DICKON v. RUBIN & ROTHMAN, LLC et al

Filing 26

OPINION fld. Signed by Judge Jose L. Linares on 4/4/16. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
RICHARD DICKON,

Civil Action No.: 15-7961 (JLL)

Plaintiff,

OPINION

V.

RUBIN & ROTHMAN, LLC
Defendant.

LINARES, District Judge.
This matter comes before the Court by way of Defendant Rubin & Rothman, LLC’s
filing
of a motion to set aside the Clerk of Court’s entry of default and to dismiss Plainti
ffs Complaint
or, alternatively, to permit the filing of an answer. (ECF No. 10, “Def.’s Mov.
Br.”). Plaintiff
Richard Dickon has opposed Defendant’s Motion (ECF No. 15, “Pl.’s Opp. Br.”),
and Defendant
has replied to that opposition (ECF No. 23, “Def.’s Reply Br.”). The Court
decides this matter
without oral argument pursuant to Rule 78 of the Federal Rules of Civil Procedure.
For the reasons
set forth below, the Court grants Defendant’s Motion to Vacate the Entry
of Default, denies
Defendant’s Motion to Dismiss this matter, and permits Plaintiff (14) days
to file an Answer to the
Complaint.
BAC KGROUND

Plaintiff Richard Dickon filed the instant action on November 6, 2015
on behalf of himself
and a putative class. (ECF No. 1, Complaint, “Compl.”). Plaintiff alleges
that Defendant Rubin
& Rothman, LLC, a law firm operating out of New York, has violated the
Fair Debt Collection

Practices Act by “using false, deceptive, misleading, unfair and unconscionab
le practices in
connection with their attempt to collect an alleged debt from Plaintiff and others.
” (Compi.

¶ 9).

Further, Plaintiff alleges that Defendant, in its capacity as debt collector operati
ng on behalf of
Toyota Motor Credit Corporation, “files hundreds of lawsuits each year agains
t consumers in the
State of New Jersey” and that those lawsuits “falsely represent[] and impl[y] that
a licensed
attorney was directly and/or personally involved in reviewing Plaintiff’s file, accoun
t, loan and/or
records prior to the [lawsuits] being filed.” (Id. 57). Additionally, Plaintiff alleges
¶
that a lawsuit
that Defendant filed in New Jersey Superior Court against Plaintiff and other
members of the
putative class “seeks to collect interests, fees, and costs, to which [Defen
dant] has no legal or
contractual basis to collect.” (Id.

¶ 53).

The record reflects that Defendant was served with the Summons and Compl
aint on
December 11, 2015. (ECF No. 3). However, Defendant did not timely answer
or otherwise
respond to the Complaint. Accordingly, on January 4, 2016, the undersigned
issued an Order
directing Plaintiff’s counsel to move this action by either requesting that a
default be entered or
submitting an extension to answer out of time. (ECF No. 4). Plaintiff moved
for the entry of
default on January 5, 2016, which the Clerk of Court entered that same day. Then,
on January 14,
2016, this Court entered an Order directing Plaintiff to request an entry of
default judgment or
submit an extension to answer out of time. (ECF No. 6).
In response to the Court’s January 14, 2016 letter, Plaintiff filed a motion for
an extension
of time to request an entry of default judgment. (ECF No. 7). Plaintiff’s
counsel requested an
extension to permit Plaintiff to “obtain discovery, move for class certification
and, once the Court
has rendered a decision on class certification, [to] permit Plaintiff to
move for the entry of
judgment.” (Id). The Court granted Plaintiffs request. (ECF No. 8).

2

After filing this Complaint, on November 30, 2015, Plaintiff filed for
Chapter 7
Bankruptcy. (ECF No. 15-1, Declaration of Yongmoon Kim, “KimDecL”J3
, Exh. A). Plaintiff’s
Bankruptcy Petition notified the Bankruptcy Court of this lawsuit. In particu
lar, Plaintiff listed
this action as an asset on Schedule B of his Petition and listed the lawsuit as proper
ty to be exempt
from the Bankruptcy estate on Schedule C of his Petition. (Id. 9, Exh.
A at 9).
¶
A hearing was held before the bankruptcy Trustee, Jay L. Lubetkin, on Januar
y 7, 2016.
(Kim Dccl.

¶ 6). On January 11, 2016, Mr. Lubetkin filed a Chapter 7 Trustee’s Report of No

Distribution, in which he stated that he “ha[s] made a diligent inquiry into
the financial affairs of
the debtor(s) and the location of the property belonging to the estate; and that
there is no property
available for distribution from the estate over and above that exempted by law.”
(Kim Dccl. ¶J 78, Exh, B).

Mr. Lubetkin then certified that Mr. Dickon’s bankruptcy estate “ha[d] been
fully

administered” and requested to be discharged as Trustee.

(Id.).

