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March (and April) Default Madness

In this entry, we highlight three Itkowitz victories, which are not so earth shattering in and of themselves, but which are important for what they say about the current lack of professional courtesy at the bar.  In all three cases below, our clients (before fully retaining us on these matters) through no real fault or malice, failed to answer a lawsuit on time.  In one case, the defendant was eighteen days late (during the holidays and this season’s massive winter storms).  In another case, the defendant simply did not change their address at the Secretary of State when they moved, and the summons and complaint were sent to the wrong place.  This was an easy mistake to make.  On top of that, the plaintiff in that case was suing the entity in a number of other lawsuits that the defendant had, indeed, appeared in, so Plaintiff’s counsel knew Defendant’s counsel.  How hard would it have been for Plaintiff’s counsel to say, “Hey, what about this other case?  You never answered?”  But that isn’t what happened.

Failure to meet a statutory deadline for filing pleadings is known as a “default.”  After a default occurs, a non-defaulting party may bring a motion for a default judgment.  Once this occurs, the defaulting party is forced to submit opposition papers stating why the default should be excused, and also to submit a cross motion asking the court for more time.  In order to prevail on a motion in opposition of a default judgment, a party must show that they have a reasonable excuse for their default and that they have meritorious defenses against the allegations of the non-defaulting party.  The determination of what constitutes a reasonable excuse for a default “lies within the discretion of the trial court.”  In other words, it is up to the judge.  

In June 2013, two lawsuits were simultaneously filed by a contractor alleging it was not paid for work performed at 622 Third Avenue and 3 East 54th Street.  Neither 622 nor 3E54 received a copy of the Complaint, and neither filed an Answer in the matter.  Plaintiff brought default motions against 622.  In January 2014, we submitted opposition papers in both matters and prevailed.

Legacy Builders/Developers Corp. v. 622 Third Avenue Company LLC, Amick Carpentry Corp., Corporate Woodworking, Inc. et al.
(Supreme Court, New York County, February 28, 2014)

The court decided this motion on the papers alone (i.e. without having a motion oral argument) and found that 622 LLC had a reasonable excuse for its default in that 622 LLC experienced a clerical error.  The court ordered that the Plaintiff accept service of the answer (a copy of which was attached to our motion papers) and deemed the answer served retroactively. 

Legacy Builders/Developers Corp. v. Cohen Brothers Realty Corporation, 3 East 54th New York LLC, et al.  
(Supreme Court, New York County, February 6, 2014)

The court ordered that that the parties discuss the default, and that they appear for oral argument on April 1, 2014.  The clerk pressured Legacy to withdraw the default motion, stating that the motion would take a very long time to adjudicate and that the judge was extremely likely to lift the default.  Legacy refused.  The clerk did not even allow Legacy to argue the motion, said the motion would only be judged on the court papers, that Legacy was highly likely to lose, and that she would put the motion papers at the very bottom of the largest stack of court papers we had seen.  Since Legacy is the Plaintiff in this matter and they do not get paid unless and until they win the case, the delay was an obvious loss for them.

Jordan Daniels and Joshua LaMorey v. Putnam Holdings 125 LLC 
(Supreme Court, New York County, December 19, 2013)

Here, the Plaintiffs seek a rent stabilized lease renewal and rent overcharges of approximately $100,000.  Our clients, the building owners, were a mere 18 days late in filing the answer.  The Plaintiff insisted on bringing a default motion and would not withdraw it, despite the very slight default.   Plaintiff had to wait 5 months for oral argument in Brooklyn, and the judge ultimately ordered that the Plaintiff accept service of the answer (a copy of which was attached to the motion papers) and deemed the answer served retroactively.  Now how did that make sense for our adversary or his client?  The point here is simply this – a little professional courtesy goes a long way.  

Advice for Defaulting Parties (and Non-Defaulting Parties)

1.) Hire a lawyer and respond to pleadings, motions, or any other court papers immediately.  If you don’t, you will have to spend thousands of dollars on a motion to set aside the default, and in addition to the cost of the motion, you will still have to spend the money to respond to pleading, motion, or other court paper.  

2.) Be sure to update your Department of State service address as soon as you move locations or change agents of service.  In our experience, this may be the single largest cause of defaults.

3.) Make sure your support staff knows to promptly turn over legal documents to management.

4.) Take responsibility for the default.  Even if you aren’t exactly sure what happened to the documents.  Judges appreciate when litigants take responsibility for their mistakes, probably because it rarely happens.

And here is some advice if your adversary has defaulted.  We do not recommend that Plaintiffs bring a default motion where a party is only a few days late.  We do recommend that Plaintiffs withdraw a default motion if the court asks them to do so.  This is because Plaintiffs should always want their cases to proceed as quickly as possible to keep litigation costs low and to receive compensation for their damages as soon as possible.  Default motions can often take months to decide and, as you will see below, at the end of the day a default motion may delay a case for a year, or even longer in some cases. 

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