Chain et al v. Land-Air Express of New England, Ltd.

Filing 280

ORDER ADOPTING REPORT AND RECOMMENDATION: Having conducted a de novo review of the magistrate judge's thorough and well-reasoned R&R, as well as plaintiffs' objections, the applicable case law, and the underlying record, the Court conclu des the default judgment as to liability previously entered against Land-Air must be vacated, and the action against Land-Air must be dismissed. Accordingly, plaintiffs' objections to the R&R are OVERRULED, and the Court adopts the R&R as the op inion of the Court. The default judgment as to liability previously entered against Land-Air (Doc. #13) is VACATED, and the action against Land-Air Express of New England, Ltd., is DISMISSED. The parties' respective requests for sanctions are DENIED. The Clerk is instructed to close this case. SO ORDERED. Land-Air Express of New England, Ltd. terminated. (Signed by Judge Vincent L. Briccetti on 11/1/2021) (mml)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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VICTOR J. CHAIN, JR., PETER HAYWARD,
:
GILBERT LEWIS, ANTHONY L. PLATONI,
:
and OWEN TAYLOR, on behalf of themselves
:
and all others similarly situated,
:
Plaintiffs,
:
:
v.
:
:
NORTH EAST FREIGHTWAYS, INC. d/b/a
:
Land Air Express; LAX, LLC; and
:
LAND-AIR EXPRESS OF NEW ENGLAND,
:
LTD.,
:
Defendants.
:
--------------------------------------------------------------x

ORDER ADOPTING
REPORT AND
RECOMMENDATION
16 CV 3371 (VB)

Briccetti, J.:
Before the Court is Magistrate Judge Judith C. McCarthy’s Report and Recommendation
dated December 18, 2020 (Doc. #258, at pages 33-39) (“R&R”), to which plaintiffs filed timely
objections. Also pending are defendants North East Freightways, Inc. d/b/a Land Air Express
(“NEF”), and LAX, LLC’s (“LAX”), and plaintiffs’ respective requests for sanctions against
each other.
In the R&R, Judge McCarthy recommended that the default judgment as to liability this
Court previously entered against defendant Land-Air Express of New England, Ltd. (“LandAir”), be vacated and that the action against Land-Air be dismissed.
For the following reasons, the Court overrules plaintiffs’ objections and adopts the R&R
in its entirety as the opinion of the Court.
The Court also denies the parties’ respective requests for sanctions.

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DISCUSSION
I.

Background
The Court presumes the parties’ familiarity with the factual and procedural background

of this case and only recites it to the extent necessary.
On May 6, 2016, plaintiffs commenced this action against defendant Land-Air seeking
damages pursuant to the federal Worker Adjustment and Retraining Notification Act, the New
York Worker Adjustment and Retraining Notification Act, and the New Jersey Millville Dallas
Airmotive Plant Job Loss Notification Act (collectively, the “WARN Acts”), based on LandAir’s alleged failure to provide statutorily-required advance notice of plaintiffs’ terminations
stemming from Land-Air’s plant closings in January 2016. (Doc. #1).
On August 22, 2016, this Court entered a default judgment as to liability against LandAir for failing to answer or otherwise respond to the complaint. (Doc. #13). The Court also
referred the matter to Judge McCarthy to conduct an inquest as to damages, attorney’s fees, and
costs in connection with the default judgment. (Id.).
On May 3, 2017, plaintiffs filed an Amended Complaint, naming as defendants NEF and
LAX, as well as Land-Air. (Doc. #30).
On September 30, 2019, defendants NEF and LAX and plaintiffs signed and filed a
Notice, Consent, and Reference of a Civil Action to a Magistrate Judge. (Doc. #156).
Accordingly, on October 1, 2019, this Court referred the case to Judge McCarthy to conduct all
proceedings and order the entry of a final judgment in accordance with 28 U.S.C. § 636(c) and
Fed. R. Civ. P. 73. (Doc. #157). At this point in the case, Land-Air was still in default.

