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United States v. Ratto

United States District Court, Second Circuit

August 8, 2013

UNITED STATES OF AMERICA c/o Gary Valerino, Plaintiff,
v.
MATTHEW RATTO, Defendant.

MEGGESTO, CROSSETT & VALERINO, LLP, GARY J. VALERINO, ESQ., Syracuse, New York, Attorneys for Plaintiff.

MEMORANDUM-DECISION AND ORDER

MAE A. D'AGOSTINO, District Judge.

I. INTRODUCTION

On May 23, 2012, Plaintiff United States of America commenced this action alleging that Defendant defaulted on a promissory note. See Dkt. No. 1. On August 24, 2012, Plaintiff moved for an entry of default, which was entered by the Clerk of the Court on August 27, 2012. See Dkt. Nos. 4, 5.

Currently before the Court is Plaintiff's motion for entry of a default judgment against Defendant pursuant to Rule 55(b) of the Federal Rules of Civil Procedure.

II. DISCUSSION

A. Standard of Review

"Generally, Federal Rule of Civil Procedure 55 provides a two-step process that the Court must follow before it may enter a default judgment against a defendant.'" United States v. Simmons, No. 5:10-CV-1272, 2012 U.S. Dist. LEXIS 27787, *3 (N.D.N.Y. Mar. 2, 2012) (quotation omitted). "First, under Rule 55(a), when a party fails to "plead or otherwise defend... the clerk must enter the party's default."'" Id. (quotation omitted); Fed.R.Civ.P. 55(a). "Second, pursuant to Rule 55(b)(2), the party seeking default is required to present its application for entry of judgment to the court.'" Id. (quotation omitted). "Notice of the application must be sent to the defaulting party so that it has an opportunity to show cause why the court should not enter a default judgment.'" Id. (quotation omitted); Fed.R.Civ.P. 55(b)(2).

"When a default is entered, the defendant is deemed to have admitted all of the well-pleaded factual allegations in the complaint pertaining to liability." Bravado Int'l Group Merch. Servs. v. Ninna, Inc., 655 F.Supp.2d 177, 188 (E.D.N.Y. 2009) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). "While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof unless the amount is liquidated or susceptible of mathematical computation." Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974) (citations omitted); see also Bravado Int'l, 655 F.Supp.2d at 189-90 (citation omitted). "[E]ven upon default, a court may not rubber-stamp the non-defaulting party's damages calculation, but rather must ensure that there is a basis for the damages that are sought." Overcash v. United Abstract Group, Inc., 549 F.Supp.2d 193, 196 (N.D.N.Y. 2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). "The burden is on the plaintiff to establish its entitlement to recovery." Bravado Int'l, 655 F.Supp.2d at 189 (citing Greyhound Exhibitgroup, Inc., 973 F.2d at 158). "While the court must ensure that there is a basis for the damages specified in a default judgment, it may, but need not, make the determination through a hearing.'" Id. at 190 (quotation omitted).

B. Application

In the present matter, Plaintiff has established through its complaint and attached exhibits that it is entitled to judgment in its favor. The complaint and summons were properly served on June 20, 2012, see Dkt. No. 7, and Defendant has failed to answer the complaint or otherwise appear in this matter. Plaintiff has complied with the requirements set forth in Local Rule 55.2(b) to the extent required for the Court to grant Plaintiff's motion as to liability.[1] As such, Defendant has defaulted within the meaning of Rule 55(b)(2) of the Federal Rules of Civil Procedure and the following factual allegations are deemed true for purposes of establishing liability. See United States v. Beam, No. 6:12-CV-0087, 2012 U.S. Dist. LEXIS 69054, *4 (N.D.N.Y. May 17, 2012) (holding that by failing to answer the plaintiff's complaint or respond to the motion, the defendant "has effectively conceded" that he is subject to the terms of the promissory note, and is liable for the money owed).

On or about November 17, 1991, Defendant executed a promissory note to secure a loan of $4, 000.00 from Glens Falls National Bank and Trust (holder). See Dkt. No. 1-2 at 1. The loan was disbursed at an 8.00 percent interest rate per annum, rising to 10.00 percent after the fourth year of repayment. See Dkt. No. 1-2 at 1. The loan was guaranteed by the New York State Higher Education Services Corporation (guaranty agency), and reinsured by the Department of Education (Department) under loan guaranty programs authorized by Title IV-B of the Higher Education Act of 1965. See id. Pursuant to 20 U.S.C. § 1077a(i)(7), the holder converted the interest rate to a variable rate. See id. The holder demanded payment according to the terms of the note, and on January 26, 1997, Defendant defaulted on his obligation. See id.

Due to Defendant's default, the guaranty agency paid a claim in the amount of $3, 821.14 to the holder. See id. The guaranty agency was reimbursed for that payment by the Department under its reinsurance agreement. See id. Pursuant to 34 C.F.R. § 682.410(b)(4), once the guaranty agency pays on the default claim, the entire amount paid becomes due to the guaranty agency as the new principal. See id. The guarantor attempted to collect the debt from Defendant but was unable to collect the ...


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