Skinscience Labs, Inc. v. McNulty et al

Filing 92

ORDER denying 35 Motion for Default Judgment; granting 53 Motion to Set Aside Default; granting 54 Motion to Set Aside Default; granting 55 Motion to Set Aside Default; granting 56 Motion to Set Aside Default; denying 57 Motion to S et Aside Default. SO ORDERED that Peluso's motion for the entry of a default judgment on her cross claim against the McNultys pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure is denied and the McNultys' motions to set aside the Clerk's entry of default on Peluso's cross claim against them pursuant to Rule 55(c) of the Federal Rules of Civil Procedure are granted. Ordered by Judge Sandra J. Feuerstein on 1/24/2013. (Florio, Lisa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

_______________________________X
SKINSCIENCE LABS, INC.,
Plaintiff,

ORDER
11-CV-5361(SJF)(ARL)

-againstMICHAEL A. MCNULTY, JOHN M. MCNULTY,
LAURENN. MCNULTY, NICOLE R. MCNULTY,
BLUEST AR PROCESSING, INC., CASMIR USA, INC.,
ELISSA D. PELUSO and MARVIN LEEDS
MARKETING SERVICES, INC.,

FILED

IN CLERK'S OFFICE
U S DISTRICT COURT E 0 N V

*

Jt.d

2 4 2013

LONG ~~~LJ\NU OFFICE

Defendants.

___________________________________X
FEUERSTEIN, J.
On November 2, 20 II, plaintiff Skinscience Labs, Inc. ("plaintiff') commenced this
action against defendants Michael A. McNulty, John M. McNulty, Lauren N. McNulty and
Nicole R. McNulty (collectively, "the McNultys"), Bluestar Processing, Inc. ("Bluestar") and
Casmir USA, Inc. ("Casmir"), alleging, inter alia, violations of Sections 32(1) and 43(a) of the
Lanham Act, 15 U.S.C. §§ 1114(1) and 1125(a). On January 31,2012, plaintiff filed an amended
complaint, inter alia, adding Summa Trading Company, Inc. ("Summa Trading"), Marvin Leeds
Marketing Services, Inc. ("Marvin Leeds"), Elissa D. Peluso ("Peluso") and Morris Moshe
Pirzant ("Pirzant") as additional defendants.' On March 20, 2012, Peluso filed an answer to the
amended complaint and asserted a cross claim against the McNultys for indemnification. On
June II, 2012, upon Peluso's application, the Clerk of the Court entered the McNultys' default

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On September 13, 2012, final consent judgments and permanent injunctions were
entered against Prizant and Peluso, and on October 16, 2012, a final consent judgment and
permanent injunction was entered against Summa Trading.
I

*

.
on Peluso's cross claim pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. On July
23, 2012, Michael A. McNulty, Bluestar and Casmir filed answers to the amended complaint and
cross claims asserted against them by Peluso and Summa Trading.' On July 27, 2012, the
remaining McNultys filed answers to the amended complaint and all cross claims asserted
against them. Pending before the Court are: (I) Peluso's motion for the entry of a default
judgment against the McNultys on her cross claim pursuant to Rule 55(b)(2) ofthe Federal Rules
of Civil Procedure; and (2) the McNultys' motions to set aside the Clerk's entry of default
against them on Peluso's cross claim pursuant to Rule 55( c) of the Federal Rules of Civil
Procedure.' For the reasons set forth below, the McNultys' motions are granted and Peluso's
motion is denied.

I.

Discussion
Rule 55(c) of the Federal Rules of Civil Procedure provides, in relevant part, that "[t]he

court may set aside an entry of default for good cause* * *." "In determining whether to set
aside a party's default, the district court should consider principally '(I) whether the default was
willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a

