Defendant Granted Default Judgment on its Counterclaims Against Plaintiff

On February 8, 2019, Justice Masley of the New York County Commercial Division issued a decision in K's Intl. Polybags Mfg. Ltd. v. M.T. Packaging Inc., 2019 NY Slip Op. 30333(U), granting a defendant default judgment on its counterclaims against a plaintiff, explaining:

When a defendant has failed to appear, plead or proceed to trial of an action reached and called for trial, or when the court orders a dismissal for any other neglect to proceed, the plaintiff may seek a default judgment against him. While CPLR 3215 does not specifically mention counterclaims, the statute's legislative history reveals that it was intended to apply to claims asserted as counterclaims, cross claims, and third-party claims, in addition to those set forth in complaints.

On a motion for a default judgment, the movant must submit proof of service of the pleadings, proof of the facts constituting the claim, proof of the default, and amount due by affidavit made by the party. CPLR 3215(f) requires that an applicant for a default judgment file proof by affidavit made by the party of the facts constituting the claim. However, a verified pleading may be submitted instead of the affidavit when it has been properly served. Defendant has provided proof that plaintiff was not only served with a copy of defendant's verified answer with counterclaims, but also, served with the September 12, 2018 order dismissing the complaint and a copy of this motion.

In its answer, defendant asserts counterclaims for (1) defective goods under UCC § 2-714; (2) failure to remove defective goods under UCC § 2-715; (3) breach of contract; (4) negligent misrepresentation; (5) damage to business reputation; (6) breach of express warranty; (7) breach of implied warranty of fitness for a particular purpose; (8) breach of implied warranty of merchantability under UCC § 2-314; (9) breach of warranty of good faith; and (10) a declaratory judgment declaring that defendant does owe anything to plaintiff.

Defendant provides adequate proof of its claims arising out the defective goods that plaintiff delivered. In addition to its answer with counterclaims, verified by Jack Elefant, an employee of defendant, defendant attaches exhibits to its answer, showing that the goods, which were plastic bags, tested for high levels of lead, cadmium, chromium, and mercury despite plaintiffs certification that the bags contained levels of those toxins not exceeding a certain amount. Defendant also submits evidence that it informed plaintiff of the issue and demanded to stop production. Further, defendant's verified answer adequately states counterclaims for defective goods under UCC § 2-714; failure to remove defective goods under UCC § 2-715; breach of contract; negligent misrepresentation; damage to business reputation; breach of express warranty; breach of implied warranty of fitness for a particular purpose; breach of implied warranty of merchantability under UCC § 2-314; and breach of warranty of good faith. Finally, defendant provides its attorney's affirmation, affirming that plaintiff has not appeared in this action since its counsel withdrew and plaintiff has not responded to defense counsel's communications. Thus, the motion for a default judgment on defendant's counterclaims seeking monetary damages is granted, and the court will hold a hearing on the issue of damages as to these claims.

In addition to its claims seeking monetary relief, defendant also seeks a declaratory judgment. However, New York courts rarely grant declaratory judgments on default with no inquiry as to the merits. Declaratory judgments require that a party establish a right to a declaration against its adversary and will not be granted on the default and pleadings alone. Therefore, a hearing is necessary on this claim.

(Internal quotations and citations omitted).

If you are served with a complaint (or counterclaims, as happened in this case) and fail timely to answer, the court can enter judgment against you: a default judgment. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether you have been properly served or if a default judgment has been entered against you.