Burdick v. Dufek
Filing
36
ORDER denying plaintiff's 11 Motion for Default Judgment; denying plaintiff's 18 Motion for Default Judgment; and granting defendant's 24 Motion to Vacate Entry of Default. Signed by US Magistrate Judge Veronica L. Duffy on 05/21/12. (Duffy, Veronica)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
KAREN BURDICK,
Plaintiff,
vs.
DAVID SEAN DUFEK,
d/b/a LAW OFFICE OF DAVID
SEAN DUFEK,
Defendant.
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CIV. 11-5071-JLV
ORDER GRANTING
DEFENDANT’S MOTION
TO VACATE ENTRY
OF DEFAULT AND DENYING
PLAINTIFF’S MOTION
FOR DEFAULT JUDGMENT
INTRODUCTION
Plaintiff Karen Burdick filed this lawsuit, invoking this court’s federal
question jurisdiction under 28 U.S.C. § 1331 and pursuant to 15 U.S.C.
§ 1692k(d), and alleging that defendant David Sean Dufek violated the Fair
Debt Collection Practices Act (FDCPA”). See Docket No. 1. Defendant did not
answer her complaint within 21 days after service of the summons and
complaint as required under Fed. R. Civ. P. 12(a)(1)(A)(I). Ms. Burdick
accordingly obtained the Clerk’s Entry of Default on February 22, 2012.
See Docket No. 16. Ms. Burdick now moves the court for entry of default
judgment against Mr. Dufek. See Docket Nos. 11, 18. Mr. Dufek moves to
vacate the Clerk’s Entry of Default by Mr. Dufek and opposes the plaintiff’s
motion for entry of default judgment against him. See Docket No. 24. The
district court, the Honorable Jeffrey L. Viken, referred these motions to this
magistrate judge for resolution pursuant to 28 U.S.C. § 636(b)(1)(A). See
Docket No. 66.
FACTS
The facts pertinent to the motions pending before this court are as
follows. Ms. Burdick’s verified complaint alleges claims under the Fair Debt
Collection Practices Act, 15 U.S.C. § 1692 et seq., (hereinafter “FDCPA”) against
Mr. Dufek. See Docket No. 1. Mr. Dufek was personally served with the
summons and complaint on September 21, 2011. See Docket No. 10. After
receiving the summons and complaint, Mr. Dufek contacted counsel for
Ms. Burdick in an effort to resolve the matter before answering the complaint.
See Docket No. 29 at ¶ 18. However, Mr. Dufek and counsel for Ms. Burdick
were unable to resolve the matter. Mr. Dufek then made an offer of judgment
(Docket No. 9), which Ms. Burdick rejected. Thereafter, Mr. Dufek did not file
an answer to the complaint.
On February 17, 2012, counsel for Ms. Burdick filed a motion for entry of
default and default judgment. See Docket No. 11. On February 22, 2012, the
Clerk of Court filed an entry of default pursuant to Federal Rule of Civil
Procedure 55. See Docket No. 16. On February 24, 2012, Ms. Burdick filed a
second motion for default judgment pursuant to Rule 55(b)(2). See Docket
No. 18.
2
On February 28, 2012, Mr. Dufek filed a motion to vacate entry of
default, a motion for relief from D.S.D. Civ. LR 7.1, and leave to file a brief and
additional affidavits. See Docket Nos. 24-25. The district court granted
Mr. Dufek's motion for leave to file a brief and additional affidavits.
Before the court now is Ms. Burdick’s motion for default judgment. See
Docket No. 18. Mr. Dufek opposes the motion for default judgment and has
also filed a motion to vacate the Clerk of Court’s entry of default previously
entered on February 22, 2012. See Docket No. 24.
DISCUSSION
The summons in this case properly set forth the obligations of Mr. Dufek
following service of the summons and complaint. See Docket No. 4. “Within 21
days after service of this summons on you (not counting the day your receive it)
... you must serve on the plaintiff an answer to the attached complaint or a
motion under Rule 12 of the Federal Rules of Civil Procedure ... You must also
file your answer or motion with the court.” Id.
“When a party has ‘failed to plead or otherwise defend’ against a pleading
listed in Rule 7(a) [a compliant], entry of default under Rule 55(a) must precede
grant of default judgement under Rule 55(b).” Johnson v. Dayton Elec. Mfg.
