United States District Court, District of Columbia
BERMAN JACKSON United States District Judge
the Republic of Kazakhstan (“Kazakhstan”), has
brought this action against defendants, Anatolie Stati and
Gabriel Stati and the two companies they own, Ascom Group,
S.A. (“Ascom”) and Terra Raf Trans Traiding Ltd.
(“Terra Raf”) for alleged violations of the
Racketeer Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. § 1961 et seq.,
and the common law torts of fraud and civil conspiracy.
Compl. ¶ 1 [Dkt. # 1]. Kazakhstan claims that defendants
obtained an arbitral award from the Stockholm Chamber of
Commerce (“SCC”) in Sweden through fraud, and it
seeks damages, attorneys' fees, and an injunction
preventing defendants from enforcing the arbitral award in
the United States. Id. at 92-93 (“Prayer for
February 26, 2018, the Clerk of Court entered defaults
against two of the four defendants - Ascom and Terra Raf -
due to their failure to answer the complaint. Clerk's
Entry of Default Re: Terra Raf [Dkt. # 8]; Clerk's Entry
of Default Re: Ascom [Dkt. # 9]. A few days later, on March
2, 2018, defendants moved to vacate the entries of default,
see Defs.' Mot. to Vacate Entry of Default
Against Ascom and Terra Raf [Dkt. # 13] (“Defs.'
Mot.”); Mem. in Supp. of Defs.' Mot. [Dkt. # 14]
(“Defs.' Mem.”), and plaintiff opposed the
motion. Kazakhstan's Opp. to Defs.' Mot. [Dkt. # 15]
(“Pl.'s Opp.”). For the reasons that follow,
the Court will grant defendants' motion.
Federal Rule of Civil Procedure 55(c), “[t]he court may
set aside an entry of default for good cause.”
Fed.R.Civ.P. 55(c). The Court must exercise its discretion in
making such a determination, but in this Circuit,
“strong policies favor resolution of disputes on their
merits.” Jackson v. Beech, 636 F.2d 831, 835
(D.C. Cir. 1980); see also Mohamad v. Rajoub, 634
F.3d 604, 606 (D.C. Cir. 2011) (pointing to Jackson v.
Beech for the same proposition). “In exercising
its discretion, the district court is supposed to consider
‘whether (1) the default was willful, (2) a set-aside
would prejudice plaintiff, and (3) the alleged defense was
meritorious.'” Mohamad, 634 F.3d at 606,
quoting Keegel v. Key West & Caribbean Trading
Co., 627 F.2d 372, 373 (D.C. Cir. 1980). “Because
of the strong preference for resolving disputes on the
merits, any doubts must be resolved in favor of the party
seeking relief from the default.” Gray v.
Staley, 310 F.R.D. 32, 35 (D.D.C. 2015), citing
Jackson, 636 F.2d at 837.
the Court can analyze whether good cause exists to vacate the
entry of default, it must first address the threshold
requirement set forth in Local Civil Rule 7(g) which provides
that “[a] motion to vacate an entry of default, or a
judgment by default, or both, shall be accompanied by a
verified answer presenting a defense sufficient to bar the
claim in whole or in part.” LCvR 7(g). Defendants have
not filed an answer with their motion. Instead, they request
that the Court exercise its discretion and permit them to
file a motion to dismiss by May 4, 2018, which is sixty days
from the date the last defendant in this case was
served. Defs.' Mem. at 5 n.3; Defs.' Reply
at 6 n.2.
Court will grant this request as a matter of judicial
efficiency. It sees no reason why the four defendants, all
represented by the same counsel, should be required to file
separate answers or other responsive pleadings to the same
complaint. Furthermore, this ruling is consistent
with the Circuit's strong preference to proceed on the
merits. See Jackson, 636 F.2d at 837; see also
Azamar v. Stern, 275 F.R.D. 1, 4 n.3 (D.D.C. 2011)
(noting that “courts have proceeded with considering
the merits of a motion to vacate default despite the failure
to comply with [Local Civil Rule 7(g)], partially due to the
preference for allowing a case to proceed on the merits
rather than allowing the entry of default to stand on a
purely procedural ground”).
respect to the motion to vacate the defaults, the Court has
considered each of the Rule 55(c) factors, and it finds that
there is good cause to vacate the defaults entered against
Ascom and Terra Raf. The first factor - whether the default
was “willful” - requires more than negligent
conduct. See, e.g., Gray, 310 F.R.D. at 35
(“To show willfulness, a moving party need not
establish bad faith, though it must demonstrate more than
mere negligence.”); see also Wilson v. Superclub
Ibiza, LLC, 279 F.R.D. 176, 179 (D.D.C. 2012) (same).
