Opinion
01 Civ. 1941 (CSH)
October 15, 2003
MEMORANDUM OPINION AND ORDER
This is an action for breach of contract and copyright infringement brought in connection with a licensing agreement between the parties covering certain musical compositions. Plaintiffs filed their action on March 7, 2001. Defendants subsequently failed to answer the complaint. On May 17, 2001 this Court entered a default against the individual Defendant, Patricia Rankin. In entering the default the Court relied on an affidavit of service sworn to by Joseph Hackett, a process server, on March 14, 2001, In this affidavit Hackett recited the steps he took to serve copies of the summons and complaint on Rankin. Specifically, Hackett averred that on March 9, 2001 he served a copy of the summons and complaint on a doorman working at Rankin's residence, 80 Central Park West, New York, NY. In addition, Hackett stated that, consistent with; he New York rules regulating substituted service, he mailed a copy of the summons arid order to Rankin at her residence on March 14, 2001.
With the default, the Court made an Order of Reference to Magistrate Judge Francis to conduct an inquest on damages. During the discovery process counsel for Plaintiffs applied to Judge Francis by a letter dated September 4, 2001 for an order to compel Rankin to produce certain documents. Judge Francis made that order. Upon notice of the order, Rankin appealed to Judge Francis in a letter dated September 10, 2001 for an extension to comply with the order. In this letter Rankin explained that she was not able to afford legal counsel. She also denied having received notice of the lawsuit against her. Judge Francis granted Rankin's request on the same day it was made, providing her with leave until September 28, 2001 to produce the requested documents.
In a letter endorsed before a Notary Public on September 26, 2001, Rankin applied directly to this Court for relief from the default. In this letter Rankin once again claimed that she did not have and could not afford legal representation. In support of her request that the Court "set aside" the default, Rankin claimed that she was not properly served with a summons and complaint before the default was entered against her; that she allowed her "mail to accumulate unopened" during the period of time when this suit was filed due to a "deep depression;" and that Plaintiffs suit was without merit. Sept. 26 Letter at 1-2.
In an Order dated October 4, 2001 this Court interpreted Rankin's September 26, 2001 letter as both a request to proceed pro se and a motion for relief from the default on the ground that the judgment was void within the meaning of Rule 60(b)(4), Fed.R.Civ.P. "a judgment may also be void because, although the court has the theoretical power to exercise personal jurisdiction over a defendant, the defendant was not adequately served with process." 12 Moore's Federal Practice (3d ed. 2000) at 60-147. In response to these requests the Court expanded the scope of its referral to Judge Francis so that he could conduct any and all inquiries necessary to resolve Rankin's request for relief.
In an October 5, 2001 (the "October 5 Order") this Court clarified the scope of its October 4, 2001 Order. Specifically, the Court recognized that Rankin's September 26, 2001 letter also asserted possible grounds for relief under Federal Rules of Evidence 60(b)(1) ("excusable neglect") and 60(b)(6) ("any other reason justifying relief from the operation of the judgment").
On April 26, 2002 Judge Francis conducted a hearing pursuant to this Court's Orders of reference dated October 4, 2001 and October 5, 2001. At this hearing Plaintiffs were represented by Brian Socolow, Esq. and Ronald Israel, Esq. Defendants were represented by Herbert Rubin, Esq. Judge Francis heard testimony from Simon Kahn, Joseph Hackett, and Patricia Rankin. Subsequent to this hearing Judge Francis issued a Report and Recommendation to this Court on June 26, 2002 ("Report"). There, Judge Francis stated that he conducted "a hearing on the adequacy of service" and that "[o]n the basis of the evidence presented at that hearing, I recommend that the defendants' motion be denied." Report at 2. In his report Judge Francis provided this Court and the parties with extensive analysis of the testimony, including his assessment that Hackett's testimony was credible and the steps taken by him to serve the complaint upon Rankin were legally sufficient.
On July 15, 2002 Defendants, pursuant to Rule 72, Fed.R.Civ.P., entered an Objection to Judge Francis's Report and Recommendation made timely by a previous extension granted by this Court. The parties subsequently pursued extended settlement negotiations during which time this Court granted Plaintiffs nine requests to extend the deadline for submission of their response. By the early summer of 2003 these negotiations reached an apparent impasse and Plaintiffs responded to Defendants' objections in a timely Response on June 30, 2003. As Rule 72 does not provide for any additional submissions, Defendants' Objection is now ripe for decision.
DISCUSSION
Under Rule 72(b), Fed.R.Civ.P., the Court's review of Judge Francis's order is de novo. Having reviewed the record this Court agrees with Judge Francis's findings set forth in his Report and Recommendation. The sole issue pursued and analyzed by Judge Francis was adequacy of service. Report at 2. In an affidavit notarized on March 14, 2001, an affidavit notarized on October 26, 2001, and in his testimony before Judge Francis on April 26, 2002 Hackett has consistently reported that he made substituted service of the complaint and summons on Rankin by 1) serving a true copy of both on a person of suitable age and discretion at Rankin's residence, namely, the doorman of her building, on the afternoon of March 9, 2001, and 2) mailing a second copy of the complaint and summons to Rankin's residence in a properly marked envelope on March 14, 2001.
