Cordero v. AT&T

Filing 14

MEMORANDUM AND ORDER: Each of the Rule 55(c) factors weighs in favor of vacating the Clerk's entry of default. Accordingly, AT&T has demonstrated good cause pursuant to Rule 55(c), and its motion to vacate its default (Doc. No. 9 ) is granted. This action is committed to the assigned Magistrate Judge for supervision of all pre-trial matters. Ordered by Judge Roslynn R. Mauskopf on 1/4/2017. (Taronji, Robert)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------x
RUISDAEL CORDERO,
Plaintiff,

MEMORANDUM AND ORDER
15-CV-5601 (RRM) (ST)

-againstAT&T,
Defendant.
----------------------------------------------------------x
ROSLYNN R. MAUSKOPF, United States District Judge.
Plaintiff Ruisdael Cordero brought this Fair Credit Reporting Act (“FCRA”) action,
against defendant AT&T1 on September 29, 2015. (See Compl. (Doc. No. 1) at 1.)2 AT&T did
not appear and on December 4, 2015, the Clerk’s office entered default pursuant to Federal Rule
of Civil Procedure (“Rule”) 55(a). Cordero did not subsequently move for default judgment, and
on February 26, 2016, AT&T appeared through counsel and filed a proposed schedule for
briefing AT&T’s anticipated motion to vacate the entry of default, which the Court approved.
(See Notice of Appearance (Doc. No. 7); Proposed Scheduling Order (Doc. No. 8).) For the
reasons discussed below, AT&T’s motion to vacate the Clerk’s entry of default is granted.
BACKGROUND
Cordero brought this action seeking damages and declaratory and injunctive relief for
alleged violations of the FCRA. (Compl. ¶ 1.) As a brief overview of the underlying claim,
Cordero alleges that he purchased an AT&T Iphone 5 in April 2013. (Id. ¶ 11.) Cordero alleges
Defendant asserts that there is no entity by the name of “AT&T,” and instead, Cordero should have named New
Cingular Wireless PCS, LLC d/b/a AT&T Mobility (“New Cingular”) as the defendant. (Best Decl. (Doc. No. 9-4)
¶ 2.) For uniformity, the Court will refer to defendant as AT&T herein, but notes that defendant has represented that
New Cingular will stipulate to amending the complaint so that it can be named as defendant should the Court grant
its motion to vacate the entry of default. (Mem. Vacate Default (Doc. No. 10) at 4 n.1.)
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For ease of reference, citations to court documents utilize ECF pagination.

that he was the victim of identity theft in December 2013, and, in January 2014, Cordero
received a statement from AT&T claiming a balance due in the amount of $2,851.58 indicating
data usage by telephone numbers that allegedly did not belong to Cordero. (Id. ¶¶ 12, 13.)
According to Cordero, he called AT&T – which he asserts is a “creditor reporting agency” as
defined by the FCRA, 15 U.S.C. § 1681a(b) and (f) – to advise that he was the victim of identity
theft. Cordero claims that the AT&T representative refused to provide him with information
about the new numbers on his account and his account was ultimately canceled due to the unpaid
balance. (Id. ¶¶ 14, 16.) Despite Cordero’s dispute of the debt’s validity, AT&T allegedly
placed Cordero’s account in collections with a debt collector and authorized reporting on
Cordero’s credit report. (Id. ¶ 22–23.) Cordero’s credit report showed that his account was in
collections but made no mention of Cordero’s dispute of the debt. (Id. ¶ 22.)
On September 29, 2015, Cordero filed this action, alleging, inter alia, that AT&T’s
failure to reasonably investigate his claims and remove inaccurate information from Cordero’s
credit file constitutes an FCRA violation. (See id. ¶¶ 34–52.) The summons and complaint were
served on October 5, 2015, on an individual by the name of Andrew Awad at an AT&T facility
in Paramus, New Jersey. (Aff. of Service. (Doc. No. 5).) On December 4, 2015, after AT&T
failed to appear, Cordero requested, and the Clerk of Court entered, default pursuant to Rule
55(a). As set forth above, on February 26, 2016, AT&T appeared through counsel and
subsequently moved to vacate the entry of default. (Mot. to Vacate (Doc. No. 9).)
STANDARD OF REVIEW
Federal Rule of Civil Procedure 55(a) states that “[w]hen a party against whom a
judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure
is shown by affidavit or otherwise, the clerk must enter the party’s default.” Fed. R. Civ. P.

