LALIMA v. KAPLAN
3:20-cv-07687
| D.N.J. | Feb 19, 2021Background
- Plaintiffs filed suit on June 23, 2020; Defendant Encore Real Estate, LLC was served July 13, 2020 and an answer was due August 3, 2020.
- Plaintiffs requested entry of default as to Encore on September 3, 2020; the Clerk entered default on September 14 after the Court found service proper.
- Plaintiffs voluntarily dismissed the other named defendants on September 14–15, 2020, leaving Encore as the sole defendant.
- Encore moved on October 1, 2020 to vacate the clerk’s entry of default, asserting it believed a global settlement had included it and asserting meritorious defenses (denial of liability and that alleged misconduct was by independent contractors).
- The Court applied Rule 55(c) and the Third Circuit factors (meritorious defense, prejudice, culpability), denied plaintiffs’ request for fees tied to securing default, and granted vacatur; Encore was ordered to respond by March 12, 2021.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendant has a meritorious defense sufficient to support vacatur | Encore’s asserted defenses are insufficiently articulated | Denies liability; asserts defenses including that plaintiffs knew material facts and that alleged wrongdoing was by independent contractors/principal–agent limits | Court: Defendant’s pleaded defenses, if proven, would constitute meritorious defenses; this factor favors vacatur |
| Whether vacating default would prejudice plaintiffs | Vacatur will prejudice settlement expectations and force plaintiffs to restart litigation | Delay is minimal; case is at an early stage with no discovery/schedule | Court: No meaningful prejudice; delay is minimal; favors vacatur |
| Whether default resulted from defendant’s culpable conduct | Entry reflects defendant’s failure to respond and should not be excused | Failure resulted from a mistaken belief it was included in a global settlement; acted promptly after learning otherwise | Court: No willfulness or bad faith; negligence at most; not culpable conduct; favors vacatur |
| Plaintiffs’ request for fees incurred in obtaining default and opposing vacatur | Entitled to attorneys’ fees for service/default and opposition work | Request improperly raised on this motion; fees can be sought in a separate motion | Court: Denied here; plaintiffs may pursue a separate motion for fees if appropriate |
Key Cases Cited
- Bailey v. United Airlines, 279 F.3d 194 (3d Cir. 2002) (setting out district court’s discretion to set aside default)
- Hritz v. Woma Corp., 732 F.2d 1178 (3d Cir. 1984) (standard for vacating default; culpability requires willfulness or bad faith)
- United States v. $55,518.05 in U.S. Currency, 728 F.2d 192 (3d Cir. 1984) (meritorious defense standard for vacatur explained)
- Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171 (D.N.J. 2008) (identifies factors to evaluate vacating default)
- Feliciano v. Reliant Tooling Co. Ltd., 691 F.2d 653 (3d Cir. 1982) (delay alone rarely establishes prejudice sufficient to deny vacatur)
- Tozer v. Charles A. Krause Milling Co., 189 F.2d 242 (3d Cir. 1951) (definition of a meritorious defense for vacatur purposes)