Opinion
02 CV 6294
April 7, 2003
MEMORANDUM ORDER
Before us are Plaintiffs' second motion for default judgment and motion for legal fees associated with the filing of this second motion. For the reasons set forth below, those motions are DENIED.
PROCEDURAL HISTORY
Plaintiffs Fashion Fragrance Cosmetics ("FFC") and International Operations Research Ltd ("IOR") (collectively "Plaintiffs") commenced this action on August 7, 2002. Defendants were served on August 8. On August 26, 2002, Defendants' New Jersey counsel, Lane Miller ("Miller"), wrote Plaintiffs' counsel, Tedd Levine ("Levine") stating that Defendants had retained New York counsel and needed a 20 day extension to answer. (Second Levine Declaration, Ex. D.) Levine agreed to the 20 day extension. Nonetheless, Defendants did not file an answer. On October 9, 2002, Plaintiffs filed a default motion; same was served on Defendants on October 7.
On October 16, 2002, Timothy Alnwick ("Alnwick"), Defendants' counsel in New York, wrote the Court explaining that he was recently retained and requested that we stay the default motion and extend Defendants' time to file a motion to dismiss. (Letter from Alnwick to the Court of 10/16/02.) Alnwick explained that Defendants' delay was a result of a misunderstanding between Miller and Levine: Miller had never received confirmation from Plaintiffs' attorney regarding the twenty day extension to file an answer. (Id.) Alnwick catalogued various other reasons for the delay. Nonetheless, we granted Alnwick's requests and on October 22, 2002 issued an order staying Plaintiffs' default motion and extending Defendants' time to file a motion to dismiss. On November 1, 2002, Plaintiff submitted a motion for reconsideration, requesting that we not excuse the default or in the alternative, excuse the default and bar Defendants from making a Rule 12(b) motion. We denied that motion for reconsideration. Following various requests for extensions of time by both parties, Defendants' motion to dismiss was deemed fully briefed on December 24, 2002. On February 13, 2003, we denied Defendants' motion to dismiss and ordered Defendants to file an answer within 14 days of entry of this order. On March 18, 2003, we received Plaintiffs' second motion for default judgment ("Second Default Motion.") Shortly thereafter, Alnwick contacted chambers and reported that he had not received a copy of the February 13 opinion and had only become aware of it because it was attached as an exhibit to the Second Default Motion. On April 2, 2003, a courtesy copy of Defendants' answer was received in Chambers. We also received a memorandum from Office of the Clerk indicating that the answer had not been accepted for filing under Rule 5(e) because it was not accompanied by a Federal Civil Rule 7.1 disclosure statement. We nonetheless directed the Clerk to accept the answer for filing. We hereby ORDER Defendants to file the required disclosure statement within seven days of the entry of this Order. On April 3, 2003, we received a letter from Plaintiffs in which they request that, if we decide to "forgive" Defendants' latest delay, that we require Defendants to reimburse Plaintiffs their legal fees. (Letter from Levine to the Court of 4/3/03 at 2.) We construe this request as a motion for legal fees.
We note that only a Court may grant an extension of time to answer.
Despite being granted two extensions of time to file a reply to Plaintiffs' opposition to Defendants' motion to dismiss, Defendants never filed that reply.
SECOND DEFAULT MOTION
Plaintiffs have moved for a default judgment on the grounds that Defendants failed to timely file an answer to Plaintiffs' complaint. The principal factors for judging the suitability of a default judgment are 1) whether defendant's default was willful; 2) whether denying the motion for default judgment will prejudice the plaintiff; and 3) whether defendant has a meritorious defense. See Meehan v. Snow (2d Cir. 1981) 652 F.2d 274, 276-77 (applying these factors in context of motion to set aside entry of default judgment and observing that same factors apply to motion to oppose default judgment); Kuhlik v. Atlantic Corp., Inc. (S.D.N.Y. 1986) 112 F.R.D. 146.
