PLAINTIFF, CRYSTAL BURNETT’S, RESPONSE TO DEFENDANT, SBSFLD, LLC’S AMENDED EMERGENCY MOTION TO VACATE DEFAULT JUDGMENT [DOC. 20]
COMES NOW, Plaintiff Crystal Burnett, by and through undersigned counsel and hereby responds to Defendant, SBSFLD, LLC’s (“SBSFLD”) Amended Emergency Motion to Vacate Default Judgment and Set Aside Clerk’s Entry of Default, and Dissolve Writ of Garnishment, With Supporting Memorandum of Law [Doc. 20].
SBSFLD’s Motion seeks to vacate the Default Final Judgment entered against it. The standard for such motions is well established in the Eleventh Circuit, which requires that the defaulting party must (i) establish a meritorious defense to support vacating a default judgment, (ii) prove lack of substantial prejudice to the nonmoving party, and (iii) present a good reason for failing to respond to the Complaint. SBSFLD’s Motion fails on all counts.
As to the first prong, SBSFLD seems to dispute only the amounts to which Plaintiff is entitled without establishing a meritorious defense to the action itself. In fact, the affidavit of Mr. Goodman it includes admits that Plaintiff “may” have been issued a company cell phone to use off the clock. It’s unverified statements and proposed Answer and Affirmative Defenses is hardly a demonstration of a meritorious defense and none of the supposed defenses are supported by declarations. Thus, it is inadequate as a matter of law.
Second, SBSFLD’s Motion makes no showing as to the prejudice that would be visited upon the Plaintiff, Ms. Burnett, by the granting of the instant Motion. SBSFLD argues only there is no evidence to suggest that Plaintiff has suffered any prejudice, but, to the contrary, it would also result in the unfreezing of the bank account funds already being held by SBSFLD’s bank per her Writ of Garnishment. Reversal of the judgment entered against SBSFLD and dissolution of the Writ would likely result in SBSFLD transferring the frozen funds to its “sister” company so that Plaintiff would never be afforded relief.
Finally, SBSFLD’s explanation for its failure to respond to Plaintiff’s Complaint falls far short of the “good reason” required by the Eleventh Circuit in vacating a judgment and proves SBSFLD failed to establish minimal procedural safeguards. Specifically, SBSFLD admits that it established a process by which it was purposefully not put on notice of lawsuits served on its registered agent – VCORP. According to SBSFLD’s Motion, it directed VCORP to notice its “sister” corporation Platinum HR Management of lawsuits filed against SBSFLD. Moreover, Platinum HR Management’s website makes no mention that it is some sort of law firm or lawsuit-coordinator for its clients. While the concept of “excusable neglect” grants parties the ability to avoid the consequences of genuine errors, the law is plain that a party must establish minimal procedural safeguards to ensure that lawsuits filed against it are properly handled. Here, SBSFLD intentionally turned a blind eye to any and all lawsuits filed against it. Because SBSFLD’s Motion fails to satisfy any of the three prongs applicable to motions to set aside judgments – much less all three – it is due to be denied.
- On August 13, 2015, Plaintiff filed her Complaint against Defendant for overtime violations. She was represented only by the law firm of Morgan & Morgan.
- On December 11, 2015, Plaintiff filed with the Court the return of service of the Complaint demonstrating proper and valid service on VCORP Services, LLC (“VCORP”). It is undisputed that VCORP was both properly served and is the registered agent for SBSFLD.
- SBSFLD failed to appear or file any responsive pleading to defend this action within the time allowed by Fed. R. Civ. P. 12(a)(1)(A).
- On December 14, 2015, the Clerk entered a default against SBSFLD for failing to file or serve a response to the Complaint.
- On December 20, 2015, the Court entered a Final Judgment against SBSFLD in the sum of $100,125.00.
- On February 4, 2016 Plaintiff hired Michael Massey of Massey & Duffy to attempt collection of the Judgment obtained by Morgan & Morgan. The next day, on February 5th, Plaintiff moved for a Writ of Garnishment as to Wells Fargo Bank.