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55(a). Pursuant to Rule 55(b)(2), upon application of the party seeking default, the Court may
then enter default judgment.3 Fed. R. Civ. P. 55(b)(2). However, before default judgment is
entered, a defendant may move to set aside an entry of default pursuant to Rule 55(c) for “good
cause.” Fed. R. Civ. P. 55(c). “[B]ecause defaults are generally disfavored and are reserved for
rare occasions, when doubt exists as to whether a default should be granted or vacated, the doubt
should be resolved in favor of the defaulting party.” Enron Oil Corp., 10 F.3d at 96. Moreover,
default is considered an “extreme measure [that] should be reserved by a trial court as a final, not
a first, sanction imposed on a litigant.” Id.
DISCUSSION
In determining whether good cause exists for relieving a party from a finding of default
under Rule 55(c), courts consider “[1] the willfulness of the default, [2] the existence of a
meritorious defense, and [3] the level of prejudice that the non-defaulting party may suffer
should relief be granted.” Sibley v. Choice Hotels Int’l, Inc., 304 F.R.D. 125, 130 (E.D.N.Y.
2015) (quoting Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167, 171 (2d Cir. 2001)); see also
Enron Oil Corp., 10 F.3d at 96.
I.

Willfulness
A finding of willfulness is appropriate where “there is ‘evidence of bad faith’ or the

default arose ‘from egregious or deliberate conduct.’” Holland v. James, No. 05-CV-5346
(KMW), 2008 WL 3884354, at *2 (S.D.N.Y. Aug. 21, 2008) (quoting Am. Alliance Ins. Co. v.
Eagle Ins. Co., 92 F.3d 57, 60–61 (2d Cir.1996)). In other words, “[a] default is willful if it is
‘more than merely negligent or careless, but is instead egregious and not satisfactorily
explained.’” Llolla v. Karen Gardens Apt. Corp., 12-CV-1356 (MKB), 2016 WL 233665, at *2
Under Rule 55(b)(1), if the plaintiff’s claim is for a sum certain, the clerk may enter a judgment against a
defendant who has failed to appear without the involvement of a judge if furnished with an affidavit of the amount
due. Fed. R. Civ. P. 55(b)(1); Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993).
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(E.D.N.Y. Jan. 20, 2016). Under this standard, “failure to answer the complaint . . . due to a
filing mistake by [defendant’s] in-house counsel’s clerk” has been held not to be “willful,
deliberate, or evidence of bad faith.” See Am. Alliance Ins., 92 F.3d at 61.
Here, default was not willful. AT&T asserts that the summons and complaint were
served at an AT&T Mobility LLC4 facility in Paramus, New Jersey, and were then forwarded to
a corporate center for the processing of subpoenas located in North Palm Beach, Florida.
(Endres Decl. ¶ 2.) The documents were then sent to a paralegal employed in the AT&T
Services, Inc. Legal Department in Bedminster, New Jersey, who sent them to Jam Endres – a
clerk employed by AT&T Services, Inc.’s Legal Department whose job includes forwarding
legal documents to outside counsel retained to represent AT&T Inc. and its affiliated entities –
with instructions to forward them to the law firm of Lynch Rowin LLP. (Id. ¶¶ 1–2.) Endres
then put the papers aside and forgot to send them to outside counsel. (Id. ¶ 3.) While AT&T’s
conduct was careless and negligent, it does not rise to the level of willfulness necessary to
require the extreme remedy of default judgment. See Am. Alliance Ins., 92 F.3d at 61. Even in
the context of a Rule 60 motion to vacate default judgment, where courts apply a stricter and
more rigorous standard than in the case of a Rule 55(c) vacature of entry of default, the Second
Circuit has declined to expand the definition of “willfulness” to include “carelessness or
negligent errors.” Am. Alliance Ins. Co., 92 F.3d at 59, 61; see also Enron Oil Corp., 10 F.3d at
96 (“Although the factors examined in deciding whether to set aside a default or a default
judgment are the same, courts apply the factors more rigorously in the case of a default
judgment.”). Accordingly, the first factor weighs in favor of granting AT&T’s motion to vacate
entry of default.
The corporate structure of and relationships between the various AT&T entities referenced throughout AT&T’s
papers – AT&T Mobility LLC, AT&T Mobility Services LLC, and AT&T Services, Inc. – is not clear from
AT&T’s submissions.
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II.

Meritorious Defense
For a defense to be meritorious at this stage, is need not be ultimately persuasive. Am.

