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Hernandez v. LA Cazuela De Mari Restaurant

June 12, 2007

OLGA HERNANDEZ, NELSON FLOREZ, ANDRES GARCIA, JOSE ORACIO GARCIA, ADRIAN SANCHEZ, AND GUSTAVO CANTOS, PLAINTIFFS,
v.
LA CAZUELA DE MARI RESTAURANT, INC., MARILUZ OTERO DE BARRERA, AND OSCAR DIEGO BARRERA, DEFENDANTS.



The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge

MEMORANDUM AND ORDER

Defendants La Cazuela de Mari Restaurant, Inc., Mariluz Otero de Barrera, and Oscar Diego Barrera ("Defendants") seek an order vacating and setting aside the default judgment entered against them by this court on October 5, 2006.

For the reasons set forth below, Defendants' motion to vacate is denied.

I. Background

Plaintiffs Olga Hernandez, Nelson Florez, Andres Garcia ("A. Garcia"), Jose Oracio Garcia ("J. Garcia"), Gustavo Cantos, and Adrian Sanchez ("Plaintiffs") brought this action against Defendants to recover unpaid overtime and minimum wages allegedly due under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201, et seq., and the New York Minimum Wage Act, N.Y. Labor Law §§ 650, et seq. Plaintiffs further sought unpaid "spread of hours" pay under Title 12, Section 137-1.7 of the New York Compilation of Codes, Rules and Regulations. In addition, Plaintiff Hernandez raised a claim against Defendants for breach of contract. Plaintiffs are former employees of La Cazuela de Mari Restaurant, Inc. ("La Cazuela de Mari"), owned and operated by defendants Mariluz Otero de Barrera ("M. Barrera") and Oscar Diego Barrera ("O. Barrera"). (Faillace 4/27/07 Declaration ("Faillace Decl."), ¶ 3; O. Barrera Affidavit ("Aff.") Defendants' ("Defs.'") Exhibit ("Exh.") G, ¶¶ 2-4; M. Barrera Aff. Defs.' Exh. H, ¶¶ 2-4.) M. Barrera is the president of La Cazuela de Mari, and O. Barrera is the vice president. (M. Barrera Aff. Defs.' Exh. H, ¶ 2; O. Barrera Aff. Defs.' Exh. G, ¶ 2.)

Plaintiffs Hernandez, Florez, A. Garcia, and J. Garcia originally instituted this action in the Southern District of New York on February 16, 2006. The case was subsequently transferred to this court on March 24, 2006. An amended complaint was filed on April 20, 2006, adding Cantos and Sanchez as plaintiffs. Defendants failed to answer either the original complaint or the amended complaint. On October 5, 2006, on Plaintiffs' motion, this court entered a default judgment against all three Defendants ("Default Judgment") and referred the case to U.S. Magistrate Judge Levy for a determination of damages.

By order dated October 6, 2006, Judge Levy set a briefing schedule for the parties to make their submissions on the issue of damages, fees, and costs and directed Plaintiffs to mail a copy of his order to each of the Defendants. In a letter to the court dated November 15, 2006, Plaintiffs moved for an extension of time to make their submission, noting, in addition, that Defendants had "repeatedly resisted service of papers in this action," but Plaintiffs nevertheless had served Defendants by Federal Express overnight mail. Judge Levy granted Plaintiffs an extension, setting a new briefing schedule and again directing Plaintiffs to mail Defendants a copy of his order.

On December 15, 2006, Plaintiffs submitted their papers on the issue of damages. Edward

A. Roberts, counsel representing Defendants at the time, submitted a letter to the court on December 21, 2006, stating that he "expect[ed] to do a motion seeking leave of court to interpose and answer on behalf of the defendants." No such motion was forthcoming. Again, Defendants failed to submit any opposition to Plaintiffs' papers in support of their claims for damages.

Judge Levy issued a Report and Recommendation on March 2, 2007 ("Recommendation"), recommending that Plaintiffs be awarded damages and prejudgment interest in the amount of $335,413.20 and costs in the amount of $570. In the Recommendation, Judge Levy directed the parties to file any objections to the Recommendation within ten business days.

On March 8, 2007, after learning that Defendants' restaurant was listed for sale for significantly less than fair market value, Plaintiffs filed an application for an order of attachment and a temporary restraining order. See Plaintiffs' 3/5/2007 Memorandum in Support of Attachment and Exhs. F and G, ¶¶ 3-5, thereto. The same day, this court issued an Order to Show Cause for a temporary restraining order against Defendants, prohibiting them from secreting, conveying, or otherwise transferring their assets, except for transfers in good faith for fair value in the ordinary course of business. However, Plaintiffs' application for an order of attachment was denied. Defendants were directed to file a reply to the Order to Show Cause by March 15, 2007, and the parties were further ordered to appear before the court on March 16, 2007 for a hearing to be held on the matter of the injunction and requested attachment.

On March 13, 2007, attorney Gary J. Young of the law firm Robert K. Young and Associates, filed a letter noting his appearance as counsel for Defendants. In the same letter, Defendants requested an extension of time to respond to the Order to Show Cause and an adjournment of the hearing scheduled for March 16, 2007. This court denied Defendants' request for an adjournment of the March 16 proceedings, directing all parties to appear as scheduled. However, the court granted Defendants' application to the extent that the hearing concerning the injunction and the order of attachment was postponed to a date and time to be set at the March 16 proceedings. The court also granted Defendants' request for an extension of time to file their response to the Order to Show Cause, pursuant to a motion schedule also to be set on March 16.

At the March 16 conference, the court granted Defendants' request to move for vacatur of the Default Judgment, setting a briefing schedule for the parties. The parties were further granted permission to submit any objections to the Recommendation in their papers.

On March 20, 2007, Roberts apparently mailed and faxed a letter to counsel for Plaintiffs stating that he "would be submitting an order to show cause to the Court on Wednesday March 21, 2007 at approximately 10:30 A.M." and that the "said object of the order to show cause would be to vacate the defendant's default and to stay the Court's signature of the proposed order in the within matter." (See Defs.' Exh. E.) Again, no submission was forthcoming from Roberts. Instead, on March 20, 2007, Roberts executed a Consent to Change Attorneys form, agreeing that current counsel for Defendants be substituted in his stead. (See Defs.' Exh. F.)

Defendants now submit this motion to vacate the Default Judgment pursuant to Federal Rules of Civil Procedure 55(c) and 66(b), asserting good cause shown and, in effect, excusable neglect and gross attorney negligence. Plaintiffs oppose Defendants' motion.

II. Defendants' Motion to Vacate the Default Judgment

Default judgments are generally disfavored due to the principle that cases should be decided on their merits. See U.S. v. Cirami ("Cirami II"), 563 F.2d 26, 33 (2d Cir. 1977).At the same time, in the interest of the finality of judgments, a reversal of a default judgment is only appropriate in limited circumstances. See id. Federal Rule of Civil Procedure 55(c) permits a court to set aside a default judgment either for "good cause shown" or in accordance with Rule 60(b). Rule 60(b) sets forth six subsections articulating reasons for which a court may vacate a default judgment. Defendants bring their petition under subsections (1) and (6), which permit vacatur of a default judgment for, in pertinent part, "(1) excusable neglect. . . or (6) any other reason justifying relief from the operation of the judgment."See Fed. R. Civ. P. 60(b). ...


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