Cordero v. AT&T, 1:15-cv-05601

Plaintiff Ruisdael Cordero sued “AT&T” under the Fair Credit Reporting Act alleging identity-theft–related charges on an AT&T account were reported to credit agencies without reflecting his dispute.
Summons and complaint were served October 5, 2015; Clerk entered default on December 4, 2015 after no appearance by defendant.
AT&T appeared through counsel on February 26, 2016 and moved to vacate the Clerk’s entry of default.
AT&T explained the failure to respond resulted from internal misrouting/forgetting of the papers (paralegal/clerk error); plaintiff argued service was proper.
AT&T raised multiple defenses including improper service/wrong entity, an arbitration agreement in the wireless customer contract, and challenges to its status as a consumer reporting agency.
The court applied the three-factor Rule 55(c) test (willfulness, meritorious defense, prejudice) and granted AT&T’s motion to vacate the default, referring pretrial matters to the Magistrate Judge.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Was AT&T’s default willful?	Cordero did not contend there was bad faith; default was grounds for sanction.	Default stemmed from negligent internal misrouting/oversight, not bad faith.	Not willful; negligence insufficient to bar vacatur.
Was service proper / was the correct entity sued?	Service on the person at AT&T facility was adequate; AT&T should be sued under its trade name.	Process was delivered to an employee (Lead Analyst) who was not an officer, managing agent, or authorized recipient; the correct legal entity is New Cingular.	Service and entity disputes present a meritorious defense; weigh in favor of vacatur.
Are there meritorious defenses (arbitration, CRA status)?	Cordero maintained his FCRA claim that AT&T failed to investigate and reported disputed debt.	Customer agreement requires arbitration for wireless-service disputes; AT&T may not be a CRA and disputes procedural prerequisites.	Arbitration clause and service/entity defense are meritorious for Rule 55(c) purposes; factor favors vacatur.
Would vacatur prejudice plaintiff?	Delay could harm plaintiff’s ability to litigate his FCRA claim.	Case is in early stages; no evidence of lost proof or discovery impediment.	No demonstrated prejudice; factor favors vacatur.

Enron Oil Corp. v. Diakuhara, 10 F.3d 90 (2d Cir. 1993) (defaults are disfavored; vacatur standards and distinction between setting aside default and default judgment)
Am. Alliance Ins. Co. v. Eagle Ins. Co., 92 F.3d 57 (2d Cir. 1996) (careless or negligent conduct does not necessarily constitute willfulness preventing vacatur)
Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167 (2d Cir. 2001) (identifies three-factor good-cause test for vacating defaults: willfulness, meritorious defense, prejudice)