Alliance Ins., 92 F. 3d at 61. Instead, “‘[a] meritorious defense exists if based on the defendant’s
version of events, the factfinder has some determination to make.’” Sibley v. Choice Hotls Int’l,
Inc., 304 F.R.D. 125, 131 (E.D.N.Y. 2015) (quoting Am. Stevedoring, Inc. v. Banana Distribs.,
Inc., No. 98–CV–5782 (BSJ), 1999 WL 731425, at *3 (S.D.N.Y. Sept. 20, 1999)). Here, AT&T
raises several defenses.
A. Improper Service
First, AT&T asserts that the summons and complaint were improperly served and the
wrong entity was named. Where service on an incorrect entity is improperly made, default
entered against the defendant must be vacated. Icon DE Holdings LLC v. Eastside Distributors,
No. 14-CV-2832 (PAE), 2015 WL 4557278, at *3 (S.D.N.Y. July 28, 2015). This is because
“[a] default judgment is void if it is rendered by a court that lacks jurisdiction over the parties. . .
[and i]n order for a district court to exercise personal jurisdiction over a defendant, the plaintiff’s
service of process upon the defendant must have been procedurally proper.” Llolla, 2016 WL
233665, at *5 (internal citations and quotation marks omitted).
Under Rule 4(h) and New York Civil Procedure Law and Rule (“CPLR”) 311(a)(1),
which govern the service of process on a corporation, partnership, or association, service may be
made on “an officer, a managing or general agent, or any other agent authorized by appointment
or by law to receive service of process.”5 Fed. R. Civ. P. 4(h); see also N.Y. CPLR § 311(a)(1);
Llolla, 2016 WL 233665, at *5. A “managing or general agent” is a person “empowered with

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Rule 4(h)(1)(A) also provides that service may be made pursuant to Rule 4(e)(1), which permits a plaintiff to
follow “state law for serving a summons in an action brought in courts of general jurisdiction in the state where the
district court is located or where service is made.”

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supervisory authority and [who] possesses judgment and discretion to take action on behalf of
the corporation. Llolla, 2016 WL 233665, at *5. CPLR 311(a)(1), also allows for service on a
corporation’s director, cashier, and assistant cashier.6 N.Y. CPLR § 311(a)(1).
AT&T alleges that the person to whom Cordero delivered the summons and complaint
was not capable of receiving service under these rules. (Mem. Vacate Default at 4.) In support
of this assertion, AT&T submitted a declaration of Andrew Awad, the person to whom the
summons and complaint were delivered. (See Awad Decl. (Doc. No. 9-2).) Awad’s declaration
establishes that he is employed by AT&T Mobility LLC as a Lead Analyst, Asset Protection at
its location in Paramus, New Jersey. (Id. ¶ 1.) His only responsibility is to conduct internal
investigations of suspected code of conduct violations. (Id. ¶ 2.) Awad attests that the Paramus,
New Jersey location is not AT&T’s headquarters or a principal place of business for any AT&T
entity. (Id. ¶ 3.) He is not an officer, director, managing or general agent, cashier or assistant
cashier of any AT&T entity and he is not an agent authorized by appointment or law to receive
process for any such entity. (Id. ¶ 3.) Further, AT&T alleges that Cordero named the incorrect
entity in his action. AT&T supports this assertion with a declaration of John C. Best, a manager
with AT&T Mobility Services LLC’s executive response team, which explains that the wireless
telephone services relevant here were provided to Cordero by Cingular Wireless PCS, LLC d/b/a
AT&T Mobility and that no entity named “AT&T” exists. (Best Decl. ¶ 1.)
Though Cordero challenges AT&T’s assertions of improper service by stating that Awad
informed the process server that he was an agent who could receive service – an assertion that

