Mejia v. Comme Des Gar§ons, Ltd.

Background

J. Mejia sued her former employer, Comme Des Garcons, Ltd., alleging that the company terminated her in retaliation for attempts to bring it into compliance with federal, state, and local labor laws. The Complaint asserted claims under the Fair Labor Standards Act, the Family and Medical Leave Act, the False Claims Act, New York Labor Law, California labor and family-rights laws, and the Los Angeles Municipal Code.

Mejia filed proof that the company had been served through the New York Secretary of State on November 13, 2020, making the company’s answer due December 4, 2020. After the company did not timely answer or otherwise respond, the Clerk entered a certificate of default on December 17, 2020. The Court later set deadlines for Mejia’s anticipated motion for default judgment and scheduled a hearing at which the company would have to explain why default judgment should not be entered.

The company appeared through counsel, moved under Federal Rule of Civil Procedure 55(c) to vacate the default, and stated that it had learned of the lawsuit on December 30, 2020, after receiving the Court’s December 22 order. It argued that it had not received notice because service was made through the Secretary of State and it had not updated its address after its corporate address changed. Mejia did not oppose the motion, so the Court treated it as unopposed.

Rule 55(c) analysis

Rule 55(c) allows a court to set aside an entry of default for good cause. The Court applied the three-part test used by the Second Circuit: whether the default was willful, whether setting it aside would prejudice the opposing party, and whether the defendant presented a meritorious defense. A meritorious defense at this stage need not be ultimately persuasive; the defendant must present facts that, if proven at trial, would constitute a complete defense.

Willfulness

The Court found no evidence or other information showing that the company’s failure to respond was willful. It explained that more than negligence or an administrative or clerical error is needed to establish willfulness. The record suggested that the company appeared somewhat promptly after learning of the action, and the Court did not find its conduct egregious or deliberate.

Prejudice

The Court also found that the prejudice factor favored setting aside the default. Prejudice may include loss of evidence, increased difficulty in conducting discovery, or a greater opportunity for fraud or collusion. The Court found no information indicating that the company’s delay caused any such prejudice to Mejia.

Meritorious defense

The company argued that Mejia was fired because of inappropriate communications and failure to meet the company’s expectations. It submitted various emails and an affidavit supporting those contentions. Because the evidence, if proven credible at trial, could constitute a complete defense, the Court found that the company met the low threshold for showing a meritorious defense.

Ruling