As Judge Francis rightly points out, the form of service reported by Hackett is proper and sufficient under New York law. See N.Y. C.P.L.R. § 308. The sole issue remaining, then, is Hackett's credibility. With the added advantage of being able to observe the witness's demeanor, Judge Francis found Hackett's testimony "entirely credible." Report at 5. Having reviewed the record, this Court agrees with that assessment. Hackett's testimony with regard to the substituted service has been consistent through two sworn affidavits and his sworn testimony. This consistency is apparently a function, at least in part, of the fact that he habitually keeps detailed and' contemporaneous reports of his on-the-job activities. He kept with this practice during his efforts to serve Rankin. Hearing at 9. In addition, he swore to the contents of a timely affidavit, notarized on March 14, 2001 when he completed his substitute service on Rankin. In this contemporary affidavit Hackett reported in detail the steps he took to serve Rankin. Defendants did not provide any substantial evidence to contradict or deny Hackett's account of how he provided substitute notice to Rankin. Defendants' objection to Judge Francis's recommendation that her Motion to vacate the default for failure to serve adequate service be denied is, accordingly, overruled.
To the extent that Rankin seeks relief under Rules 60(b)(1) and 60(b)(6), the case stands upon different footing. The hearing conducted by Judge Francis was apparently limited to the issue of adequacy of service. Hearing at 2. So was his Report and Recommendation. Report at 2. In her letter of September 26, 2001 Rankin reported that her depression led her to neglect her mail and other correspondence through at least the spring of 2001 when she was served with notice of the present suit by substitute service. She repeated these representations in the April 26, 2002 Hearing before Judge Francis. Hearing at 49, 50. In this Court's October 5, 2001 Order it was suggested that this condition and might provide grounds for vacating the default pursuant to Rule 60(b)(1) or Rule 60(b)(6).
Since no final judgment has been entered in the present case, Judge Francis is right to point out that Rankin's September 26, 2001 letter is better considered as a motion to set aside a default under Rule 55(c) rather than a Rule 60 motion. However, since Rule 55(c) makes specific reference to Rule 60(b) the specific considerations set forth in Rule 60(b) are relevant as measures of what might qualify as "good cause" under Rule' 55(c). See Sony Corp. v. Elm State Electronics, Inc., 800 F.2d 317, 320 (2d Cir. 1986) ("Determining the existence of good cause here required consideration of whether [defendant's] default was willful, whether setting the default aside would prejudice [plaintiff] and whether [defendant] presented a meritorious defense.") (citation omitted). It is for this reason that this Court will now briefly refer to bases for relief set forth in Rule 60(b).
Rule 60(b)(1) allows a Court to vacate a default judgment for "mistake, inadvertence, surprise, or excusable neglect." The criteria for determining excusable neglect are: "(1) whether the default was willful; (2) whether defendant has a meritorious defense; and (3) the level of prejudice that may occur to the nondefaulting party if relief is granted." American Alliance Ins. Co., Ltd, v. Eagle Ins. Co., 92 F.3d 57, 59 (2d Cir. 1996) (quoting Davis v. Muster, 713 F.2d 907, 915 (2d Cir. 1983)). See also Gucci Am. v. Gold Ctr. Jewelry, 158 F.3d 631, 635 (2d. Cir. 1998) ("While a determination that the defendant acted in bad faith would certainly support a finding of 'willfulness,' it is sufficient that the defendant defaulted deliberately."). These same standards are equally applicable, though less rigorously applied, in the context of Rule 55(c) decisions. See Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993) (although the same factors examined in deciding whether to set aside a default or default judgment are the same, courts apply the factors more rigorously in the case of a default judgment, because the concepts of finality and litigation repose are more deeply implicated in the latter action.") (citation omitted). Whether Defendants' motion is considered under Rule 60(b)(6) or under Rule 55(c), Rankin's claimed clinical depression may provide good reason to vacate a default or a default judgment. See e.g. TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 699 (9th Cir. 2001) (granting a Rule 60(b)(6) motion due, in part, to the fact that the movant was under the care of a psychiatrist for depression during the period when the complaint and summons were served).
These additional criteria were not evaluated or weighed in Judge Francis's Report and Recommendation to this Court. While these criteria "should be construed generously" as a reflection of a preference to resolve cases on the merits, Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d. Cir. 1993) citing Meehan v. Snow, 652 F.2d 274, 2.77 (2d Cir. 1981), the record presented to this Court by the parties is not sufficient for an analysis even on a forgiving standard.