The Rules of Court in New Jersey, where the summons and complaint were served, similarly allow for “service
upon a domestic corporation [to] be performed by personal service upon ‘any officer, director, trustee or managing
or general agent, or any person authorized by appointment or by law to receive service of process on behalf of the
corporation, or on a person at the registered office of the corporation in charge thereof.” Mettle v. First Union Nat’l
Bank, 279 F. Supp. 2d 598, 602–03 (D.N.J. 2003) (quoting New Jersey Court Rule 4:4–4(a)(6)).
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Awad disputes in a response affidavit (Awad Supp. Decl. (Doc. No. 12) ¶ 3 (“I am not
authorized to accept service of process for any AT&T entity and I have never told a process
server that I was.”)) – and that Cordero received correspondence from AT&T naming AT&T as
the service provider and AT&T “should not be able to hold itself out under one name (AT&T)
and then later on claim that its name for suit purposes is something entirely different,” (Mem.
Opp’n (Doc. No. 11) at 6), “all doubts must be resolved in favor of trial on the merits.”7 Enron
Oil Corp., 10 F.3d at 98 (finding that a dispute over service must be resolved in favor of the
party moving to vacate default). Thus, AT&T’s challenges to service raise a meritorious defense
within the meaning of Rule 55(c) and weigh in favor of vacating the entry of default.
B. Arbitration Requirement
Additionally, AT&T alleges that, pursuant to Cordero’s agreement with New Cingular,
Cordero is required to arbitrate claims relating to wireless services. (Best Decl. ¶ 8; Decl. Ex. C
(“Wireless Customer Agreement”) (Doc. No. 9-7) at 3.) AT&T supports this assertion with a
declaration of John Best, a manager with the Executive Response Team at AT&T Mobility
Services LLC, asserting that pursuant to Cordero’s wireless customer agreement, Cordero “is
required to arbitrate all claims relating to the wireless service provided to him, including claims
arising out of status.” (Best Decl. ¶ 8.) Best attaches to his declaration excerpts of the wireless
agreement that he alleges govern Cordero’s relationship with his wireless provider. (Wireless
Customer Agreement.) Under this agreement, the customer agrees to “arbitrate all disputes and
claims” between himself and the provider, including “claims arising out of or relating to any
aspect of the relationship between [them], whether based in contract, tort, statute, fraud,
misrepresentation or any other legal theory.” (Id. § 2.2.) Such agreements to arbitrate have
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The Court also notes that Cordero did not support this argument with any legal authorities. In fact, Cordero cites
only one legal authority in the whole of his memorandum of law.

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been found to provide a “meritorious defense that, if established, would constitute a complete
defense” to the lawsuit. Kulwa v. Obiakor OB/GYN P.C., No. 12-CV-1878 (JG), 2013 WL
504383, at *6 (E.D.N.Y. Feb. 8, 2013). Accordingly, AT&T has raised a meritorious defense
within the meaning of Rule 55(c) and this factor weighs in favor of granting vacature of the entry
of default.8
III.

Prejudice
“Prejudice results when delay causes the loss of evidence, create[s] increased difficulties

of discovery or provide[s] greater opportunity for fraud and collusion.” Ward v. Ramkalawan,
No. 11–CV–4295 (JS) (ARL), 2013 WL 1149108, at *5 (E.D.N.Y. Feb. 11, 2013) (internal
quotation marks omitted), report and recommendation adopted by 2013 WL 1149068 (E.D.N.Y.
Mar. 19, 2013). Accordingly, “delay alone is not a sufficient basis for establishing prejudice.”
Id. (internal quotation marks and citation omitted); see also Enron Oil Corp. 10 F.3d at 98
(“[D]elay standing alone does not establish prejudice.”). Here, this case is in its early stages,
there is no indication that evidence has been lost or that vacating the default will result in
difficulties of discovery, and Cordero has not argued that he was prejudiced by the delay.
Accordingly, this final factor weighs in favor of granting vacature of the entry of default.

AT&T raises another potentially meritorious defense, asserting that it is not a consumer reporting agency (“CRA”)
as defined by the FCRA and, that as a furnisher of information, it is only liable if it received a complaint from a
CRA as opposed to directly from the consumer, which it allegedly did not. However, AT&T provides scant factual
evidence supporting its assertion that is it not a CRA. It merely notes in its memorandum of law that
telecommunication providers have been named as information providers in other FCRA cases. (Mem. Vacate
Default at 6.) “A defendant seeking to vacate a default judgment bears the burden of offering evidence sufficient to
establish a complete defense.” Llolla, 2016 WL 233665, at *4 (citation and internal quotation marks omitted).
However, because the Court has already found that this Rule 55(c) factor weighs in AT&T’s favor based on its other
meritorious defenses, the Court does not reach the question of whether AT&T raises a meritorious defense with
respect to its classification as a CRA. See id., at *4 n.3 (declining to make a finding as to whether one of
defendants’ affirmative defenses was meritorious where the court already found another affirmative defense
meritorious).
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CONCLUSION
Each of the Rule 55(c) factors weighs in favor of vacating the Clerk’s entry of default.
Accordingly, AT&T has demonstrated “good cause” pursuant to Rule 55(c), and its motion to
vacate its default (Doc. No. 9) is granted.
This action is committed to the assigned Magistrate Judge for supervision of all pre-trial
matters.

SO ORDERED.
Roslynn R. Mauskopf

Dated: Brooklyn, New York
January 4, 2017

_______________________
ROSLYNN R. MAUSKOPF
United States District Judge

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