Nash v. FOXO Technologies Inc.

Background

John Nash sued FOXO Technologies Inc. over FOXO’s alleged breach of a September 20, 2022 promissory note. FOXO did not timely respond to the complaint. The Clerk entered a Certificate of Default on August 22, 2024.

The court later issued an order requiring FOXO to show why a default judgment should not be entered. On December 12, 2024, the court entered a default judgment as to liability in Nash’s favor and referred the case for an inquiry into damages and any other relief. The opinion explains that this was not a final default judgment because damages had not yet been determined.

On December 31, 2024, FOXO appeared through counsel and moved under Federal Rule of Civil Procedure 55(c) to vacate the Certificate of Default. FOXO also moved under Rule 6(b)(2) for more time to answer the complaint.

Legal standard

For an entry of default, Rule 55(c) allows a court to set aside the default for “good cause.” Courts consider three main factors: whether the default was willful, whether the defendant has a potentially meritorious defense, and whether setting aside the default would prejudice the other party. The standard for setting aside an entry of default is less demanding than the standard for setting aside a final default judgment. Courts also generally favor resolving cases on their merits.

Court’s analysis

The court found that FOXO’s default was not willful. FOXO’s current chief executive officer stated that FOXO’s Delaware registered agent did not have current contact information and that neither FOXO’s former chief executive officer nor anyone else in management received the summons and complaint. The court characterized FOXO’s failure as negligence, not deliberate conduct. The court also noted that, after FOXO learned of the case and its management changed, the new chief executive officer promptly retained counsel.

The court found that FOXO had shown a potentially meritorious defense. A written amendment approved by holders of more than 50.01% of the Senior PIK Notes provided for those notes to be exchanged for preferred stock and then canceled and satisfied in full after shareholder approval of a related conversion. FOXO’s shareholders approved that conversion on January 17, 2025. The opinion stated that, under the amendment, Nash’s note would be canceled and satisfied in full on January 21, 2025, and that the lawsuit therefore appeared likely to become moot.

The court found no demonstrated prejudice to Nash. Although Nash identified prejudice as a relevant consideration, he did not explain how vacating the Certificate of Default would prejudice him.

Disposition

Judge Stewart D. Aaron granted FOXO’s motion to vacate the Clerk’s Certificate of Default. He also granted FOXO’s motion to extend its time to answer the complaint. The court ordered FOXO to respond by February 4, 2025.