Co., 140 F.3d 781, 783 (8th Cir. 1998). In the event a defendant fails to timely
file an answer or other responsive pleading, “the clerk must enter the party’s
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default.” Fed. R. Civ. P. 55(a). In this case, the Clerk of Court filed entry of
default in favor of Ms. Burdick on February 22, 2012. See Docket No. 16.
Federal Rule of Civil Procedure 55(c) governs setting aside the entry of
default. Under Rule 55, “[t]he court may set aside an entry of default for good
cause, and it may set aside a default judgment under Rule 60(b).” Although
the same factors are typically relevant in deciding whether to set aside entries
of default and default judgments, “most decisions...hold that relief from a
default judgment requires a stronger showing of excuse than relief from a mere
default order.” Johnson, 140 F.3d at 783 (citing Connecticut Nat’l Mortg. Co.
v. Brandstatter, 897 F.2d 883, 885 (7th Cir. 1990)). “This is a sound
distinction. There is a judicial preference for adjudication on the merits, and it
is likely that a party who promptly attacks an entry of default, rather than
waiting for a grant of a default judgment, was guilty of an oversight and wishes
to defend the case on the merits.” Id. (citing Oberstar v. F.D.I.C., 987 F.2d
494, 504 (8th Cir. 1993)). Mr. Dufek is entitled to the more lenient “good
cause” standard when considering his motion to set aside the entry of default.
When examining whether good cause exists, courts weigh three factors:
“whether the conduct of the defaulting party was blameworthy or culpable,
whether the defaulting party has a meritorious defense, and whether the other
party would be prejudiced if the default were excused.” Johnson, 140 F.3d at
784. The court will examine each of these factors in turn.
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A.
Conduct of Mr. Dufek
“In deciding whether to set aside a default judgment for ‘excusable
neglect,’ ” the court “ought not to focus narrowly on the negligent act that
caused the default and ask whether the act was itself in some sense excusable.
Instead the court should take account of ‘all relevant circumstances
surrounding the party’s omission....’ ” Union Pac. R.R. Co. v. Progress Rail
Serv. Corp., 256 F.3d 781, 781 (8th Cir. 2001) (citing Pioneer Inv. Serv. Co. v.
Brunswick Assoc. Ltd. P’ship, 507 U.S. 380, 395 (1993)). “The inquiry is
essentially an equitable one,” and the “court is required to engage in a careful
balancing of multiple considerations, including ‘the danger of prejudice to the
[non-moving party], the length of the delay and its potential impact on judicial
proceedings, the reason for the delay, including whether it was within the
reasonable control of the movant, and whether the movant acted in good faith.”
Id. (citing Pioneer Inv. Serv. Co., 507 U.S. at 395).
The Eight Circuit has “consistently sought to distinguish between
contumacious or intentional delay or disregard for deadlines and procedural
rules, and a ‘marginal failure’ to meet pleading or other deadlines.” Johnson,
140 F.3d at 784. The Eight Circuit has “rarely, if ever, excused the former.
But...[has] often granted Rule 55(c) and Rule 60(b) relief for marginal failures
when there were meritorious defenses and an absence of prejudice.” Id.
5
In this case, Mr. Dufek is a licensed attorney and should therefore be
familiar with the legal process of defending a claim. Mr. Dufek’s reason for
failing to respond to the complaint in accordance with the time limits provided
by the Federal Rules of Civil Procedure is premised on his belief that he was
only liable for a technical violation of the FDCPA and his determination that
Ms. Burdick suffered no actual damages. Thus, Mr. Dufek assumed that his
exposure would be limited to the $1,000 civil penalty pursuant to 15 U.S.C.
§ 1962k(a)(2) and reasonable attorney’s fees.
After receiving the complaint, Mr. Dufek asserts that he investigated the
claim by listening to recordings of the telephone calls that form the basis of
Ms. Burdick’s claim. Mr. Dufek determined that while some technical
violations of the FDCPA did occur,1 Ms. Burdick suffered no actual damages as
a result of these technical violations. Mr. Dufek then contacted counsel for
Ms. Burdick in an attempt to settle the issue prior to answering the complaint.
However, no such settlement was reached. Additionally, Mr. Dufek filed a offer
of judgment, which was rejected by Ms. Burdick.
