The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.
This is an interpleader action involving a dispute over fees among plaintiffs' attorneys in the Rezulin multidistrict litigation. The matter is before the Court on the motion of defendants Dugan and Murray, d/b/a The Murray Law Firm, to vacate the default entered against them by the Clerk on February 26, 2008.
The present dispute has its genesis in two actions brought against Warner-Lambert and Pfizer on behalf of certain third-party payers with respect to the diabetes drug, Rezulin. After extensive proceedings in which the Lowey Dannenberg firm ("Lowey"), plaintiff here, played an important role, the cases were settled and a sum of money was generated for payment of plaintiffs' counsel. Dugan and Murray then commenced an action against Lowey in a Louisiana state court claiming that they had entered into a joint venture with Lowey and others to work on the third-party payer cases and that Dugan and Murray were entitled to a share of the fees. The action was removed to the district court and transferred here by the Multidistrict Panel. I then granted the motion of Dugan and Murray to remand the case to the Louisiana state court for lack of subject matter jurisdiction.*fn1
On January 17, 2008, Lowey filed the present action, interpleading Dugan, Murray and other claimants to the fund. It promptly moved for leave to pay the disputed funds into Court and for a preliminary injunction barring Dugan and Murray from pursuing other litigation with respect to this dispute, the latter doubtless having been directed at Dugan's and Murray's then recently remanded Louisiana state court action.
On January 26, 2008, Lowey served and filed (through the CM/ECF system) an amended complaint. An answer or responsive motion therefore was due on February 19, 2008.*fn2
Dugan and Murray defaulted. The Clerk signed a certificate of default on February 26, 2008.*fn3 On the following day, Lowey moved for a default judgment against Dugan and Murray. That motion remains pending and will be decided after disposition of the present motion.
Rule 55(c) provides that "[t]he court may set aside an entry of default for good cause . . . ." The question therefore is whether there is good cause to set aside the Clerk's certificate.
"[T]he standard for setting aside the entry of a default pursuant to Rule 55(c) is less rigorous than the 'excusable neglect' standard for setting aside a default judgment by motion pursuant to Rule 60(b)."*fn4 "Under Rule 55(c), the principal factors bearing on the appropriateness of relieving a party of a default are whether the default was willful, whether setting it aside would prejudice the adversary, and whether a meritorious defense is presented."*fn5 Accordingly, the Court proceeds to those factors.
As an initial matter, Lowey has made no persuasive showing of prejudice. While the time for discovery now has passed, it lies within the Court's power to afford a further opportunity if that were appropriate. Thus, this factor favors Dugan and Murray. They do not fare so well, however, on the remaining factors.
To begin, the only excuse offered by Dugan and Murray for failing to answer or move with respect to the complaint on or before February 19, as required, is the assertion -- unsworn and appearing only in their memorandum -- that "in light of the discussion at the hearing before the Court on January 31, 2008, Dugan and Murray, mistakenly, thought that submitting a formal Answer was moot, because the Court seemed to consider the Amended Complaint in its decision to deny" their motion to dismiss the original complaint for lack of subject matter jurisdiction.*fn6 Even putting aside the fact that the claim of mistake is unsupported by any affidavit or declaration, and the Court declines to put it aside, it is irreconcilable with the events of January 31. On that occasion, counsel for Dugan and Murray said:
"Your Honor, I believe it [i.e., the motion to dismiss] is moot because they [Lowey] filed an amended complaint that cured many of the problems that we raised with the original complaint. Our time for filing a responsive pleadings [sic] I think runs until February 18. At that point we will evaluate whether to file a motion to dismiss the amended complaint."*fn7
A few moments later, counsel for Dugan and Murray reiterated the same point, stating that "[o]ur time for answering or responding to the amended complaint is February 18 . . . ."*fn8 In consequence, the failure to file an answer or responsive motion was not the product of ...