Government Employees Insurance Co. v. Jacobson, D.C., 1:15-cv-07236

GEICO filed a no-fault insurance fraud suit (over 20 defendants) on Dec. 18, 2015; the Corporate Jacobson Defendants answered on Dec. 27, 2016 after withdrawing a prior motion to dismiss.
On Mar. 20, 2019 the court permitted counsel for the Corporate Jacobson Defendants to withdraw and gave them 45 days to obtain new counsel.
GEICO requested entries of default after the defendants had not yet secured new counsel; the Clerk entered defaults on May 21, 2019 and GEICO moved for default judgment on June 3, 2019.
New counsel appeared for the Corporate Jacobson Defendants on June 7, 2019 and they moved to vacate the defaults on June 30, 2019, arguing a misunderstanding about the withdrawal order and that they had been actively seeking counsel.
Defendants proffered affirmative defenses (e.g., services were medically necessary, employees were W-2 employees, disclosures refute self-referrals) and pointed to deposition evidence and documents; GEICO asserted prejudice and sought default judgment.
Magistrate Judge Levy recommended denying GEICO’s motion for default judgment and granting the motion to set aside the defaults, finding (under Fed. R. Civ. P. 55(c)) the defaults were not willful, vacatur would not prejudice GEICO, and defendants offered meritorious defenses.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Was the entry of default willful?	Defendants failed to retain counsel within the 45‑day deadline, so default was warranted	Misunderstanding of the court’s remarks, prior counsel reasonably thought they’d cover the deposition, active efforts to retain counsel	Not willful — no evidence of bad faith or deliberate conduct
Would vacating the defaults prejudice GEICO?	One‑month delay harmed GEICO and disrupted schedule	Delay was brief; GEICO caused or agreed to other delays and was informed new counsel was coming	No significant prejudice shown; brief delay insufficient
Did defendants present meritorious defenses?	Defendants’ denials are conclusory and inadequate	Proffered factual support (deposition testimony, W‑2s, patient disclosures) that, if proven, could be a complete defense	Meritorious defense threshold met; defendants deserve an opportunity to litigate
Should default judgment be entered?	Default judgment appropriate given entry of default and alleged misconduct	Default should be vacated under Rule 55(c) to allow resolution on the merits	Default judgment denied; entries of default should be set aside (recommendation)

McLean v. Wayside Outreach Dev. Inc., [citation="624 F. App'x 44"] (describing Rule 55(c) good‑cause discretion)
Meehan v. Snow, 652 F.2d 274 (2d Cir.) (default as a last‑resort sanction)
Enron Oil Corp. v. Diakuhara, 10 F.3d 90 (2d Cir.) (Rule 55(c) construed generously)
Am. All. Ins. Co. v. Eagle Ins. Co., 92 F.3d 57 (2d Cir.) (willfulness and vacatur standards)
New York v. Green, 420 F.3d 99 (2d Cir.) (prejudice analysis for vacatur)
S.E.C. v. McNulty, 137 F.3d 732 (2d Cir.) (meritorious defense standard for vacatur)
Pecarsky v. Galaxiworld.com, Ltd., 249 F.3d 167 (2d Cir.) (conclusory denials insufficient)
City of New York v. Mickalis Pawn Shop, 645 F.3d 114 (2d Cir.) (preference for resolving disputes on the merits)
State St. Bank & Tr. Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158 (2d Cir.) (liberal construction of vacatur criteria)