William Gottlieb Management Co, LLC v. Carlin

Background

William Gottlieb Management Co, LLC (WGM) sued Allan H. Carlin over alleged interference with WGM’s computer files. The complaint asserted claims under the Computer Fraud and Abuse Act, the Stored Communications Act, New York trespass to chattels, and common-law negligence. Carlin, who was representing himself, did not respond to the complaint or otherwise appear. The clerk entered a certificate of default on March 22, 2021, and the court entered a default judgment on May 10, 2021.

Carlin moved under Federal Rules of Civil Procedure 55(c) and 60(b) to set aside both the certificate of default and the default judgment. He argued that WGM had not properly served him, which would deprive the court of authority over him. Alternatively, he argued that there was another sufficient reason to vacate the judgment. WGM argued that service was proper and that Carlin had not shown good cause to undo the default.

Service at the Manhattan residence

WGM claimed that its process server properly served Carlin under Federal Rule of Civil Procedure 4(e)(2)(B) by leaving the summons and complaint with a doorman at Carlin’s Manhattan residence. That rule permits service by leaving the papers at a person’s home with someone of suitable age and discretion who resides there.

Carlin acknowledged receiving the summons and complaint from his doorman but denied that the doormen in the building lived there. WGM offered no evidence that they did. The court explained that actual notice of a lawsuit does not cure failure to follow the legal requirements for service. Because the record did not establish that the doorman satisfied the rule’s residence requirement, the court could not conclude that this service was proper.

Service at the upstate home

WGM also claimed that it served Carlin at his upstate home and business address by attaching the papers to the door and mailing a copy. The court held that this did not satisfy New York Civil Practice Law and Rules § 308(2), because that provision requires delivery to a person of suitable age and discretion.

The court considered § 308(4), which allows service by attaching the summons to the door and mailing a copy to the person’s last known residence or actual place of business. But that method also requires timely filing of proof of service. WGM filed its proof more than twenty days after the claimed service and mailing, without requesting or obtaining permission for the late filing. The court held that later actions were therefore void and denied WGM’s request to treat the late affidavits as timely after the fact.

Alternative basis for relief

The court also considered Rule 60(b)(6), which permits relief from a judgment for another reason that justifies it. Courts generally consider whether the default was willful, whether the defendant has a potentially valid defense, and whether vacating the judgment would unfairly harm the opposing party.

The court found that Carlin’s default was willful. He received multiple notices, checked the docket, and chose not to respond because he believed the service was improper. The court rejected his explanation that he thought WGM had abandoned the lawsuit.

Even so, the court found that Carlin met the low threshold for showing a potentially valid defense. He asserted that he had only viewed the electronic files at issue and that WGM therefore could not prove the minimum damages or losses required for its claims. The court also found that WGM’s general assertions about additional expense, delay, and possible diversion did not establish sufficient prejudice.

The court further relied on WGM’s failure to comply with Local Civil Rule 55.2(c), which required papers submitted in support of a default judgment to be mailed at the same time to the party against whom the judgment was sought. The court considered Carlin’s unrebutted assertion that he received no other notice of the default, along with the federal courts’ preference for resolving disputes on their merits.

Disposition

The court granted Carlin’s motion to vacate the certificate of default and default judgment. It directed the clerk to vacate the certificate of default at ECF No. 8 and the default judgment at ECF No. 9, and to close ECF No. 21. The opinion did not decide the merits of WGM’s underlying claims.