FINE FASHION, LLC. v. RABEI MATTRESS, INC. et al

Filing 29

ORDER granting 25 Motion to Set Aside Default; Defendants shall answer or otherwise respond to the Complaint on or before 9/18/15; Clerk of Court shall attorney Victor M. Urbanez, Esq.'s appearance on behalf of Defendants Rabei Mattress, Inc., Mattress Unlimited, Inc. on the docket. Signed by Magistrate Judge Joseph A. Dickson on 9/2/15. (jr)

THE UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
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FINE FASHION, LLC,

Plaintiff,

I

I

Civil Action No.: 14-7325 (JLL) (JAD)

v.
RABEi MATTRESS, INC., et al.

ORDER VACATING ENTRY OF
DEFAULT AGAINST DEFENDANTS

Defendants.

JOSEPH A. DICKSON, U.S.M.J.
This matter comes before the Court upon Defendants Rabei Mattress, Inc., Mattress
Unlimited, Inc. and Said Rabei's motion to vacate the default entered against them on April 20,
2015. (ECF No. 25). Pursuant to Federal Rule of Civil Procedure 78, the Court did not hear oral
argument on Defendants' application. After having carefully considered the parties' submissions,
(ECF Nos. 25, 28), and for good cause shown; and
WHEREAS Plaintiff filed an Affidavit of Service indicating that Plaintiff effectuated
service on Defendant Said Rabei on December 16, 2014 by leaving copies of the Summons and
Complaint with Mr. Rabei's wife, Nancy Rabei, at Mr. Rabei's home; (ECF No. 3); and
WHEREAS Mr. Rabei's responsive pleading was therefore due on or before January 6,
2015; (ECF No. 3); and
WHEREAS Mr. Rabei did not respond to the Complaint by that date; and
WHEREAS Plaintiff filed an Affidavit of Service indicating that Plaintiff effectuated
service upon Defendant Mattress Unlimited, Inc. ("MUI") on February 9, 2015 by serving copies
of the Summons and Complaint upon the Illinois Secretary of State's office; (ECF No. 7); and

WHEREAS Plaintiff filed an Affidavit of Service indicating that Plaintiff effectuated
service upon Defendant Rabei Mattress, Inc. ("RMI") on February 9, 2015 by serving copies of
the Summons and Complaint upon the Illinois Secretary of State's office; (ECF No. 8); and

WHEREAS Defendants MUI and RMI were therefore required to file responsive
pleadings on or before March 2, 2015; (ECF Nos. 7 and 8);

WHEREAS Defendants MUI and RMI did not respond to the Complaint by that date; and
WHEREAS, on April 17, 2015, Plaintiff's counsel filed an application requesting that the
Clerk of the Court enter default against all Defendants pursuant to Federal Rule of Civil Procedure
55(c); (ECF No. 14); and

WHEREAS the Clerk of the Court entered default against all Defendants on April 20,
2015; (ECF No. 15); and

WHEREAS in compliance with the Hon. Jose L. Linares, U.S.D.J.'s Order dated April 27,
2015, (ECF No. 16), Plaintiff filed a motion for default judgment against all Defendants on May
5, 2015; (ECF No. 17); and

WHEREAS by letter dated July 10, 2015, attorney Victor M. Urbaez, Esq. filed a notice
of appearance on behalf of Defendant Rabei and sought a thirty day extension of that Defendant's
time to respond to the Complaint. (ECF No. 22). Plaintiff opposed that application by letter dated
July 14, 2015; (ECF No. 23); and

