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Joe Hand Promotions, Inc. v. Capomaccio

October 6, 2009

JOE HAND PROMOTIONS, INC., PLAINTIFF,
v.
LEE CAPOMACCIO, INDIVIDUALLY AND D/B/A PINEAPPLE JACKS A/K/A PINEAPPLE JACK'S GRILL & BAR; AND TC & COMPANY, LTD., AN UNKNOWN BUSINESS ENTITY D/B/A PINEAPPLE JACKS A/K/A PINEAPPLE JACK'S GRILL & BAR, DEFENDANTS.



The opinion of the court was delivered by: Michael A. Telesca United States District Judge

DECISION and ORDER

INTRODUCTION

Plaintiff, Joe Hand Promotions, Inc. ("Plaintiff"), brings this action against defendants Lee Capomaccio (Capomaccio") individually and d/b/a PINEAPPLE JACKS a/k/a PINEAPPLE JACK'S GRILL & BAR and TC & COMPANY, LTD., an unknown business entity d/b/a PINEAPPLE JACKS a/k/a PINEAPPLE JACK'S GRILL & BAR (collectively "defendants"), alleging that defendants unlawfully intercepted and exhibited the program entitled "Ultimate Fighting Championship 59: 'Reality Check'" at its commercial establishment in violation of 47 U.S.C. §§605 and 553. Plaintiff is seeking to recover statutory damages plus attorneys' fees and costs. The Clerk of the Court has issued an Entry of Default as to the defendants who now move to set aside the entry of a default, pursuant to Rule 55(c) of the Federal Rules of Civil Procedure. In addition, defendants request leave of this Court to serve a late Answer in response to the Summons and Complaint. Plaintiff has opposed the defendants' motion. For the reasons set forth below, the motion to vacate the entry of the default is granted and defendants are granted leave to answer the Complaint.

BACKGROUND

Plaintiff commenced this action on April 9, 2009 and served defendants with a copy of the Summons and Complaint as well as related documents on May 1, 2009. A copy of the Proof of Service for each defendant was filed with the Court on June 29, 2009. On June 30, 2009, plaintiff filed a Request to Enter Default against defendants. The Clerk of the Court issued an Entry of Default as to the defendants on July 2, 2009. Defendants' counsel entered an appearance on July 7, 2009 on behalf of all the defendants. On August 13, 2009, defendants filed the Motion to Set Aside Default, which is currently before the Court for resolution.

Defendants claim that upon being served with the Summons and Complaint, Capomaccio reached out to plaintiff's counsel two separate times by phone. See Affirmation of Frank G. Montemalo ("Montemalo Aff."), ¶7. On the first attempt, Capomaccio believes he spoke to a secretary at plaintiff's counsel's office and per the conversation he was under the impression that the parties would attempt to resolve the matter without further Court intervention. See id., ¶8.*fn1 Capomaccio asserts that he was told that no action would be taken on the Complaint while discussions were ongoing concerning a possible resolution of the case. See id. Thereafter, Capomaccio contends he made another phone call to plaintiff's counsel's office where he was once again reassured by the secretary, who claimed she was authorized to speak to Capomaccio about the case, that he did not need to retain counsel to answer the Complaint. See Capomaccio Aff., ¶8. The secretary informed Capomaccio that Mr. Riley would return his call to discuss the allegations in the Complaint. See id.

Plaintiff's counsel claims that nobody in his office has authority to speak on his behalf concerning settlement of any pending matter. See Affirmation of Thomas P. Riley ("Riley Aff."), ¶3.*fn2 In addition, plaintiff's counsel disputes that Capomaccio called his office twice. He claims that Capomaccio only called once in late May 2009 and that there were no discussions with him regarding settlement or Capomaccio's obligations relating to the Complaint. See id., ¶4. According to Capomaccio, sometime in late June, a staff person named Sarah from Mr. Riley's office left him a voice message on his cell phone. See Capomaccio Reply Aff., ¶7. The voice message indicated in sum and substance that she was returning Capomaccio's call, thinking he was the attorney for the defendants, to discuss the case. See id.*fn3 However, plaintiff subsequently requested that a default be entered against defendants for failing to timely respond to the Summons and Complaint. See Montemalo Aff., ¶9.