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Judge McCarthy held a bench trial from July 20 to July 24, 2020. On December 18,
2020, she issued an Opinion and Order, which contained the R&R, concluding the requisite
number of employees did not suffer an employment loss due to one of Land-Air’s terminal
closures, and thus, the WARN Acts’ notice requirement was not triggered. Judge McCarthy
further concluded that even if plaintiff had established the WARN Acts’ numerosity
requirements had been met, defendants NEF and LAX would not be liable as successor entities
of Land-Air. (Doc. #258); Chain v. N. E. Freightways, Inc., 2020 WL 7481142 (S.D.N.Y. Dec.
18, 2020).
In addition, Judge McCarthy recommended that this Court vacate the August 22, 2016,
default judgment against Land-Air as to liability because plaintiffs’ claim against defendants
NEF and LAX “rests on the premise that Land-Air is liable for violating the WARN Acts,” a
premise “inconsistent with [Judge McCarthy’s] findings after the bench trial” that the WARN
Acts’ notice requirements were not triggered. Chain v. N. E. Freightways, Inc., 2020 WL
7481142, at *15. 1 Thus, Judge McCarthy concluded, the default judgment against Land-Air as
to liability presents an “incongruity” with the factual findings made at the bench trial and is
“unauthorized by law.” (Id. (quoting Frow v. De La Vega, 82 U.S. 552, 554 (1872)). Judge
McCarthy also recommended that the Court dismiss the action against Land-Air.
To date, Land-Air has not appeared or otherwise taken any action in this case.
II.

Standard of Review
A district court reviewing a magistrate judge’s report and recommendation “may accept,

reject, or modify, in whole or in part, the findings or recommendations made by the magistrate

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Unless otherwise indicated, case quotations omit all internal citations, quotations,
footnotes, and alterations.
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judge.” 28 U.S.C. § 636(b)(1). Parties may raise objections to the magistrate judge’s report and
recommendation, but they must be “specific[,] written,” and submitted within fourteen days after
being served with a copy of the recommended disposition. Fed. R. Civ. P. 72(b)(2); 28 U.S.C.
§ 636(b)(1).
When a party submits a timely objection to a report and recommendation, the district
court reviews de novo those portions of the report and recommendation to which the party
objected. 28 U.S.C. § 636(b)(1)(C); Fed. R. Civ. P. 72(b)(3). The district court may adopt those
portions of the recommended ruling to which no timely objections have been made, provided no
clear error is apparent from the face of the record. See Wilds v. United Parcel Serv., Inc., 262 F.
Supp. 2d 163, 169 (S.D.N.Y. 2003). The clearly erroneous standard also applies when a party
makes only conclusory or general objections, or simply reiterates his original arguments. See
Ortiz v. Barkley, 558 F. Supp. 2d 444, 451 (S.D.N.Y. 2008).
III.

Plaintiffs’ Objections
Plaintiffs contend Judge McCarthy’s recommendation that the default judgment against

Land-Air as to liability be vacated was based on “factual mistakes and errors of law,” namely
that (i) the applicability of the WARN Acts was at issue after Land-Air defaulted, (ii) even
assuming the applicability of the WARN Acts was at issue, the WARN Acts’ numerosity
threshold was not met, and (iii) Frow v. De La Vega requires that the default judgment against
Land-Air be vacated. Put another way, plaintiffs argue that if Judge McCarthy had not
determined the WARN Acts’ applicability was at issue (because Land-Air had defaulted and the
allegations of the complaint should have been deemed true and accepted) or if she had not
determined that the WARN Acts’ numerosity requirements had not been met, there would be no
inconsistency between her decision after trial and this Court’s entry of default judgment against

