Arana v. Polaris Cleaners 99 Inc.

Background

Enrique Arana brought a proposed class action and proposed collective action against Polaris Cleaners 99 Inc. and other dry-cleaning businesses, alleging violations of the Fair Labor Standards Act and New York Labor Law. He alleged that he worked as a laundry delivery man from January 2012 through May 2018 and that the defendants deliberately underpaid him.

The court entered a default judgment on June 1, 2021, against La Mode and several other defendants after they failed to appear. The total judgment was $57,065, and the case was closed. La Mode later moved under Federal Rule of Civil Procedure 60(b) to reopen the action and vacate, or cancel, the default judgment against it. The opinion refers to this defendant as “La Mode” and as “La Mode 1st Cleaner, Inc.”

La Mode argued that it had never employed Arana and had no relationship with the other defendants. It submitted tax and New York wage-reporting records. Those records indicated that members of the Kim family owned or worked for La Mode and that La Mode did not employ anyone outside that family during the relevant periods. Arana’s complaint, by contrast, alleged that Richard J. An owned all of the defendant businesses and that they operated as one integrated enterprise.

Good-cause analysis

A court considering whether to set aside a default judgment examines whether the default was deliberate, whether reopening the case would prejudice the opposing party, and whether the defaulting party has a potentially valid defense. The court may also consider whether leaving the judgment in place would produce a harsh or unfair result.

The court said the question of deliberate default was close and did not decide it. La Mode’s owner, Jongsool Kim, acknowledged receiving the complaint but said he was panicked by the COVID-19 pandemic, was unfamiliar with legal procedures, and contacted Arana’s lawyer because he believed La Mode had been named by mistake. The court treated that alleged contact as evidence against deliberate avoidance, while also noting that La Mode did not appear after the order to show cause was mailed.

The court rejected Arana’s prejudice arguments as speculative. Arana did not explain specifically how reopening the case would threaten his recovery, cause the loss of evidence, or create opportunities for fraud or collusion.

The court also found that La Mode met the low threshold for showing a potentially valid defense. The records supported La Mode’s position that it did not employ Arana and was distinct from the other defendants. The court characterized that position as a complete defense to Arana’s allegations, while finding that Arana’s assertions about La Mode’s affiliation with the other businesses were conclusory.

Timeliness

La Mode filed its motion more than one year after the default judgment. Rule 60(b)(1) through (3) generally requires motions based on mistake, newly discovered evidence, or opposing-party misconduct to be filed within one year. Rule 60(b)(6), however, permits relief for another reason justifying relief and requires filing within a reasonable time.

The court treated La Mode’s motion as one under Rule 60(b)(6). It reasoned that the central issue was the injustice of holding a wrongly named defendant responsible for the conduct of others. In light of the circumstances surrounding La Mode’s default and the timing of its motion after learning that its bank accounts had been frozen, the court found the motion reasonably timely.

Ruling

The court granted La Mode’s motion to reopen the action and vacate the default judgment against it. The court directed the parties to appear for a telephone conference and directed the Clerk of Court to terminate the motion. The ruling did not decide whether La Mode actually employed Arana or whether Arana’s wage claims against the other defendants were valid; it addressed only La Mode’s request to set aside the default judgment.