- On February 8, 2016 the Court issued the Writ of Garnishment in the exact sum of the Final Judgment – $100,125.00. Wells Fargo subsequently answered the Writ and has now frozen SBSFLD’s account to cover the Final Judgment and related fees/expenses per Fla. Chapter 77.
III. Argument and Authorities
- Applicable Legal Standard
Setting aside a default judgment requires, at minimum, a demonstration that (1) the defaulting party has a meritorious defense, (2) the nonmoving party would not be prejudiced if the judgment were set aside, and (3) that the defaulting party had a “good reason” for failing to respond to the Complaint. See Sloss Indus. Corp. v. Eurisol, 488 F.3d 922, 934 (11th Cir. 2007). The Eleventh Circuit reviews the district court’s decision only for abuse of discretion; thus, the district court has a “range of choice” and it will not be reversed just because the Eleventh Circuit might have come to a different conclusion. Id.
- SBSFLD’s Motion Lacks Critical Specifics
Lack of specificity in a motion to vacate can itself justify denial of the Motion. As stated by the 11th Circuit:
as noted earlier, the affidavits of Mr. Ferrarin and Mr. Bertrand are not specific enough as to what happened during the three and a half months in question. Second, during this period of time, Eurisol failed to check with Mr. Bertrand to ensure that someone had been retained to respond to Sloss’ lawsuit, and did not have any procedures in place to make sure that its interests were being protected. Under the circumstances, Eurisol cannot simply shift the blame to Mr. Bertrand, its French attorney, and thereby obtain relief from the default judgment.
Id. Similarly, according to SBSFLD’s Motion at page 5, SBSFLD never set up a procedure by which it would be put on notice of lawsuits filed against it. Instead, SBSLFD directed its registered agent (VCORP) to notify a “sister” company called Platinum HR Management of lawsuits filed against SBSFLD.
No contract or other agreement between Platinum HR Management and SBSFLD was attached to SBSFLD’s Motion to carry its burden to overturn the judgment. Moreover, Platinum HR Management’s website makes no mention that its services include coordinating and/or defending lawsuits brought against its clients. No bills or evidence of payments between these companies was filed with the Motion to prove that Platinum HR Management had any actual or fiduciary duty as to lawsuits filed against SBSFLD.
According to the Department of State, SBSFLD’s only Member/Manager is HGOP LLC. See Exhibit A. HGOP LLC’s only listed Member/Manager is Mr. Simon Ganz. See Exhibit B. Platinum HR Management LLC’s registered agent is Mr. Simon Ganz (not, notably, VCORP). See Exhibit C.
The address provided by Mr. Simon Ganz for service on Platinum HR Management LLC is a 5055 Collins Avenue, 3C, Miami Beach, FL 33140. 5055 Collins Avenue, otherwise known as Crystal House, is a residential, private condominium with a “secured entrance” and “24 hour Security”. As such, SBSFLD and its “family” of companies have purposefully created a labyrinth of corporations untimely ending with a registered agent’s address that would be difficult, if not impossible, to effectuate legal process given the nature of secured, private condominiums. The same structure that was obviously created to evade legal process is the one SBSFLD wishes to utilize to evade proper service on it by Plaintiff.
In this same vein, the Affidavit of Moshe Reisman (filed as Exhibit H to SBSFLD’s Motion) is telling about the shell game being played. The affidavit remains completely silent about how much contact Mr. Reisman had with SBSFLD, Platinum HR Management, and/or Mr. Ganz. It says nothing about how his job duties change and/or if his physical location changed. It says in Paragraph 4 he was going to be working for a “Platinum affiliate” after “leaving direct employment with Platinum.” At paragraph 5, it refers to SBSFLD as “one of Platinum’s client companies.” Finally, the affidavit claims it provided the “appropriate contact point” to VCORP, but declines to explain who that is and what relationship they have to SBSFLD.
SBSFLD’s Motion is nearly identical to that brought brought by the defendant in Sloss both because its affidavits lack critical details entitling it to relief and because it is clear no procedures were in place for notifying SBSFLD of lawsuits filed against it. Thus, its Motion should likewise be denied.
