Commercial Division Blog

Posted: April 9, 2016 / Categories Commercial, Court Rules/Procedures

Court Refuses to Vacate Default Judgment for Lack of Reasonable Excuse for Default

On April 4, 2016, Justice Scarpulla of the New York County Commercial Division issued a decision in CM Collections, Inc. v. CM Brand Holdings LLC, 2016 NY Slip Op. 30567(U), refusing to vacate a default judgment.

In CM Collections, the plaintiff brought an action against multiple defendants. Four of them moved to dismiss. "The parties agreed to two extensions for [the plaintiff] to file opposition papers, with [the plaintiff's] counsel citing certain difficulties he was experiencing with regard to his law practice as the reason for his delay. Two days after the final agreed upon date for [the plaintiff] to file its opposition, [the plaintiff's counsel] e-filed the parties' previous stipulation of adjournment and nothing else."

The moving defendants' motion to dismiss was granted by default. In moving to vacate the default, the plaintiff's counsel explained:

that on September 10, 2015, he attempted to e-file three documents. After he filed the stipulation of adjournment (docket no. 34), he filed an amended complaint. After he e-filed that amended complaint, he realized that he failed to correct the caption of the action to reflect the fact that new claims were being asserted against two new parties, affiliates of the [moving] Defendants.

He then created and e-filed a corrected amended complaint that differed from the amended complaint in no substantive way, it just added the new parties . . . . He claims that he e-filed both the amended complaint and corrected amended complaint, and can not explain why they do not appear in the docket. [He] maintains that he failed to realize that the pleadings were not docketed properly because of extraordinary circumstances going on in his law practice at the time, which were extremely stressful and overwhelming.

The court refused to vacate the default, explaining:

CPLR 5015(a)(l) allows a Court to vacate a default judgment on the ground of a party's excusable default. A party seeking to vacate an order entered upon default is required to demonstrate a reasonable excuse for its default and a meritorious defense to the action. Under certain circumstances, law office failure may constitute a reasonable excuse, however, claims of law office failure which are conclusory and unsubstantiated cannot excuse default.

While [the plaintiff] properly notes that New York courts prefer to have cases decided on the merits rather than by default, here, [the plaintiff's] counsel's excuse of law office failure is vague and conclusory. The difficulties surrounding [his] law practice are unfortunate and understandably overwhelming. However, as the [moving] Defendants correctly point out, even if [the plaintiff's] counsel did e-file all three documents as he explained, he was still two days past the deadline in doing so, and offers no explanation as to why he did not pursue the case after that filing if he believed that the documents had been properly e-filed.

(Internal quotations and citations omitted). The court also faulted the plaintiff for failing to file an affidavit of merit.

While the results (refusal to vacate default versus denial of appeal) are different, this decision raises the same issues as the Second Circuit's October 30, 2015, decision in Franklin v. McHugh, No. 14‐4096‐CV, dismissing an appeal as untimely because the electronic filing of the notice of appeal, although timely attempted (and believed by counsel to have been timely made) was not successfully processed by the court's electronic filing system. The New York state e-filing system is excellent and its staff helpful in resolving problems. Still, the burden ultimately is on counsel to make sure that documents are properly filed. CM Collections and Franklin show what can happen if it does not.