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Janou Pakter, Janou LLC v. Janou Pakter, LLC

United States District Court, S.D. New York

April 3, 2018

JANOU PAKTER, JANOU LLC, and JP SEARCH, INC., formerly known as JANOU PAKTER, Plaintiffs,

          OPINION & ORDER

          Paul A. Engelmayer United States District Judge

         This decision resolves the motion of defendant Janou Pakter LLC ("defendant")[1] asking the Court to reconsider its decision denying defendant's motion to vacate the default judgment this Court had entered against it in this trademark infringement action. That decision, issued on December 5, 2017 (the "December 5 Order"), reasoned that defendant had failed to take the steps the Court had directed be taken to justify vacating the default. In particular, defendant had not reimbursed plaintiffs for the fees and costs plaintiffs had incurred in connection with a post-default inquest into damages. Defendant, having now paid those fees and costs and having explained that defendant's failure to heed that order derived from defense counsel's having failed to correct the email address that had been given to the Court, now moves for reconsideration of that decision.

         For the reasons that follow, the Court finds that defendant has now adequately cured the prejudice to plaintiffs occasioned by its defaults and has otherwise met the requirements, under Federal Rule of Civil Procedure 55(c), to set aside a default. Accordingly, the Court vacates its prior decision denying vacatur of the default judgment and now vacates the default judgment. This case will now move-expeditiously-to litigation on the merits.

         I. Background

         The Court's December 5 Order, which the Court incorporates by reference, recounted the halting trajectory of this action. As relevant here, on March 29, 2017, the Court entered default judgment against defendant and referred the case to Magistrate Judge Gorenstein for an inquest into damages. Dkts. 24-25.

         On June 15, 2017, for the first time, counsel for defendant appeared in this action, seeking an extension of time to respond to plaintiffs' proposed findings of fact and conclusions of law with respect to damages, and advising Judge Gorenstein that defendant intended to file a motion in this Court to vacate the default judgment. Dkts. 34-35. On June 16, 2017, defendant so moved, see Dkts. 37-40, and on June 30, 2017, plaintiffs filed a brief in opposition, Dkt. 43.

         On November 20, 2017, this Court entered an order stating that it would "condition any vacatur of the default judgment on defendant's payment of the fees and costs plaintiffs reasonably incurred in the preparation of plaintiffs' proposed findings of fact and conclusions of law." Dkt. 45. The Court directed plaintiffs' counsel to submit by November 28, 2017, in a sworn declaration, an accounting of the fees and costs reasonably incurred in preparation of those filings. Id. The Court further ordered that, if defendant continued to seek vacatur of the default judgment, defense counsel was required to submit a response by Friday, December 1, 2017, "attesting to defendant's willingness to promptly upon vacatur of the default judgment reimburse plaintiff for all of those reasonably incurred fees and costs." Id. The Court advised that, if the defendant were unwilling to bear those costs, the Court would "deny its motion to vacate the default judgment." Id.

         On November 28, 2017, plaintiffs submitted the declaration of their counsel William B. Kerr, attesting to the fees and costs plaintiffs reasonably incurred in preparing their proposed findings of fact and conclusions of law. Dkt. 46. That declaration was supported by billing records which it attached. Id. The fees and costs totaled $20, 607.59. Id. Defendant, however, did not pay these fees and costs (or respond to or otherwise acknowledge plaintiffs' submission).

         In the December 5 Order, the Court, noting defendant's failure to commit to so reimburse plaintiff, held that defendant had failed to cure the prejudice to plaintiffs that vacating the default would cause. Accordingly, the Court denied the motion for vacatur.

         On February 26, 2018, nearly three months later, defendant resurfaced. Its counsel, J. Gregory Lahr, submitted a letter explaining that he had just learned of the December 5 Order after the chambers of the Magistrate Judge newly assigned to the case, the Hon. Stewart Aaron, had inquired whether defendant intended to make a submission in connection with the inquest. Lahr sought leave, on defendant's behalf, to move for reconsideration of the December 5 Order. Dkt. 50. On February 27, 2018, the Court authorized Lahr to file such a motion, again conditioned on defendant's paying plaintiffs' attorneys' fees and costs. Dkt. 51.

         On March 5, 2018, defendant submitted its motion for reconsideration, accompanied by a memorandum of law in support, Dkt. 54, and a declaration from Lahr, Dkt. 53 ("Lahr Decl."). In that declaration, Lahr attested that, on March 2, 2018, defendant had paid plaintiffs $20, 607.59, the full sum that plaintiffs sought. Lahr Decl. at ¶ 10. On March 16, 2018, plaintiffs submitted their opposition in the form of a declaration of William B. Kerr. Dkt. 57 ("Kerr Deck").

         II. Legal Standard

         The Second Circuit has "advised district courts to consider three criteria in deciding a Rule 55(c) motion: (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, A6l Fed.Appx. 31, 33 (2d Cir. 2012).[2] Prejudice to the non-defaulting party is "the single most persuasive reason for denying a Rule 55(c) motion" Murray Eng'g, P.C. v. Windermere Properties LLC, No. 12 CIV. 0052 JPO, 2013 WL 1809637, at *5 (S.D.N.Y. Apr. 30, 2013) (quoting 10A Charles Allen Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2699 (3d ed. 2010)). "In cases where substantial rights are implicated or when substantial sums of money are demanded, default judgments are particularly disfavored by the law." Id. at *3 (internal quotations omitted), III. Analysis

         Although the question presented by defendant's motion for vacatur is a close one given the defense's lax approach to this lawsuit, the Court finds-given defendant's recompense of plaintiffs' attorneys' fees and costs as directed and given defense counsel's proffer of a colorable explanation for its failure to respond to the ...

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