MATTHEW W. BRANN, District Judge.
Before the Court are Defendant Commonwealth Financial Systems, Inc.'s ("Defendant") Motion to Vacate Default Judgment (ECF No. 25) and third-party Garnishee Fidelity Deposit & Discount Bank's Motion for Interpleader (ECF No. 33). As elaborated below, the Defendant's Motion is denied because it failed to demonstrate that it has a meritorious defense to Plaintiff's claims and that it was not derelict in its duty to litigate. The Motion for Interpleader is denied without prejudice.
Plaintiff Alexandra Paradise ("Plaintiff" or "Paradise") filed a Complaint (ECF No. 1) on January 1, 2013, alleging inter alia violations of the Telephone Consumer Protection Act, 47 U.S.C. § 227 ("TCPA") for debt collection phone calls that Defendant placed to Plaintiff's phone number. Plaintiff was not the intended recipient of the calls.
Defendant accepted service of Plaintiff's Complaint via electronic mail to Matthew Healey ("Healy"), its compliance officer, on January 3, 2014. Pl.'s Br. Opp'n 1, July 22, 2014, ECF No. 36 [hereinafter Pl.'s Br.]. The Parties then engaged in informal discovery and an email exchange, in which Defendant made a settlement offer. After Plaintiff rejected the settlement offer, Healey wrote: "[t]hen proceed with judgment." Pl.'s Br., Ex. C.
Plaintiff filed an Amended Complaint on January 24, 2013 (ECF No. 5). The Defendant did not respond. Plaintiff then filed a Request for Entry of Default (ECF No. 8) and certificate of service, and the Clerk entered Default on March 21, 2013 (ECF No. 9). The Court held a hearing on October 1, 2013 to assess damages, which it fixed at $63,000 (ECF Nos. 19, 20) and subsequently entered Default Judgment in favor of the Plaintiff on October 21, 2013(ECF No. 21).
Despite eleven months of silence after its initial communications in this case, Defendant then filed the Motion to Vacate Default Judgment that is now before the Court (ECF No. 25). Defendant seeks to vacate the Default Judgment and litigate the case.
Federal Rule of Civil Procedure 55(c) allows a court to "set aside an entry of default for good cause, and . . . set aside a default judgment under Rule 60(b)." FED. R. CIV. P. 55(c). Rule 60(b) grants courts broad authority to provide relief from judgment for reasons including: 1) mistake, inadvertence, surprise, or excusable neglect; . . . or (6) any other reason that justified relief." FED. R. CIV. P. 60(b).
Default judgments and "default [are] generally disfavored and [courts] have long indicated [the] strong preference that cases be decided on the merits."
The Court has discretion in determining whether there is a reason justifying relief, and evaluates a number of factors to that end including: "(1) whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious defense; (3) whether the default was the result of the defendant's culpable conduct."
The primary dispositive issue is whether the Defendant can establish a meritorious defense to the Plaintiff's claims. This inquiry is critical because, without a meritorious defense, the Defendant could not prevail at trial and there would be little purpose in setting aside the default judgment.
"The showing of a meritorious defense is accomplished when `allegations of defendant's answer, if established on trial, would constitute a complete defense to the action.'"
In the case at bar, the Defendant asserts two affirmative defenses to Plaintiff's claims. The first defense alleges that the Defendant was exempt from TCPA restrictions on calling cellular telephones because the Defendant had proper prior consent to do so.
The Defendant asserts that the TCPA provides an exemption from its restrictions on calling cellular telephones when the "called party" has obtained prior consent to call. The pertinent statutory language reads:
47 U.S.C. § 227(b)(1).
Defendant alleges that it did retain consent from the debtor it was attempting to contact, who used the phone number at the time the Defendant obtained consent. The Defendant argues that consent is sufficient to invoke the exception to the statute's restriction, despite the fact that the Plaintiff, the party who used that phone number during the events of the instant litigation, did not provide her express consent. This argument is unavailing in light of both the statutory text and persuasive precedent to the contrary.
Chief Judge Frank H. Easterbrook of the United States Court of Appeals for the Seventh Circuit examined this very issue writing for the court, which held that a "called party" for the purposes of the exemption to the TCPA's restriction on making automated calls to a cell phone is the person subscribing to the called number at the time the call was made.
