Mason Tenders District Council of Greater New York et al v. Western Surety Company

Filing 106

OPINION AND ORDER: re: 80 MOTION to Set Aside Default Against Vertical Building Concepts Corp. filed by Vertical Building Concepts Corp., 85 MOTION to Strike Document No. 79 as to Vertical Building Concepts Corp. filed by Mason Tender s District Council Welfare Fund, Pension Fund, Annuity Fund, Training Fund, Health and Safety Fund, Mason Tenders District Council of Greater New York, Dominick Giammona. For the foregoing reasons, Vertical's motion to set aside the default judgment is GRANTED, and Mason Tender's motion to strike is DENIED. The Clerk of Court is directed to close the motions at Docket Numbers 80 and 85. SO ORDERED. (Signed by Judge J. Paul Oetken on 9/11/2017) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MASON TENDERS DISTRICT
COUNCIL OF GREATER NEW YORK,
et al.,
Plaintiffs,

15-CV-9600 (JPO)
OPINION AND ORDER

-vWestern Surety Company, et al.,
Defendants.
J. PAUL OETKEN, District Judge:

After this Court entered a default judgment against Defendant Vertical Building Concepts
Corp. (“Vertical”), Vertical filed an answer to the Second Amended Complaint (Dkt. No. 79) and
now moves this Court to set aside the default judgment (Dkt. No. 80). In response, Plaintiffs
Mason Tenders District Council of Greater New York; Mason Tenders District Council Welfare
Fund, Pension Fund, Annuity Fund, Training Fund, Health and Safety Fund; and Dominick
Giammona, as the Funds’ Contribution/Deficiency Manager (collectively, “Mason Tenders”)
have filed a motion to strike Vertical’s answer. (Dkt. No. 85.) For the reasons that follow, the
motion to set aside the default judgement is granted, and the motion to strike Vertical’s answer is
denied.
I.

Background
Familiarity with the underlying dispute, as detailed in the Court’s prior Order granting

default judgment, is presumed. (See Dkt. No. 49.)
Mason Tenders filed the First Amended Complaint in this action on October 10, 2016
(Dkt. No. 36 (“FAC”)), and served Vertical with the FAC via service on an agent of the
Secretary of State of New York (Dkt. No. 44). Vertical never received actual notice of the FAC,
however, because it had changed its address without notifying the Secretary of State. (See Dkt.
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No. 80-1 Ex. A ¶¶ 6, 19, 22 (“Frascone Aff.”).) As a result, Vertical failed to answer or
otherwise respond to the FAC, and Mason Tenders moved for entry of default judgment. (See
Dkt. No. 46.) This Court granted Mason Tenders’ motion for default judgment against Vertical
on January 10, 2017 (Dkt. No. 49), and the Clerk of Court entered judgment against Vertical on
January 12, 2017 (Dkt. No. 51). At Mason Tenders’ request (see Dkt. No. 62), this Court
subsequently entered an amended default judgment against Vertical to award relief sought by
Mason Tenders in the FAC. (Dkt. No. 65.) Mason Tenders served Vertical with the amended
default judgment on March 8, 2017, again through an agent of the Secretary of State. (Dkt. No.
86-1.) As with the FAC, Vertical did not receive actual notice of the amended default judgment
through this service. (Frascone Aff. ¶ 23.)
Mason Tenders filed a Second Amended Complaint on February 21, 2017. (Dkt. No. 60
(“SAC”).) The SAC did not add any claims against Vertical (see SAC), but it did add Anthony
Frascone, President of Vertical (see SAC ¶ 15; Frascone Aff. ¶ 1), as an individual defendant in
the action. Frascone received service of the SAC via mail at his personal home address on
March 8, 2017 (Frascone Aff. ¶ 23; see also Dkt. No. 69), and he affirms that the first time he
had knowledge of the action against Vertical was upon receiving service of the SAC (Frascone
Aff. ¶ 23).
Frascone subsequently retained counsel (id. ¶ 24), and Vertical filed its first appearance
in the case on March 21, 2017 (Dkt. No. 70). On consent, this Court granted the defendants’
request for an extension of time to answer the SAC (see Dkt. Nos. 74‒75), and Vertical filed a
timely answer to the SAC on April 27, 2017 (Dkt. No. 79).