On March 11, 2016, the

Bankruptcy Court entered an Order of Discharge. (Id. ¶9, Exh. C).
On February 9, 2016, prior to the entry of an Order of Discharge in Plainti
ff’s Bankruptcy
proceeding, Defendant filed the pending Motion to set aside the entry of default
and also to dismiss
Plaintiff’s Complaint or, alternatively, to permit the filing of an answer
to the Complaint. (ECF
No. 10). Plaintiff has opposed his Motion (ECF No. 15), and Defendant
has replied to same (ECF
No. 23).

DISCUSSION
A. Defendant’s Motion to Set Aside the Clerk’s Entry of Default

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Defendant now moves for an Order setting aside the Clerk’s Entry of Default.
Under Rule 55
of the Federal Rules of Civil Procedure, a court may set aside an entry of default
for “good cause.”
Fed. R. Civ. P. 55(c). The Third Circuit expressly disfavors default judgments,
preferring that

cases be adjudicated on their merits. See, e.g., Zawadski de Bueno v. Bueno C’astro
, 822 F.2d 416,
420 (3d Cir. 1987). Moreover, adjudication of a motion to set aside default “is
left primarily to
the discretion of the district court.” Bailey v. United Airlines, 279 F.3d 194,
204 (3d Cir.2002).
That said, Courts considering a motion to vacate the entry of default consider
“(1) whether the
plaintiff will be prejudiced; (2) whether the defendant has a meritorious defens
e; [and] (3) whether
the default was the result of the defendant’s culpable conduct.” United States
v. $55,518.05 in
US. Currency, 728 F.2d 192, 195 (3d Cir. 1984); see also Getty Petroleum Marke
ting, Inc. v.

Saini, No. 05—4732, 2007 WL 465451, at *2 (D.N.J. Feb.7, 2007).
As to the first prong, there is simply no indication before the Court that Plainti
ff would be
prejudiced in any meaningful way by having his case decided on the merits.
That is, Plaintiff “has
not suggested that [his] ability to pursue [his] claim[s] has been hindered
since the entry of
[default],” Feliciano v. Reliant Tooling Co., Ltd., 691 F.2d 653, 657 (3d Cir.
1982). Plaintiff “has
not asserted loss of available evidence, increased potential for fraud or collusi
on, or substantial
reliance upon the [entry of default] to support a finding of prejudice.” Id.;
see also Emcasco Ins.
Co. v, Sambrick, 834 F.2d 71, 74 (3d Cir. 1987). Instead, Plaintiff argues that
“Plaintiffs counsel
has expended time and expenses which would not have been expended but
for

Defendant’s delays.

The failure to compensate them is prejudicial because it penalizes them
for doing what they were
supposed to do.” (Pl.’s Opp. Br. at 17). The Court is not persuaded that the
hard work of Plaintiff’s
counsel has materially prejudiced Plaintiffs ability to prosecute this litigati
on.

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Second, the Court finds that Defendant has sufficiently argued that it can presen
t evidence of
a meritorious defense to Plaintiffs claims. (See Def.’s Mov. Br. at 7-8).’ In particular,
Defendant
maintains that the evidence will show, inter alia, that (contrary to Plainti
ffs allegations), the
demand letter Defendant sent to Plaintiff from which some of his claims arise was
in fact reviewed
by an attorney and that the monies Rubin & Rothman sought in its collection action
were properly
due under the express terms of the retail installment contract. (Id.).
2
Lastly, the Court considers whether Defendant’s failure to timely answer or otherw
ise respon

d

to the Complaint can be attributed to Defendant’s culpable conduct. The
record reflects that
Defendant was served with the Summons and Complaint on December 11, 2015.
(ECF No. 3).
Accordingly, Defendant’s responsive filing was due on January 4, 2016. See Fed.
R. Civ. p. 12(a).
3
The Clerk properly entered default against Defendant on January 5, 2016, but Defens
e counsel did
not enter an appearance on the record until almost one month later, on February
2, 2016 (ECF No.
9). Defendant did not file the pending Motion until February 9, 2016 (ECF No.
10).
The parties have submitted arguments and affidavits detailing a history
of back-and-forth
communications between their respective attorneys. In short, both parties appear
to insinuate that
the other dragged its feet and was non-cooperative in consenting to relief from

the Entry of Default.

‘Plaintiff contends that “Defendant should be estopped from pursuing a determ
ination on [the merits] issue because
Plaintiff is prevented from contesting it,” (Pl.’s Opp. Br. 19). Plaintiff appear
s to argue that because the issue of class
certification is typically dealt with prior to a determination on the merits, if
the Court were to find that Defendant may
have a meritorious defense to the claims, then Plaintiff would somehow be prejud
iced. To this argument, the Court
only notes that its determination that Defendant has offered a prima facie
showing of a meritorious defense to these
claims is not and cannot be construed as the Court offering any opinion
on the merits of Plaintiffs claim.
2
Defendant also argues that it has meritorious defenses to the certification
of the putative class. (Def. ‘s Mov. Br. at
9-13). At this stage of the litigation, however, the Court will not consid
er whether Defendant has viable defenses to
the certification of a class action, nor is the existence of defenses to class certific
ation relevant to Defendant’s motion
to set aside the entry of default.
Pursuant to Rule 12(a)’s directive, a defendant has 21 days from service
of process to file a responsive pleading.
Thus, Defendant’s responsive pleading would have been due on New
Year’s Day, 2016. However, Rule 6(a)( 1 )(c)
explains that where, as here, a filing deadline falls on a legal holiday such
as New Year’s Day, the filing period “run[s]
until the end of the next day that is not a Saturday, Sunday, or legal holiday
.” Accordingly, Defendant’s responsive
pleading was due on January 4, 2016.

