Parallax Health Sciences, Inc. v. EMA Financial, LLC
- Lorna Schofield
- 1:20-cv-02375-LGS-RWL
- U.S. District Court · Southern District of New York
- 3
In Parallax Health Sciences v. EMA Financial, Judge Schofield denied Parallax’s motion to undo a default judgment, adopting a modified recommendation.
Parallax Health Sciences, Inc.’s default judgment remained in place. Parallax was allowed to contest the amount of damages sought by EMA under the adopted recommendation, but the order itself did not decide that amount.
What happened
Parallax Health Sciences, Inc. sued EMA Financial, LLC, and EMA later asserted counterclaims. After Parallax’s lawyer withdrew and Parallax did not retain new counsel, the court entered a default judgment against Parallax, dismissed Parallax’s complaint with prejudice, and referred EMA’s damages request for further proceedings.
Parallax later asked the court to vacate, or undo, the default judgment. A magistrate judge recommended denying that request while allowing Parallax to contest the amount of damages. The magistrate judge later removed discussion of whether the notes were usurious under New York law, and no timely objections were filed.
In Parallax Health Sciences, Inc. v. EMA Financial, LLC, Judge Lorna G. Schofield found no clear error, adopted the recommendation as modified, and denied Parallax’s motion to vacate the default judgment.
The detailed version
- Parallax Health Sciences, Inc. v. EMA Financial, LLC · No. 1:20-cv-02375-LGS-RWL
- Lorna Schofield
- Apr. 7, 2022
Background
Parallax moved for a preliminary injunction in March 2020, but the court denied that motion. Parallax then filed an amended complaint. EMA answered, denied Parallax’s claims, asserted affirmative defenses, and brought counterclaims. Parallax answered the counterclaims.
In October 2020, Parallax’s counsel moved to withdraw. Magistrate Judge Robert W. Lehrburger granted that motion, and Parallax did not retain new counsel. EMA later filed for default. In an August 10, 2021, Default Judgment Order, the court entered judgment for EMA on its counterclaims and dismissed Parallax’s amended complaint with prejudice. EMA’s request for damages was referred to Judge Lehrburger for a later damages proceeding.
Motion to Vacate
After obtaining new counsel, Parallax asked to vacate the default judgment. Judge Lehrburger issued a Report and Recommendation recommending that the motion be denied but that Parallax be allowed to contest the amount of damages EMA sought. The report applied Nevada law to Parallax’s potential defenses because the relevant loan agreements required that law. The report also contained discussion of Parallax’s unconscionability argument under New York law.
After the Second Circuit issued a decision concerning New York usury law, Judge Lehrburger modified the report by withdrawing the paragraphs discussing whether the notes were usurious under New York law. The order stated that the rest of the report remained unchanged. No timely objections were filed to either the report or the modification order.
Court’s Ruling
When no specific objection is filed to a magistrate judge’s recommendation, the district court reviews the recommendation for clear error. Judge Schofield found no clear error in the recommendation to deny Parallax’s motion to vacate the default judgment while allowing Parallax to contest the amount of damages.
The court adopted the Report and Recommendation as modified by the March 16, 2022, order and denied Parallax’s motion to vacate the default judgment. The order did not itself decide the amount of EMA’s damages.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.