United States District Court, W.D. New York
DECISION & ORDER
FRANK P. GERACI, Jr., District Judge.
Plaintiff Rexo Imports LLC ("Rexo" or "Plaintiff") commenced this action on January 24, 2014 against four Defendants, namely, Brighton Ford, Inc. ("Brighton Ford); Extreme Motor Sports Used Cars, LLC ("Extreme"); Dangerously Racing, Inc., d/b/a Compass Transport Solutions ("Compass"); and Hauling Express, Inc. ("Hauling Express"), alleging causes of action for breach of contract and negligence relating to the purchase of a 2013 Ford Mustang Shelby by Plaintiff from Defendant Brighton Ford. Dkt. # 1. The gist of the Complaint alleges that Plaintiff Rexo contracted with Brighton Ford to purchase a 2013 Ford Mustang Shelby, that would ultimately be delivered to a third party purchaser, Exclusive Cars AB ("Exclusive"), in Stockholm, Sweden. However, the Shelby was allegedly lost in transit, and therefore never made it to Exclusive. Id.
Defendant Brighton Ford answered the Complaint on May 23, 2014 (Dkt. # 15). Since the other three Defendants had not answered the Complaint, on June 4, 2014, the Plaintiff requested the Clerk of the Court to enter default against Extreme, Compass, and Hauling Express pursuant to Fed.R.Civ.P. 55 (a). Dkt. # 16. On July 1, 2014, the Clerk of the Court entered default against those three Defendants, Dkt. # 17, and the Plaintiff subsequently moved for default judgment against these Defendants pursuant to Fed.R.Civ.P. 55 (b). Dkt. # 18. All Defendants were given until August 21, 2014 to file any responses regarding the Motion for Default Judgment. Dkt. # 19.
On August 20, 2014, Defendant Extreme filed a response in opposition to the Motion for Default Judgment, wherein they ask this Court to vacate the Clerk's Entry of Default against them. Dkt. # 21. The Plaintiff has not responded to this application, and no other Defendant has responded to the Motion for Default Judgment in any fashion.
I. Motion to Set Aside Clerk's Entry of Default
Once the Clerk of the Court has entered default against a party, Fed.R.Civ.P. 55 (c) permits district courts to "set aside an entry of default for good cause shown." This standard is more lenient than the standard to set aside a default judgment entered by the Court under Rule 60(b). See Meehan v. Snow, 652 F.2d 274, 276 (2d Cir. 1981) ("[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).").
In determining whether "good cause" exists to vacate the entry of default, courts consider (1) the willfulness of the default; (2) the existence of a meritorious defense; and (3) the level of prejudice that the non-defaulting party may suffer should relief be granted. Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167, 171 (2d Cir. 2001) (citation omitted). In addition, "other relevant equitable factors may also be considered, for instance, 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 result." Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993). In resolving any ambiguities, "all doubts must be resolved in favor of the party seeking relief from the judgment in order to ensure that to the extent possible, disputes are resolved on their merits." New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005).
With these factors in mind, I easily conclude that the Clerk's Entry of Default against Extreme should be vacated. The unopposed submission from this Defendant explains that their default was not willful in that they had contacted their insurance carrier, and were waiting for a determination regarding their coverage. After that coverage decision was made, Extreme obtained counsel and filed the instant application. While the better practice would have been for Extreme to have requested an extension of time from this Court to respond to the Complaint, that misstep is not so severe as to prevent Extreme from defending against the claims in this case. Further, the application recites several potential meritorious defenses, including the averment that Extreme was not involved in making the transportation arrangements that allegedly resulted in the 2013 Shelby being lost. Finally, there is no prejudice in allowing Extreme to now interpose an answer in this case. The Plaintiff, in not responding to the application, has not demonstrated any potential prejudice, and in any event, I discern none. This case is relatively new, and as Extreme points out, discovery has not yet commenced. For all of these reasons, and especially in light of the strong preference for resolving cases on the merits, Extreme's application is GRANTED, and the Clerk's Entry of Default against Extreme is hereby VACATED. Extreme shall answer or otherwise move against the Complaint within 14 days of the entry of this Order.
II. Motion for Default Judgment
Judgment by default is governed by Rule 55 of the Federal Rules of Civil Procedure, which sets forth a two-part procedure. First, the party seeking default must obtain an entry of default from the Clerk of the Court, by demonstrating that the opposing party has defaulted. Fed.R.Civ.P. 55(a). The entry of default by the Clerk is a mandatory pre-condition to seeking default judgment from the Court. See, e.g., Perkins v. Napoli, No. 08-CV-6248 CJS, 2010 WL 455475 at *1 (W.D.N.Y. Feb. 4, 2010).
After the Clerk has entered default, a moving party may seek a default judgment from the Court. Fed.R.Civ.P. 55(b). However, district courts do not simply accept at face value that a plaintiff is entitled to the particular relief it seeks. Rather, "judgment against a defaulting party should be granted only after careful examination of the moving party's claim by the district court... Indeed, a defendant's default does not in itself warrant a court in entering a default judgment because there must be a sufficient basis in the pleadings for the judgment entered." Bianco v. Seaway Industrial Services, Inc., No. 03-CV-0084E(F), 2004 WL 912916, at *1 (W.D.N.Y. Apr. 1, 2004) (Elfvin, J.) (internal citations and quotations omitted); see also Enron Oil Corp., 10 F.3d at 95-96. The Second Circuit has also cautioned district courts that "defaults are generally disfavored and are reserved for rare occasions, " and when there is doubt as to the propriety of granting judgment by default, "the doubt should be resolved in favor of the defaulting party." Enron Oil Corp., 10 F.3d at 96.
In this case, I have doubts regarding the claims made by the Plaintiff against, and the amounts sought from, ...