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The Court has considered these arguments, but declines to parse them herein.
That said, the Court
appreciates Defendant’s explanation, which it expressed to Plaintiffs counse
l early-on, that in
light of the bankruptcy petition—which Plaintiff filed after initiating this action

and before serving

Defendant with process—Defendant did not believe that Plaintiff maintained
standing to pursue
this action. (Def’s Mov. Br. at 14-15).
When a debtor files for Chapter 7 bankruptcy, a trustee is appointed as a “repres
entative of the
estate.” 1 1 U.S.C.

§ 323(a). As representative of the debtor’s estate, the trustee maintains the

“exclusive right to sue on behalf of the bankruptcy estate.” See, e.g., Estate
ofSpiritos v. One San
Bernardino C’ounry Superior ‘ourt Case Numbered SPR 02211, 443 F.3d
1172, 1174 (7th Cir.

2006) (emphasis added); see also In re Dionisio, 2003 U.S. App. LEXIS 12432 *5
,
(3d Cir. Apr.
17, 2003); 11 U.S.C. §323(b). Stated differently, once a debtor has filed for
Chapter? bankruptcy,
he lacks standing to pursue any litigation in his own right. See, e.g., Barns
v. Midland Funding,

LLC, l4-cv-6469, 2015 WL 519176, *3 (D.N.J. Feb. 9, 2015); see also in
re Truong, 2006 WL
4452984 (Bankr. D. N.J. May 3, 2006) (“[Aj trustee is granted complete
authority and discretion
with respect to the prosecution and defenses of any litigation of the debtor’s
estate.”). In light of
this law, Defendant reasonably believed that Plaintiff lacked standing to contin
ue to prosecute this
matter as of the date he filed for Chapter 7 Bankruptcy.
Thus, although the Court notes that Defendant should have presented
this argument to the
Court well before the February 9’ filing of this Motion, the Court finds that
it was not the intent
of Defendant and its attorneys act “willfully” or in “bad faith” to ignore
the Complaint. See, e.g.,
Hritz v. Woma Corp., 732 F.2d 1178, 1182-83 (3d Cir. 1984) (“[T]h
e standard for ‘culpable
conduct’ in this Circuit is the ‘willfulness’ or ‘bad faith’ of a non-re
sponding defendant.”). For

6

the same reason, the Court denies Plaintiff’s request to direct Defendant to
pay sanctions as a
condition to setting aside default. (See Pl.’s

Opp. Br. at 22).

In light of the foregoing, and given the Court’s general preference for decidin
g cases on the
merits, the Court finds that Defendant has demonstrated good cause to vacate
the Clerk’s Entry of
Default. See generally $55,518.05 in US. Currency, 728 F.2d at 195 (“[Tjhi
s court does not favor
entry of defaults or default judgments. We require doubtful cases to be resolve
d in favor of the
party moving to set aside the default judgment ‘so that cases may be decide
d on their merits.”)
(citations omitted). Thus, the Clerk’s Entry of Default against Defendant
is hereby vacated, as is
this Court’s January 27, 2016 Order granting Plaintiff an extension of time
to move for default
judgment and setting discovery deadlines.
B Motion to Dismiss

in addition to seeking a vacation of the entry of default, Defendant has
moved to dismiss
Plaintiffs Complaint for lack of jurisdictional standing pursuant to Rule
12(b)(1). As discussed
above, in its moving brief, Defendant argued that “Plaintiff lacks pruden
tial standing[ j because
he is a Chapter 7 debtor in bankruptcy and it is hombook law that only the
bankruptcy trustee has
standing to prosecute his claim.” (Def.’s Mov. Br. at 6). After Defendant’s
motion was filed, on
March 11, 2016, the Bankruptcy Court entered an Order of Discharge in
Bankruptcy that closed
the bankruptcy matter. In light of this recent discharge, Defendant now
concedes that as of March
11, 2016, Plaintiff has standing to litigate this action. (Def. ‘s Reply Br.
at 1). Accordingly, the
Court finds that to the extent Defendant still seeks dismissal of this action
for lack of standing, that
request is now moot. Defendant’s motion to dismiss this action for lack
of standing is denied.
CONCLUSION

7

For the reasons stated herein, Defendant’s Motion to Vacate the Entry of Default is
granted.
However, Defendant’s motion to dismiss the Complaint is denied, and the Court
will permit

Defendant fourteen (14) days from the entry of this Order to file an Answer to the Compl
aint. An
appropriate Order accompanies this Opinion.

IT IS SO ORDERED.

DATED:

April

/7
JOSJ. LINARES
urtYED STATES DISTRICT JUDGE

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