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Land-Air. Defendants respond that these objections go beyond the narrow scope of Judge
McCarthy’s R&R.
Having carefully reviewed the R&R and the underlying record de novo as to plaintiffs’
specific objections, the Court finds plaintiffs’ objections to be without merit.
As an initial matter, Judge McCarthy’s R&R to this Court respected only whether Frow
v. De La Vega dictates that the default judgment as to liability against Land-Air be vacated as
unauthorized by law. To the extent plaintiffs object to the judgment in favor of defendants NEF
and LAX, such objections are not properly before this Court because defendants NEF and LAX
and plaintiffs consented to conduct all proceedings before Judge McCarthy. Accordingly, the
Court will not consider those objections. See Roell v. Withrow, 538 U.S. 580, 585 (2003) (“[A]
§ 636(c)(1) referral gives the magistrate judge full authority over dispositive motions, conduct of
trial, and entry of final judgment, all without district court review. A judgment entered by a
magistrate judge designated to exercise civil jurisdiction under § 636(c)(1) is to be treated as a
final judgment of the district court, appealable in the same manner as an appeal from any other
judgment of a district court.”) (citing § 636(c)(3)). 2

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To the extent plaintiffs take issue with Land-Air’s lack of consent to conduct any
proceeding in front of Magistrate Judge McCarthy, the “Second Circuit has not addressed
whether referral to a magistrate judge for all purposes is appropriate where, as here, all parties
that have appeared—but not all named parties—have consented to the jurisdiction of a
magistrate judge for all purposes.” Ideavillage Prod. Corp. v. Antiker, 2021 WL 1987382, at *1
(S.D.N.Y. May 17, 2021) (declining to refer case to magistrate judge where plaintiff had not yet
moved for default judgment against non-appearing defendants). “The law is clear, however, that
a magistrate judge cannot enter default judgment against a party absent the defaulting party’s
consent to the jurisdiction of the magistrate judge to enter final judgment.” Id. at *2.
Accordingly, Judge McCarthy correctly made a report and recommendation to this Court
regarding the default judgment against Land-Air. See Laboratorios Rivas, SRL v. Ugly &
Beauty, Inc., 2013 WL 5977440, at *1 n.1 (S.D.N.Y. Nov. 12, 2013) (submitting R&R on
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Moreover, even if, as plaintiffs contend, the allegations of the original complaint must
have been accepted as true upon Land-Air’s default, the story of this case did not end at LandAir’s default. Plaintiffs thereafter filed an amended complaint, in which LAX and NEF—in
addition to Land-Air—were alleged to have violated the WARN Acts. Unlike Land-Air, LAX
and NEF did appear in this case. They were entitled to go to trial and require plaintiffs to prove
by a preponderance of the evidence that the WARN Acts had been violated. Indeed, the original
complaint contained no allegations about LAX or NEF or whether they violated the WARN
Acts. Said otherwise, even if the allegations of the original complaint were accepted as true, this
did not mean that the allegations of the amended complaint did not need to be proven at trial.
Thus, Judge McCarthy’s consideration of whether the WARN Acts applied, even though
defendant Land-Air had defaulted, was not improper. Cf. In re Indus. Diamonds Antitrust Litig.,
119 F. Supp. 2d 418, 420 (S.D.N.Y. 2000) (“While a default constitutes an admission of all the
facts ‘well pleaded’ in the complaint, it does not admit any conclusions of law alleged therein,
nor establish the legal sufficiency of any cause of action.”); 1199 SEIU United Healthcare
Workers E. v. S. Bronx Mental Health Council, Inc., 2013 WL 6003731, at *2 (S.D.N.Y. Nov.
13, 2013), report and recommendation adopted sub nom. 1199/SEIU United Healthcare Workers
E. v. S. Bronx Mental Health Council Inc., 2013 WL 6244716 (S.D.N.Y. Dec. 3, 2013) (“When
defendants default, all of the facts alleged in the complaint, except those relating to the amount
of damages, must be accepted as true. . . . Nonetheless, a court must still satisfy itself that the
plaintiff has established a sound legal basis upon which liability may be imposed.”).

motion for default judgment because “the defaulting party[] has not consented to my
jurisdiction”), report and recommendation adopted, 2014 WL 112397 (S.D.N.Y. Jan. 8, 2014).