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Now before the Court are two motions: Vertical’s motion to set aside the default
judgment (Dkt. No. 80) and Mason Tenders’ motion to strike Vertical’s answer to the SAC (Dkt.
No. 85).
II.

Discussion
Under Federal Rule of Civil Procedure 60(b)(1), a court “may relieve a party or its legal

representative from a final judgment, order, or proceeding for . . . mistake, inadvertence,
surprise, or excusable neglect.” Although “final judgments should not ‘be lightly reopened,’”
Nemaizer v. Baker, 793 F.2d 58, 61 (2d Cir. 1986) (quoting Seven Elves, Inc. v. Eskenazi, 635
F.2d 396, 401 (5th Cir. 1981)), “[s]trong public policy favors resolving disputes on the merits,”
Am. All. Ins. Co. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996). “Accordingly, in ruling on a
motion to vacate a default judgment, all doubts must be resolved in favor of the party seeking
relief from the judgment in order to ensure that to the extent possible, disputes are resolved on
their merits.” New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005).
“A motion to vacate a default judgment is addressed to the sound discretion of the district
court,” and the inquiry is “guided principally by three factors: (1) whether the default was
willful, (2) whether the defendant demonstrates the existence of a meritorious defense, and (3)
whether, and to what extent, vacating the default will cause the nondefaulting party prejudice.”
S.E.C. v. McNulty, 137 F.3d 732, 738 (2d Cir. 1998). Each of these factors counsels in favor of
relieving Vertical from the default judgment.
First, Vertical’s default was not willful. In the context of a default judgment,
“‘willfulness’ . . . refer[s] to conduct that is more than merely negligent or careless.” Id. at 738.
In contrast to situations in which “the conduct of counsel or the litigant was egregious and was
not satisfactorily explained,” a defendant’s inadvertent mistake may be excusable. Id.; see also

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Am. All. Ins. Co., 92 F.3d at 61 (“The subjective inquiry into willfulness effectively distinguishes
those defaults that, though due to neglect, are excusable, from those that are not.”).
Vertical has offered a satisfactory explanation for its failure to answer the FAC: It never
knew that such a complaint existed. (See Frascone Aff. ¶ 23). Vertical made no efforts to
conceal its address from Mason Tenders—indeed, Vertical and Mason Tenders had several
exchanges of correspondence at Vertical’s new address. (See Dkt. No. 80-1 Exs. B, C.) And
upon learning of the action against it, Vertical moved promptly to respond to the SAC. As such,
this Court concludes that Vertical’s failure to update its address with the Secretary of State does
not indicate a willful or “strategic decision to default.” Am. All. Ins. Co., 92 F.3d at 60; cf. Swift
Spinning Mills v. B&H Apparel, No. 00 Civ. 652, 2003 WL 942610, at *2 (S.D.N.Y. Mar. 6,
2003), aff’d sub nom. Swift Spinning Mills, Inc. v. B & H Apparel Corp., 96 F. App’x 761 (2d
Cir. 2004) (concluding that the defendant’s failure to update its address was willful because “it
made no effort to notify anyone, including the Secretary of State, that it was changing its
address” and because “[t]he facts clearly show that [the defendant] was seeking to hinder its
creditor” (emphasis added)).
Second, Vertical has made a threshold showing of the availability of a meritorious
defense. “In order to make a sufficient showing of a meritorious defense in connection with a
motion to vacate a default judgment, the defendant . . . must present evidence of facts that, ‘if
proven at trial, would constitute a complete defense.’” McNulty, 137 F.3d at 740 (quoting Enron
Oil Corp. v. Diakuhara, 10 F.3d 90, 98 (2d Cir.1993)). The threshold for making this showing is
low. “A defense is meritorious if it is good at law so as to give the factfinder some determination
to make.” Am. All. Ins. Co., 92 F.3d at 61 (quoting Anilina Fabrique de Colorants v. Aakash
Chemicals and Dyestuffs, Inc., 856 F.2d 873, 879 (7th Cir. 1988)); see also Micolo v. Brennan,