Following notice to defendants of the entry of default, they immediately retained Mr. Montemalo to represent their interests in this matter and an appearance was entered on behalf of defendants in this Court. See Doc. #9. Consequently, defense counsel contacted plaintiff's counsel to request permission to file an Answer to the Complaint and advised that defendants had a reasonable excuse for the default and a meritorious defense. See Montemalo Aff., ¶12. In response, plaintiff's counsel asked for proof of the meritorious defense but refused to accept a late Answer for the Complaint. See id., ¶13. On July 23, 2009, defense counsel sent a letter to plaintiff's counsel in an attempt to resolve the matter without need for judicial intervention and asking plaintiff's counsel to accept defendants' proof of a meritorious defense in exchange for a promise to discontinue this action. See id., ¶14. To date plaintiff's counsel has not responded to this request. See id., ¶15. Defendants have filed a motion to vacate the Entry of Default on grounds that the default was not willful; that defendants have a meritorious defense and no prejudice will result to plaintiff if default is vacated. Plaintiff opposes defendants' motion.

DISCUSSION

I. Defendants' Motion to Set Aside Entry of Default

A. Standard of Review

Rule 55 sets forth the procedural steps for obtaining and vacating an entry of a default judgment. Rule 55(a) provides that "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules...the clerk shall enter the party's default." Fed.R.Civ.P. 55(a). Following entry of default upon the plaintiff's request, defendants may seek to set aside the entry of default pursuant to Rule 55(c). See Meehan v. Snow, 652 F.2d 274, 276 n. 5 (2d Cir.1981) ("Entering a default pursuant to Rule 55(a) and affording a defendant an opportunity to move to vacate it pursuant to Rule 55(c) is the preferable course"). If a Rule 55(c) motion is not made or is unsuccessful, and if no hearing is necessary to determine damages, a default judgment may be entered by the court or by the clerk. See id. at 276. Under Rule 55(c), the court may set aside an entry of default "[f]or good cause shown." Fed.R.Civ.P. 55(c).

As the Second Circuit has explained, "[b]ecause Rule 55(c) does not define the term 'good cause,' we have established three criteria that must be assessed in order to decide whether to relieve a party from default or from a default judgment." Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir.1993) (citations omitted). Specifically, the three-pronged inquiry to determine whether good cause has been shown to set aside an entry of default are: (1) whether the default was willful; (2) whether setting aside the default will prejudice the adversary; and (3) whether a meritorious defense is presented. See id.; accord Comm. Bank of Kuwait v. Rafidain Bank, 15 F.3d 238, 243 (2d Cir.1994); See Pecarsky v. Galaxiworld.Com Ltd., 249 F.3d 167, 171 (2d Cir.2001). Other equitable considerations include whether the failure to follow a rule of procedure was a mistake made in good faith, and whether the entry of default would bring about a harsh or unfair resolution. See Enron Oil Corp., 10 F.3d at 96; Brown v. Gabbidon, 2007 WL 1423788, at *2 (S.D.N.Y.2007) (Court also permitted to consider relevant equitable factors including whether failure to appear "was 'a mistake made in good-faith and whether the entry of default would bring about a harsh or unfair result.'") (quotations omitted).

"Default judgments 'are generally disfavored and are reserved for rare occasions.'" State St. Bank & Trust Co. v. Inversions Errazuriz Limitada, 374 F.3d 158, 168 (2d Cir.2004) (quoting Enron Oil Corp., 10 F.3d at 96). The universally preferred course is resolution of disputes on their merits. Thus, "good cause" under Rule 55(c) "should be construed generously." Enron Oil Corp., 10 F.3d at 96. For example, "when doubt exists as to whether a default should be granted or vacated, the doubt should be resolved in favor of the defaulting party." Id.; Powerserve Int'l, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2001) (Any doubt should be resolved in favor of the defaulting party). Finally, "[t]he dispositions of motions for entries of defaults and default judgments and relief from the same under Rule 55(c) are left to the sound discretion of a district court because it is in the best position to assess the ...


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