ANN TAYLOR, INC.v.INTERSTATE MOTOR CARRIER, INC.

United States District Court, S.D. New YorkSep 13, 2004
No. 03 Civ. 7502 (RWS) (S.D.N.Y. Sep. 13, 2004)

No. 03 Civ. 7502 (RWS).

September 13, 2004

DONOVAN PARRY McDERMOTT RADZIK, New York, NY, Attorneys for Plaintiff, DANIEL G. McDERMOTT, ESQ., LORI J. QUINN, ESQ., Of Counsel.

INTERSTATE MOTOR CARRIERS, INC., Charleston, IN, Defendant.

SCHINDEL, FARMAN LIPSIUS, New York, NY, Attorneys for Third-Party Defendant, JEAN M. GARDNER, ESQ., ANDREW KARONIS, ESQ., Of Counsel.


OPINION


ROBERT SWEET, Senior District Judge

Plaintiff Ann Taylor, Inc. ("Ann Taylor") has moved for entry of a default judgment against defendant Interstate Motor Carrier, Inc. ("IMC") pursuant to Rule 55(b) (2) of the Federal Rules of Civil Procedure. For the reasons set forth below, Ann Taylor's motion is granted, and the Clerk of the Court is ordered to enter default against defendant IMC.

Prior Proceedings and Background

Ann Taylor commenced this action on September 24, 2003 against IMC, seeking damages in the sum of $1,676,668.38 for loss and non-delivery of Ann Taylor's goods delivered to IMC as a common carrier. On December 9, 2003, IMC filed its answer to the complaint. On February 17, 2004, Fireman's Fund Insurance Company ("Fireman's Fund") filed an answer to a third-party action brought by IMC seeking a declaration that Fireman's Fund must indemnify IMC for any liability arising from the underlying events. In its answer, Fireman's Fund asserted counterclaims against IMC, and IMC, in turn, filed its answer to the counterclaims on March 18, 2004.

On or about May 20, 2004, IMC's counsel, Barry N. Gutterman Associates, moved to be relieved as counsel. In support of the motion, Barry N. Gutterman declared that he had been advised on April 26, 2004, that IMC was out of business and that he should not do any further legal work on the matter. He further declared that he had not been paid for certain of the legal services rendered. By an order of May 25, 2004, Barry N. Gutterman Associates was relieved as counsel for IMC, and IMC has not retained counsel to appear in this action since that time.

In the interim, on April 5, 2004, Ann Taylor served its Request for Admissions to IMC. IMC has not served Ann Taylor with a response to the Request for Admissions as of August 3, 2004.

On June 15, 2004, Ann Taylor served a Notice of Deposition on IMC, which Notice was returned to Ann Taylor, marked by the United States Postal Service as undeliverable, as IMC had moved and left no forwarding address. On July 6, 2004, Ann Taylor served a Request for Production of Documents on IMC, which too was returned to Ann Taylor, marked as undeliverable by the United States Postal Service since IMC had moved.

On July 9, 2004, Ann Taylor mailed its Notice of Deposition to IMC at the forwarding address identified in mail returned by the United States Postal Service. This too was returned and marked by the United States Postal Service as undeliverable to IMC, with no forwarding address. Once again, on July 14, 2004, Ann Taylor mailed its Request for Production of Documents to IMC at the forwarding address identified in mail returned by the United States Postal Service, which Request was returned as undeliverable to IMC, with no forwarding address.

On July 30, 2004, Fireman's Fund moved for summary judgment, which motion will be heard at a later date. On August 4, 2004, Ann Taylor filed the instant motion, seeking entry of a default judgment against IMC in the amount of $1,676,668.38, together with pre- and post-judgment interest, attorney's fees, and the costs of suit. No opposition was filed, and the motion was taken on submission on August 25, 2004.

Discussion

Rule 55 of the Federal Rules of Civil Procedure governs the entry of default judgments and sets forth a two-step process by which a party may secure a default judgment. First, under Rule 55(a),

When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules and that fact is made to appear by affidavit or otherwise, the clerk shall enter the party's default.

Fed.R.Civ.P. 55(a). As set forth above, IMC initially made an appearance in this action through an attorney, but subsequently advised its counsel that IMC was out of business and that he should not do any further legal work on the matter. Beginning in April of 2004, IMC has failed to respond to numerous discovery requests from Ann Taylor. An appearance by a party, "`without any further attempt to defend on the merits, will not keep a party from being in default for failure to plead or otherwise defend.'"Diversified Fin. Sys., Inc. v. Tomich Corp., No. 95 Civ. 4211, 1997 WL 177873, at *2 (E.D.N.Y. Mar. 28, 1997) (quoting 10 Charles Alan Wright et al., Federal Practice and Procedure § 2686 (2d ed. 1983)). Accordingly, the Clerk of Court is hereby ordered to enter a default as to defendant IMC.

