OPINION AND ORDER Plaintiff brings claims for breach of contract and account stated against Defendant, alleging that Defendant failed to pay Plaintiff for diamonds. After Defendant failed to timely respond to Plaintiff’s complaint, the clerk entered default against Defendant. The questions now before the Court are: (1) whether Defendant has made a sufficient showing to warrant vacating the entry of default against it and (2) if not, whether Plaintiff is entitled to default judgment. For the reasons given below, the Court vacates the entry of default and therefore denies Plaintiff’s motion for default judgment without prejudice as moot.I. BackgroundPlaintiff filed a revised complaint on December 5, 2017. Compl. Dkt. 4. Both parties are diamond wholesalers and Plaintiff alleges that after it had sold diamonds to Defendant on credit, Defendant made a series of payments with checks that were returned for insufficient funds or were otherwise uncollectable. Compl.
9-1111. Plaintiff further alleges that it continued requesting the outstanding payments, including through a demand letter attached as Exhibit B to the Complaint, yet Defendant still did not pay. Compl., Ex. B. Defendant’s counsel filed an appearance on December 27, 2018, Dkt. 7, but Defendant failed to answer or otherwise respond to the Complaint. Plaintiff then requested an entry of default on January 9, 2018. Dkts. 9 & 10. Defendant immediately requested an extension to February 16, 2018, to answer or otherwise respond to Plaintiff’s complaint, which the Court granted. Dkt. 13. Defendant then again failed to respond and Plaintiff requested an entry of default on April 9, 2018. Dkt. 20. The clerk entered default on April 10, 2018. Dkt. 21. The next day, Defendant filed a letter with the Court asking for the default to be vacated. Curran Second Letter, Dkt. 22. The parties then filed a flurry of letters to the Court, after which Plaintiff moved for default judgment on May 3, 2018. Dkts. 28-31. Defendant filed an affidavit and declaration in opposition. Dkts. 37-40. Plaintiff then replied with a brief and a supplemental declaration. Dkts. 41 & 42.II. Legal StandardFederal Rule of Civil Procedure 55 sets out a two-step procedure to be followed for the entry of judgment against a party who fails to defend: the entry of a default and the granting of default judgment. New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005). As to the first step, once entered, a default may be set aside for “good cause.” Rule 55(c). When determining whether good cause has been shown by a Defendant, a court will balance three factors: “(1) whether the default was willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a meritorious defense is presented.” Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993) (citing cases). A court will also consider “[o]ther relevant equitable factors” including “whether the failure to follow a rule of procedure was a mistake made in good faith and whether the entry of default would bring about a harsh or unfair result.” Id. (citing Sony Corp. v. Elm State Elecs., Inc., 800 F.2d 317, 320 (2d Cir. 1986)). These criteria are construed generously, id., in light of the Second Circuit’s “strong preference for resolving disputes on the merits,” Green, 420 F.3d at 104 (quoting Powerserve Int’l, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2001) (internal quotation marks omitted)). A defendant’s failure to meet one of these factors will not defeat their motion if other factors weigh in favor of setting aside the default. See Sea Hope Navigation Inc. v. Novel Commodities SA, 978 F. Supp. 2d 333, 341 (S.D.N.Y. 2013) (citing cases).III. DiscussionThe Court first addresses the threshold question of whether Defendant has made a sufficient showing that the default entered on March 10, 2018, should be set aside. The Court will examine and balance each of the factors set out by the Second Circuit in Enron Oil in turn.A. Defendant’s Default Was WillfulIn the context of a default, “willfulness” refers to “conduct that is more than merely negligent or careless, but is instead egregious and…not satisfactorily explained.” Bricklayers & Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 186 (2d Cir. 2015) (internal quotation marks omitted). However, “a finding of bad faith is [not] a necessary predicate to concluding that a defendant acted ‘willfully.’” Gucci Am., Inc. v. Gold Ctr. Jewelry, 158 F.3d 631, 635 (2d Cir. 1998). Instead, to find that a default was willful “it is sufficient to conclude that the defendant defaulted deliberately.” Bricklayers & Allied Craftworkers, 779 F.3d at 187 (internal quotation marks omitted). Thus, if a defendant “does not deny that he received the complaint, the court’s orders,… or that he never answered the complaint,” and “does not contend that his non-compliance was due to circumstances beyond his control,” a court can infer willfulness. Guggenheim Capital, LLC v. Birnbaum, 722 F.3d 444, 455 (2d Cir. 2013); see also S.E.C. v. McNulty, 137 F.3d 732, 738-39 (2d Cir. 1998) (“[D]efaults have been found willful where, for example, an attorney failed, for unexplained reasons, to respond to a motion for summary judgment, or failed, for flimsy reasons, to comply with scheduling orders[.]“) (internal citations omitted)).Defendant’s conduct indicates that its default was willful. Defendant cannot dispute that it was “aware of the legal action pending against [it] based on [its] own admissions and the fact that [it] requested, through counsel, an extension of time to respond.” Bricklayers & Allied Craftworkers, 779 F.3d at 186. The Court granted the requested extension, yet Defendant failed entirely to comply with the deadline, only requesting by letter that the default be vacated almost two months later, after the default had been entered. See Curran Second Letter. Defendant’s counsel represented that the primary reason for this “silence” was because his client was confused and believed that an arbitration in Israel would resolve all of the issues and moot this case. Curran Second Letter at 1; Hayon Affidavit, Dkt. 37 10. Yet the responsibility to file a responsive pleading is not obviated by a defendant’s mistaken belief that some other event will resolve the case. See Bricklayers & Allied Craftworkers, 779 F.3d at 186-87. Nor did the fact that there was some uncertainty about whether Defendant would formalize its relationship with its counsel, Curran Second Letter at 1 & Hayon Affidavit 10, absolve Defendant of its responsibility to comply with the Court’s deadline or, at the very least, request another extension. Because Defendant was plainly aware of the suit and has offered only flimsy reasons for its failure to comply with the Court’s scheduling order, its default was willful.B. Plaintiff Would Not Be Prejudiced By Setting Aside the DefaultAs to the second factor, prejudice, the Second Circuit has made clear that “delay standing alone does not establish prejudice” in the context of request to set aside a default. Enron Oil, 10 F.3d at 98. “Rather, it must be shown that delay will result in the loss of evidence, create increased difficulties of discovery, or provide greater opportunity for fraud and collusion.” Davis v. Musler, 713 F.2d 907, 916 (2d Cir. 1983) (internal quotation marks omitted). To meet this standard, “the plaintiff must demonstrate that any prejudice resulting from the defendant’s default cannot be rectified in the Court in another manner were the default to be vacated.” Murray Eng’g, P.C. v. Windermere Properties LLC, No. 12-cv-0052 (JPO), 2013 WL 1809637, at *5 (S.D.N.Y. Apr. 30, 2013). Plaintiff argues that setting aside the default would be prejudicial because it would allow Defendant to divert funds to avoid paying Plaintiff. It is true that this litigation arose out of a series of uncollectable checks that Defendant sent Plaintiff, something that Defendant does not really deny. Hayon Aff. 7. In addition, Plaintiff’s principal alleges — albeit for the first time in a declaration attached to Plaintiffs reply — that he has “reason to believe that Defendant has acquired, and refused to pay for diamonds from multiple suppliers” and is worried that “any increased delay will allow Defendant to divert funds and preclude Plaintiff from successfully enforcing a judgment against the Defendant in the future.” Holzman Reply Declaration, Dkt. 42
