Hong v. Mommy's Jamaican Market Corp.

Background

Sun Yeul Hong sued Mommy’s Jamaican Market Corp. and Kap Won Kim, Myong Su Kim, and Dae Kyu Kim. He alleged violations of the federal Fair Labor Standards Act and the New York Labor Law based on unpaid overtime wages, minimum wages, and New York spread-of-hours payments during the 31-year period he worked for the defendants, ending in September 2020.

The defendants were served, but they did not answer. The Clerk of Court entered a default, and the court later granted Hong’s motion for a default judgment on October 15, 2021. The defendants then moved under Federal Rules of Civil Procedure 55(c) and 60(b) to vacate, or set aside, that judgment. They also argued that Mommy’s Jamaican Market Corp. had not been properly served, but the court rejected that argument because the evidence supported service through Tim Chi, who appeared to act as Kap Won Kim’s agent.

Arguments and Legal Standard

A court deciding whether to vacate a default judgment considers three factors: whether the default was deliberate, whether the defendant has a potentially successful defense, and whether setting aside the judgment would prejudice the plaintiff. Courts also generally prefer resolving disputes on their merits rather than by default.

The defendants said they failed to respond because they mistakenly believed that an unemployment claim Hong filed with the New York State Department of Labor would resolve the federal lawsuit as well. They said they had limited English-language ability and little understanding of court proceedings. They also argued that Hong was exempt from the federal wage law’s overtime requirements because he was an administrative employee. Hong argued that the defendants had not shown a defense to the New York Labor Law claims and that reopening the case would cause him serious prejudice.

Court’s Analysis

The court found that whether the default was deliberate was a close question. The defendants knew that the corporate defendant needed a lawyer and knew that an agreed extension to answer had expired. Those facts suggested some deliberate failure to participate. But the court also credited their explanation that they mistakenly believed the state unemployment proceeding would resolve the lawsuit. The court concluded that even if their conduct could be considered deliberate, it was not sufficiently serious to prevent relief when the other factors favored vacating the judgment.

The defendants met the standard for showing a potentially meritorious defense. They did not have to prove the defense at this stage; they needed to provide facts that, if proven at trial, could completely defeat the claims. Kap Won Kim stated that Hong was paid between $950 and $985 per week and received additional meals and transportation compensation that brought his total compensation above $1,200 per week during the final six years of his employment. Kim also stated that Hong’s primary duties included negotiating supplier prices, researching replacement products, calculating prices to maximize profit margins, and evaluating consumer trends. The court concluded that these facts, if true, could support the administrative exemption under both federal and New York law.

The court found no demonstrated prejudice to Hong from reopening the case. Hong identified no lost documents, increased discovery difficulties, opportunity for fraud, or other specific harm caused by the delay. The court also stated that discourteous language by defense counsel was not enough to deprive the defendants of an opportunity to have the dispute decided in court.

Disposition

The motion to vacate the default judgment was GRANTED. The Clerk of Court was directed to reopen the case and close the defendants’ motions to vacate. To minimize any prejudice from reopening the case, the court ordered the defendants to reimburse Hong for the costs he incurred in moving for the default judgment. Judge Lewis J. Liman did not decide the underlying wage claims on their merits in this opinion.