Following his unsuccessful attempts to settle the matter, Mr. Dufek
chose not to answer the complaint and await entry of default judgment under
1
Mr. Dufek’s admits that his employee failed to state: “This
communication is an attempt to collect a debt, any information gathered will be
used for that purpose” on four different voice mail messages left for
Ms. Burdick. Failure to include this specific reference in the voicemail violates
15 U.S.C. § 1692e(11).
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the assumption that the default judgment requested would be limited to the
$1,000 civil penalty and reasonable attorney’s fees. After the entry of default
was ordered on February 22, 2012, and realizing that Ms. Burdick was
requesting not only the $1,000 civil penalty, but $25,000 in actual damages
and $13,642.95 in attorney’s fees,2 Mr. Dufek immediately hired counsel who
promptly filed a motion to vacate the entry of default.
Mr. Dufek asserts that he attempted in good faith to resolve the matter
prior to the deadline for filing his answer while also minimizing litigation
expenses for both parties. However, once settlement negotiations ceased,
Mr. Dufek essentially determined that it would cost him less to allow the entry
of default against him and pay the civil penalty and attorney’s fees rather than
incur additional litigation costs. “Without attempting to fix blame, the ...
conduct of [Mr. Dufek] was careless, risking precisely the adverse result
rendered by the [Clerk of Court]. But it was not contumacious, it did not
exhibit an intentional flouting or disregard for the court and its procedures,
and it only briefly delayed the litigation.” Johnson, 140 F.3d at 784-85. While
this court certainly does “not approve of this sort of cavalier approach to
litigation, ... [Mr. Dufek is] guilty of only a marginal failure for which relief from
default should be granted if [Mr. Dufek] has a meritorious defense and
[Ms. Burdick] will not suffer prejudice.” Id. (emphasis in original).
2
Counsel for Ms. Burdick is now seeking $18,662.46 in attorney’s fees.
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B.
Existence Of A Meritorious Defense
Whether a meritorious defense exists is an important factor in the
analysis. “Such a showing underscore[s] the potential injustice of allowing the
case to be disposed of by default, ... thus triggering the incessant command of
a court’s conscience that justice be done in light of all the facts.” Johnson, 140
F.3d at 784 (internal citations and quotations marks omitted). Whether a
meritorious defense exists is determined by examining “whether the proffered
evidence ‘would permit a finding for the defaulting party.’ ” Id. at 785 (quoting
Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843 F.2d 808,
812 (4th Cir. 1988)). “The underlying concern is ... whether there is some
possibility that the outcome ... after a full trial will be contrary to the result
achieved by the default.” Stephenson v. El-Batrawi, 524 F.3d 907, 914 (8th
Cir. 2008) (quotations omitted). Significantly, “[t]he issue is whether the
proffered evidence would permit a finding for the defaulting party, not whether
it is undisputed.” Johnson, 140 F.3d at 785 (quotation omitted).
Based on the complaint, Ms. Burdick’s single cause of action alleges that
Mr. Dufek’s employees violated the FDCPA by: (1) telling Ms. Burdick she must
refinance her home, cash in her retirement accounts, or borrow money from
family and friends to satisfy the debt in full immediately, in violation of
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15 U.S.C. §§ 1692d,3 1692e,4 and 1692f;5 (2) contacting Ms. Burdick’s daughter
and disclosing Ms. Burdick’s debt to her, in violation of 15 U.S.C. § 1692c;6
3) lying to Ms. Burdick’s daughter by telling her that Ms. Burdick had provided
her daughter’s telephone number as Ms. Burdick’s residence, in violation of
15 U.S.C. §§ 1695d, 1692e, and 1692f; and (4) improperly contacting
Ms. Burdick at her place of employment and disclosing information regarding
her financial information to her supervisor, in violation of 15 U.S.C.
§§ 1692c(b),7 1692d, and 1692f. See Docket No. 1 at ¶¶ 12, 14-16, 20.
3
“A debt collector may not engage in any conduct the natural
consequence of which is to harass, oppress, or abuse any person in connection
with the collection of a debt.” 15 U.S.C. § 1692d.
4
“A debt collector may not use any false, deceptive, or misleading
representation or means in connection with the collection of any debt.”
15 U.S.C. § 1692e.
5
“A debt collector may not use unfair or unconscionable means to collect
or attempt to collect any debt.” 15 U.S.C. § 1692f.