Here, defendants contend that their failure to respond to the
complaint was “borne of negligence, ” Defs.'
Reply at 2, that is “a combination of miscommunication,
colorable questions concerning the sufficiency of service
with respect to . . . [d]efendant Terra [Raf], lack of
service on Gabriel Stati, and [p]laintiff's failure to
file certificates of service [on the public docket] when it
considered service to have been completed.” Defs.'
Mem. at 3. And they assert that despite this initial delay in
responding, defendants are now ready and eager to defend
against the suit. Defs.' Reply at 2.
the Court does not condone defendants' negligent
behavior, there is no indication that they deliberately tried
to delay this case or acted with wanton or willful disregard
for their legal responsibilities. See Gray, 310
F.R.D. at 35 (holding that the defendants' two-month
delayed response was not willful under Rule 55(c) because
they had not failed to defend against the case or otherwise
engaged in “dilatory tactics”); see also Kusi
v. British Airways Corp., No. 96-2868, 1997 WL 420334,
at *1 (D.D.C. July 17, 1997) (holding that the
defendant's failure to respond to complaint due to
miscommunication between its foreign corporate headquarters
and its U.S. counsel was excusable neglect since there was no
indication that the defendant “acted with willful
disregard for its legal responsibilities”).
fact, a day after the Clerk of Court entered the defaults
against Ascom and Terra Raf, counsel for defendants entered
their appearance and emailed plaintiff's counsel seeking
to negotiate a briefing schedule. Ex. A to Defs.' Reply
[Dkt. # 16-3]; Notice of Appearance James E. Berger [Dkt. #
10]; Notice of Appearance Charlene C. Sun [Dkt. # 11]; Notice
of Appearance Taylor T. Lankford [Dkt. # 12]. And shortly
thereafter, defendants filed this motion to vacate the
defaults. Defs.' Mot. So this is not a case where
defendants were “totally unresponsive, ” see
Jackson, 636 F.2d at 836 (noting that default judgment
should be reserved for situations involving a “totally
unresponsive party”), and since “enforcing
judgments as a penalty for delays in filing is often contrary
to the fair administration of justice, ” the Court
finds that this delay is excusable under Rule 55(c).
Int'l Painters & Allied Trades Union & Indus.
Pension Fund v. H.W. Ellis Painting Co., 288 F.Supp.2d
22, 25 (D.D.C. 2003).
plaintiff will not be prejudiced by vacating the defaults.
There is no indication that the delay in this case has caused
witnesses to disappear or physical evidence to deteriorate.
See Capital Yacht Club v. Vessel AVIVA, 228 F.R.D.
389, 394 (D.D.C. 2005), citing KPS & Assocs., Inc. v.
Designs By FMC, Inc., 318 F.3d 1, 15 (1st Cir. 2003)
(noting that prejudice results from the dangers that
accompany delay such as “loss of evidence, increased
difficulties of discovery, or an enhanced opportunity for
fraud or collusion”). Plaintiff asserts that
“delay enhances [defendants'] opportunity to
perpetuate their fraudulent scheme.” Pl.'s Opp. at
9. But this claim is not well-founded since the danger
plaintiff seeks to forestall is an effort by the defendants
to enforce the arbitral award through legal systems in
“multiple jurisdictions.” Id. And the
arbitral award has already been upheld by the Swedish Supreme
Court and recently by this Court notwithstanding the fraud
allegations. See Stati, 2018 WL 1461898 at *5, 16.
defendants have met the third criteria for vacating the
defaults because they have proffered a potentially
meritorious defense based on their contention that the
complaint fails to allege a prima facie RICO claim because
the vast majority of the conduct is lawful and occurred
outside the United States. Defs.' Mem. at 5; see
Mohamad, 634 F.3d at 606 (“[A]llegations are
meritorious if they contain even a hint of a suggestion
which, proven at trial, would constitute a complete
defense.”), quoting Keegel, 627 F.2d at 374.
for the reasons stated, the Court will grant defendants'
motion, [Dkt. # 13], to vacate the defaults entered against