Trustees of the New York City District Council of Carpenters Pension Fund v. PF…

Background

The court stated that a corporation may appear in federal court only through a licensed attorney. On December 27, 2021, the court granted Defendants’ prior counsel’s motion to withdraw and told Defendants that a default judgment would be entered if they did not obtain representation by January 31, 2022. The Clerk of Court entered certificates of default against Defendants on February 4, 2022.

Plaintiffs filed a motion for default judgment and supporting papers on February 9, 2022. The court then issued an order requiring Defendants to explain why default judgment should not be entered. Defendants’ principals appeared at the March 9, 2022, hearing, which was adjourned to allow the parties to explore settlement. Counsel appeared for Defendants on April 5, 2022, and the parties appeared at the continued hearing on April 6, 2022.

Legal standard

Federal Rule of Civil Procedure 55(c) allows a court to set aside an entry of default for “good cause.” The court identified three relevant factors: whether the default was intentional, whether setting it aside would prejudice the opposing party, and whether the defendant presented a potentially valid defense.

Ruling

The court found that Defendants had shown good cause. It relied on the fact that Defendants’ principals had attempted to participate in the proceeding but had struggled to obtain representation because of their financial position. The court also found that, at that stage, setting aside the default did not appear likely to prejudice Plaintiffs.

The court therefore ordered that the Certificates of Default be set aside and vacated. The court did not decide the underlying dispute or enter a ruling on the merits. It further ordered the parties to file a joint letter by April 20, 2022, addressing the status of settlement negotiations, their plans for conducting an audit, and the expected timing and duration of the audit.