United States District Court, S.D. New York
PEDRO LOPEZ, CESAR GUZMAN, RAQUEL ROMERO, JUAN VICTOR JIMENEZ and JORGE PAREDES, individually and on behalf of others similarly situated, Plaintiffs,
TRAFFIC BAR AND RESTAURANT INC. (d/b/a TRAFFIC BAR AND RESTAURANT), CHRIS FOLEY, JOEY MORGAN, MICHAEL O'NEIL, MEAGAN PUGH, and PAUL VALENTI, Defendants.
MEMORANDUM AND ORDER
JAMES C. FRANCIS, IV, Magistrate Judge.
The plaintiffs filed this collective action in November 2012, claiming that while they were employed at Traffic Bar and Restaurant, Inc. ("Traffic Bar"), they were paid wages below those required by the Fair Labor Standards Act ("FLSA") and New York Labor Law ("NYLL"). When the amended complaint went unanswered, the Honorable Alvin K. Hellerstein, U.S.D.J., entered judgment by default. Subsequently, the parties consented to proceed before me for all purposes under 28 U.S.C. § 636(c). The defendants now move to vacate the default judgment pursuant to Rule 60(b) of the Federal Rules of Civil Procedure, and for a preliminary injunction and temporary restraining order enjoining enforcement of the default judgment. For the reasons that follow, the motion is denied as to the individual defendants, and judgment is deferred as to the corporate defendant pending an evidentiary hearing.
The plaintiffs allege that between May 2009 and May 2013, they were employed by Traffic Bar, an establishment owned by the individual defendants with one location at 701 Ninth Avenue and another at 986 Second Avenue, both in Manhattan. (Plaintiff's Memorandum of Law in Opposition to the Defendants' Motion to Vacate Default Judgment ("Pl. Memo.") at 3). On March 9, 2013, they served copies of the amended complaint and summons on all defendants by hand delivery to a bartender at the Second Avenue restaurant location, by mail delivery to the Second Avenue location (the individual defendants' place of work), and by mail delivery to 501 Madison Avenue, Room 301, which was registered as the corporation's business address. (Pl. Memo. at 3; Affidavits of Service of Summons and Amended Complaint, attached as Exhibits 4-13 to Faillace Decl.). As noted, no answer was filed, and the plaintiffs moved for entry of a default judgment. (Pl. Memo. at 3-4). The plaintiffs' motion was served by mail to both locations of Traffic Bar and to all residential addresses associated with the individual defendants' names in New York City, Nassau County, and Suffolk County. (Pl. Memo. at 4). The defendants did not oppose the plaintiff's motion, and judgment by default was entered. (Order dated Nov. 15, 2013).
When the plaintiffs sought to enforce the judgment, the defendants received levy notices from the Marshal of the City of New York (Declaration of Chris Foley dated April 18, 2014 ("Foley Decl."), ¶ 3) and filed the instant motion. The defendants assert that they never received the amended complaint or summons and were not aware of the action until they received the levy notices. (Defendants' Memorandum of Law in Support of Order to Show Cause With Temporary Restraining Order ("Def. Memo.") at 4-6; Foley Decl., ¶ 3; Declaration of Paul Valenti dated April 18, 2014 ("Valenti Decl."), ¶ 3; Declaration of Meagan Pugh dated April 18, 2014 ("Pugh Decl."), ¶ 3; Declaration of Joey Morgan dated April 18, 2014 ("Morgan Decl."), ¶ 3). They claim that the summons and complaint were in fact served at 323 Second Avenue, which is not associated with Traffic Bar, and then at 501 Madison Avenue, and that Traffic Bar "has not used 501 Madison Avenue, New York, New York as its mailing address for a few years." (Foley Decl., ¶¶ 5-6; Morgan Decl., ¶¶ 5-6; Valenti Decl., ¶¶ 5-6; Pugh Decl., ¶¶ 5-6). They further contend that, were the default judgment to be vacated, they would present a meritorious defense to the plaintiffs' claims based on all employees having been paid the wages required by federal and state law (Foley Decl., ¶ 14; Morgan Decl., ¶ 14; Valenti Decl., ¶ 14; Pugh Decl., ¶ 13), and on a lack of any records establishing that any of the named plaintiffs worked at either Traffic Bar location (Foley Decl., ¶ 11; Morgan Decl., ¶ 11; Valenti Decl., ¶ 11; Pugh Decl., ¶ 11).