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No. 07 Civ. 4901, 2009 WL 742729, at *10 (E.D.N.Y. Mar. 18, 2009) (“With respect to whether
the movant has a meritorious defense, the Defendant must go further than merely ‘alleging that a
defense exists.’ However, the threshold is very low—the movant need only present some
evidence demonstrating ‘that if relief is granted the outcome of the suit may be different than if
the entry of default or the default judgment is allowed to stand.’” (citations omitted) (first
quoting Dudley v. Pendagrass, No. 06 Civ. 216, 2008 WL 4790501, at * 4 (E.D.N.Y. Oct. 31,
2008)) (second quoting In re Martin–Trigona, 763 F.2d 503, 505 n.2 (2d Cir. 1985))).
Vertical offers two potentially meritorious complete defenses. First, it argues that it is
not subject to the terms of the collective bargaining agreement (“CBA”) because the company
was not incorporated until February 9, 2012—several months after Vertical is alleged to have
entered into the CBA. (Dkt. No 80 at 12.) In addition to offering an affidavit attesting to
Vertical’s date of incorporation (see Frascone Aff. ¶¶ 2‒3), Vertical has proffered an email from
2014 describing the execution of the CBA as a future, anticipated event (see Dkt. No. 80-1 Ex.
E). 1 Alternatively, Vertical has proffered an email to support the allegation that G. Fazio
Construction Company, the General Contractor, was ultimately responsible for payment. (See
Dkt. No. 80-1 Ex. F.) The Court need not draw any conclusions about the veracity of Vertical’s

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Mason Tenders responds that ERISA § 515 limits the defenses available to
employers who seek to allege that no valid collective bargaining agreement ever existed. (See
Dkt. No. 91 at 9.) One permissible defense, however, is “that the collective bargaining
agreement is void (not merely voidable).” Benson v. Brower’s Moving & Storage, Inc., 907 F.2d
310, 314 (2d Cir. 1990). Mindful that on a motion to vacate a default judgment “all doubts must
be resolved in favor of the party seeking relief from the judgment,” Green, 420 F.3d at 104, this
Court concludes that Vertical has, at this stage, sufficiently raised the possibility that Vertical
was never bound by the CBA.

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putative defenses; it is enough to conclude that Vertical has “present[ed] some evidence”
supporting a meritorious defense. 2 Micolo, 2009 WL 742729, at *10.
Third, Mason Tenders will not be unduly prejudiced by this Court’s decision to set aside
the default judgment. “Some delay is inevitable when a motion to vacate a default judgment is
granted; thus, ‘delay alone is not a sufficient basis for establishing prejudice.’ Something more
is needed.” Green, 420 F.3d at 110 (citations omitted) (quoting Davis v. Musler, 713 F.2d 907,
916 (2d Cir. 1983)). In this case, the delay occasioned by setting aside the default judgment will
not be especially lengthy or prejudicial. Mason Tenders filed its FAC on October 10, 2016, and
Vertical responded to the SAC on April 27, 2017—a delay of under seven months. (See Dkt.
Nos. 36, 79.) The case is still in its early stages; discovery never commenced with respect to
Vertical. See Haynes v. Zaporowski, No. 10 Civ. 224A, 2010 WL 3636205, at *2 (W.D.N.Y.
Sept. 15, 2010) (“Setting aside the default would not prejudice plaintiff in any way because
discovery never began and because no claim or argument from plaintiff would have to be
modified in response.”). And because Mason Tenders recently filed a second amended
complaint adding Defendant Frascone, additional discovery in the case is likely. (See Dkt. Nos.
93‒94, 101‒02.)
III.

Conclusion
For the foregoing reasons, Vertical’s motion to set aside the default judgment is

GRANTED, and Mason Tenders’ motion to strike is DENIED.

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Mason Tenders contends that a separate judgment has collaterally estopped
Vertical from arguing that it is not bound by the CBA. (See Dkt. No. 87 at 7; Dkt. No. 91 at 10.)
Vertical responds that the judgment in question—a judgment confirming a default arbitration
award—does not have preclusive effect because Vertical never received actual notice of the
arbitration and, as a result, did not have a full and fair opportunity to litigate the issue. (See Dkt.
No. 95 at 6‒7.) Without the benefit of full briefing and discovery, drawing a conclusion on the
issue of collateral estoppel at this time would be premature.
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The Clerk of Court is directed to close the motions at Docket Numbers 80 and 85.
SO ORDERED.
Dated: September 11, 2017
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge

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