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Although Summa Trading moved for a Clerk's entry of default on its cross claim
against the McNultys on July 17, 2012, that application was denied on July 26,2012 for Summa
Trading's failure to provide a proposed Clerk's certificate of default. Summa Trading never
renewed its application. On July 24, 2012, Michael A. McNulty, Bluestar and Casmir also filed
an answer to the cross claim asserted against them by Marvin Leeds.
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The motion ofBluestar and Casmir to set aside the Clerk's entry of default against them
on Peluso's cross claim (Doc. No. 57) is denied since Peluso only asserted a cross claim against
the McNultys and the Clerk never entered the defaults of Bluestar and Casmir on any claim
against those defendants in this action.
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meritorious defense is presented."' Powerserve InternationaL Inc. v. Lavi, 239 F .3d 508, 514 (2d
Cir. 2001) (quoting Enron Oil Com. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993)); see also W.B.
David & Co .. Inc. v. De Beers Centenary AG, No. 11-4609-cv, 2013 WL 106454, at* I (2d Cir.
Jan. 10, 2013) (summary order); Swama v. Al-Awadi, 622 F.3d 123, 142 (2d Cir. 2010). With
respect to prejudice, "the district court must consider the effect of the delay caused by the
defendant's default, such as thwarting [the cross claimant's] recovery or remedy ... , resulting in
the loss of evidence, creating increased difficulties of discovery, or providing greater opportunity
for fraud and collusion." Swama, 622 F.3d at 142 (quotations, alterations and citation omitted).
With respect to a meritorious defense, "the defendant must present evidence of facts that, if
proven at trial, would constitute a complete defense." !d. (quotations and citation omitted).
"Because there is a preference for resolving disputes on the merits, doubts should be
resolved in favor of the defaulting party." Powerserve, 239 F.3d at 514 (quotations and citation
omitted); see also W.B. David, 2013 WL I 06454, at* I. "Ultimately, the matter of whether to
grant relief from the entry of a default is left to the sound discretion of a district court***"
Powerserve, 239 F.3d at 514 (quoting Enron Oil, 10 F.3d at 95).
Regardless of whether the McNultys' default was willful, as alleged by Peluso\ Peluso
will not be prejudiced by vacating the McNultys' default on her cross claim against them and the
McNultys have a meritorious defense to the cross claim for indemnification because, inter alia,
the McNultys have since, albeit belatedly, answered the cross claim and participated in discovery
and a final consent judgment has been entered on plaintiffs claims against Peluso which does

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Indeed, Peluso's motion focuses almost exclusively upon the willfulness prong and
does not even address the "meritorious defense" prong.
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not contain a monetary award to plaintiff from Peluso requiring indemnification by the
McNultys. All of Peluso's claims of prejudice relate to her ability to obtain discovery and defend
plaintiffs claims against her; issues now rendered moot by the entry of a final consent judgment
against Peluso on all of plaintiffs claims against her in this action. Moreover, the only potential
relief Peluso can obtain from the McNultys on her cross claim for indemnification is recovery of
the costs she expended in defending this action, including attorneys' fees, yet Peluso has
submitted no proof of any such amounts on her motion for a default judgment. Accordingly, a
default judgment cannot be entered against the McNultys on Peluso's cross claim. See Enron
Oil, 10 F.3d at 97 ("[D]efaultjudgment cannot be entered until the amount of damages has been
ascertained."); see also Swama, 622 F.3d at 140 (construing the district court's entry of a default
judgment leaving unresolved the issue of the proper amount of damages to be a non-final entry of
default). Therefore, Peluso's motion for a default judgment is denied and the McNultys' motion
to set aside the Clerk's entry of default on Peluso's cross claims against them is granted. See,

u

W.B. David, 2013 WL I 06454, at

* I (finding that the district court did not abuse its

discretion in vacating the Clerk's entry of default, notwithstanding its determination that it was
"questionable" whether the defendants' default was willful, since the defendants had a
meritorious defense and the plaintiff would not suffer prejudice as a result of vacating the entry
of default); Swama, 622 F. 3d at 143 (finding that it was not necessary to address all three (3)
prongs where the entry of a default judgment failed on at least one (I) of the prongs).

II.

Conclusion
For the reasons set forth above, Peluso's motion for the entry of a default judgment on her
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cross claim against the McNultys pursuant to Rule 55(b)(2) of the Federal Rules of Civil
Procedure is denied and the McNultys' motions to set aside the Clerk's entry of default on
Peluso's cross claim against them pursuant to Rule 55(c) of the Federal Rules of Civil Procedure
are granted.
SO ORDERED.

s/ Sandra J. Feuerstein
SANDRA J. FEUEMiTEIN
United States District Judge
Dated: Januaryj\, 2013
Central Islip, New York

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