Court Grants Default Judgment; No Good Cause Shown for Failure Timely to Answer

On March 25, 2019, Justice Schecter of the New York County Commercial Division issued a decision in Black Pearl Global Opportunity Fund v. Summit Equtites LLC, 2019 NY Slip Op. 30917(U), granting a default judgment because the defendant showed no good cause for failing timely to answer, explaining:

Where, as here, a defendant does not timely respond to the complaint and the plaintiff moves for a default judgment and proffers an affidavit of merit showing defendants' liability, the burden shifts to defendants to proffer a justifiable excuse for default and a meritorious defense.

Summit does not proffer any excuse for failing to respond to the AC, Jet alone a reasonable one. Indeed, Summit's only attempt at addressing the reasonableness of its failure to respond to the AC is the purported lack of proper service on Seiden. That issue, while dubious, is a red herring. Even if Seiden was not served, that fact has no bearing on whether a default judgment should be issued against Summit. There is no question that Summit was served with the original complaint, appeared in this action by counsel and responded to the original complaint. It was properly served with the AC bye-filing at a time when it was represented by counsel.

Summit's failure to explain its failure to respond to the AC is unsurprising. As discussed, the record is clear that it willfully defaulted. It made the tactical decision that defending the breach of contract claim was not worth its time or money because it is judgment proof. The record is equally clear that Summit, from the outset, frustrated the discovery process and that it chose to default to forgo engaging in discovery on the claims against it, including the breach of contract cause of action. Excusing Summit's default, under the circumstances, would allow Summit to achieve maximum delay by requiring the parties to altogether reopen the ESI process when, had it not affirmatively chosen to default, all of the discovery would have efficiently proceeded in tandem from the outset.

(Citations omitted).

If you are served with a complaint 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.