6
“Without prior consent of the consumer given directly to the debt
collector or the express permission of a court of competent jurisdiction, a debt
collector may not communicate with a consumer in connection with the
collection of any debt - (1) at an unusual time or place or a time or place known
or which should be known to be inconvenient to the customer....(3) at the
consumer’s place of employment if the debt collector knows or has reason to
know that the consumer’s employer prohibits the consumer from receiving
such communication.” 15 U.S.C. § 1692c.
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“Except as provided in § 1692b of this title, without the prior consent of
the consumer given directly to the debt collector, or the express permission of a
court of competent jurisdiction, or as reasonably necessary to effectuate a
postjudgment judicial remedy, a debt collector may not communicate, in
connection with the collection of any debt, with any person other than the
consumer, his attorney, a consumer reporting agency if otherwise permitted by
9
Mr. Dufek’s brief in support of his motion to vacate entry of default and
opposing Ms. Burdick’s motion for entry of default judgment articulates
Mr. Dufek’s potentially meritorious claim to each of these allegations.
See Docket No. 28. Again, “[t]he issue is whether the proffered evidence would
permit a finding for the defaulting party, not whether it is undisputed.”
Johnson, 140 F.3d at 785 (quotation omitted).
As set forth in Mr. Dufek’s brief, Mr. Dufek asserts that his employees
did not tell Ms. Burdick that she would be required to refinance her home,
cash in her retirement accounts, or borrow money to satisfy the debt in full
immediately. Rather, Mr. Dufek asserts that the recorded telephone calls show
that these were made as mere suggestions of possible sources of funds in order
to satisfy the debt. Mr. Dufek asserts that merely suggesting possible sources
of funds does not violate the FDCPA. Additionally, Mr. Dufek asserts that the
recorded conversations indicate that no other false, deceptive, or misleading
representations were made to Ms. Burdick in attempting to resolve her debt.
Mr. Dufek also asserts that his employees never disclosed Ms. Burdick’s
debt to her daughter and that they did not intentionally call Ms. Burdick’s
daughter’s home knowing that it was not a valid contact number for
Ms. Burdick. Rather, Mr. Dufek asserts that the number for Ms. Burdick’s
law, the creditor, the attorney for the creditor, or the attorney of the debt
collector.” 15 U.S.C. § 1692c(b).
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daughter’s home was provided to them in a file and was listed as an alternative
number for Ms. Burdick. Mr. Dufek does admit that the message left on
Ms. Burdick’s daughter’s answering machine did indicate that the call was an
attempt to resolve an account and that if this was heard by Ms. Dufek’s
daughter that it would be a violation of 15 U.S.C. § 1692c(b). However,
Mr. Dufek asserts that no identifying name was provided on the answering
machine and that he did not know the number was for Ms. Burdick’s daughter
and not for Ms. Burdick. Thus, Mr. Dufek asserts that even if a violation of
the FDCPA occurred that he would be entitled to the “bona fide error defense”
because the violation was not intentional and occurred despite procedures
adopted to avoid such errors. Finally, Mr. Dufek asserts that once he was
made aware that the telephone number for Ms. Burdick’s daughter was not
associated with Ms. Burdick, no further calls were made to that number.
Ms. Burdick also alleges that Mr. Dufek's employees lied to her daughter
by telling her that Ms. Burdick had provided her daughter’s telephone number
as a number for Ms. Burdick. Mr. Dufek asserts that the recorded telephone
conversation shows that his employee did not say that Ms. Burdick had
provided the number as her own, but rather stated that the number was
marked in the file as Ms. Burdick’s home number. Thus, Mr. Dufek asserts
that no violation of the FDCPA occurred as a result of the conversation between
Mr. Dufek’s employee and Ms. Burdick’s daughter.
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Finally, with regards to Ms. Burdick’s allegation that Mr. Dufek called
her place of employment and disclosed Ms. Burdick’s personal information
concerning her financing, Mr. Dufek asserts that Ms. Burdick provided her
employer as a contact number and that simply calling her employer was not a
violation because Mr. Dufek had no reason to know that the employer
prohibited such calls. Furthermore, Mr. Dufek asserts that his employee only
actually spoke with Ms. Burdick’s employer on one occasion and that the
recorded telephone conversation indicates that Mr. Dufek’s employee did not
disclose any of Ms. Burdick’s personal financial information to Ms. Burdick’s
employer. Additionally, Mr. Dufek asserts that his employee only disclosed
that they were calling from a law office when asked to leave a message.