WHEREAS on July 16, 2015, this Court entered the following Order:
The Court has carefully reviewed attorney Victor Urbaez's 7/10/15
letter, in which Mr. Urbaez seeks to enter an appearance on behalf
of Defendant Said Rabei and requests additional time to respond to
the Complaint and to oppose Plaintiff's pending motion for a default
judgment. (ECF No. 22). The Court has also carefully reviewed
Plaintiff's 7/14/15 response thereto. (ECF No. 23). The Court notes
that the Clerk of the Court previously entered a default against
Defendant Rabei. If Mr. Rabei seeks to litigate this matter, he must

file a formal motion to vacate the entry of default in accordance with
Federal Rule of Civil Procedure 55(c). Mr. Rabei shall file any such
application on or before 7/31/15. The Court stresses that, because
the Court has not yet entered a default judgment against any
defendant, the appropriate standard on such a motion is the "good
cause" standard set forth in Rule 55(c) and NOT, as Plaintiff
suggests, the more stringent standard associated with vacating a
judgment under Rule 60(b). The Clerk of the Court shall note Mr.
Urbaez's appearance as counsel for Mr. Rabei on the docket for this
matter.
and;
WHEREAS, on July 31, 2015, Mr. Urbaez filed a "Motion to Set Aside Entry of Default

and/or Default Judgment" on behalf of all Defendants; (ECF No. 25); and
WHEREAS Federal Rule of Civil Procedure 55(c) provides that, for good cause shown, a

court "may set aside an entry of default"; and
WHEREAS in determining whether the good cause standard has been satisfied, courts

examine the following three factors: (i) whether defendant has set forth a meritorious defense; (ii)
whether plaintiff will be prejudiced by setting aside the default; and (iii) whether defendant's
culpable conduct led to the default. United States v. $55,518.05 in U.S. Currency, 728 F.2d 192,
195 (3rd Cir. 1984); and
WHEREAS the Court notes that "[a] standard of' liberality' rather than 'strictness' should

be used in deciding whether to vacate a default so that 'any doubt should be resolved in favor of
the petition to set aside the judgment so that cases may be decided on their merits.'" Fed. Home
Loan Mortg. Com. v. B&C Inv. Assocs., No. 97-1913 (JEI}, 1998 U.S. Dist. LEXIS 23521, *13
(D.N.J. Aug. 11, 1998) (quoting Medunic v. Lederer, 533 F.2d 891, 893-94 (3d Cir. 1976)); and
WHEREAS a meritorious defense is established if the moving party's allegations, if

established at trial, would constitute a complete defense against the plaintiff's claims. Id. A
complete defense must "allege [] specific facts beyond simple denials or conclusory statements.

Getty Petroleum Marketing, Inc. v. Saini, No. 05-4732(RBK), 2007 WL 465451 (D.N.J. Feb. 7,
2007)(citation omitted). Moreover, the Court, in deciding whether to vacate the entry of default,
need not delve into the ultimate legal merit of the Defendants' assertions. Getty Petroleum
Marketing, Inc. v. Saini, No. 05-4732(RBK), 2007 WL 465451 (D.N.J. Feb. 7, 2007). It is enough
that Defendants' allegations, if true, could defeat the allegations of Plaintiffs Complaint. Id.; and
WHEREAS, in its Complaint, Plaintiff asserts claims (including fraud and breach of

contract), in connection with Defendants' alleged failure to remit full payment for various goods
that Plaintiff supplied in connection with a written agreement between Plaintiff and RMI; (see
Compl., ECF No. 1); and
WHEREAS in moving to vacate the entry of default, Defendants argue that Plaintiff

actually breached the parties' agreement first by failing to supply materials that met the
specifications set forth under that contract, and that Plaintiff instead delivered unusable material;
(Def. Br. at 10-11, ECF No. 25); and
WHEREAS, in its Opposition to Defendants' motion, Plaintiff does not suggest that

Defendants' contentions, if proven at trial, would fail to create a complete defense against
Plaintiffs claims. (See Pl.'s Opp. Br. at 5, ECF No. 28). Rather, Plaintiff challenges the form of
Defendants' allegations, arguing that because they were set forth by Defendants' attorney (i.e.,
rather than in an affidavit signed by an individual with personal knowledge of its content),
Defendants' statements do not constitute "competent evidence" and are therefore insufficient to
support the establishment of the sort of meritorious defense required to vacate the entry of default
under Rule 55(c) and relevant case law. (Id.). This Court disagrees. Defendants are not required
to proffer evidence in support of their defense at this juncture of the case. Indeed, courts typically
determine whether a defendant has articulated a meritorious defense by examining the content of

its proposed answer. See $55,518.05 in U.S. Currency, 728 F.2d at 195 ("The showing of a
meritorious defense is accomplished when 'allegations of defendant's answer, if established at
trial, would constitute a complete defense to the action."') (internal citations omitted); and
WHEREAS the Court finds that, at this early stage of the litigation, and in light of