The paucity of the record on these issues is surprising, given the contents of this Court's October 5 Order. That Order recited Rankin's assertions in her September 26, 2001 letter to the Court that she had been in a deep depression for some years and allowed mail to accumulate unopened. The October 5 Order observed that, by those assertions, Rankin "may be laying the groundwork for a contention that she should be excused for failing to respond to the summons and complaint which Plaintiffs process server says he mailed to Rankin at her home address." October 5 Order at 1-6. The Order recognized that this circumstance might entitle Rankin to relief under Rule 60(b)(1) ("excusable neglect") or under Rule 60(b)(6) ("any other reason justifying relief from the judgment").
As noted in text supra, because no judgment against Rankin has yet been entered, the governing Rule is 55(c), rather than 60(b), but the governing criteria are the same.
The October 5 Order amended the original October 4 Order of Reference to Judge Francis to make it clear that Rankin's grounds for relief were not limited to Rule 60(b)(4). The October 5 Order made it clear that, in addition to challenging the default for insufficiency of personal service, Rankin could also assert additional grounds for relief under Rules 60(b) based on her claimed state of depression. However, the Order was careful to point out that "Rankin bears the burden of proving facts and circumstances sufficient to justify relief under any of these provisions of Rule 60(b)." October 5 Order at 2.
Having fashioned what Middle East diplomats might refer to as a "road map," I have discovered, with some surprise, by reading the transcript of the hearing before Judge Francis that Mr. Rubin, Rankin's counsel, confined his direct examination of Rankin to facts relevant to the service of process upon her. He elicited no testimony with respect to Rankin's depressed state. That subject was introduced only when Mr. Socolow, cross-examining Rankin on behalf of Plaintiffs, elicited her acknowledgment that she was suffering from depression on March 9, 2001, "was not on top of her business affairs for some time," and that "during that period mail that was sent to [her] apartment went unopened." Hearing at 49. Counsel's purpose in this line of questioning was apparently to suggest that Judge Francis should not accept Rankin's testimony on direct examination that she never received the mailed summons and complaint:
Q. [by Plaintiffs' counsel, cross-examining]: And isn't it possible, then, Ms. Rankin, given that during this period you allowed essential mail to go unopened, that you could have received a summons and complaint in the mail and not opened that as well?
A. That's possible.
Hearing at 50. Judge Francis, viewing this testimony in the light Plaintiffs' counsel intended, wrote in his Report and Recommendation at 7:
Finally, there is every reason to believe that the summons and complaint were mailed to Ms. Rankin as well and that she ignored them. Mr. Hackett's firm tracks undelivered mail, and these documents were not returned. Moreover, Ms. Rankin acknowledged that she was not at the top of her affairs during this time and that essential mail was accumulating unopened. She admitted that this could have included the summons and complaint here.
(citations to transcript omitted).
In his Objections to Judge Francis's Report, counsel for Rankin criticizes the Report on the ground that it "fails to deal with Ms. Rankin's right to relief from the judgment under Rule 60(b)(i) [sic] for excusable neglect or Rule 60(b)(6) for any reason justifying relief," Objection at H18, a criticism that counsel buttresses by stating that "the record makes clear her depression, the pile up of unopened letters, even of checks for thousands of dollars." Id. There is a hollow ring to these contentions by Rankin's counsel, since he concluded his direct examination of her without eliciting any of those facts, despite the reminder in the October 5 Order (which counsel should not have needed) that if Rankin wished to assert her depression as a basis for relief from the default, she bore the burden of proof on the issue. The facts upon which Rankin now relies on her Objections were elicited during her cross-examination by Plaintiffs' counsel, who now finds his line of inquiry being turned into a two-edged sword.
I think it is clear that the Court could disregard this particular objection on the ground that Rankin's counsel, having elicited no relevant testimony from Rankin although she bore the burden of proof on the issue, abandoned Rankin's asserted depression as a basis for relief from the default. However, the subjects of Rankin's depression and its consequent paralysis of action were introduced by Plaintiffs' counsel on cross-examination; and Judge Francis's Report (quite understandably, given the confines of Rankin's direct examination) does not deal with those factors as an alternative basis for relief, although the October 5 Order enlarged the boundaries of the hearing to include them. My responsibility is to consider the record in its entirety, without regard to the manner in which relevant testimony was elicited; and, having done so, I conclude that fairness requires a limited remand to Judge Francis for further consideration of the alternative basis for relief.
In these circumstances, the Court makes the following Order:
1. Insofar as the Objections to the Report and Recommendation of Magistrate Judge Francis challenge his findings that Plaintiff proved legally sufficient service by Plaintiffs of the summons and complaint upon Defendant Rankin, the Objections are overruled.
2. The case is respectfully remanded to Judge Francis for further consideration of whether the Defendant's asserted depression furnishes an alternative basis for relief from her default in answering the summons and complaint. If so advised, Rankin should be allowed to offer further evidence on remand, subject, of course, to cross-examination and any relevant evidence offered by Plaintiff. This Court will be grateful for a supplemental Report and Recommendation from Judge Francis following proceedings on the remand.