As to the first factor, courts in this circuit have recognized that "willfulness" in the context of a motion for a default judgment requires more than a showing of carelessness or negligence and is more akin to bad faith or a demonstration that the defaulting party has engaged in culpable conduct. See American Alliance Ins. Co., Ltd. v. Eagle Ins. Co. (2d Cir. 1996) 92 F.3d 57, 60, 61. A showing that a defendant has chosen to default for strategic reasons or in order to gain some tactical advantage has been held to constitute grounds for default judgment. See American Alliance, 92 F.3d at 60; Action S.A. v. Marc Rich Co. (2d Cir. 1991) 95 F.2d 504, 507; United States v. Erdoss (2d Cir. 1971) 440 F.2d 1221. Defense counsel's inability to file memoranda within generously extended deadlines as well as his failure to be aware of decisions issued by this Court on a motion filed by him represents a level of carelessness we find staggering. Nonetheless, we find no evidence in the record that these failures have been committed for strategic reasons or to gain some tactical advantage.
Plaintiffs argue that Defendants' "pattern of delay and excuses" are wasting time and have caused Plaintiffs "to incur needless expense." (Letter from Levine to the Court of 4/3/03 at 2.) This may be so; however, these allegations do not justify the very extreme sanction of a default judgment. See Enron Oil Corp. v. Diakuhara (2d Cir. 1993) 10 F.3d 90, 96 ("[B]ecause defaults are generally disfavored and are reserved for rare occasions, when doubt exists as to whether a default should be granted . . . the doubt should be resolved in favor of the defaulting party."); see also Sony Corp. v. Elm State Electronics, Inc. (2d Cir. 1986) 800 F.2d 317, 319 (it is within the descretion of a district court "to deny technically valid motions for default.") This approach is consistent with this circuits strong public policy favoring the resolution of disputes on the merits. See, e.g., American Alliance, 92 F.3d at 61.
Second, Plaintiffs have not demonstrate that they have been prejudiced by Defendants' delay. Delay alone is insufficient to establish prejudice. See Davis v. Musler (2d Cir.) 713 F.2d 907, 916. Instead, a plaintiff must show that "delay will `result in the loss of evidence, create increased difficulties of discovery, or provide greater opportunity for fraud and collusion.'" Id. (citation omitted). Plaintiffs have alleged none of these in their request for a default judgment.
In order to satisfy the third factor — whether the defendant has a meritorious defense — the defendant need not demonstrate "a likelihood that [the defense] will carry the day." Enron, 10 F.3d at 98. Rather, the applicable standard is "whether the evidence submitted, if proven at trial, would constitute a complete defense." Id. In denying Plaintiffs' allegations, Defendants have satisfied the requirement for the purpose of defeating Plaintiffs' Second Default Motion.
For the foregoing reasons, Plaintiffs' motion for a default judgment is DENIED.
MOTION FOR LEGAL FEES
Although Plaintiffs have asked us to award them legal fees in conjunction with the filing of the Second Default Motion, we decline to do so. Since the Defendants have not specifically set forth a statutory basis for their fee request, we assume that they seek fees in accordance with our inherent authority to impose such a sanction. We may, through the discretionary exercise of our inherent power, award reasonable attorneys fees where the opposing party has "`acted in bad faith, vexatiously, wantonly, or for oppressive reasons.'" Fornar Corp. v. Magnetic Reponance Plus, Inc. (S.D.N.Y. 1996) 935 F. Supp. 443, 448. Because the Plaintiffs have not alleged with any specificity that the Defendants failed to timely file their answer in bad faith, we will not invoke our discretion to issue such an award in this instance. We also note that because Plaintiffs' first motion for default judgment was never denied, but rather stayed, their filing of the Second Motion was unnecessary. Accordingly, Plaintiffs' request for legal fees is denied. See Zeke N' Zoe Corp. v. Zeke N' Zoe, LLC (S.D.N.Y. May 15, 2002) 2002 WL 1000957, *2.
CONCLUSION
Defendants are ORDERED to file the required disclosure statement within seven days of the entry of this Order.
Plaintiffs' motion for default judgment is DENIED.
Plaintiff's motion for legal fees is DENIED.
SO ORDERED.