Under Rule 60(b) of the Federal Rules of Civil Procedure, a district court may grant relief from a judgment due to "mistake, inadvertence, surprise, or excusable neglect, " among other grounds.
The decision of whether to vacate a default judgment is "addressed to the sound discretion of the district court." New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005) (quoting State Street Bank & Trust Co. v. Inversiones Errazuriz Limitada, 347 F.3d 158, 166 (2d Cir. 2004)). Consideration of whether to vacate a default judgment is "guided by three principal factors: (1) whether the default was willful, (2) whether the defendant demonstrates the existence of a meritorious defense, and (3) whether, and to what extent, vacating the default will cause the nondefaulting party prejudice." Green, 420 F.3d at 108 (quoting State Street Bank, 374 F.3d at 166-67). Because courts have consistently expressed a "preference for resolving disputes on the merits, doubts should be resolved in favor of the defaulting party." Powerserve International, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2011) (internal quotation marks omitted).
The Second Circuit has interpreted "willfulness" in the context of a default to mean conduct that is more than merely negligent. See Securities and Exchange Commission v. McNulty, 137 F.3d 732, 738 (2d Cir. 1998); Gonzalez v. City of New York, 104 F.Supp.2d 193, 195 (S.D.N.Y. 2000). Conduct may be deemed "willful" if it is "egregious" or "not satisfactorily explained." Gonzalez, 104 F.Supp.2d at 196. Thus, willfulness may be found where, for example, an attorney has "thoroughly neglected" the client's case, Schwarz v. United States, 384 F.2d 833, 836 (2d Cir. 1967) (cited in American Alliance Insurance Co. v. Eagle Insurance Co., 92 F.3d 57, 61 (2d Cir. 1996)); however, mere "carelessness" will not suffice, American Alliance, 92 F.3d at 60 n.1. At the same time, the Second Circuit has recognized "that the degree of negligence in precipitating a default is a relevant factor to be considered, along with the availability of a meritorious defense and the existence of prejudice, in determining whether a default judgment should be vacated and whether failure to do so exceeds allowable discretion." Id. at 61.
Here, the defendants claim that their default was not willful because they were never served with process and were not even made aware of the lawsuit until they received levy notices. (Def. Memo. at 6; Foley Decl., ¶ 3).
1. Individual Defendants
Rule 4(e) of the Federal Rules of Civil Procedure governs service of process on an individual. According to that rule, a person may be served by, among other means, "following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made[.]" Fed.R.Civ.P. 4(e)(1). In New York, service may be accomplished by personal delivery to the individual to be served. N.Y. C.P.L.R. ("CPLR") § 308(1). Alternatively, and in conjunction with service by mail of a second copy of the summons to the individual at their last known dwelling or actual place of business, service may be made: (1) on "a person of suitable age and discretion at the actual place of business, dwelling place, or usual place of abode of the person to be served"; (2) on an agent of the individual; or (3) by affixing process to the door of the individual's home or business. CPLR § 308(2)-(4). This last method is commonly referred to as "nail and mail" and may be resorted to only if neither personal nor substitute service can be made with due diligence. CPLR § 308(4).
An affidavit of service is prima facie proof of effective service. Gore v. RBA Group, Inc., No. 03 Civ. 9442, 2009 WL 884565, at *4 (S.D.N.Y. March 27, 2009); Fifth Third Bank v. Mytelka, No. 05 MC 52, 2008 WL 3852170, at *2 (E.D.N.Y. Aug. 16, 2008); Polygram Merchandising, Inc. v. New York Wholesale Co., No. 97 Civ. 6489, 2000 WL 23287, at *2 (S.D.N.Y. Jan. 13, 2000). Here, the process server submitted affidavits in which he attested to making substitute service on all individual defendants through the bartender, identified as "Hugh Doe, '" at the 986 Second Avenue Traffic Bar location (Affidavits of Service of Summons and Amended Complaint, attached as Exhs. 4-8 to Faillace Decl.), and by mail to the same location (Exhs. 5-8 to Faillace Decl.). As the defendants admit that 986 Second Avenue is one of their restaurant locations and the location at which they receive their mail (Foley Decl., ¶¶ 7-8), and as the bartender is presumably of suitable age and discretion, see, e.g., Melton v. Brotman Foot Care Group, 198 A.D.2d 481, 481, 604 N.Y.S.2d 203, 204 (2d Dep't 1993) (finding office assistant to be of suitable age and discretion); Wells Fargo Bank Minnesota v. Roman, 10 Misc.3d 1075(A) ...