The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge
This motion to vacate the default judgment arises out of a
claim by plaintiffs, Theodore King and Gary LaBarbera, in their
capacity as trustees for various trust funds of Local 282,
International Brotherhood of Teamsters ("Local 282"), alleging
that defendants Galluzzo Equipment & Excavating ("Galluzzo
Equipment"), BTS Construction Corp. ("BTS"), and Dominick
Galluzzo ("Galluzzo"), failed to make required contributions to
the Local 282 trusts. Plaintiffs brought this claim pursuant to
the Employee Retirement Income Security Act of 1974, as amended,
29 U.S.C. § 1001, et seq. ("ERISA"), and Section 301 of the
Labor Management Relations Act, 29 U.S.C. § 185 ("LMRA"). A
default judgment was entered against defendants on May 9, 2003.
Almost one year later, on March 24, 2004, defendants brought this
motion to vacate the default judgment. For the reasons set forth
below, this motion is denied. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
On or about September 9, 1998, Galluzzo Equipment executed a
New York City Heavy Construction & Excavating Contract with Local
282 ("1998 contract"), which was to be in effect through June 20,
1999. The 1998 contract was later extended through June 30, 2002.
Around the time that the 1998 contract was extended, Galluzzo
Equipment was provided with a copy of a contract between it and
Local 282 for the period 1999-2002 ("1999 contract"). According
to defendants, the 1999 contract was not signed by Galluzzo or by
any representative of Galluzzo Equipment or BTS. On or about
March 31, 2000, Local 282 commenced an ERISA action against
defendants for unpaid contributions, King, et al. v. Galluzzo
Equipment & Excavating, Inc., No. CV 00 1889 ("Prior Action").
Galluzzo Equipment failed to answer the complaint or appear in
the Prior Action; plaintiffs moved for a default judgment, which
was entered against Galluzzo Equipment on June 29, 2000. A
satisfaction of judgment in the Prior Action was filed by the
plaintiffs on April 18, 2001.
Plaintiffs filed this action on October 18, 2000, alleging that
Galluzzo Equipment and its controlling officer, Galluzzo, engaged
in a scheme in which an alter-ego corporation (BTS) was used to
employ and pay a number of employees covered by the 1998
Contract. The complaint further alleges that, as a result of this
scheme, the Remittance Reports submitted to the Funds for each
month from September 1998 through July 2000 misrepresented the
number of hours worked by employees covered by the 1998 Contract.
According to plaintiffs, as a result of the misrepresentations,
the contributions to the Funds for these months were
substantially lower than what was actually owed.
Defendants were originally represented in this action by
Herrick Feinstein, LLP ("Herrick Feinstein"). Defendants filed an answer and later moved for
partial summary judgment on the grounds of insufficient service
of process and res judicata. Their motion was denied in its
entirety. See King v. Galluzzo Equipment & Excavating, Inc.,
2001 WL 1402996, at *1 (E.D.N.Y. Nov. 8, 2001). According to
plaintiffs, following the denial of summary judgment, plaintiffs
attempted to proceed with discovery but defendants refused to
respond to discovery requests.
When defendants fell behind in payment of their legal bills,
Herrick Feinstein moved to be relieved as counsel and their
motion was granted on July 9, 2002. In granting that motion, this
Court warned that the corporate defendants had to retain new
counsel by August 6, 2002, that Galluzzo would be deemed to be
appearing pro se if he did not retain new counsel, and that all
defendants risked default judgment. Defendants did not retain new
counsel did nor did they request an extension of time to do so.
Plaintiffs subsequently filed a default application with the
Court on April 3, 2003, copies of which were served on all
defendants who had not even by then retained new counsel. By
letter dated April 16, 2003, copies of which were also sent to
defendants, plaintiffs confirmed with the court that a hearing on
the default application would take place on May 9, 2003.
Defendants did not attend the default hearing and on May 9, 2003,
a default judgment was entered against them, jointly and
severally, in the amount of $338,711.80. According to plaintiffs,
this amount was based on an estimated audit and on the trust
agreements, and included interest, liquidated damages, audit
fees, and attorney's fees and costs. All defendants were served
with the default judgment on September 12, 2003.
According to plaintiffs, defendants failed to respond to
plaintiffs' post-judgment discovery requests until plaintiffs
sought judicial intervention in a New Jersey state court. Defendants eventually retained new counsel and filed this motion
to vacate the default judgment on March 24, 2004.
