May 29, 2018 motion for garnishment of funds.
Defendant does not dispute receipt of such correspondence, and the failure to respond to “key
correspondence,” like those here, has contributed to a finding of culpability. See Nationwide,
175 F. App’x at 523 (holding that defendant’s failure to refute receipt of all “key
correspondence,” and failure to respond to such repeated communications establishes
culpability).
In fact, at no time did Defendant request an extension of time to retain counsel, file an
answer or motion, or otherwise contact the Court regarding the intention to defend in this case
once it could afford representation. Instead, Defendant contacted the Court but one time in a
letter that suggests that, contrary to Defendant’s claim that Defendant misunderstood and was not
familiar with the consequences of not timely responding (Def.’s Br. at ¶ 3, 9), Defendant was in
fact aware of the effects an adverse judgment may have in this case. 2 In that letter, Defendant
asked that Avon Foods be released from the litigation because the business is small, and “if we
are made to pay” the amounts Plaintiffs demanded, the “business will have to liquidate and the
current employees will be out of work,” and “even a healthy, multi location chain would be
impacted by the amount being demanded.” (Doc. No. 8 at ¶ 4.) Defendant’s suggestion that it
2
The Court ignored this letter in granting the default judgment because as a corporation,
Defendant must generally be represented by counsel. (Doc. No. 10 at 4.) But the Court
addresses it here, as Defendant relies on it to suggest that Defendant has “limited understanding
of legal requirements.” (Def.’s Br. at ¶¶ 3, 4.)
10
misunderstood the effects of not timely responding—and thus, having to pay the amounts
demanded—stands on shaky ground considering the content of the summons issued. (Doc. No.
2.) The summons explicitly states: “If you fail to respond, judgment by default will be entered
against you for the relief demanded in the complaint.” (Id.); Smith, 2016 WL 5402211, at *4 n.5
(explaining that Federal Rule of Civil Procedure 4(c)(1) requires such notice to accompany the
summons “[i]n anticipation that a defendant may be unaware of what to do when he is served
with a complaint”).
In any event, Defendant’s assertions do not excuse what appears to be an intentional
decision to ignore key communications. Defendant asserts that it is a small, unsophisticated
company that “is not intimately familiar with legal requirements” and “struggled to obtain
sufficient funding to obtain counsel to defend” this case. (Def.’s Br. at 9.) But as noted in Smith,
Even accepting as true that [defendant] had never been sued, was
unfamiliar with the documents sent to him, and was never advised
to appear in court on a particular date, ignoring legal documents
and service of a complaint simply because they were new and
unfamiliar cannot absolve a properly served defendant from the
ramifications of burying his head in the sand.
Smith, 2016 WL 5402211, at *4.
Difficulties in procuring representation are similarly
insufficient, particularly when, as here, Defendant failed to contact the Court in any way about
this difficulty. See Marks Law Offices, LLC v. Mireskandari, 704 F. App’x 171, 178 (3d Cir.
2017) (affirming decision denying Rule 60(b)(1) relief because “a conclusory assertion that
[defendants] had trouble finding a lawyer—falls woefully short of showing that their failure to
appear was beyond their control”). Thus, Defendant’s conduct is culpable and inexcusable. This
factor weighs in favor of Plaintiffs.
11
B. Rule 60(b)(6)
Even if Defendant intends to seek relief under Rule 60(b)(6), the default judgment must
stand. Rule 60(b)(6) allows a court to vacate a default judgment for “any other reason that
justifies relief.” Fed. R. Civ. P. 60(b)(6). To obtain relief, the movant must meet a “high”
standard. Michael v. Wetzel, 570 F. App’x 176, 180 (3d Cir. 2014). The movant must show that
“extraordinary circumstances” justify vacating the default judgment. Budget Blinds, Inc., 536
F.3d at 255 (explaining that courts should consider whether a movant has shown that “extreme
and unexpected hardship will result” if the default judgment is not vacated).
Here, no extraordinary circumstances exist. Contrary to Defendant’s suggestion, failure
to afford legal counsel has failed to constitute “extraordinary circumstances” in cases far more
compelling than here.
See Uwalaka v. New Jersey, 549 F. App’x 69, 70 (3d Cir. 2014)
(affirming district court’s decision that refused to find extraordinary circumstances when
defendant was on medication due to an illness, in treatment throughout the seven-year period
during which he did not file to reopen the case, and claimed that he lacked the financial means
during this time to retain legal counsel). Failure to understand legal requirements is similarly
insufficient.
See Atkinson v. Middlesex Cty., 610 F. App’x 109, 113 (3d Cir. 2015)
(“[Defendant] cites no authority for the proposition that confusion about the finality of an order
or his alleged personal challenges and efforts to obtain new counsel constitute extraordinary
circumstances.”). Relief under Rule 60(b)(6) is not warranted.
12
IV.
CONCLUSION
For the foregoing reasons, Defendant’s motion to vacate the default judgment is
DENIED, and Defendant’s motion for an order to show cause is DENIED AS MOOT.
Dated: 2/1/2019
/s/ Robert B. Kugler
ROBERT B. KUGLER
United States District Judge
13
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?