In accordance with the second step involved in securing a default judgment, where, as here, a party has appeared in the action, the party seeking judgment by default against the first party "shall apply to the court therefor," Fed.R.Civ.P. 55(b)(2), as Ann Taylor has done. Furthermore, pursuant to Rule 55(b)(2),

If the party against whom judgment by default is sought has appeared in the action, the party (or, if appearing by representative, the party's representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application.

Fed.R.Civ.P. 55(b) (2). Annexed to Ann Taylor's Notice of Motion is a certificate of service certifying that Ann Taylor's motion papers were served by mail on IMC on August 3, 2004, at IMC's last known address. Ann Taylor has, accordingly, complied with the notice requirement of Rule 55(b)(2).

In determining whether a default judgment should be entered under Rule 55(b) (2), courts are to exercise sound judicial discretion. See Shah v. New York State Dep't of Civil Serv., 168 F. 3d 610, 615 (2d Cir. 1999); Badian v. Brandaid Communications Corp., No. 03 Civ. 2424 (DC), 2004 WL 1933573, at *2 (S.D.N.Y. Aug. 30, 2004); Diversified Fin. Sys., 1997 WL 177873, at *3; Wing v. East River Chinese Restaurant, 884 F. Supp. 663, 669 (E.D.N.Y. 1995). Various factors may be considered in making the determination, including:

[T]he amount of money potentially involved; whether material issues of fact or issues of substantial public importance are at issue; whether the default is largely technical; whether plaintiff has been substantially prejudiced by the delay involved; and whether the grounds for default are clearly established or are in doubt. Furthermore, the court may consider how harsh an effect a default judgment might have; or whether the default was caused by a good-faith mistake or by excusable or inexcusable neglect on the part of the defendant.
Badian, 2004 WL 1933573, at *2 (quotation marks and citation omitted); see also Wing, 884 F. Supp. at 669.

The grounds for default in this case are clearly established. As set forth above, IMC, after making an initial appearance in this action, has failed to select new counsel or to respond to Ann Taylor's discovery requests over a period of at least four months. No substantive material issues of fact appear to be in dispute, and, on this record, it appears unlikely that IMC would be able to demonstrate the good cause necessary to vacate a default judgment pursuant to Rule 55(c), Fed.R.Civ.P. Moreover, no issues of substantial public importance have been identified in this action. In light of IMC's indications to its former counsel that it was no longer in business and its failure to participate in this case since May of 2004, entry of default judgment is appropriate.

"Although the default establishes a defendant's liability, unless the amount of damages is certain, the court is required to make an independent determination of the sum to be awarded."Wing, 884 F. Supp. at 669 (citing S.E.C. v. Management Dynamics, Inc., 515 F.2d 801, 814 (2d Cir. 1975)). Rule 55(b)(2) provides,

If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper and shall accord a right of trial by jury to the parties when and as required by any statute of the United States.

Fed.R.Civ.P. 55(b) (2).

Neither the affidavit submitted in support of Ann Taylor's motion nor the documents annexed thereto provide an adequate basis upon which this Court may conclude that the amount of damages sought is a sum certain or may otherwise reach an independent determination of the sum to be awarded. The affidavit only refers to the sum of $1,676,668.38 as the amount sought in the complaint, and the complaint itself alleges that Ann Taylor "has suffered monetary damages as nearly as can be estimated in the amount of $1,676,668.38." (Compl. at ¶¶ 11, 15, 19.) Accordingly, Ann Taylor is directed to submit to this Court within thirty (30) days of entry of this opinion and order such materials as it may deem necessary to establish the amount of damages in this action. Ann Taylor is further directed to submit to this Court within thirty (30) days of entry of this opinion and order such materials as it may deem necessary in support of its request for attorney's fees and costs.

Upon receipt of Ann Taylor's submissions, the Court will determine if a hearing is necessary to ascertain the amount of damages or to make an investigation of any other matter prior to entry of judgment in this action.

Conclusion

For the foregoing reasons, the Clerk of the Court is ordered to enter a default as to defendant IMC and Ann Taylor is directed to submit materials as set forth above within thirty (30) days of entry of this opinion and order.

It is so ordered.