Mr. Dufek has provided sufficient “factual support to illustrate the
potential viability of [his] asserted defenses.” Stephensen, 524 F.3d at 914.
Again, “[t]he issue is whether the proffered evidence would permit a finding for
the defaulting party, not whether [the proffered evidence] is undisputed.”
Johnson, 140 F.3d at 785 (quotation omitted). Disputes between Ms. Burdick
and Mr. Dufek concerning the facts of this case are not for this court to decide.
However, if Mr. Dufek’s filings are accurate, “the proffered evidence would
permit a finding for the defaulting party.” Id.
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C.
Prejudice To Ms. Burdick
“Delay alone, or the fact the defaulting party would be permitted to
defend on the merits, are insufficient grounds to establish the requisite
prejudice to the plaintiff....‘Setting aside a default must prejudice plaintiff in a
concrete way, such as loss of evidence, increased difficulties in discovery, or
greater opportunities for fraud and collusion.’ ” Stephenson, 524 F.3d at 915
(quoting Johnson, 140 F.3d at 785).
Ms. Burdick asserts that prejudice exists for a number of reasons.
Ms. Burdick asserts that given the circumstances of this case, she believes
there is “a measurable risk that critical evidence to prove Plaintiff’s claims
might be lost or not fully disclosed by Defendant.” See Docket No. 32 at 12.
Those circumstances include the following: Mr. Dufek’s decision not to answer
the complaint and proceed with discovery; Mr. Dufek’s decision to offer the
transcript of the telephone conversations with Ms. Burdick in lieu of providing
the actual recordings; the fact that Mr. Dufek is the sole possessor of the
recordings; the fact that the affidavit of Natalie Solomon, which contains the
transcriptions of the telephone calls, indicates that the calls were transcribed
to the “best of [her] ability;” and the fact that Natalie Solomon’s transcription of
the calls contradicts the affidavit of Ms. Haskell on a material issue.
Ms. Burdick places significant weight on the fact that Ms. Solomon’s
affidavit indicates that she transcribed that recorded telephone calls to the
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“best of [her] ability” and also asserts that her affidavit is “highly suspect.”
Ms. Burdick looks at the statement - “best of my ability” - as a “disclaimer”
rather than an indication that Ms. Solomon acted in good faith in transcribing
the recorded calls. Additionally, the only reason provided by Ms. Burdick as to
why Ms. Solomon’s affidavit is “highly suspect” is because she disagrees with
Ms. Haskell’s affidavit as to the facts regarding a telephone conversation.
However, as indicated above, whether the proffered evidence is disputed is not
the issue. See Johnson, 140 F.3d at 785.
Mr. Dufek asserts that Ms. Burdick will suffer no prejudice as a result of
vacating the entry of default. Mr. Dufek asserts that the telephone recordings
are still in existence. See Docket No. 28 at 16. There is no indication in the
record, and Ms. Burdick has provided none, to show that evidence will be lost
or that Mr. Dufek will destroy critical evidence. The court will not assume that
to be the case. The court finds that there is no prejudice to Ms. Burdick by
vacating the entry of default.
CONCLUSION
Based on the foregoing discussion, the court finds “good cause exists”
and that the three factors set forth in Johnson weigh in favor of granting
defendant’s motion to vacate the entry of default. Therefore, this court grants
defendant’s motion to vacate the entry of default [Docket No. 24] and denies
plaintiff’s motions [Docket Nos. 11 and 18] for default judgment.
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NOTICE OF RIGHT TO APPEAL
Pursuant to 28 U.S.C. § 636(b)(1)(A), any party may seek reconsideration
of this order before the district court upon a showing that the order is clearly
erroneous or contrary to law. The parties have fourteen (14) days after service
of this order to file written objections pursuant to 28 U.S.C. § 636(b)(1)(A),
unless an extension of time for good cause is obtained. See Fed. R. Civ. P.
72(a); 28 U.S.C. § 636(b)(1)(A). Failure to file timely objections will result in
the waiver of the right to appeal questions of fact. Id. Objections must be
timely and specific in order to require review by the district court. Thompson
v. Nix, 897 F.2d 356 (8th Cir. 1990); Nash v. Black, 781 F.2d 665 (8th Cir.
1986).
Dated May 21, 2012.
BY THE COURT:
/s/
Veronica L. Duffy
VERONICA L. DUFFY
UNITED STATES MAGISTRATE JUDGE
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