- SBSFLD Failed to Demonstrate a Meritorious Defense; Instead it Only Seeks to Argue Damages
Demonstration of a meritorious defense is a threshold requirement to setting aside a default. Gulf Coast Fans, Inc. v. Midwest Elec. Importers, Inc., 740 F.2d 1499, 1511 (11th Cir. 1984). SBSFLD’s Motion plainly fails to cross the threshold showing that it has a meritorious defense to Plaintiff’s claims. To establish a meritorious defense, the moving party “must make an affirmative showing of a defense that is likely to be successful.” Solaroll Shade & Shutter Corp. v. Bio-Energy Sys., Inc., 803 F.2d 1130, 1132 (11th Cir. 1986). The mere assertion of general denials and affirmative defenses to a complaint are insufficient to demonstrate a meritorious defense justifying an order setting aside a default judgment. Id.
In Valdez v. Feltman (In re Worldwide Web Systems, Inc., 328 F.3d 1291, 1295 (11th Cir. 2003)), a bankruptcy trustee was awarded a final default judgment in his suit to recover sums allegedly paid to the defendant within one year of the debtor’s Chapter 11 filing. Id. at 1291. Seeking to set aside the final default judgment under Rule 60(b)(1), Valdez argued that his meritorious defense was demonstrated by his Answer and Affirmative Defenses to the Complaint. Id, at 1296. Finding that the Answer and Affirmative Defenses “amounted to little more than general denials offered only at the highest order of abstraction,” the Eleventh Circuit ruled that Valdez failed to satisfy his burden of showing a meritorious defense: “Specifically, Valdez has offered nothing to explain what happened to the money that was transferred, nor anything to show that the large financial transfers were not to made to him personally by the debtor.” Id. at 1296. Stated differently, merely offering conclusions that a defense exists is not enough – a party must make an affirmative showing of fact and explain how the defense exists at law.
In the instant case, SBSFLD’s Motion fails to articulate any meritorious defense to the instant action. Rather than offer concrete fact and an explication of how those facts establish defensive legal theories, SBSFLD offers no authority to support the “viable defenses” which supposedly shield it from liability in this case. SBSFLD offers nothing more than a potential dispute over the amount Plaintiff is due. Defendant’s dispute over how many hours Plaintiff may have worked is hardly an exceptional circumstance or evidence of “fraud” justifying vacating the Judgment – defendants dispute how many hours plaintiffs are claiming in virtually every single FLSA case brought regardless of the, parties venue or legal counsel involved. Moreover, attaching an Answer and Affirmative Defenses to its Motion is an approach previously rejected by the Eleventh Circuit in Valdez.
Finally, and most glaringly, SBSFLD omitted specifics about the amount of hours Plaintiff worked – failing to compare the amount of hours of overtime Plaintiff claimed versus the amount SBSFLD claims she worked as to the off the clock cell phone it admits she “may” have been issued. If SBSFLD does not know the amount of hours worked by Plaintiff off the clock, it cannot establish the hours she claimed are invalid. If it does know the amount of overtime hours worked, its Motion fails for lack of specificity because it has chosen to challenge the damages suffered by Plaintiff. Having provided nothing to show that the purported defenses exist, much less have any merit, SBSFLD has not satisfied its burden of proving a meritorious defense sufficient to warrant entry of an order setting aside the Judgment. Accordingly, its Motion should be denied.
- SBSFLD Failed to Demonstrate a Lack of Prejudice to Plaintiff
As with its “meritorious defense,” SBSFLD’s Motion offers another bare-bones statement in response to the second prong, asserting only that there is no evidence to suggest that Plaintiff has suffered any prejudice and that the lawsuit was filed in August 2015. As an initial matter, SBSFLD is not required to establish prejudice in order to be entitled to maintain the judgment; instead it must show the absence of prejudice. The Motion offers nothing to satisfy this burden.
