First Tech. Capital, Inc. v. Airborne, Inc.

378 F.Supp.3d 212

FIRST TECHNOLOGY CAPITAL, INC., Plaintiff,

v.AIRBORNE, INC. d/b/a Firstflight, Defendant.

6:15-CV-06063 EAW

United States District Court, W.D. New York.

Signed May 6, 2019

Michael J. Gartland, DelCotto Law Group PLLC, Lexington, KY, for Plaintiff.

Airborne, Inc., pro se.

Neil Joseph Smith, W. Bradley Hunt, Mackenzie Hughes LLP, Syracuse, NY, for Defendant.

DECISION AND ORDER

ELIZABETH A. WOLFORD, United States District Judge

BACKGROUND

Plaintiff First Technology Capital, Inc. ("Plaintiff") commenced this action on February 5, 2015, against Airborne, Inc. d/b/a/ Firstflight ("Defendant"), for damages allegedly sustained when Defendant breached a contract to purchase an aircraft from Plaintiff. (Dkt. 1). Following the filing of the parties' competing motions seeking various forms of relief (Dkt. 30; Dkt. 39; Dkt. 47; Dkt. 57), the Court issued a Decision and Order on August 2, 2017, granting Defendant's motion for judgment on the pleadings and dismissing Plaintiff's Complaint based upon Defendant's perfect tender defense (Dkt. 71). On September 5, 2017, Plaintiff appealed the judgment entered against it. (Dkt. 73). On July 3, 2018, the Second Circuit issued a summary order vacating the judgment and remanding the case for this Court to consider Plaintiff's motion for contract reformation before addressing Defendant's perfect tender defense. (Dkt. 74).

On August 15, 2018, Defendant's counsel filed a motion to withdraw as attorney of record. (Dkt. 75). The Court ordered Defendant's counsel to file proof of service that its motion papers were served upon Defendant and Defendant's CEO, John H. Dow ("Dow"). (Dkt. 77). Defendant's counsel complied with the Court's order. (See Dkt. 78; Dkt. 79). On October 3, 2018, Dow filed an affidavit stating that Defendant had no objection to the motion to withdraw, and that Defendant "has ceased all operations, ... has no assets and no employees[, and]... [t]here are no plans for [Defendant] to ever resume any operations or activities." (Dkt. 80 at ¶¶ 2-4).

The Court held a telephonic motion hearing on October 17, 2018, which was attended by Defendant's counsel and Dow. (Dkt. 85). Dow again raised no objections to the motion to withdraw. (Id. ). The Court advised the parties that it would grant the motion to withdraw and cautioned Dow that a corporation may not proceed pro se. The Court informed Dow that Defendant would have 30 days to retain new counsel and to file a Notice of Appearance. (Id. ).

On October 18, 2018, the Court issued an Order, granting the motion to withdraw and memorializing the admonishments it made to Dow at the motion hearing the previous day. (Dkt. 84). In particular, the Court advised Defendant "that failure to retain another attorney within the prescribed time may result in a default judgment against it because a corporation may not proceed pro se ." (Id. at 1). In spite of the Court's cautionary warning, no notice of appearance was filed within the 30-day deadline set by the Order.

On December 5, 2018, Plaintiff filed a motion for default judgment based upon Defendant's failure to retain new counsel as ordered by the Court. (Dkt. 89). The Court issued a motion scheduling order and required that Plaintiff serve Defendant and Dow with a copy of the order and Plaintiff's motion papers. (Dkt. 90). The Court reminded Dow that "a corporation may not proceed pro se ," and indicated that while he "may inform the Court of any progress made towards securing legal representation, any papers submitted in opposition to Plaintiff's motion must be filed by an attorney and be preceded by a notice of appearance filed on behalf of Defendant by that attorney." (Id. at ¶ 6). The next day, Plaintiff filed a certificate of service indicating that Defendant and Dow had both been served. (Dkt. 91). No other papers have since been filed by either party, and no attorney has appeared on Defendant's behalf.

DISCUSSION

I. Legal Standard for Seeking a Default Judgment

" Federal Rule of Civil Procedure 55 is the basic procedure to be followed when there is a default in the course of litigation." Vt. Teddy Bear Co. v. 1-800 Beargram Co. , 373 F.3d 241, 246 (2d Cir. 2004). " Rule 55 provides a ‘two-step process’ for the entry of judgment against a party who fails to defend: first, the entry of a default, and second, the entry of a default judgment." City of New York v. Mickalis Pawn Shop, LLC , 645 F.3d 114, 128 (2d Cir. 2011) (citation omitted). "The first step is to obtain an entry of default. When a party against whom affirmative relief is sought has failed to plead or otherwise defend, a plaintiff may bring that fact to the court's attention." Priestley v. Headminder, Inc. , 647 F.3d 497, 504-05 (2d Cir. 2011). "Although Rule 55(a) contemplates that entry of a default is a ‘ministerial’ step to be performed by the clerk of court, a district court judge also possesses the inherent power to enter a default." Peterson v. Syracuse Police Dep't , 467 F. App'x 31, 33 (2d Cir. 2012) (quoting Beller & Keller v. Tyler , 120 F.3d 21, 22 n.1 (2d Cir. 1997) ). "The second step is to seek a default judgment under Rule 55(b)." Crabtree v. Hope's Windows, Inc. , No. 3:17-CV-01709 (VAB), 2018 WL 2436992, at *5 (D. Conn. May 30, 2018). " Rule 55(b)(1) allows the clerk to enter a default judgment if the plaintiff's claim is for a sum certain and the defendant has failed to appear and is not an infant or incompetent person." New York v. Green , 420 F.3d 99, 104 (2d Cir. 2005). "In all other cases Rule 55(b)(2) governs. It requires a party seeking a judgment by default to apply to the court for entry of a default judgment." Priestley , 647 F.3d at 505.

