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Todtman, Nachamie, Spizz & Johns, P.C. v. Ashraf

March 7, 2007

TODTMAN, NACHAMIE, SPIZZ & JOHNS, P.C., PLAINTIFF,
v.
RAUF ASHRAF, AND EMPYREAN INVESTMENT FUND, L.P., DEFENDANTS.



The opinion of the court was delivered by: Haight, Senior District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Todtman, Nachamie, Spizz & Johns, P.C., a law firm, sues to recover its fees for legal services rendered to defendants Rauf Ashraf and Empyrean Investment Fund, L.P. ("Empyrean"). After the defendants failed to answer or otherwise move with respect to the complaint, the Clerk of the Court entered the defendants' default pursuant to Federal Rule of Civil Procedure 55(a). Plaintiff has moved for this Court to enter a default judgment under Rule 55(b)(2), while defendants move to set aside the entry of default under Rule 55(c).

For the reasons set forth below, defendants' motion to vacate the entry of default is denied, and plaintiff's motion for a default judgment will be granted. An Order of Reference to a Magistrate Judge will be made to determine the amount of plaintiff's "third party costs," should plaintiff seek to recover those costs.

I. BACKGROUND

The underlying fee dispute relates to plaintiff's prior representation of the defendants in an adversary proceeding, In re MarketXT Holdings Corp., Case No. 04-12078 (ALG); Nisselson v. Empyrean Inv. Fund, L.P., Adv. No. 05-01268 (ALG), pending in the United States Bankruptcy Court for the Southern District of New York. On August 12, 2005, the plaintiff withdrew from representing the defendants in the adversary proceeding and new counsel for the defendants was substituted in plaintiff's place.

On or about September 6, 2005, plaintiff provided defendants with a statement of account for legal services previously rendered in the amount of $154,890.22. In their submissions on the present motions, defendants do not deny having received that statement. They did not object to the amount, but did not pay it. On November 30, 2005, plaintiff filed its complaint in this action, alleging causes of action for breach of contract, account stated, and quantum meruit, and seeking damages of $154,890.22 (the amount of the unpaid statement of account) plus interest, " third-party costs," and attorneys' fees, costs, and disbursements of the action. Summons was issued by the Clerk of the Court on that date.

Ashraf resides in Brookline, Massachusetts. Plaintiff retained a process server to effect service of the summons and complaint upon the defendants. The process server's affidavit states that he effected service by affixing copies of the summons and complaint to the door of Ashraf's residence in Brookline on February 17, 2006 and by mailing copies to that address on February 24, 2006.*fn1 Defendants do not deny having been served. They did not answer the complaint or appear in the action. On July 19, 2006, and again on August 16, 2006, plaintiff filed identical notices of a motion under Rule 55 for an order granting a default judgment against defendants for the relief prayed for in the complaint. Plaintiff did not accompany those motions with a certificate that the Clerk had entered defendants' default pursuant to Rule 55(a). Plaintiff remedied that defect by obtaining from the Clerk a certificate, dated September 15, 2006 and filed on September 25, 2006, which recited service upon the defendants as described above and noted their default.

Plaintiff's motion for a judgment by default lies under Rule 55(b)(2). On September 19, 2006 and October 4, 2006, Ashraf wrote pro se letters to the Court, requesting additional time to retain counsel and respond to plaintiff's submissions. On December 8, 2006, defendants-now represented by present counsel-filed a motion under Rule 55(c) to set aside the default. This Opinion resolves both motions.*fn2

II. DISCUSSION

A. Standard of Review

Rule 55(a) provides that a plaintiff may request the Clerk of the Court to enter default against a defendant who "has failed to plead or otherwise defend as provided by these rules." Following entry of default, the plaintiff may then obtain a judgment by default pursuant to Rule 55(b). If the plaintiff's claim is for a sum certain, and the defendant has not appeared, the Clerk of the Court can enter a judgment. Fed. R. Civ. P. 55(b)(1). Alternatively, a default judgment can be entered by the Court. Fed. R. Civ. P. 55(b)(2). If necessary, the Court can direct that a hearing be held, usually conducted by a Magistrate Judge and called an "inquest," to determine the amount of damages, before entering judgment for that amount pursuant to Rule 55(b)(2).

Rule 55(c) provides than an entry of default may be set aside "for good cause shown." In assessing "good cause," courts must consider the following factors: "(1) whether the default was willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a meritorious defense is presented." Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993).*fn3 The court must weigh and balance each of the relevant factors in making its determination. See id. at 97; Info. Sys. & Networks Corp. v. United States, 994 F.2d 792, 796 (Fed. Cir. 1993).

Rule 55(c) determinations are left to the sound discretion of the district court. Enron, 10 F.3d at 95. However, there is a preference for resolving disputes on the merits, and doubts should generally be ...


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