Plaintiffs failure to offer any substantive argument to the contrary, Defendants have established a
prima facie meritorious defense against Plaintiffs claims; and
WHEREAS this Court finds that Plaintiff would not suffer any legitimate prejudice should

the Court vacate the defaults entered against Defendants. Prejudice to a plaintiff"is established[ .
. .] when a plaintiffs ability to pursue the claim has been hindered [by, for example,] loss of
available evidence, increased potential for fraud or collusion, or substantial reliance upon the
judgment." Nationwide Mut. Ins. Co. V. Starlight Ballroom Dance Club, Inc., 175 F. App'x 519,
522 (3rd Cir. 2006)(citation omitted). The fact that a plaintiff faces "'delay in realizing satisfaction
on a claim rarely serves to establish [a sufficient] degree of prejudice."' Id. at 523-24 (quoting
Feliciano v. Reliant Tooling Co., 691 F.2d 653, 656-57 (3d Cir. 1982)). Nothing in the record
suggests that vacating the entry of default against Defendants here would hinder Plaintiffs efforts
to pursue its claims, or that the delayed start of discovery in this matter has jeopardized the
availability of evidence or might otherwise cause the sort of prejudice articulated by the Court of
Appeals; and
WHEREAS this Court finds that the Defendants' actions here do not rise to the level of

culpable conduct such that their Motion to Vacate Default should be denied. The Court notes that
"[a]ppropriate application of the culpable conduct standard requires that as a threshold matter more
than mere negligence be demonstrated." Hritz v. Woma Corp., 732 F.2d 1178, 1183 (3d Cir.
1984). While there is no bright line standard for determining whether a defendant's default was

based on its own culpable conduct, the United States Court of Appeals has noted that "[r]eckless
disregard for repeated communications from plaintiffs and the court ... can satisfy the culpable
conduct standard." Id.; Nationwide Mut. Ins. Co., 175 F. App'x at 523. Here, Defendant Said
Rabei has represented that he has been living outside of the United States since November 2014
and that he first became aware of this lawsuit when he received a copy of Plaintiffs motion for
default judgment. (Rabei Deel., ~~ 3, 6, ECF No. 25). Mr. Said also advised that he learned that
employees for the entity defendants have likewise never received a copy of the Complaint. (Id. ~
7). Mr. Said further represented that, upon learning of the case, he immediately contacted attorney
Victor Urbaez for assistance. (Id.

~

4). In light of Mr. Said's statements, the Court finds that

Defendants' default was not the result of any conduct that rises above the level of "mere
negligence." Hritz, 732 F.2d at 1183; and
WHEREAS the Court finds that, in light of the foregoing, and mindful of the Court of

Appeals' preference for resolving cases on their relative merits, good cause exists to vacate the
default that the Clerk of the Court entered against all Defendants on April 20, 2015,

1 f..)/)
IT IS on this _of...._____ day of September, 2015,
ORDERED that Defendants' motion to vacate the entry of default, (ECF No. 25), is
GRANTED; and

IT IS FURTHER ORDERED that the Clerk of the Court's entry of default against all
Defendants on April 20, 2015, (ECF No. 15), is hereby vacated; and
IT IS FURTHER ORDERED that Defendants shall answer or otherwise respond to the

Complaint on or before September 18, 2015; and

IT IS FURTHER ORDERED that the Clerk of the Court shall note attorney Victor M
Urbanez, Esq.' s appearance on behalf of Defendants Rabei Mattress, Inc., Mattress Unlimited, Inc.
on the docket for this matter.

SO ORDERED

cc: Honorable Jose L. Linares, U.S.D.J.