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On the issue of whether Frow v. De La Vega necessitates vacatur of the default judgment
as to liability against Land-Air, the Court agrees with Judge McCarthy that “the default judgment
presents an incongruity with the factual findings made at the bench trial and therefore is
unauthorized by law.” Chain v. N. E. Freightways, Inc., 2020 WL 7481142, at *15. Plaintiffs’
argument that Frow v. De La Vega applies only when plaintiffs have pleaded defendants are
jointly liable is not persuasive. “[C]ourts within this Circuit have continued to cite Frow v. De
La Vega as relevant authority, even in cases that do not involve true joint liability.” See El
Omari v. Buchanan, 2021 WL 465431, at *2 (S.D.N.Y. Feb. 9, 2021). “The key inquiry is
whether the default judgment could result in inconsistent outcomes for similarly situated
defendants.” Id. at *3. Here, allowing the default judgment as to liability against Land-Air to
stand would result in an outcome inconsistent with Judge McCarthy’s findings after the bench
trial that the WARN Acts’ numerosity requirements were not triggered. Thus, the default
judgment as to liability against Land-Air shall be vacated. See Beom Su Lee v. Karaoke City,
2020 WL 2036706, at *1 (S.D.N.Y. April 28, 2020) (“A district court may sua sponte . . . revisit
[and vacate] an award of a default judgment as to liability when a damages inquest has yet to be
completed.”).
Accordingly, the Court adopts the R&R as the opinion of the Court.
IV.

Cross Motions for Sanctions
Defendants argue they are entitled to an award of sanctions against plaintiffs and its

counsel under 28 U.S.C. § 1927 because “Plaintiffs’ objection to the factual findings
underpinning Judge McCarthy’s WARN Act Opinion and Order needlessly expands the scope of
this litigation.” (Doc. #270 (“Defs. Resp.”) at 5). Plaintiffs argue defendants’ counsel should be

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sanctioned because defendants’ request for sanctions was unfounded and has needlessly
expanded the scope of this litigation.
The Court disagrees with both sets of parties.
“A district court has inherent power to award attorneys’ fees against the offending party
and his attorney when it determines a party has acted in bad faith, vexatiously, wantonly, or for
oppressive reasons.” Agee v. Paramount Commc’ns, Inc., 114 F.3d 395, 398 (2d Cir. 1997).
“Similarly, under 28 U.S.C. § 1927, the court may require any attorney to pay costs if he or she
so multiplies the proceedings in any case unreasonably and vexatiously.” Id. “To impose
sanctions under either authority, the trial court must find clear evidence that (1) the offending
party’s claims were entirely meritless and (2) the party acted for improper purposes.” Id.
Here, there is no clear evidence either set of parties’ claims were entirely meritless or
either acted for improper purposes.
Accordingly, the Court will not impose sanctions against any party.

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CONCLUSION
Having conducted a de novo review of the magistrate judge’s thorough and well-reasoned
R&R, as well as plaintiffs’ objections, the applicable case law, and the underlying record, the
Court concludes the default judgment as to liability previously entered against Land-Air must be
vacated, and the action against Land-Air must be dismissed.
Accordingly, plaintiffs’ objections to the R&R are OVERRULED, and the Court adopts
the R&R as the opinion of the Court. The default judgment as to liability previously entered
against Land-Air (Doc. #13) is VACATED, and the action against Land-Air Express of New
England, Ltd., is DISMISSED.
The parties’ respective requests for sanctions are DENIED.
The Clerk is instructed to close this case.
Dated: November 1, 2021
White Plains, NY

SO ORDERED:

____________________________
Vincent L. Briccetti
United States District Judge

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