Contrary to SBSFLD’s statement, however, Plaintiff would suffer prejudice if the Motion were granted. The Eleventh Circuit has recognized that there is an inherent prejudice to the nonmoving party where a default final judgment is ultimately set aside:
While the prejudice in this case is not particularly pronounced, we find – as did the bankruptcy court – that there is some prejudice to Feltman [bankruptcy trustee]. ‘There certainly is some prejudice to the plaintiff in the delay if the default was to be set aside.’
Valdez, 328 F.3d at 1297 (internal citations omitted). With nothing more, this prejudice exists as a matter of law and SBSFLD presents nothing to overcome it.
Additionally, Plaintiff can demonstrate actual prejudice should the Default be vacated and the frozen funds released by Wells Fargo. Not only does that deprive her of funds she is rightfully entitled to live on as per the Fair Labor Standards Act, but it is highly likely that the frozen funds would be “loaned” to one of SBSFLD’s “sister” companies – leaving Plaintiff without a remedy when she again wins this case long from now. Thus, Plaintiff would absolutely be prejudiced should the Writ be dissolved and the funds returned to SBSFLD.
In Valdez, despite only slight prejudice to the nonmoving party, the Eleventh Circuit found:
[W]e cannot say that the lack of substantial prejudice to the nonmoving party so tips the scale in favor of Valdez that we should excuse his failure to make even the barest showing of a meritorious defense or to present a good reason for failing to respond to the Complaint.
Valdez, 328 F.3d at 1297. Stated differently, while the barest showing of prejudice may have to give way to the desire to resolve cases on their merits where the defaulting party has a legitimate defense, even the most minimal prejudice is sufficient. Here, the substantial risk that the frozen funds will disappear if unfrozen is prejudicial to Plaintiff.
Although SBSFLD’s Motion claims there’s one big family of related entities (despite the fact they have different owners, registered agents, addresses, etc.), neither Platinum HR Management nor any of of the other companies in SBSFLD’s “family” have agreed to share in the liability of SBSFLD. Noticeably absent is SBSFLD’s offer to post a bond or otherwise protect the funds necessary to compensate Plaintiff (including the mandatory award of attorneys’ fees per the FSLA).
- SBSFLD’s Motion Does Not Establish Good Cause; Instead it Proves a Failure to Establish Minimal Procedural Safeguards
While the Motion fails to establish much, it does establish one thing very clearly: the default judgment resulted from a complete lack of diligence on the part of SBSFLD. The affidavits attached to the Motion plainly show that Defendant purposefully set up a system by which it advised its registered agent (VCORP) not to notify it of lawsuits. Instead, VCORP was instructed by SBSFLD to tell a completely different “sister” company called Platinum HR Management of lawsuits filed by SBSFLD. SBSFLD and Platinum HR Management themselves have different registered agents. See attached Exhibits A and C. Moreover, as mentioned above, SBSFLD’s “family” of companies – ultimately ending with a registered agent’s address in a secured, residential Miami Beach condo – is intentionally arranged to make process on these companies difficult (if not impossible).
SBSFLD must demonstrate its own diligence in responding to Complaints. See SEC v. Simmons, 241 Fed. Appx. 660, 663-64 (11th Cir. 2007). The circumstances here should be considered through the “minimum procedural safeguards” standard, which, while generally applied to companies, stands to require diligence to ensure action on a summons and Complaint was being taken. Florida Physicians Insurance Co., Inc., 8 F.3d at 784 (11th Cir. 1993) (citing Gibbs v. Air Canada, 810 F.2d 1529, 1537). The term “minimum procedural safeguards” refers to a “system of checking up on process to see that it has in fact reached its destination and that action is being taken.” Gibbs, 810 F.2d 1537; See also, Baez v. S.S. Kresge Co., 518 F.2d 349, 350 (5th Cir. 1975) (holding that the fact [that] Complaint received in timely manner by defendant was lost in mail en route to counsel did not constitute excusable neglect because of failure to establish minimum procedural safeguards); Davis v. Safeway Stores, Inc., 532 F.2d 489, 490 (5th Cir.1976) (finding excusable neglect absent when lack of communication between defendant and insurance company for three weeks after latter received copy of Complaint indicated absence of minimum procedural safeguards”).
