Crawford v. Nails on 7th by Jenny Inc.

Background

Beverly Crawford sued Nails on 7th by Jenny Inc., doing business as Jenny’s Spa; Nails on 7th II by Jenny Inc., doing business as Jenny’s Spa; and Nguyen Bui. She alleged that, while working as a part-time nail technician at the defendants’ salon, she was not paid all wages and overtime due under the Fair Labor Standards Act and New York State Labor Law.

The defendants did not answer after Crawford filed affidavits describing service of the summons and complaint. The court entered certificates of default and, after a hearing at which only Crawford’s counsel appeared, entered a default judgment for $74,839.11 on January 18, 2019.

After a marshal served a notice of levy and sale, the defendants moved under Rules 55(c) and 60(b)(1) and (4) to vacate the default judgment. Bui stated that he had not received the complaint, did not know the person identified as having received service for him, and did not believe either corporation had been properly served. He also stated that he was the president and sole shareholder of both corporations. The defendants’ proposed answer denied, among other things, that Crawford had been their employee.

Court’s analysis

The court applied the three-factor test used for motions to vacate a default judgment: whether the default was willful, whether the defendants had a potentially meritorious defense, and whether vacating the judgment would prejudice Crawford. The court also emphasized the strong preference for resolving disputes on their merits.

On willfulness, the court noted that Crawford’s affidavits of service initially provided a presumption of proper service. But Bui’s sworn denials of receiving service rebutted that presumption and created uncertainty about whether service was proper. The court found no evidence that the defendants had deliberately evaded service, which was required to show a willful default. This factor favored vacating the judgment.

On a meritorious defense, the court explained that the defendants did not have to prove their defense at this stage. They needed to present facts that, if proven at trial, would provide a complete defense. The proposed answer’s denial that Crawford was ever employed by the defendants met that standard, even though the court did not decide whether the defense would ultimately succeed.

On prejudice, Crawford pointed to attorney fees, litigation expenses, and costs related to collecting the default judgment and opposing the motion. The court held that these costs did not constitute the type of prejudice that would justify keeping the default judgment in place. Crawford did not contend that vacating the judgment would hinder her ability to pursue her claims.

Disposition

The court granted the defendants’ motion to vacate the default judgment. It ordered the defendants to answer or otherwise respond to the complaint by February 26, 2020. The court did not reach the defendants’ request for a temporary restraining order because that request had not been submitted under the district’s required filing procedure.