Castillo v. Z Deli Grocery V Corp

Background

Enrique Castillo sued Z Deli Grocery V Corp, doing business as Z Grill, Ali Esmael Ziad, and Mohammed Ziad, alleging violations of the Fair Labor Standards Act and the New York Labor Law. This order addressed only Ali Esmael Ziad and Mohammed Ziad because they alone moved to vacate the default judgment.

After defense counsel withdrew, Magistrate Judge Jennifer Willis ordered the corporate defendant to obtain new counsel and ordered the individual defendants to obtain new counsel or appear without a lawyer. The defendants did not comply. The court canceled the scheduled trial, and Castillo later sought a default judgment. After the defendants did not respond to notices and a show-cause order, the court adopted a recommendation to enter default judgment against them on February 28, 2024.

The individual defendants later challenged the default judgment and moved to vacate it under Federal Rule of Civil Procedure 60(b). Magistrate Judge Willis recommended granting that motion. No party objected to the recommendation.

Legal standard

When no party objects to a magistrate judge’s report and recommendation, the district court reviews it for clear error—whether the record leaves the court with a firm conviction that a mistake was made. A court considering whether to vacate a default judgment generally examines whether the default was willful, whether the defendant has a potentially complete defense, and whether vacating the judgment would prejudice the other party.

Court’s analysis

The court agreed that the individual defendants’ default was not willful. Although they failed to respond properly, the record showed that they intended to oppose the request for default judgment but lacked knowledge about the required filing format and the correct email recipient. The court also noted that they later provided additional evidence explaining their failure to respond.

The court found that the individual defendants had shown potentially complete defenses. They argued that Z Grill was not an enterprise or employer covered by the Fair Labor Standards Act, that Castillo had been properly paid for overtime work, and that they had complied with the New York Labor Law. The court stated that, if proven at trial, these arguments would constitute a complete defense and were supported by testimony and documents.

The court also agreed that vacating the default judgment would not prejudice Castillo. Castillo did not object to that conclusion, and the court found no evidence that undoing the judgment would cause loss of evidence, make discovery more difficult, or increase the opportunity for fraud or collusion. The court noted that delay alone was not enough to establish prejudice.

Disposition

The court adopted Magistrate Judge Willis’s report and recommendation and granted Ali Esmael Ziad and Mohammed Ziad’s motion to vacate the default judgment. The Clerk of Court was directed to close the motion at ECF No. 89.