SBSFLD’s Motion at page 5 makes it plainly clear that SBSFLD never set up a procedure by which it would be put on notice of lawsuits filed against it. Instead, SBSFLD directed its registered agent (VCORP) to notify a “sister” company called Platinum HR Management of lawsuits filed against SBSFLD. Incredibly, SBSFLD intentionally set up a procedure by which it would not be notified of lawsuits filed against it. Even if SBSFLD’s arguments are taken as completely accurate, its system worked perfectly in the instant case and it was thus not provided a copy with the Complaint properly served on VCORP.
Moreover, SBSFLD has completely failed to provided evidentiary support that it and VCORP previously had a good working relationship. SBSFLD provides no citations to other lawsuits or cases where VCORP accepted service. More importantly, there is absolutely no evidence that SBSFLD’s system of having VCORP refer lawsuits filed against SBSFLD to Platinum HR Management has ever successfully resulted in the defense of SBSFLD. To the contrary, such a “system” is not at all a reasonable procedural safeguard for dealing with lawsuits.
Under the minimum procedural safeguards standard, a “party served with a complaint, could not just ‘pass it on’ and forget about it.” In re Fletcher, 1998 WL 34065285, 1 (Bkrtcy. C.D. 111. 1998). The instant case represents such a situation because SBSFLD essentially “passed on” each and every Complaint it was served with to Platinum HR Management – a legally separate company – without any procedures to follow up on such documents. See Gibbs v. Air Canada, 810 F.2d 1529 (11th Cir.1987) (denying Motion to set aside the judgment where the plaintiff served defendant’s personnel and administration manager who attempted to contact the company’s solicitor in charge of litigation to no avail and never followed up to ensure the solicitor received the Complaint). Such lack of diligence does not constitute default through excusable neglect:
Ehlers’s lack of diligence is easily analogized to a company’s failure to establish minimal procedural safeguards. [The defendant], as a defendant in a suit alleging millions of dollars in damages, had a duty to act with some diligence to ensure that his attorney was protecting his interest. He did not do so, and we find that the district court did not abuse its discretion in finding that [the defendant] did not establish good cause for his default.
Florida Physician’s Ins. Co., Inc. v. Ehlers, 8 F.3d 780, 784 (11th Cir.1993). SBSFLD’s failure to ensure proper transmittal of the Complaint to itself (instead of a “sister” company) falls squarely within the Eleventh Circuit’s prohibition of setting aside default judgments where the movant fails to establish minimum procedural safeguards. See National R.R. Passenger Corp. v. Patco Transport, Inc., 128 Fed. Appx. 93 (11th Cir.2005) (where defendant did not follow up with its insurance company to inquire whether it received the Complaint and whether it was pursuing the Complaint showed a lack of minimal procedural safeguards for responding to complaints in a legal action and did not constitute excusable neglect); Drywall Phelps Constr. Co. v. Drywall Systems Inc. Of & Fla., 2007 WL 2433839 (S.D. Fla. Aug.22, 2007) (denying Motion to vacate where defendant failed to show evidence to establish that it had any minimum procedural safeguards in place or that any procedural safeguards were violated by its registered agent who delayed forwarding complaint to defendant’s offices and failed to inform it about the contents or significance of the Complaint). Thus Defendant’s Motion should likewise be denied.
Because SBSFLD’s Motion completely fails to satisfy one or more of the Eleventh Circuit’s requirements for a motion to set aside a default judgment, Plaintiff requests that this Court enter an order denying the relief requested in the Amended Motion for Relief from Final Default Judgment. Moreover, because SBSFLD has now responded to Wells Fargo’s Answer, Plaintiff respectfully requests an Order Per. Fla. Stat. Chapter 77 that the funds held by Wells Fargo per the Writ be ordered to be delivered to counsel for Plaintiff without delay with the Court reserving jurisdiction for the additional enforcement of the Writ and the award of additional attorneys’ fees and costs to Plaintiff.