HOFMANN v. DRATEL et al

Filing 19

OPINION. Signed by Judge William J. Martini on 12/9/13. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Docket No.: 13-cv-2828-WJMMF

ERNST HOFFMANN,
Plaintiff,
v.

OPINION

WILLIAM DRATEL and SHARYN
LAWALL DRATEL,
Defendants.

WILLIAM J. MARTINI, U.S.D.J.:
This is a breach of contract case in which Defendants failed to timely file their
Answer. Plaintiff has filed a motion for default judgment, and Defendants have filed
an opposing cross-motion to vacate default. There was no oral argument. L. Civ.
R. 78.1(b). For the reasons set forth below, Plaintiff’s motion is DENIED, and
Defendants’ motion is GRANTED.
I.

BACKGROUND

Defendant William Dratel (“Dratel”) admits to being a broker/dealer who
invested money for Plaintiff Ernst Hoffmann beginning in 1986. (Defendants’
Proposed Answer (“Answer”) at ¶ 2, 5, 10-11) In the mid-2000’s, Hoffmann
confronted Dratel about perceived mismanagement of the investments. (Answer at
¶ 22-24) Hoffmann was angry that the investments had not earned as much money
as he would have liked. (See Certification of William Dratel, Exhibit A)
The parties signed an agreement on April 11, 2008 (“the Agreement”)
whereby Defendants agreed to make payments totaling $270,755 to Hoffmann.
(Certification of Peter Gallagher, Esq., Exhibit C) Plaintiff claims that he gave up
legal rights to file a Complaint in exchange for this Agreement. (Complaint at ¶ 22)

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Plaintiff claims that the Defendants did not pay him the money that they agreed to.
(Complaint at ¶ 32)
Plaintiff served Defendants with this Complaint on May 17, 2013. (Gallagher
Certification at ¶ 2) Defendants did not answer, and the clerk entered default on
June 21, 2013. (Id. at ¶ 3-4) Plaintiff initially filed a motion for default judgment
on July 16, 2013, but it was denied without prejudice because the Plaintiff did not
serve Defendants with the motion. (Id. at ¶ 5) Plaintiff re-filed the motion for default
judgment on October 17, 2013. (Id. at ¶ 6) On October 25, 2013, Defendants filed
a cross-motion to vacate default along with a proposed Answer. (Id. at ¶ 7)
According to Dratel, the failure to timely file an Answer was due to a
miscommunication between him and his wife, Co-Defendant Sharyn Lawall Dratel.
(Certification of William Dratel at ¶ 9) William Dratel believed his wife was
working on the case with a lawyer when, in fact, she was not. (Ibid.)
Defendants proffer two notable defenses to liability. First, Dratel stated that
the Agreement was signed under duress. Part of the duress was that Ernst Hoffmann
said that he had tapped Dratel’s phone calls and would “ruin” Dratel if Dratel did
not sign the Agreement. (Dratel Certification at ¶ 5; Answer at ¶ 16)
Second, the Answer alleges that this court has no personal jurisdiction over
Defendants. The Answer denies that Defendants, who are New York residents, ever
did business in New Jersey. (Answer at ¶ 1, 4)
II.

DISCUSSION

The court may, at its discretion, set aside an entry of default for good cause.
Fed. R. Civ. P. 55(c); Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 982 (3d Cir.
1988). As a general matter, courts disfavor defaults. Harad, 839 F.2d at 982.
“Matters involving large sums of money should not be determined by default
judgment if it can reasonably be avoided.” Tozer v. Charles A. Krause Mill. Co.,
189 F.2d 242, 245 (3d Cir. 1951). “Any doubt should be resolved in favor of the
petition to set aside the [default] judgment so that cases may be decided on the
merits.” Medunic v. Lederer, 533 F.2d 891, 894 (3d Cir. l976).
On a motion for vacating a default under Fed. R. Civ. P. 55(c), the district
court, in exercising its discretion, must consider: (1) whether the plaintiff will be
prejudiced; (2) whether the defendant has a meritorious defense; and (3) whether the
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default was the result of the defendant's culpable conduct.
$55,518.05 in U.S. Currency, 728 F.2d 192, 195 (3d Cir. 1984).

United States v.

Dratel has submitted two meritorious defenses to liability. First, he asserts
that Hoffman procured the Agreement through duress by threatening him. Second,
he asserts that this court lacks personal jurisdiction over the matter because William
Dratel never did business in New Jersey and is a resident of New York. (Answer at
¶ 1, 4) Initially, Plaintiff will have the burden of producing evidence sufficient to
support personal jurisdiction. See Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141,
146 (3d Cir. 1992).
Denying default judgment will not unduly prejudice the Plaintiff. The
Agreement contains a provision that entitles Plaintiff to legal fees to support the cost
of collection if the Agreement is breached. If Plaintiff in fact has a meritorious case,
and Dratel is merely employing delay tactics to avoid an inevitable finding of
liability, Defendants will likely be responsible for the legal costs attendant to their
delay.
Miscommunication between Dratel and his wife caused the default. Facially,
this was a negligent failure. It is not clearly culpable conduct, and doubts must be
resolved in favor of the party seeking to vacate default. Medunic, 533 F.2d at 894.
Considering that there are meritorious defenses, that Dratel will ultimately be
held responsible for the Plaintiff’s legal fees if his delay tactics are not for good
reason, the lack of clearly culpable conduct, and the law’s disfavor towards settling
cases by default judgment, the court will exercise its discretion to vacate default.

III.

CONCLUSION

For the reasons stated above, Defendants’ motion to vacate is GRANTED,
and Plaintiff’s motion to enter default judgment is DENIED. The Clerk of Court
shall file the proposed Answer.

/s/ William J. Martini
_____________________________
WILLIAM J. MARTINI, U.S.D.J.
Date: December 9, 2013
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