United States District Court, Eastern District of New York
Murphy & McKenna Attorneys for the Plaintiff, Bryan A. McKenna, Esq., Of Counsel.
Law Offices of Andrew J. Spinnell, LLC Attorneys for the Defendants, Andrew J. Spinnell, Esq., Of Counsel
DECISION AND ORDER
ARTHUR D. SPATT, United States District Judge.
On August 20, 2013, the Plaintiff MD Produce Corp. (the “Plaintiff”) commenced this action against the Defendants 231 Food Corp. and Rafael Monte De Oscar (the “Defendants”) pursuant to Section 5(c)(5) of the Perishable Agriculture Commodities Act, 7 U.S.C. § 499e(c)(5). On August 21, 2013, the Plaintiff served the Defendants with a copy of the summons and complaint.
Thereafter, attorneys for the Plaintiff engaged the Defendants’ former counsel Sanford Goldberg, Esq. in settlement negotiations. Goldberg did not file an appearance nor did the Defendants file an answer to the complaint.
On September 4, 2014, the Clerk of the Court noted the default of the Defendants. On October 3, 2014, the Plaintiff moved for a default judgment pursuant to Federal Rule of Civil Procedure (“Fed. R. Civ. P.”) 55(b)(2).
On October 6, 2014, the Court referred this matter to United States Magistrate Judge Steven I. Locke for a recommendation as to whether the motion for a default judgment should be granted, and if so, whether damages should be awarded, including reasonable attorney’s fees and costs.
On October 15, 2014, the Law Offices of Andrew J. Spinnell, LLC filed a notice of appearance on behalf of the Defendants.
On November 16, 2014, the Defendants moved pursuant to Fed.R.Civ.P. 55(c) to set aside the default and to compel the Plaintiff to accept the Defendants’ proposed answer.
On December 8, 2014, the Defendants moved pursuant to Fed.R.Civ.P. 12(b)(3) to dismiss this action for improper venue or, in the alternative, pursuant to 28 U.S.C. § 1406(a) to transfer the venue to the United States District Court for the Southern District of New York.
With regard to the Defendants’ challenge to venue in this District, the Court finds that they have waived that defense by their default. As one treatise explains, “proper venue is not essential to a valid judgment; therefore a venue defect will be waived by failing to appear and suffering a default judgment.” 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2695 (3d ed. 1998); see also Hoffman v. Blaski, 363 U.S. 335, 343, 80 S.Ct. 1084, 4 L.Ed.2d 1254 (1960)(“a defendant, properly served with process by a court having subject matter jurisdiction, waives venue by failing seasonably to assert it, or even simply by making default.”).
This conclusion is not altered by the fact that, as explained later, the Court vacates the underlying default against the Defendants. The Defendants are not free of fault for their failure to appear, and, therefore, they are reinstated to this lawsuit on the condition that they have waived the defense of improper venue by failing to timely raise the issue in response to the complaint. Saunders v. Morton, 269 F.R.D. 387, 401 (D. Vt. 2010)(recommending reinstatement of the defendant to the suit, following entry of judgment and default against him, on the condition that he waived the defense of improper venue by failing to timely raise it in response to the complaint.); 10A Wright, Miller & Kane § 2700 (“The court’s inherent power and use of discretion . . . enables it to set aside default entries on various conditions.”).
As stated above, the Court grants the Defendants’ motion to set aside the default. Federal Rule of Civil Procedure 55(c) requires “good cause” to set aside an entry of default. The determination of “good cause” requires the Court to exercise its discretion in considering three factors: “(1) whether the default was willful; (2) whether setting aside the default would prejudice the party for whom default was awarded; and (3) whether the moving party has presented a meritorious defense.” Peterson v. Syracuse Police Dep’t, 467 F. App’x 31, 33 (2d Cir. 2012). “This test should be applied in the context of the general preference ‘that litigation disputes be resolved on the merits, not on default.’” Citadel Mgmt. Inc. v. Telesis Trust, Inc., 123 F.Supp.2d 133, 142 (S.D.N.Y. 2000)(quoting Cody v. Mello, 59 F.3d 13, 15 (2d Cir. 1995)).
In this case, the Defendants contend that they failed to file a timely answer due to ongoing settlement ...