II. Defendant is in Default for Failing to Retain New Legal Counsel

"The Second Circuit has repeatedly affirmed district court cases that granted default judgments against corporate defendants that were specifically instructed to retain counsel by a certain date, yet failed to do so." Grant v. West , No. 97 CV 6560 (ILG), 2001 WL 1597804, at *4 (E.D.N.Y. Nov. 6, 2001) (collecting cases); see Grace v. Bank Leumi Tr. Co. of N.Y. , 443 F.3d 180, 192 (2d Cir. 2006) ("[I]t is settled law that a corporation may not appear in a lawsuit against it except through an attorney, and that, where a corporation repeatedly fails to appear by counsel, a default judgment may be entered against it pursuant to Rule 55, F[ed]. R. Civ. P." (quoting SEC v. Research Automation Corp. , 521 F.2d 585, 589 (2d Cir. 1975) )); see generally Rowland v. Cal. Men's Colony, Unit II Men's Advisory Council , 506 U.S. 194, 201-02, 113 S.Ct. 716, 121 L.Ed.2d 656 (1993) ("It has been the law for the better part of two centuries, for example, that a corporation may appear in the federal courts only through licensed counsel."); Jones v. Niagara Frontier Transp. Auth. , 722 F.2d 20, 22 (2d Cir. 1983) ("The rule that a corporation may litigate only through a duly licensed attorney is venerable and widespread."). A corporation's failure to comply with a court order to secure legal counsel has been characterized as a failure to "otherwise defend" the action pursuant to Rule 55(a). See, e.g., Eagle Assocs. v. Bank of Montreal , 926 F.2d 1305, 1310 (2d Cir. 1991) ; Shapiro, Bernstein & Co. v. Cont'l Record Co. , 386 F.2d 426, 427 (2d Cir. 1967) ; S & K Commack Dev., LLC v. Hasn Dry Cleaners, Inc. , No. 13-CV-5297 SJF ARL, 2015 WL 4139357, at *7 (E.D.N.Y. July 9, 2015) ; Kiewit Constructors, Inc. v. Franbuilt, Inc. , No. 07-CV-121 A, 2007 WL 4405029, at *2 (W.D.N.Y. Dec. 14, 2007) ; see generally Fed. R. Civ. P. 55(a) ("When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.").

Here, Dow was advised on three separate occasions that Defendant, as a corporation, may not proceed pro se and that it was required to secure legal counsel to continue to defend this action. (Dkt. 84; Dkt. 85; Dkt. 90). The Court specifically warned Dow that Defendant's failure to obtain legal representation in this matter "may result in a default against it." (Dkt. 84 at 1). Defendant has failed to appear through counsel. Accordingly, because Defendant failed to secure legal counsel and file a notice of appearance within the prescribed time permitted by the Court, Defendant is in default for its failure to "otherwise defend" against this action. See Cabrera v. Canela , No. 14 CV 4874 (LDH) (RML), 2018 WL 3742686, at *2 (E.D.N.Y. Apr. 19, 2018) ("[T]he court need not go through the formal step of ordering the Clerk to enter a default, as ‘a district judge also possesses the inherent to enter a default.’ " (quoting Mickalis Pawn Shop, LLC , 645 F.3d at 128 )); see also Pinaud v. County of Suffolk , 52 F.3d 1139, 1152 n.11 (2d Cir. 1995) (describing an "entry of a default" as "largely a formal matter" (quotation omitted)); see generally Christa Constr., LLC v. Connelly Drywall, LLC , 879 F.Supp.2d 389, 393 (W.D.N.Y. 2012) (concluding that the corporate entity's "failure to ‘otherwise defend’ by its refusal to obtain new counsel" resulted in its default, and granting the plaintiff's motion for default judgment without ordering a formal entry of default).

III. Entry of Default Judgment Against Defendant is Warranted

A. Legal Standard

Once a party is deemed in default, "the Court will accept as true the allegations of the complaint that establish the defaulting [defendant's] liability." Am. Fruit & Vegetable Co. v. Ithaca Produce, Inc. , 848 F.Supp.2d 375, 377 (W.D.N.Y. 2011). "The court, however, must still determine whether, based on the complaint's well-pleaded allegations, the complaint states a claim upon which relief can be granted." Granite Music Corp. v. Ctr. St. Smoke House, Inc. , 786 F.Supp.2d 716, 726 (W.D.N.Y. 2011). In other words, where a defendant corporation has "failed to retain counsel, a plaintiff is entitled to default judgment where ‘drawing all...