Adam v. Tighe

Background

The plaintiffs filed the complaint on June 20, 2019. GCT New York LP and James Tighe were served on September 12, 2019. The court granted two extensions of the defendants’ deadline to answer or otherwise appear. Their deadline was December 2, 2019, but they did not respond by then. On December 11, 2019, the Clerk entered certificates of default against both defendants.

Before a default judgment is entered, Federal Rule of Civil Procedure 55(c) allows a court to set aside an entry of default for “good cause.” Courts consider three factors: whether the default was willful, whether setting it aside would prejudice the other side, and whether the defendant has presented a potentially valid defense. The court also noted that defaults are generally disfavored and that disputes are preferably resolved on their merits.

Court’s Analysis

The court found that the defendants’ failure to respond was not willful. Defense counsel had made a clerical error and recorded the answer deadline incorrectly. Counsel realized the mistake after the plaintiffs filed proposed certificates of default and then tried to correct it.

The court also found no cognizable prejudice to the plaintiffs. The delay was eleven days, the defendants submitted a draft answer with their motion, and the plaintiffs did not dispute that the delay caused no prejudice. The plaintiffs’ earlier consent to two extensions further supported that conclusion.

Finally, the court found that the defendants had identified a meritorious defense. This standard did not require the defendants to show that the defense would probably succeed. They only had to present facts that, if proven, could provide a complete defense. The court concluded that the defendants met this low threshold because the facts they presented could foreclose the plaintiffs’ claims under the Supreme Court’s decisions in Great-West Life & Annuity Insurance Co. v. Knudson and Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan. The opinion states that the plaintiffs did not attempt to distinguish those decisions.

Ruling

Judge Vernon S. Broderick held that all three good-cause factors favored the defendants. The court granted the defendants’ motion to vacate the Clerk’s entry of default. It directed GCT New York LP and James Tighe to answer, file a motion, or otherwise respond to the complaint within five days. The Clerk was directed to terminate the motion at Document 25.