“Strategic”, “Willful” Default in Race Discrimination Case Will Not Be Vacated

In Francis v. Ideal Masonry, Inc., 2020 WL 6737463 (E.D.N.Y. Nov. 17, 2020), a race discrimination case, the court (upon review of a Magistrate Judge’s Report & Recommendation) denied defendants’ motion to vacate a default judgment.

Plaintiffs, who are both Black males and immigrants. alleged that while employed by defendant, their supervisor, “used racist epithets against them and prohibited them from taking coffee and restroom breaks, and did not subject Plaintiffs’ white coworkers to similar treatment.”

The court explained: “When a district court decides a motion to vacate a default judgment pursuant to the provisions of Rule 60(b), the court’s determination must be 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.”

The court evaluated each factor. As to willfulness, it explained:

Defendants offer two independent (and somewhat contradictory) explanations for their default. First, they suggest that they misinterpreted the notices of dismissal from the EEOC as an indication that they had been “fully exonerated” and therefore did not need to respond to Plaintiffs’ Summons and Complaint. Second, they suggest Vrlaku was not properly served and that the corporate defendants never received a copy of the Summons and Complaint.

The court agrees with Judge Kuo’s determination that these excuses are not credible and do not amount to satisfactory explanations. For one thing, Defendants make no effort to reconcile the implicit contradiction between their two excuses: they claim at the same time to have believed that they did not need to participate in this litigation, thereby implying that they were aware of Plaintiff’s lawsuit, and to have been ignorant of the lawsuit altogether. While parties are of course free to allege alternative legal theories, here Defendants instead appear to allege alternative sets of facts. As a result, the court finds both versions of Defendants’ story to be less than credible.

Moreover, neither of Defendants’ two explanations holds up when viewed independently. A defendant’s mistaken belief that participation in a separate proceeding was “sufficient to discharge [its] duties” does not excuse its default, but rather “indicates … [a] willful and deliberate disregard for the litigation.” [Citations omitted.]

It next found that defendant had proffered a “meritorious defense,” pointing to (inter alia) an affidavit denying plaintiffs’ claims that defendants used racial slurs, treated Plaintiffs less favorably than white employees, or engaged in harassment, and allegations that plaintiffs were “terminated due to a lack of available work at the project site and Plaintiffs’ lack of seniority relative to other employees.”

As to prejudice, the court observed that plaintiff would suffer “not merely the burden of further litigation, but the burden of further litigation with an adversary that has proven itself to be particularly evasive and uncooperative.” While this prejudice was “not so severe as to weigh strongly in favor of denying Defendants’ motion to vacate, it does not weigh strongly in favor of granting the motion[.]”

Balancing these factors, the court explained:

The Second Circuit has established that “[a] default should not be set aside when it is found to be willful.” Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 507 (2d Cir. 1991). It has also noted that of the three factors to be considered in deciding a motion to vacate a default judgment, “willfulness carries the most weight.” De Curtis v. Ferrandina, 529 F. App’x 85, 86 (2d Cir. 2013). Following that admonition, district courts in this circuit have repeatedly denied motions to vacate default judgments solely on the basis of the defaulting party’s willfulness. See, e.g., Burns v. Kelly Enterprises of Staten Island, LLC, No. 16-CV-6251 (WFK), 2019 WL 3304883, at *4 (E.D.N.Y. Jul. 23, 2019) (finding that “Defendants’ defenses and prejudice to the non-defaulting party … do not outweigh Defendants’ willful default”); Kass v. City of New York, No. 14-CV-7505 (ALC), 2015 WL 8479748, at *4 (S.D.N.Y. Dec. 2, 2015) (denying motion to vacate, without prejudice, on the basis of finding of willfulness without considering the other two factors); Belizaire v. RAV Investigative & Sec. Servs., Ltd., 310 F.R.D. 100, 106 (S.D.N.Y. 2015) (denying motion to vacate based on finding that “a potentially meritorious defense and the absence of prejudice” did not outweigh “such [a] willful and otherwise inexcusable default[ ]”).

Defendants’ default in this case was deliberate, strategic, and egregious; in other words, it was precisely the kind of willful default that courts in this circuit have treated as a sufficient basis to deny vacatur. Thus, notwithstanding the court’s obligation to resolve doubts in favor of the defaulting party in order to facilitate a decision on the merits whenever possible, the willfulness of Defendants’ default renders vacatur inappropriate under the circumstances. “The interests of sound and efficient judicial administration warn against encouraging” willful defaults by allowing a defendant “who made a strategic decision to default” to disrupt a final judgment. Belizaire, 310 F.R.D. at 106. Because the court finds that Defendants defaulted strategically, their ability to raise a meritorious defense and Plaintiffs’ minimal evidence of prejudice do not outweigh Defendants’ egregious disregard for the legal process.

The court therefore sustained plaintiffs’ objection to the Report & Recommendation, declined to adopt it, and denied defendants’ motion to vacate the default judgment.

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