Rule 60(b) of the Federal Rules of Civil Procedure provides, in
pertinent part, that "[o]n motion and upon such terms as are
just, the court may relieve a party or a party's legal
representative from a final judgment . . . [because of] mistake,
inadvertence, surprise or excusable neglect." In the Second
Circuit, courts evaluate whether to grant such motions by
weighing three criteria: "(1) whether the default was willful;
(2) whether defendant has a meritorious defense; and (3) the
level of prejudice that may occur to the non-defaulting party if
relief is granted." Davis v. Musler, 713 F.2d 907, 915 (2d Cir.
1983). "An application for relief under 60(b) `shall be made
within a reasonable time . . . not more than one year after the
judgment . . . was entered or taken.'" Sasso v. M. Fine Lumber
Co., Inc., 144 F.R.D. 185, 188 (E.D.N.Y. 1992) (quoting F.R.C.P.
60(b)). "Proper application of the rule strikes a balance between
serving the ends of justice and preserving the finality of
judgments." Id. (quoting House v. Sec'y of Health & Human
Servs., 688 F.2d 7, 9 (2d Cir. 1982)).
A motion under Rule 60(b) is addressed to the sound discretion
of the trial court. Velez v. Vassallo, 203 F. Supp.2d 312, 333
(S.D.N.Y. 2002). On a motion to set aside a default judgment, the
defaulting party bears the burden of proof, see In re
Martin-Trigona, 763 F.2d 503, 505 n. 2 (2d Cir. 1985), but
doubts should be resolved in favor of the party seeking relief.
Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993).
Because Rule 60(b) allows extraordinary relief, it should be invoked only if the moving party meets its
burden of demonstrating "exceptional circumstances." Paddington
Partners v. Bouchard, 34 F.3d 1132, 1142 (2d Cir. 1994); see
also Artmatic USA Cosmetics v. Maybelline Co., 906 F. Supp. 850,
853 (E.D.N.Y. 1995) (Glasser, J.).
Defendants argue that their default was not willful but was a
result of their inability to retain new counsel and Galluzzo's
mistaken belief that defendants were unable to oppose the
application for a default judgment. Plaintiffs, however, point to
four facts that demonstrate that defendants were acting willfully
and with knowledge of the default and its consequences: (1) this
Court's order dated July 9, 2002 requiring the corporate
defendants to obtain counsel by August 6, 2002 or risk default;
(2) plaintiffs' default application of April 3, 2003, copies of
which were sent to defendants; (3) defendants' absence at the
default hearing; and (4) defendants' failure to respond to
plaintiffs' pre- and post-judgment discovery requests. "The
boundary of willfulness lies somewhere between a case involving a
negligent filing error, which is normally considered an excusable
failure to respond, and a deliberate decision to default, which
is generally not excusable." Int'l Painters and Allied Trades
Union and Indus. Pension Fund v. H.W. Ellis Painting Co., Inc.,
288 F. Supp.2d 22, 26 (D.D.C. 2003) (citing Gucci Am., Inc. v.
Gold Ctr. Jewelry, 158 F.3d 631, 634 (2d Cir. 1998), cert.
denied, 525 U.S. 1106 (1998)); see also Am. Alliance Ins.
Co., Ltd. v. Eagle Ins. Co., 92 F.3d 57 (2d Cir. 1996) (filing
mistake by clerk for defendant's in-house counsel not willful but
weighs somewhat against granting relief). Defendants' actions
here bespeak a deliberate decision to default, rather than
Defendants contend first that Galluzzo's lack of sophistication
resulted in their failure to respond to plaintiffs' default application. Lack of
sophistication, however, is no excuse for a defendants' default.
Original Appalachian Artworks, Inc. v. Yuil Int'l Trading
Corp., 105 F.R.D. 113, 116 (S.D.N.Y. 1985) ("the lack of legal
sophistication on the part of a corporation and its principal
simply cannot form the basis of a claim of excusable neglect or
fraud for purposes of Rule 60(b)"); ILGWU Nat'l Retirement Fund
v. Empire State Mills Corp., 696 F. Supp. 885, 887-88 (S.D.N.Y.
1988) (same). Moreover, defendants' claim of ignorance about the
consequences of a default judgment is belied by the fact that the
Prior Action also ended with the entry of a default judgment
against defendants. In addition, Galluzzo had the opportunity in
this action to consult with highly ...