Notably, there is a distinction between the "called party" and the "intended recipient" of the call, as the terms are used in the TCPA.
The Defendant's second asserted defense is that the TCPA's prohibitions do not apply to calls made for the purpose of debt collection that do not qualify as telemarketing. Def.'s Br., at 6. To assert this argument, the Defendant relies on a case decided by Judge Caputo of this Court, who found that "the FCC has determined that all debt-collection circumstances are excluded from the TCPA's coverage."
The Court wrote at length:
In the wake of this opinion, courts within the Third Circuit have adopted this result as the definitive statement of the law on the issue.
In addition to the fact that Defendant lacks a facially meritorious defense, there is evidence in the record to suggest the Defendant's may have acted with callous disregard of this lawsuit. First, the Defendant argues that its failure to file an answer to the Plaintiff's Complaint was simply a result of poor communication with its counsel. Def.'s Br., at 7-8. The evidence of record casts a dubious pall over the Defendant's contention in this respect.
The Plaintiff filed her Complaint against the Defendant on January 1, 2013; summons was issued electronically to Defendant on January 2, 2013; and the Defendant's compliance officer, Matthew Healey, accepted service of the Complaint on January 3, 2013.
On January 8, 2013, Defendant offered to settle the matter in an e-mail exchange; the Plaintiff rejected the offer, and the Defendant responded: "[t]hen proceed with judgment." Pl.'s Br., Ex. C. Even viewing the facts in a favorable light for the Defendant, this exchange demonstrates awareness of the instant suit and draws into question the Defendant's subsequent failure to litigate.
Defendant's second argument asserting that it is not culpable for the default judgment concerns Plaintiff's Request for Default (ECF No. 8). Defendant asserts that Plaintiff filed the Request, but served Defendant at an incorrect address. As such, the Defendant asserts it did not realize an Answer was necessary, or had not been filed, or that the matter had proceeded beyond the filing of a complaint, a fact the Defendant alleges it did not discover until after Default Judgment was entered. Def.'s Br., at 7-8.
The certificate of service filed that Plaintiff filed on the record with the Court did contain an incorrect address for Defendant, by Plaintiff's own admission. Pl.'s Br., at 9. Nevertheless, the Plaintiff asserts that, despite the erroneous address on the Request filed with the Court, the notice of default was mailed to Defendant's correct mailing address and Defendant received it on March 21, 2013. Plaintiff submits proof of mailing and delivery to corroborate this assertion.
In sum, this evidence may not unequivocally demonstrate "[r]eckless disregard for repeated communications from plaintiffs and the court," when viewing the facts most favorably for Defendant.
"Prejudice exists if circumstances have changed since entry of the default such that plaintiff's ability to litigate its claim is now impaired in some material way or if relevant evidence has become lost or unavailable."
In the instant case, it does not appear that the Plaintiff would suffer any prejudice from the removal of the default judgment.
Fidelity Deposit and Discount Bank ("Fidelity"), the third-party Garnishee in this action, filed a Motion for Interpleader alleging that it holds a first priority security interest on all the accounts that the Defendant maintains at Fidelity that are subject to the Plaintiff's judgment.
In its two page motion, however, Fidelity has offered little information besides its own averment that it holds a first priority security interest. The brief is devoid of any law or strongly supported facts that satisfy the Court to a degree sufficient to grant Fidelity's requested relief. Fidelity has neither alleged a basis for subject matter jurisdiction over its claim, nor provided the Court with legal citation and sufficiently probative evidence to corroborate its claims. Consequently, Fidelity's motion is denied without prejudice.
Recently, on September 18, 2014, Fidelity filed another motion requesting the same relief and attaching exhibits in support of its claims. When the motion is ripe because it has been briefed by the pertinent parities, or the time in which they are allowed to file briefs has expired, the Court will address Fidelity's claims.
The Defendant's Motion to Vacate Default Judgment is denied, primarily because the Defendant fails to assert a facially meritorious defense, and the record demonstrates the Defendant was aware of this suit and failed to litigate. Third-party Garnishee Fidelity's Motion for Interpleader is denied without prejudice.
An appropriate Order follows.